1.
Sison vs Ancheta (1984) profession vis-a-vis those which are imposed upon fixed
Facts:  income or salaried individual taxpayers. He characterizes said
Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged
that its provision (Section 1) unduly discriminated against him
by the imposition of higher rates upon his income as a
professional, that it amounts to class legislation, and that it
transgresses against the equal protection and due process
clauses of the Constitution as well as the rule requiring
uniformity in taxation.
Issue: Whether BP 135 violates the due process and equal
protection clauses, and the rule on uniformity in taxation.
Held:  There is a need for proof of such persuasive character
as would lead to a conclusion that there was a violation of the
due process and equal protection clauses. Absent such
showing, the presumption of validity must prevail. Equality
and uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed at the same
rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation. Where the
differentitation conforms to the practical dictates of justice
and equity, similar to the standards of equal protection, it is
not discriminatory within the meaning of the clause and is
therefore uniform. Taxpayers may be classified  into different
categories, such as recipients of compensation income as
against professionals. Recipients of compensation income are
not entitled to make deductions for income tax purposes as
there is no practically no overhead expense, while
professionals and businessmen have no uniform costs or
expenses necessaryh to produce their income. There is ample
justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net
income taxation as regards professional and business income.
1. SISON VS ANCHETA 130 SCRA 654
FACTS: Section 1 of BP Blg 135 amended the Tax Code and
petitioner Antero M. Sison, as taxpayer, alleges that "he would
be unduly discriminated against by the imposition of higher
rates of tax upon his income arising from the exercise of his
Paneda.Auby N. Subject : Taxation Law 1
provision as arbitrary amounting to class legislation, oppressive
and capricious in character. It therefore violates both the
equal protection and due process clauses of the Constitution as
well as of the rule requiring uniformity in taxation.
ISSUE:  Whether or not the assailed provision violates the
equal protection and due process clauses of the Constitution
while also violating the rule that taxes must be uniform and
equitable.
HELD: The petition is without merit.
On due process - it is undoubted that it may be invoked where
a taxing statute is so arbitrary that it finds no support in the
Constitution. An obvious example is where it can be shown to
amount to the confiscation of property from abuse of power.
Petitioner alleges arbitrariness but his mere allegation does
not suffice and there must be a factual foundation of such
unconsitutional taint.
On equal protection - it suffices that the laws operate equally
and uniformly on all persons under similar circumstances, both
in the privileges conferred and the liabilities imposed.
On the matter that the rule of taxation shall be uniform and
equitable - this requirement is met when the tax operates with
the same force and effect in every place where the subject
may be found." Also, the rule of uniformity does not call for
perfect uniformity or perfect equality, because this is hardly
unattainable." When the problem of classification became of
issue, the Court said: "Equality and uniformity in taxation
means that all taxable articles or kinds of property of the
same class shall be taxed the same rate. The taxing power has
the authority to make reasonable and natural classifications
for purposes of taxation..." As provided by this Court, where
"the differentiation" complained of "conforms to the practical
dictates of justice and equity" it "is not discriminatory within
the meaning of this clause and is therefore uniform."
1
 2. Tio v Videogram Regulatory Board (1987) GR No L-
75697, June 18, 1987  of the government and deputize, for a fixed and limited
FACTS:
The petition assails the constitutionality of PD No 1987
entitled “An act creating the Videogram Regulatory Board”
based on several grounds, including the following: (1) Section
10 of PD No 1987 which imposes a tax of 30% on the gross
receipts payable to the local government is a rider and the
same is not germane to the subject thereof; (2) the tax
imposed is harsh, confiscatory, oppressive and/or in unlawful
restraint of trade in violation of the due process of the
Constitution; and (3) undue delegation of power and authority.
ISSUE:
Is PD 1987 constitutional?  with broad powers to regulate and supervise the videogram
RULING: Yes.
(1)  The contention that the tax provision of the Decree is a
rider is bereft and devoid of merit because the title of the
Decree, which is the creation of the Videogram Regulatory
Board (VRB) aimed at regulating and controlling the video
industry, is comprehensive enough to include the purposes
expressed in its preamble and reasonably covers all its
provisions. Moreover, it is unnecessary to express all those
objectives in the title or that the latter be an index to the
body of the decree.
(2)  It is axiomatic that a tax does not cease to be valid merely
because it regulates, discourages, or even definitely deters the
activities taxed. The legislature acts upon its constituents in
imposing a tax; thus, in general, a sufficient security against
erroneous and oppressive taxation is afforded the taxpayer.
Also, the tax imposed by the Decree is a revenue measure. The
tax of 30% is exacted for a public 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.
(3)  The grant in Section 11 of the Decree of authority to the
Paneda.Auby N. Subject : Taxation Law 1
VRB to “solicit the direct assistance of other agencies & units
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. 
2. Tio vs Videogram Regulatory Commission (G.R.
No. 75697)
Facts: The case is a petition filed by petitioner on behalf of
videogram operators adversely affected by Presidential Decree
No. 1987, “An Act Creating the Videogram Regulatory Board”
industry.
A month after the promulgation of the said Presidential
Decree, the amended the National Internal Revenue Code
provided that:
“SEC. 134. Video Tapes. — There shall be collected on each
processed video-tape cassette, ready for playback, regardless
of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject
to sales tax.”
“Section 10. Tax on Sale, Lease or Disposition of Videograms.
— Notwithstanding any provision of law to the contrary, the
province shall collect a tax of thirty percent (30%) of the
purchase price or rental rate, as the case may be, for every
sale, lease or disposition of a videogram containing a
reproduction of any motion picture or audiovisual program.”
“Fifty percent (50%) of the proceeds of the tax collected shall
accrue to the province, and the other fifty percent (50%) shall
accrue to the municipality where the tax is collected;
PROVIDED, That in Metropolitan Manila, the tax shall be shared
equally by the City/Municipality and the Metropolitan Manila
Commission.”
The rationale behind the tax provision is to curb the
proliferation and unregulated circulation of videograms
including, among others, videotapes, discs, cassettes or any
2
technical improvement or variation thereof, have greatly films with brutally violent sequences; and losses in government
prejudiced the operations of movie houses and theaters. Such revenues due to the drop in theatrical attendance, not to
unregulated circulation have caused a sharp decline in mention the fact that the activities of video establishments
theatrical attendance by at least forty percent (40%) and a are virtually untaxed since mere payment of Mayor’s permit
tremendous drop in the collection of sales, contractor’s and municipal license fees are required to engage in business.”
specific, amusement and other taxes, thereby resulting in WHEREFORE, the instant Petition is hereby dismissed. No
substantial losses estimated at P450 Million annually in costs.
government revenues.
Videogram(s) establishments collectively earn around P600
Million per annum from rentals, sales and disposition of
videograms, and these earnings have not been subjected to
tax, thereby depriving the Government of approximately P180
Million in taxes each year.
The unregulated activities of videogram establishments have
also affected the viability of the movie industry.

Issues:
(1) Whether or not tax imposed by the DECREE is a valid
exercise of police power.
(2) Whether or nor the DECREE is constitutional.

Held: Taxation has been made the implement of the state’s

police power. 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.
We find no clear violation of the Constitution which would
justify us in pronouncing Presidential Decree No. 1987 as
unconstitutional and void. While the underlying objective of
the DECREE is to protect the moribund movie industry, there is
no question that public welfare is at bottom of its enactment,
considering “the unfair competition posed by rampant film
piracy; the erosion of the moral fiber of the viewing public
brought about by the availability of unclassified and
unreviewed video tapes containing pornographic films and
3
Paneda.Auby N. Subject : Taxation Law 1
 3. VILLEGAS vs. HIU CHIONG 86 SCRA 270/ GR No. L-
29646, November 10, 1978
"A tax law should be declared invalid if it fails to lay down
standards to guide or limit the actions of the taxing authority."
FACTS: The Municipal Board of Manila enacted Ordinance No.
6537 which prohibits aliens from being employed or to engage
or participate in any position or occupation or business,
without first securing an employment permit from the Mayor
of Manila and paying the permit fee of P50.00. The repondent
challenged the validity of the ordinance upon the contention
that it does not qualify as a valid exercise of the power to tax
for as a revenue measure imposed on aliens employed in the
City of Manila, the ordinance is discriminatory and violative of
the rule of the uniformity in taxation, and as a police power
measure, it makes no distinction between useful and non-
useful occupations, imposing a fixed P50.00 employment
permit, which is out of proportion to the cost of registration
and that it fails to prescribe any standard to guide and/or limit
the action of the Mayor, thus, violating the fundamental
principle on illegal delegation of legislative powers: 
ISSUE: Is there a valid exercise of the taxing power of the local
government?
