UNIVERSITY OF THE CORDILLERAS

TAXATION 1 CASE DIGESTS

Pine, Katherine Janice De Guzman

3A
 SUBJECT: Tax Exemption

1. MACTAN CEBU INTERNATIONAL AIRPORT

AUTHORITY vs. HON. FERDINAND J. MARCOS

FACTS:

Petitioner Mactan Cebu International Airport Authority

(MCIAA) was created by virtue of Republic Act No. 6958.
Under the provisions of such Republic Act, it was expressly
exempted from payment of tax.

However, on October 11, 1994, the Officer-in-Charge

from the Office of the Treasurer of the City of Cebu, Mr.
Eustaquio B. Cesa, demanded the payment of realty taxes
on several parcels of land that belonged to MCIAA.

The petitioner contended that Section 14 of RA 6958

expressly granted their tax exemption thus the demand of
Cesa was baseless and unjustified. Further, MCIAA
contended that the section 133 of the Local Government
Code of 1991 limits the taxing powers of the local
government units. To which, the city, thru Cesa, responded
that the MCIAA is a government-controlled owned
corporation thus the tax exemption privilege was withdrawn
per Sections 193 and 234 of the Local Government Code.

ISSUE:

Whether or not MCIAA is a GOCC or an instrumentality

of the government exempted from paying realty taxes.

HELD:

No. MCIAA as a GOCC or an instrumentality of the

government is not exempted from paying realty taxes.
Taxation is the rule and exemption is the exception so
the exemption may thus be withdrawn at the pleasure of the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 and controlled corporations,
section 193 of the LGC prescribes the general rule, that 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are withdrawn upon the effectivity of the LGC, except those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 other

Though the petitioner raised its exemption under RA

6958 to pay the realty taxes, RA 7160 expressly provides
that all general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative
regulations, or part of parts thereof which are inconsistent
with any of the provisions of this Code are hereby repealed
or modified accordingly.

The petitioner cannot claim that it was never a taxable

person under its Charter. It was only exempted from the
payment of real property 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.

SUBJECT: Tax Liabilities, Concept Of Protest, Set-

Off Doctrine

2. PHILEX MINING CORPORATION VS

COMMISSIONER OF INTERNAL REVENUE, GR NO.
125704, AUGUST 28, 1998

FACTS:

On August 5, 1992, the BIR sent a letter to Philex

asking it to settle its tax liabilities for the second to fourth
quarter of 1991 as well as the 1st and 2nd quarter of 1992.
The total amount of the tax liability is P123,821,982.52.

Philex answered the letter by way of protest on August

20, 1992. In its letter, it stated that it has pending claims for
VAT input credit or refund for the taxes that were paid from
1980 through 1991. The amount reportedly totaled to
P119,977,037.02 not including the interest yet.

Therefore, these claims for tax credit or refund should

be applied against the tax liabilities, citing our ruling in
Commissioner of Internal Revenue v. Itogon-Suyoc Mines,
Inc.
 The BIR replied via a letter on September 7, 1992
stating that because the claims have not been determined
yet, no legal compensation may take place. The BIR then
maintained that Philex still has to pay the earlier stated tax
liability plus interest accruing from the receipt of the first
letter.

Aggrieved, Philex raised the issue to the Court of Tax

Appeals on November 6, 1992. Amidst the proceedings, the
BIR issues a Tax Credit Certificate amounting to
P13,144,313.88 leading to the reduction of the then-present
tax liability of Philex to P110,677,688.52.

Despite the reduction of its tax liabilities, the CTA still

ordered Philex to pay the remaining balance of
P110,677,688.52 plus interest because such is not subject
for legal compensation. In order for legal compensation to
take place, both obligations must be liquidated and
demandable. Liquidated debts are those where the exact
amount has already been determined. In the instant case,
the claims of the Petitioner for VAT refund is still pending
litigation, and still has to be determined by this Court.

Moreover, the Court of Tax Appeals ruled that taxes

cannot be subject to set-off on compensation since claim for
taxes is not a debt or contract.

A few days after the denial of its motion for

reconsideration with the Court of Tax Appeals, Philex was
able to obtain its VAT input credit/refund not only for the
taxable year 1989 to 1991 but also for 1992 and 1994.
Philex now contends that legal compensation can properly
take place.

