Eloise
Case No. 64: CIR v. Bank of Commerce (2005) Eloise
Double Taxation
Facts: Respondent Bank of Commerce derived passage income in the form of
interests or discounts from its investments in gov’t securities and private
commercial papers; it paid 5% gross receipts tax on its income, as reflected in
its quarterly percentage tax returns. Included therein were the respondent
bank’s passive income from said investments amounting to 85, 384, 254.51 php
which had already been subjected to a final tax of 20%. Meanwhile, Court of Tax
Appeals (CTA) rendered judgment in Asia Bank Corp. v. CIR holding that the
20% final withholding tax on interest income from banks does not form part of
taxable gross receipts for Gross Receipts Tax (GRT) purposes. CTA relied on
Section 4(e) of Revenue Regulations (Rev. Reg.) No. 12-80. Relying on the said
decision, the respondent bank filed an administrative claim for refund with the
CIR. It claimed that it had overpaid its gross receipts tax for 1994 to 1995 by
853,842.54 php. CTA partially granted the petition and ordered that the amount
of ₱355,258.99 be refunded to the respondent bank. CIR filed petition for
review under Rule 43 before CA—dismissed.
Issue: Whether subjecting the Final Withholding Tax (FWT) to the 5% of gross
receipts tax would result in double taxation.
Ruling and Main Point (lifted entirely from Mamalateo, page 26); NO.
Subjecting the Final Withholding Tax (FWT) to the 5% of gross receipts tax
would NOT result in double taxation. The taxes are imposed on two
different subject matters—20% FWT is imposed on the passive income
generated in the form of interest on deposits, while GRT is imposed on the
privilege of engaging in the business of banking. A tax based on receipts is a
tax on business rather than on property; hence, it is an excise tax rather than a
property tax. GRT is not an income tax, but a percentage tax not subject to
withholding tax; unlike the FWT, which is an income tax subject to withholding.
Also, the taxing periods they affect are different: FWT is deducted and withheld
as soon as the income is earned; while GRT is neither deducted nor withheld,
but is paid only every taxable quarter in which it is earned. The fact that FWT
is a special trust fund belonging to the gov’t and that the bank did not
benefit from it while in custody of the borrower does not justify its
exclusion from the computation of interest income subject to GRT.
In short, there is no double taxation, because there is no taxing twice, by
the same taxing authority, within the same jurisdiction, for the same
purpose, in different taxing periods, some of the property in the territory.
Case No. 65: Acebedo Optical Co. v. CA (2000)
Double Taxation
Facts: Petitioner applied with the Office of the City Mayor-Iligan for a business
permit. City Mayor then issued Business Permit No. 5342 subject to five (5)
conditions, one of them is that since it is a corporation, Acebedo cannot put up
an optical clinic but only a commercial store. Private respondent Samahan ng
Optometrist Sa Pilipinas (SOPI)-Iligan lodged a complaint against the petitioner
before the Office of the City Mayor, alleging that Acebedo had violated the
conditions and requesting the cancellation and/or revocation of the business
permit. After investigation, City Mayor sent petitioner a Notice of Resolution
and Cancellation of Business Permit. Petitioner brought a petition for certiorari,
prohibition and mandamus with prayer for restraining order/preliminary
injunction against the private respondents, before RTC-Iligan City. Petitioner
alleged among others that it was denied equal protection of the laws as the
limitations imposed on its business permit were not imposed on similar
businesses in Iligan City; and that the City Mayor had no authority to impose the
special conditions on its business permit. RTC dismissed the petition for failure
to exhaust administrative remedies. Petitioner filed a petition for certiorari,
prohibition and mandamus with the CA seeking to set aside the questioned
Order of Dismissal by RTC—likewise dismissed. MR denied.
Issue: Whether respondent city mayor acted beyond his authority in imposing
the special conditions in the permit.
Ruling and Main Point (lifted entirely from Mamalateo, pg. 27): YES. In the case
under consideration, the business permit granted by respondent City Mayor to
petitioner was burdened with several conditions. The authority of city mayors
to issue or grant license and business permits is beyond cavil. It is
provided for by law. However, in the present case, the objective of the
imposition of subject conditions on petitioner's business permit could be
attained by requiring the optometrists in petitioner's employ to produce a
valid certificate of registration as optometrist, from the Board of
Examiners in Optometry. A business permit is issued primarily to regulate
the conduct of business and the City Mayor cannot, through the issuance of
such permit, regulate the practice of a profession, like that of optometry.
Such a function is within the exclusive domain of the administrative agency
specifically empowered by law to supervise the profession.
*No double taxation mentioned in the case
Eloise
Case No. 66: White Light Corp. v. City of Manila (2009)
Double Taxation

Facts: On December 3, 1992, then Mayor Lim signed into law Ordinance 7774
entitled “An Ordinance prohibiting short time admission in hotels, motels,
lodging houses, pension houses and similar establishments in the City of
Manila”. The apparent goal of the Ordinance is to minimize if not eliminate the
use of the covered establishments for illicit sex, prostitution, drug use and alike.
White Light Corp is an operator of mini hotels and motels who sought to have
the Ordinance nullified as the said Ordinance infringes on the private rights of
their patrons and directly affects their business interests. RTC ruled in favor of
petitioner. CA reversed the decision and asserted that the Ordinance is a valid
exercise of police power.

Issue: Whether the ordinance is valid.

Ruling and Main Point (lifted entirely from Mamalateo, pg. 27): NO. The test of
a valid ordinance is well established. A long line of decisions including City of
Manila has held that for an ordinance to be valid, it must not only be within
the corporate powers of the local government unit to enact and pass
according to the procedure prescribed by law, it must also conform to the
following substantive requirements: (1) must not contravene the
Constitution or any statute; (2) must not be unfair or oppressive; (3) must
not be partial or discriminatory; (4) must not prohibit but may regulate
trade; (5) must be general and consistent with public policy; and (6) must
not be unreasonable. The Ordinance prohibits two specific and distinct
business practices, namely wash rate admissions and renting out a room more
than twice a day. The ban is evidently sought to be rooted in the police power as
conferred on local government units by the Local Government Code through
such implements as the general welfare clause. Lacking a concurrence of
these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights.

The apparent goal of the Ordinance is to minimize if not eliminate the use of the
covered establishments for illicit sex, prostitution, drug use and alike. These
goals, by themselves, are unimpeachable and certainly fall within the ambit of
the police power of the State. Yet the desirability of these ends do not sanctify
any and all means for their achievement. Those means must align with the
Constitution, and our emerging sophisticated analysis of its guarantees to the
people.

*No double taxation mentioned in the case