COMMISSIONER v. Algue Inc.

158 SCRA 9, (1998)

Petitioner: Commissioner

Respondents: Algue, Inc.

FACTS:

The Algue,Inc. was appointed as an agent by The Philippine Sugar Estate Development Company,
authorizing them to sell lands, factories and oil manufacturing process. And for this sale, Algue, Inc.,
received as an agent commission of P 126,000.00, and it was from this commission that the P 75,000.00
promotional fees were paid to Alberto Guevara Jr., Eduardo Guevara, Isabel Guevara, Edith, O’Farrell,
and Pablo Sanchez.

The tax authorities challenged a payment made by Algue Inc. as an illegal attempt to evade taxes.
However, the Court of Tax Appeals found the payment to be legitimate and related to Algue's business,
hence deductible as a business expense. The Supreme Court agreed with the ruling, confirming that the
payment was a valid business expense, paid as promotional fees to individuals involved in a
corporation's creation, and was supported by sufficient evidence.

ISSUES:

Whether or not the Internal Revenue disallowed the collection of P 75,000.00 promotional expense as a
legitimate business expense in its income tax returns.

RULING:

No, the court agreed that the promotional fee paid by the Philippine Sugar Estate Development Co. was
a valid deductable. The amount of P75,000.00 was 60% of the total commission, which was reasonable
given the efforts of the payees in inducing investors and prominent businessmen to venture in an
experimental enterprise.
GASTON v. REPUBLIC PLANTERS

158 SCRA 626 (1988)

Petitioner: Virgilio Gaston

Respondents: Republic Planters Bank

FACTS:

The Philippine Sugar Commission (PHILSUCOM) was a government office tasked with regulating and
supervising the sugar industry until it was superseded by the Sugar Regulatory Administration (SRA)
under Executive Order No. 18. It was mandated to continue for three more years to prosecute and
defend suits, settle and close its affairs, dispose of and convey its property, and distribute its assets.

ISSUES:

Whether or not the stabilization fees collected from sugar planters and millers pursuant to Section 7 of
P.D. No. 388 are public funds.

RULING:

The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a
special purpose. The revenues collected are to be treated as a special fund, to be administered in trust
for the purpose intended. The funds are deposited in the Philippine National Bank and not in the
Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by
law. The fees were collected from sugar producers, planters and millers, and the funds were channeled
to the purchase of shares of stock in respondent Bank, which does not convert the funds into a trust
fired for their benefit nor make them the beneficial owners of the shares so purchased. The investment
in shares of respondent Bank is not alien to the purpose intended because of the Bank's character as a
commodity bank.
PHIL GUARANTY CO., V. COMM

13 SCRA 775 (1965)

Petitioner: The Philippine Guaranty Co.,

Respondents: The Commissioner of Internal Revenue

FACTS:

With international insurance firms not operating in the Philippines, the petitioner or The Philippine
Guaranty Co., engaged into reinsurance arrangements. With the exception of the agreement with Swiss
Reinsurance Company, which was signed by both parties in Switzerland, the aforementioned
reinsurance contracts were signed by Philippine Guaranty Co., Inc. in Manila. When Philippine Guaranty
Co., Inc. submitted its income tax returns for 1953 and 1954, it deducted the premiums it had
surrendered to the overseas reinsurers under the aforementioned reinsurance contracts from its gross
revenue.

ISSUES:

Whether or not reinsurance premium ceded to foreign reinsurers not being business in the Philippines
are subject to withholding tax

RULING:

Yes, reinsurance premiums ceded to foreign reinsurers by Philippine-based insurers are subject to
withholding tax, regardless of whether the foreign reinsurers are doing business in the Philippines or
not. The applicable withholding tax rate is 10% of the gross amount of the reinsurance premium. The
source of the reinsurance premium is considered as within the Philippines if the original insurance
contract was issued by a Philippine-based insurer.
GOMEZ v. PALOMAR

25 SCRA 829 (1968)

Petitioner: Benjamin P. Gomez

Respondents: Enrico Palomar

FACTS:

Petitioner Gomez appealed the constitutionality of Republic Act 1635, 1 as amended by Republic Act
2631, also known as the Anti-TB Stamp Law. Enrico Palomar, the Postmaster General, issued four
administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 28 (August 28, 1958), and 10 (July
15, 1960). On September 15, 1963, Benjamin P. Gomez mailed a letter at the post office in San
Fernando, Pampanga. The letter did not bear the special anti-TB stamp required by the statute, so it was
returned to the petitioner. Gomez brought suit for declaratory relief in the Court of First Instance of
Pampanga to test the constitutionality of the statute and the implementing administrative orders issued.
The CFI declared the statute and administrative orders as unconstitutional and an appeal was made by
the respondents.

ISSUES:

Whether or not the Anti TB Stamp Law violates the equal protection clause of the Constitution

Whether or not the Anti TB Stamp Law violates the rule of uniformity and equality of taxation

RULING:

It is established that the legislature has an inherent right to decide which goods are subject to taxation
and also to grant a derogation. The most classification freedom in the field of taxation is widely believed
to lie with the legislature, more so than any other. The term "wide range and flexibility" was correctly
used to describe this authority.
LUTZ v. ARANETA

98 PHIL. 148

Petitioner: Walter Lutz

Respondents: J. Antonio Araneta

FACTS:

The Intestate Estate of Antonio Jayme Ledesma is being represented by Walter Lutz, who is initiating
legal action against J. Antonio Araneta Collector of Internal Revenue. The sum of money paid by the
estate as taxes, pursuant to the Sugar Adjustment Act.

