CASE DIGESTS IN TAXATION I

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COMMISSIONER vs ALGUE, INC.GR No. L-28896, February 17, 1988158 SCRA 9

Facts: Algue Inc. filed its income tax returns showing deductions, for promotional fees paid, from their gross income. The BIR assessed

Algue based on such deductions contending that the promotional fees are not ordinary, reasonable and necessary expenses, thus,

disallowed. Algue was able to prove that the professional fees were 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.

Issue: Whether the BIR correctly disallowed the deduction.

Held: No, because Algue was able to prove that the professional fees were ordinary, necessary and reasonable. It is well-settled that

taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection

should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary

to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the

promotion of the common good, may be achieved.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it 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. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer

can demonstrate, as it has here, that the law has not been observed.

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OSMEÑA vs ORBOSGR No 99886, March 31, 1993

Facts: The Oil Price Stabilization Fund (OPSF) was created by President Marcos to reimburse oil companies for cost increases in

crude oil. Subsequently, the OPSF was reclassified into a "trust liability account," and ordered released from the National Treasury to

the Ministry of Energy. It is contended that the creation of trust fund violates the Constitution on the reason that if a special tax is

collected for a specific purpose, the revenue generated as a special fund to be used only for the purpose indicated.

Issue: Whether the creation of the trust fund is unconstitutional.

Held: No. The tax collected is not in pure exercise of the taxing power. It is levied with a regulatory purpose, to provide a means for the

stabilization of the petroleum products industry. The levy is primarily in the exercise of the police power of the State.

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REPUBLIC OF THE PHILIPPINES vs BACOLOD-MURCIAGR No. L-19824, L-19825, L-19826; July 9, 1966

Facts: RA 632 created the Philippine Sugar Institute, a semi-public corporation. It acquired the Insular Sugar Refinery from the

proceeds of the Sugar tax to be collected under RA 632. The operation of the refinery was disastrous. Bacolod-Murcia refused to pay

its contribution to the said fund contending that the purchase of refinery with money from the Institute’s fund was not authorized under

RA 632 and that the continued operation of the refinery is inimical to its interest.

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Issue: Whether Bacolod- Murcia is liable.

Held: Yes. The special assessment or levy for the Philippine Sugar Institute Fund is not so much an exercise of the power of taxation,

nor the imposition of a special assessment, but the exercise of police power for the general welfare of the entire country. It is, therefore,

an exercise of a sovereign power which no private citizen may lawfully resist.

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TIO vs VIDEOGRAM REGULATORY BOARD G.R. No. L-75697; 18 June 1987151 SCRA 208

Facts: Tio assails the validity of PD 1987 entitled “Act Creating the Videogram Regulatory Board” which imposes a 30% tax on gross

receipts. Tio contends that the imposition is harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of the due

process clause of the Constitution.

Issue: Whether PD 1987 is a valid exercise of the power of taxation?

Held: Yes. 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.

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REPUBLIC OF THE PHILIPPINES vs PATANAO GR No L-22356, July 21, 1967

Facts: A complaint was filed against the defendant alleging that the latter failed to file income tax returns for 1953 and 1954. He filed

false and fraudulent returns for 1951, 1952 and 1955. the lower court dismissed the complaint holding that the action is barred by prior

judgment, defendant having been acquitted in criminal cases of the same court, which were prosecutions for failure to file income tax

returns and for non-payment of income taxes.

Issue: Whether the action is barred by prior judgment.

Held: No. Under the Penal Code the civil liability is incurred by reason of the offender’s criminal act. The situation under the income tax

law is the exact opposite. Civil liability to pay taxes arises from the fact that one has engaged himself in business and not because of

any criminal act committed by him. The acquittal in the said criminal case cannot operate to discharge defendant from the duty of

paying the taxes which the law requires to be paid, since that duty is imposed by statute prior to and independently of any attempts by

the taxpayer to evade payment.