HELD: None. First, the ordinance is not a regulatory or police
power measure; it is but a revenue measure guise in a police
power measure. Second, the P50.00 fee is unreasonable not
only because it is excessive but because it fails to consider
valid substantial differences in situation among individual
aliens who are required to pay it. Although the equal
protection clause of the Constitution does not forbid
classification, it is imperative that the classification should be
based on real and substantial differences having a reasonable
relation to the subject of the particular legislation. The same
amount of P50.00 is being collected from every employed alien
whether he is casual or permanent, part time or full time or
whether he is a lowly employee or a highly paid executive.  section 3 levies on owners or persons in control of lands
Paneda.Auby N. Subject : Taxation Law 1
   On the illegal delegation part of the argument, Ordinance
No. 6537 is void for it does not lay down any criterion or
standard to guide the Mayor in the exercise of his discretion. It
has been held that where an ordinance of a municipality fails
to state any policy or to set up any standard to guide or limit
the mayor's action, expresses no purpose to be attained by
requiring a permit, enumerates no conditions for its grant or
refusal, and entirely lacks standard, thus conferring upon the
Mayor arbitrary and unrestricted power to grant or deny the
issuance of building permits, such ordinance is invalid, being
an undefined and unlimited delegation of power to allow or
prevent an activity per se lawful.
4. WALTER LUTZ VS. ANTONIO ARANETA  G.R. NO. L-
7859 /DECEMBER 22, 1955 
FACTS: This case was initiated in the Court of First Instance of
Negros Occidental to test the legality of the taxes imposed by
Commonwealth Act No. 567, otherwise known as the Sugar
Adjustment Act. 
Promulgated in 1940, the due to the threat to our industry by
the imminent imposition of export taxes upon sugar as
provided in the Tydings-McDuffe Act, and the "eventual loss of
its preferential position in the United States market";
wherefore, the national policy was expressed "to obtain a
readjustment of the benefits derived from the sugar industry
by the component elements thereof" and "to stabilize the
sugar industry so as to prepare it for the eventuality of the loss
of its preferential position in the United States market and the
imposition of the export taxes." 
In section 2, Commonwealth Act 567 provides for an increase
of the existing tax on the manufacture of sugar, on a
graduated basis, on each picul of sugar manufactured; while
devoted to the cultivation of sugar cane and ceded to others
4
for a consideration, on lease or otherwise a tax equivalent to
the difference between the money value of the rental or
consideration collected and the amount representing 12 per
centum of the assessed value of such land.  that the distribution of benefits therefrom be readjusted
Plaintiff, Walter Lutz, in his capacity as Judicial Administrator
of the Intestate Estate of Antonio Jayme Ledesma, seeks to
recover from the Collector of Internal Revenue the sum of
P14,666.40 paid by the estate as taxes, under section 3 of the
Act, for the crop years 1948-1949 and 1949-1950; alleging that
such tax is unconstitutional and void, being levied for the aid
and support of the sugar industry exclusively, which in
plaintiff's opinion is not a public purpose for which a tax may
be constitutionally levied. The action having been dismissed by
the Court of First Instance, the plaintiffs appealed the case
directly to this Court (Judiciary Act, section 17).  objective pursued or are oppressive in character. If objective
ISSUE: Whether or not the CA No. 567 or Sugar Adjustment Act
is constitutional and for public purpose.  prosecution and attainment. Taxation may be made the
HELD: The basic defect in the plaintiff's position is his
assumption that the tax provided for in Commonwealth Act
No. 567 is a pure exercise of the taxing power. Analysis of the
Act, and particularly of section 6, will show that the tax is
levied with a regulatory purpose, to provide means for the
rehabilitation and stabilization of the threatened sugar
industry. In other words, the act is primarily an exercise of the
police power.  has been repeatedly held that "inequalities which result from a
This Court can take judicial notice of the fact that sugar
production is one of the great industries of our nation, sugar
occupying a leading position among its export products; that it
gives employment to thousands of laborers in fields and
factories; that it is a great source of the state's wealth, is one
of the important sources of foreign exchange needed by our
government, and is thus pivotal in the plans of a regime
committed to a policy of currency stability. Its promotion,
protection and advancement, therefore redounds greatly to
the general welfare. Hence it was competent for the
Paneda.Auby N. Subject : Taxation Law 1
legislature to find that the general welfare demanded that the
sugar industry should be stabilized in turn; and in the wide
field of its police power, the lawmaking body could provide
among its components to enable it to resist the added strain of
the increase in taxes that it had to sustain. 
Once it is conceded, as it must, that the protection and
promotion of the sugar industry is a matter of public concern,
it follows that the Legislature may determine within
reasonable bounds what is necessary for its protection and
expedient for its promotion. Here, the legislative discretion
must be allowed fully play, subject only to the test of
reasonableness; and it is not contended that the means
provided in section 6 of the law bear no relation to the
and methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their
implement of the state's police power. 
That the tax to be levied should burden the sugar producers
themselves can hardly be a ground of complaint; indeed, it
appears rational that the tax be obtained precisely from those
who are to be benefited from the expenditure of the funds
derived from it. At any rate, it is inherent in the power to tax
that a state be free to select the subjects of taxation, and it
singling out of one particular class for taxation, or exemption
infringe no constitutional limitation". 
From the point of view we have taken it appears of no moment
that the funds raised under the Sugar Stabilization Act, now in
question, should be exclusively spent in aid of the sugar
industry, since it is that very enterprise that is being
protected. It may be that other industries are also in need of
similar protection; that the legislature is not required by the
Constitution to adhere to a policy of "all or none." As ruled in
Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84
5
L. Ed. 744, "if the law presumably hits the evil where it is most
felt, it is not to be overthrown because there are other
instances to which it might have been applied;" and that "the
legislative authority, exerted within its proper field, need not
embrace all the evils within its reach".
5. Commissioner of Internal Revenue vs. Algue Inc GR
No. L-28896 | Feb. 17, 1988
Facts:Algue Inc. is a domestic corp engaged in engineering,
construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CIR
regarding its delinquency income taxes from 1958-1959, amtg
to P83,183.85
A letter of protest or reconsideration was filed by Algue Inc on
Jan 18
On March 12, a warrant of distraint and levy was presented
to Algue Inc. thru its counsel, Atty. Guevara, who refused
to receive it on the ground of the pending protest
Since the protest was not found on the records, a file copy
from the corp was produced and given to BIR Agent
Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was
not taking any action on the protest and it was only then
that he accepted the warrant of distraint and levy earlier
sought to be served
On April 23, Algue filed a petition for review of the
decision of the CIR with the Court of Tax Appeals
CIR contentions:
the claimed deduction of P75,000.00 was properly
disallowed because it was not an ordinary reasonable
or necessary business expense
Paneda.Auby N. Subject : Taxation Law 1
payments are fictitious because most of the payees
are members of the same family in control of Algue
and that there is not enough substantiation of such
payments
CTA: 75K had been legitimately paid by Algue Inc. for
actual services rendered in the form of promotional fees.
These were collected by the Payees for their work in the
creation of the Vegetable Oil Investment Corporation of the
Philippines and its subsequent purchase of the properties of
the Philippine Sugar Estate Development Company.
Issue: W/N the Collector of Internal Revenue correctly
disallowed the P75,000.00 deduction claimed by Algue as
legitimate business expenses in its income tax returns
Ruling:
Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance, made in
accordance with law.
RA 1125: the appeal may be made within thirty days after
receipt of the decision or ruling challenged
During the intervening period, the warrant was premature
and could therefore not be served.
Originally, CIR claimed that the 75K promotional fees to be
personal holding company income, but later on conformed
to the decision of CTA
There is no dispute that the payees duly reported their
respective shares of the fees in their income tax returns
and paid the corresponding taxes thereon. CTA also found,
after examining the evidence, that no distribution of
dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate
assessment by involving an imaginary deduction
6
 Algue Inc. was a family corporation where strict business
procedures were not applied and immediate issuance of
receipts was not required. at the end of the year, when the
books were to be closed, each payee made an accounting
of all of the fees received by him or her, to make up the
total of P75,000.00. This arrangement was understandable
in view of the close relationship among the persons in the
family corporation
The amount of the promotional fees was not excessive. The
total commission paid by the Philippine Sugar Estate
Development Co. to Algue Inc. was P125K. After deducting
the said fees, Algue still had a balance of P50,000.00 as
clear profit from the transaction. The amount of
P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees
who did practically everything, from the formation of the
Vegetable Oil Investment Corporation to the actual
purchase by it of the Sugar Estate properties.
Sec. 30 of the Tax Code: allowed deductions in the net
income – Expenses - All the ordinary and necessary
expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable
allowance for salaries or other compensation for personal
services actually rendered xxx
the burden is on the taxpayer to prove the validity of the
claimed deduction
In this case, Algue Inc. has proved that the payment of the
fees was necessary and reasonable in the light of the
efforts exerted by the payees in inducing investors and
prominent businessmen to venture in an experimental
enterprise and involve themselves in a new business
requiring millions of pesos.
