JACINTO-HENARES vs. ST.

PAUL'S

KIM S. JACINTO-HENARES vs. ST. PAUL COLLEGE OF MAKATI

GR No. 215383

March 08, 2017

FACTS:

On 22 July 2013, petitioner Kim S. Jacinto-Henares, acting in her capacity as then Commissioner of
Internal Revenue (CIR), issued RMO No. 20-2013, "Prescribing the Policies and Guidelines in the Issuance
of Tax Exemption Rulings to Qualified Non-Stock, Non-Profit Corporations and Associations under
Section 30 of the National Internal Revenue Code of 1997, as Amended.”

On 29 November 2013, respondent St. Paul College of Makati (SPCM), a non-stock, non-profit
educational institution organized and existing under Philippine laws, filed a Civil Action to Declare
Unconstitutional [Bureau of Internal Revenue] RMO No. 20-2013 with Prayer for Issuance of Temporary
Restraining Order and Writ of Preliminary Injunction before the RTC. SPCM alleged that "RMO No. 20-
2013 imposes as a prerequisite to the enjoyment by non-stock, non-profit educational institutions of the
privilege of tax exemption under Sec. 4(3) of Article XIV of the Constitution both a registration and
approval requirement, i.e., that they submit an application for tax exemption to the BIR subject to
approval by CIR in the form of a Tax Exemption Ruling (TER) which is valid for a period of [three] years
and subject to renewal."

In a Resolution dated 22 January 2014,[9] the RTC granted the writ of preliminary injunction after finding
that RMO No. 20-2013 appears to divest non-stock, non-profit educational institutions of their tax
exemption privilege. Thereafter, the RTC denied the CIR's motion for reconsideration. On 29 April 2014,
SPCM filed a Motion for Judgment on the Pleadings under Rule 34 of the Rules of Court.

In a Decision dated 25 July 2014, the RTC ruled in favor of SPCM and declared RMO No. 20-2013
unconstitutional. It held that "by imposing the x x x [prerequisites alleged by SPCM,] and if not complied
with by non-stock, non-profit educational institutions, [RMO No. 20-2013 serves] as diminution of the
constitutional privilege, which even Congress cannot diminish by legislation, and thus more so by the CIR
who merely exercises quasi-legislative function.

On 18 September 2014, the CIR issued RMO No. 34-2014,[12] which clarified certain provisions of RMO
No. 20-2013, as amended by RMO No. 28-2013.

Meanwhile, this Court clarifies that the phrase "Revenue Memorandum Order" referred to in the second
sentence of its decision dated July 25, 2014 refers to "issuance/s" of the respondent which tends to
implement RMO 20-2013 for if it is otherwise, said decision would be useless and would be rendered
nugatory.
ISSUES:

1. WHETHER OR NOT the petition to review by the CIR be given merit.

2. WHETHER OR NOT the Revenue Memorandum Order (RMO) No. 20-2013 is unconstitutional.

HELD:

1. NO. Petition is denied on the ground of mootness. On 25 July 2016, the present CIR Caesar R. Dulay
issued RMO No. 44-2016, which provides that: Amending Revenue Memorandum Order No. 20-2013, as
amended (Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Rulings to Qualified
Non-Stock, Non-Profit Corporations and Associations under Section 30 of the National Internal Revenue
Code of 1997, as Amended.

In line with the Bureau's commitment to put in proper context the nature and tax status of non-profit,
non-stock educational institutions, this Order is being issued to exclude non-stock, non-profit
educational institutions from the coverage of Revenue Memorandum Order No. 20-2013, as amended.

SECTION 1. Nature of Tax Exemption. --- The tax exemption of non-stock, non-profit educational
institutions is directly conferred by paragraph 3, Section 4, Article XIV of the 1987 Constitution:

"All revenues and assets of non-stock, non-profit educational institutions used actually, directly and
exclusively for educational purposes shall be exempt from taxes and duties."

