Lung Center of the Philippines vs. Quezon City [GR No. 144104 June 29, 2004]

Facts:Lung Center ofthe Philippinesis a non-stock and non-profit entity established by virtue of PD No. 1823. It is the registered owner of the land on which the Lung Center ofthe Philippines Hospitalis erected. A big space inthe groundfloor of thehospitalis 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. Also, a big portion on the right side of the hospitalis being leased for commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center.

When the City Assessor ofQuezon Cityassessed both its land and hospitalbuilding for realpropertytaxes, the Lung Center ofthe Philippinesfiled a claim forexemptionon its averment that it is a charitable institution with a minimum of 60% of itshospitalbeds exclusively used for charity patients and that the major thrust of itshospitaloperation is to serve charity patients. The claim for exemptionwas denied, prompting a petition for the reversal of the resolution of the City Assessor withthe LocalBoard of Assessment Appeals ofQuezon City, which denied the same. On appeal, the Central Board of Assessment Appeals ofQuezon Cityaffirmedthe localboards decision, finding that Lung Center ofthe Philippinesis not a charitable institution and that its properties were not actually, directly and exclusively used for charitable purposes. Hence, the present petition for review with averments that the Lung Center ofthe Philippinesis a charitable institution under Section 28(3), Article VI of theConstitution, notwithstanding that it accepts paying patients and rents out portions of thehospitalbuilding to private individuals and enterprises.

Issue:Is the Lung Center ofthe Philippinesa charitable institution within the context of theConstitution, and therefore, exempt from realpropertytax?

Held:The Lung Center ofthe Philippinesis a charitable institution. To determine whether an enterprise is a charitable institution or not, the elements which should be considered include the statute creating the enterprise, its corporate purposes, itsconstitutionand by-laws, the methods of administration, the nature of the actual work performed, that character of the services rendered, the indefiniteness of the beneficiaries and the use and occupation of the properties.

However, under theConstitution, in order to be entitled toexemption from realpropertytax, there must be clear and unequivocal proof that (1) it is a charitable institution and (2)its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes. While portions of thehospitalare used for 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 and enterprises.

Exclusive is defined as possessed and enjoyed to the exclusion of others, debarred from participation or enjoyment. If realpropertyis used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation.

Manila International Airport Authority vs CA GR No. 155650, July 20, 2006, 495 SCRA 591Facts:Manila International Airport Authority (MIAA) is the operator of the Ninoy International Airport located at Paranaque City. The Officers of Paranaque City sent notices to MIAA due to real estate tax delinquency. MIAA then settled some of the amount. When MIAA failed to settle the entire amount, the officers of Paranaque city threatened to levy and subject to auction the land and buildings of MIAA, which they did. MIAA sought for a Temporary Restraining Order from the CA but failed to do so within the 60 days reglementary period, so the petition was dismissed. MIAA then sought for the TRO with theSupreme Court a day before the public auction, MIAA was granted with the TRO but unfortunately theTRO was received by theParanaque City officers 3 hours afterthe public auction. MIAA claims that although the charter provides that the title of the land and building are with MIAA still the ownership is with the Republic of the Philippines. MIAA also contends that it is an instrumentality of the government and as such exempted from real estate tax. That the land and buildings of MIAA are of public dominion therefore cannot be subjected to levy and auction sale. On the otherhand, the officers of Paranaque City claim that MIAA is a government owned and controlled corporation therefore not exempted to real estatetax.Issues:Whether or not MIAA is an instrumentality of the government and not a government owned and controlled corporation and as such exempted from tax. Whether or not the land and buildings of MIAA are part of the public dominion and thus cannotbe the subject of levyand auction sale.Ruling:UndertheLocal governmentcode,governmentownedandcontrolledcorporationsarenotexempted from real estate tax. MIAA is not a government owned and controlled corporation, for tobecome one MIAA should either be a stock or non stock corporation. MIAA isnot a stock corporation forits capital is not divided into shares. It is not a non stock corporation since it has no members. MIAA is an instrumentality of the government vested withcorporate powers and government functions. Under the civil code, property may either be under public dominion or private ownership. Those under public dominion are owned by the State and are utilized for public use, public service and for the development of national wealth. The ports included in the public dominion pertain either to seaports orairports.When properties under public dominion cease to be for public use and service, they form part ofthepatrimonialpropertyoftheState. The court held that the land and buildings of MIAA are part of the public dominion. Since the airport is devoted for public use, for the domestic and international travel and transportation. Even ifMIAA charge fees, this is for support of its operation and forregulation and does not change the characterof the land and buildings of MIAAas part of thepublic dominion. As part of the public dominion the land and buildings of MIAA are outside the commerce of man. To subject them to levy and public auction is contrary to public policy. Unless the President issues a proclamation withdrawing the airport land andbuildings from public use, these properties remain to be of public dominion and are inalienable. As long as the land and buildings arefor public use the ownership is with theRepublic of the Philippines.

