1
1. Sarasola vs. Trinidad, 40 Phil. 252
Facts:
The complaint in this case was nled in the Court of First Instance of
Manila for the purpose of having an injunction issue to restrain the
defendant, the Collector of Internal Revenue, from the alleged illegal
collection of taxes in the amount of ^11,739.29.
The defendant interposed a demurrer to the complaint, based on two
grounds, namely: (1) that the court had no jurisdiction of the subject-
matter of the action because of the provisions of section 1578 of the
Administrative Code of 1917; and (2) that the facts stated in the...
complaint did not entitle the plaintiff to the relief demanded. The
Honorable James A. Ostrand, Judge of First Instance, sustained the
demurrer, holding that "In the opinion, of the court, the case is still
controlled by the decision of the Supreme Court in the case of
Churchill... and Tait vs. Rafferty (32 Phil., 580). The fact that section
1579 of the Administrative Code of 1917 disallows interest on the
internal revenue taxes recovered back is hardly sufficient to vary the
rule." It is from the final order dismissing the complaint, without
special... finding as to costs, that the plaintiff appeals to this court.
Sections 1578 and 1579 of the Administrative Code of 1917 read as
follows:
"Sec. 1578. Injunction not available to restrain collection of tax. No
court shall have authority to grant an injunction to restrain the
collection of any internal-revenue tax. "Sec. 1579. Recovery of tax
paid under protest. When the validity of any tax is... questioned, or its
amount disputed, or other question raised as to liability therefor, the
person against whom or against whose property the same is sought
to be enforced shall pay the tax under instant protest, or upon protest
within ten days, and shall thereupon request the... decision of the
Collector of Internal Revenue. If the decision of the Collector of
Internal Revenue is adverse, or if no decision is made by him within
six months from the date when his decision was requested, the
taxpayer may proceed, at any time within two years after the...
payment of the tax, to bring an action against the Collector of Internal
Revenue for the recovery without interest of the sum alleged to have
been illegally collected, the process to be served upon him, upon the
provincial treasurer, or upon the officer collecting the... tax."
Again expressly leaving out of our present consideration the phrase
"without interest," a vast array of interpretative jurisprudence which
culminates in, the decision in Churchill and Tait vs. Rafferty, supra,
would leave no room... for doubt that such legislation is constitutional.
The point, however, to keep sharply before us is, that until the
enactment of the Administrative Code of 1917, no law of the Philippine
Legislature or Commission had contained a provision permitting the
recovery of taxes
"without interest," and no provision esentially the same can be found
in the statutes of the United States or of the several States.
It is a wise and reasonable precaution for the security of the
government. No government could exist'that permitted its collection to
be delayed by every litigious man or every embarrassed man, to whom
delay... was more important than the payment of costs." (State of
Tennessee vs. Sneed [1877], 6 Otto, 69. See also 37 Cyc, 1267,
1268.) Again in the case of Snyder vs. Marks ([1883], 109 U. S., 185)
the sole object of the suit was to restrain the collection of a tax which
was assessed... under the United States Internal Revenue Laws. The
court said: "The remedy of a suit to recover back the tax after it is paid,
is provided by statute, and a suit to restrain its collection is forbidden.
The remedy so given is exclusive, and no other remedy... can be
substituted for it."
(Dows vs. The City of Chicago [1871], 11 Wall., 108) it was remarked
that there... can be no case of equitable cognizance "where there is a
plain and adequate remedy at law. And except where the special
 2
circumstances which we have mentioned exist, the party of whom an
illegal tax is collected has ordinarily ample remedy, either by action
against the officer... making the collection or the body to whom the tax
is paid." Accordingly, it was held that since the plaintiff had his action
after the tax was paid "against the officer or the city to recover back
the money," a bill in equity to restrain the collection of a tax would not
be... sustained. If the ground alleged is alone that the tax was illegal,
this is not sufficient for the maintenance of an injunction
Issues:
"Is the legal provision prohibiting the courts from granting an injunction
to restrain the collection of internal revenue taxes constitutional?
Ruling:
It is well settled both on principle and authority that interest is not to
be awarded against a sovereign government, as the United States or
a State, unless its consent has been manifested by an Act of its
Legislature or by a lawful contract of its executive officers. If there...
be doubt upon the subject, that doubt must be resolved in favor of the
State.
In Gosman's Case ([1881], L. R. 17 Ch. Div., 771) Sir George Jessel,
Master of the Rolls, speaking for the Court of Appeals, summed up the
Law of England in this concise statement: "There is no ground... for
charging the Crown with interest. Interest is only payable by statute or
by contract." In Attorney-General vs. Cape Fear Navigation Co.
([1843], 37 N. C, 444) Chief Justice Ruffin laid down as undoubted law
that "the State never pays interest unless she expressly engages to...
do so."
Judge Cooley says that "The recovery (in tax suits) must be limited to
the money received. * * * Interest is recoverable only when expressly
allowed by statute.
As this is the main rule, the converse proposition must be equally true,
that taxes only draw interest as do sums of money when expressly
authorized. A corollary to the principle is also self-evident, that interest
cannot be recovered on an abatement unless the statute provides...
for it
The only contrary dictum is to the effect that where an illegal tax has
been collected, the citizen who has... paid and is obliged to bring suit
against the collector is entitled to interest from the time of the illegal
exaction
It has been urged that since interest is in the nature of damages, it is
proper for allowance. While this may be true in the general run of
cases, it is not necessary true when the sovereign power is concerned.
The state is not amenable to judgments for damages or costs
without... its consent,... Our statute, it will be remembered, not only
does not authorize interest but negatives the payment of interest.
While, therefore, coming under the purview of the general principle
pertaining to legislative discretion, it also avoids any trouble to be
found in those decisions... which allow interest without any express
provision on the subject, because the statute provides that interest
shall not be allowed. From whatever direction we look at the subject,
therefore, we reach either the conclusion that the law is valid, or that
the plaintiff has not... proven such a case of irreparable injury as would
warrant the issuance of the extraordinary writ of injunction.
The reason for what superficially seems to be a harsh ruling goes back
to the fundamental conception of the nature of taxation. It is but a
truism to restate that taxation is an attribute of sovereignty. It is the
strongest of all the powers of government. It involves, as Chief
 3
Justice Marshall in his historical statement said, the power to destroy.
(McCulloch vs. Maryland [1819], 4 Wheat., 316; Loan Association vs.
Topeka [1875], 20 Wall., 655.) "The right of taxation where it exists,"
the court said in Austin vs. Aldermen ([1868], 7 Wall., 694), "is...
necessarily unlimited in its nature. It carries with it inherently the power
to embarrass and destroy."
Public policy decrees that, since upon the prompt collection of revenue
there depends the very existence of government itself, whatever
determination shall be arrived at by the Legislature should not be
interfered with, unless there be a clear violation of some
constitutional... inhibition.
"It is upon taxation that the several states chiefly rely to obtain the
means to carry on their respective governments, and it is of the utmost
importance to all of them that the modes adopted to enforce the
taxes... levied should be interfered with as little as possible. Any delay
in the proceedings of the officers, upon whom the duty is devolved of
collecting the taxes, may derange the operations of government, and
thereby cause serious detriment to the public."
"The Government may fix the conditions upon which it will consent to
litigate the validity of its original taxes." Or as said in a New York case,
"The power of taxation being legislative, all the incidents are within the
control of the Legislature." (Genet vs. City of Brooklyn
[1885], 99 N. Y., 296.) Or as said by Chief Justice Marshall in
McCulloch vs. Maryland, supra, "The people of a state give to their
government a right of taxing themselves and their property, and as the
exigencies of the Government cannot be limited, they prescribe no
limit to... the exercise of this right, resting confidently on the interest of
the legislator and on the influence of the constituents over their
representatives, to guard themselves against its abuse."
Applying these well-known principles to the case at bar, it wouldseem
that the legislature has considered that a law providing for the payment
of a tax with a right to bring a suit before a tribunal to recover back the
same without interest is a full and adequate remedy for the...
aggrieved taxpayer. The disallowance of interest in such case, like the
other steps prescribed as conditional to recovery, has been made one
of the conditions which the lawmakers have seen fit. to attach to the
remedy provided. As the Legislature in the exercise of its wide...
discretionary power, has deemed the remedy provided in section 1579
of the Administrative Code to be an adequate mode of testing the
validity of an internal revenue tax and has willed that such a remedy
shall be exclusive, the courts not only owe it to a coordinate branch of
the... government to respect the opinion thus announced, but have no
right to interfere with the enforcement of such a law.
"That the Supreme Court and the Courts of First Instance of the
Philippine Islands shall possess and exercise... jurisdiction as
heretofore provided and such additional jurisdiction as shall hereafter
be prescribed by law. * * *" The Supreme Court of the Philippines, in
interpreting these provisions, has reached the conclusion that they
had the effect of taking one or more Acts of the
Philippine Commission and Legislature out of the field of ordinary
legislation and making of them in effect basic laws. In other words, it
was held that the Legislature could add to but could not diminish the
jurisdiction of the courts. (Barrameda vs. Moir [1913], 25 Phil., 44.)
But any argument predicated upon such a proposition must
necessarily assume that the Philippine courts have had the power to
restrain by injunction the collection of taxes. And since, with or without
a law, the Philippine courts would not have presumed to issue an
injunction to... restrain the collection of a tax, the prohibition expressed
in the law has had no other effect than to confirm a universal principle.
This was expressly decided in the case of Churchill and Tait vs.
Rafferty, supra, and has since then not been open to discussion.
To conclude in answer to the argument made by appellant, we can
say that sections 1578 and 1579 of the Administrative Code establish
 4

an adequate remedy at law and that we are not convinced that the
enforcement of the tax will produce irreparable injury, and, in answer
to the... argument of appellee, that sections 1578 and 1579 of the
Administrative Code of 1917 are valid. The result is, thus, to affirm the
final order appealed from.
 5

2. CIR vs. Santos, 277 SCRA 1997

GR No 119252, August 18, 1997

FACTS:

Respondent Guild of Philippine Jewelers seek the nullification of a

provision in the Tariff and Customs Code and to declare such as
unconstitutional for being oppressive in taxing jewelry compared to
other countries.

ISSUE:

Is the tax imposed oppressive?

RULING:

No. The curt may not question the wisdom f the legislature. The court
cannot subscribe to the theory that the tax rates of other countries
should be used as a yardstick in determining what may be the proper
subjects of taxation in our country.
 6
3. Gerochi vs. Department of Energy, 527 SCRA 696
ROMEO P. GEROCHI vs. DEPARTMENT OF ENERGY (DOE)G.R.
No. 159796 July 17, 2007Ponente: NACHURA, J.:
FACTS:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and
Environmentalist Consumers Network, Inc. (ECN)(petitioners), come
before this Court in this original action praying that Section 34 of
Republic Act (RA) 9136,otherwise known as the Electric Power
Industry Reform Act of 2001 (EPIRA), imposing the
UniversalCharge, and Rule 18 of the Rules and Regulations (IRR)
which seeks to implement the said imposition, be
declaredunconstitutional. Petitioners also pray that the Universal
Charge imposed upon the consumers be refunded and that a
preliminaryinjunction and/or temporary restraining order (TRO) be
issued directing the respondents to refrain from
implementing,charging, and collecting the said charge. Congress
enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect.
On April 5, 2002, respondent NationalPower Corporation-Strategic
Power Utilities Group (NPC-SPUG) filed with respondent Energy
RegulatoryCommission (ERC) a petition for the availment from
the Universal Charge of its share for MissionaryElectrification.
On May 7, 2002, NPC filed another petition with ERC, praying that the
proposed share from theUniversal Charge for the Environmental
charge be approved for withdrawal from the SpecialTrust Fund
(STF) managed by respondent Power Sector Assets and Liabilities
Management Group (PSALM) for therehabilitation and management
of watershed areas. On December 20, 2002, the ERC issued an Order
provisionallyapproving the computed amount as the share of the
NPC-SPUG from the Universal Charge for
MissionaryElectrification and authorizing the National Transmission
Corporation (TRANSCO) and Distribution Utilities to collectthe same
from its end-users on a monthly basis. On August 13, 2003, NPC-
SPUG filed a Motion for Reconsiderationasking the ERC, among
others,[14] to set aside the Decision. On April 2, 2003, ERC authorized
the NPC to draw upto P70,000,000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds
forthe Environmental Fund component of the Universal Charge. On
the basis of the said ERC decisions, respondent Panay Electric
Company, Inc. (PECO) charged petitioner Romeo P.Gerochi and all
other end-users with the Universal Charge as reflected in their
respective electric bills starting from themonth of July 2003.
Petitioners submit that the assailed provision of law and its
IRR which sought to implement the same areunconstitutional
on the following grounds:1) The universal charge provided for under
Sec. 34 of the EPIRA and sought to be implemented under Sec.
2,Rule 18 of the IRR of the said law is a tax which is to be collected
from all electric end-users and self-generating entities. The power to
tax is strictly a legislative function and as such, the delegation of
saidpower to any executive or administrative agency like the ERC is
unconstitutional, giving the sameunlimited authority. The assailed
provision clearly provides that the Universal Charge is to be
determined,fixed and approved by the ERC, hence leaving to the latter
complete discretionary legislative authority.2) The ERC is also
empowered to approve and determine where the funds collected
should be used.3) The imposition of the Universal Charge on all end-
users is oppressive and confiscatory and amounts totaxation without
representation as the consumers were not given a chance to be heard
and represented.Respondent PSALM through the Office of the
Government Corporate Counsel (OGCC) and Respondents
Departmentof Energy (DOE), ERC, and NPC, through the Office of the
Solicitor General (OSG) contends:1) Unlike a tax which is imposed to
provide income for public purposes, the assailed Universal Charge is
leviedfor a specific regulatory purpose, which is to ensure the viability
of the country's electric power industry. 2) It is exacted by the State in
the exercise of its inherent police power. On this premise, PSALM
submits thatthere is no undue delegation of legislative power to the
ERC since the latter merely exercises a limitedauthority or discretion
as to the execution and implementation of the provisions of the EPIRA.
3) Universal Charge does not possess the essential characteristics of
a tax, that its imposition would redoundto the benefit of the electric
power industry and not to the public, and that its rate is uniformly levied
onelectricity end-users, unlike a tax which is imposed based on the
individual taxpayer's ability to pay. 4) Imposition of the Universal
Charge is not oppressive and confiscatory since it is an exercise of the
policepower of the State and it complies with the requirements of due
 7
process. PECO argues that it is duty-bound to collect and remit the
amount pertaining to the Missionary Electrification andEnvironmental
Fund components of the Universal Charge, pursuant to Sec. 34 of the
EPIRA and the Decisions in ERCCase Nos. 2002-194 and 2002-
165.Otherwise, PECO could be held liable under Sec. 46[24] of the
EPIRA, whichimposes fines and penalties for any violation of its
provisions or its IRR.
ISSUE 1) Whether or not, the Universal Charge imposed under Sec.
34 of the EPIRA is a tax
2) Whether or not there is undue delegation of legislative power to tax
on the part of the ERC.
HELD
1st ISSUE
The conservative and pivotal distinction between these two powers
rests in the purpose for which the charge ismade. If generation of
revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but ifregulation is the primary purpose, the fact that
revenue is incidentally raised does not make the imposition a tax.
Inexacting the assailed Universal Charge through Sec. 34 of the
EPIRA, the State's police power, particularly itsregulatory dimension,
is invoked. Such can be deduced from Sec. 34 which enumerates the
purposes for which theUniversal Charge is imposed. From the
aforementioned purposes, it can be gleaned that the assailed
Universal Chargeis not a tax, but an exaction in the exercise of the
State's police power. Public welfare is surely promoted.
2nd ISSUE
There is no undue delegation of legislative power to the ERC.The
principle of separation of powers ordains that each of the three
branches of government has exclusive cognizanceof and is supreme
in matters falling within its own constitutionally allocated sphere. A
logical corollary to the doctrineof separation of powers is the principle
of non-delegation of powers, as expressed in the Latin maxim
potestas delegatanon delegari potest (what has been delegated
cannot be delegated). This is based on the ethical principle that
suchdelegated power constitutes not only a right but a duty to be
performed by the delegate through the instrumentality ofhis own
judgment and not through the intervening mind of another. In the face
of the increasing complexity of modern life, delegation of legislative
power to various specializedadministrative agencies is allowed as an
exception to this principle. Given the volume and variety of interactions
intoday's society, it is doubtful if the legislature can promulgate laws
that will deal adequately with and respond promptlyto the minutiae of
everyday life. Hence, the need to delegate to administrative bodies -
the principal agencies tasked toexecute laws in their specialized fields
- the authority to promulgate rules and regulations to implement a
given statuteand effectuate its policies. All that is required for the valid
exercise of this power of subordinate legislation is that theregulation
be germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but inconformity with, the
standards prescribed by the law. These requirements are
denominated as the completeness test andthe sufficient standard test.
Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such thatwhen it reaches the
delegate, the only thing he will have to do is to enforce it. The second
test mandates adequateguidelines or limitations in the law to
determine the boundaries of the delegate's authority and prevent the
delegationfrom running riot. The Court finds that the EPIRA, read and
appreciated in its entirety, in relation to Sec. 34 thereof, iscomplete in
all its essential terms and conditions, and that it contains sufficient
standards
1st test –
Although Sec. 34 of the EPIRA merely provides that within one (1)
year from the effectivity thereof, aUniversal Charge to be determined,
fixed and approved by the ERC, shall be imposed on all electricity end-
users, andtherefore, does not state the specific amount to be paid as
Universal Charge, the amount nevertheless is made certain bythe
legislative parameters provided in the law itself. Moreover, contrary
to the petitioners contention, the ERC does notenjoy a wide latitude of
discretion in the determination of the Universal Charge. Thus, the law
is complete and passesthe first test for valid delegation of legislative
power.
2nd test
Provisions of the EPIRA such as, among others, to ensure the total
electrification of the country and thequality, reliability, security and
affordability of the supply of electric power[59] and watershed
rehabilitation andmanagement[60] meet the requirements for valid
 8

delegation, as they provide the limitations on the ERCs power
toformulate the IRR. These are sufficient standards.From the
foregoing disquisitions, we therefore hold that there is no undue
delegation of legislative power to theERC. Petitioners failed to pursue
in their Memorandum the contention in the Complaint that the
imposition of theUniversal Charge on all end-users is oppressive
and confiscatory, and amounts to taxation
withoutrepresentation. Hence, such contention is deemed waived or
abandoned. Moreover, the determination ofwhether or not a tax is
excessive, oppressive or confiscatory is an issue which essentially
involves questions offact, and thus, this Court is precluded from
reviewing the same.Finally, every law has in its favor the presumption
of constitutionality, and to justify its nullification, theremust be a clear
and unequivocal breach of the Constitution and not one that is
doubtful, speculative, orargumentative. Indubitably, petitioners failed
to overcome this presumption in favor of the EPIRA. We find noclear
violation of the Constitution which would warrant a pronouncement
that Sec. 34 of the EPIRA and Rule18 of its IRR are unconstitutional
and void.
WHEREFORE, the instant case is hereby DISMISSED for lack of merit
period of (1) one year after the effectively of the EPIRA Law. The
universal charge to be collected would serve as payment for
government debts, missionary electrification, equalization of taxes and
royalties applied to renewable energy and imported energy,
environmental charge and for a charge to account for all forms of cross
subsidies for a period not exceeding three years. The universal charge
shall be collected by the ERC on a monthly basis from all end users
and will then be managed by the PSALM Corp. through the creation
of a special trust fund.
ISSUE:
Whether or not there is an undue delegation of the power to tax on the
part of the ERC
HELD:
No, the universal charge as provided for in section 34 is not a tax but
an exaction of the regulatory power (police power) of the state. The
universal charge under section 34 is incidental to the regulatory duties
of the ERC, hence the provision assailed is not for generation of
revenue and therefore it cannot be considered as tax, but an execution
of the states police power thru regulation.