2. YES. It was Amended. It is clear and unmistakable from the aforequoted constitutional provision that
non-stock, non-profit educational institutions are constitutionally exempt from tax on all revenues
derived in pursuance of its purpose as an educational institution and used actually, directly and
exclusively for educational purposes. This constitutional exemption gives the non-stock, non-profit
educational institutions a distinct character. And for the constitutional exemption to be enjoyed,
jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: (1) The school
must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for
educational purposes. There are no other conditions and limitations as provided by law and is therefore
constitutional.
In this light, the constitutional conferral of tax exemption upon non-stock and non-profit educational
institutions should not be implemented or interpreted in such a manner that will defeat or diminish the
intent and language of the Constitution.

Lung Center of the Philippines vs. Quezon City

G.R. No. 144104, June 29, 2004
Petitioner: Lung Center of the Philippines

Respondents: Quezon City and Constantino P. Rosas, in his capacity as City Assessor
of Quezon City

Facts:

            The petitioner is a non-stock and non-profit entity established on January 16,

1981 and a registered owner of a parcel of land located at Quezon Avenue corner
Elliptical Road, Central District, Quezon City. Erected in the middle of the aforesaid lot is
a hospital known as the Lung Center of the Philippines. A big space at the ground floor
is being leased to private parties, for canteen and small store spaces, and to medical or
professional practitioners who use the same as their private clinics for their patients
whom they charge for their professional services. Almost one-half of the entire area on
the left side of the building along Quezon Avenue is vacant and idle, while a big portion
on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased
for commercial purposes to a private enterprise.

            On June 7, 1993, both the land and the hospital building of the petitioner were
assessed for real property taxes in the amount of P4,554,860 by the City Assessor of
Quezon City. On August 25, 1993, the petitioner filed a Claim for Exemption that it is a
charitable institution. The petitioners request was denied, and a petition was, thereafter,
filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA) for
reversal. The petitioner alleged that under Section 28, paragraph 3 of the 1987
Constitution, the property is exempt from real property taxes. It averred that a minimum
of 60% of its hospital beds are exclusively used for charity patients and that the major
thrust of its hospital operation is to serve charity patients. The petitioner contends that it
is a charitable institution and, as such, is exempt from real property taxes. The QC-
LBAA rendered judgment dismissing the petition and holding the petitioner liable for real
property taxes.
 The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of
Assessment Appeals of Quezon City (CBAA) which ruled that the petitioner was not a
charitable institution and that its real properties were not actually, directly and
exclusively used for charitable purposes; hence, it was not entitled to real property tax
exemption under the constitution and the law. The petitioner sought relief from the Court
of Appeals, which rendered judgment affirming the decision of the CBAA.

Thus, the petitioner files a petition for review on certiorari before the Supreme Court.

Issue:

1. Whether or not petitioner is a charitable institution within the context of PD 1823

and the 1973 and 1987 Constitution and Section 234(b) of RA 7160.
2. Whether or not petitioner is exempted from real property taxes.

Discussion:

1. The Court ruled that the petitioner is a charitable institution within the context of
the 1973 and 1987 Constitution. Under PD No. 1823, the petitioner is a non-profit and
non-stock corporation which, subject to the provisions of the decree, is to be
administered by the Office of the President with the Ministry of Health and the Ministry
of Human Settlements. The purpose for which it was created was to render medical
services to the public in general including those who are poor and also the rich, and
become a subject of charity. Under Presidential Decree No. 1823, petitioner is entitled
to receive donations, even if the gift or donation is in the form of subsidies granted by
the government.
2. Partly No. Under PD No. 1823, the petitioner does not enjoy any property tax
exemption privileges for its real properties as well as the building
constructed thereon.The property tax exemption under Section 28(3), Article VI of the
Constitution is for the property taxes only. This provision was implanted by Sec.243 (b)
of RA No. 7160 which provides that in order to be entitled to the exemption, the
petitioner must be able to prove that: it is a charitable institution and; its real properties
are actually, directly and exclusively used for charitable purpose. Accordingly, the
portions occupied by the hospital used for its patients are exempt from real property
taxes while those leased to private entities are not exempt from such taxes.