Taxes are what we pay for civilization society. Without
taxes, the government would be paralyzed for lack of the
Paneda.Auby N. Subject : Taxation Law 1
motive power to activate and operate it. Hence, despite
the natural reluctance to surrender part of one's hard
earned income to the taxing authorities, every person who
is able to must contribute his share in the running of the
government. The government for its part, is expected to
respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance
their moral and material values
Taxation must be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts will then
come to his succor
Algue Inc.’s appeal from the decision of the CIR was filed on
time with the CTA in accordance with Rep. Act No. 1125. And
we also find that the claimed deduction by Algue Inc. was
permitted under the Internal Revenue Code and should
therefore not have been disallowed by the CIR.
6. [G.R. No. L-18649. February 27, 1965.]
CEBU PORTLAND CEMENT COMPANY, Petitioner, v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
SYLLABUS
1. TAXATION; AD VALOREM MINING TAXES ON CEMENT; BASED
ON ACTUAL MARKET VALUE OF QUARRIED MINERALS. — The
collectible ad valorem tax on cement under Sections 243 and
246 of the Tax Code is based on the actual market value of the
quarried minerals, like limestone and shale, and not on the
selling price of the cement produced.
2. ID.; AD VALOREM MINING TAXES; NATURE AS TAX ON
PRIVILEGE OF MINING. — The ad valorem tax on mining is a tax
not on the minerals, but upon the privilege of severing or
extracting the same from the earth, the government’s right to
exact the said impost springing from the Regalian theory of
State ownership of its natural resources.
7
3. ID.; MINERAL PRODUCTS; NATURE OF, FOR AD VALOREM
TAX. — The inclusion of the term mineral products is intended
to comprehend cases where the mined or quarried elements
may not be usable in its original state without application of
simple treatments, such as washing, or cutting them into sizes,
which process does not necessarily involve the change or
transformation of the raw materials into a composite, distinct
product.
4. ID.; CEMENT NOT CONSIDERED MINERAL PRODUCTS FOR
PURPOSES OF AD VALOREM TAX. — While cement is composed
of 80% mineral, it is not merely an admixture or blending of
raw materials, as lime, silica, shale and others. It is the result
of a definite process, the crushing of minerals, grinding,
mixing, calcining, cooling, adding of retarder or raw gypsum.
In short, before cement reaches its saleable form, the
minerals had already undergone a chemical change through
manufacturing process. This could not have been the state of
"mineral products’ that the law contemplates for purposes of
imposing the ad valorem tax. While the selling price of cement
may reflect the actual market value of cement, said selling
price cannot be taken as the market value also of the minerals
composing the cement. And it was not the cement that was
mined, only the mineral composing the finished product.
DECISION
BARRERA, J.:
This is a petition filed by the Cebu Portland Cement Company
(CEPOC) for review of the decision of the Court of Tax Appeals
(in CTA Case No. 708) denying its claim against the
Commissioner of Internal Revenue for refund of the sum of
P476,208.50, representing alleged overpayments of ad valorem
taxes for the period of from January 1, 1957 to June 30, 1959,
on the ground that said court erred in upholding the
assessment and collection thereof based on the selling price of
the cement petitioner produced and not on the value of the
limestone and shale it quarried and used in the production of
the cement.
Paneda.Auby N. Subject : Taxation Law 1
There is no controversy as to the fact that for the period of
from April 16, 1957 to July 20, 1959, for the cement it
produced and sold, petitioner was assessed and paid ad
valorem taxes in the total sum of P502,975.28; that its
demand for refund of alleged overpayment having been
denied, petitioner filed on October 15, 1959, a corresponding
petition in the Court of Tax Appeals against the respondent
Commissioner of Internal Revenue; and that after due hearing,
the Court of Tax Appeals rendered a decision on June 21,
1961, declaring the collection of the ad valorem tax based on
the selling price of cement to have been made in accordance
with Section 243 in relation to Section 246 of the National
Internal Revenue Code.
The National Internal Revenue Code, as amended, 1 provides:
"SEC. 243. Ad valorem taxes on output of mineral lands not
covered by lease. — There shall be assessed and collected on
the actual market value of the annual gross output of the
minerals or mineral products extracted or produced from all
mineral lands, not covered by lease, an ad valorem tax
payable to the Collector of Internal Revenue, in the amount of
one and one-half per centum of the value of said output.
"Before the mineral products are removed from the mines, the
Collector of Internal Revenue or his representative shall first
be notified of such removal on a form prescribed for the
purpose.
"SEC. 245. Time and manner of payment of royalties or ad
valorem taxes. — The royalties or ad valorem taxes, as the
case may be, shall be due and payable upon removal of the
mineral products from the locality where mined. However, the
output of the mine may be removed from such locality without
the prepayment of such royalties or ad valorem taxes if the
lessee, owner or operator shall file a bond in the form and
amount and with such sureties the payment of such royalties
or ad valorem taxes, . .
8

"SEC. 246. Definitions of the terms ‘gross output’, ‘minerals’
and ‘mineral products’ — Disposition of royalties and ad
valorem taxes. — The term ‘gross output’ shall be interpreted
as the actual market value of minerals or mineral products, or
of bullion from each mine or mineral lands operated as a
separate entity without any deduction from mining, milling,
refining, transporting, handling, marketing, or any other
expenses: Provided, however, . . . The word ‘minerals’ shall
mean all inorganic substances found in nature whether in
solid, liquid, gaseous, or any intermediate state. The term
‘mineral products’ shall mean things produced by the lessee,
concessionaire or owner of mineral lands, at least eighty per
cent of which things must be minerals extracted by such
lessee, concessionaire, or owner of mineral lands. Ten per
centum of the royalties and ad valorem taxes herein provided
shall accrue to the municipality and ten per centum to the
province where the mines are situated, and eighty per centum
to the National Treasury." (Emphasis supplied.)
Herein petitioner contends that the collectible ad valorem tax
should be based on the actual market value of the quarried
minerals that were used in the production of cement;
whereas, respondent Commissioner of Internal Revenue
maintains that, as the cement produced by petitioner consists
of 80% minerals, the same is a mineral product pursuant to the
definition given in Section 246 of the Tax Code, and the ad
valorem tax should be based on its selling price.
It is noteworthy that under Section 242 of the same Code, with
respect to leased mineral lands, the lessee shall pay to the
government, not only rentals for the use of the land, but also
royalty, on the minerals extracted therefrom. These imposts
are levied "for the privilege of exploring, developing mining,
extracting and disposing of the minerals" from said land. With
respect to mineral lands not under lease. Section 243 governs,
and imposes ad valorem tax on the actual market value of the
gross output of the minerals or mineral products extracted
Paneda.Auby N. Subject : Taxation Law 1
therefrom. Both sections 242 and 243 are under Title VI of the
Tax Code which refers to Mining Taxes. As under Section 242,
the rentals and royalties collectible from the lessees and
concessionaires of the leased lands are for the privilege of
mining and extracting minerals therefrom, so it may be said
that the ad valorem tax imposed by Section 243 upon those
extracting minerals and mineral products from lands not under
lease, is also for the same purpose, i.e., the privilege of
mining and extracting minerals from said lands. In other
words, ad valorem tax is a tax not on the minerals, but upon
the privilege of severing or extracting the same from the
earth, the government’s right to exact the said impost
springing from the Regalian theory of State ownership of its
natural resources.
There can be no question that quarried minerals have their
own market value. The dispute here arose, however, from the
construction given to the term mineral products, which was
defined in Section 246 of the Tax Code, as "things produced by
the lessee, concessionaire, or owner of mineral lands, at least
eighty per cent of which things must be minerals extracted by
such lessee, concessionaire or owner of mineral lands."
Respondent argues that since the portland cement produced
by petitioner 2 consists of 8% minerals quarried from its mines,
such cement falls within the definition of a mineral product
and the imposable ad valorem tax should be based on its
selling price which is its actual market value.
This line of argument suffers from two infirmities: First, while
cement is composed of 80% minerals, it is not merely an
admixture or blending of raw materials, as lime, silica, shale
and others. It is the result of a definite process — the crushing
of minerals, grinding, mixing, calcining, cooling, adding of
retarder or raw gypsum. In short, before cement reaches its
saleable form, the minerals had already undergone a chemical
change through manufacturing process. This could not have
been the state of "mineral products" that the law
contemplates for purposes of imposing the ad valorem tax. It
9
must be remembered that, as aforestated, this tax is imposed
on the privilege of extracting or severing the minerals from
the mines. To our minds, therefore, the inclusion of the term
mineral products is intended to comprehend cases where the
mined or quarried elements may not be usable in its original
state without application of simple treatments, such as
washing, or cutting them into sizes, which process does not
necessarily involve the change or transformation of the raw
materials into a composite, distinct product. Secondly,
respondent cannot use the selling price of the product in this
case as gauge of its actual market value. The cement here is
manufactured by petitioner itself out of materials quarried
from its mines. While the selling price of cement may reflect
the actual market value of cement, said selling price cannot
be taken as the market value also of the minerals composing
the cement. And it was not the cement that was mined, only
the minerals composing the finished product.
