1 | T a x a t i o n I |2017 public purpose. But if by public purpose the petitioner means benefit to a taxpayer as a return for what he pays, then it is sufficient to answer that the only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. Any other view would preclude the levying of taxes except as they are used to compensate for the burden on those who pay them and would involve the abandonment of the most fundamental principle of government – that it exists primarily to provide for the common good.
Facts: This petition assails the constitutionality of RA 1635 as amended which provides that to help raise funds for the Philippine Tuberculosis Society, no mail matter shall be accepted in the mails unless it bears the semi-postal stamps which bears the regular postage stamps plus the additional amount of five centavos for the said purpose. The additional charge of five centavos will constitute a special fund to be expended by the PTS.
In September 1963, petitioner Benjamin Gomez mailed a letter at the post office of San Fernando, Pampanga but since it did not include the special anti-TB stamp, it was returned to Gomez. Petitioner then brought a declaratory suit in the CFI of Pampanga to test the constitutionality of the statute contending that it violates the equal protection clause of the Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the statute and the orders unconstitutional.
Issue: W/N RA 1635 is unconstitutional for being violative of the equal protection clause and for not being levied for a public purpose. Ruling: The Court ruled that the five centavo charge levied is in the nature of an excise tax, laid upon the exercise of a privilege, namely the privilege of using the mails. 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.” It is also not violative of the equal protection clause that only tuberculous is singled out for the fund to the exclusion of other diseases. It is never the requirement of equal protection that all evils of the same genus be eradicated or none at all.
It is for a public purpose as the eradication of a dreaded disease is a
2. PAL v. Edu, Carbonell
GR No. L-41383, August 15, 1988
1. Gomez v. Palomar
GR No. L-23645, October 29, 1968
Facts: The Philippine Airlines (PAL) is a corporation organized and existing under Philippine laws and is granted a franchise to operate its air transportation business. Under its franchise, PAL is granted tax exemption, and on the strength of the opinion of the Secretary of Justice (Op. No. 307, series of 1956), PAL has since 1956, not been paying motor vehicle registration fees. In 1971, Commissioner Elevate issued a regulation requiring all tax exempt entities, to pay motor vehicle registration fees. PAL paid Php 19,529.75 under protest. Subsequently, PAL’s counsel wrote to Commissioner Edu demanding refund of the amount saying that motor vehicle registration fees are in reality tax payment to which PAL is exempted to pay under its franchise.
Issue: W/N motor vehicle registration fees are considered as taxes. Ruling: Yes. It is possible for an exaction to be either a tax or a regulation. License fees are charges looked to as a source of revenue as well as means of regulation as consequence of the exercise of the State’s police power. 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.
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Originally, vehicle registration fees were intended only for rigidly purposes in the exercise of the State’s police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Hence, presently motor vehicle registration fees are considered as taxes.
on the property inherited for any unpaid income taxes. By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the P2, 500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a right of contribution from his co-heirs, to achieve an adjustment of the proper share of each heir in the distributable estate.
3. CIR v. Pineda
GR No. L-22734, September 15, 1967
Facts: Anastasio Pineda died and was survived by his wife and children. The estate was divided and distributed to his heirs, with Atty. Manuel Pineda receiving a share of P2,500.00. After the estate proceedings were closed, the BIR investigated the estate tax liabilities and discovered that tax returns were not filed and hence, issued an assessment covering the years 1945 – 1947. The SC ruled that the right to assess and collect tax for the years 1945-1946 had already prescribed but affirmed the assessment and collection for 1947. The case was then remanded back to the CTA where it ruled that Pineda is liable only to the tax in proportion to his share. CIR appealed contending that Pineda must be liable to the whole tax due from the estate, and not merely his portion thereof.
Issue: W/N Manuel Pineda can be held liable of the whole amount of the unpaid income tax.
Ruling: Yes. Pineda is liable for the assessment as an heir and as a holder transferee of property belonging to the estate/taxpayer. As an heir, he is individually answerable for the part of the tax proportionate to the share he received from the inheritance. His liability, however, cannot exceed the amount of his share. As a holder of property belonging to the estate, Pineda is liable for the tax up to the amount of the property in his possession. Sec. 315 of the Tax Code creates a lien
4. Francia v. IAC
GR No. L-67649, June 28, 1988
Facts: Engracio Francia is the registered owner of a residential lot with a two-story house in Pasay City. In 1977, 125 out of the 328 square meters of the lot was expropriated by the Republic for more than 4,000 equivalent to its assessed value. Since 1963 up to 1977, Francia failed to pay real estate taes and hence, his property was sold at public auction to satisfy a tax delinquency of P2,400. Private respondent Ho Fernandez is the highest bidder. When Ho filed a petition for a new Certificate of Title, Francia filed a complaint to annul the auction sale but the CTA and IAC both ruled in favor of Ho.
Issue: W/N the tax delinquency may be set off from the amount which the government owed to Francia
Ruling: No. The court has consistently ruled that there can be no off-setting 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.
Furthermore, the tax was due to the city government while the expropriation was effected by the national government. Also, the amount for the expropriation has long been deposited to the account of Francia long before the public auction of his property. He could have easily withdrawn the amount needed so that he could pay the tax obligation thus aborting the sale at public auction.