Moreover, the amount collected is not made certain by the ERC, but
G.R. No. 159796 July 17, 2007 by the legislative parameters provided for in the law (RA 9136) itself,
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and it therefore cannot be understood as a rule solely coming from the
ENVIRONMENTALIST CONSUMERS NETWORK, INC. ERC. The ERC in this case is only a specialized administrative agency
(ECN), petitioners which is tasked of executing a subordinate legislation issued by
vs congress; which before execution must pass both the completeness
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY test and the sufficiency of standard test. The court in appreciating
COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC), Section 34 of RA 9136 in its entirety finds the said law and the assailed
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT portions free from any constitutional defect and thus deemed complete
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP and sufficient in form.
(SPUG), and PANAY ELECTRIC COMPANY INC.
(PECO),respondents.

FACTS: https://vdocuments.site/gerochi-vsdoe-grno159796-july-17-2007.html

On June 8, 2001 Congress enacted RA 9136 or the Electric Power

Industry Act of 2001. Petitioners Romeo P. Gerochi and company
assail the validity of Section 34 of the EPIRA Law for being an undue
delegation of the power of taxation. Section 34 provides for the
imposition of a “Universal Charge” to all electricity end users after a
 9

Herein, the Act imposes a tax of P2 per square meter or a fraction

thereof upon every electric sign, billboard, etc. Wherever found in the
Philippine Islands. The rule of taxation upon such signs is uniform
4. Churchill vs. Concepcion, 34 Phil. 969 throughout the islands. The rule does not require taxes to be graded
according to the value of the subjects upon which they are imposed,
especially those levied as privilege or occupation taxes.
Churchill v Concepcion (1916)

Churchill v Concepcion

GR No 11572, September 22, 1916

FACTS:

Section 100 of Act 2339 imposed an annual tax of P4 per square meter
upon electric signs, billboards, and spaces used for posting or
displaying temporary signs, and all signs displayed on premises not
occupied by buildings. The section was amended by Act 2432,
reducing the tax to P2 per square meter. Francis A. Churchill and
Stewart Tait, co-partners in Mercantile Advertising Agency, owned a
billboard to which they were taxes at P104. The tax was paid under
protest. Churchill and Tait instituted the action to recover the amount.

ISSUE:

Is the statute and the tax imposed void for lack of uniformity?

RULING:

No, the tax is valid.

Uniformity in taxation means that all taxable articles or kinds of

property, of the same class, shall be taxed at the same rate. It does
not mean that all lands, chattels, securities, incomes, occupations,
franchises, privileges, necessities, and luxuries shall all be assessed
at the same rate. Different articles may be taxed at different amounts
provided the rate is uniform on the same class everywhere, with all
people, at all times.
 10
5. CIR vs. Eastern Telecommunications, 624 SCRA
340
Commissioner of Internal Revenue v. Eastern Telecommunications
Philippines
G.R. No. 163835 July 7, 2010
Brion, J.
Doctrine:
Lapses in the literal observance of a rule of procedure may be
overlooked when they have not prejudiced the adverse party and
especially when they are more consistent with upholding settled
principles in taxation.
The burden of strict compliance with statutory and administrative
requirements by the person claiming for a tax refund cannot be offset
by the non-observance of procedural technicalities by the
government’s tax agents when the non-observance of the remedial
measure addressing it does not in any manner prejudice the
taxpayer’s due process rights.
Facts:
Eastern filed with the CIR a written application for refund or credit of
unapplied input taxes it paid on the imported equipment purchased
during 1995 and 1996 amounting to P22,013,134.00. To toll the
running of the two-year prescriptive period under the same provision,
Eastern filed an appeal with the CTA. The CTA found that Eastern has
a valid claim for the refund/credit of the unapplied input taxes,
declaring it entitled to a tax refund of P16,229,100.00.
The CIR filed a motion for reconsideration of the CTA’s decision.
Subsequently, it filed a supplemental motion for reconsideration. The
CTA denied the CIR’s motion for reconsideration. The CIR then
elevated the case to the CA, who affirmed the CTA ruling and likewise
denied the subsequent motion for reconsideration. Hence, the present
petition.
The CIR posits that, applying Section 104(A) of the Tax Code on
apportionment of tax credits, Eastern is entitled to a tax refund of only
a portion of the amount claimed. Since the VAT returns clearly
reflected income from exempt sales, the CIR asserts that this
constitutes as an admission on Eastern’s part that it engaged in
transactions not subject to VAT. Hence, the proportionate allocation
of the tax credit to VAT and non-VAT transactions provided in Section
104(A) of the Tax Code should apply.
Eastern objects to the arguments raised in the petition, alleging that
these have not been raised in the Answer filed by the CIR before the
CTA and was only raised. In fact, the CIR only raised the applicability
of Section 104(A) of the Tax Code in his supplemental motion for
reconsideration of the CTA’s ruling. Eastern claims that for the CIR to
raise such an issue now would constitute a violation of its right to due
process; following settled rules of procedure and fair play, the CIR
should not be allowed at the appeal level to change his theory of the
case.
Eastern further argues that there is no evidence on record that would
evidently show that respondent is also engaged in other transactions
that are not subject to VAT.
Issue:
Whether or not the rule in Section 104(A) of the Tax Code on the
apportionment of tax credits can be applied in appreciating Eastern’s
claim for tax refund, considering that the matter was raised by the CIR
only when he sought reconsideration of the CTA ruling
Held:
 11

Yes. The question of the applicability of Section 104(A) of the Tax measure addressing it does not in any manner prejudice the
Code was already raised but the tax court did not rule on it. This failure taxpayer’s due process rights.
should not be taken against the CIR. The mere declaration of exempt
sales in the VAT returns, whether based on Section 103 of the Tax
Code or some other special law, should have prompted for the Lapses in the literal observance of a rule of procedure may be
application of Section 104 (A) of the Tax Code to Eastern’s claim. overlooked when they have not prejudiced the adverse party and
especially when they are more consistent with upholding settled
principles in taxation.
The general rule is that appeals can only raise questions of law or fact
that (a) were raised in the court below, and (b) are within the issues
framed by the parties therein (People v. Echegaray, G.R. No. 117472).
An issue which was neither averred in the pleadings nor raised during
trial in the court below cannot be raised for the first time on appeal.

The rule against raising new issues on appeal is not without

exceptions; it is a procedural rule that the Court may relax when
compelling reasons so warrant or when justice requires it. What
constitutes good and sufficient cause that would merit suspension of
the rules is discretionary upon the courts (CIR v. Mirant Pagbilao
Corporation, G.R. No. 159593). Another exception is when the
question involves matters of public importance.

“Taxes are the lifeblood of the government.” For this reason, the right
of taxation cannot easily be surrendered; statutes granting tax
exemptions are considered as a derogation of the sovereign authority
and are strictly construed against the person or entity claiming the
exemption. Claims for tax refunds, when based on statutes granting
tax exemption or tax refund, partake of the nature of an exemption;
thus, the rule of strict interpretation against the taxpayer-claimant
similarly applies (CIR v. Fortune Tobacco Corporation, G.R. Nos.
167274-75).

The taxpayer is charged with the heavy burden of proving that he has
complied with and satisfied all the statutory and administrative
requirements to be entitled to the tax refund. This burden cannot be
offset by the non-observance of procedural technicalities by the
government’s tax agents when the non-observance of the remedial
 12
6. ABAKADA Guro vs. Ermita, 469 SCRA 14
Facts:
ABAKADA GURO Party List, et al., filed a petition for prohibition o
questioning the constitutionality of Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC).
Section 4 imposes a 10% VAT on sale of goods and properties;
Section 5 imposes a 10% VAT on importation of goods; and
Section 6 imposes a 10% VAT on sale of services and use or lease of
properties;
These provisions contain a provision which authorizing the President,
upon recommendation of the Secretary of Finance, to raise the VAT
rate to 12%, effective January 1, 2006, after specified conditions have
been satisfied.
Issues:
Whether or not there is a violation of Article VI, Section 24 of the
Constitution.
Whether or not there is undue delegation of legislative power in
violation of Article VI Sec 28(2) of the Constitution.
Whether or not there is a violation of the due process and equal
protection of the Constitution.
Ruling:
No, the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its constitutional power
to introduce amendments to the House bill when it included provisions
in Senate Bill No. 1950 amending corporate income taxes,
percentage, and excise and franchise taxes.
No, there is no undue delegation of legislative power but only of the
discretion as to the execution of a law. This is constitutionally
permissible. Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must
do it, and what is the scope of his authority; in our complex economy
that is frequently the only way in which the legislative process can go
forward. In this case, it is not a delegation of legislative power but a
delegation of ascertainment of facts upon which enforcement and
administration of the increased rate under the law is contingent.
No, the power of the State to make reasonable and natural
classifications for the purposes of taxation has long been established.
Whether it relates to the subject of taxation, the kind of property, the
rates to be levied, or the amounts to be raised, the methods of
assessment, valuation and collection, the State’s power is entitled to
presumption of validity. As a rule, the judiciary will not interfere with
such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.
 13
7. Paseo Realty and Development Corp. vs. CA, G.R.
No. 119286, October 13, 2004
PASEO REALTY AND DEVELOPMENT CORP. vs. CA
(G.R. No. 119286; 13 October 2004)
Facts:
Petitioner filed a its Income Tax Return (ITR) for the
calendar year 1989. He later filed with respondent CTA
for a refund of excess creditable taxes withholding
(CTW) and income taxes for the years 1989 and 1990 in
the aggregate amount of 147, 036.15.
Respondent Commissioner (CIR) filed an Answer
stating some defenses. The Court rendered decision in
favor of the petitioner. However, CIR filed a Motion for
Reconsideration (MFR) alleging that the amount sought
to be refunded “has already been included in the 172,
447 which the petitioner applied as tax credit for the
succeeding taxable year 1990.
Upon the respondent Court (RC) dismissed the petition,
the petitioner filed MFR which was denied by the RC.
Thus, petitioner filed a petition for Review before the CA.
The appellate court held that petitioner is not entitled to
a refund because it appears that the latter did not specify
the amount to be refunded and the amount to be applied
as tax credit to the succeeding taxable year, but only
marked an “X” to the box indicating “to be applied as tax
credit to the succeeding taxable year” when the latter
filed its income tax return for the year 1989.
The Office of the Solicitor General (OSG) filed a
Comment that the claimed refund was to be applied
against its tax liability for 1990.
Petitioner filed a Reply that the issue is not whether the
54,104 was included as tax credit to be applied against
its 1990 income tax liability but whether the same
amount was actually applied as tax credit for 1990.
The OSG filed a Rejoinder that petitioner’s 1989 tax
return shows that the latter included 1988 excess credit
which had already been segregated for refund and
specified that the full amount of Php 172, 479.00 be
considered as its tax credit for 1990. The OSG further
contended that the remaining tax credit for 1989 should
be the excess credit to be applied against its 1990 tax
liability. Hence, petitioner ask for a refund of its CTW in
1989 because it had been applied against its 1990 tax
due.
Issue:
Whether or not the petitioner should be refunded.
Ruling:
No. The grant of refund is founded on the assumption
that the tax return is valid. Without the tax return, it is
error to grant a refund since it would be impossible to
determine whether the proper taxes have been
assessed and paid.
In this case, petitioner did not present evidence to prove
that its claimed refund had already been automatically
credited against its 1990 tax liability. The burden of proof
to establish the factual basis of claim for tax credit or
refund lies on the claimant. Tax refunds are construed
strictly against the taxpayer.
Under the provision, the taxpayer is allowed three (3)
options if the sum of its quarterly tax payments made
 14

during the taxable year is not equal to the total tax due
for that year:

pay the balance of the tax still due;