Anent respondent’s contention, however, that the taxes
collected and paid two years before the filing of the action in
the Court of Tax Appeals are barred by prescription, the same
must be sustained. By specific provision of Section 308 of the
Internal Revenue Code, action for recovery of tax payments
erroneously or illegally collected must be filed within 2 years
from such payments. As the action in this case was instituted
only on October 16, 1959, over payments made prior to
October 15, 1957 are no longer refundable.
WHEREFORE, the decision of the Court of Tax Appeals under
review is hereby modified, by holding petitioner entitled to
the refund of the corresponding overpayments of ad valorem
taxes made after October 15, 1957. No costs. So ordered.
7. Commissioner of Internal Revenue v Ayala Securities
Corporation
Facts:
Paneda.Auby N. Subject : Taxation Law 1
Ayala Securities Corp. (Ayala) failed to file returns of their
accumulated surplus so Ayala was charged with 25% surtax by
the Commissioner of internal Revenue. The CTA (Court of Tax
Appeals) reversed the Commissioner’s decision and held that
the assessment made against Ayala was beyond the 5-yr
prescriptive period as provided in section 331 of the National
Internal Revenue Code. Commissioner now files a motion for
reconsideration of this decision. Ayala invokes the defense of
prescription against the right of the Commissioner to assess
the surtax.
Issue:
Whether or not the right to assess and collect the 25% surtax
has prescribed after five years.
Held:
Limitations upon the right of the government to assess and
collect taxes &ill not be presumed in the absence of clear
legislation to the contrary and that &here the government has
not by express statutory provision provided a limitation upon
its right to assess unpaid taxes, such right is imprescriptible
No. There is no such time limit on the right of the
Commissioner to assess the 25% surtax since there is no
express statutory provision limiting such right or providing for
its prescription. Hence, the collection of surtax is
imprescriptible. The underlying purpose of the surtax is to
avoid a situation where the corporation unduly retains its
surplus earnings instead of declaring and paying dividends to
its shareholders. SC reverses the ruling of the CTA.
8. Victorias Milling Co. vs. Municipality of Victorias GR L-
21183, 27 September 1968 En Banc, Sanchez (J): 9 concur
10
 Facts: Ordinance 1 (1956) was approved by the municipal
council of Victorias by way of an amendment to 2 municipal
ordinances separately imposing license taxes on operators of
sugar centrals and sugar refineries. The changes were: (1) with
respect to sugar centrals, by increasing the rates of license
taxes; and (2) as to sugar refineries, by increasing the rates of
license taxes as well as teh range of graduated schedule of
annual output capacity. Victorias Milling questioned the
validity of Ordinance 1 as it, among others, allegedly singled
out Victorias Milling Co. since it is the only operator of a sugar
central and a sugar refinery within the jurisdiction of the
municipality.
Issue: Whether Ordinance 1 is discriminatory.
Held: The ordinance does not single out Victorias as the only
object of the ordinance but is made to apply to any sugar
central or sugar refinery which may happen to operate in the
municipality. The fact that Victorias Milling is actually the sole
operator of a sugar central and a sugar refinery does not make
the ordinance discriminatory. The ordinance is unlike that in
Ormoc Sugar Company vs. Municipal Board of Ormoc City,
which specifically spelled out Ormoc Sugar as the subject of
the taxation, the name of the company herein was never
mentioned in the ordinance.
9. Pepsi-Cola Bottling Company of the Philippines, Inc. v.
Municipality of Tanauan
G.R. No. L-31156; February 27, 1976
Facts: In February 1963, plaintiff commenced a complaint
seeking to declare Section 2 of R.A. 2264 (Local Autonomy Act)
unconstitutional as an undue delegation of taxing power and to
declare Ordinance Nos. 23 and 27 issued by the Municipality of
Tanauan, Leyte as null and void.
Municipal Ordinance No. 23 levies and collects from soft drinks
producers and manufacturers one-sixteenth (1/16) of a
Paneda.Auby N. Subject : Taxation Law 1
centavo for every bottle of soft drink corked. On the other
hand, Municipal Ordinance No. 27 levies and collects on soft
drinks produced or manufactured within the territorial
jurisdiction of the municipality a tax of one centavo (P0.01) on
each gallon of volume capacity. The tax imposed in both
Ordinances Nos. 23 and 27 is denominated as "municipal
production tax.”
Issues:  (1) Is Section 2 of R.A. 2264 an undue delegation of
the power of taxation? (2) Do Ordinance Nos. 23 and 24
constitute double taxation and impose percentage or specific
taxes?
Held: (1) NO. The power of taxation is purely legislative and
cannot be delegated to the executive or judicial department
of the government without infringing upon the theory of
separation of powers. But as an exception, the theory does not
apply to municipal corporations. Legislative powers may be
delegated to local governments in respect of matters of local
concern. (2) NO. The Municipality of Tanauan discovered that
manufacturers could increase the volume contents of each
bottle and still pay the same tax rate since tax is imposed on
every bottle corked. To combat this scheme, Municipal
Ordinance No. 27 was enacted. As such, it was a repeal of
Municipal Ordinance No. 23. In the stipulation of facts, the
parties admitted that the Municipal Treasurer was enforcing
Municipal Ordinance No. 27 only. Hence, there was no case of
double taxation.
9. PEPSI-COLA BOTTLING CO. OF THE PHILS., INC. vs.
MUNICIPALITY OF TANAUAN
69 SCRA 460, GR No. L-31156, February 27, 1976
"Legislative power to create political corporations for purposes
of local self-government carries with it the power to confer on
such local governmental agencies the power to tax. 
11

FACTS: Plaintiff-appellant Pepsi-Cola commenced a complaint
with preliminary injunction to declare Section 2 of Republic
Act No. 2264, otherwise known as the Local Autonomy Act,
unconstitutional as an undue delegation of taxing authority as
well as to declare Ordinances Nos. 23 and 27 denominated as
"municipal production tax" of the Municipality of Tanauan,
Leyte, null and void. Ordinance 23 levies and collects "from
soft drinks producers and manufacturers a tax of one-sixteenth
(1/16) of a centavo for every bottle of soft drink corked, and
Ordinance 27 levies and collects "on soft drinks produced or
manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon
(128 fluid ounces, U.S.) of volume capacity. Aside from the
undue delegation of authority, appellant contends that it
allows double taxation, and that the subject ordinances are
void for they impose percentage or specific tax.
ISSUE: Are the contentions of the appellant tenable?
HELD: No. On the issue of undue delegation of taxing power, it
is settled that the power of taxation is an essential and
inherent attribute of sovereignty, belonging as a matter of
right to every independent government, without being
expressly conferred by the people.  It is a power that is purely
legislative and which the central legislative body cannot
delegate either to the executive or judicial department of the
government without infringing upon the theory of separation
of powers. The exception, however, lies in the case of
municipal corporations, to which, said theory does not apply.
Legislative powers may be delegated to local governments in
respect of matters of local concern. By necessary implication,
the legislative power to create political corporations for
purposes of local self-government carries with it the power to
confer on such local governmental agencies the power to tax. 
   Also, there is no validity to the assertion that the delegated
authority can be declared unconstitutional on the theory of
Paneda.Auby N. Subject : Taxation Law 1
double taxation. It must be observed that the delegating
authority specifies the limitations and enumerates the taxes
over which local taxation may not be exercised. The reason is
that the State has exclusively reserved the same for its own
prerogative. Moreover, double taxation, in general, is not
forbidden by our fundamental law, so that double taxation
becomes obnoxious only where the taxpayer is taxed twice for
the benefit of the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case where one
tax is imposed by the State and the other by the city or
municipality.
   On the last issue raised, the ordinances do not partake of
the nature of a percentage tax on sales, or other taxes in any
form based thereon. The tax is levied on the produce (whether
sold or not) and not on the sales. The volume capacity of the
taxpayer's production of soft drinks is considered solely for
purposes of determining the tax rate on the products, but
there is not set ratio between the volume of sales and the
amount of the tax.
9. PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,
INC. vs. MUNICIPALITY OF TANAUAN, LEYTE
FACTS: Pepsi-Cola Bottling Company of the Philippines, Inc.,
filed a complaint with preliminary injunction before the Court
of First Instance of Leyte to declare Section 2 of R.A. No.
2264, (known as the Local Autonomy Act) unconstitutional as
an undue delegation of the taxing authority and declare null
and void Municipal Ordinance No. 23, which levies and collects
from soft drinks producers and manufactures a tax of 1/16 of a
centavo for every bottle of soft drinks corked, and Municipal
Ordinance No. 27 which levies and collects on soft drinks
produced or manufactured within the territorial jurisdiction a
tax of one centavo on each gallon of volume capacity.
The trial court dismissed the complaint and upheld the
constitutionality of Sec. 2 of R.A. No. 2264 and declared
Municipal Ordinances Nos. 27 valid and constitutional.
12
Appealed to the Court of Appeals, the case was certified to the
Supreme Court as involving pure question of law.
