PAL VS.

EDU, 164 SCRA 320 (1988)

Facts of the case:

The disputed registration fees were imposed by the commissioner Elevate pursuant to Section 8, RA 4136,
the Land Transportation and Traffic Code.

PAL as a corporation is engaged in the air transportation business under the legislative franchise. Under
its franchise, PAL is exempt from the payment of taxes.

In 1971 however, appellee Commissioner elevate issued a regulation requiring all tax exempt entities, among
them PAL to pay motor vehicle registration fees.

Despite PAL’s protest, appellee refused to register the appellant’s motor vehicles unless the amounts
imposed were paid. PAL thus paid, under protest, P19,529.75 as registration fees of its motor vehicles.

After paying under protest, PAL wrote to Commissioner Edu demanding a refund of the amounts paid,
invoking Calalang vs. Lorenzo where it was held that motor vehicle registration fees are in reality taxes from the
payment of which PAL is exempt by virtue of its legislative franchise.

Edu denied request for refund based on Republic v. Phil. Rabbit Bus, that motor vehicle registration fees are
regulatory and not revenue measures and, therefore, do not come within the exemption granted to PAL under its
franchise.

PAL filed the complaint against LTC Commissioner EDu and National Treasurer Carbonell.

ISSUE: What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?

RULING ON TAX VS. LICENSE AND REGULATORY FEE

SC ruled that motor vehicles registration fees are TAXES. Fees may be regarded as taxes even though they
also serve as instruments of regulation because taxation may be made as an implementation of the State’s police
power. But if the purpose is primarily REVENUE, or if revenue is atleast, one of the real and substantial purposes,
then the exaction is properly called a TAX.

RULING ON PURPOSES OF TAX, OBJECTIVE OF TAXATION: GENERAL, FISCAL REVENUE

The Legislative intent and purpose behind the law requiring owners of vehicles , to pay for their
registration is mainly to raise funds for the construction and maintenance of highways and, to a much lesser
degree, pay for the operating expenses of the administering agency.

It is possible for an exaction to be both a tax and a regulation. License fees are charges, looked to as a
source of revenue as well as a means of regulation. The fees may be properly regarded as taxes eventhough they
also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue is atleast one of the
real and substantial purposes, then the exaction is properly called a TAX.

RULING ON NON-DELEGABILITY OF THE POWER TO TAX

It is clear from the provisions of section 73 of Commonwealth Act 123 and section 61 of the Land
Transportation and Traffic Code that the legislative intent and purpose behind the law requiring owners of vehicles
to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a
much lesser degree, pay for the operating expenses of the administering agency.

There is a valid delegation to the Land Transportation Office. Simply put, if the exaction under RA 4136
were merely a regulatory fee, the imposition on RA 5448 need not be an “additional” tax. RA4136 also speaks of
other “fees” such as the special permit fees for certain types of motor vehicles (sec.10) and additional fees for
change of registration (sec.11). These are not to be understood as taxes because such fees are very minimal to be
revenue-raising. Thus they are not mentioned by Sec. 59 (b) of the Code as taxes like the motor vehicle
registration fee and chauffers’ license fee. Such fees are to go into the expenditures of the Land Transportation
Commission as provided for in the last proviso of Sec. 61.

Motor vehicle registration fees are at present exacted pursuant to the Land Transportation and Traffic
Code are actually taxes intended for additional revenues of government even if one-fifth or less of the amount
collected is set aside for the operating expenses of the agency administering the program.

LORENZO VS. POSADAS 64 PHIL 353 (1937)

Facts of the case:

Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and personal
properties. Proceedings for the probate of his will and the settlement and distribution of his estate were begun in
the Court of First Instance of Zamboanga.

The court thought it better to appoint a trustee and 10 years after the death of Hanley, the property shall
pass to Matthew Hanley. Moore was appointed as Trustee, until replaced by Lorenzo.

The Collector filed with the CFI for the collection of P2,052.74 for the inheritance tax against the estate,
which was granted. The plaintiff paid under protest, and since he was not refuned, he went to court.