3 | T a x a t i o n I |2017 BIR denied the request of Philex stating that the pending claim of the latter is yet to be determined and established with certainty. Due to this, Philex raised the issue with CTA which reduced the obligation but still ordered Philex to pay. While the case was pending before the SC, its VAT input/refund was credited such that it now contends before the SC that the BIR should, ipso jure, off-set its excise tax liabilities since both had already become due and demandable, as well as fully liquidated.
Issue: W/N the excise tax liabilities and the VAT input credit/refund may be set-off on compensation.
Ruling: No. It is already settled that taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and a debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity.
Facts: On January 30, 1960, the Supreme Court declared as final and executory the order for the payment by the estate of Walter Scott Price of the estate and inheritance taxes, charges and penalties amounting to P40k in the case of Domingo v. Moscoso. In order to enforce the claims against the estate, the fiscal presented a petition for the execution of the judgment. The CFI of Leyte however denied the petition as execution is not justifiable as the Government is indebted to the estate in the amount of P262,200. The CFI of Leyte however ordered that the amount of taxes be taken from the P262k that the Government still owes from the estate.
Issue: W/N set off may take place.
Ruling: Yes. The Court which has jurisdiction over the estate has found that the claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a correspondent law. Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become due and demandable as well as fully liquidated. Compensation, therefore, takes place by operation of law.
5. Domingo v. Garlitos
GR No. L-18994, June 29, 1963
6. Philex Mining Corp v. CIR
GR No. 125704, August 28, 1988
Facts: BIR sent a letter to Philex asking it to settle its excise tax liabilities in the amount of P 123, 821, 982.52. In its written reply, Philex protested and stated that it has pending claims for VAT input credit/refund for the taxes it paid in the amount of P 119, 977 plus interest, thus claiming set-off between its tax liabilities and tax claims.
7. Caltex Phil v. COA
GR No. 925585, May 8, 1992
Facts: In 1989, COA sent a letter to Caltex directing it to remit to OPSF its collection of the additional tax on petroleum authorized under PD 1956 and pending such remittance, all of its claims from the OPSF shall be held in abeyance. Petitioner requested COA for the early release of its reimbursement certificates from the OPSF covering claims with the Office of Energy Affairs. COA denied the same.
Issue: W/N petitioner can avail of the right to offset any amount that it may be required under the law to remit to the OPSF against any amount that it may receive by way of reimbursement.
Ruling: It is a settled rule that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of compensation because the government and
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taxpayer are not mutually debtors and creditors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off. The oil companies merely acted as agents for the government in the latter’s collection since taxes are passed unto the end-users, the consuming public.
8. Vera v. Fernandez
GR No. L-31364, March 30, 1979
Facts: The BIR sought to claim the payment of taxes representing the estate's tax deficiencies intestate proceedings of Luis Tongoy. The administrator opposed arguing that the claim was already barred by the statute of limitation for under the RoC, all claims for money against the decedent, arising from contracts, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever.
Issue: Does the rule bar recovery by the Government of unpaid taxes? Ruling: No. The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel.
9. PAL v. Edu, Carbonell
GR No. L-41383, August 15, 1988
See no. 2, page 1.
Facts: In 1940, Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act was promulgated. The law wanted to obtain a readjustment of benefits derived from the sugar industry and to stabilize the sugar industry.
Walter Lutz, 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. He alleged 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. His action was dismissed by the CFI and was appealed directly to the SC.
Issue: W/N the taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act are legal.
Ruling: Yes. The Supreme Court held that the 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.
Sugar production is one of the great industries of our nation and that it is a great source of the state's wealth. The protection of a large industry constituting one of the great sources of the state's wealth and therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police power of the sovereign. The
10. Lutz v. Araneta
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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. Taxation may be made the implement of the state's police power.
Even from the standpoint that the Act is a pure tax measure, it cannot be said that it constitutes expenditure of tax money for private purposes.
was approved by the President. Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and void.
11. Pascual v. Sec of Public Works
GR No. No. L-10405, December 29,
1960
Facts: Republic Act No. 920 was approved on June 20, 1953. It was act that would appropriate funds for the construction of Pasig feeder road terminals. Pascual instituted this action upon the ground that said appropriation was made by Congress because its members were made to believe that the projected feeder roads in question were "public roads and not private streets of a private subdivision". Pascual alleges that when the appropriation was approved the roads in question were private property owned by Senator Zulueta and that on Dec 12, 1953 Senator Zulueta donated parcels of land to the government in order to give a semblance of legality to the appropriation.
Issue: W/N the appropriation was valid and was for public purpose Ruling: NO. The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute. The legality of the appropriation depended upon whether said roads were public or private property when the bill, which, later on, became Republic Act 920, was passed by Congress, or, when said bill
Facts: Ordinance 110 was enacted by the City of Butuan imposing a tax of P0.10 per case of 24 bottles of softdrinks or carbonated drinks. The tax was imposed upon dealers engeged in selling softdrinks or carbonated drinks. When Ordinance 110, the tax was imposed upon an agent or consignee of any person, association, partnership, company or corporation engaged in selling softdrinks or carbonated drinks, with “agent or consignee” being particularly defined on the inserted provision Section 3-A. In effect, merchants engaged in the sale of softdrinks, etc. are not subject to the tax unless they are agents or consignees of another dealer who must be one engaged in business outside the City. Pepsi-Cola Bottling Co. filed suit to recover sums paid by it to the city pursuant to the Ordinance, which it claims to be null and void.