The Supreme Court upheld the validity of the delegation to
Municipal Corporation or authority to tax and likewise the
validity of Municipal Ordinance No. 27, which repealed
Municipal Ordinance No. 23.
ISSUE: Whether there was undue delegation of the taxing
authority.
HELD: NO. The power of taxation is an essential and inherent
attribute of sovereignty, belonging as a matter of right to
every independent government, without being expressly
conferred by the people. It is a power that is purely legislative
and which the central legislative body cannot delegate either
to the executive or judicial department of government without
infringing upon the theory of separation of powers. The
exception, however, lies in the case of municipal corporations,
to which, said theory does not apply. Legislative powers may
be delegated to local governments in respect of matters of
local concern. By necessary implication, the legislative power
to create political corporations for purpose of local self-
government carries with it the power to confer on such local
government agencies the power to tax.
The taxing authority conferred on local governments under
Section 2, Republic Act No. 2264, is broad enough as to extend
to almost "everything, excepting those which are mentioned
therein." As long as the tax levied under the authority of a city
or municipal ordinance is not within the exceptions and
limitations in the law, the same comes within the ambit of the
general rule, pursuant to the rules of expresio unius est
exclusio alterius, and exceptio firmat regulum in casibus
nonexcepti. Municipalities are empowered to impose not only
municipal license taxes upon persons engaged in any business
or occupation but also to levy for public purposes, just and
uniform taxes.
Paneda.Auby N. Subject : Taxation Law 1
10. . CIR v. Toda, Jr. GR No. 147188; 14 September 2004
F A C T S: On 2 March 1989, CIC authorized Benigno P. Toda,
Jr., President and owner of 99.991% of its outstanding
capital stock, to sell the Cibeles Building. On 30 August 1989,
Toda purportedly sold the property for P100 million to Rafael
A. Altonaga, who, in turn, sold the same property on the same
day to Royal Match Inc. (RMI) for P200 million. Three and a
half years later Toda died. On 29 March 1994, the BIR sent an
assessment notice and demand letter to the CIC for deficiency
income tax for the year 1989. On 27 January 1995, the Estate
of Benigno P. Toda, Jr., represented by special co-
administrators Lorna Kapunan and Mario Luza Bautista,
received a Notice of Assessment from the CIR for deficiency
income tax for the year 1989. The Estate thereafter filed a
letter of protest. The Commissioner dismissed the protest. On
15 February 1996, the Estate filed a petition for review with
the CTA. In its decision the CTA held that the Commissioner
failed to prove that CIC committed fraud to deprive the
government of the taxes due it. It ruled that even assuming
that a pre-conceived scheme was adopted by CIC, the same
constituted mere tax avoidance, and not tax evasion. Hence,
the CTA declared that the Estate is not liable for deficiency of
income tax. The Commissioner filed a petition for review with
the Court of Appeals. The Court of Appeals affirmed the
decision of the CTA, hence, this recourse.
I S S U E: Whether or not this is a case of tax evasion or tax
avoidance.
H E L D: Tax evasion connotes the integration of three factors:
(1) the end to be achieved, i.e. the payment of less than that
known by the taxpayer to be legally due, or the non-payment
of tax when it is shown that a tax is due; (2) an accompanying
state of mind which is described as being “evil,” in “bad
faith,” “willfull,” or “deliberate and not accidental”; and (3) a
course of action or failure of action which is unlawful. All
13
these factors are present in the instant case. The scheme
resorted to by CIC in making it appear that there were two
sales of the subject properties, i.e. from CIC to Altonaga, and
then from Altonaga to RMI cannot be considered a legitimate
tax planning. Such scheme is tainted with fraud. Altonaga’s
sole purpose of acquiring and transferring title of the subject
properties on the same day was to create a tax shelter. The
sale to him was merely a tax ploy, a sham, and without
business purpose and economic substance. Doubtless, the
execution of the two sales was calculated to mislead the BIR
with the end in view of reducing the consequent income tax
liability.
11. Republic vs. Mambulao Lumber GR L-17725, 28
February 1962 En Banc, Barrera (J): 10 concur
Facts: Mambulao Lumber Company paid the Government a
total of P9,127.50 as reforestation charges. Having found
liable for an aggregate amount of P4,802.37 for forest charges,
it contended that since the Republic (Government) has not
made use of the reforestation charges for reforesting the
denuded area of the land covered by the company’s license,
the Republic should refund said amount or, if it cannot be
refunded, at least the company should be compensated with
what it owed the Republic for reforestation charges.
Issue: Whether taxes may be subject of set-off or
compensation.
Held: Internal revenue taxes, such as forest charges, cannot be
the subject of set-off or compensation. A claim for taxes is not
such a debt, demand, contract or judgment as is allowed to be
set-off under the statutes of setoff, which are construed
uniformly, in the light of public policy, to exclude the remedy
in an action or any indebtedness of the State or municipality
to one who is liable to the State or municipality for taxes.
Neither are they subject of recoupment since they do not arise
out of the contract or transaction sued on. Taxes are not in
the nature of contracts between the parties but grow out of a
duty to, and are the positive acts of the government, to the
Paneda.Auby N. Subject : Taxation Law 1
making and enforcing of which, the personal consent of
individual taxpayers is not required.
12. Product v. Fertiphil Corp.G.R. No. 166006  March 14,
2008
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.
14
 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
Paneda.Auby N. Subject : Taxation Law 1
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.
12. PLANTERS PRODUCTS v. FERTIPHIL CORPORATION, GR
No. 166006, 2008-03-14
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 in the Philippines.
Pursuant to the LOI, Fertiphil paid P10 for every bag of
fertilizer it sold in the domestic market
After the 1986 Edsa Revolution, FPA voluntarily stopped the
imposition of the P10 levy. With the return of democracy,
Fertiphil demanded from PPI a refund of the amounts it paid
under LOI No. 1465, but PPI refused to accede to the demand
PPI insists that LOI No. 1465 is a valid exercise either of the
police power or the power of taxation. It claims that the LOI
was implemented for the purpose of assuring the fertilizer
supply and distribution in the country and for benefiting a
foundation created by law to hold... in trust for millions of
farmers their stock ownership in PPI.
Fertiphil counters that the LOI is unconstitutional because it
was enacted to give benefit to a private company. The levy
was imposed to pay the corporate debt of PPI. Fertiphil also
argues that, even if the LOI is enacted under the police power,
15
it is still unconstitutional... because it did not promote the
general welfare of the people or public interest.
Issues:
LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF
ASSURING THE FERTILIZER SUPPLY AND DISTRIBUTION IN THE
COUNTRY, AND FOR BENEFITING A FOUNDATION CREATED BY
LAW TO HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR
STOCK OWNERSHIP IN PPI CONSTITUTES A VALID LEGISLATION
PURSUANT TO THE EXERCISE OF TAXATION AND POLICE POWER
FOR PUBLIC PURPOSES.
Ruling:
The P10 levy under LOI No. 1465 is... an exercise of the power
of taxation.
We agree with the RTC that the imposition of the levy was an
exercise by the State of its taxation power.
the primary purpose of the levy is revenue generation. If... the
purpose is primarily revenue, or if revenue is, at least, one of
the real and substantial purposes, then the exaction is
properly called a tax.
The P10 levy under LOI No. 1465 is too excessive to serve a
mere regulatory purpose.
Taxes are exacted only for a public... purpose. The P10 levy
is... unconstitutional because it was not... for a public
purpose. The levy was... imposed to give undue benefit to PPI.
First, the LOI expressly provided that the levy be imposed to
benefit PPI, a private company.
Second, the LOI provides that the imposition of the P10 levy
was conditional and dependent upon PPI becoming financially
"viable." This suggests that the levy was actually imposed to
benefit PPI.
Paneda.Auby N. Subject : Taxation Law 1
Third, the RTC and the CA held that the levies paid under the
LOI were directly remitted and deposited by FPA to Far East
Bank and Trust Company, the depositary bank of PPI.[49] This
proves that PPI benefited from the LOI. It is also proves that
the... main purpose of the law was to give undue benefit and
advantage to PPI.
Fourth, the levy was used to pay the corporate debts of PPI.
All told, the RTC and the CA did not err in holding that the
levy imposed under LOI No. 1465 was not for a public purpose.
LOI No. 1465 failed to comply with the public purpose
requirement for tax laws.
13. MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY
(MCIAA) VS MARCOS AND CITY OF CEBU
 G.R. No. 120082, September 11, 1996 261 SCRA 667
FACTS: Petitioner Mactan Cebu International Airport Authority
(MCIAA) was created by virtue of Republic Act No. 6958,
mandated to principally undertake the economical, efficient
and effective control, management and supervision of the
Mactan International Airport,Lahug Airport and such other
Airports as may be established in the Province of Cebu. Since
the time of its creation, petitioner MCIAA enjoyed the
privilege of exemption from payment of realty taxes in
accordance with Section 14 of its Charter.