ISSUE: WON there is delinquency of taxes

RULING ON THE DELINQUENCY IN THE PAYMENT OF TAXES

YES. The delinquency in payment occurred on the date when Moore became trustee because delivery of
the Estate to the trustee was in essence delivery of the same estate to the cestui que trust (fedeicommissary), the
beneficiary in this case. The interest due should be computed from that date and it is error on the part of the
defendant to compute it one month later. The provision of law requiring the payment of interest in appropriate
cases is mandatory. The tax and interest due were not paid within ten days after the ate of notice and demand
thereof by the Collector, a surcharge of 25% should be added. Demand was made by the Deputy Collector upon
Moore in a communication dated 10/16/31. The date fixed for the payment of the tax and interest was 11/30/31.
As the tax and interest due were not paid on that date, the estate became liable for the payment of the surcharge.

RULING ON THE THEORY AND BASIS OF TAXATION

Taxes are essential to the existence of the government. The obligation to pay taxes rests not upon the
privileges enjoyed by or the protection afforded to the citizen by the government, but upon the necessity of money
for the support of the State. For this reason, no one is allowed to object to or resist payment of taxes solely
because no personal benefit to him can be pointed out as arising from the tax.
Commissioner vs. John Gotamco GR L-31092, 27 February 1987

Facts of the Case:

The World Trade Organization (WHO) decided to construct a building to house its offices, as well as the
other United Nations Offices in Manila. In inviting bids for the construction of the building, the WHO informed the
bidders of its tax exemptions. The contract was awarded to John Gotamco and Sons. The Commissioner opined
that a 3% contractor’s tax should be due from the contractor. The WHO issued a certification that Gotamco should
be exempted, but the Commissioner insisted on the tax. Raised in the Court of Tax Appeals, the court ruled in favor
of Gotamco.

Issue: Whether Gotamco is likewise from the contractor’s tax in lieu of WHO’s exemption from indirect taxes.

RULING ON CLASSIFICATION OF TAXES:AS TO WHO SHOULDERS THE BURDEN

AS Direct taxes are those that are demanded from the very person who, it is intended or desired, should pay them;
while indirect taxes are those that are demanded in the first instance from one person in the expectation and
intention that he can shift the burden to someone else. Herein, the contractor’s tax is payable by the contractor
but it is the owner of the building that shoulders the burden of the tax because the same is shifted by the
contractor to the owner as a matter of self-preservation. Such tax is an “indirect tax” on the organization, as the
payment thereof or its inclusion in the bid price would have meant an increase in the construction cost of the
building.

Hence, the Contractee’s (WHO) exemption from “indirect taxes” implies that contractor (Gotamco) is exempt from
contractor’s tax.

CIR VS. SANTOS 277 SCRA 617 (1997)

Facts of the case:

Guild of Phil. Jewellers questions the constitutionality of certain provisions of the NIRC and Tariff and
Customs Code of the Philippines. It is their contention that present Tariff and tax structure increases
manufacturing costs and render local jewelry manufacturers uncompetitive against other countries., in support of
their position, they submitted what they purported to be an exhaustive study of the tax rates on jewelry prevailing
in other Asian countries, in comparison to tax rates levied in the country.

Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and oppressive and declared
them INOPERATIVE and WITHOUR FORCE AND EFFECT insofar as petitioners are concerned.

Petitioner CIR assailed decision rendered by respondent judge contending that the latter has no authority
to pass judgment upon the taxation policy of the government. Petitioners also impugn the decision by asserting
that there was no showing that the tax laws on jewelry are confiscatory.

ISSUE: whether RTC has authority to pass judgment upon taxation policy of the government.

RULING OF THE COURT:

 The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the
political departments are valid in the absence of a clear and unmistakable showing to the contrary.

This is not to say that RTC has no power whatsoever to declare a law unconstitutional. But this authority
does not extend to deciding questions which pertain to legislative policy.

RTC have the power to declare the law unconstitutional but this authority does not extend to deciding
questions which pertain to legislative policy. RTC can only look into the validity of a provision, that is whether or
not it has been passed according to the provisions laid down by law, and thus cannot inquire as to the reasons for
its existence.

RULING ON THE EXTENT OF LEGISLATIVE POWER TO TAX

SC held that it is within the power f the legislature whether to tax jewelry or not. With the legislature
primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subject) and
situs (place) of taxation.