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PHIL. GUARANTY CO., INC. vs CIRGR No. L-22074, April 30, 196513 SCRA 775

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Facts: The petitioner, a domestic insurance company, entered into reinsurance contracts with foreign insurance companies not doing

business in the country. It ceded to foreign reinsurers a portion of the premiums on insurance it has originally underwritten in the

Philippines. The premiums paid by such companies were excluded by the petitioner from its gross income when it file its income tax

returns. The CIR assessed against the petitioner withholding taxes on the ceded reinsurance premiums to which the latter protested the

assessment on the ground that the premiums are not subject to tax for the premiums did not constitute income from sources within the

Philippines because the foreign reinsurers did not engage in business in the Philippines.

Issue: whether insurance companies are not required to withhold tax on reinsurance premiums ceded to foreign insurance companies.

Held: No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve

the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a

corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which come within the State's

territory, and facilities and protection which a government is supposed to provide. Considering that the reinsurance premiums in

question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by

our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state.

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GOMEZ vs PALOMARGR No L-23645, October 29, 1968

Facts: Petitioners question the constitutionality of the RA 1635, which requires an additional 5 centavo stamp for every mail being

posted to help raise funds for the Philippine Tuberculosis Society, claiming that the law violates the equal protection cause because it

constitutes mail users into a class for tax purposes while leaving untaxed the rest of the population.

Issue: Whether RA 1635 is unconstitutional.

Held: No. It is settled that the legislature has the inherent power to select the subjects of taxation and to grant exemptions. This power

has aptly been described as "of wide range and flexibility." Indeed, it is said that in the field of taxation, more than in other areas, the

legislature possesses the greatest freedom in classification. The reason for this is that traditionally, classification has been a device for

fitting tax programs to local needs and usages in order to achieve an equitable distribution of the tax burden.

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TOLENTINO vs SECRETARY OF FINANCE GR No. 115455, August 25, 1994

Facts: Various petitioners seek to declare RA 7166, which widens the tax base of the existing VAT system, as unconstitutional

because it violates Article VI, Section 28 (1) of the Constitution which provides that “the rule of taxation shall be uniform and equitable.

The Congress shall evolve a progressive system of taxation.”

Issue: Whether RA 7166 violates the principle of progressive system of taxation.

Held: No. Regressivity is not a negative standard for courts to enforce. “Evolve a progressive system of taxation” is a directive to

Congress. These provisions are placed in the Constitution as moral incentives to legislation, not as judicially enforceable rights.

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LUTZ vs ARANETAGR No. L-7859, December 22, 195598 PHIL 148

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Facts: Plaintiff questioned the constitutionality of CA 567 or the Sugar Adjustment Act for it provided for an increase of the existing tax

on the manufacture of sugar. He alleged that such enactment is not being levied for a public purposebut solely and exclusively for the

aid and support of the sugar industry thus making it void and unconstitutional.

Issue: Whether CA 567 is constitutional.

Held: Yes. 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 to fully play, subject only to the test of reasonableness; and it is not contended that the means provided in the law

bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid, no

reason is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the

implement of the state's police power.

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PUNSALAN vs MUNICIPAL BOARD OF MANILAGR NO.L-4817; 26 MAY 195495 PHIL 46

Facts: Petitioners assailed the validity Ordinance No. 3398 which imposes a municipal occupation tax on persons exercising

various professions in the city and penalizes non-payment of the same. Petitioners contend that the ordinance is unjust and oppressive

and amounts to double taxation.

Issue: Whether Ordinance No 3398 constitutes double taxation?

Held: No. The argument against double taxation may not be invoked if one tax is imposed by the state and the other is imposed by the

city. It is widely recognized that there is nothing inherently terrible in the requirement that taxes be exacted with respect to the same

occupation by both the state and the political subdivisions thereof.

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CHAVEZ vs ONGPINGR No 76778, June 6, 1990

Facts: President Corazon Aquino issued EO 73 increasing the basis for assessment of real property tax. Chavez, a taxpayer and

landowner, questioned the constitutionality of EO 74. He alleged that it will bring unreasonable increase in real property taxes.

Issue: Whether EO 73 is constitutional.