On October 11, 1994, however, Mr.Eustaquio B. Cesa, Officer-
in-Charge, 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 exempt 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. Respondent City refused to cancel and set
16
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 Governmental Code. As the City of Cebu was
about to issue a warrant of levy against the properties of
petitioner, the latter was compelled to pay its tax account
"under protest" and thereafter filed a Petition for Declaratory
Relief with the Regional Trial Court of Cebu. Trial court
dismissed the petition. Motion for reconsideration having been
denied by the trial court, the petitioner filed the instant
petition.
ISSUE: Whether Mactan Cebu International Airport Authority
(MCIAA) is exempted from payment of real property tax
HELD: No. Since the last paragraph of Section 234
unequivocally withdrew, upon the effectivity of the LGC,
exemptions from 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.
It may also be relevant to recall that the original reasons for
the withdrawal of tax exemption privileges granted to
government-owned and 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, and there was a need for this
entities to share in the requirements of the development,
fiscal or otherwise, by paying the taxes and other charges due
from them.
Nevertheless, since taxation is the rule and exemption
therefrom is the exception, the exemption may thus be
withdrawn at the pleasure of the taxing authority. Besides,
Paneda.Auby N. Subject : Taxation Law 1
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.
14. CITY OF BAGUIO vs. DE LEON 25 SCRA 938 / GR No. L-
24756, October 31, 1968
"There is no double taxation where one tax is imposed by the
state and the other is imposed by the city."
FACTS: The City of Baguio passed an ordinance imposing a
license fee on any person, entity or corporation doing business
in the City. The ordinance sourced its authority from RA No.
329, thereby amending the city charter empowering it to fix
the license fee and regulate businesses, trades and
occupations as may be established or practiced in the City. De
Leon was assessed for P50 annual fee it being shown that he
was engaged in property rental and deriving income
therefrom. The latter assailed the validity of the ordinance
arguing that it is ultra vires for there is no statury authority
which expressly grants the City of Baguio to levy such tax, and
that there it imposed double taxation, and violates the
requirement of uniformity.
ISSUE: Are the contentions of the defendant-appellant
tenable?
HELD: No. First, RA 329 was enacted amending Section 2553 of
the Revised Administrative Code empowering the City Council
not only to impose a license fee but to levy a tax for purposes
of revenue, thus the ordinance cannot be considered ultra
vires for there is more than ample statury authority for the
enactment thereof.
   Second, an argument against double taxation may not be
invoked where one tax is imposed by the state and the other is
imposed by the city, so that where, as here, Congress has
17
clearly expressed its intention, the statute must be sustained
even though double taxation results.
 And third, violation of uniformity is out of place it being
widely recognized that there is nothing inherently obnoxious in
the requirement that license fees or taxes be exacted with
respect to the same occupation, calling or activity by both the
state and the political subdivisions thereof.
14.CITY OF BAGUIO V. DE LEON 25 SCRA 938
FACTS: An ordinance was declared in the city of Baguio
imposing license fee on any person, firm, entity or corporation
doing business in the city, supplied by RA329 which amended
the City Charter of Baguio, empowering it to fix the license
fee and to regulate businesses, trades and corporations as may
be established or practiced in the city.
It was further declared that the said amendment added to
Baguio’s power to license, the power to tax and the power to
regulate.
As an exercise of such powers, Baguio City held De Leon, a real
estate dealer, liable under the ordinance for he was engaged
in rental of his property and deriving income therefrom. Now,
De Leon assails the constitutionality of the ordinance
contending that it is ultra vires and in violation of the principle
of uniformity and of his constitutional right, contending
further that the implementation of the ordinance would result
to double taxation, thus, depriving him of his properties
without due process of law.
ISSUE: Whether or not the ordinance imposing license fee is in
violation of due process.
HELD: The Lower Court up to the Supreme Court ruled in the
negative stating that RA 329 was enacted to empower the city
council not only to impose license fee but also to levy a tax for
Paneda.Auby N. Subject : Taxation Law 1
the purpose of revenue, thus, the ordinance cannot be held
ultra vires for there is more than an ample statutory authority
for its enactment.
And an argument against double taxation may not be invoked
if one tax is imposed by the state and the other is imposed by
the city for the congress has already expressed its intention
and the statute must be sustained even if it results to double
taxation, therefore, no constitutional rights are violated.
15. ABRA VALLEY COLLEGE, INC., represented by PEDRO V.
BORGONIA
vs.HON. JUAN P. AQUINO, Judge, Court of First Instance. et.
al.
[G.R. No. L-39086; June 15, 1988] Constitutional Law| Power
of Taxation
FACTS:
Abra Valley College is an educational corporation and
institution of higher learning in Bangued, Abra. In 1974, the
CFI ordered for the seizure and sale of the subject school
property for non-payment of real estate taxes and penalties.
Private respondents stated  that the college lot and building in
question are not only used for educational purposes of the
college, but also as the permanent residence of the President
and Director, Mr. Pedro V. Borgonia, and his family
including his in-laws and grandchildren; while the ground floor
of the college building is being used and rented by a
commercial establishment.
ISSUE:
Whether or not the lot and building in question are used
exclusively for educational purposes and thus exempted from
paying taxes.
HELD:
The 1935 Philippine Constitution, Art. VI, par. 3 Sec.
22, expressly grants exemption from realty taxes
for “Cemeteries, churches and parsonages or convents
appurtenant thereto, and all lands, buildings, and
18
improvements used exclusively for religious, charitable
or educational purposes….
Relative thereto, CA No. 470 as amended by RA No. 409, Sec.
54, paragraph c otherwise known as the Assessment Law,
provides:
The following are exempted from real property tax under
the Assessment Law:
(c) churches and parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements used exclusively
for religious, charitable, scientific or educational purposes.
Thus, the use of the second floor of the main building for
residential purposes of the Director and his family, may find
justification under the concept of incidental use, which is
complimentary to the main or primary purpose–educational.
The lease of the first floor, however, by a commercial
establishment cannot be considered incidental to the purpose
of education.
Under the 1935 Constitution, the trial court correctly arrived
at the conclusion that the school building as well as the lot
where it is built, should be taxed, not because the second
floor of the same is being used by the Director and his family
for residential purposes, but because the first floor thereof is
being used for commercial purposes.
15. Abra Valley College vs Aquino (G.R. No. L-39086)
FACTS: Petitioner, an educational corporation and institution
of higher learning duly incorporated with the Securities and
Exchange Commission in 1948, filed a complaint to annul and
declare void the “Notice of Seizure’ and the “Notice of Sale”
of its lot and building located at Bangued, Abra, for non-
payment of real estate taxes and penalties amounting to
P5,140.31. Said “Notice of Seizure” by respondents Municipal
Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon.
Paneda.Auby N. Subject : Taxation Law 1
The parties entered into a stipulation of facts adopted and
embodied by the trial court in its questioned decision. The
trial court ruled for the government, holding that the second
floor of the building is being used by the director for
residential purposes and that the ground floor used and rented
by Northern Marketing Corporation, a commercial
establishment, and thus the property is not being used
exclusively for educational purposes. Instead of perfecting an
appeal, petitioner availed of the instant petition for review on
certiorari with prayer for preliminary injunction before the
Supreme Court, by filing said petition on 17 August 1974.
ISSUE: Whether or not the lot and building are used exclusively
for educational purposes.
HELD: Section 22, paragraph 3, Article VI, of the then 1935
Philippine Constitution, expressly grants exemption from
realty taxes for cemeteries, churches and parsonages or
convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable or
educational purposes. ﾝ Reasonable emphasis has always been
made that the exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment
of the main purposes. The use of the school building or lot for
commercial purposes is neither contemplated by law, nor by
jurisprudence. In the case at bar, the lease of the first floor of
the building to the Northern Marketing Corporation cannot by
any stretch of the imagination be considered incidental to the
purpose of education. The test of exemption from taxation is
the use of the property for purposes mentioned in the
Constitution.
The decision of the CFI Abra (Branch I) is affirmed subject to
the modification that half of the assessed tax be returned to
the petitioner. The modification is derived from the fact that
the ground floor is being used for commercial purposes
19
(leased) and the second floor being used as incidental to
education (residence of the director).
16. LUNG CENTER OF THE PHILIPPINES vs. QUEZON CITY and
CONSTANTINO P. ROSAS[G.R. No. 144104. June 29, 2004.]
Tax Exemption of Charitable Institutions
CALLEJO, SR., J:
FACTS: The petitioner Lung Center of the Philippines is a
non-stock and non-profit entity by virtue of Presidential
Decree No. 1823. It is the registered owner of a parcel of land
with a hospital in the middle, located at Quezon City. 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. A big
portion of the land is being leased for commercial purposes to
a private enterprise.
The petitioner accepts paying and non-paying patients.
It also renders medical services to out-patients, both paying
and non-paying. It also receives annual subsidies from the
government.