Held:

            The petition was partly granted. The respondent Quezon City Assessor was
directed to determine the precise portions of the land and the area thereof which are
leased to private persons, and to compute the real property taxes due thereon as
provided for by law.
CIR VS. ST. LUKE'S MEDICAL CENTER
G.R. No. 195909               September 26, 2012

FACTS

St. Luke's is a hospital organized as a non-stock and non-profit corporation. The BIR assessed St. Luke's deficiency
taxes amounting toP76,063,116.06 for 1998, comprised of deficiency income tax, value-added tax, withholding tax
on compensation and expanded withholding tax. The BIR reduced the amount to P63,935,351.57 during trial in the
First Division of the CTA. St. Luke's filed an administrative protest with the BIR against the deficiency tax
assessments. The BIR argued that Section 27(B) of the NIRC, which imposes a 10% preferential tax rate on the
income of proprietary non-profit hospitals, should be applicable to St. Luke's. The former claimed that St. Luke's
was actually operating for profit in 1998 because only 13% of its revenues came from charitable purposes.
Moreover, the hospital's board of trustees, officers and employees directly benefit from its profits and assets. St.
Luke's maintained that it is a non-stock and non-profit institution for charitable and social welfare purposes under
Section 30(E) and (G) of the NIRC. It argued that the making of profit per se does not destroy its income tax
exemption.

ISSUE

Whether St. Luke's is liable for deficiency income tax in 1998 under Section 27(B) of the NIRC, which
imposes a preferential tax rate of 10% on the income of proprietary non-profit hospitals.

RULING

Yes. There is no dispute that St. Luke's is organized as a non-stock and non-profit charitable institution.
However, this does not automatically exempt St. Luke's from paying taxes. This only refers to the organization of St.
Luke's. Even if St. Luke's meets the test of charity, a charitable institution is not ipso facto tax exempt. To be exempt
from real property taxes, Section 28(3), Article VI of the Constitution requires that a charitable institution use the
property "actually, directly and exclusively" for charitable purposes. To be exempt from income taxes, Section
30(E) of the NIRC requires that a charitable institution must be "organized and operated exclusively" for charitable
purposes. Likewise, to be exempt from income taxes, Section 30(G) of the NIRC requires that the institution be
"operated exclusively" for social welfare.

St. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC to be completely tax
exempt from all its income. However, it remains a proprietary non-profit hospital under Section 27(B) of the NIRC
as long as it does not distribute any of its profits to its members and such profits are reinvested pursuant to its
corporate purposes. St. Luke's, as a proprietary non-profit hospital, is entitled to the preferential tax rate of 10% on
its net income from its for-profit activities. St. Luke's is therefore liable for deficiency income tax in 1998 under
Section 27(B) of the NIRC.

Southern Cross Cement Corp vs Philippine Cement Manufacturers’ Corporation

FACTS: Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation
engaged in the business of cement manufacturing, production, importation and exportation. Private
respondent Philippine Cement Manufacturers Corporation (Philcemcor) is an association of domestic
cement manufacturers. DTI accepted an application from Philcemcor, alleging that the importation of
gray Portland cement in increased quantities has caused declines in domestic production, capacity
utilization, market share, sales and employment; as well as caused depressed local prices. Accordingly,
Philcemcor sought the imposition a definitive safeguard measures on the import of cement pursuant to
the Safeguard Measures Act.

The Tariff Commission received a request from the DTI for a formal investigation to determine whether
or not to impose a definitive safeguard measure on imports of gray Portland cement

Tariff Commission’s report: The elements of serious injury and imminent threat of serious injury not
having been established, it is hereby recommended that no definitive general safeguard measure be
imposed on the importation of gray Portland cement

After reviewing the report, then DTI Secretary Manuel Roxas II (DTI Secretary) disagreed with the
conclusion of the Tariff Commission that there was no serious injury to the local cement industry caused
by the surge of imports. In view of this disagreement, the DTI requested an opinion from the
Department of Justice (DOJ) on the DTI Secretarys scope of options in acting on the Commissions
recommendations.