carry-over the excess credit; or
be credited or refunded the amount period.
 15

8. CIR vs. Fortune Tobacco Corp., 559 SCRA 161

(2008)
 16

9. Lutz vs. Araneta, G.R. No. L-7859, December 22,

1955
 17

10. CIR vs. Central Luzon Drug Corp., G.R. No. 159647,
April 15, 2005
 18
11. Carlos Superdrug Corp. vs. DSWD, G.R. No. 166494, June 29,
2007
Political Law 2
On October 1, 2004, Administrative Order (A.O.) No. 171 or the
Policies and Guidelines toImplement the Relevant Provisions of
Republic Act 9257, otherwise known as the "ExpandedSenior Citizens
Act of 2003" was issued by the DOH, providing the grant of twenty
percent (20%)discount in the purchase of unbranded generic
medicines from all establishments dispensingmedicines for the
exclusive use of the senior citizens.On November 12, 2004, the DOH
issued Administrative Order No. 177 12 amending A.O. No.171. Under
A.O. No. 177, the twenty percent discount shall not be limited to the
purchase ofunbranded generic medicines only, but shall extend to
both prescription and non-prescriptionmedicines whether branded or
generic. Thus, it stated that "[t]he grant of twenty percent
(20%)discount shall be provided in the purchase of medicines from all
establishments dispensingmedicines for the exclusive use of
the senior citizens".Petitioners assailed the constitutionality of Section
4 (a) of the Expanded Senior Citizens Act.
Issue:
Whether Section 4 (a) of the law is unconstitutional based on the
following
grounds:1) The law is confiscatory because it infringes Art. III, Sec. 9
of theConstitution which provides that private property shall not
be taken for public usewithout just
compensation;2) It violates the equal protection clause (Art. III, Sec.
1) enshrined in ourConstitution which states that "no person shall be
deprived of life, liberty orproperty without due process of law, nor shall
any person be denied of the equalprotection of the laws;"
and3) The 20% discount on medicines violates the constitutional gua
rantee inArticle XIII, Section 11 that makes "essential goods, health
and other socialservices available to all people at affordable cost."
Held:
No. Based on the DOF Opinion (differentiating tax credit of the old
Senior Citizens Act fromtax deduction under RA 9257), the tax
deduction scheme does not fully reimburse petitioners forthe discount
privilege accorded to senior citizens. This is because the discount is
treated as adeduction, a tax-deductible expense that is subtracted
from the gross income and results in a lowertaxable income. Stated
otherwise, it is an amount that is allowed by law to reduce the income
priorto the application of the tax rate to compute the amount of tax
which is due. Being a tax deduction,the discount does not reduce
taxes owed on a peso for peso basis but merely offers a
fractionalreduction in taxes owed.The permanent reduction in their
total revenues is a forced subsidy corresponding to the taking
ofprivate property for public use or benefit. This constitutes
compensable taking for which petitionerswould ordinarily become
entitled to a just compensation.Just compensation is defined as the
full and fair equivalent of the property taken from its owner bythe
expropriator. The measure is not the taker's gain but the owner's loss.
The word just is used tointensify the meaning of the word
compensation, and to convey the idea that the equivalent to
berendered for the property to be taken shall be real, substantial, full
and ample.This raises the question of whether the State, in promoting
the health and welfare of a special groupof citizens, can impose upon
private establishments the burden of partly subsidizing a
governmentprogram.
Political Law 3
The Court believes so. The Senior Citizens Act was enacted primarily
to maximize the contributionof senior citizens to nation-building, and
to grant benefits and privileges to them for theirimprovement and well-
being as the State considers them an integral part of our society.The
priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself.Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as
follows:SECTION 1. Declaration of Policies and Objectives.
—
Pursuant to Article XV,Section 4 of the Constitution, it is the duty of
the family to take care of its elderly memberswhile the State may
design programs of social security for them. In addition to this,
Section10 in the Declaration of Principles and State Policies provides:
"The State shall providesocial justice in all phases of national
 19
development." Further, Article XIII, Section 11,provides: "The State
shall adopt an integrated and comprehensive approach to
healthdevelopment which shall endeavor to make essential goods,
health and other social servicesavailable to all the people at affordable
cost. There shall be priority for the needs of theunderprivileged sick,
elderly, disabled, women and children." Consonant with
theseconstitutional principles the following are the declared policies of
this Act:xxx xxx
xxx(f) To recognize the important role of the private sector in the impr
ovement of thewelfare of senior citizens and to actively seek their
partnership.
To implement the above policy, the law grants a twenty percent
discount to senior citizens formedical and dental services,
and diagnostic and laboratory fees; admission fees charged
by theaters,concert halls, circuses, carnivals, and other similar places
of culture, leisure and amusement; faresfor domestic land, air and sea
travel; utilization of services in hotels and similar
lodgingestablishments, restaurants and recreation centers; and
purchases of medicines for the exclusive useor enjoyment of senior
citizens. As a form of reimbursement, the law provides that
businessestablishments extending the twenty percent discount to
senior citizens may claim the discount asa tax deduction.The law is a
legitimate exercise of police power which, similar to the power of
eminent domain,has general welfare for its object. Police power is not
capable of an exact definition, but has beenpurposely veiled in general
terms to underscore its comprehensiveness to meet all exigencies
andprovide enough room for an efficient and flexible response to
conditions and circumstances, thusassuring the greatest benefits.
Accordingly, it has been described as "the most essential, insistentand
the least limitable of powers, extending as it does to all the great public
needs." It is "[t]hepower vested in the legislature by the constitution to
make, ordain, and establish all manner ofwholesome and reasonable
laws, statutes, and ordinances, either with penalties or without,
notrepugnant to the constitution, as they shall judge to be for the good
and welfare of thecommonwealth, and of the subjects of the same."For
this reason, when the conditions so demand as determined by the
legislature, property rightsmust bow to the primacy of police power
because property rights, though sheltered by due process,must yield
to general welfare.Police power as an attribute to promote the
common good would be diluted considerably if on themere plea
of petitioners that they will suffer loss of earnings and capital,
the questioned provisionis invalidated. Moreover, in the absence of
evidence demonstrating the alleged confiscatory effect
Political Law 4
of the provision in question, there is no basis for its nullification in view
of the presumption ofvalidity which every law has in its favor.Given
these, it is incorrect for petitioners to insist that the grant of the senior
citizen discount isunduly oppressive to their business, because
petitioners have not taken time to calculate correctlyand come up with
a financial report, so that they have not been able to show properly
whether ornot the tax deduction scheme really works greatly to their
disadvantage.It is unfair for petitioners to criticize the law because
they cannot raise the prices of their medicinesgiven the cutthroat
nature of the players in the industry. It is a business decision on the
part ofpetitioners to peg the mark-up at 5%. Selling the medicines
below acquisition cost, as alleged bypetitioners, is merely a result of
this decision. Inasmuch as pricing is a property right, petitionerscannot
reproach the law for being oppressive, simply because they cannot
afford to raise their pricesfor fear of losing their customers to
competition.The Court is not oblivious of the retail side of the
pharmaceutical industry and the competitivepricing component of
the business. While the Constitution protects property
rights, petitioners mustaccept the realities of business and the State,
in the exercise of police power, can intervene in theoperations of a
business which may result in an impairment of property rights in the
process.The right to property has a social dimension. While Article XIII
of the Constitution provides theprecept for the protection of property,
various laws and jurisprudence, particularly on agrarianreform and the
regulation of contracts and public utilities, continuously serve as a
reminder that theright to property can be relinquished upon the
command of the State for the promotion of publicgood.The success of
the senior citizens program rests largely on the support imparted by
petitioners andthe other private establishments concerned. This being
the case, the means employed in invokingthe active participation of
the private sector, in order to achieve the purpose or objective of the
law,is reasonably and directly related. Without sufficient proof that
Section 4 (a) of R.A. No. 9257 isarbitrary, and that the continued
implementation of the same would be unconscionably detrimentalto
petitioners, the Court will refrain from quashing a legislative act
 20
12. Manila Memorial Park, Inc. vs. Sec. of DSWD, G.R.
No. 175356, December 3, 2013
711 SCRA 302
G.R. No. 175356
December 3, 2013
TOPIC: Bill of Rights; Eminent Domain v. Police Power
FACTS: RA 7432 was passed into law (amended by RA
9257), granting senior citizens 20% discount on certain
establishments.
To implement the tax provisions of RA 9257, the
Secretary of Finance and the DSWD issued its own Rules
and Regulations.
Hence, this petition.
Petitioners are not questioning the 20% discount granted
to senior citizens but are only assailing the
constitutionality of the tax deduction scheme prescribed
under RA 9257 and the implementing rules and
regulations issued by the DSWD and the DOF.
Petitioners posit that the tax deduction scheme
contravenes Article III, Section 9 of the Constitution,
which provides that: "private property shall not be taken
for public use without just compensation."
Respondents maintain that the tax deduction scheme is a
legitimate exercise of the State’s police power.
ISSUE: Whether the legally mandated 20% senior
citizen discount is an exercise of police power or eminent
domain.
RULING: The 20% senior citizen discount is an exercise
of police power.
It may not always be easy to determine whether a
challenged governmental act is an exercise of police
power or eminent domain. The judicious approach,
therefore, is to look at the nature and effects of the
challenged governmental act and decide on the basis
thereof.
The 20% discount is intended to improve the welfare of
senior citizens who, at their age, are less likely to be
gainfully employed, more prone to illnesses and other
disabilities, and, thus, in need of subsidy in purchasing
basic commodities. It serves to honor senior citizens who
presumably spent their lives on contributing to the
development and progress of the nation.
In turn, the subject regulation affects the pricing, and,
hence, the profitability of a private establishment.
The subject regulation may be said to be similar to, but
with substantial distinctions from, price control or rate of
return on investment control laws which are traditionally
regarded as police power measures.
The subject regulation differs there from in that (1) the
discount does not prevent the establishments from
adjusting the level of prices of their goods and services,
and (2) the discount does not apply to all customers of a
given establishment but only to the class of senior
citizens. Nonetheless, to the degree material to the
resolution of this case, the 20% discount may be properly
viewed as belonging to the category of price regulatory
measures which affect the profitability of establishments
subjected thereto. On its face, therefore, the subject
regulation is a police power measure.
 21
13. o Planters Product Inc. vs. Fertiphil Corp., 564 SCRA 385
(2008)
Product v. Fertiphil Corp.
G.R. No. 166006 March 14, 2008
REYES, R.T., J.
Lessons Applicable: Bet. private and public suit, easier to file
public suit, Apply real party in interest test for private suit and
direct injury test for public suit, Validity test varies depending on
which inherent power
Laws Applicable:
FACTS:
 President Ferdinand Marcos, exercising his legislative
powers, issued LOI No. 1465 which provided, among others,
for the imposition of a capital recovery component (CRC) on
the domestic sale of all grades of fertilizers which resulted in
having Fertiphil paying P 10/bag sold to the Fertilizer and
Perticide Authority (FPA).
 FPA remits its collection to Far East Bank and Trust
Company who applies to the payment of corporate debts of
Planters Products Inc. (PPI)
 After the Edsa Revolution, FPA voluntarily stopped the
imposition of the P10 levy. Upon return of democracy,
Fertiphil demanded a refund but PPI refused. Fertiphil filed a
complaint for collection and damages against FPA and PPI
with the RTC on the ground that LOI No. 1465 is unjust,
unreaonable oppressive, invalid and unlawful resulting to
denial of due process of law.
 FPA answered that it is a valid exercise of the police power of
the state in ensuring the stability of the fertilizing industry in
the country and that Fertiphil did NOT sustain damages since
the burden imposed fell on the ultimate consumers.
 RTC and CA favored Fertiphil holding that it is an exercise of
the power of taxation ad is as such because it is NOT for
public purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation
rather the police power
Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real
party in interest" or party who stands to be benefited or injured by
the judgment in the suit. In public suits, there is the right of the
ordinary citizen to petition the courts to be freed from unlawful
government intrusion and illegal official action subject to the direct
injury test or where there must be personal and substantial interest
in the case such that he has sustained or will sustain direct injury
as a result. Being a mere procedural technicality, it has also been
held that locus standi may be waived in the public interest such as
cases of transcendental importance or with far-reaching
implications whether private or public suit, Fertiphil has locus
standi.
2. As a seller, it bore the ultimate burden of paying the levy which
made its products more expensive and harm its business. It is also
of paramount public importance since it involves the
constitutionality of a tax law and use of taxes for public purpose.
3. Yes. Police power and the power of taxation are inherent powers
of the state but distinct and have different tests for validity. Police
power is the power of the state to enact the legislation that may
interfere with personal liberty on property in order to promote
general welfare. While, the power of taxation is the power to levy
taxes as to be used for public purpose. The main purpose of police
power is the regulation of a behavior or conduct, while taxation is
revenue generation. The lawful subjects and lawful means tests
are used to determine the validity of a law enacted under the police
power. The power of taxation, on the other hand, is circumscribed
by inherent and constitutional limitations.
In this case, it is for purpose of revenue. But it is a robbery for the
State to tax the citizen and use the funds generation for a private
purpose. Public purpose does NOT only pertain to those purpose
which are traditionally viewed as essentially governmental function
such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice. Thus,
public money may now be used for the relocation of illegal settlers,
low-cost housing and urban or agrarian reform.
 22
14. Bagatsing vs. Ramirez, 74 SCRA 407
BAGATSING
vs.
RAMIREZ74 SCRA 306G.R. No. L-41631 December 17,
1976MARTIN,
J.:
Facts:Municipal Board of Manila enacted Ordinance No. 7522, "AN
ORDINANCE REGULATING THEOPERATION OF PUBLIC
MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF
STALLSAND PROVIDING PENALTIES FOR VIOLATION THEREOF
AND FOR OTHER PURPOSES." Thepetitioner City Mayor, Ramon D.
Bagatsing, approved the ordinance.Respondent Federation of Manila
Market Vendors, Inc. commenced a Civil Case before the CFI
byrespondent Judge, seeking the declaration of nullity of Ordinance
No. 7522 for the reason that (a)the publication requirement under the
Revised Charter of the City of Manila has not been compliedwith; (b)
the Market Committee was not given any participation in the
enactment of the ordinance, asenvisioned by Republic Act 6039; (c)
Section 3 (e) of the Anti-Graft and Corrupt Practices Act hasbeen
violated; and (d) the ordinance would violate Presidential Decree No.
7 of September 30, 1972prescribing the collection of fees and charges
on livestock and animal products.Private respondent also bewails that
the market stall fees imposed in the disputed ordinance arediverted to
the exclusive private use of the Asiatic Integrated Corporation since
the collection of saidfees had been let by the City of Manila to the said
corporation in a "Management and OperatingContract."Resolving the
accompanying prayer for the issuance of a writ of preliminary
injunction, respondentJudge issued an order denying the plea for
failure of the respondent Federation of Manila MarketVendors, Inc. to
exhaust the administrative remedies outlined in the Local Tax
Code.After due hearing on the merits, respondent Judge rendered
another decision, declaring the nullity of Ordinance No. 7522 of the
City of Manila on the primary ground of non-compliance with
therequirement of publication under the Revised City
Charter.Petitioners moved for reconsideration of the adverse decision,
stressing that (a) only a post-publication is required by the Local Tax
Code; and (b) private respondent failed to exhaust alladministrative
remedies before instituting an action in court.Respondent Judge
denied the motion. Hence petitioners brought the matter to the
Supreme Courtthrough the a petition for review on
certiorari.Issue:What law shall govern the publication of a tax
ordinance enacted by the Municipal Board of Manila,the Revised City
Charter (R.A. 409, as amended), which requires publication of the
ordinance beforeits enactment and after its approval, or the Local Tax
Code (P.D. No. 231), which only demandspublication after
approval.Held:
There is no question that the Revised Charter of the City of Manila is
a
special act
since it relatesonly to the City of Manila, whereas the Local Tax Code
is a general law because it appliesuniversally to all local governments.
Blackstone defines general law as a universal rule affecting theentire
community and special law as one relating to particular persons or
things of a class. And therule commonly said is that a prior special law
is not ordinarily repealed by a subsequent general law.The fact that
one is special and the other general creates a presumption that the
special is to beconsidered as remaining an exception of the general,
one as a general law of the land, the other asthe law of a particular
case. However, the rule readily yields to a situation where the special
statuterefers to a subject in general, which the general statute treats
in
particular
. The exactly is thecircumstance obtaining in the case at bar. Section
17 of the Revised Charter of the City of Manilaspeaks of "ordinance"
in general, i.e., irrespective of the nature and scope thereof,
whereas
, Section43 of the Local Tax Code relates to "ordinances levying or
imposing taxes, fees or other charges" inparticular. In regard,
therefore, to ordinances in general, the Revised Charter of the City of
Manila isdoubtless dominant, but, that dominant force loses its
continuity when it approaches the realm of "ordinances levying or
imposing taxes, fees or other charges" in particular. There, the Local
TaxCode controls. Here, as always, a general provision must give way
 23

to a particular provision. Specialprovision governs. This is especially fund israised. It is not dependent on the nature or character of the
true where the law containing the particular provision wasenacted later person or corporation whoseintermediate agency is to be used in
than the one containing the general provision. The City Charter of applying it. The people may be taxed for a public purpose,although it
Manila waspromulgated on June 18, 1949 as against the Local Tax be under the direction of an individual or private
Code which was decreed on June 1, 1973.The law-making power corporation.ACCORDINGLY, the decision of the court below is hereby
cannot be said to have intended the establishment of conflicting and reversed and set aside. Ordinance No.7522 is held validly enacted.
hostilesystems upon the same subject, or to leave in force provisions
of a prior law by which the new will of the legislating power may be
thwarted and overthrown. Such a result would render legislation
auseless and Idle ceremony, and subject the law to the reproach of
uncertainty and unintelligibility.It is maintained by private respondent
that the subject ordinance is not a "tax ordinance," becausethe
imposition of rentals, permit fees, tolls and other fees is not strictly a
taxing power but a revenue-raising function, so that the procedure for
publication under the Local Tax Code finds no application.The
pretense bears its own marks of fallacy. Precisely, the raising of
revenues is the principal objectof taxation. Under Section 5, Article XI
of the New Constitution, "Each local government unit shallhave the
power to create its own sources of revenue and to levy taxes, subject
to such provisions asmay be provided by law." And one of those
sources of revenue is what the Local Tax Code points toin particular:
"Local governments may collect fees or rentals for the occupancy or
use of publicmarkets and premises * * *."

14

They can provide for and regulate market stands, stalls andprivileges,
and, also, the sale, lease or occupancy thereof. They can license, or
permit the use of,lease, sell or otherwise dispose of stands, stalls or
marketing privileges.Private respondent bewails that the market stall
fees imposed in the disputed ordinance are divertedto the exclusive
private use of the Asiatic Integrated Corporation since the collection
of said fees hadbeen let by the City of Manila to the said corporation
in a "Management and Operating Contract."The assumption is of
course saddled on erroneous premise. The fees collected do not go
direct tothe private coffers of the corporation. Ordinance No. 7522 was
not made for the corporation but for the purpose of raising revenues
for the city. That is the object it serves. The entrusting of thecollection
of the fees does not destroy the public purpose of the ordinance. So
long as the purpose ispublic, it does not matter whether the agency
through which the money is dispensed is public or private. The right to
tax depends upon the ultimate use, purpose and object for which the
 24

15. o Caltex Phils. vs. COA, G.R. No. 92585, May 8, reimbursementcertificates which the latter denied.COA
1992 disallowed recover of financing charges, inventory losses
and sales tomarcopper and atlas but allowed the recovery
of product sale or those arisingfrom export
G.R. No. 92585 May 8, 1992CALTEX PHILIPPINES, INC., sales.Petitioner’s Contention:Department of Finance
petitioner,vs.THE HONORABLE COMMISSION ON issued Circular No. 4-88 allowing reimbursement.Denial of
AUDIT, HONORABLECOMMISSIONER BARTOLOME C. claim for reimbursement would be inequitable. NCC
FERNANDEZ and HONORABLECOMMISSIONER (compensation)and Sec. 21, Book V, Title I-B of the
ALBERTO P. CRUZ, respondents. Revised Administrative Code (Retention of Money for
Satisfaction of Indebtedness to Government) allows
Topic: (1) tax vs. ordinary debt, (2) purpose/objective of offsetting.Amounts due do not arise as a result of taxation
taxation: non-revenue / special / regulatoryPonente: since PD 1956 did not create asource of taxation, it instead
Davide, Jr. J. established a special fund. This lack of publicpurpose
DOCTRINE: behind OPSF exactions distinguishes it from
tax.Respondent’s Contention:Based on
A taxpayer may not offset taxes due from the claims that
he may have againstthe government. Francia v. IAC

QUICK FACTS , there’s no offsetting of taxes against the the claimsthat a

taxpayer may have against the government, as taxes do
: Caltex Philippines questions the decisions of COA not arise fromcontracts or depend upon the will of the
fordisallowing the offsetting of its claims for reimbursement taxpayer, but are imposed by law.
with its due OPSFremittance

ISSUE: WON Caltex is entitled to

FACTS: offsettingDECISION: NO. COA AFFIRMEDHELD:
The Oil Price Stabilization Fund (OPSF) was
created under Sec. 8, PD 1956, asamended by EO 137
for the purpose of minimizing frequent price It is settled that a taxpayer may not offset taxes due from
changesbrought about by exchange rate adjustments. It the claimsthat he may have against the government.
will be used to reimburse theoil companies for cost Taxes cannot be subject of compensation because the
increase and possible cost underrecovery incurred dueto government and taxpayer are not mutuallycreditors and
reduction of domestic prices.COA sent a letter to Caltex debtors of each other and a claim for taxes is not such
directing the latter to remit to the OPSF itscollection. adebt, demand, contract or judgment as is allowed to be
Caltex requested COA for an early release of its set-off.
 25

Technically, the oil companies merely act as agents for

the Governmentin the latter’s collection since the taxes
are, in reality, passed unto theend-users – the consuming
public. Their primary obligation is to accountfor and remit
the taxes collection to the administrator of the OPSF.

There is not merit in Caltex’s contention that the OPSF

contributions
arenot for a public purpose because they go to a special
fund of thegovernment. Taxation is no longer envisioned
as a measure merely toraise revenue to support the
existence of the government; taxes may belevied with a
regulatory purpose to provide means for the
rehabilitationand stabilization of a threatened industry
which is affected with publicinterest as to be within the
police power of the State.

The oil industry is greatly imbued with public interest as it

vitally affectsthe general welfare.