ISSUE:

Whether or not Philex’s contention is correct that legal

compensation can properly take place now that the liabilities
had become due and demandable.

HELD:

No, because 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 debt. Debts are due
to the Government in its corporate capacity, while taxes are
due to the Government in its sovereign capacity.

Further, Philex’s reliance on our holding in

Commissioner of Internal Revenue v. Itogon-Suyoc Mines,
Inc., wherein we ruled that a pending refund may be set off
against an existing tax liability even though the refund has
not yet been approved by the Commissioner, is no longer
without any support in statutory law.

Philex cannot be allowed to refuse the payment of its

tax liabilities on the ground that it has a pending tax claim
for refund or credit against the government which has not
yet been granted. It must be noted that a distinguishing
feature of a tax is that it is compulsory rather than a matter
of bargain. Hence, a tax does not depend upon the consent
of the taxpayer. If any payer can defer the payment of taxes
by raising the defense that it still has a pending claim for
refund or credit, this would adversely affect the government
revenue system. A taxpayer cannot refuse to pay his taxes
when they fall due simply because he has a claim against
the government or that the collection of the tax is
contingent on the result of the lawsuit it filed against the
government.

SUBJECT: Tax Exemption

3. Atlas Consolidated vs. CIR ATLAS CONSOLIDATED

MINING DEVT CORP vs. CIR, 524 SCRA 73, 103, GR
Nos. 141104 & 148763, June 8, 2007

"The taxpayer must justify his claim for tax exemption

or refund by the clearest grant of organic or statute law and
should not be permitted to stand on vague implications."

"Export processing zones (EPZA) are effectively

considered as foreign territory for tax purposes."

FACTS:

Petitioner corporation, a VAT-registered taxpayer

engaged in mining, production, and sale of various mineral
products, filed claims with the BIR for refund/credit of input
VAT on its purchases of capital goods and on its zero-rated
sales in the taxable quarters of the years 1990 and 1992.
BIR did not immediately act on the matter prompting the
petitioner to file a petition for review before the CTA. The
latter denied the claims on the grounds that for zero-rating
to apply, 70% of the company's sales must consists of
exports, that the same were not filed within the 2-year
prescriptive period (the claim for 1992 quarterly returns
were judicially filed only on April 20, 1994), and that
petitioner failed to submit substantial evidence to support its
claim for refund/credit. The petitioner, on the other hand,
contends that CTA failed to consider the following: sales to
PASAR and PHILPOS within the EPZA as zero-rated export
sales; the 2-year prescriptive period should be counted from
the date of filing of the last adjustment return which was
April 15, 1993, and not on every end of the applicable
quarters; and that the certification of the independent CPA
attesting to the correctness of the contents of the summary
of suppliers’ invoices or receipts examined, evaluated and
audited by said CPA should substantiate its claims.

ISSUE:

Whether or not the petitioner corporation sufficiently

establish the factual bases for its applications for
refund/credit of input VAT.

HELD:

No. Although the Court agreed with the petitioner

corporation that the two-year prescriptive period for the
filing of claims for refund/credit of input VAT must be
counted from the date of filing of the quarterly VAT return,
and that sales to PASAR and PHILPOS inside the EPZA are
taxed as exports because these export processing zones are
to be managed as a separate customs territory from the rest
of the Philippines, and thus, for tax purposes, are effectively
considered as foreign territory, it still denies the claims of
petitioner corporation for refund of its input VAT on its
purchases of capital goods and effectively zero-rated sales
during the period claimed for not being established and
substantiated by appropriate and sufficient evidence. Tax
refunds are in the nature of tax exemptions. It is regarded
as in derogation of the sovereign authority, and should be
construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for
exemption must justify his claim by the clearest grant of
organic or statute law and should not be permitted to stand
on vague implications.