Issue: Whether the Ordinance is discriminatory.
Ruling: The Ordinance, as amended, is discriminatory since only sales by “agents or consignees” of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales , and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the city, would be exempt from the tax. The classification made in the exercise of the authority to tax, to be valid must be reasonable, which would be satisfied if the classification is based upon substantial distinctions which makes real differences; these are germane to the purpose of legislation or ordinance; the classification applies not only to present conditions but also to future conditions substantially identical to those of the present; and the classification applies equally to all those who belong to the same class. These conditions are not fully met by the ordinance in question.
12. Pepsi-Cola v. Butuan City
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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: W/N the contentions of the appellant tenable?
Ruling: 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.
14. Abakada Guro v. Ermita
G.R. No. 168056, September 1, 2005Facts: 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 Also, there is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of 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.
13. Pepsi-Cola v. Municipality of Tanauan
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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.
Ruling: 1. Since there is no question that 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, 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.
Facts: In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating the operation of public markets and prescribing fees for the rentals of stalls and providing penalties for violation thereof. The Federation of Manila Market Vendors Inc. assailed the validity of the ordinance, alleging among others the non-compliance to the publication requirement under the Revised Charter of the City of Manila.
Issue: WN the publication requirement was complied with.
Ruling: The Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code id a general law because it applies universally to all local governments. Section 17 of the Charter speaks of “ordinance” in general. Whereas, Section 43 of the Local Tax Code relates to “ordinances levying or imposing taxes, fees or other charges” in particular. While the Charter requires publication, before the enactment of the ordinance and after approval thereof, in two daily newspapers of the general circulation in the city, the Local Tax Code only prescribes for publication widely circulated within the jurisdiction of the local government or by posting the ordinance in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. Being a general law with a special provision applicable in the case, the Local Tax Code prevails.
15. Bagatsing v. Ramirez
8 | T a x a t i o n I |2017 Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 3 and 22 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and
Parañaque City.
On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. The City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. ISSUE: Whether the NAIA Pasay properties of MIAA are exempt from
real property tax.
HELD: In Manila International Airport Authority v. Court of Appeals (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Parañaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Parañaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Parañaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of
MIAA.
As held in the 2006 MIAA case, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of
16. National Development Co. (NDC) v.
Commissioner
GR No. L-53961, June 1987
Facts: The National Development Co. (NDC) entered into contracts in Tokyo with several Japanese shipbuilding companies for the construction of 12 ocean-going vessels. Initial payments were made in cash and through irrevocable letters of credit. When the vessels were completed and delivered to the NDC in Tokyo, the latter remitted to the shipbuilders the amount of US$ 4,066,580.70 as interest on the balance of the purchase price. No tax was withheld. The Commissioner then held NDC liable on such tax in the total amount of P5,115,234.74. The Bureau of Internal Revenue served upon the NDC a warrant of distraint and levy after negotiations failed.
Issue: W/N the NDC is liable for deficiency tax.
Ruling: The Japanese shipbuilders were liable on the interest remitted to them under Section 37 of the Tax Code. The NDC is not the one taxed. The imposition of the deficiency taxes on the NDS is a penalty for its failure to withhold the same from the Japanese shipbuilders. Such liability is imposed by Section 53(c) of the Tax Code. NDC was remiss in the discharge of its obligation of its obligation as the withholding agent of the government and so should be liable for its omission.
17. MIAA vs CITY OF PASAY
(G.R. No. 163072)
FACTS:Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903), otherwise known as the Revised Charter of the Manila International Airport
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economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.
Manila. CFI Manila decided in favor of NDC.
The defendants appealed to the Court of Appeals which however certified the case to the SC as one involving pure questions of law, pursuant to Sec. 17, R.A. 296.
ISSUE:
1. Whether NDC is exempt from payment of real estate taxes on the land reserved by the President for warehousing purposes as well as the warehouse constructed thereon.
2. Whether NDC may recover in refund unprotested real estate taxes it paid from 1948 to 1970.
HELD:
1. Section 3, par. (a), of the Assessment Law provides
"SEC. 3. Property exempt from tax. The exemptions shall be as follows: (a) Property owned by the United States of America, the Commonwealth of the Philippines, any province, city, municipality or municipal district x x x x"
To come within the ambit of the exemption provided in Art. 3, par. (a), of the Assessment Law, it is important to establish that the property is owned by the government or by its unincorporated agency, and once government ownership is determined, the nature of the use of the property, whether for proprietary or sovereign purposes, becomes immaterial. What appears to have been ceded to NWC (later transferred to NDC), is merely the administration of the property while the government retains ownership of what has been declared reserved for warehousing purposes under Proclamation No. 430.
Incidentally, the parties never raised the issue of ownership from the court a quo to this Court.
A reserved land is defined as a "[p]ublic land that has been withheld or kept back from sale or disposition." The land remains "absolute property of the government." The government "does not part with its title by reserving them (lands), but simply gives notice to all the world that it desires them for a certain purpose".Absolute disposition of land is not implied from reservation; it merely means "a withdrawal of a specified portion of the public domain from disposal under the land laws and the appropriation thereof, for the time being, to some particular use or purpose of the general government". As its title remains with the Republic, the reserved land is clearly covered by the tax exemption provision.