PD 1956, as amended by EO No. 137 explicitly provides

that the sourceof OPSF is taxation
 26
16. o Southern Cross Cement Corp. vs. Cement
Manufacturers Assoc. of the Phils., G.R. No. 158540,
August 3, 2005
[G.R. No. 158540. August 3, 2005]
SOUTHERN CROSS CEMENT CORPORATION,
petitioner, vs. CEMENT MANUFACTURERS
ASSOCIATION OF THE PHILIPPINES, THE
SECRETARY OF THE DEPARTMENT OF TRADE AND
INDUSTRY, THE SECRETARY OF THE DEPARTMENT
OF FINANCE and THE COMMISSIONER OF THE
BUREAU OF CUSTOMS, respondents.
Facts:
Republic Act No. 8800, the Safeguard Measures Act
(SMA), which was one of the laws enacted by Congress
soon after the Philippines ratified the General Agreement
on Tariff and Trade (GATT) and the World Trade
Organization (WTO) Agreement.[3] The SMA provides
the structure and mechanics for the imposition of
emergency measures, including tariffs, to protect
domestic industries and producers from increased
imports which inflict or could inflict serious injury on
them.
Petitioner Southern Cross Cement Corporation (Southern
Cross) is a domestic corporation engaged in the business
of cement manufacturing, production, importation and
exportation. Its principal stockholders are Taiheiyo
Cement Corporation and Tokuyama Corporation,
purportedly the largest cement manufacturers in
Japan.[5]
Private respondent Philippine Cement Manufacturers
Corporation[6] (Philcemcor) is an association of
domestic cement manufacturers. It has eighteen (18)
members,[7] per Record. While Philcemcor heralds itself
to be an association of domestic cement manufacturers, it
appears that considerable equity holdings, if not
controlling interests in at least twelve (12) of its member-
corporations, were acquired by the three largest cement
manufacturers in the world, namely Financiere Lafarge
S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim
Ltd. of Switzerland (formerly Holderbank Financiere
Glaris, Ltd., then Holderfin B.V.).
the DTIs disagreement with the conclusions of the Tariff
Commission, but at the same time, ultimately denying
Philcemcors application for safeguard measures on the
ground that the he was bound to do so in light of the
Tariff Commissions negative findings.
Philcemcor challenged this Decision of the DTI Secretary
by filing with the Court of Appeals a Petition for
Certiorari, Prohibition and Mandamus[11] seeking to set
aside the DTI Decision, as well as the Tariff Commissions
Report. The Court of Appeals Twelfth Division, in a
Decision[13] penned by Court of Appeals Associate
Justice Elvi John Asuncion,[14] partially granted
Philcemcors petition.
On 23 June 2003, Southern Cross filed the present
petition, arguing that the Court of Appeals has no
jurisdiction over Philcemcors petition, as the proper
remedy is a petition for review with the CTA conformably
with the SMA, and; that the factual findings of the Tariff
Commission on the existence or non-existence of
conditions warranting the imposition of general
safeguard measures are binding upon the DTI Secretary.
 27

Despite the fact that the Court of Appeals Decision had Whether or not the decision of DTI Secretary, to impose
not yet become final, its binding force was cited by the safeguard measures is valid.
DTI Secretary when he issued a new Decision on 25 June
2003, wherein he ruled that that in light of the appellate
Held:
courts Decision, there was no longer any legal
impediment to his deciding Philcemcors application for
definitive safeguard measures. NO, due to the nature of this case, the Court found that
the DTI should follow the regulations prescribed by SMA.
The Court held that he assailed Decision of the Court of
The Court of Appeals had held that based on the
Appeals is DECLARED NULL AND VOID and SET
foregoing premises, petitioner’s prayer to set aside the
ASIDE. The Decision of the DTI Secretary dated 25 June
findings of the Tariff Commission in its assailed Report
2003 is also DECLARED NULL AND VOID and SET
dated March 13, 2002 is DENIED. On the other hand, the
ASIDE. No Costs.
assailed April 5, 2002 Decision of the Secretary of the
Department of Trade and Industry is hereby SET ASIDE.
Consequently, the case is REMANDED to the public Yet on 25 June 2003, the DTI Secretary issued a
respondent Secretary of Department of Trade and new Decision, ruling this time that that in light of the
Industry for a final decision in accordance with RA 8800 appellate courts Decision there was no longer any legal
and its Implementing Rules and Regulations. Hence, the impediment to his deciding Philcemcors application for
appeal. definitive safeguard measures.[41] He made a
determination that, contrary to the findings of the Tariff
Commission, the local cement industry had suffered
Yet on 25 June 2003, the DTI Secretary issued a new
serious injury as a result of the import
Decision, ruling this time that that in light of the
surges.[42] Accordingly, he imposed a definitive safeguard
appellate courts Decision there was no longer any legal
measure on the importation of gray Portland cement, in
impediment to his deciding Philcemcors application for
the form of a definitive safeguard duty in the amount
definitive safeguard measures.[41] He made a
of P20.60/40 kg. bag for three years on imported gray
determination that, contrary to the findings of the Tariff
Portland Cement.
Commission, the local cement industry had suffered
serious injury as a result of the import surges.[42]
Accordingly, he imposed a definitive safeguard measure
on the importation of gray Portland cement, in the form
of a definitive safeguard duty in the amount of P20.60/40
kg. bag for three years on imported gray Portland
Cement. Hence, the appeal.

Issue:
 28

17. o CIR vs. Ayala Securities Corp., G.R. No. L-

29485, Nov. 21, 1980
 29

18. PBCom vs. CIR, G.R. No. 112024, January 28, 1999
 30

19. o Velera vs. Office of the Ombudsman, 547 SCRA

43
 31
20. o National Power Corp. vs. City of Cabanatuan,
401 SCRA 409
NATIONAL POWER CORPORATION, petitioner,
vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled
corporation created under Commonwealth Act No. 120, as
amended.
For many years now, petitioner sells electric power to the
residents of Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992.7 Pursuant to section 37 of
Ordinance No. 165-92,8 the respondent assessed the
petitioner a franchise tax amounting to P808,606.41,
representing 75% of 1% of the latter’s gross receipts for
the preceding year.
Petitioner refused to pay the tax assessment arguing that
the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a
non-profit organization, it is exempted from the payment of
all forms of taxes, charges, duties or fees in accordance
with sec. 13 of Rep. Act No. 6395, as amended.
The respondent filed a collection suit in the RTC,
demanding that petitioner pay the assessed tax due, plus
surcharge. Respondent alleged that petitioner’s
exemption from local taxes has been repealed by section
193 of the LGC, which reads as follows:
“Sec. 193. Withdrawal of Tax Exemption Privileges.-
Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government owned
or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational institutions,
are hereby withdrawn upon the effectivity of this Code.”
RTC upheld NPC’s tax exemption. On appeal the CA
reversed the trial court’s Order on the ground that section
193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the
petitioner.
ISSUE: W/N the respondent city government has the
authority to issue Ordinance No. 165-92 and impose an
annual tax on “businesses enjoying a franchise
HELD: YES. Taxes are the lifeblood of the government, for
without taxes, the government can neither exist nor
endure. A principal attribute of sovereignty, the exercise of
taxing power derives its source from the very existence of
the state whose social contract with its citizens obliges it
to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from
 32
necessity;32 without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being
of the people.
Section 137 of the LGC clearly states that the LGUs can
impose franchise tax “notwithstanding any exemption
granted by any law or other special law.” This particular
provision of the LGC does not admit any exception. In City
Government of San Pablo, Laguna v. Reyes,74
MERALCO’s exemption from the payment of franchise
taxes was brought as an issue before this Court. The same
issue was involved in the subsequent case of Manila
Electric Company v. Province of Laguna.75 Ruling in favor
of the local government in both instances, we ruled that
the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws, viz:
“It is our view that petitioners correctly rely on provisions
of Sections 137 and 193 of the LGC to support their
position that MERALCO’s tax exemption has been
withdrawn. The explicit language of section 137 which
authorizes the province to impose franchise tax
‘notwithstanding any exemption granted by any law or
other special law’ is all-encompassing and clear. The
franchise tax is imposable despite any exemption enjoyed
under special laws.
Section 193 buttresses the withdrawal of extant tax
exemption privileges. By stating that unless otherwise
provided in this Code, tax exemptions or incentives
granted to or presently enjoyed by all persons, whether
natural or juridical, including government-owned or
controlled corporations except (1) local water districts, (2)
cooperatives duly registered under R.A. 6938, (3) non-
stock and non-profit hospitals and educational institutions,
are withdrawn upon the effectivity of this code, the obvious
import is to limit the exemptions to the three enumerated
entities. It is a basic precept of statutory construction that
the express mention of one person, thing, act, or
consequence excludes all others as expressed in the
familiar maxim expressio unius est exclusio alterius. In the
absence of any provision of the Code to the contrary, and
we find no other provision in point, any existing tax
exemption or incentive enjoyed by MERALCO under
existing law was clearly intended to be withdrawn.
Reading together sections 137 and 193 of the LGC, we
conclude that under the LGC the local government unit
may now impose a local tax at a rate not exceeding 50%
of 1% of the gross annual receipts for the preceding
calendar based on the incoming receipts realized within its
territorial jurisdiction. The legislative purpose to withdraw
tax privileges enjoyed under existing law or charter is
clearly manifested by the language used on (sic) Sections
137 and 193 categorically withdrawing such exemption
subject only to the exceptions enumerated. Since it would
be not only 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.”76 (emphases supplied)
 33

Doubtless, the power to tax is the most effective

instrument to raise needed revenues to finance and
support myriad activities of the local government units for
the delivery of basic services essential to the promotion of
the general welfare and the enhancement of peace,
progress, and prosperity of the people. As this Court
observed in the Mactan case, “the original reasons for the
withdrawal of tax exemption privileges granted to
government-owned or controlled corporations and all other
units of government were that such privilege resulted in
serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises.” With the added
burden of devolution, it is even more imperative for
government entities to share in the requirements of
development, fiscal or otherwise, by paying taxes or other
charges due from them.
 34

21. o CIR vs. Algue, G.R. No. L-28896, February 17, Issue:
1988
Whether or not the Collector of Internal Revenue correctly
Commissioner of Internal Revenue vs Algue Inc., and disallowed the P75, 000.00 deduction claimed by private
Court of Tax Appeals respondent Algue Inc., as legitimate business expenses in
its income tax returns.
GR No. L-28896 February 17,
1988
Ruling:
Facts: No, The Supreme Court agrees with the respondent court
that the amount of the promotional fees was not excessive.
The Philippine Sugar Estate Development Company had
The P75,000.00 was 60% of the total commission. This
earlier appointed Algue Inc., as its agent, authorizing it to
was a reasonable proportion, considering that it was the
sell its land, factories and oil manufacturing process.As
payees who did practically everything, from the formation
such,the corporation worked for the formation of the
of the Vegetable Oil Investment Corporation to the actual
Vegetable Oil Investment Corporation, until they were able
purchase by it of the Sugar Estate properties.
to purchased the PSEDC properties. For this sale, Algue
Inc., received as agent a commission of P126, 000.00, and
it was from this commission that the P75, 000.00
The claimed deduction by the private respondent was
promotional fees were paid to Alberto Guevara, Jr.,
permitted under the Internal Revenue Code and should
Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and
therefore not have been disallowed by the petitioner
Pablo Sanchez.

Commissioner of Internal Revenue contends that the

claimed deduction is not allowed because it was not an
ordinary reasonable or necessary business expense. The
Court of Tax Appeals had seen it differently. Agreeing with
Algue Inc., it held that the said amount had been
legitimately paid by the private respondent for actual
services rendered. The payment was in the form of
promotional fees.
 35

22. o Southern Cross Cement Corp. vs. Phil. Cement

Manufacturers Corp., 434 SCRA 65
 36

23. o Meralco vs. Province of Laguna, 306 SCRA 750 authorizes provincial governments, notwithstanding “any
exemption granted by any law or other special law, . . . (to)
Manila Electric Company v. Province of Laguna (G.R. No.
impose a tax on businesses enjoying a franchise.” A
131359. May 5, 1999)
franchise partakes the nature of a grant which is beyond
18AUG the purview of the non-impairment clause of the
Constitution. Article XII, Section 11, of the 1987
FACTS: Constitution, like its precursor provisions in the 1935 and
MERALCO was granted a franchise by several municipal the 1973 Constitutions, is explicit that no franchise for the
councils and the National Electrification Administration to operation of a public utility shall be granted except under
operate an electric light and power service in the Laguna. the condition that such privilege shall be subject to
Upon enactment of Local Government Code, the amendment, alteration or repeal by Congress as and when
provincial government issued ordinance imposing the common good so requires.
franchise tax. MERALCO paid under protest and later
claims for refund because of the duplicity with Section 1 of
P.D. No. 551. This was denied by the governor (Joey Lina)
relying on a more recent law (LGC). MERALCO filed with
the RTC a complaint for refund, but was dismissed. Hence,
this petition.
ISSUE:
Whether or not the imposition of franchise tax under the
provincial ordinance is violative of the non-impairment
clause of the Constitution and of P.D. 551.
HELD:
No. There is no violation of the non-impairment clause for
the same must yield to the inherent power of the state
(taxation). The provincial ordinance is valid and
constitutional.
RATIO:
The Local Government Code of 1991 has incorporated
and adopted, by and large, the provisions of the now
repealed Local Tax Code. The 1991 Code explicitly
 37

24. o CIR vs. Tokyo Shipping, 244 SCRA 332

 38
25. Roxas v. CTA, 23 SCRA 276 (1968)
G.R. No. L-25043 April 26, 1968
ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own
respective behalf and as judicial co-guardians of JOSE
ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents.
Leido, Andrada, Perez and Associates for petitioners.
Office of the Solicitor General for respondents.
BENGZON, J.P., J.:
Facts:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to
their grandchildren by hereditary succession several properties. To manage
the above-mentioned properties, said children, namely, Antonio Roxas,
Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y
Compania. At the conclusion of the WW2, the tenants who have all been
tilling the lands in Nasugbu for generations expressed their desire to
purchase from Roxas y Cia. the parcels which they actually occupied. For
its part, the Government, in consonance with the constitutional mandate to
acquire big landed estates and apportion them among landless tenant-
farmers, persuaded the Roxas brothers to part with their landholdings.
Conferences were held with the farmers in the early part of 1948 and finally
the Roxas brothers agree to sell 13,500 hectares to the Government for
distribution to actual occupants for a price of P2,079,048.47 plus P300,000
for survey and distribution expenses. It turned out however that the
Government did not have funds to cover the purchase price, and so a special
arrangement was made for the Rehabilitation Finance Corporation to
advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral for
such loan were the lands proposed to be sold to the farmers. Under the
arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same
price but by installment, and contracted with the Rehabilitation Finance
Corporation to pay its loan from the proceeds of the yearly amortizations
paid by the farmers.
The CIR demanded from Roxas y Cia. the payment of deficiency income taxes
resulting from the inclusion as income of Roxas y Cia. of the unreported 50%
of the net profits for 1953 and 1955 derived from the sale of the Nasugbu
farmlands to the tenants, and the disallowance of deductions from gross
income of various business expenses and contributions claimed by Roxas y
Cia. and the Roxas brothers. For the reason that Roxas y CIa. subdivided its
Nasugbu farmlands and sold them to the farmers on installment, the
Commissioner considered the partnership as engaged in the business of real
estate, hence, 100% of the profits derived there from was taxed. The Roxas
brothers protested the assessment but inasmuch as said protest was denied,
they instituted an appeal in the CTA which sustained the assessment.
Hence, this appeal.
Issue:
I. Is the gain derived from the sale of the Nasugbu farm lands an
ordinary gain, hence 100% taxable? And is
Roxas y Cia liable for the payment of deficiency income for the sale
of Nasugbu farmlands?
II. Are the deductions for business expenses and contributions
deductible?
Ruling:
I. NO. The proposition of the CIR cannot be favorably accepted in
this isolated transaction with its peculiar circumstances inspite of the fact
that there were hundreds of vendees. Although they paid for their respective
holdings in installment for the period of 10 years, it would nevertheless
make the vendor Roxas y Cia. a real estate dealer during the 10-year
amortization period. It should be borne in mind that the sale of the Nasugbu
farmlands to the very farmers who tilled them for generations was not only
in consonance with, but more in obedience to the request and pursuant to
the policy of our Government to allocate lands to the landless. It was the
bounden duty of the Government to pay the agreed compensation after it
had persuaded Roxas y Cia. to sell its haciendas, and to subsequently
subdivide them among the farmers at very reasonable terms and prices.
However, the Government could not comply with its duty for lack of funds.
Obligingly, Roxas y Cia. shouldered the Government’s burden, went out of
its way and sold lands directly to the farmers in the same way and under the
same terms as would have been the case had the Government done it itself.
For this magnanimous act, the municipal council of Nasugbu passed a
resolution expressing the people’s gratitude.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale
in question. Hence, pursuant to section 34 of the Tax Code, the land sold to
 39

the farmers are capital assets, and the gain derived from the sale thereof is
capital gain, taxable only to the extent of 50%.
II. DISALLOWED DEDUCTIONS
Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets
to a banquet given in honor of Sergio Osmena and P28.00 for San Miguel
beer given as gifts to various persons. The deduction were claimed as
representation expenses. Representation expenses are deductible from
gross income as expenditures incurred in carrying on a trade or business
under Section 30(a) of the Tax Code provided the taxpayer proves that they
are reasonable in amount, ordinary and necessary, and incurred in
connection with his business. In the case at bar, the evidence does not show
such link between the expenses and the business of Roxas y Cia. The findings
of the Court of Tax Appeals must therefore be sustained (disallowed
deduction).
Rightly, the Commissioner of Internal Revenue disallowed the contribution
to Our Lady of Fatima chapel at the Far Eastern University on the ground
that the said university gives dividends to its stockholders (it should be non-
profit institution. Located within the premises of the university, the chapel
in question has not been shown to belong to the Catholic Church or any
religious organization. On the other hand, the lower court found that it
belongs to the Far Eastern University, contributions to which are not
deductible under Section 30(h) of the Tax Code for the reason that the net
income of said university injures to the benefit of its stockholders. The
disallowance should be sustained.
Doctrines:
I. Sale of property by landowners to tenants under government policy
to allocate lands to the landless subject not subject to real estate dealer’s
tax.