CHAVEZ vs PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT 299 SCRA 744 (1998)

Facts of the Case:

-Petitioner Francisco I Chavez (in his capacity as taxpayer, citizen and a former government official) initiated this
original action seeking

(1) to prohibit and “enjoin respondents [PCGG and its chairman] from privately entering into, perfecting
and/or executing any agreement with the heirs of the late President Ferdinand E. Marcos . . . relating to and
concerning the properties and assets of Ferdinand Marcos located in the Philippines and/or abroad — including
the so-called Marcos gold hoard"; and

(2) to “compel respondent[s] to make public all negotiations and agreement, be they ongoing or
perfected, and all documents related to or relating to such negotiations and agreement between the PCGG and the
Marcos heirs."

-Chavez is the same person initiated the prosecution of the Marcoses and their cronies who committed
unmitigated plunder of the public treasury and the systematic subjugation of the country's economy; he says that
what impelled him to bring this action were several news reports 2 bannered in a number of broadsheets
sometime in September 1997. These news items referred to (1) the alleged discovery of billions of dollars of
Marcos assets deposited in various coded accounts in Swiss banks; and (2) the reported execution of a
compromise, between the government (through PCGG) and the Marcos heirs, on how to split or share these
assets.

-PETITIONER DEMANDS that respondents make public any and all negotiations and agreements pertaining to
PCGG's task of recovering the Marcoses' ill-gotten wealth. He claims that any compromise on the alleged billions of
ill-gotten wealth involves an issue of "paramount public interest," since it has a "debilitating effect on the country's
economy" that would be greatly prejudicial to the national interest of the Filipino people. Hence, the people in
general have a right to know the transactions or deals being contrived and effected by the government.

-RESPONDENT ANSWERS that they do not deny forging a compromise agreement with the Marcos heirs. They
claim, though, that petitioner's action is premature, because there is no showing that he has asked the PCGG to
disclose the negotiations and the Agreements. And even if he has, PCGG may not yet be compelled to make any
disclosure, since the proposed terms and conditions of the Agreements have not become effective and binding.

-PETITIONER INVOKES

Sec. 7 [Article III]. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy development,
shall be afforded the citizen, subject to such limitations as may be provided by law.

Sec. 28 [Article II]. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public interest

RULING OF THE COURT ON WHO MAY QUESTION THE VALIDITY OF A TAX MEASURE OR EXPENDITURE OF TAXES

SC finds the petition of Frank Chavez meritorious because as a tax payer, he has the legal personality to
file the petition since ill-gotten wealth belongs to the Filipino people. The Agreement between PCGG and Marcos
is Null and void because contrary to law and constitution.

CIR VS. CA AND ALHAMBRA 267 SCRA 557 (1997)

Facts of the Case:

Alhambra industries, Inc. (Alhambra) is a domestic corporation engaged in the manufacture and sale of
cigar and cigarette products. On May 7, 1991 private respondent received a letter dated April 26, 1991 from the
Commissioner of Internal Revenue assessing its deficiency Ad Valorem Tax (AVT) in the total amount of
P488,396.62, inclusive of increments, on the removals of cigarette products from their place of production during
the period Nov. 2, 1990 to January 22, 1991.

Alhambra filed protest against amount assessed by the CIR, however, it was denied by the latter at the
same time increasing the amount assessed to P520,835.29. Alhambra filed a petition for review with the CTA,
despite payment under protest the amount of P520,835.29. On December 1, 1993, CTA ordered petitioner to
refund said amount to Alhambra. CA affirming such decision, hence, this appeal.

ISSUE: whether private respondent's reliance on a void BIR ruling conferred upon the latter a vested right to apply
the same in the computation of its ad valorem tax and claim for tax refund
RULING ON EQUAL PROTECTION OF THE LAWS

The government is not stopped from collecting taxes legally due because of mistake/errors of its agents,
this admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer.

As regards, petitioner’s argument the private respondent should have made consultations with it before
private respondent used the computation mandated by BIR ruling 473-88 suffice it to state that the BIR ruling was
clear and categorical, there leaving no room for interpretation. The failure of private respondent to consult
petitioner does not imply bad faith on the part of the former.