18. NDC vs CEBU
(G.R. No. 51593)
FACTS: Petitioner National Development Company (NDC) is a government-owned or controlled corporation (GOCC) authorized to engage in commercial, industrial, mining, agricultural and other enterprises necessary or contributory to economic development or important to public interest. It also operates, in furtherance of its objectives, subsidiary corporations one of which is the now defunct National Warehousing Corporation (NWC).
On 10 August 1939, the President issued Proclamation No. 430[5] reserving Block No. 4, Reclamation Area No. 4, of Cebu City for
warehousing purposes under the administration of NWC. Subsequently, in 1940, a warehouse was constructed thereon.
On 4 October 1947, E.O. 93 dissolved NWCwith NDC taking over its assets and functions. Commencing 1948, Cebu City (CEBU) assessed and collected from NDC real estate taxes on the land and the warehouse thereon.
On 20 March 1970, NDC wrote the City Assessor demanding full refund of the real estate taxes paid to CEBU claiming that the land and the warehouse standing thereon belonged to the Republic and therefore exempt from taxation. CEBU did not acquiesce in the demand, hence, the present suit filed 25 October 1972 in the Court of First Instance of
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However, as regards the warehouse constructed on a public reservation, a different rule should apply because "[t]he exemption of public property from taxation does not extend to improvements on the public lands made by pre-emptioners, homesteaders and other claimants, or occupants, at their own expense, and these are taxable by the state x x x x" Consequently, the warehouse constructed on the reserved land by NWC (now under administration by NDC), indeed, should properly be assessed real estate tax as such improvement does not appear to belong to the Republic.
2. Since the reservation is exempt from realty tax, the erroneous tax payments collected by CEBU should be refunded to NDC. This is in consonance with Sec. 40, par. (a) of the former Real Property Tax Code which exempted from taxation real property owned by the Republic of the Philippines or any of its political subdivisions, as well as any GOCC so exempt by its charter.
and controlled corporations, section 193 of the LGC prescribes the general rule, viz, they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives, duly registered under RA 6938, non stock and nonprofit hospitals and educational institutions and unless otherwise provided in the LGC.
19. Mactan Cebu International Airport
Authority v Marcos (1996)
FACTS: Petitioner was created by virtue of RA 6958. Section 1 thereof states that the authority shall be exempt from realty taxes imposed by the National Government or any of its political subdivisions, agencies and instrumentalities. However, the Treasurer of Cebu City demanded payment for realty taxes from petitioner. Petitioner filed a declaratory relief before the Regional Trial Court. The trial court dismissed the petitioner ruling that the Local Government Code withdrew the tax exemption granted to Government owned and controlled corporation. ISSUE:
Whether the city of Cebu has the power to impose taxes on petitioner RULING:Yes. Taxation is the rule and exemption is the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government- owned
20. Republic vs. Paranaque
(GR No. 191109)
FACTS: This is a petition for review on certiorari assailing the Order of the Regional Trial Court, Branch 195,Paranaque City (RTC), which ruled that petitioner Philippine Reclamation Authority (PRA) is a government-owned and controlled corporation (GOCC), a taxable entity, and, therefore, not exempt from payment of real property taxes. The Public Estates Authority (PEA) is a government corporation created by virtue of P.D. No. 1084 to provide a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by, the government with the object of maximizing their utilization and hastening their development consistent with public interest.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including those located in Parañaque City. Parañaque City Treasurer issued Warrants of Levy on PRA’s reclaimed properties based on the assessment for delinquent real property for tax years 2001 and 2002. PRA asserted that:
- It is not a GOCC under the Administrative Code, nor is it a GOCC under Section 16, Article XII of the 1987Constitution because it is not required to meet the test of economic viability.
- It is a government instrumentality vested with corporate powers and performing an essential publicservice. Although it has a capital stock divided into shares, it may not be classified as a stock corporationbecause it lacks the second requisite of a
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stock corporation: to distribute dividends and allotment ofsurplus and profits to its stockholders.
- It may not be classified as a non-stock corporation because it has no members and it is not organized forcharitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social,civil service, or similar purposes, like trade, industry, agriculture and like chambers as provided in Section88 of the Corporation Code.
- It was not created to compete in the market place as there was no competing reclamation company operated by the private sector. Also, while PRA is vested with corporate powers under P.D. No. 1084, such circumstance does not make it a corporation but merely an incorporated instrumentality and that themere fact that an incorporated instrumentality of the National Government holds title to real propertydoes not make said instrumentality a GOCC.
City of Parañaque (respondent) argued that:
- PRA since its creation consistently represented itself to be a GOCC. PRA’s very own charter (P.D. No. 1084) declared it to be a GOCC and that it has entered into several thousands of contracts where itrepresented itself to be a GOCC. In fact, PRA admitted in its original and amended petitions and pre-trialbrief filed with the RTC of Parañaque City that it was a GOCC.
- It argues that PRA is a stock corporation with an authorized capital stock divided into 3 million no parvalue shares, out of which 2 million shares have been subscribed and fully paid up. Section 193 of the LGCof 1991 has withdrawn tax exemption privileges granted to or presently enjoyed by all persons, whethernatural or juridical, including GOCCs.