4. MELECIO R. DOMINGO, as Commissioner of

Internal Revenue vs. HON. LORENZO C.
GARLITOS, in his capacity as Judge of the Court
of First Instance of Leyte, and SIMEONA K. PRICE,
as Administratrix of the Intestate Estate of the
late Walter Scott Price, G.R. No. L-18994, June 29,
1963

FACTS:

In Domingo vs. Moscoso, the Supreme Court declared

as final and executory the order of the lower court for the
payment of estate and inheritance taxes, charges and
penalties amounting to Php 40,058.55 by the estate of the
of the late Walter Price. The petitioner for execution filed by
the fiscal was denied by the lower court. The court held that
the execution is unjustified as the Government is indebted to
the estate for Php 262, 200 and ordered the amount of
inheritance taxes can be deducted from the Government’s
indebtedness to the estate.

ISSUE:

Whether or not a tax and a debt may be compensated.

HELD:

The court having jurisdiction of the Estate had found

that the claim of the Estate against the government has
been recognized and the amount has already been
appropriated by a corresponding law, Rep. Act No. 2700.
Both the claim of the Government for inheritance taxes and
the claim of the intestate for services rendered have already
become overdue and demandable as well as fully liquidated.
Compensation takes place by operation of law and both
debts are extinguished to the concurrent amount. Therefore
the petitioner has no clear right to execute the judgment for
taxes against the estate of the deceased Walter Price.

5. CIR v. ALGUE, GR No. L-28896, Feb 17, 1988.

FACTS:

The Philippine Sugar Estate Development Company had

earlier appointed Algue Inc., as its agent, authorizing it to
sell its land, factories and oil manufacturing process.As
such,the corporation worked for the formation of the
Vegetable Oil Investment Corporation, until they were able
to purchased the PSEDC properties. For this sale, Algue Inc.,
received as agent a commission of P126, 000.00, and it was
from this commission that the P75, 000.00 promotional fees
were paid to Alberto Guevara, Jr., Eduardo Guevara, Isabel
Guevara, Edith, O'Farell, and Pablo Sanchez.

Commissioner of Internal Revenue contends that the

claimed deduction is not allowed because it was not an
ordinary reasonable or necessary business expense. The
Court of Tax Appeals had seen it differently. Agreeing with
Algue Inc., it held that the said amount had been
legitimately paid by the private respondent for actual
services rendered. The payment was in the form of
promotional fees.

ISSUE:

Whether or not the Collector of Internal Revenue

correctly disallowed the P75,000.00 deduction claimed by
private respondent Algue as legitimate business expenses in
its income tax returns.

HELD:

The Solicitor General is correct when he says that the

burden is on the taxpayer to prove the validity of the
claimed deduction. In the present case, however, we find
that the onus has been discharged satisfactorily. The private
respondent has proved that the payment of the fees was
necessary and reasonable in the light of the efforts exerted
by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and
involve themselves in a new business requiring millions of
pesos. This was no mean feat and should be, as it was,
sufficiently recompensed.
 It is said that taxes are what we pay for civilized
society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it.
Hence, despite the natural reluctance to surrender part of
one's hard-earned income to the taxing authorities, every
person who is able to must contribute his share in the
running of the government. The government, for its part, is
expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic
relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction
by those in the seat of power.

But even as we concede the inevitability and

indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then
the taxpayer has a right to complain and the courts will then
come to his succor. For all the awesome power of the tax
collector, he may still be stopped in his tracks if the taxpayer
can demonstrate, as it has here, that the law has not been
observed.

We find that the claimed deduction by the private

respondent was permitted under the Internal Revenue Code
and should therefore not have been disallowed by the
petitioner.

6. National Power Corporation vs. City of

Cabanatuan ,G.R. No. 149110, April 9, 2003.

FACTS:

Petitioner is a government-owned and controlled

corporation created under Commonwealth Act No. 120, as
amended.
For many years now, petitioner sells electric power to
the residents of Cabanatuan City, posting a gross income of
P107,814,187.96 in 1992.7 Pursuant to section 37 of
Ordinance No. 165-92,8 the respondent assessed the
petitioner a franchise tax amounting to P808,606.41,
representing 75% of 1% of the latter’s gross receipts for the
preceding year.
 Petitioner refused to pay the tax assessment arguing
that the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a
non-profit organization, it is exempted from the payment of
all forms of taxes, charges, duties or fees in accordance with
sec. 13 of Rep. Act No. 6395, as amended.