Subsequently, then DOJ Secretary Hernando Perez rendered an opinion stating that Section 13 of the
SMA precluded a review by the DTI Secretary of the Tariff Commissions negative finding, or finding that
a definitive safeguard measure should not be imposed.

DTI then denied application for safeguard measures against the importation of gray Portland cement

Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of
Appeals a Petition for Certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision, as
well as the Tariff Commissions Report. On the other hand, Southern Cross filed its Comment arguing that
the Court of Appeals had no jurisdiction over Philcemcors Petition, for it is on the Court of Tax Appeals
(CTA) that the SMA conferred jurisdiction to review rulings of the Secretary in connection with the
imposition of a safeguard measure.

ISSUE: Whether or not the CA has jurisdiction over the case which is concerned with imposition of
safeguard measures
RULING: CTA has jurisdiction.  Under Section 29 of the SMA, there are three requisites to enable the CTA
to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by
the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling;
and (iii) such ruling must be in connection with the imposition of a safeguard measure. The first two
requisites are clearly present. The third requisite deserves closer scrutiny.

Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary
decides not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision.
The reasons are as follows:

First. Split jurisdiction is abhorred. The law expressly confers on the CTA, the tribunal with the
specialized competence over tax and tariff matters, the role of judicial review without mention of any
other court that may exercise corollary or ancillary jurisdiction in relation to the SMA.

Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate
jurisdiction on the CTA.

A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from
reviewing a negative determination by the DTI Secretary nor conferred on the Court of Appeals such
review authority. Respondents note, on the other hand, that neither did the law expressly grant to the
CTA the power to review a negative determination. However, under the clear text of the law, the CTA is
vested with jurisdiction to review the ruling of the DTI Secretary in connection with the imposition of a
safeguard measure. Had the law been couched instead to incorporate the phrase the ruling imposing a
safeguard measure, then respondents claim would have indisputable merit. Undoubtedly, the phrase in
connection with not only qualifies but clarifies the succeeding phrase imposition of a safeguard
measure. As expounded later, the phrase also encompasses the opposite or converse ruling which is the
non-imposition of a safeguard measure.

Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.

Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a
negative ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would
cause inconvenience and absurdity. Adopting the respondents position favoring the CTAs minimal
jurisdiction would unnecessarily lead to illogical and onerous results.
CASE DIGEST: AIR CANADA, Petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE, Respondent. (G.R. No. 169507; January 11,
2016)

FACTS: Air Canada is an offline air carrier selling passage tickets in the

Philippines, through a general sales agent, Aerotel. As an off-line carrier, [Air
Canada] does not have flights originating from or coming to the Philippines [and
does not] operate any airplane [in] the Philippines[.]

Air Canada filed a claim for refund for more than 5 million pesos. It claims that
there was overpayment, saying that the applicable tax rate against it is 2.5%
under the law on tax on Resident Foreign Corporations (RFCs) for international
carriers. It argues that, as an international carrier doing business in the
Philippines, it is not subject to tax at the regular rate of 32%.

Air Canada also claims that it is not taxable because its income is taxable only in
Canada because of the Philippines-Canada Treaty (treaty). According to it, even if
taxable, the rate should not exceed 1.5% as stated in said treaty.

However, the CTA ruled that Air Canada was engaged in business in the
Philippines through a local agent that sells airline tickets on its behalf. As such, it
should be taxed as a resident foreign corporation at the regular rate of 32%.

The CTA also said that Air Canada cannot avail of the lower tax rate under the
treaty because it has a "permanent establishment" in the Philippines. Hence, Air
Canada cannot avail of the tax exemption under the treaty.