ISSUE: Whether or not petitioner is an incorporated instrumentality of the national government and is, therefore, exempt from payment of real property tax under sections 234(a) and 133(o) of Republic Act 7160 or the Local Government Code vis-à-vis Manila International Airport Authority v. Court of Appeals.
HELD: Yes it is a Government Instrumentality. However, it is not a GOCC. When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated
government instrumentality, it is exempt from payment of real property tax.
Furthermore, the Court agrees with PRA that the subject reclaimed lands are still part of the public domain, owned by the State and, therefore, exempt from payment of real estate taxes.
21. REPUBLIC (DOTC) vs MANDALUYONG
Facts:The subject of this petition for review on certiorari is the writ of possession issued in favor of respondent City of real properties forming part of the EDSA Metro Rail Transit (MRT) III. Petitioner Republic of the Philippines (Republic) is represented in this suit by the Department of Transportation and Communications (DOTC
On 8 August 1997, the DOTC entered into a Revised and Restated Agreement to Build, Lease and Transfer a Light Rail System for EDSA (BLT) with Metro Rail Transit Corporation Limited (Metro Rail), a foreign corporation. Under the BLT Agreement, Metro Rail shall be responsible for the design, construction, equipping, completion, testing, and commissioning of the Light Rail Transit System-LRTS Phase I (EDSA MRT III). The DOTC shall operate the same but ownership of the EDSA MRT III shall remain with Metro Rail during the Revenue and Construction periods. Metro Rail assigned all its rights and obligations under the BLT Agreement to Metro Rail Transit Corporation (MRTC), a domestic corporation.
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On July 15,2000, Metro Rail turned over the EDSA MRT III System to the DOTC for its operation. The City Assessors of Mandaluyong City, Quezon City, Makati City and Pasay City fixed the current and market value of EDSA MRT III at P32.75 Billion.On 4 June 2001, the Office of the City Assessor of Mandaluyong issued Tax Declaration No. D-013-06267 in the name of MRTC. Subsequently on 18 June 2001, the said Office of the City Assessor of Mandaluyong City demanded payment of real property taxes due under the aforesaid tax declaration.
Another demand was made on MRTC placing the deficiency real estate tax due to the City of Mandaluyong at P769,784,981.52. Several Notice of Delinquency was issued to MRTC. The City Treasurer issued and served a Warrant of Levy upon MRTC with the corresponding Notices of Levy. On 5 December 2005, petitioner Republic filed a case for Declaration of Nullity of Real Property Tax Assessment and Warrant of Levy with a prayer for a TRO and Writ of Preliminary Injunction before the RTC (branch 208) of Mandaluyong City.
On 22 March 2006, the RTC denied both petitioner Republics and MRTCs applications for TRO. The issue on the validity of tax assessment however is pending before that court. Petitioner Republic filed a petition for certiorari before the Court of Appeals challenging the denial of both the TRO and injunction by RTC Branch 208.
A public auction was conducted. For lack of bidders, the real properties were forfeited in favor of the City of Mandaluyong. Petitioner Republic filed a petition for certiorari before the Court of Appeals challenging the denial of both the TRO and injunction by RTC Branch 208.
On 11 April 2008, respondent filed an ex parte petition praying for the issuance of a writ of possession before RTC Branch 213 of Mandaluyong.
On 30 July 2008, the RTC Branch 213 granted the petition for the issuance of a writ of possession. A subsequent motion for
reconsideration filed by petitioner was denied for lack of merit. While MRTC appealed said order to the Court of Appeals, petitioner Republic filed the instant case raising a question of law, i.e. the propriety of the issuance of a writ of possession. To support its main thesis that the RTC Branch 213 erred in issuing a writ of possession, petitioner claims that since EDSA MRT properties are beneficially owned by DOTC, it should not have been assessed for payment of real property taxes. Being a governmental entity, it is exempt from payment of real property tax under Section 234 of the Local Government Code. Therefore, no tax delinquency exist authorizing respondent to sell the subject properties through public auction. It then follows that respondent has no legal right to a writ of possession.
Respondent does not contest petitioners immunity from local taxes. In fact, it has assessed MRTC, and not petitioner, for real property tax. This case is, ultimately, between a local governments power to tax and the national governments privilege of tax exemption. That issue needs full hearing and deliberation, as indeed, the issue pends before the RTC, at first instance. Such trial of facts and issues must proceed. It should not be pre-empted by the present petition that deals with precisely the herein respondents intended end result.
ISSUE: Whether or not the writ issued by the RTC in favor of the respondent is premature and without force and effect.
RULING:
Yes. A writ of possession is a mere incident in the transfer of title. In the instant case, it stemmed from the exercise of alleged ownership by respondent over EDSA MRT III properties by virtue of a tax delinquency sale. The issue of whether the auction sale should be enjoined is still pending before the Court of Appeals. Pending determination, it is premature for respondent to have conducted the auction sale and caused the transfer of title over the real properties to its name. The denial by the RTC to issue an injunction or TRO does not automatically give respondent the liberty to proceed with the actions sought to be enjoined, especially so in this case where a certiorari petition assailing the denial is still being deliberated in the Court of Appeals. All the more it is premature for the RTC to issue a writ of possession where the ownership of the subject properties is derived
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subject lots with a collective area specified as 423,177 square meters from GSIS, with the amount of 1,100,000 pesos. GSIS accepted the offer through a Deed of Conditional Sale on February 26, 1980. GMC then learned that the subject lots was only 298,504 square meters and requested GSIS to reduce the price according to the actual proportion of the land. This proposal was approved with an Amendment to the Deed of Conditional Sale, which reflected the agreement of GSIS and GMC. LLDHC filed a complaint against GSIS before the RTC of Manila on April 23, 1980 for Foreclosure with Writ of Mandatory Injunction, known as Civil Case No. R-82-3429. GMC filed a complaint also against GSIS on November 3, 1989, known as Civil Case No. 2203-L, for Specific Performance with Damages before the RTC of Lapu-Lapu City. GSIS, in its defense, submitted a COA Memorandum dated April 3, 1989 disallowing in audit the sale of the subject to the court, stating that there were “apparent inherent irregularities,” and that GMC bought the property at a value much lower than GSIS’ purchasing price.