The respondent filed a collection suit in the RTC,

demanding that petitioner pay the assessed tax due, plus
surcharge. Respondent alleged that petitioner’s exemption
from local taxes has been repealed by section 193 of the
LGC, which reads as follows:
“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless
otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government owned or
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectively of this Code.”

RTC upheld NPC’s tax exemption. On appeal the CA

reversed the trial court’s Order on the ground that section
193, in relation to sections 137 and 151 of the LGC,
expressly withdrew the exemptions granted to the
petitioner.

ISSUE:

Whether or not the respondent city government has the

authority to issue Ordinance No. 165-92 and impose an
annual tax on businesses enjoying a franchise?

HELD:

Yes, Taxes are the lifeblood of the government, for

without taxes, the government can neither exist nor endure.
A principal attribute of sovereignty, the exercise of taxing
power derives its source from the very existence of the state
whose social contract with its citizens obliges it to promote
public interest and common good. The theory behind the
exercise of the power to tax emanates from necessity;32
without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people.
 The power to tax is the most effective instrument to
raise needed revenues to finance and support myriad
activities of the local government units for the delivery of
basic services essential to the promotion of the general
welfare and the enhancement of peace, progress, and
prosperity of the people. As this Court observed in the
Mactan case, “the original reasons for the withdrawal of tax
exemption privileges granted to government-owned or
controlled corporations and all other units of government
were that such privilege resulted in serious tax base erosion
and distortions in the tax treatment of similarly situated
enterprises.” With the added burden of devolution, it is even
more imperative for government entities to share in the
requirements of development, fiscal or otherwise, by paying
taxes or other charges due from them.

7. PABLO LORENZO, as trustee of the estate of Thomas

Hanley, vs. JUAN POSADAS, JR., Collector of
Internal Revenue

FACTS:

Thomas Hanley died in Zamboanga. He directs in his

will that any money left by him and any property shall go to
Matthew Hanley, his nephew. That the property shall only go
to him to be disposed as he sees fit after 10 years has
passed. The plaintiff was appointed as the executor of the
decedent's estate and he contends that the estate tax
regarding the property shall be collected and on the date it
is transferred which shall be 10 years later while the other
party contends that it should be upon the death of the
testator or right now.

ISSUE:

Whether the tax is to be collected now or 10 year later?

HELD:

The court rules that the tax shall be collected promptly

which is what is ingrained in our tax system and no
injunction by a court is allowed to delay such collection. The
primary purpose of tax is to support the government and so
it does not matter if no benefit has yet accrued to the
taxpayer. That the property shall only benefit the taxpayer
after 10 year is of no consequence since the primary
purpose of taxation is to fund the government to lessen its
expenses and to raise revenue.

The obligation to pay taxes rests not upon the

privileges enjoyed by, or the protection afforded to, a citizen
by the government but upon the necessity of money for the
support of the state. A tax statute should be construed to
avoid the possibilities of tax evasion.

8. PHILIPPINE AIRLINES, INC vs. ROMEO F. EDU and

UBALDO CARBONELL

FACTS:

Philippine Airlines (PAL) is engaged in the air

transportation business under a legislative franchise, Act No.
42739, as amended by Republic Act Nos. 25 and 269. PAL is
exempt from the payment of taxes under its franchise. In
1971, Commissioner Romeo F. Elevate issued a regulation
requiring all tax exempt entities, among them PAL, to pay
motor vehicle registration fees.

Despite PAL's protestations, the appellee refused to

register the appellant's motor vehicles unless the amounts
imposed under Republic Act 4136 were paid. The appellant
thus paid, under protest, the amount of P19,529.75 as
registration fees of its motor vehicles. PAL wrote a letter to
Commissioner Edu demanding a refund of the amounts paid.
Appellee Edu denied the request for refund on the ground
that motor vehicle registration fees are regulatory,
exceptional and not revenue measures and, therefore, do
not come within the exemption granted to PAL under its
franchise.

ISSUE:

Whether or not PAL is liable to pay motor vehicle

registration fees.

HELD:
 Yes. Fees may be properly regarded as taxes even
though they also serve as an instrument of regulation. It is
possible for an exaction to be both tax and regulation.
License fees are charges looked to as a source of revenue as
well as a means of regulation. The fees may properly be
regarded as taxes even though they also serve as an
instrument of regulation. 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. These
exactions are sometimes called regulatory taxes.