ISSUES:

Whether or not the tax levied under the Sugar Adjustment Act (Commonwealth Act 567) is
unconstitutional.

RULING:

The Sugar Adjustment Act's tax is legitimately imposed. The tax imposed by the aforementioned Act is
implemented for regulatory purposes in order to give funds for the recovery and stabilization of the
sugar sector, which is in danger. Since the production of sugar is one of the major businesses in our
country, its development, preservation, and progress have a significant positive impact on society as a
whole. Therefore, stated Act's goals are public concerns, making them constitutional.
CITY OF BAGUIO v. DE LEON

25 SCRA 938 (1984)

Petitioner: De Leon

Respondents: CITY OF BAGUIO

FACTS:

City of Baguio imposing a license fee on any person, firm, entity or corporation doing business in the
City, which questioned by Fortunato de Leon. As a real estate daler He was held liable as a real estate
dealer with a property therein worth more than P10,000, but not in excess of P50,000, and therefore
obligated to pay under such ordinance the P50 annual fee.

ISSUES:

Whether or not the ordinance violates the uniformity established by the constitution

RULING:

NO. A tax is considered uniform when it operates with the same force and effect in every place where
the subject may be found. The ordinance imposes taxes on real estate dealers depending on the worth
of property leased.
SISON JR v. ANCHETA

130 SCRA 654 (1968)

Petitioner: Antero M. Sison Jr.

Respondents: Ruben B. Ancheta

FACTS:

Petitioner Sison Jr., challenge/ summons the constitution of Section 1 of the Batas Pambansa Blg. 135,
which amended by the Section 21 of National Internal Revenue Code of 1977.

As a taxpayer, petitioner claimed that the "he would be unduly discriminated against by the imposition
of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which
are imposed upon fixed income or salaried individual taxpayers". He describes that the aforementioned
law as oppressive, and capricious in character.

ISSUES:

Whether or not, the assailed provision violates the equal protection and due process clause of the
Constitution while also violating the rule that taxes must be uniform and equitable.

RULING:

No, the petition is without merit.

The Supreme Court ruled against Sison.

The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state
functions. It is the source of the bulk of public funds. To paraphrase a recent decision, taxes being the
lifeblood of the government, their prompt and certain availability is of the essence.

ROXAS v COURT OF TAX APPEALS

23 SCRA 276 (1968)

Petitioner: Antonio Roxas

Respondents: Court of Tax Appeals

FACTS:

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by
hereditary succession the following properties:

(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu,
Batangas province;

(2) A residential house and lot located at Wright St., Malate, Manila; and

(3) Shares of stocks in different corporations.

To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and
Jose Roxas. Roxas y Compania is a joint venture that Roxas and Jose Roxas established.

The tenants in Nasugbu who had all been cultivating the land since World War II expressed a wish to
own the pieces that they had been living on. The Roxas brothers decided to sell 13,500 hectares to the
government for distribution to genuine occupants after being encouraged by the government to do the
same.

However, it turned out that the government lacked the resources necessary to pay the purchase price,
therefore a special agreement was formed for the Rehabilitation Finance Corporation to lend Roxas y Cia
a set sum. The lands that were slated to be sold to farmers served as collateral for this loan. Farmers
were given the option to purchase the lands at the same price but in installments, and the Rehabilitation
Finance Corporation agreed to repay its loan with money from the farmers' yearly amortization
payments.

In 1953 and 1955, Roxas y Cia derived from said instalment payments a net gain, 50% of which was
reported for income tax purposes as gain on the sale of capital asset held for more than 1 year pursuant
to Section 34 of the Tax Code.

In 1958, the CIR demanded from Roxas y Cia the payment of real estate dealer's tax (based on the fact
that Roxas y Cia received house rentals from Jose Roxas in the amount of P8,000.00) and tax for dealers
of securities for 1952.

ISSUES:

Whether or not Roxas y Cia is not liable for the payment of the fixed tax on real estate dealers

Whether or not the gain derived from the sale of the Nasugbu farm lands is not an ordinary gain, hence
not 100% taxable
RULING:

AFFIRMATIVE.

This is an isolated transaction with its peculiar circumstances in spite of the fact that there were
hundreds of vendees. Although they paid for their respective holdings in instalment for a period of 10
years, it would nevertheless not make the vendor Roxa y Cia a real estate dealer during the 10-year
amortization period.
PHILEX MINING CORP v Commissioner of Internal Revenue

294 SCRA 687 (1968)

Petitioner: Philex Mining Corp

Respondents: Commissioner of Internal Revenue

FACTS:

Philex Mining Corp. the petitioner, is questioning the decision of the Court of Appeals issued on April 8,
1996 in CA-G.R. SP No. 36975. According to the Decision, since August 6, 1994 until the final payment of
the balance was made in respect of the period from July 1991 to June 1992, Philex Mining Corporation
has been required to pay an excise tax amount of P 110,677,668.52 with a yearly interest rate of 20 %.
Sections 248 and 249 of the 1977 Income Tax Code form the basis for this Directive.

ISSUES:

Is it possible that, as regards the tax refund claims of the applicant, there is an uneven playing field
between the taxation liabilities?

RULING:

In that respect, the Supreme Court does not consider this argument to be valid. For the simple reason
that the government and the taxpayer are not creditors and debtors of each other, in several cases
before the present case, the Supreme Court has already ruled that taxes cannot be reimbursed.