The petitioners also claim deductions for contributions to the Pasay City II. The power of taxation is sometimes called also the power to
Police, Pasay City Firemen, and Baguio City Police Christmas funds, Manila destroy. Therefore it should be exercised with caution to minimize injury
Police Trust Fund, Philippines Herald's fund for Manila's neediest families to the proprietary rights of a taxpayer. It must be exercised fairly, equally
and Our Lady of Fatima chapel at Far Eastern University. and uniformly, lest the tax collector kill the “hen that lays the golden egg”.

The contributions to the Christmas funds of the Pasay City Police, Pasay
City Firemen and Baguio City Police are not deductible for the reason that
the Christmas funds were not spent for public purposes but as Christmas
gifts to the families of the members of said entities. Under Section 39(h), a
contribution to a government entity is deductible when used exclusively for
public purposes. For this reason, the disallowance must be sustained. On the
other hand, the contribution to the Manila Police trust fund is an allowable
deduction for said trust fund belongs to the Manila Police, a government
entity, intended to be used exclusively for its public functions.

The contributions to the Philippines Herald's fund for Manila's neediest

families were disallowed on the ground that the Philippines Herald is not a
corporation or an association contemplated in Section 30 (h) of the Tax
Code. It should be noted however that the contributions were not made to
the Philippines Herald but to a group of civic spirited citizens organized by
the Philippines Herald solely for charitable purposes. There is no question
that the members of this group of citizens do not receive profits, for all the
funds they raised were for Manila's neediest families. Such a group of citizens
may be classified as an association organized exclusively for charitable
purposes mentioned in Section 30(h) of the Tax Code.
 40
26. Mactan Cebu International Airport vs. Marcos, 261
SCRA 667
Facts:
Petitioner Mactan Cebu International Airport Authority
(MCIAA)
Since the time of its creation,... enjoyed the privilege of
exemption from payment of realty taxes in accordance with
Section 14 of its Charter
Office of the Treasurer of the City of Cebu, demanded
payment for realty taxes on several parcels of land
belonging to the petitioner
Petitioner objected to such demand for payment as
baseless and unjustified, claiming in its favor the aforecited
Section 14 of RA 6958 which exempts it from payment of
realty taxes. It was also asserted that it is an
instrumentality of the government performing...
governmental functions, citing Section 133 of the Local
Government Code of 1991 which puts limitations on the
taxing powers of local government units
Section 133. Common Limitations on the Taxing Powers of
Local Government Units. -- Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to the
levy of the... following:
Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and local
government units. (underscoring supplied)
Respondent City refused to cancel and set aside petitioner's
realty tax account, insisting that the MCIAA is a
government-controlled corporation whose tax exemption
privilege has been withdrawn by virtue of Sections 193 and
234 of the Local Government Code... petitioner... was
compelled to pay its tax account "under protest" and
thereafter filed a Petition for Declaratory Relief with the
Regional Trial Court of Cebu
MCIAA basically contended that the taxing powers of local
government units do not extend to the levy of taxes or fees
of any kind on an instrumentality of the national
government. Petitioner insisted that while it is indeed a
government-owned corporation, it... nonetheless stands on
the same footing as an agency or instrumentality of the
national government by the very nature of its powers and
functions.
trial court dismissed the petition... infer and state that the
tax exemption provided for in RA 6958 creating petitioner
had been expressly repealed by the provisions of the New
Local Government Code of 1991.
So that petitioner in this case has to pay the assessed
realty tax of its properties effective after January 1, 1992
until the present.
Issues:
respondent City of Cebu has no power nor authority to
impose realty taxes upon it... whether the petitioner is a
"taxable person."
Ruling:
Considering its task "not merely to efficiently operate and
manage the Mactan-Cebu International Airport, but more
importantly, to carry out the Government... policies of
promoting and developing the Central Visayas and
Mindanao regions as centers of international trade and
tourism, and accelerating the development of the means of
transportation and communication in the country,"... and
that it is an attached... agency of the Department of
Transportation and Communication (DOTC),... the petitioner
"may stand in [sic] the same footing as an agency or
instrumentality of the national government." Hence, its tax
exemption privilege under Section 14 of its Charter
 41
"cannot be considered withdrawn with the passage of the
Local Government Code of 1991 (hereinafter LGC) because
Section 133 thereof specifically states that the `taxing
powers of local government units shall not extend to the
levy of taxes or fees or charges of any kind on the...
national government, its agencies and instrumentalities.'"
There can be no question that under Section 14 of R.A. No.
6958 the petitioner is exempt from the payment of realty
taxes imposed by the National Government or any of its
political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule
and... exemption therefrom the exception, the exemption
may thus be withdrawn at the pleasure of the taxing
authority. The only exception to this rule is where the
exemption was granted to private parties based on material
consideration of a mutual nature, which then becomes...
contractual and is thus covered by the non-impairment
clause of the Constitution.
we conclude that as a general rule, as laid down in Section
133, the taxing powers of local government units cannot
extend to the levy of, inter alia, "taxes, fees and charges of
any kind on the National
Government, its agencies and instrumentalities, and local
government units"; however, pursuant to Section 232,
provinces, cities, and municipalities in the Metropolitan
Manila Area may impose the real property tax except on,
inter alia, "real property owned by the Republic of... the
Philippines or any of its political subdivisions except when
the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person," as
provided in item (a) of the first paragraph of Section 234.
upon the effectivity of the LGC, exemptions from payment
of real property taxes granted to natural or juridical persons,
including government-owned or controlled corporations,
except as provided in the said section,... and the petitioner
is, undoubtedly, a government-owned corporation, it
necessarily follows that its exemption from such tax granted
it in Section 14 of its Charter, R.A. No. 6958, has been
withdrawn.
In short, the petitioner can no longer invoke the general rule
in Section 133 that the taxing powers of the local
government units cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National
Government, its agencies or instrumentalities, and local
government units.
the petitioner cannot claim that it was never a "taxable
person" under its Charter. It was only exempted from the
payment of real property taxes. The grant of the privilege
only in respect of this tax is conclusive proof of the
legislative intent to... make it a taxable person subject to all
taxes, except real property tax.
Finally, even if the petitioner was originally not a taxable
person for purposes of real property tax, in light of the
foregoing disquisitions, it had already become, even if it be
conceded to be an "agency" or "instrumentality" of the
Government, a taxable person for such... purpose in view of
the withdrawal in the last paragraph of Section 234 of
exemptions from the payment of real property taxes, which,
as earlier adverted to, applies to the petitioner.
Accordingly, the position taken by the petitioner is
untenable.
nothing can prevent
Congress from decreeing that even instrumentalities or
agencies of the Government performing governmental
functions may be subject to tax. Where it is done precisely
to fulfill a constitutional mandate and national policy, no one
can doubt its wisdom.
 42

27. o Petron vs. Pililla, G.R. No. 90776, June 3, 1991 The exercise by local governments of the power to tax is ordained by the
present constitution. To allow the continuous effectivity of the prohibition set
forth in PC no. 26-73 would be tantamount to restricting their power to tax
Philippine Petroleum Corporation vs Municipality of Pililla Rizal
by mere administrative issuances. Under section 5, article X of the 1987
198 SCRA 82 [GR No. 90776 June 3, 1991]
constitution, only guidelines and limitations that may be established by
congress can define and limit such power of local governments.
Facts: Philippine Petroleum Corporation is a business enterprise engaged in
the manufacture of lubricated oil base stocks which is a petroleum product,
The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for
with its refinery plant situated at Malaya, Pilillia Rizal, conducting its
the installation and keeping in storage of any flammable, combustible or
business activities within the territorial jurisdiction of municipality of Pilillia,
explosive substances. In as much as said storage makes use of tanks owned
Rizal and is in continuous operation up to the present. PPC owns and
not by the Municipality of Pilillia but by petitioner PPC, same is obviously
maintains an oil refinery including 49 storage tanks for its petroleum products
not a charge for any service rendered by the municipality as what is
in Malaya, Pililla, Rizal. Under section 142 of NIRC of 1939, manufactured
envisioned in section 37 of the same code.
oils and other fuels are subject to specific tax. Respondent municipality of
Pilillia, Rizal through municipal council resolution no. 25-s-1974 enacted
municipal tax ordinance no. 1-s-1974 otherwise known as “The Pililla Tax
Code Of 1974” on June 14, 1974 which took effect on July 1, 1974. Sections
9 and 10 of the said ordinance imposed a tax on business, except for those
which fixed taxes are provided in the local tax code on manufacturers,
importers, or producers of any article of commerce of whatever kind or
nature, including brewers, distiller, rectifiers, repackers and compounders of
liquors distilled spirits and/or wines in accordance with the schedule found
in the local tax code, as well as mayor’s permit sanitary inspection fee and
storage permit fee for flammable, combustible or explosive substances, while
section 139 of the disputed ordinance imposed surcharges and interests on
unpaid taxes, fees or charges. Enforcing the provisions of the above
mentioned ordinance, the respondent filed a complaint on April 4, 1986
docketed as civil case no. 057-T against PPC for the collection of the business
tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor’s
permit fee and sanitary permit inspection fees from 1975 to 1984. PPC,
however, have already paid the last named fees starting 1985.

Issue: Whether or not the Municipality may validly impose taxes on

petitioner’s business.

Held: No. While section 2 of PD 436 prohibits the imposition of local taxes
on petroleum products, said decree did not amend sections 19 and 19 (a) of
PD 231 as amended by PD 426, wherein the municipality is granted the right
to levy taxes on business of manufacturers, importers, producers of any
article of commerce of whatever kind or nature. A tax on business is distinct
from a tax on the article itself. Thus, if the imposition of tax on business of
manufacturers, etc. in petroleum products contravenes a declared national
policy, it should have been expressly stated in PD No. 436.
 43
28. CREBA Inc. vs. Romulo, G.R. No. 160756, March 9, 2010
CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS,
INC.
vs.
THE HON. EXECUTIVE SECRETARY ALBERTO ROMULO
G.R. No. 160756 March 9, 2010
FACTS:
Petitioner is an association of real estate developers and builders in the
Philippines. It assails the validity of the imposition of minimum corporate
income tax (MCIT) on corporations and creditable withholding tax (CWT)
on sales of real properties classified as ordinary assets.
Petitioner argues that the MCIT violates the due process clause because it
levies income tax even if there is no realized gain. Petitioner also asserts that
the enumerated provisions of the subject revenue regulations violate the due
process clause because, like the MCIT, the government collects income tax
even when the net income has not yet been determined. They contravene the
equal protection clause as well because the CWT is being levied upon real
estate enterprises but not on other business enterprises, more particularly
those in the manufacturing sector.
ISSUE:
Whether the imposition of the MCIT on domestic corporations and CWT on
income from sales of real properties classified as ordinary assets are
unconstitutional.
RULING:
NO. MCIT is not violative of due process. The MCIT is imposed on gross
income which is arrived at by deducting the capital spent by a corporation in
the sale of its goods, i.e., the cost of goods and other direct expenses from
gross sales. Clearly, the capital is not being taxed. Furthermore, the MCIT is
not an additional tax imposition. It is imposed in lieu of the normal net income
tax, and only if the normal income tax is suspiciously low. The MCIT merely
approximates the amount of net income tax due from a corporation, pegging
the rate at a very much reduced 2% and uses as the base the corporation’s
gross income.
It is also stressed that the CWT is creditable against the tax due from the seller
of the property at the end of the taxable year. The seller will be able to claim
a tax refund if its net income is less than the taxes withheld. Nothing is taken
that is not due so there is no confiscation of property repugnant to the
constitutional guarantee of due process. More importantly, the due process
requirement applies to the power to tax. The CWT does not impose new taxes
nor does it increase taxes. It relates entirely to the method and time of
payment. Petitioner, in insisting that its industry should be treated similarly
as manufacturing enterprises, fails to realize that what distinguishes the real
estate business from other manufacturing enterprises, for purposes of the
imposition of the CWT, is not their production processes but the prices of
their goods sold and the number of transactions involved. The income from
the sale of a real property is bigger and its frequency of transaction limited,
making it less cumbersome for the parties to comply with the withholding tax
scheme.

29. PEOPLE OF THE PHILIPPINES
SANDIGANBAYAN and BIENVENIDO A. TAN JR.
G.R. No. 152532 August 16, 2005
FACTS:
Pursuant to Letter of Authority No. ATD-035-
STO dated January 2, 1986 and Memorandum of
Authority dated March 3, 1986, an investigation was
conducted by Bureau of Internal Revenue (BIR)
examiners on the ad valorem and specific tax
liabilities of San Miguel Corp. (SMC) covering the
period from January 1, 1985 to March 31, 1986. It was
found out in the investigation that SMC have a
deficiency amounting to more than Php
300,000,000.00.
SMC protested the assessment on the ground
that the said tax deficiency was already paid and the
computation of the ad valorem tax deficiency was
erroneous since the BIR examiners disallowed the
deduction of the price differential (cost of freight from
brewery to warehouse) and ad valorem tax. The tax
liabilities was then reduced and pursuant to this the
SMC, in a letter dated August 31, 1988 thru a certain
Avendano offered the amount of P10,000,000.00 for
the settlement of the assessment.
The offer was then accepted by former BIR
Commissioner Bienvenido A. Tan Jr. who was
charged with "having wilfully, unlawfully and
criminally caused undue injury to the government by
effecting a compromise of the tax liabilities" of SMC
amounting toP302,051,048.93 for only P10,000,000, a
44
v. "compromise that is grossly disadvantageous to the
government." In no uncertain terms, the assailed
Resolution of the Sandiganbayan acquitted him of
violating Section 3(e) of Republic Act No. 3019 (the
Anti-Graft Law).
ISSUE:
Whether or not the acceptance of Php 10,000,000.00
as allegedly a compromise is gross and therefore
illegal.
RULING:
The Sandiganbayan did not gravely abuse its
discretion when it upheld private respondents
acceptance of SMC’s compromise offer of P10 million.
Although it has been repeatedly said that the
offer by SMC was in a form of compromise the court
held that what was entered into by the parties was not
a compromise but was abatement. The disallowance
on deducting the price differential and ad valorem tax
will result to a higher base for taxes and this is
erroneous because a tax cannot be impose on another
tax.
Thus, no mutual concessions need be made, because
an excessive or erroneous tax is not compromised; it
is abated or cancelled. Ultimately it should be noted
that only correct and proper taxes should be paid.
 45

30. Roxas v CTA

GR No L-25043, April 26, 1968 In order to maintain the general public’s trust and
confidence in the Government this power must be
used justly and not treacherously. It does not conform
FACTS: with the sense of justice for the Government to
persuade the taxpayer to lend it a helping hand and
Antonio, Eduardo and Jose Roxas, brothers and at the later on penalize him for duly answering the urgent
same time partners of the Roxas y Compania, call.
inherited from their grandparents several properties
which included farmlands. The tenants expressed
their desire to purchase the farmland. The tenants,
In fine, Roxas cannot be considered a real estate
however, did not have enough funds, so the Roxases
dealer and is not liable for 100% of the sale. Pursuant
agreed to a purchase by installment. Subsequently,
to Section 34 of the Tax Code, the lands sold to the
the CIR demanded from the brothers the payment of
farmers are capital assets and the gain derived from
deficiency income taxes resulting from the sale, 100%
the sale thereof is capital gain, taxable only to the
of the profits derived therefrom was taxed. The
extent of 50%.
brothers protested the assessment but the same was
denied. On appeal, the Court of Tax Appeals sustained
the assessment. Hence, this petition.

ISSUE:
Is Roxas liable?

RULING:
No. It should be borne in mind that the sale of the
farmlands to the very farmers who tilled them for
generations was not only in consonance with, but
more in obedience to the request and pursuant to the
policy of our Government to allocate lands to the
landless.
 46

31. o Tio vs. Videogram Regulatory Board, G.R. No. (1) Whether or not Section 10 of P.D. No. 1987,
75697, June 18, 1987 which imposes a tax of thirty percent (30%) on the
gross receipts payable to the local government is a
Income Taxation (LMG15)
rider and the same is not germane to the subject
thereof;