On February 24, 1992, with regard to Civil Case No. 2203-L, the RTC of Lapu-Lapu City decided in favor of GMC, and that GSIS was to execute order of the court pertaining to damages, and actions needed to finalize the deed of absolute sale with GMC. On May 10, 1994, the RTC of Manila also rendered its judgment that, aside from court orders, all claims and counterclaims by the parties against each other are dismissed in Civil Case No. R-82-3429. LLDHC now used the Manila RTC decision as a means to file a Petition for Annulment of Judgment of the Lapu-Lapu RTC Decision in Civil Case No. 2203-L, named CA-GR SP No. 34696, which was dismissed by the Court of Appeals. After this was a series of filing petitions to appeal the judgment. Throughout the years, eventually, the three parties approached the Supreme Court, where, in G.R. No. 167000, GSIS seeks to reverse and set aside the decision made on November 25, 2004 and January 20, 2005, and to annul and set aside the March 1, 2004 and May 7 2004 orders from the Lapu-Lapu RTC in Civil Case No. 2203-L. And in G.R. No. 169971, GMC seeks to reverse and set aside the Decision made in September 23, 2005 and to annul and set aside the March 11, 2004 Lapu-Lapu RTC decision.
Issues: Whether or not the decisions of the Manila RTC in Civil Case No. R-82-3429 shall be executory, despite the decision of Lapu-Lapu RTC
22. GSIS vs Group Mgt. Corp. Et. Al.
(JUNE 8, 2011)
FACTS: This case revolves around the petitions of the Lapu-Lapu Development & Housing Corporation (LLDHC), Group Management Corporation (GMC) and the Government Service Insurance System (GSIS). The three entities consistently filed cases for the same subject lots from April 30, 1980, until this case. The cases were filed before both the RTC of Lapu-Lapu City, where the subject lots are situated in, and the RTC of Manila.
LLDHC entered into a Project and Loan Agreement with GSIS on February 4, 1974, involving seventy-eight lots situated in Barrio, Marigondon, Lapu-Lapu City. GSIS agreed to a 25 million peso loan with LLDHC, the owner of the lots. LLDHC failed to fulfill all of its obligations regarding the lots, which included the real estate mortgage in favor of GSIS, and so, GSIS closed the mortgage. Being the only bidder in the public auction sale, GSIS won over the subject lots, and in time secured its ownership over the lots with the transfer certificate of titles issued to its name. GMC offered to purchase on installment the petition assailing the denial is still being deliberated in the Court of Appeals. All the more it is premature for the RTC to issue a writ of possession where the ownership of the subject properties is derived from an auction sale, the validity of which is still being threshed out in the Court of Appeals. The RTC should have held in abeyance the issuance of a writ of possession. At this juncture, the writ issued is premature and has no force and effect.
The petition is GRANTED. The decision of RTC branch 213 of Mandaluyong City issuing the writ of possession is vacated and set aside.
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in Civil Case No. 2203-L. Whether or not the decision in CA GR SP No. 84382 and GSIS Petition in 167000 are barred by Res Judicata. Whether or not due process was given to the parties/entities involved in the case. Whether or not GSIS can be immune to acting out the orders of the court.
Ruling: The petition in G.R. No. 167000 was denied by the court, and the petition in G.R. No. 169971 is granted.
Ratio Decidendi: The decision of the Lapu-Lapu RTC in Civil Case No. 2203-L does not in any way affect the orders from the Manila RTC in Civil Case No. R-82-3429, since the former has been finalized on January 28, 1995, while the latter became final on May 30, 1997. Procedural due process was extended to all parties, that there was no immediate dismissal of their cases before they were heard by the respective courts, even if they have already had a rendered decision. However, the Supreme Court also recognized the doctrine of “Finality of Judgment,” where the decisions, once final and executed cannot be appealed, unless of circumstances that happen after the finalization, void judgments, correction of clerical errors and nunc pro tunc entries. The decision in CA GR SP No. 84382 and GSIS Petition in 167000 are barred by Res Judicata, which is one of the reasons why G.R. No. 167000 was denied. GSIS acted jure gestonis, entering into a contract, and being solely liable for their irresponsibility. They are not immune from acting out the orders of the court.
23. REYES v. ALMANZOR
GR Nos. L-49839-46, April 26, 1991
196 SCRA 322
FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as dwelling units by tenants who were paying monthly rentals of not exceeding P300. Sometimes in 1971 the Rental Freezing Law was passed prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were precluded from raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market values, which entailed an increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement averring that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties. They argued that the income approach should have been used in determining the land values instead of the comparable sales approach which the City Assessor adopted.