ISSUES:
[1] Is Air Canada, an offline international carrier selling passage documents
through Aerotel, a RFC?
[2] As an offline international carrier selling passage documents, is Air Canada
subject to 2.5% tax on Gross Philippine Billings or to the regular 32% tax?
[3] Can Air Canada benefit from the treaty's elimination of double taxation in
favor of Canada or the preferential rate of 1.5%?
[4] Can Air Canada validly refuse to pay its tax deficiency on the ground that
there is a pending tax credit proceeding it has filed?
[5] Is Air Canada entitled to the tax refund claimed at more than 5 million pesos?
HELD:
[1] Yes, Air Canada is a resident foreign corporation. Although there is no one
rule in determining what "doing business in the Philippines" means, the
appointment of an agent or an employee is a good indicator. This is especially
true when there is effective control, similar to that of employer-employee
relationship. This is true between Air Canada and Aerotel. Hence, Air Canada is a
RFC.

[2] No, because the 2.5% tax on Gross Philippine Billings applies only to carriers
maintaining flights to and from the Philippines. Air Canada's appointment of a
general sales agent, Aerotel, here is only for the purpose of selling passage
documents. However, this is not the complete answer since the treaty is the latter
law that prevails in this case.

[3] Air Canada cannot avail of the elimination of double taxation in favor of
Canada since the treaty expressly excludes Canadian carriers with "permanent
establishment." Through the appointment of Aerotel as its local sales agent,
petitioner is deemed to have created a "permanent establishment" in the
Philippines as defined under the Republic of the Philippines-Canada Tax Treaty.

This is especially true since Aerotel has no "independent status" beacuse Air
Canada exercises comprehensive control and detailed instructions over the
means and results of the activities of the former.

[4] No, it cannot. Even if Air Canada succeeds in claiming tax refund, the general
rule prevails that there can be not setting off of taxes since the Government and
the taxpayer are not creditors and debtors of each other.

[5] No, Air Canada is not entitled to refund. The P5,185,676.77 Gross Philippine
Billings tax paid by petitioner was computed at the rate of 1 ½% of its gross
revenues amounting to P345,711,806.08149 from the third quarter of 2000 to the
second quarter of 2002. It is quite apparent that the tax imposable under Section
28(A)(l) of the 1997 National Internal Revenue Code [32% of taxable income, that
is, gross income less deductions] will exceed the maximum ceiling of 1 ½% of
gross revenues as decreed in Article VIII of the Republic of the Philippines-
Canada Tax Treaty. Hence, no refund is forthcoming.

Fortune Tobacco Corporation v. CIR, G.R. No. 192024, July 1, 2015

FACTS
The subject claim for refund involves the amount of excise taxes allegedly overpaid. Petitioner is the
manufacturer/producer of cigarette brands, with tax rate classification based on net retail price
prescribed under Republic Act (R.A.) No. 4280. Immediately prior to January 1, 1997, the mentioned
cigarette brands were subject to ad valorem tax pursuant to then Section 142 of the Tax Code of 1977,
as amended. However, on January 1, 1997, R.A. No. 8240 took effect causing a shift from the ad valorem
tax (AVT) system to the specific tax system. As a result of such shift, the said cigarette brands were
subjected to specific tax under Section 142 thereof, now renumbered as Section 145 of the Tax Code of
1997.  Petitioner filed a claim for tax credit or refund under Section 229 of the National Internal Revenue
Code of 1997 (1997 NIRC) for erroneously or illegally collected specific taxes covering the period June to
December 31, 2004 in the total amount of Php219,566,450.00. Respondent in his Answer raised among
others, as a Special and Affirmative Defense, that the amount of TWO HUNDRED NINETEEN MILLION
FIVE HUNDRED SIXTY SIX THOUSAND FOUR HUNDRED FIFTY PESOS (Php219,566,450.00) being claimed
by petitioner as alleged overpaid excise tax is not properly documented. The Court ruled that there is
insufficiency of evidence on the claim for refund. Although both the CTA Division and the CTA En Banc
provisionally admitted petitioner’s Exhibit “C,” (Letter Claim for Refund) the mentioned documents, as
well as the other documentary evidence submitted by petitioner were refused admission for being
merely photocopies.  In this case, petitioner did not even attempt to provide a plausible reason as to
why the original copies of the documents presented could not be produced before the CTA or any
reason that the application of any of the foregoing exceptions could be justified. Although petitioner
presented one (1) witness to prove its claim, it appears that this witness was not even a signatory to any
of the disputed documentary evidence. Petitioner posits that if their exhibits, specifically Exhibits “G”,
“G-1” to “G-7” and Exhibit “H”, are admitted together with the testimony of their witness, the same
would sufficiently prove their claim.