Held: Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values. Certainly, to

continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of

real properties that have occurred since then is not in consonance with a sound tax system. Fiscal adequacy, which is one of the

characteristics of a sound tax system, requires that sources of revenue must be adequate to meet government expenditures and their

variations.

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KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN vs TAN GR No 81311 June 30, 1988

Facts: EO 372 was issued by the President of the Philippines which amended the Revenue Code, adopting the value-added tax (VAT)

effective January 1, 1988. Four petitions assailed the validity of the VAT Law from being beyond the President to enact; for being

oppressive, discriminatory, regressive and violative of the due process and equal protection clauses, among others, of the Constitution.

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Issue: Whether or not EO 273 is unconstitutional.

Held: No. Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner

by reason of passion or personal hostility. They have failed to adequately show that the VAT is oppressive, discriminatory or unjust.

Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a

law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. As the Court sees

it, EO 273 satisfies all the requirements of a valid tax. It is uniform. A tax is considered uniform when it operates with the same force

and effect in every place where the subject may be found."

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PHILIPPINE ACETYLENE CO. INC. vs CIR GR No L-19707, August 17, 1967

Facts: Philippine Acetylene Co. Inc sold its oxygen and acetylene gases to Napocor and Voice of America (VOA). It refused to pay

sales tax on such sales on the ground that both Napocor and Voice of America are exempt from taxes.

Issue: Whether Philippine Acetylene Co. Inc is liable to pay the sales tax.

Held: Yes. When the consumer or end-user of a manufacturer product is tax-exempt, such exemption covers only those taxes for

which such consumer or end-user is directly liable. Indirect taxes are not included. Hence, the manufacturer cannot claim exemption

from the payment of sales tax, neither can the consumer or buyer of the product demand the refund of the tax that the manufacturer

might have passed on to him.

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MACEDA vs MACARAIGGR No 88291, May 31, 1991

Facts: NPC was granted exemption from direct and indirect taxes under PD 938. NPC seeks to recover the indirect taxes passed by oil

companies which supplied bunker fuel oil to NPC.

Issue: Whether NPC is entitled to recover indirect taxes paid by it.

Held: Yes. When the law granting tax exemption specifically includes indirect taxes or when it is clearly manifest therein that legislative

intention to exempt embraces indirect taxes, then the buyer of the product or service sold has a right to be reimbursed the amount of

the taxes that the sellers passed on to him. By the very nature of indirect taxation, the economic burden of such taxation is expected to

be passed on through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been

exempted from both direct and indirect taxation, the NPC must be held exempted from absorbing the economic burden of indirect

taxation.

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CIR vs GOTAMCOGR No L-31092, February 27, 1987

Facts: The contract for the construction of the building of WHO in Manila was awarded to Gotamco. WHO enjoys tax exemptions.

WHO received an opinion from the CIR stating that the 3% contractor’s tax is an indirect tax, and thus WHO is exempt. Subsequently,

the CIR reversed his opinion stating that the 3% contractor’s tax is not a direct or indirect tax due on WHO, but a tax primarily due from

the contractor.

Issue: Whether Gotamco is liable for the tax.

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Held: No. Where the exemption from indirect tax is given to the contractee, but the evident intention is to exempt the contractor so that

such contractor may no longer shift or pass on any tax to the contractee, the contractor may claim tax exemption on the transaction.

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CIR vs AMERICAN RUBBER COMPANY GR No L-19667, November 29, 1966

Facts: American Rubber sold its rubber products locally and declared the same for tax purposes in which the Commissioner

accordingly assessed. The company paid under protest claiming that its rubber products were agricultural products exempt from sales

tax under Section 188b of the Tax Code.

Issue: whether American rubber is entitled to recover the sales tax paid by it.

Held: Yes. When the transaction itself is the one that is tax-exempt but through error the seller pays the tax and shifts the same to the

buyer, the seller gets the refund, but must hold it in trust for buyer.