Facts: (2) Whether or not the tax imposed is harsh,

confiscatory, oppressive and/or in unlawful restraint
On September 1, 1986, Valentino Tio (Tio for brevity), of trade in violation of the due process of the
on his own behalf and purportedly on behalf of other Constitution; and
videogram operators adversely affected, filed a
petition assailing the constitutionality of Presidential (3) Whether or not there is undue delegation of
Decree (P.D.) No. 1987 entitled “An Act Creating the power and authority;
Videogram Regulatory Board” with broad powers to
regulate and supervise the videogram industry. The
rationale behind the enactment of the aforesaid Ruling:
Decree may be summarized in its eighth (8th) whereas
As to the first issue, the SC held that Tio’s contention
clause stating that grave emergencies corroding the
that the tax provision of the Decree is a rider is bereft
moral values of the people and betraying the national
and devoid of merit because the title of the Decree,
economic recovery program necessitate the adoption
which is the creation of the Videogram Regulatory
of bold measures with dispatch. On October 23, 1986,
Board (VRB) aimed at regulating and controlling the
the Greater Manila Theaters Association, Integrated
video industry, is comprehensive enough to include
Movie Producers, Importers and Distributors
the purposes expressed in its Preamble and
Association of the Philippines, and Philippine Motion
reasonably covers all its provisions. Moreover, it is
Pictures Producers Association were permitted by the
unnecessary to express all those objectives in the title
Supreme Court (SC) to intervene in the case over Tio’s
or that the latter be an index to the body of the decree.
opposition upon the allegations that intervention was
As to the second issue, the SC held that it is axiomatic
necessary for the complete protection of their rights
that a tax does not cease to be valid merely because it
and that their “survival and very existence is
regulates, discourages, or even definitely deters the
threatened by the unregulated proliferation of film
activities taxed. The legislature acts upon its
piracy.”
constituents in imposing a tax; thus, in general, a
sufficient security against erroneous and oppressive
taxation is afforded the taxpayer. More importantly,
Issues:
the tax imposed by the Decree is also a revenue
measure. The tax of 30% is exacted for a public
 47
purpose, i.e. 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. As to the third issue, the SC held that the
grant in Section 11 of the Decree of authority to the
VRB to “solicit the direct assistance of other agencies
and units of the government and deputize, for a fixed
and limited period, the heads or personnel of such
agencies and units to perform enforcement functions
for the Board” is not a delegation of the power to
legislate but merely a conferment of authority or
discretion as to its execution, enforcement, and
implementation.
TIO vs. VIDEOGRAM REGULATORY BOARD
Citation: 151 SCRA 208; G.R. No. L-75697; June 18,
1987
Ponente: Melencio-Herrera, J.
DOCTRINES:
Validity of law; title of bill – The Constitutional
requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof"
is sufficiently complied with if the title be
comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not
necessary that the title express each and every end
that the statute wishes to accomplish. The
requirement is satisfied if all the parts of the statute
are related, and are germane to the subject matter
expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and
title.
Taxation; security against oppressive taxation – 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 as a revenue and regulatory measure – The
tax imposed by the DECREE is not only a regulatory
but also a revenue measure prompted by the
realization that earnings of videogram establishments
of around P600 million per annum have not been
subjected to tax, thereby depriving the Government of
an additional source of revenue. . . . 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.
 48
Undue delegation of legislative power – The grant in
Section 11 of the DECREE of authority to the BOARD
to "solicit the direct assistance of other agencies and
units of the government and deputize, for a fixed and
limited period, the heads or personnel of such
agencies and units to perform enforcement functions
for the Board" is not a delegation of the power to
legislate but merely a conferment of authority or
discretion as to its execution, enforcement, and
implementation. "The true distinction is between the
delegation of power to make the law, which
necessarily involves a discretion as to what it shall be,
and conferring authority or discretion as to its
execution to be exercised under and in pursuance of
the law. The first cannot be done; to the latter, no valid
objection can be made." Besides, in the very language
of the decree, the authority of the BOARD to solicit
such assistance is for a "fixed and limited period" with
the deputized agencies concerned being "subject to
the direction and control of the BOARD." That the
grant of such authority might be the source of graft
and corruption would not stigmatize the DECREE as
unconstitutional. Should the eventuality occur, the
aggrieved parties will not be without adequate remedy
in law.
FACTS:
Valentin Tio is a videogram establishment operator
adversely affected by Presidential Decree No. 1987
entitled "An Act Creating the Videogram Regulatory
Board".
P.D. No. 1987 provides for the levy of a tax over each
cassette sold (Sec. 134) and a 30% tax on the gross
receipts of a videogram establishment, payable to the
local government (Sec. 10). The rationale for this
decree is set forth in its preambulatory/whereas
clauses to wit:
1. WHEREAS, the proliferation and unregulated
circulation of videograms including, among others,
videotapes, discs, cassettes ... have greatly
prejudiced the operations of moviehouses and
theaters, and have caused a sharp decline in theatrical
attendance by at least forty percent (40%) and a
tremendous drop in the collection of [taxes] thereby
resulting in substantial losses estimated at P450
Million annually in government revenues;
2. WHEREAS, videogram(s) establishments
collectively earn around P600 Million per annum from
rentals, sales and disposition of videograms, and
such earnings have not been subjected to tax, thereby
depriving the Government of approximately P180
Million in taxes each year;
3. WHEREAS, the unregulated activities of videogram
establishments have also affected the viability of the
movie industry, ...;
5. WHEREAS, proper taxation of the activities of
videogram establishments will not only alleviate the
 49
dire financial condition of the movie industry ..., but
also provide an additional source of revenue for the
Government, and at the same time rationalize the
heretofore uncontrolled distribution of videograms;
6. WHEREAS, the rampant and unregulated showing
of obscene videogram features constitutes a clear and
present danger to the moral and spiritual well-being of
the youth [READ: PORN], and impairs the mandate of
the Constitution for the State to support the rearing of
the youth for civic efficiency and the development of
moral character and promote their physical,
intellectual, and social well-being;
8. WHEREAS, in the face of these grave emergencies
corroding the moral values of the people [AGAIN,
READ: PORN] and betraying the national economic
recovery program, bold emergency measures must be
adopted with dispatch; (emphasis supplied and
certain passages omitted)
ISSUES:
The petioner, among others, raised the following
issues:
1. Whether or not the imposition of the 30% tax is a
rider and the same is not germane to the subject
matter of the law.
2. Whether or not there is undue delegation of power
and authority; and
HELD:
1. No, the tax is not a rider and is germane to the
purpose and subject of the law.
The Constitutional requirement that "every bill shall
embrace only one subject which shall be expressed in
the title thereof" is sufficiently complied with if the title
be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not
necessary that the title express each and every end
that the statute wishes to accomplish. The
requirement is satisfied if all the parts of the statute
are related, and are germane to the subject matter
expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and
title.
Reading section 10 of P.D. No. 1987 closely, one can
see that the foregoing provision is allied and germane
to, and is reasonably necessary for the
accomplishment of, the general object of the law,
which is the regulation of the video industry through
the Videogram Regulatory Board as expressed in its
title. The tax provision is not inconsistent with, nor
foreign to that general subject and title. As a tool for
regulation it is simply one of the regulatory and
control mechanisms scattered throughout the decree.
 50

This is not a delegation of the power to legislate but

merely a conferment of authority or discretion as to its
Aside from revenue collection, tax laws may also be
execution, enforcement, and implementation. "The
enacted for the purpose of regulating an activity. At
true distinction is between the delegation of power to
the same time, the videogram industry is also an
make the law, which necessarily involves a discretion
untapped source of revenue which the government
as to what it shall be, and conferring authority or
may validly tax. All of this is evident from
discretion as to its execution to be exercised under
preambulatory clauses nos. 2, 5, 6 and 8, quoted in
and in pursuance of the law. The first cannot be done;
part above.
to the latter, no valid objection can be made." Besides,
in the very language of the decree, the authority of the
Board to solicit such assistance is for a "fixed and
The levy of the 30% tax is also for a public purpose. It limited period" with the deputized agencies
was imposed primarily to answer the need for concerned being "subject to the direction and control
regulating the video industry, particularly because of of the Board."
the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of
pornographic video tapes. And while it was also an
The petition was DISMISSED.
objective of the law to protect the movie industry, the
tax remains a valid imposition.

2. No. There was no undue delegation of law making

authority.

Petitioner was concerned that Section 11 of P.D. No.

1987 stating that the videogram board (Board) has
authority to "solicit the direct assistance of other
agencies and units of the government and deputize,
for a fixed and limited period, the heads or personnel
of such agencies and units to perform enforcement
functions for the Board" is an undue delegation of
legislative power.
 51
32. o Progressive Development Corp. vs. Quezon
City, G.R. No. L-36081, April 24, 1989
Facts:
Progressive Development Corporation, owner and
operator of a public market known as the "Farmers
Market & Shopping Center" filed a Petition for
Prohibition with Preliminary Injunction against
respondent... on the ground that the supervision fee
or license tax imposed by the above-mentioned
ordinances is in reality a tax on income which
respondent may not impose, the same being
expressly prohibited by Republic Act No. 2264, as
amended
Petitioner, however, insists that the "supervision fee"
collected from rentals, being a return from capital
invested in the construction of the Farmers Market,
practically operates as a tax on income, one of those
expressly excepted from respondent's taxing
authority, and... thus beyond the latter's competence.
Issues:
The only issue to be resolved here is whether the tax
imposed by respondent on gross receipts of stall
rentals is properly characterized as partaking of the
nature of an income tax or, alternatively, of a license
fee.
Ruling:
The "Farmers' Market and Shopping Center" being a
public market in the sense of a market open to and
inviting the, patronage of the general public, even
though privately owned, petitioner's operation thereof
required a license issued by the respondent City, the
issuance... of which, applying the standards set forth
above, was done principally in the exercise of the
respondent's police power
The operation of a privately owned market is, as
correctly noted by the Solicitor General,... equivalent
to or quite the same as the operation of a government-
owned market;
We believe and so hold that the five percent (5%) tax
imposed in Ordinance No. 9236 constitutes, not a tax
on income, not a city income tax... but rather a license
tax or fee for the regulation of the business in which
the petitioner is engaged.
 52
33. ERNESTO M. MACEDA, petitioner, vs. HON.
CATALINO MACARAIG, JR
G.R. No. 88291 May 31, 1991; G.R. No. 88291 June 8,
1993
FACTS: On November 3, 1986, Commonwealth Act No.
120 created the NPC as a public corporation to
undertake the development of hydraulic power and
the production of power from other sources.
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.
Though the issues raised was resolved by the
Supreme Court in G.R. No. 88291, the issues was
again brought to the Supreme Court for the second
time by the petitioner in G.R. No. 88291.
ISSUE: Whether or not the powers conferred upon the
FIRB by Section 2(a), (b), and (c) and (4) of Executive
Order No. 93 "constitute undue delegation of
legislative power and is, therefore, unconstitutional.”
RULING: No.
With the growing complexities of modern life and the
many technical fields of governmental functions, as in
matters pertaining to tax exemptions, delegation of
legislative powers has become the rule and non-
delegation the exception. The legislature may not
have the competence, let alone the interest and the
time, to provide direct and efficacious solutions to
many problems attendant upon present day
undertakings. The legislature could not be expected to
state all the detailed situations wherein the tax
exemption privilege would be restored. The task may
be assigned to an administrative body like the Fiscal
Incentives Review Board (FIRB).
When E.O No. 93 (S'86) was issued, President Aquino
was exercising both Executive and Legislative
powers. Thus, there was no power delegated to her,
rather it was she who was delegating her power. She
delegated it to the FIRB, which, for purposes of E.O
No. 93 (S'86), is a delegate of the legislature. Clearly,
she was not sub-delegating her power.
And E.O. No. 93 (S'86), as a delegating law, was
complete in itself — it set forth the policy to be carried
out 85 and it fixed the standard to which the delegate
had to conform in the performance of his functions, 86
both qualities having been enunciated by this Court in
Pelaez vs. Auditor General. 87
For delegation to be constitutionally valid, the law
must be complete in itself and must set forth sufficient
standards.
Certain aspects of the taxing process that are not
really legislative in nature are vested in administrative
 53

agencies. In this case, there really is no delegation, to

wit: a) power to value property; b) power to assess and
collect taxes; c) power to perform details of
computation, appraisement or adjustment; among
others.
 54
34.
CHAVEZ vs NATIONAL HOUSING AUTHORITY
530 SCRA 235
Scope of Powers of Administrative Agencies
Express and Implied Powers
FACTS: Petitioner Francisco Chavez in his capacity as
taxpayer seeks to declare null and void the Joint
Venture Agreement between the NHA and R-II
Builder’s, Inc (RBI) for being unconstitutional and
invalid, and to enjoin respondents — particularly
respondent NHA – from implementing and/or
enforcing the said project and other agreements
related thereto. On March 1, 1988, then President
Corazon C. Aquino issued Memorandum Order No.
161 approving and directing the implementation of the
Comprehensive and Integrated Metropolitan Manila
Waste Management Plan. Specifically, respondent
NHA was ordered to “conduct feasibility studies and
develop low-cost housing projects at the dumpsite
and absorb scavengers in NHA resettlement/low-cost
housing projects.”
Pursuant to MO 161-A, NHA prepared the feasibility
studies which resulted in the formulation of the
Smokey Mountain Development Plan and Reclamation
of the Area Across R-10 or the Smokey Mountain
Development and Reclamation Project. SMDRP aimed
to convert the Smokey Mountain dumpsite into a
habitable housing project, inclusive of the reclamation
of the area across R-10, adjacent to the Smokey
Mountain as the enabling component of the project.
Once finalized, the plan was submitted to President
Aquino for her approval.
On January 17, 1992, President Aquino proclaimed
MO 415, approving and directing the implementation
of the SMDRP through a private sector joint venture.
Said MO stipulated that the land area covered by the
Smokey Mountain dumpsite is conveyed to the NHA
as well as the area to be reclaimed across R-10. In the
same MO 415, President Aquino created an Executive
Committee to oversee the implementation of the plan
and an inter-agency Technical Committee was created
composed of the technical representatives of the
EXECOM. Based on the evaluation of the pre-
qualification documents, the EXECOM declared the
New San Jose Builders, Inc. and RBI as top two
contractors. Thereafter, TECHCOM submitted its
recommendation to the EXECOM to approve the RBI
proposal which garnered the highest score.
On October 7, 1992, President Ramos authorized NHA
to enter into a JVA with RBI. Afterwards, President
Ramos issued Proclamation No. 465 increasing the
proposed area for reclamation across R-10 from 40
hectares to 79 hectares. On September 1, 1994,
pursuant to Proclamation No. 39, the DENR issued
Special Patent No. 3591 conveying in favor of NHA an
area of 211,975 square meters covering the Smokey
Mountain Dumpsite. The land reclamation was
completed in August 1996. Sometime later in 1996,
 55

pursuant likewise to Proclamation No. 39, the DENR

issued Special Patent No. 3598 conveying in favor of
RULING: Yes. While the authority of NHA to reclaim
NHA an additional 390,000 square meter area. After
lands is challenged by petitioner, we find that the NHA
some time, the JVA was terminated. RBI demanded
had more than enough authority to do so under
the payment of just compensation for all
existing laws. While PD 757, the charter of NHA, does
accomplishments and costs incurred in developing
not explicitly mention “reclamation” in any of the
the SMDRP plus a reasonable rate of return. In a
listed powers of the agency, we rule that the NHA has
Memorandum of Agreement (MOA) executed by NHA
an implied power to reclaim land as this is vital or
and RBI, both parties agreed to terminate the JVA and
incidental to effectively, logically, and successfully
other subsequent agreements, which stipulated,
implement an urban land reform and housing program
among others, that unpaid balance may be paid in
enunciated in Sec. 9 of Article XIII of the 1987
cash, bonds or through the conveyance of properties
Constitution.
or any combination thereof.

Basic in administrative law is the doctrine that a

On August 5, 2004, former Solicitor General Francisco
government agency or office has express and implied
I. Chavez filed this Petition for Prohibition and
powers based on its charter and other pertinent
Mandamus seeking to declare null and void the Joint
statutes. Express powers are those powers granted,
Venture Agreement and the Smokey Mountain
allocated, and delegated to a government agency or
Development and Reclamation Project, and all other
office by express provisions of law. On the other
agreements in relation thereto, for being
hand, implied powers are those that can be inferred or
Unconstitutional and Invalid. The petitioner
are implicit in the wordings of the law or conferred by
challenges the authority of NHA to reclaim lands. He
necessary or fair implication in the enabling act. When
claims that the power to reclaim lands of public
a general grant of power is conferred or duty enjoined,
domain is vested exclusively with the Public Estates
every particular power necessary for the exercise of
Authority. He also contends that NHA and RBI were
the one or the performance of the other is also
not given the power and authority by DENR to reclaim
conferred by necessary implication. when the statute
foreshore and submerged lands, as required and that
does not specify the particular method to be followed
there was no proclamation officially classifying the
or used by a government agency in the exercise of the
reclaimed lands as alienable and disposable.
power vested in it by law, said agency has the
authority to adopt any reasonable method to carry out
its functions.
ISSUE: Whether or not the NHA has the authority to
reclaim lands
 56

The power to reclaim on the part of the NHA is implicit

from PD 757, RA 7279, MO 415, RA 6957, and PD 3-A.
Land reclamation is an integral part of the
development of resources for some of the housing
requirements of the NHA. Private participation in
housing projects may also take the form of land
reclamation.

RATIO: Express and implied powers. - The jurisdiction

and powers of administrative agencies are measured
and limited by the Constitution or law creating them or
granting their powers, to those conferred expressly or
by necessary or fair implication.