On June 7, 1993, both the land and the hospital building
of the petitioner were assessed for real property taxes. The
petitioner filed a Claim for Exemption from real property taxes
with the City Assessor, predicated on its claim that it is a
charitable institution. The petitioner's request was denied, and
a petition was, thereafter, filed before the Local Board of
Assessment Appeals of Quezon City (QC-LBAA). The petitioner
alleged that under Section 28, paragraph 3 of the 1987
Constitution, the property is exempt from real property taxes.
Paneda.Auby N. Subject : Taxation Law 1
The QC-LBAA dismissed the petition and held the petitioner
liable for real property taxes.
The Central Board of Assessment Appeals of Quezon City
and the Court of Appeals (CBAA) affirmed QC-LBAA’s decision.
ISSUES:
1. Whether petitioner is a charitable institution within
the context of Presidential Decree No. 1823 and the
1973 and 1987 Constitutions and Section 234(b) of
Republic Act No. 7160.
2. Whether the real properties of the petitioner are
exempt from real property taxes.
HELD: 1. YES. To determine whether an enterprise is a
charitable institution/entity or not, the elements which should
be considered include the statute creating the enterprise, its
corporate purposes, its constitution and by-laws, the methods
of administration, the nature of the actual work performed,
the character of the services rendered, the indefiniteness of
the beneficiaries, and the use and occupation of the
properties.
Charity may be applied to almost anything that tend to
promote the well-doing and well-being of social man. It
embraces the improvement and promotion of the happiness of
man. The word "charitable" is not restricted to relief of the
poor or sick. The test of a charity and a charitable
organization are in law the same. The test whether an
enterprise is charitable or not is whether it exists to carry out
a purpose reorganized in law as charitable or whether it is
maintained for gain, profit, or private advantage.
Under P.D. No. 1823, the petitioner is a non-profit and
non-stock corporation which was organized for the welfare and
benefit of the Filipino people principally to help combat the
high incidence of lung and pulmonary diseases in the
Philippines. The medical services of the petitioner are to be
rendered to the public in general in any and all walks of life
20
including those who are poor and the needy without
discrimination.
As a general principle, a charitable institution does not
lose its character as such and its exemption from taxes simply
because it derives income from paying patients, whether out-
patient, or confined in the hospital, or receives subsidies from
the government, so long as the money received is devoted or
used altogether to the charitable object which it is intended
to achieve; and no money inures to the private benefit of the
persons managing or operating the institution.
The fundamental ground upon which all exemptions in
favor of charitable institutions are based is the benefit
conferred upon the public by them, and a consequent relief,
to some extent, of the burden upon the state to care for and
advance the interests of its citizens.
2. NO. Even though the petitioner is a charitable
institution, those portions of its real property that are leased
to private entities are not exempt from real property taxes as
these are not actually, directly and exclusively used for
charitable purposes.
The settled rule in this jurisdiction is that laws granting
exemption from tax are construed strictissimi juris against the
taxpayer and liberally in favor of the taxing power. Taxation is
the rule and exemption is the exception. The effect of an
exemption is equivalent to an appropriation. Hence, a claim
for exemption from tax payments must be clearly shown and
based on language in the law too plain to be mistaken.
The tax exemption under Section 28(3), Article VI of the
1987 Philippine Constitution covers property taxes only. What
is exempted is not the institution itself; those exempted from
real estate taxes are lands, buildings and improvements
actually, directly and exclusively used for religious, charitable
or educational purposes.
Paneda.Auby N. Subject : Taxation Law 1
Under the 1973 and 1987 Constitutions and Rep. Act No.
7160 in order to be entitled to the exemption, the petitioner is
burdened to prove, by clear and unequivocal proof, that (a) it
is a charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable
purposes. If real property is used for one or more commercial
purposes, it is not exclusively used for the exempted purposes
but is subject to taxation. The words "dominant use" or
"principal use" cannot be substituted for the words "used
exclusively" without doing violence to the Constitution and the
law.
What is meant by actual, direct and exclusive use of the
property for charitable purposes is the direct and immediate
and actual application of the property itself to the purposes
for which the charitable institution is organized. It is not the
use of the income from the real property that is determinative
of whether the property is used for tax-exempt purposes.
16. LUNG CENTER OF THE PHILIPPINES VS. QUEZON CITY
FACTS: Lung Center of the Philippines (LCP) is a non-stock and
non-profit corporation established by PD 1823. The LCP
building is erected on its own lot located in Quezon City. 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 is vacant and idle, while a big portion on the right
side is being leased for commercial purposes to a private
enterprise Elliptical Orchids and Garden Center.
LCP accepts paying and non-paying patients. It also renders
medical services to out-patients, both paying and non-paying.
Aside from its income from paying patients, the petitioner
receives annual subsidies from the government.
21
On June 7, 1993, both the land and the hospital building of the
petitioner were assessed for real property taxes by the City
Assessor of Quezon City. Subsequently, LCP filed before the
City Assessor a petition for tax exemption predicated on its
claim that it is a charitable institution, however, the petition
was denied. LCP elevated it to the Local Board of Assessment
Appeals of Quezon City (QC-LBAA) alleging that the property is
exempt from real property taxes under the constitution. 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
dismissed the petition.
The QC-LBAA’s 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. Hence, the petition.
ISSUES:
1. Whether or not LCP is a charitable institution.
2. Is LCP exempted from real property taxes?
RULING:
1. Yes. It is a charitable institution within the context of
the 1973 and 1987 Constitutions. Under P.D. 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 of the
Philippines with the Ministry of Health and the Ministry
of Human Settlements. It was organized for the welfare
and benefit of the Filipino people principally to help
Paneda.Auby N. Subject : Taxation Law 1
combat the high incidence of lung and pulmonary
diseases in the Philippines. As a general principle, a
charitable institution does not lose its character as
such and its exemption from taxes simply because it
derives income from paying patients, whether out-
patient, or confined in the hospital, or receives
subsidies from the government, so long as the money
received is devoted or used altogether to the
charitable object which it is intended to achieve; and
no money inures to the private benefit of the persons
managing or operating the institution.
2. No. LCP failed to prove that the entirety of its real
property is actually, directly and exclusively used for
charitable purposes. While portions of the hospital are
used for the treatment of patients and the dispensation
of medical services to them, whether paying or non-
paying, other portions thereof are being leased to
private individuals for their clinics and a canteen.
Further, a portion of the land is being leased to a
private individual for her business enterprise under the
business name Elliptical Orchids and Garden Center.
Indeed, the petitioners evidence shows that it
collected P1, 136,483.45 as rentals in 1991 and P1,
679,999.28 for 1992 from the said lessees.
Those exempted from real estate taxes are lands,
buildings and improvements actually, directly and
exclusively used for religious, charitable or educational
purposes. It covers property taxes only. To be entitled
to the exemption, the petitioner is burdened to prove,
by clear and unequivocal proof, that (a) it is a
charitable institution; and (b) its real properties are
ACTUALLY, DIRECTLY and EXCLUSIVELY used for
charitable purposes. What is meant by actual, direct
and exclusive use of the property for charitable
purposes is the direct and immediate and actual
application of the property itself to the purposes for
which the charitable institution is organized. It is not
22
 the use of the income from the real property that is
determinative of whether the property is used for tax-
exempt purposes. If real property is used for one or
more commercial purposes, it is not exclusively used for
the exempted purposes but is subject to taxation.
Accordingly, the court ruled that the portions of the
land leased to private entities as well as those parts of
the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether
paying or non-paying, are exempt from real property
taxes.
17. Ormoc Sugar vs. Treasurer of Ormoc City GR L-23794,
17 February 1968 En Banc, Bangzon JP (J): 9 concur
Facts: In 1964, the Municipal Board of Ormoc City passed
Ordinance 4, imposing on any and all productions of centrifuga
sugar milled at the Ormoc Sugar Co. Inc. in Ormoc City a
municpal tax equivalent to 1% per export sale to the United
States and other foreign countries. The company paid the said
tax under protest. It subsequently filed a case seeking to
invalidate the ordinance for being unconstitutional.
Issue: Whether the ordinance violates the equal protection
clause.
Held: The Ordinance taxes only centrifugal sugar produced and
exported by the Ormoc Sugar Co. Inc. and none other. At the
time of the taxing ordinance’s enacted, the company was the
only sugar central in Ormoc City. The classification, to be
reasonable, should be in terms applicable to future conditions
as well. The taxing ordinance should not be singular and
exclusive as to exclude any subsequently established sugar
central, of the same class as the present company, from the
coverage of the tax. As it is now, even if later a similar
company is set up, it cannot be subject to the tax because the
Paneda.Auby N. Subject : Taxation Law 1
ordinance expressly points only to the company as the entity
to be levied upon.
18. AMERICAN BIBLE SOCIETY vs CITY OF MANILA
FACTS: On May 29 1953, the acting City Treasurer of the City
of Manila informed plaintiff that it was conducting the
business of general merchandise without providing itself with
the necessary Mayor's permit and municipal license, in
violation of Ordinance No. 3000, and Ordinances Nos. 2529 and
required plaintiff to secure, within three days, the
corresponding permit and license fees, together with
compromise covering the period from the 4th quarter of 1945
to the 2nd quarter of 1953, in the total sum of P5,821.45
ABS protested, but CTM demanded. To avoid closing of its
business and further fines, ABS paid the said amounts.