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PHILIPPINE AIRLINES, INC. vs EDUG.R. No. L- 41383, August 15, 1988

Facts: Under its franchise, PAL is exempt from the payment of taxes. The Land Transportation Commissioner issued a regulation

requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. The money collected from the motor vehicle

registration fees are intended for the construction and maintenance of public roads, streets and bridges.

Issue: Whether or not motor vehicle registration fees are considered as taxes.

Held: Yes. 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. Such is the case of motor vehicle registration fees. The motor vehicle registration fees are actually taxes intended

for additional revenues of the government.

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PROGRESSIVE DEVELOPMENT CORPORATION vs QUEZON CITYGR 36081, April 24, 1989

Facts: The City Council of Quezon City adopted an ordinance imposing a supervision fee for the regulation of privately-owned public

markets equal to 5% of gross receipts on rentals of space of privately-owned public markets in Quezon City. Progressive Development

Corp. filed a petition for prohibition against the city on the ground that the supervision fee is in reality a tax on income which the city

cannot impose.

Issue: Whether the supervision fee is a tax on income.

Held: No. The general rule is that the imposition is a tax if its primary purpose is to generate revenue and regulation is merely

incidental; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition of a

tax. Since the supervision fee is for regulatory purpose, it is not a tax.

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FRANCIA vs INTERMEDIATE APPELLATE COURTGR No L-67649, June 28, 1988

Facts: Francia was the registered owner of a house and lot a portion of which was expropriated by the Republic of the Philippines.

Because he was not able to pay real property taxes from 1963 to 1977, his property was sold in a public auction. Francia contends that

his tax delinquency has been extinguished by legal compensation. He claims that the government owed him when a portion of his land

was expropriated.

Issue: Whether the expropriation payment compensate for the real estate taxes due.

Held: No. There can be no offsetting of taxes against the claims that the taxpayer may have against the government. A person cannot

refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected.

The collection of a tax cannot await the results of a lawsuit against the government. Internal revenue taxes cannot be the subject of

compensation. The Government and the taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil

Code and a claim of taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

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DOMINGO vs GARLITOSG.R. NO. 18993 June 29, 1963

Facts: In Domingo vs Moscoso, the SC declared as final and executor the order for the payment of the estate and inheritance taxes,

charges and penalties by the estate of the of the late Walter Price. It appears that the Government is indebted to the estate of Price.

Such claim has been recognized and the amount has been appropriated by a corresponding law (RA 2700).

Issue: Whether legal compensation may take place in the case at bar.

Held: Yes. Both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already

become overdue and demandable as well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance

with Article 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount.

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PHILEX MINING CORPORATION vs CIRGR No 125704, August 28, 1998

Facts: BIR demanded from Philex the payment of its tax liabilities. Philex protested the demand stating that it has pending claims for

VAT input/refund, which should be applied against it tax liabilities.

Issue: Whether legal compensation can take place.

Held: No. The government and the taxpayer are not creditors and debtors or each other. Obligations in the nature of debts are due to

the government in its corporate capacity, while taxes are due to the government in its sovereign capacity.

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ROXAS vs CTAGR No L-25043, April 26, 1968

Facts: The Roxas brothers inherited from their grandparents several properties which included farmlands. The government, in line with

the constitutional mandate to acquire big landed estates and apportion them among landless tenants-farmers, persuaded the Roxas

brothers to part with their landholdings. The brothers agreed to sell the lots to the government. Unfortunately, the government did not

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have funds so the brothers agreed to a purchase by installment. Subsequently, the CIR demanded from the brothers the payment of

deficiency income taxes resulting from the sale.

Issue: whether the brothers are liable.

Held: No. It should be borne in mind that the sale of the farmlands to the very farmers who tilled them for generations was not only in

consonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the

landless. In order to maintain the general public’s trust and confidence in the Government this power must be used justly and not

treacherously. It does not conform to the sense of justice for the Government to persuade the taxpayer to lend it a helping hand and

later on penalize him for duly answering the urgent call.