35. G.R. No. 180884
June 27, 2008
EMERLINDA TALENTO in her capacity as the
Provincial Treasurer of the Province of Bataan vs.
HON. REMIGIO ESCALADA, JR., Presiding Judge of
the Regional Trial Court of Bataan, Branch 3 and
PETRON CORPORATION
FACTS:
Petron received from the Provincial Assessors Office
a notice of revised assessment over its machineries
and pieces of equipment. Based on the revised
assessment, the Provincial Treasurer of Bataan
issued a notice informing Petron that its total liability
is P1,731,025,403.06, representing deficiency real
property tax.
Petron then filed a petition with the Local Board of
Assessment Appeals (LBAA) contesting the revised
assessment on the following grounds:
Subject assessment pertained to properties
that have been previously declared
Assessment covered periods of more than 10
years which is not allowed under the LGC
Fair market value or replacement cost used by
the Provincial Treasurer included items which should
be properly excluded
Prompt payment of discounts were
considered in determining the FMV
Subject assessment should take effect a year
after or on January 1, 2008
57
Petron also sought the approval of a surety bond in
the amount of P1,286,057,899.54.
Petron then received a final notice from the Provincial
Treasurer of delinquent real property tax with a
warning that the subject properties would be sold
should Petron fail to pay. Petron replied, stating that
in view of the pendency of its appeal with the LBAA,
any action by the Treasurer’s Office on the subject
properties would be premature.
With the issuance of a Warrant of Levy against its
machineries and pieces of equipment, Petron filed an
urgent motion to lift the final notice of delinquent real
property tax and warrant of levy with the LBAA.
Subsequently, Petron received a notice of sale of its
properties and withdrew its motion to lift the final
notice of delinquent tax. Petron then filed with the RTC
for prohibition with prayer for the issuance of TRO and
preliminary injunction.
The RTC issued a TRO for 20 days, enjoining the
Provincial Treasurer from proceeding with the public
auction. It then issued an order granting Petron’s
petition for issuance of writ of preliminary injunction,
subject to Petron posting a bond in addition to its
previously posted surety.
ISSUES: Whether the collection of taxes may be
suspended by reason of the filing of an appeal and
posting of a surety bond
not
LAWS:
Sec. 231, Local Government Code
 58
Section 231. Effect of Appeal on the Payment of Real
Property Tax. - Appeal on assessments of real
property made under the provisions of this Code shall,
in no case, suspend the collection of the
corresponding realty taxes on the property involved
as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.
Sec. 252, Local Government Code
Section 252. Payment Under Protest.
(a) No protest shall be entertained unless the taxpayer
first pays the tax. There shall be annotated on the tax
receipts the words "paid under protest". The protest
in writing must be filed within thirty (30) days from
payment of the tax to the provincial, city treasurer or
municipal treasurer, in the case of a municipality
within Metropolitan Manila Area, who shall decide the
protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paid under protest,
shall be held in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in
favor of the taxpayer, the amount or portion of the tax
protested shall be refunded to the protestant, or
applied as tax credit against his existing or future tax
liability.
(d) In the event that the protest is denied or upon the
lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the
remedies as provided for in Chapter 3, Title II, Book II
of this Code.
Sec. 7, Rule V, Rules of Procedure of the LBAA
Section 7. Effect of Appeal on Collection of Taxes. An
appeal shall not suspend the collection of the
corresponding realty taxes on the real property
subject of the appeal as assessed by the Provincial,
City or Municipal Assessor, without prejudice to the
subsequent adjustment depending upon the outcome
of the appeal. An appeal may be entertained but the
hearing thereof shall be deferred until the
corresponding taxes due on the real property subject
of the appeal shall have been paid under protest or the
petitioner shall have given a surety bond, subject to
the following conditions:
(1) the amount of the bond must not be less than the
total realty taxes and penalties due as assessed by the
assessor nor more than double said amount;
(2) the bond must be accompanied by a certification
from the Insurance Commissioner (a) that the surety
is duly authorized to issue such bond; (a) that the
surety bond is approved by and registered with said
Commission; and (c) that the amount covered by the
surety bond is within the writing capacity of the surety
company; and
(3) the amount of the bond in excess of the surety
company’s writing capacity, if any, must be covered
by Reinsurance Binder, in which case, a certification
to this effect must likewise accompany the surety
bond.
Sec. 11, RA 9282
Section 11. Who may Appeal; Mode of Appeal; Effect
of Appeal;
xxxx
 59

No appeal taken to the Court of Appeals from the
Collector of Internal Revenue x x x shall suspend the
payment, levy, distraint, and/or sale of any property
for the satisfaction of his tax liability as provided by
existing law. Provided, however, That when in the
opinion of the Court the collection by the
aforementioned government agencies may jeopardize
the interest of the Government and/or the taxpayer the
Court at any stage of the processing may suspend the
collection and require the taxpayer either to deposit
the amount claimed or to file a surety bond for not
more than double the amount with the Court.
ARGUMENTS:
COMPLAINANT (TALENTO) RESPONDENT
(PETRON)
Only payment under protest shall bar the collection of
the realty taxes due, pursuant to Sections 231 and 252
of the LGC. In view of the pendency of the appeal with
the LBAA, any action by the Treasurers Office on the
subject properties would be premature.
In this case, there is urgency and paramount
necessity for the issuance of a writ of injunction, since
what is being enjoined is the sale by public auction of
the properties of Petron amounting to at least P1.7
billion and which properties are vital to its business
operations.
The grounds given by Petron in contesting the
assessment have a direct bearing on the assessment
made by the Provincial Treasurer. It is necessary that
these issues must first be passed upon before the
properties of Petron are sold in public auction.
Furthermore, Petron has posted a surety bond
equivalent to the amount of assessment due. The
posting of this bond is in accordance with Section 7,
Rule V of the LBAA Rules of Procedure, as well as with
Sec. 11 of RA 9282.
Therefore, the petition of Talento, as Provincial
Treasurer, should be dismissed.

COURT’S RULING:
YES.
The general rule is based on the doctrine that taxes
are the lifeblood of the government, and thus appeal
shall not suspend the collection of realty taxes.
However, an exception is when the taxpayer has
shown a clear and unmistakable right to refuse or to
hold in abeyance the payment of taxes.
 60
36. COCONUT OIL REFINERS ASSOCIATION, INC. et
al vs. RUBEN TORRES, as Executive Secretary, et al
G.R. No. 132527. July 29, 2005
Facts: On March 13, 1992, RA No. 7227 was enacted,
providing for, among other things, the sound and
balanced conversion of the Clark and Subic military
reservations and their extensions into alternative
productive uses in the form of special economic
zones in order to promote the economic and social
development of Central Luzon in particular and the
country in general. The law contains provisions on tax
exemptions for importations of raw materials, capital
and equipment. After which the President issued
several Executive Orders as mandated by the law for
the implementation of RA 7227. Herein petitioners
contend the validity of the tax exemption provided for
in the law.
Issue: Whether or not the Executive Orders issued by
President for the implementation of the tax
exemptions constitutes executive legislation.
Held: To limit the tax-free importation privilege of
enterprises located inside the special economic zone
only to raw materials, capital and equipment clearly
runs counter to the intention of the Legislature to
create a free port where the “free flow of goods or
capital within, into, and out of the zones” is insured.
The phrase “tax and duty-free importations of raw
materials, capital and equipment” was merely cited as
an example of incentives that may be given to entities
operating within the zone. Public respondent SBMA
correctly argued that the maxim expressio unius est
exclusio alterius, on which petitioners impliedly rely
to support their restrictive interpretation, does not
apply when words are mentioned by way of example.
It is obvious from the wording of RA No. 7227,
particularly the use of the phrase “such as,” that the
enumeration only meant to illustrate incentives that
the SSEZ is authorized to grant, in line with its being a
free port zone.
The Court finds that the setting up of such commercial
establishments which are the only ones duly
authorized to sell consumer items tax and duty-free is
still well within the policy enunciated in Section 12 of
RA No. 7227 that “. . .the Subic Special Economic Zone
shall be developed into a self-sustaining, industrial,
commercial, financial and investment center to
generate employment opportunities in and around the
zone and to attract and promote productive foreign
investments.” However, the Court reiterates that the
second sentences of paragraphs 1.2 and 1.3 of
Executive Order No. 97-A, allowing tax and duty-free
removal of goods to certain individuals, even in a
limited amount, from the Secured Area of the SSEZ,
are null and void for being contrary to Section 12 of
RA No. 7227. Said Section clearly provides that
“exportation or removal of goods from the territory of
the Subic Special Economic Zone to the other parts of
the Philippine territory shall be subject to customs
duties and taxes under the Customs and Tariff Code
and other relevant tax laws of the Philippines.”
 61

37.
 62

38/. NO DIGEST
COCOFED vs. PCGG, 178 SCRA 236 (1989)
 63
39. o Caltex vs. COA, 208 SCRA 738
Caltex Philippines, Inc. v COA (1992)
Caltex Philippines, Inc. v Commission on Audit GR No.
92585, May 8, 1992
FACTS:
In 1989, COA sent a letter to Caltex, directing it to remit
its collection to the Oil Price Stabilization Fund
(OPSF), excluding that unremitted for the years 1986
and 1988, of the additional tax on petroleum products
authorized under the PD 1956. Pending such
remittance, all of its claims for reimbursement from
the OPSF shall be held in abeyance. The grant total of
its unremitted collections of the above tax is
P1,287,668,820.
Caltex submitted a proposal to COA for the payment
and the recovery of claims. COA approved the
proposal but prohibited Caltex from further offsetting
remittances and reimbursements for the current and
ensuing years. Caltex moved for reconsideration but
was denied. Hence, the present petition.
ISSUE:
Whether the amounts due from Caltex to the OPSF
may be offsetted against Caltex’s outstanding claims
from said funds
RULING:
No. Taxation is no longer envisioned as a measure
merely to raise revenue to support the existence of
government. Taxes may be levied with a regulatory
purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected
with public interest as to be within the police power of
the State.
PD 1956, as amended by EO 137, explicitly provides
that the source of OPSF is taxation. A taxpayer may
not offset taxes due from the claims he may have
against the government. Taxes cannot be subject of
compensation because the government and taxpayer
are not mutually creditors and debtors of each other
and a claim for taxes is not such a debt, demand,,
contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltex’s
claim for reimbursement of underrecovery arising
from sales to the National Power Corporation is
allowed.
 64

40. o Osmeña vs. Orboz, 220 SCRA 703 1956 is unconstitutional for being an undue and
invalid delegation of legislative power, setting no limit
Osmena, petitioner vs Orbos, respondents
on the powers of the ERB

Facts: PD 1956 was issued to create the Oil Price

Held: The fluctuations in world market prices and
Stabilization Fund (OPSF) designed to reimburse oil
foreign exchange rates would in a completely free
companies for cost increases in crude oil resulting
market translate into corresponding adjustments in
from exchange rate fluctuations and from increases in
domestic prices of oil and petroleum products with
the prices of oil in the world market. It was later
sympathetic frequency. But domestic prices which
amended by EO 137 which expands the grounds for
vary from day to day would result in a chaotic market
reimbursement to oil companies for possible cost
with unpredictable effects upon the country’s
underrecovery incurred as a result of the reduction of
economy. The OPSF was established to protect local
domestic prices of petroleum products. In 1991, the
consumers from the adverse consequences that
OPSF incurred a deficit to which the Energy
frequent oil price adjustments may have upon the
Regulatory Board (ERB) tried to resolve such problem
economy. The OPSF is thus a buffer mechanism
by issuing an order to increase pump prices of
through which the domestic consumer prices of oil
petroleum and such shall have covered the OPSF
and petroleum products are stabilized instead of
deficit within 6 months. Osmena reacted to this by
fluctuating every so often. The establishment and
claiming that the OPSF should be treated as a special
maintenance of the OPSF is well within that power and
fund and not as a trust account/fund because a special
responsibility of the government to secure the
tax collected for a specific purpose shall have its
physical and economic survival—it is within the police
revenue expended for such purposes only and not
power of the State. The stabilization and subsidy of
channeled to another government objective and that
domestic prices of petroleum products is regarded as
PD 1956 is unconstitutional because it confers invalid
public purpose. With regard to undue delegation of
delegation to ERB. It thus appears that the challenge
legislative power, the Court finds that the authority
posed by the petitioner is premised primarily on the
conferred upon the ERB to impose additional amounts
view that the powers granted to the ERB under PD
on petroleum provides a sufficient standard. PD 1956
1956, partake the nature of the taxation power of the
expressly authorizes the ERB to impose additional
State.
amounts to augment the resources of the Fund. What
is here involved is not so much the power of taxation
as police power. Although the provision authorizing
Issues: (1) Whether PD 1956 is a legislation partaking the ERB to impose additional amounts could be
the nature of the taxation power of the State or is it construed to refer to the power of taxation, it cannot
more of police power; (2) Whether Paragraph 1 PD No.
 65
be overlooked that the overriding consideration is to
enable the delegate to act with expediency in carrying
out the objectives of the law which are embraced by
the police power of the State. Constant fluctuation of
the various factors involved in the determination of
the price of oil and petroleum products do not
conveniently permit the setting of fixed or rigid
parameters in the law as proposed by the petitioner.
As such, the standard as it is expressed, suffices to
guide the delegate in the exercise of the delegated
power. The petition is granted only for the nullification
of the reimbursement of financing charges (because
they were not incurred as a result of the reduction of
domestic prices of petroleum products—hindi to ung
issue so ok lng..for purposes lang ng kung ano ung
court decision) but dismissed in all other respects.
OSMEÑA vs. ORBOS
220 SCRA 703
GR No. 99886, March 31, 1993
" To avoid the taint of unlawful delegation of the power
to tax, there must be a standard which implies that the
legislature determines matter of principle and lays
down fundamental policy."
FACTS: Senator John Osmeña assails the
constitutionality of paragraph 1c of PD 1956, as
amended by EO 137, empowering the Energy
Regulatory Board (ERB) to approve the increase of
fuel prices or impose additional amounts on
petroleum products which proceeds shall accrue to
the Oil Price Stabilization Fund (OPSF) established for
the reimbursement to ailing oil companies in the event
of sudden price increases. The petitioner avers that
the collection on oil products establishments is an
undue and invalid delegation of legislative power to
tax. Further, the petitioner points out that since a
'special fund' consists of monies collected through
the taxing power of a State, such amounts belong to
the State, although the use thereof is limited to the
special purpose/objective for which it was created. It
thus appears that the challenge posed by the
petitioner is premised primarily on the view that the
powers granted to the ERB under P.D. 1956, as
amended, partake of the nature of the taxation power
of the State.
ISSUE: Is there an undue delegation of the legislative
power of taxation?
HELD: None. It seems clear that while the funds
collected may be referred to as taxes, they are exacted
in the exercise of the police power of the State.
Moreover, that the OPSF as a special fund is plain
from the special treatment given it by E.O. 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. The Court is satisfied
that these measures comply with the constitutional
description of a "special fund." With regard to the
 66

alleged undue delegation of legislative power, the

Court finds that the provision conferring the authority
upon the ERB to impose additional amounts on
petroleum products provides a sufficient standard by
which the authority must be exercised. In addition to
the general policy of the law to protect the local
consumer by stabilizing and subsidizing domestic
pump rates, P.D. 1956 expressly authorizes the ERB
to impose additional amounts to augment the
resources of the Fund.
 67
41. o Tañada vs. Angara, 272 SCRA 18
Facts
On April 15, 1994, the Philippine Government
represented by its Secretary of the Department of
Trade and Industry signed the Final Act binding the
Philippine Government to submit to its respective
competent authorities the WTO (World Trade
Organization) Agreements to seek approval for such.
On December 14, 1994, Resolution No. 97 was adopted
by the Philippine Senate to ratify the WTO Agreement.
This is a petition assailing the constitutionality of the
WTO agreement as it violates Sec 19, Article II,
providing for the development of a self reliant and
independent national economy, and Sections 10 and
12, Article XII, providing for the “Filipino first” policy.
Issue
Whether or not the Resolution No. 97 ratifying the
WTO Agreement is unconstitutional
Ruling
The Supreme Court ruled the Resolution No. 97 is not
unconstitutional. While the constitution mandates a
bias in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need
for business exchange with the rest of the world on
the bases of equality and reciprocity and limits
protection of Filipino interests only against foreign
competition and trade practices that are unfair. In
other words, the Constitution did not intend to pursue
an isolationalist policy. Furthermore, the
constitutional policy of a “self-reliant and independent
national economy” does not necessarily rule out the
entry of foreign investments, goods and services. It
contemplates neither “economic seclusion” nor
“mendicancy in the international community.”
The Senate, after deliberation and voting, gave its
consent to the WTO Agreement thereby making it “a
part of the law of the land”. The Supreme Court gave
due respect to an equal department in government. It
presumes its actions as regular and done in good faith
unless there is convincing proof and persuasive
agreements to the contrary. As a result, the ratification
of the WTO Agreement limits or restricts the
absoluteness of sovereignty. A treaty engagement is
not a mere obligation but creates a legally binding
obligation on the parties. A state which has contracted
valid international obligations is bound to make its
legislations such modifications as may be necessary
to ensure the fulfillment of the obligations undertaken.
 68

42. o Philhealth Care vs. CIR, 554 SCRA 411 undertakes for a consideration to indemnify its clients
against loss, damage or liability arising from unknown
Facts: On January 27, 2000, the respondent CIR sent
or contingent event. The term “indemnify” therein
petitioner assessment of deficiency taxes, both Value-
presuppose that a liability or claim has already been
Added Tax (VAT) and documentary stamp tax (DST) in
incurred. In HMOs, there is no indemnity precisely
the total amount of P224,702,641.18 for taxable years
because the member merely avails of medical
1996 and 1997.
services to be paid or already paid in advance at a pre-
Petitioner protested such assessment in a letter, but agreed price under the agreements.
the respondent did not act on the protest which led the
Moreover, HMOs play an important role in society as
petitioner to file a petition in the Court of Tax Appeals
partners of the State in achieving its constitutional
(CTA) seeking the cancellation of said assessments.
mandate of providing citizens with affordable health
CTA partially granted the petition wherein the
services.
petitioner is ordered to pay the deficiency VAT and set
aside the DST deficiency tax. Also, the DST assessment of the petitioner for the
years 1996 and 1997 became moot and academic
Respondent appealed in Court of Appeals (CA) with
since it availed tax amnesty under RA 9480 on
regard to the cancellation of DST assessment. CA
December 10, 2007. Thus, petitioner is entitled to
granted the petition. The Court affirmed CA’s
immunity from payment of taxes for taxable year 2005
decision. Hence, petitioner filed a motion for
and prior years.
reconsideration.

Issue: Whether or not the petitioner is liable to pay the

DST on its health care agreement pursuant to Sec.185
of the National Internal Revenue Code of 1997

Held: Petition granted. Petitioner is not contemplated

to be included in “or other branch insurance” covered
by Section 185 of NIRC because it is a Health
Maintenance Organization (HMO) and not an
insurance company. HMOs primary purpose is
rendering service to its member by lowering prices
and reducing the cost rather than the risk of medical
health. On the other hand, insurance businesses
 69

43. o Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990

Chavez vs. Ongpin
G.R. No. 76778 | June 6, 1990
En Banc

FACTS
Frank Chavez, as taxpayer, and intervenor Realty Owners
Association of the Philippines, Inc. (ROAP), alleges that
E.O.73 providing for the collection of Real Property taxes as
provided for under Section 21 of the P.D.464 (Real Property
Tax Code) is unconstitutional because it accelerated the
application of the general revision of assessments to January
1, 1987 thereby increasing in real property taxes by 100%
to 400% on improvements, and up to 100% on land which
would necessarily lead to an increase in real property taxes
amounting to confiscation of property. Additionally, P.D.464
is unconstitutional insofar as it imposes an additional1% tax
on all property owners to raise funds for education, as real
property tax is admittedly a local tax for local governments.

ISSUE
Is the contention of the petitioner and intervenor
correct?

RULING
No, 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.
 70

44. o Abakada Guro Party List vs. Ermita, G.R. No.