CIR VS. CA, CTA AND ATENEO GR 115349, 18 April 1997 (271 SCRA 605)

Facts of the Case

Private respondent, the Ateneo de Manila University, is a non-stock, non-profit educational institution
with auxiliary units and branches all over the Philippines. One auxiliary unit is the Institute of Philippine Culture
(IPC), which has no legal personality separate and distinct from that of private respondent. The IPC is a Philippine
unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its
research activities from international organizations, private foundations and government agencies. On 8 July 1983,
private respondent received from Commissioner of Internal Revenue (CIR) a demand letter dated 3 June 1983,
assessing private respondent the sum of P174,043.97 for alleged deficiency contractor’s tax, and an assessment
dated 27 June 1983 in the sum of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended 31
March 1978. Denying said tax liabilities, private respondent sent petitioner a letter-protest and subsequently filed
with the latter a memorandum contesting the validity of the assessments.  On 17 March 988, petitioner rendered a
letter-decision canceling the assessment for deficiency income tax but modifying the assessment for deficiency
contractor’s tax by increasing the amount due to P193,475.55. Unsatisfied, private respondent requested for a
reconsideration or reinvestigation of the modified assessment.

At the same time, it filed in the respondent court a petition for review of the said letter-decision of the
petitioner. While the petition was pending before the respondent court, petitioner issued a final decision dated 3
August 1988 reducing the assessment for deficiency contractor’s tax from P193,475.55 to P46,516.41, exclusive of
surcharge and interest. On 12 July 1993, the respondent court set aside respondent’s decision, and canceling the
deficiency contractor’s tax assessment in the amount of P46,516.41 exclusive of surcharge and interest for the
fiscal year ended 31 March 1978. No pronouncement as to cost. On 27 April 1994, Court of Appeals, in CA-GR SP
31790, affirmed the decision of the Court of Tax Appeals. Not in accord with said decision, petitioner came to
Supreme Court via a petition for review.

Issues:

 Whether the private respondent has the burden of proof in the tax case.
 Whether the private respondent is taxable as an independent contractor.

Held: The Commissioner erred in applying the principles of tax exemption without first applying the well-settled
doctrine of strict interpretation in the imposition of taxes. It is obviously both illogical and impractical to determine
who are exempted without first determining who are covered by the aforesaid provision. The Commissioner
should have determined first if private respondent was covered by Section 205, applying the rule of strict
interpretation of laws imposing taxes and other burdens on the populace, before asking Ateneo to prove its
exemption therefrom, following the rule of construction where “the tax exemptions are to be strictly construed
against the taxpayer”.

The doctrine in the interpretation of tax laws is that a statute will not be construed as imposing a tax unless it does
so clearly, expressly, and unambiguously. Tax cannot be imposed without clear and express words for that
purpose. Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with
peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication.”  In case of
doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or
citizens because burdens are not to be imposed nor presumed to be imposed beyond what statutes expressly and
clearly import. In the present case, Ateneo’s Institute of Philippine Culture never sold its services for a fee to
anyone or was ever engaged in a business apart from and independently of the academic purposes of the
university. Funds received by the Ateneo de Manila University are technically not a fee. They may however fall as
gifts or donations which are “tax-exempt” as shown by private respondent’s compliance with the requirement of
Section 123 of the National Internal Revenue Code providing for the exemption of such gifts to an educational
institution.

The Supreme Court denied the petition and affirmed the assailed Decision of the Court of Appeals. The Court ruled
that the private respondent is not a contractor selling its services for a fee but an academic institution conducting
these researches pursuant to its commitments to education and, ultimately, to public service. For the institute to
have tenaciously continued operating for so long despite its accumulation of significant losses, we can only agree
with both the Court of Tax Appeals and the Court of Appeals that “education and not profit is motive for
undertaking the research projects.

RULING ON PROHIBITION AGAINST TAXATION OF NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTION

There is no evidence that Ateneo’s Institute of Philippine Culture ever sold its services for a fee to anyone
or was ever engaged in business apart from and independently of the academic purposes of the university.

The research activities of the IPC is done in pursuance of maintaining Ateneo University’s statuts and not
in the course of an independent business of selling such research without profit in mind.

Ateneo IPC is an auxillary unit performing the act of independent contractor; the funds received by
Ateneo’s IPC are not given in the concept of a fee/price in exchange for the performance of a service or delivery of
an object.