PlantersProductsIncvsFertiphilCorpG.R.No.166006March14,2008

FACTS:Petitioner PPI and respondent Fertiphil are private corporations incorporated under Philippine laws, both engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals. Marcos issuedLetterof Instruction (LOI) 1465, imposing a capital recovery component of Php10.00 per bag of fertilizer. The levy was to continue until adequate capital was raisedto make PPI financially viable. Fertiphil remitted to theFertilizerand PesticideAuthority (FPA), which was then remitted the depository bank of PPI.Fertiphil paid P6,689,144 to FPA from 1985 to 1986.After the 1986 EdsaRevolution, FPA voluntarily stopped the imposition of the P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted, however PPI refused. Fertiphil filed a complaint for collection and damages, questioning the constitutionality of LOI 1465, claiming that it was unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial ofdue process.PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465 because itdoes not have a "personal and substantial interest in the case or will sustain direct injury as a result ofits enforcement." It asserts that Fertiphil didnot suffer any damage fromthe imposition because "incidence of the levy fell on the ultimateconsumer or the farmers themselves, not onthe seller fertilizer company.

ISSUE: Whether or not Fertiphil has locus standi to question the constitutionality of LOI No. 1465.

What is the power of taxation?

RULING:

Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere procedural technicality which may be waived. The imposition of the levy was an exercise of the taxation power of the state.While it is true that the power to tax can be used as an implement of police power, the primary purpose of the levy was revenue generation. If the purpose is primarilyrevenue, or if revenue is, at least, oneof the real andsubstantial purposes, then the exaction is properly called a tax. Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different tests for validity. Police power is the power of the State to enact legislation that may interfere with personal liberty or property in orderto promote the general welfare,while the power oftaxation is the power to levy taxes to be used for public purpose. The main purpose of police power is the regulation of a behaviour orconduct, while taxation isrevenue generation. The "lawful subjects" and "lawful means" tests are used to determine thevalidity of a law enacted underthe police power. The power of taxation, onthe other hand, is circumscribed byinherent and constitutional limitations.Mactan Cebu International Airport Authority v. Marcos 261 SCRA 667(1996)Facts:Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A. 6958, mandated to principally undertake the economical, efficient, and effective control, management, and supervision of the Mactan International Airport and Lahug Airport, and such other airports as may be established in 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. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the Treasurer of the City of Cebu, demanded payment from realty taxes in the total amount of P2229078.79. Petitioner objected to such demand for payment as baseless and unjustified claiming in its favor the afore cited Section 14 of R.A. 6958. 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.Section 133. Common limitations on the Taxing Powers of Local Government Units.The exercise of the taxing powers of the provinces, cities, barangays, municipalities shall not extend to the levi of the following:xxx Taxes, fees or charges of any kind in the National Government, its agencies and instrumentalities, and LGUs. xxxRespondent City refused to cancel and set aside petitioners 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 Labor Code that took effect on January 1, 1992.Issue:Whether or not the petitioner is a taxable personRulings:Taxation is the rule and exemption is the exception. MCIAAs exemption from payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor Code. Statutes granting tax exemptions shall be strictly construed against the taxpayer and liberally construed in favor of the taxing authority.The petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the payment of realty taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property tax.J. CASANOVAS, plaintiff-appellant, vs. JNO. S. HORD, defendant-appellee. F.G. Waite for appellant.Attorney-General Araneta for appellee

Facts:The Spanish Govt. by virtue of a royal decree granted the plaintiffcertainmines. The plaintiff is now the owner of those mines. TheCollectorofInternal Revenueimposed tax on theproperties, contending that they were valid perfected mine concessions and it falls within the provisions of sec.134 of Act No. 1189 known asInternal RevenueAct. The plaintiff paid under protest. He brought an action against the defendantCollectorofInternal Revenueto recover the sum of Php. 9, 600 paid by him as taxes.Judgmentwas rendered in favor of the defendant, so the plaintiff appealed.

Issue:Whether or Not Sec. 164 is void or valid.

Held:The deed constituted a contract between the Spanish Government and the plaintiff. Theobligationof which contract was impaired by the enactment of sec. 134 of theInternal RevenueLaw infringing sec. 5 of the Act ofCongresswhich provides that no law impairing theobligationof contracts shall be enacted. Sec. 134 of theInternal RevenueLaw of 1904 is void because it impairs theobligationof contracts contained in the concessions of mine made by the Spanish Government.Judgmentreversed.

GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN),-versus-DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL POWER CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAYELECTRIC COMPANY INC. (PECO),Facts:RA 9136, otherwise known as theElectric PowerIndustry Reform Act of 2001 (EPIRA), which sought toimposea universal charge on all end-users of electricity for the purpose offundingNAPOCORs projects, was enacted and took effect in 2001.

Petitionerscontesttheconstitutionalityof the EPIRA, stating that theimpositionof the universal charge on all end-users is oppressive and confiscatory and amounts to taxation without representation for not giving the consumers a chance to be heard and be represented.

Issue:Whether or not the universal charge is atax.

