CITY OF MANILA v.

ANGEL VALERA COLET

GR No. 124855

FACTS:

On June 22, 1993 The City of Manila, through its City Treasurer, began imposing and
collecting the business under Section 21(B) of the Manila Revenue Code, as amended
by Ordinance No. 7807. Section 21 (B) of the Code imposed business tax on
“transportation contractors, persons who transport passenger or freight for hire,
and common carriers by land, air or water ”while the Ordinance amended such by lowering
the tax rate from 3% per annum to .5%per annum. Because they were assessed and/or
compelled today business taxes pursuant to Section 21(B) of the Manila Revenue
Code, as amended, before they were issued their business permits filed their
respective petitions before the Manila RTC against the City of Manila, and questioned
the constitutionality of Sec. 21 (B) for being contrary to the Constitution and the
Local Government Code, and asked for the refund of what they had paid as business
tax.

One of the petitioners is Dongnama and Kyowa are foreign corporations, organized and existing
under the laws of the Republic of Korea and Japan, respectively. Both shipping companies are doing
business in the Philippines through their resident agent, Sky International, Inc.(Sky International),
with office in Binondo, Manila.

ISSUE:

Whether Section 21(B) of the Manila Revenue Code, as amended by Ordinance

No. 7807 is unconstitutional.

RULING/ANALYSIS:

Yes. Section 133(j) of the Local Government Code clearly and unambiguously
proscribes LGUs from imposing any tax on the gross receipts of transportation
contractors, persons engaged in the transportation of passengers or freight by hire, and
common carriers by air, land, or water. Yet, confusion arose from the phrase “unless
otherwise provided herein,” found at the beginning of the said provision, and the City
of Manila anchors the validity of Sec. 21 (B) on said phrase.

Moreover, the business tax imposed by Section 21(B) of the Manila Revenue Code, as amended,
complied with the limitations and conditions in the LGC for a valid local tax. Section 21(B) of the
Manila Revenue Code, as amended, also enjoyed the presumption of constitutionality and validity.
This presumption can only be overridden by overwhelming evidence to the contrary. Taxes are the
lifeblood of the nation. Tax exemptions are construed strictly against the taxpayer, and the burden is
upon the person claiming exemption from the tax to show a clear grant of exemption by organic law
or statute.

Conclusion:
The court REVERSE and SET ASIDE the Decision dated August 28, 1995 of RTC-Branch and
to ORDER the City of Manila to refund to Dongnama and Kyowa the business taxes assessed
and collected against said corporations under Section 21(B) of the Manila Revenue Code, as
amended; and (d) to MAKE PERMANENT the Writs of Preliminary Injunction restored by
RTC-Branch 32 during the pendency of the Petitions at bar. So ordered.