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PASCUAL vs SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS110 Phil. 331

Facts: Pascual assailed the validity of RA 920 appropriating P85,000.00 for the construction, reconstruction, repair, extension and

improvement Pasig feeder road terminals”. He claimed that the appropriation was actually going to be used for private use for the

terminals sought to be improved were part of the Antonio Subdivision. The said Subdivision is owned by Senator Jose Zulueta who was

a member of the same Senate that passed and approved RA 920.

Issue: Whether or not the appropriation is valid.

Held: No, the appropriation is void for being an appropriation for a private purpose. “In accordance with the rule that the taxing power

must be exercised for public purposes only, money raised by taxation can be expanded only for public purposes and not for the

advantage of private individuals.” Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to

Zulueta, the result is that said appropriation sought a private purpose, and, hence, was null and void.

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BAGATSING vs RAMIREZGR No L-41631, December 17, 1976

Facts: The Municipal Board of Manila enacted Ordinance 7522, regulating the operation of public markets and prescribing fees for the

rentals of stalls. Private respondent questioned the validity of the ordinance contending that the market stall fees imposed are diverted

to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to

the said corporation in a "Management and Operating Contract."

Issue: Whether the delegation of the collection of tax to a private person/entity defeats the public purpose requirement of a tax

ordinance.

Held: No. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is

public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon

the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or

corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under

the direction of an individual or private corporation.

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BASCO vs PAGCORGR 91649; May 14, 1991

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197 SCRA 52, 65

Facts: Petitioner is seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter - PD 1869, because it

waived the Manila Cit government’s right to impose taxes and license fees, which is recognized by law. For the same reason, the law

has intruded into the local government’s right to impose local taxes and license fees.

Issue: Whether PD 1869 is valid.

Held: Yes. LGUs have no power to tax Government instrumentalities. PAGCOR, being a GOCC, is therefore exempt from local

taxes. The National Government is supreme over local governments. As such, mere creatures of the State cannot defeat national

policies using the power to tax as a “tool for regulation”. The power to tax cannot be allowed to defeat an instrumentality of the very

entity which has the inherent power to wield it. The power of LGUs to impose taxes & fees is always subject to limitation provided by

Congress.

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GARCIA vs EXECUTIVE SECRETARY211 SCRA 219

Facts: President Corazon Aquino issued Executive Order No. 438 which imposed, in addition to any other duties, taxes and charges

imposed by law on all articles imported into the Philippines. Garcia questioned the validity of the said law for being violative of section

24 Article VI of the Constitution which provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt,

bills of local application, and private bills shall originate exclusively in the House of Representatives.

Issue: whether EO 438 is valid

Held: Yes. Section 28(2) of Article VI of the Constitution explicitly allows the Congress to authorize the President subject to such

limitations and restrictions as Congress may impose to fix within specific limits tariff rates and other duties or imposts.

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MACEDA vs ENERGY REGULATORY BOARDGR No. 96266, July 18, 1991

Facts: Upon the outbreak of the Persian Gulf conflict on August 1990, private respondents filed with the ERB their respective

applications on oil price increases. ERB then issued an order granting a provisional increase of P1.42 per liter. Petitioner Maceda filed

a petition for Prohibition seeking to nullify said increase. Petitioner claimed that if the price increase will be used to augment the Oil

Price Stabilization Fund (OPSF) this will constitute illegal taxation.

Issue: Whether the said increase amounts to illegal taxation.

Held: No. In the Maceda case, (G.R. Nos. 95203-05) this Court has already ruled that "the Board Order authorizing the proceeds

generated by the increase to be deposited to the OPSF is not an act of taxation but is authorized by Presidential Decree No. 1956. It is

an exercise of police power.

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REYES vs ALMANZORGR No. 43839-46; April 26, 1991 196 SCRA 322

Facts: Petitioners is an owner of parcels of land leased to tenants. RA 6359 was enacted prohibiting for one year an increase in

monthly rentals. The City Assessor of Manila assessed the value of petitioner’s property based on the schedule of market values duly

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reviewed by the Secretary of Finance. The revision increased the tax rates and petitioner averred that the reassessment imposed upon

him greatly exceeded the annual income derived from their properties.