It is quite apparent that vehicle registration fees were

originally intended only for the purpose of the exercise of
the State's police powers. Congress found that the
registration of vehicles is a very convenient way of raising
much needed revenues. Without changing the earlier deputy
of registration payments as "fees," their nature has become
that of "taxes." Motor vehicle registration fees, at present
exacted pursuant to the Land Transportation and Traffic
Code, are actually taxes intended for additional revenues of
government even if one fifth or less of the amount collected
is set aside for the operating expenses of the agency
administering the program.

In this case, any registration fees collected between

June 27, 1968 and April 9, 1979, were correctly imposed
because the tax exemption in the franchise of PAL was
repealed during the period. However, an amended franchise
was given to PAL in 1979. Section 13 of Presidential Decree
No. 1590 now exempts PAL from the payment of any tax,
fee, or other charge on the registration and licensing of
motor vehicles. Such payments are already included in the
basic tax or franchise tax provided in Subsections (a) and
(b) of Section 13, P.D. 1590, and may no longer be exacted.
The prayed for refund of registration fees paid in 1971 is
denied.

9. Tolentino vs Sec. of Finance, G.R. No. 115455,

October 30, 1995

FACTS:

The value-added tax (VAT) is levied on the sale, barter

or exchange of goods and properties as well as on the sale
or exchange of services. It is equivalent to 10% of the gross
selling price or gross value in money of goods or properties
sold, bartered or exchanged or of the gross receipts from
the sale or exchange of services. Republic Act No. 7716
(EVAT) seeks to widen the tax base of the existing VAT
system and enhance its administration by amending the
National Internal Revenue Code. This EVAT is now being
questioned by Tolentino et al. as to its constitutionality since
it did not originate from the house of representatives.

ISSUES:

(1) Whether RA 7716 originated exclusively from the

House of Rep. in accordance with sec 24, art 6 of
Constitution

(2) press freedom and religious liberty is erogated by

the passage of RA 7716

(3) Whether RA 7716 is violative on the rule of taxation

that it should be uniform and equitable.

HELD:

1. Yes. Court said that it is not the law which should

originate from the House of Rep, but the revenue bill which
was required to originate from the House of Rep. The
inititiative must ocme from the Lower House because they
are elected in the district level – meaning they are expected
to be more sensitive to the needs of the locality.

Also, a bill originating from the Lower House may

undergo extensive changes while in the Senate. Senate can
introduce a separate and distinct bill other than the one the
Lower House proposed. The Constitution does not prohibit
the filing in the Senate of a substitute bill in anticipation of
its receipt of the House bill, so long as action by Senate is
withheld pending the receipt of the House bill.

2. The PPI says that the discriminatory treatment of the

press is highlighted by the fact that transactions, which are
profit oriented, continue to enjoy exemption under R.A. No.
7716. An enumeration of some of these transactions will
suffice to show that by and large this is not so and that the
exemptions are granted for a purpose. As the Solicitor
General says, such exemptions are granted, in some cases,
to encourage agricultural production and, in other cases, for
the personal benefit of the end-user rather than for profit.
The VAT is, however, different. It is not a license tax. It is
not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease
or exchange of goods or properties or the sale or exchange
of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to
burden the exercise of its right any more than to make the
press pay income tax or subject it to general regulation is
not to violate its freedom under the Constitution.

3. No. Equality and uniformity of taxation means that

all taxable articles or kinds of property of the same class be
taxed at the same rate. The taxing power has the authority
to make reasonable and natural classifications for purposes
of taxation. To satisfy this requirement it is enough that the
statute or ordinance applies equally to all persons, forms
and corporations placed in similar situation.

9. TOLENTINO VS. SECRETARY OF FINANCE (249)

FACTS:

There are various suits challenging the constitutionality

of RA 7716, otherwise known as the Expanded Value Added
Tax (E-VAT) Law, on various grounds. It seeks to widen the
tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue
Code (NIRC).