168056, Sept. 1, 2005
 71
45. o Tolentino vs. Secretary of Finance, G.R. No.
115455, October 30, 1995
FACTS:
These are motions seeking reconsideration of our
decision dismissing the petitions filed in these cases
for the declaration of unconstitutionality of R.A. No.
7716, otherwise known as the Expanded Value-Added
Tax Law. Now it is contended by the Philippine Press
Institute (PPI) that by removing the exemption of the
press from the VAT while maintaining those granted
to others, the law discriminates against the press. At
any rate, it is averred, “even nondiscriminatory
taxation of constitutionally guaranteed freedom is
unconstitutional.”
ISSUE:
Does sales tax on bible sales violative of religious and
press freedom?
RULING:
No. The Court was speaking in that case of a license
tax, which, unlike an ordinary tax, is mainly for
regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint on
the exercise of its right. Hence, although its
application to others, such those selling goods, is
valid, its application to the press or to religious
groups, such as the Jehovah’s Witnesses, in
connection with the latter’s sale of religious books
and pamphlets, is unconstitutional. As the U.S.
Supreme Court put it, “it is one thing to impose a tax
on income or property of a preacher. It is quite another
thing to exact a tax on him for delivering a sermon.”
The VAT is, however, different. It is not a license tax.
It is not a tax on the exercise of a privilege, much less
a constitutional right. It is imposed on the sale, barter,
lease or exchange of goods or properties or the sale
or exchange of services and the lease of properties
purely for revenue purposes. To subject the press to
its payment is not to burden the exercise of its right
any more than to make the press pay income tax or
subject it to general regulation is not to violate its
freedom under the Constitution.
 72
46. o Tan Tiong Bio vs. CIR, G.R. No. L-15778, April
23, 1962
219 TAN TIONG BIO VS CIR
G.R. No. L-15778 April 23, 1962
TOPIC: Effects of Dissolution; Winding up and
liquidation- Distribution of Assets after Payment of
Debts
PONENTE: Justice Bautistsa AUTHOR:
VILLANUEVA, Karyl Stephanie L.
FACTS
1. Central Syndicate (syndicate for short) a
corporation, sent a letter to the Collector of Internal
Revenue advising the latter that (1) it purchased from
Dee Hong Lue the surplus properties which the said
Dee Hong Lue had bought from the Foreign
Liquidation Commission (2) that it assumed Dee Hong
Lue's obligation and would pay a portion of the sales
tax on said surplus goods (3) it was paying P43,750.00
in behalf of Dee Hong Lue as deposit to answer for the
payment of said sales tax
2. The syndicate again wrote the Collector requesting
a refund for the purchase price of goods obtained
from Dee Hong Lue was adjusted and reduced. The
CIR investigated the matter and the Collector decided
that the Central Syndicate was the importer and
original seller of the surplus goods in question and,
therefore, the one liable to pay the sales tax. The
Collector denied the request of the syndicate for the
refund.
3. The Central Syndicate elevated the case to the Court
of Tax Appeals. The Collector filed a motion requiring
the syndicate to file a bond to guarantee the payment
of the tax assessed against it.
4. COURT OF TAX APPEALS DECISION: (1)Denied
Collector’s motion. On the ground that cannot be
legally done it appearing that the syndicate is already
a non-existing entity due to the expiration of its
corporate existence (2) dismissing syndicate’s appeal
primarily on the ground that the Central Syndicate has
no personality to maintain the action then pending
before it. From this order the syndicate appealed to
the Supreme Court wherein it intimated that the appeal
should not be dismissed because it could be
substituted by its successors-in-interest.
5. The syndicate was later substituted by its officers
and directors (petitioners herein). Court of Tax
Appeals proceeded to hear the case.
6. COURT OF TAX APPEALS DECISION: Petitioners
ordered to pay jointly and severally, to the Collector of
Internal Revenue deficiency sales tax and surcharge
on the surplus goods purchased by them from the
Foreign Liquidation Commission. Petitioners filed
appeal.
 73

ISSUE: W/N the sales tax in question can be enforced that the legal death of the corporation no more
against the corporation’s successors-in-interest who prevents such action than would the physical death of
are the present petitioners since the Central Syndicate an individual prevent the government from assessing
has already been dissolved because of the expiration taxes against him and collecting them from his
of its corporate existence. administrator, who holds the property which the
decedent had formerly possessed".
HELD: YES. The creditor of a dissolved corporation
may follow its assets once they passed into the hands
of the stockholders.
RATIO:
***somewhat related:
• Net profit of the corporation (from the sale of the
It was found out that Dee Hong Lue purchased the
surplus goods) and was distributed among the
surplus goods in question not for himself but for the
stockholders when the corporation liquidated and
Central Syndicate (as an agent) which was then in the
distributed its assets immediately after the sale of the
process of incorporation such that the deed of sale
said surplus goods. Petitioners are therefore the
which purports to show that Dee Hong Lue sold said
beneficiaries of the defunct corporation and as such
goods to the syndicate is but a ruse for the syndicate
should be held liable to pay the taxes in question.
to evade payment of a greater amount of percentage
tax.
• The dissolution of a corporation does not
extinguish the debts due or owing to it because a
creditor of a dissolved corporation may follow its
assets, as in the nature of a trust fund, into the hands
of its stockholders.

• With reference to the effect of dissolution upon

taxes due from a corporation, "that the hands of the
government cannot, of course, collect taxes from a
defunct corporation, it loses thereby none of its rights
to assess taxes which had been due from the
corporation, and to collect them from persons, who by
reason of transactions with the corporation, hold
property against which the tax can be enforced and
 74
47. G.R. No. L-22734, September 15, 1967
CIR vs. PINEDA
Estate proceedings were had to settle the estate of
Atanasio Pineda.
After the estate proceedings were closed, the BIR
found out that the income tax liability of the estate
during the pendency of the estate proceedings were
not paid.
The Court of Tax Appeals rendered judgment holding
Manuel B. Pineda, the eldest son of the deceased,
liable for the payment corresponding to his share of
the estate.
The Commissioner of Internal Revenue has appealed
to SC and has proposed to hold Manuel B. Pineda
liable for the payment of all the taxes found by the Tax
Court to be due from the estate instead of only for the
amount of taxes corresponding to his share in the
estate.
ISSUE:
Can the Government require Pineda to pay the full
amount of the taxes assessed?
RULING:
Yes.
Pineda is liable for the assessment as an heir and as
a holder-transferee of property belonging to the
estate/taxpayer.
As a holder of property belonging to the estate, Pineda
is liable for the tax up to the amount of the property in
his possession. The reason is that the Government
has a lien on what he received from the estate as his
share in the inheritance for unpaid income taxes for
which said estate is liable.
By virtue of such lien, the Government has the right to
subject the property in Pineda's possession, i.e., the
P2,500.00, to satisfy the income tax assessment in the
sum of P760.28. After such payment, Pineda will have
a right of contribution from his co-heirs, to achieve an
adjustment of the proper share of each heir in the
distributable estate.
The Government has two ways of collecting the tax in
question. One, by going after all the heirs and
collecting from each one of them the amount of the tax
proportionate to the inheritance received. The reason
why a case suit is filed against all the heirs for the tax
due from the estate is to achieve thereby two results:
first, payment of the tax; and second, adjustment of
the shares of each heir in the distributed estate as
lessened by the tax.
Another remedy is by subjecting said property of the
estate which is in the hands of an heir or transferee to
the payment of the tax due. This second remedy is the
very avenue the Government took in this case to
collect the tax. The BIR should be given the necessary
discretion to avail itself of the most expeditious way
to collect the tax because taxes are the lifeblood of
government and their prompt and certain availability
is an imperious need. The adjustment of the
respective shares due to the heirs from the
inheritance, as lessened by the tax, is left to await the
 75

suit for contribution by the heir from whom the

Government recovered said tax.
 76
48. G.R. No. L-18330 July 31, 1963 DE BORJA vs
GELLA
Facts:
Jose de Borja has been delinquent in the payment of
his real estate taxes since 1958 for properties located
in the City of Manila and Pasay City and has offered to
pay them with two negotiable certificate of
indebtedness. Borja was, however, a mere assignee of
the aforesaid negotiable certificates. The offers to pay
the estate taxes in question were rejected by the city
treasurers of both Manila and Pasay cities on the
ground of their limited negotiability, that the
negotiable certificates cannot be accepted as
payment of real estate taxes inasmuch as the law
provides for their acceptance from their backpay
holder only or the original applicant himself, but not
his assignee.
Issues:
1) has appellee the right to apply to the payment
of his real estate taxes to the government.
2) can compensation be invoked to extinguish
appellee's real estate tax liability between the latter's
obligation and the credit represented by said
certificates of indebtedness?
Held:
1) To begin with, it cannot be contended that
appellants are in duty bound to accept the negotiable
certificates of indebtedness held by appellee in
payment of his real estate taxes for the simple reason
that they were not obligations subsisting at the time
of the approval of Republic Act No. 304 which took
effect on June 18, 1948. It should be noted that the real
estate taxes in question have reference to those due
in 1958 and subsequent years. The law is explicit that
in order that a certificate may be used in payment of
an obligation the same must be subsisting at the time
of its approval even if we hold that a tax partakes of
this character, neither can it be contended that
appellee can compel the government to accept the
alleged certificates of indebtedness in payment of his
real estate taxes under proviso No. 2 abovequoted
also for the reason that in order that such payment
may be allowed the tax must be owed by the applicant
himself . This is the correct implication that may be
drawn from the use by the law of the words "his
taxes". Verily, the right to use the backpay certificate
in settlement of taxes is given only to the applicant
and not to any holder of any negotiable certificate to
whom the law only gives the right to have it
discounted by a Filipino citizen or corporation under
certain limitations. Here appellee is not himself the
applicant of the certificate, in question. He is merely
an assignee thereof, or a subsequent holder whose
right is at most to have it discounted upon maturity —
or to negotiate it in the meantime. A fortiori, it may be
included that, not having the right to use said
certificates to pay his taxes, appellee cannot compel
appellants to accept them as he requests in the
present petition for mandamus. As a consequence, we
cannot but hold that mandamus does not lie against
appellants because they have in no way neglected to
perform an act enjoined upon them by law as a duty,
nor have they unlawfully excluded appellee from the
use or enjoyment of a right to which be is entitled.
 77

2) With regard to the second issue, i.e., whether
compensation can be invoked insofar as the two
obligations are concerned, Articles 1278 and 1279 of
the new Civil Code provide:
ART. 1278. Compensation shall take place when two
persons, in their own right, are creditors and debtors
of each other.
ART. 1279. In order that compensation may be proper,
it is necessary:
(1) That each one of the obligors be bound principally,
and that he be at the same time a principal creditor of
the other;
(2) That both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind,
and also of the same quality if the latter has been
stated;
is the appellee while the debtor is the Republic of the
Philippines. And with regard to the taxes, the creditors
are the City of Manila and Pasay City while the debtor
is the appellee. It appears, therefore, that each one of
the obligors concerning the two obligations is not at
the same time the principal creditor of the other. It
cannot also be said for certain that the certificates are
already due. Although on their faces the certificates
issued to appellee state that they are redeemable on
June 18, 1958, yet the law does not say that they are
redeemable from its approval on June 18, 1948 but
"within ten years from the date of issuance" of the
certificates. There is no certainty, therefore, when the
certificates are really redeemable within the meaning
of the law. Since the requisites for the
accomplishment of legal compensation cannot be
fulfilled, the latter cannot take place with regard to the
two obligations as found by the court a quo.

(3) That the two debts be due; WHEREFORE, the decision appealed from is reversed.
The petition for mandamus is dismissed. The
(4) That they two liquidated and demandable; injunction issued against respondents-appellants is
(5) That over neither of them there be any retention or hereby lifted. No costs.
controversy, commenced by third persons and
communicated in due time to the debtor.
It is clear from the above legal provisions that
compensation cannot be effected with regard to the
two obligations in question. In the first place, the
debtor insofar as the certificates of indebtedness are
concerned is the Republic of the Philippines, whereas
the real estate taxes owed by appellee are due to the
City of Manila and Pasay City, each one of which
having a distinct and separate personality from our
Republic. With regard to the certificates, the creditor
 78

"the lifeblood of the government." If the payment of

taxes could be postponed by simply questioning their
49. o CIR vs. Cebu Portland Cement, G.R. No. L-
validity, the machinery of the state would grind to a
29059, December 15, 1987
halt and all government functions would be paralyzed.
GR. No. L-29059, 15 December 1987 That is the reason why, save for the exception in RA
1125 , the Tax Code provides that injunction is not
available to restrain collection of tax. Thereby, we hold
Facts: CTA decision ordered the petitioner CIR to that the respondent Court of Tax Appeals erred in its
refund to the Cebu Portland Cement Company, order
respondent, P 359,408.98 representing overpayments
of ad valorem taxes on cement sold by it. Execution
of judgement was opposed by the petitioner citing that
private respondent had an outstanding sales tax
liability to which the judgment debt had already been
credited. In fact, there was still a P4 M plus balance
they owed. The Court of Tax Appeals, in holding that
the alleged sales tax liability of the private respondent
was still being questioned and therefore could not be
set-off against the refund, granted private
respondent's motion. The private respondent
questioned the assessed tax based on Article 186 of
the Tax Code, contending that cement was adjudged
a mineral and not a manufactured product; and thusly
they were not liable for their alleged tax deficiency.
Thereby, petitioner filed this petition for review.

Issue: Whether or not assessment of taxes can be

enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet

be enforced because it is still being contested loses
sight of the urgency of the need to collect taxes as
 79
50. Republic v Mambulao Lumber Company, et al GR
No L-17725, February 28, 1962
FACTS:
Mambulao Lumber Company paid the Government a
total of P 9,127.50 as reforestation charges for the
years 1947 to 1956. It is the company’s contention that
said sum of 9,127.50, not having been used in the
reforestationof the area covered by its license, the
same is refundable to it or may be applied in
compensation of P4,802.37 due from it as forest
charges.
Court of First Instance of Manila ordered the company
to pay the government the sum of P 4,802.37 with
6% interest thereon from date of the filing of the
complaint until fully paid, plus costs. Thus, the
present
appeal.
ISSUE: Whether the set-off or compensation is proper
RULING:
No. There is nothing in the law which requires that the
amount collected as reforestation charges should
be used exclusively for the reforestation of the area
covered by the license of a licensee or
concessionaire,
and that if not so used, the same shall be refunded to
him.
The conclusion seems to be that the amount paid by a
licensee as reforestation charges is in the nature of a
tax which forms part of the Forestation Fund, payable
by him irrespective of whether the area covered by
his license is reforested or not.
Said fund, as the law expressly provides, shall be
expended in carrying out the purposes provided for
thereunder, namely, the reforestation or afforestation,
among others, of denuded areas needing
reforestation or afforestation.
The weight of authority is to the effect that internal
revenue taxes, such as the forest charges in question
is
not subject to set-off or compensation. Taxes are not
in the nature of contracts between the parties but
grow out of a duty to, and are positive acts of the
government, to the making and enforcing of which,
the
personal consent of the individual taxpayers is not
required.
With respect to the forest charges which the company
has paid to the government, they are in the coffers
of the government as tax collected, and the
government does not owe anything. It is crystal clear
that the
Republic of the Philippines and the Mambulao Lumber
Company are not creditors and debtors of each
other, because compensation refers to mutual debts.
 80

51. o Francia vs. IAC, G.R. No. L-67649, June 28, 1988
 81
52. PHILEX MINING CORP. v. CIR
GR No. 125704, August 28, 1998
294 SCRA 687
FACTS: Petitioner Philex Mining Corp. assails the
decision of the Court of Appeals affirming the Court of
Tax
Appeals decision ordering it to pay the amount of
P110.7 M as excise tax liability for the period from the
2nd
quarter of 1991 to the 2nd quarter of 1992 plus 20%
annual interest from 1994 until fully paid pursuant to
Sections 248 and 249 of the Tax Code of 1977. Philex
protested the demand for payment of the tax liabilities
stating that it has pending claims for VAT input
credit/refund for the taxes it paid for the years 1989 to
1991 in
the amount of P120 M plus interest. Therefore these
claims for tax credit/refund should be applied against
the
tax liabilities.
ISSUE: Can there be an off-setting between the tax
liabilities vis-a-vis claims of tax refund of the
petitioner?
HELD: No. Philex's claim is an outright disregard of
the basic principle in tax law that taxes are the
lifeblood of the
government and so should be collected without
unnecessary hindrance. Evidently, to countenance
Philex's
whimsical reason would render ineffective our tax
collection system. Too simplistic, it finds no support
in law or in
jurisprudence.
To be sure, Philex cannot be allowed to refuse the
payment of its tax liabilities on the ground that it has
a
pending tax claim for refund or credit against the
government which has not yet been granted.Taxes
cannot be
subject to compensation for the simple reason that
the government and the taxpayer are not creditors and
debtors of each other. There is a material distinction
between a tax and debt. Debts are due to the
Government
in its corporate capacity, while taxes are due to the
Government in its sovereign capacity. xxx There can
be no
off-setting of taxes against the claims that the
taxpayer may have against the government. A person
cannot
refuse to pay a tax on the ground that the government
owes him an amount equal to or greater than the tax
 82

being collected. The collection of a tax cannot await

the results of a lawsuit against the government.
 83
53. o Domingo vs. Garlitos, 8 SCRA 443
Domingo vs. Garlitos
8 SCRA 443
FACTS:
In Domingo vs. Moscoso, the Supreme Court
declared at final and executor the order of the court of
first instance of Leyte for the payment of estate and
inheritance taxes, charges and penalties amounting to
₱ 40, 058.55 by the estate of the late Walter Scott Pine.
He petition for execution filed by the fiscal, however,
was denied by the lower court the court held that the
execution is unjustified as the government itself is
indebted to the estate for 262,200; and ordered the
amount of inheritance taxes be deducted from the
governments’ indebtedness to the estate.
Issues: Can there be legal compensation?
Ruling:
Yes. The fact that the court having
jurisdiction of the estate had found that the claim of
the estate against the government has been
appropriated for the purpose by a corresponding law
( RA 2700) shows that both the claim of the
government for inheritance taxes and the claim of the
intestate for services regarded have already become
overdue and demandable as well as fully liquidated.
Compensation, therefore, take place by operation of
law, in accordance with the provisions of article 1279
and 1290 of the civil code, and both debts are
extinguished to the amount.
Exception: SC allowed set off in the case of Domingo
v. Garlitos [8 SCRA 443] re: claim for payment of
unpaid services of a government employee vis-à-vis
the estate taxes due from his estate. The fact that the
court having jurisdiction of the estate had found that
the claim of the estate against the government has
been appropriated for the purpose by a corresponding
law shows that both the claim of the government for
inheritance taxes and the claim of the intestate for
services rendered have already become overdue and
demandable as well as fully liquidated. Compensation
therefore takes place by operation of law.