Issue: whether the approach on tax assessment used by the City Assessor reasonable.

Held: No. The taxing power has the authority to make a reasonable and natural classification for purposes of taxation but the

government's act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason.

Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No.

6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of

excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.

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SISON, JR. vs ANCHETAGR No. L-59431, July 25, 1984

Facts: Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135 which imposed different rates of tax for

different classes of income earners. He alleged that 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 characterizes the above section as arbitrary amounting to class legislation, oppressive and capricious in character.

Issue: Whether BP 135 transgresses both the equal protection and due process clauses of the Constitution as well as of the

rule requiring uniformity in taxation

Held: No. The presumption of validity must prevail. The taxing power has the authority to make reasonable and natural classifications

for purposes of taxation. Recipients of compensation income are not entitled to make deductions for income tax purposes as there is

practically no overhead expense, while professionals and businessmen have no uniform costs or expenses necessary 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.

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VILLEGAS vs HIU CHIONG TSAI PAO HO GR No L-29646, November 10, 1978

Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens to procure the requisite mayor’s permit so as to be

employed or engage in trade in the City of Manila.

Issue: Whether Ordinance 6537 is valid

Held: No. The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus

deprived of their rights to life, liberty and property and therefore violates the due process and equal protection clauses of the

Constitution. Further, the ordinance does not lay down any criterion or standard to guide the Mayor in the exercise of his discretion,

thus conferring upon the mayor arbitrary and unrestricted powers.

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MANILA RACE HORSE TRAINERS ASSOCIATION, INC vs DELA FUENTEGR No. L-2947, January 11, 195188 Phil 60

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Facts: The Municipal Board of the City of Manila enacted Ordinance 3065 which imposes tax on stable owners based on how many

horses they maintain in their stables. They prayed that said ordinance be declared invalid because it violates the equal protection

clause. They alleged that the tax imposed should be uniform whether there are horses or no horses are maintained in the stables.

Issue: Whether Ordinance 3065 is valid.

Held: Yes. The Court held that In taxing only boarding stables for race horses, we do not believe that the ordinance, makes arbitrary

classification. There is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate.

Applying this criterion to the present case, there would be discrimination if some boarding stables of the same class used for the same

number of horses were not taxed or were made to pay less or more than others.

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AMERICAN BIBLE SOCIETY vs CITY OF MANILAG.R. No. L-9637; April 30, 1957

Facts: Plaintiff's Philippine agency has been distributing and selling bibles throughout the Philippines and translating the same into

several Philippine dialects. The City Treasurer of Manila, by virtue of Ordinance Nos. 3000, 2529, 3028 and 3364, required plaintiff to

secure the necessary Mayor’s permit and license fees. Plaintiff contended that the said ordinances are unconstitutional and illegal in so

far as its society is concerned, because they provide for religious censorship and restrain the free exercise and enjoyment of its

religious profession, to wit: the distribution and sale of bibles and other religious literature to the people of the Philippines.

Issue: Whether the ordinances in question are unconstitutional.

Held: Ordinance No. 3000, which requires a Mayor's permit before any person can engage in any of the businesses, trades or

occupations, does not impose any charge upon the enjoyment of a right granted by the Constitution nor tax the exercise of religious

practices. It cannot be considered unconstitutional, even if applied to plaintiff Society.

The other ordinances are valid. However, these cannot be applied to the plaintiff. This is because the defendant is powerless to license

or tax the business of plaintiff Society involved herein for 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.

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LUNG CENTER OF THE PHILIPPINES vs QUEZON CITY

Facts: Petitioner is a non-stock and non-profit entity. Petitioner owns a parcel of land where a portion of which is being leased for

commercial purposes. The City Assessor of Quezon City assessed both the land and building of petitioner for real property taxes.

Petitioner filed a claim for exemption predicated on its claim that it is a charitable institution. The petitioner alleged that under Section

28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes.

Issue: Whether the real properties of the petitioner are exempt from real property taxes.

Held: 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.