ISSUE

whether or not there is sufficient evidence to warrant the grant of petitioner’s claim for tax refund.

HELD

The petition lacks merit.  Petitioner relied heavily on photocopied documents to prove its claim.
Granting that the Court could take a second look and review petitioner’s evidence, the result would be
the same.  The claim for refund hinges on the admissibility and the probative value of the f photocopied
documents that allegedly contain a recording of petitioner’s excise payments. Petitioner failed to offer
any proof or tender of excluded evidence.

It has been repeatedly ruled that where documentary evidence was rejected by the lower court and the
offeror did not move that the same be attached to the record, the same cannot be considered by the
appellate court,  as documents forming no part of proofs before the appellate court cannot be
considered in disposing the case. For the appellate court to consider as evidence, which was not offered
by one party at all during the proceedings below, would infringe the constitutional right of the adverse
party — in this case, the CIR, to due process of law. In this case, as explained above, petitioner utterly
failed to not only comply with the basic procedural requirement of presenting only the original copies of
its documentary evidence, but also to adhere to the requirement to properly make its offer of proof or
tender of excluded evidence for the proper consideration of the appellate tribunal.
 REVENUE vs. COURT OF APPEALS,
COURT OF TAX APPEALS and YOUNG
MENS CHRISTIAN ASSOCIATION OF
THE PHILIPPINES, INC. G.R. No.
124043. October 14, 1998
FACTS:

YMCA has earned income from leasing out a portion of its premises to small shop owner
s, like restaurants and canteen operators, and also from parking fees collected from non-
members. The  Commissioner of internal revenue (CIR) said that it should be taxed. It i
nvoked then  the fundamental law, that Article VI, Section 28 of par. 3 of the 1987 Const
itution, exempts charitable institutions from the payment not only of property taxes but 
also of income tax from any source.

ISSUE:

1. Whether or not the income derived from rentals of real property owned by the Young Me
ns Christian Association of the Philippines, Inc. (YMCA) established as a welfare, educational an
d charitable non-profit corporation subject to income tax under Article VI, Section 28 of par. 3 o
f the 1987 Constitution.
2. Whether or not  the YMCA is aneducational institution within the purview of Article XIV
, Section 4, par.3 of the Constitution.

RULING:

1. Justice Hilario G. Davide, Jr., a former constitutional commissioner, who is now a memb
er of this Court, stressed during the Concom debates that what is exempted is not the institution 
itself; those exempted from real estate taxes are lands, buildings and improvements actually, dir
ectly and exclusively used for religious, charitable or educational purposes. Hence, Indeed, the i
ncome tax exemption claimed by private respondent finds no basis in Article VI, Section 28, par. 
3 of the Constitution.

 
3. Laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be 
granted the exemption it claims under Article XIV, Section 4, par.3 of the Constitution, it must p
rove with substantial evidence that (1) it falls under the classification non-stock, non-profit edu
cational institution; and (2) the income it seeks to be exempted from taxation is used actually, 
directly, and exclusively for educational purposes. However, the Court notes that not a scintill
a of evidence was submitted by private respondent to prove that it met the said requisites.

Under the Education Act of 1982, term educational institution refers to schools. The sch
ool system is synonymous with formal education, which refers to the hierarchically struc
tured and chronological graded learnings organized and provided by the formal school s
ystem and for which certification is required in order for the learner to progress through 
the grades or move to the higher levels.] The Court has examined the Amended Articles 
of Incorporation and By-Laws of the YMCA, but found nothing in them that even hints t
hat it is a school or an educational institution.