ISSUE: Is 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. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different both in the privileges conferred and the liabilities imposed.
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
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penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.
-Use gross selling price (GSP) or fair market value (FMV) as basis for determining
the income tax on the sale of real estate classified as ordinary assets, instead of the entity’s net taxable income as provided for under the Tax Code;
- Mandate the collection of income tax on a per transaction basis, contrary to the Tax Code provision which imposes income tax on net income at the end of the taxable period;
- Go against the due process clause because the government collects income tax even when the net income has not yet been determined; gain is never assured by mere receipt of the selling price; and
- Contravene the equal protection clause because the CWT is being charged upon real estate enterprises, but not on other business enterprises, more particularly, those in the manufacturing sector, which do business similar to that of a real estate enterprise.
Issues: (1) Is the imposition of MCIT constitutional? (2) Is the imposition of CWT on income from sales of real properties classified as ordinary assets constitutional?
Held: (1) Yes. The imposition of the MCIT is constitutional. An income tax is arbitrary and confiscatory if it taxes capital, because it is income, and not capital, which is subject to income tax. However, MCIT is imposed on gross income which is computed by deducting from gross sales the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct expenses from gross sales. Clearly, the capital is not being taxed.
Various safeguards were incorporated into the law imposing MCIT. Firstly, recognizing the birth pangs of businesses and the reality of the need to recoup initial major capital expenditures, the MCIT is imposed only on the 4th taxable year immediately following the year in which the corporation commenced its operations.
Secondly, the law allows the carry-forward of any excess of the MCIT
24. CREBA v. The Hon. Executive
Secretary Alberto Romulo, et al
G.R. No. 160756. March 9, 2010
Facts: Petitioner Chamber of Real Estate and Builders’ Associations, Inc. (CREBA), an association of real estate developers and builders in the Philippines, questioned the validity of Section 27(E) of the Tax Code which imposes the minimum corporate income tax (MCIT) on corporations.
Under the Tax Code, a corporation can become subject to the MCIT at the rate of 2% of gross income, beginning on the 4th taxable year immediately following the year in which it commenced its business operations, when such MCIT is greater than the normal corporate income tax. If the regular income tax is higher than the MCIT, the corporation does not pay the MCIT.
CREBA argued, among others, that the use of gross income as MCIT base amounts to a confiscation of capital because gross income, unlike net income, is not realized gain.
CREBA also sought to invalidate the provisions of RR No. 2-98, as amended, otherwise known as the Consolidated Withholding Tax Regulations, which prescribe the rules and procedures for the collection of CWT on sales of real properties classified as ordinary assets, on the grounds that these regulations:
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paid over the normal income tax which shall be credited against the normal income tax for the three immediately succeeding years.
Thirdly, since certain businesses may be incurring genuine repeated losses, the law authorizes the Secretary of Finance to suspend the imposition of MCIT if a corporation suffers losses due to prolonged labor dispute, force majeure and legitimate business reverses.
(2) Yes. Despite the imposition of CWT on GSP or FMV, the income tax base for sales of real property classified as ordinary assets remains as the entity’s net taxable income as provided in the Tax Code, i.e., gross income less allowable costs and deductions. The seller shall file its income tax return and credit the taxes withheld by the withholding agent-buyer against its tax due. If the tax due is greater than the tax withheld, then the taxpayer shall pay the difference. If, on the other hand, the tax due is less than the tax withheld, the taxpayer will be entitled to a refund or tax credit.
The use of the GSP or FMV as basis to determine the CWT is for purposes of practicality and convenience. The knowledge of the withholding agent-buyer is limited to the particular transaction in which he is a party. Hence, his basis can only be the GSP or FMV which figures are reasonably known to him.
Also, the collection of income tax via the CWT on a per transaction basis, i.e., upon consummation of the sale, is not contrary to the Tax Code which calls for the payment of the net income at the end of the taxable period. The taxes withheld are in the nature of advance tax payments by a taxpayer in order to cancel its possible future tax obligation. They are installments on the annual tax which may be due at the end of the taxable year. The withholding agent-buyer’s act of collecting the tax at the time of the transaction, by withholding the tax due from the income payable, is the very essence of the withholding tax method of tax collection.
On the alleged violation of the equal protection clause, the taxing power has the authority to make reasonable classifications for purposes of taxation. Inequalities which result from singling out a particular class for taxation, or exemption, infringe no constitutional limitation. The real estate industry is, by itself, a class and can be validly treated differently from other business enterprises.
What distinguishes the real estate business from other manufacturing enterprises, for purposes of the imposition of the CWT, is not their production processes but the prices of their goods sold and the number of transactions involved. The income from the sale of a real property is bigger and its frequency of transaction limited, making it less cumbersome for the parties to comply with the withholding tax scheme. On the other hand, each manufacturing enterprise may have tens of thousands of transactions with several thousand customers every month involving both minimal and substantial amounts.
25. GOMEZ V PALOMAR
See number 1
26. Manila Race Horses Trainers Association
Inc v. Manuel de la Fuente
Gr. No L-2947 January 11, 1951
Facts: The Manila Race Horses Association is a non-stock corporation duly organized and existing under and by virtue of the law of the Philippines. The association alleges that they are owners of boarding stables for race horses and that their rights as such are affected by Ordinance No. 3065 of the City of Manila. The association avers that the ordinance in question is discriminatory and savors of class legislation, since the ordinance ought to tax only boarding stables for race horses and that the other owners of other kinds of horses are taxed less or not at all.