ABS filed a complaint praying that Ord. 3000 and Ord. 2359 be
declared illegal and unconstitutional under Art. III, Sec. 5.
When the case was set for hearing, ABS tried to establish that
it never made any profit from the sale of its bible. CTM retorts
to the admission of a witness that the price for the bibles and
other religious pamphlets were a little bit higher than the
usual price, which clearly shows that ABS contention is
untentable.
Petition was dismissed. ABS appealed to the CA.
ISSUES:
1. WON Ord. 3000 and 2359 are constitutional and valid.
2. Whether the provisions are applicable or not to be the
case at bar.
RULING: It may be true that in the case at bar the price asked
for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same
23
but this cannot mean that appellant was engaged in the
business or occupation of selling said "merchandise" for profit.
For this reason We believe that the provisions of City of Manila
Ordinance No. 2529, cannot be applied to appellant, for in
doing so it would impair its free exercise and enjoyment of its
religious profession and worship as well as its rights of
dissemination of religious beliefs.
With respect to Ordinance No. 3000, as amended, which
requires the obtention the Mayor's permit before any person
can engage in any of the businesses, trades or occupations
enumerated therein, We do not find that it imposes any charge
upon the enjoyment of a right granted by the Constitution, nor
tax the exercise of religious practices.
It seems clear, therefore, that Ordinance No. 3000 cannot be
considered unconstitutional, even if applied to plaintiff
Society. But as Ordinance No. 2529 of the City of Manila, as
amended, is not applicable to plaintiff-appellant and
defendant-appellee is powerless to license or tax the business
of plaintiff Society involved herein for, as stated before, it
would impair plaintiff's right to the free exercise and
enjoyment of its religious profession and worship, as well as its
rights of dissemination of religious beliefs, We find that
Ordinance No. 3000, as amended is also inapplicable to said
business, trade or occupation of the plaintiff.
18. American Bible Society v City of Manila (1957)
American Bible Society v City of Manila GR No. L-9637, April
30, 1957  occupation of the plaintiff. Even if religious groups and the
FACTS:
In the course of its ministry, the Philippine agency of American
Bible Society (a foreign, non-stock, non-profit,
religious, missionary corporation) has been distributing and
selling bibles and/or gospel portions thereof throughout the
Paneda.Auby N. Subject : Taxation Law 1
Philippines. The acting City Treasurer of Manila informed
plaintiff that it was conducting the business of general
merchandise since November 1945, without providing itself
with the necessary Mayor’s permit and municipal license, in
violation of Ordinance No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364. The society paid such under protest
and filed suit questioning the legality of the ordinances under
which the fees are being collected. 
ISSUES: 
1. Whether or not the ordinances of the City of Manila are
constitutional and valid 
2. Whether the provisions of said ordinances are applicable
or not to the case at bar 
RULING:
1. Yes, they are constitutional. The ordinances do not deprive
defendant of his constitutional right of the free exercise
and enjoyment of religious profession and worship, even
though it prohibits him from introducing and carrying out a
scheme or purpose which he sees fit to claim as part of his
religious system. It seems clear, therefore, that Ordinance No.
3000 cannot be considered unconstitutional, even if applied to
plaintiff society.
2. The ordinance is inapplicable to said business, trade or
press are not altogether free from the burdens of the
government, the act of distributing and selling bibles is purely
religious and does not fall under Section 27e of the Tax Code
(CA 466). The fact that the price of bibles, etc. are a little
higher than actual cost of the same does not necessarily mean
24
it is already engaged in business for profit. Thus, the
Ordinances are not applicable to the Society.  1. Since there is no question that the revenue bill exclusively
19. ABAKADA Guro Party List vs. Ermita G.R. No. 168056
September 1, 2005
FACTS:
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO
Party List, et al., filed a petition for prohibition on May 27,
2005 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 questioned provisions contain a
uniformp ro v is o 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. Petitioners argue that the law
is unconstitutional.
ISSUES:
1. Whether or not there is a violation of Article VI, Section 24
of the Constitution.
2. Whether or not there is undue delegation of legislative
power in violation of Article VI Sec 28(2) of the Constitution.
3. Whether or not there is a violation of the due process and
equal protection under Article III Sec. 1 of the Constitution.
Paneda.Auby N. Subject : Taxation Law 1
RULING:
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.
2. 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.
3. 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.
19. ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY
G.R. No. 168056     September 1, 2005
Facts:
Petitioners ABAKADA GURO Party List challenged the
constitutionality of R.A. No. 9337 particularly Sections 4, 5 and
6, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). These questioned
provisions contain a uniform proviso authorizing the President,
25
upon recommendation of the Secretary of Finance, to raise the
VAT rate to 12%, effective January 1, 2006, after any of the
following conditions have been satisfied, to wit:
. . . That the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%), after any
of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and
four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the
previous year exceeds one and one-half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it
constitutes abandonment by Congress of its exclusive authority
to fix the rate of taxes under Article VI, Section 28(2) of the
1987 Philippine Constitution. They further argue that VAT is a
tax levied on the sale or exchange of goods and services and
cannot be included within the purview of tariffs under the
exemption delegation since this refers to customs duties, tolls
or tribute payable upon merchandise to the government and
usually imposed on imported/exported goods. They also said
that the President has powers to cause, influence or create
the conditions provided by law to bring about the conditions
precedent. Moreover, they allege that no guiding standards are
made by law as to how the Secretary of Finance will make the
recommendation. They claim, nonetheless, that any
recommendation of the Secretary of Finance can easily be
brushed aside by the President since the former is a mere alter
ego of the latter, such that, ultimately, it is the President who
decides whether to impose the increased tax rate or not.
 Issues:
Paneda.Auby N. Subject : Taxation Law 1
1. Whether or not R.A. No. 9337 has violated the provisions in
Article VI, Section 24, and Article VI, Section 26 (2) of the
Constitution.
2. Whether or not there was an undue delegation of
legislative power in violation of Article VI Sec 28 Par 1 and
2 of the Constitution.
3. Whether or not there was a violation of the due process
and equal protection under Article III Sec. 1 of the
Constitution.
 Discussions:
1. Basing from the ruling of Tolentino case, it is not the law,
but the revenue bill which is required by the Constitution
to “originate exclusively” in the House of Representatives,
but Senate has the power not only to propose amendments,
but also to propose its own version even with respect to
bills which are required by the Constitution to originate in
the House. the Constitution simply means is that the
initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills and
bills of local application must come from the House of
Representatives on the theory that, elected as they are
from the districts, the members of the House can be
expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are
elected at large, are expected to approach the same
problems from the national perspective. Both views are
thereby made to bear on the enactment of such laws.
2. In testing whether a statute constitutes an undue
delegation of legislative power or not, it is usual to inquire
whether the statute was complete in all its terms and
26
 provisions when it left the hands of the legislature so that
nothing was left to the judgment of any other appointee or
delegate of the legislature.
3. The equal protection clause under the Constitution means
that “no person or class of persons shall be deprived of the
same protection of laws which is enjoyed by other persons
or other classes in the same place and in like
circumstances.”
Rulings:
1. R.A. No. 9337 has not violated the provisions. 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, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not
contain any prohibition or limitation on the extent of the
amendments that may be introduced by the Senate to the
House revenue bill.
2. 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.
3. Supreme Court held no decision on this matter. The power
of the State to make reasonable and natural classifications
for the purposes of taxation has long been established.
Paneda.Auby N. Subject : Taxation Law 1
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.
20. Progressive Development Corporation vs. Quezon
City GR 36081, 24 April 1989
Facts: The City Council of Quezon City adopted Ordinance
7997 (1969) where privately owned and operated public
markets to pay 10% of the gross receipts from stall rentals to
the City, as supervision fee. Such ordinance was amended by
Ordinance 9236 (1972), which imposed a 5% tax on gross
receipts on rentals or lease of space in privately-owned public
markets in Quezon City. Progressive Development Corp.,
owner and operator of Farmer’s Market and Shopping Center,
filed a petition for prohibition against the city on the ground
that the supervision fee or license tax imposed is in reality a
tax on income the city cannot impose.
Issue: Whether the supervision fee / license tax is a tax on
income.
Held: The 5% tax imposed in Ordinance 9236 does not
constitute a tax on income, nor a city income tax
(distinguished from the national income tax by the Tax Code)
within the meaning of Section 2 (g) of the Local Autonomy Act,
but rather a license tax or fee for the regulation of business in
which the company is engaged. To be considered a license fee,
the imposition must relate to an occupation or activity that so
engages the public interest in health, morals, safety and
development as to require regulations for the protection and
promotion of such public interest; the imposition must also
bear a reasonable relation to the probable
27
 28
Paneda.Auby N. Subject : Taxation Law 1