PROCTER & GAMBLE PHL. MANUFACTURING CORPORATION vs. THE MUNICIPALITY OF JAGNA,
PROVINCE OF BOHOL

G.R. No. L-24265 28 December 1979

FACTS:

The CFI of Manila upheld the validity of Ordinance No. 4, Series of 1957, which imposed “storage fees on
all exportable copra deposited in the bodega of the Municipality of Jagna.” Plaintiff-appellant is engaged
in the manufacture of soap, edible oil, margarine and other similar products, and for this purpose,
maintains a bodega in Jagna where it stores copra purchased in the Municipality. It further claims that
Ordinance No. 4 is ultra-vires and void for being beyond the power of the Municipality to enact and that
it be allowed to refund to it the amount of Php42,265.13 it paid in protest.  Moreover, it claims that
subject Ordinance is inapplicable to it as it is not engaged in the business or trade of storing copra for
others for compensation or profit.

ISSUE: Whether the Municipality of Jagna was authorised to impose and collect the storage fee provided
for in the challenged Ordinance.
RULING:

YES. The validity of the ordinance must be upheld pursuant to the broad authority conferred upon
municipalities by CA No. 472, Section 1. Under the foregoing provision, a municipality is authorised to
impose (1) a license for regulation of useful occupation; (2) a license for restriction or regulation of non-
useful occupation or enterprises; and (3) license for revenue.

The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on
persons, firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within
the Municipality's territorial jurisdiction. For it has been held that a warehouse used for keeping or
storing copra is an establishment likely to endanger the public safety or likely to give rise to
conflagration because the oil content of the copra when ignited is difficult to put under control by water
and the use of chemicals is necessary to put out the fire, the same is under Section 2238 of the
Administrative Code.

Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not
engaged in the business or occupation of buying or selling of copra but is only storing copra in
connection with its main business of manufacturing soap and other similar products, and that to be
compelled to pay the storage fees would amount to double taxation, does not inspire assent. The
question of whether appellant is engaged in that business or not is irrelevant because the storage fee, as
previously mentioned, is an imposition on the privilege of storing copra in a bodega within defendant
municipality by persons, firms or corporations. Section 1 of the Ordinance in question does not state
that said persons, firms or corporations should be engaged in the business or occupation of buying or
selling copra. Moreover, by plaintiff's own admission that it is a consolidated corporation with its trading
company, it will be hard to segregate the copra it uses for trading from that it utilizes for manufacturing.

Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does
not amount to double taxation. For double taxation to exist, the same property must be taxed twice,
when it should be taxed but once. Double taxation has also been defined as taxing the same person
twice by the same jurisdiction for the same thing. Surely, a tax on plaintiff's products is different from a
tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant
municipality.

Madrigal vs. Rafferty G.R. No. L-12287 August 7, 1918 Income Tax defined, Income vs. Capital

DECEMBER 4, 2017
FACTS:

Vicente Madrigal and Susana Paterno were married with Conjugal Partnership  as their property
relations.Vicente filed his 1914 income tax return but later claimed a refund on the contention that it
was the income of the conjugal partnership. Vicente claimed that the income should be divided into two
with each spouse filing a separate return.Hence, Vicente claimed that each spouse should be entitled to
the P8,000 exemption, which would result in a lower amount of income tax due.

ISSUE:

Define Income Tax

RULING:

The essential difference between capital and income is that capital is a fund; income is a flow.A fund of
property existing at an instant of time is called capital.A flow of services rendered by that capital by the
payment of money from it or any other benefit rendered by a fund of capital in relation to such fund
through a period of time is called income. Capital is wealth, while income is the service of wealth.

A tax on income is not a tax on property. Income can be defined as profits or gains. Susana, has an
inchoate right in the property of her husband during the life of the conjugal partnership.Her interest in
the ultimate property rights and in the ultimate ownership of property acquired as income lies after
such income has become capital.She has no absolute right to ½ the income of the conjugal
partnership.Not being seized of a separate estate, Susana cannot make a separate return in order to
receive the benefit of the exemption which would arise by reason of the additional tax.As she has no
estate and income, actually and legally vested in her and entirely distinct from her husband’s property,
the income cannot properly be considered the separate income of the wife for purposes of the
additional tax.