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. Exclusive is defined as possessed and enjoyed to the

exclusion of others; debarred from participation or enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a

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privilege exclusively. 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 Constitutions and the law. Solely is synonymous with exclusively.

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.

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ABRA VALLEY COLLEGE, INC., vs HON. JUAN P. AQUINOG.R. No. L-39086 June 15, 1988

Facts: Petitioner is an educational corporation and institution of higher learning. The second floor of the school is used by the Director

of petitioner for residential purposes while the ground floor of the college building is being used and rented by a commercial

establishment. Petitioner claims exemption from real property tax finding support under Section 22, paragraph 3, Article VI, of the then

1935 Philippine Constitution, which 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 .

Issue: Whether petitioner is exempted from real property tax.

Held: The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. However, the phrase

"exclusively used for educational purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution,

extends only to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise

stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while

the use of the second floor of the main building in the case at bar 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 thereof to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the

purpose of education.

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SAN MIGUEL CORPORATION vs HON. CELSO AVELINOG.R. No. L-39699 March 14, 1979

Facts: The Acting Secretary of Justice Macaraig rendered an opinion that the Mandaue Tax Code is "of doubtful validity." A suit for

collection against petitioner was filed by Respondent City where it squarely put in issue the validity of such ordinance, thus contesting

the opinion of the Acting Secretary of Justice. Petitioner filed a motion to dismiss on the ground of lack of jurisdiction claiming that the

collection suit is an appeal under Section 47 of PD 231, which the Court of First Instance has no jurisdiction.

Issue: Whether the filing of such action after such opinion was rendered may be considered "an appeal" under the Presidential Decree.

Held: No. It is an accepted juridical norm that the validity of a statute, an executive order or ordinance is a matter for the judiciary to

decide and that whenever in the disposition of a pending case such a question becomes unavoidable, then it is not only the power but

the duty of the Court to resolve such a question. It is likewise expressly provided in Section 43 of the Judiciary Act that the original

jurisdiction over all civil actions involving the legality of any tax, impost or assessment appertains to the Court of First Instance.

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PHILIPPINE PRESS INSTITUTE, INC. vs COMMISSION ON ELECTIONS

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G.R. No. L-119694 May 22, 1995

Facts: COMELEC promulgated Resolution No. 2772 directing newspapers to provide free COMELEC space of not less than one-half

page for the common use of political parties and candidates. Petitioner asks the Supreme Court to declare the resolution

unconstitutional and void on the ground that it violates the prohibition imposed by the Constitution upon the government against the

taking of private property for public use without just compensation.

Issue: Whether COMELEC Resolution No. 2772 is unconstitutional.

Held: Yes. To compel print media companies to donate “Comelec space” amounts to “taking” of private personal property without

payment of the just compensation required in expropriation cases. Moreover, the element of necessity for the taking has not been

established by respondent Comelec, considering that the newspapers were not unwilling to sell advertising space. The taking of private

property for public use is authorized by the constitution, but not without payment of just compensation.

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WELLS FARGO BANK & UNION TRUST COMPANY vs THE COLLECTOR OF INTERNAL REVENUEG.R. No. L-46720; June 28, 1940

Facts: Eye died in Los Angeles, California, USA which was also her place of domicile. She left intangibles consisting of 70,000 shares

in the Benguet Consolidated Mining Company, a corporation organized and existing under Philippine laws. The Collector of Internal

Revenue sought to assess and collect estate tax on the said shares. Wells Fargo Banks & Union Trust Company, the trustee of the

estate of the decedent Eye, objected to said assessment averring that said shares were already subjected to inheritance tax in

California and hence cannot be taxed again in the Philippines.

Issue: Whether or not the shares are subject to estate tax in the Philippines.

Held: Yes. The situs of taxation is here in the Philippines because the situs of the shares of stock concerned is in the Philippines. This

is due to the fact that the said shares were issued here by a domestic corporation which is also domiciled here. Furthermore, when Eye

was alive, she actually delivered the title to said shares to the resident secretary of the corporation here in the Philippines hence the

shares never left the Philippines.

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