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27. Casanovas v Hord
Issue: Whether or not the said ordinance in taxing only boarding stables for race horses makes the ordinance invalid on the ground that it makes arbitrary classification
Held: No. The ordinance makes no arbitrary classification hence it is a valid ordinance.
Ratio: In one case the Supreme Court stated that there is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate. From the viewpoint of economics and public policy the taxing of boarding stables for race horses to the exclusion of boarding stables for horses dedicated to other purpose is not indefensible. Race horses are devoted to gambling if legalized, their owners derive fat income and the public hardly any profit from horse racing, and this business demands relatively heavy police supervision. Taking everything into account, the differentiation against which the association complains conforms to the practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution.
FACTS: In January 1897, the Spanish Government, in accordance with the provisions of the royal decree of May14,1867, granted J. Casanovas certain mines in the Province of Ambos Camarines. They were so considered by the Collector of Internal Revenue and were by him said to fall within the provisions of Section 134 of Act 1189 which imposes an annual tax and an ad valorem tax on all valid perfected mining concessions granted prior to April 11th, 1899. The Commissioner, JNO S. Hord, imposed upon these properties the tax mentioned in Section 134, which Casanovas paid under protest.
ISSUE: Is Section 134 valid?
28. Cagayan Electric Power & Light Co. Inc. v
CIR (1985)
GR No. L-60126, September 25, 1985
FACTS: Cagayan Electric is a holder of a legislative franchise under RA 3247 where payment of 3% tax on gross earning is in lieu of all taxes and assessments upon privileges. In 1968, RA 5431 amended the franchise by making all corporate taxpayers liable for income tax. In 1969, through RA 6020, its franchise was extended to two other towns and the tax exemption was reenacted. The commissioner required the company to pay deficiency income taxes for the intervening period (1968-1969).
ISSUE: Is CEPALCO liable for the tax?
RULING: Yes. Congress could impair the company’s legislative franchise by making it liable for income tax. The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires. However, it cannot be denied that the said 1969 assessment appears to be highly controversial. It had reason not to pay income tax because of the tax exemption its franchise. For this reason, it should be liable only for tax proper and should not be held liable for surcharge and interest.
RULING: No, the concessions granted by the Government of Spain to the plaintiff, constitute contracts between the parties; that section 134 of the Internal Revenue Law impairs the obligation of these contracts, and is therefore void as to them.
The deed constituted a contract between the Spanish Government and Casanovas. Furthermore, the section conflicts with Section 60 of the Act of Congress of July 1, 1902, which indicate that concessions can be cancelled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisites for their retention in the laws under which they were granted. The grounds were not shown nor claimed in the case.
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Facts: American Bible Society (Society for short) is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the PH through its PH agency. In the course of its ministry, the Society has been distributing and selling bible’s and gospel portions throughout PH and translating the same into several PH dialects.
On May of 1953, the acting City Treasurer of the City of Manila informed the Society that it was conducting business of general merchandise since November of 1945 without providing itself with the necessary Mayor’s permit and municipal license in violation of the Ordinance No. 3000 (as amended). It also informed the Society that it is required to secure the permits and licenses covering the period of the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of
Php 5,821.45 as provided for in Ordinance No. 2529,3028 and 3364. The Society objected but the City Treasurer demanded that the Society should deposit and pay under protest. To avoid the closing of its business as well as further fines and penalties, the Society paid such said amount. On the same day, the Society filed a complaint that gave rise to this action.
In its complaint the Society prays that judgment be rendered declaring the said ordinances as illegal and unconstitutional. The Society tried to establish that it never made any profit from the sales of its bibles, which are disposed of for as low as one third of its costs. The Society anchored their opposition that the ordinance is in contrast of the constitutional guaranty of the free exercise and enjoyment of religious profession and worship as provided for in the Constitution. The society further prayed that the amount unduly collected from them be returned.
29. American Bible Society v. City of Manila
Gr. No L-9637 April 30, 1957
30. Abra Valley College v. Aquino
June 15,1988
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 5,140.31. Said “Notice of Seizure” by respondents Municipal Treasurer and Provincial Treasurer, defendants, was issued for the satisfaction of the said taxes thereon. Issue: Whether or not the above ordinances are illegal and unconstitutional.
Held : No, the said ordinances are constitutional but they are just inapplicable to the Society. The City of Manila is ordered to return to the Society the amount it unduly collected.
Ratio: The Supreme Court held that such ordinances cannot be declared unconstitutional but it is only not applicable to the Society. The SC held that the City of Manila is powerless to license or tax the business of the Society for it would impair the Society’s right to the free exercise and enjoyment of its religious profession and worship. It is to be noted that such right includes the right of dissemination of religious beliefs.
As quoted by the SC: “ When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of press and religion, as we must here, we remain mindful of the fact that the latter occupy a preferred position”.
Lastly, the SC said that it cannot be said the Society were engaged in the commercial rather than a religious venture, even on the fact it disposed the bibles with price ( for as low as one third of its costs). Their activities could not be described as embraced in the occupation of selling books and pamphlets.