Held:NO. The assailed universal charge is not a tax, but anexactionin the exercise of the States police power. That public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State regarding electrification. Moreover, the Special Trust Fund feature of the universal charge reasonably serves and assures the attainment and perpetuity of the purposes for which the universal charge is imposed (e.g. to ensure the viability of the countryselectric powerindustry), further boosting the position that the same is anexactionprimarily in pursuit of the States police objectives

If generation of revenue is the primary purpose and regulation is merely incidental, theimpositionis a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make theimpositiona tax.

The taxing power may be used asan implement of police power.The theory behind the exercise of the power to tax emanates from necessity; withouttaxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.

Punsalan vs Municipal Board of Manila GR 4817 26 May1954Facts:Petitioners, who areprofessionalsin the city, assail Ordinance No. 3398 together with the law authorizing it (Section18 of the Revised Charter of the City of Manila). The ordinance imposes a municipaloccupationtax onpersonsexercising various professions in the city and penalizes non-payment of the same. The law authorizing said ordinance empowers the Municipal Board of the city to impose a municipaloccupationtax onpersonsengaged in various professions. Petitioners, having already paid theiroccupationtax undersection201 of the NationalInternal RevenueCode, paid the tax under protest as imposed by Ordinance No. 3398. The lower court declared the ordinance invalid and affirmed the validity of the law authorizing it.

Issue:Whether or Not the ordinance and law authorizing it constitute class legislation, and authorize whatamountsto double taxation.

Held:The Legislature may, in its discretion, select whatoccupationsshall betaxed, and in its discretion may tax all, or select classes ofoccupationfor taxation, and leave others untaxed. It is not for the courts to judge which cities ormunicipalitiesshouldbe empoweredto imposeoccupationtaxes aside from that imposed by theNational Government. That matter is within the domain of political departments. 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 sameoccupationby both the state and the political subdivisions thereof. Judgment of the lower court is reversed with regards to the ordinance and affirmed as to the law authorizing it.

American Bible Society vs. City of ManilaGR No. L-9637 | April 30, 1957

Facts:American Bible Societyis a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the Philippines through its Philippine agency established in Manila in November, 1898City of Manilais a municipal corporation with powers that are to be exercised in conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of ManilaAmerican Bible Society has been distributing and selling bibles and/or gospel portions throughout the Philippines and translating the same into several Philippine dialectCity Treasurer of Manila informed American Bible Society that it was violating several Ordinances for operating without the necessary permit and license, thereby requiring the corporation to secure the permit and license fees covering the period from 4Q 1945-2Q 1953To avoid closing of its business, American Bible Society paid the City of Manila its permit and license fees under protestAmerican Bible filed a complaint, questioning the constitutionality and legality of the Ordinances 2529 and 3000, and prayed for a refund of the payment made to the City of Manila. They contended:a.They had been in the Philippines since 1899 and were not required to pay any license fee or sales taxb.it never made any profit from the sale of its biblesCity of Manila prayed that the complaint be dismissed, reiterating the constitutionality of the Ordinances in questionTrial Court dismissed the complaintAmerican Bible Society appealed to the Court of Appeals

Issue:WON American Bible Society liable to pay sales tax for the distribution and sale of bibles

Ruling: NOUnderSec. 1 of Ordinance 3000, one of the ordinance in question, person or entity engaged in any of the business, trades or occupation enumerated under Sec. 3 must obtain a Mayors permit and license from the City Treasurer. American Bible Societys business is not among those enumeratedHowever, item 79 of Sec. 3 of the Ordinance provides that all other businesses, trade or occupation not mentioned, except those upon which the City is not empowered to license or to tax P5.00Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business, trade or occupation.2 provisions of law that may have bearing on this case:a.Chapter 60 of the Revised Administrative Code, the Municipal Board of the City of Manila is empowered to tax and fix the license fees on retail dealers engaged in the sale of booksb.Sec. 18(o) of RA 409: totax and fix the license fee on dealers in general merchandise, including importers and indentors, except those dealers who may be expressly subject to the payment of some other municipal tax. Further, Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be prescribed for each class but where commodities of different classes are sold in the same establishment, it shall not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinanceThe only difference between the 2 provisions is the limitation as to the amount of tax or license fee that a retail dealer has to pay per annumAs held inMurdock vs. Pennsylvania,The power to impose a license tax on the exercise of these freedoms provided for in the Bill of Rights, is indeed as potent as the power of censorship which this Court has repeatedly struck down. It is not a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax.Further, the case also mentioned that the power to tax the exercise of a privilege is the power to control or suppress its enjoyment. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form of missionary evangelism can close all its doors to all those who do not have a full purseUnderSec. 27(e) of Commonwealth Act No. 466 or the National Internal Revenue Code,Corporations or associations organized and operated exclusively forreligious, charitable, . . . or educational purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this Codeshall not be taxedThe price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that American Bible Society was engaged in the business or occupation of selling said "merchandise" for profitTherefore, the Ordinance cannot be applied for in doing so it would impair American Bible Societys free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it

Abra Valley College v. AquinoG.R. No. L-39086 June 15, 1988Paras, J.

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.

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.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 (leased) and the second floor being used as incidental to education (residence of the director).