Among the petitioners was the Philippine Press Institute

(PPI) which claims that R.A. 7716 violates their press
freedom and religious liberty, having removed them from
the exemption to pay VAT. It is contended that by removing
the exemption of the press from the VAT while maintaining
those granted to others, the law discriminates against the
press. At any rate, it is averred, "even non-discriminatory
taxation of constitutionally guaranteed freedom is
unconstitutional." PPI argued that the VAT is in the nature of
a license tax.

CREBA asserts that R.A. No. 7716 (1) impairs the

obligations of contracts, (2) classifies transactions as
covered or exempt without reasonable basis, and (3)
violates the rule that taxes should be uniform and equitable
and that Congress shall "evolve a progressive system of
taxation."

ISSUE:

(a) Whether or not the purpose of VAT is the same as that of

a license tax; and (b) Whether or not RA 7716 violates the
rule on taxation.

HELD:

a.) NO. A license tax, unlike an ordinary tax, is mainly

for regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint on the
exercise of its right. Hence, although its application to
others, such as those selling goods is valid, its
application to the press or to religious groups, such as
the Jehovah's Witnesses, in connection with the latter's
sale of religious books and pamphlets, is unconstitutional.
As the U.S. Supreme Court put it, ―it is one thing to
impose a tax on income or property of a preacher. It is
quite another thing to exact a tax on him for delivering a
sermon.

VAT is not a license tax. It is not a tax on the exercise

of a privilege, much less a constitutional right. It is imposed
on the sale, barter, lease or exchange of goods or properties
or the sale or exchange of services and the lease of
properties purely for revenue purposes. To subject the press
to its payment is not to burden the exercise of its right any
more than to make the press pay income tax or subject it to
general regulation is not to violate its freedom under the
Constitution.

b.) NO. The CREBA claims that the VAT is

regressive. The Constitution does not really prohibit the
imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall
"evolve a progressive system of taxation." The constitutional
provision has been interpreted to mean simply that "direct
taxes are . . . to be preferred [and] as much as possible,
indirect taxes should be minimized." Indeed, the mandate
to Congress is not to prescribe, but to evolve, a progressive
tax system.

Resort to indirect taxes should be minimized but not

avoided entirely because it is difficult, if not impossible, to
avoid them by imposing such taxes according to the
taxpayers' ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition by
providing for zero rating of certain transactions (R.A. No.
7716, §3, amending §102 (b) of the NIRC), while granting
exemptions to other transactions (R.A. No. 7716, §4,
amending §103 of the NIRC).

10. OSMEÑA vs. ORBOS, 220 SCRA 703, GR No.

99886, March 31, 1993

FACTS:

On October 10, 1984, President Ferdinand Marcos

issued P.D. 1956 creating a Special Account in the General
Fund, designated as the Oil Price Stabilization Fund (OPSF)
designed to reimburse oil companies for cost increases in
crude oil and imported petroleum products resulting from
exchange rate adjustments and from increases in the world
market prices of crude oil. It was subsequently reclassified
into a "trust liability account," in virtue of E.O. 1024, and
ordered released from the National Treasury to the Ministry
of Energy. The same Executive Order also authorized the
investment of the fund in government securities, with the
earnings from such placements accruing to the fund. P.D.
1956 was amended by EO 137 issued by President Corazon
Aquino expanding the grounds for reimbursement to oil
companies.

Senator John Osmeña assails the constitutionality of

paragraph 1c of PD 1956, as amended by EO 137,
empowering the Energy Regulatory Board (ERB) to approve
the increase of fuel prices or impose additional amounts on
petroleum products which proceeds shall accrue to the Oil
Price Stabilization Fund (OPSF) established for the
reimbursement to ailing oil companies in the event of
sudden price increases. The petitioner avers that the
collection on oil products establishments is an undue and
invalid delegation of legislative power to tax. Further, the
petitioner points out that since a 'special fund' consists of
monies collected through the taxing power of a State, such
amounts belong to the State, although the use thereof is
limited to the special purpose/objective for which it was
created. It thus appears that the challenge posed by the
petitioner is premised primarily on the view that the powers
granted to the ERB under P.D. 1956, as amended, partake
of the nature of the taxation power of the State.

ISSUE:

Whether or not there is an undue delegation of the

legislative power of taxation.

HELD:

None. It seems clear that while the funds collected may

be referred to as taxes; they are exacted in the exercise of
the police power of the State, Moreover, that the OPSF as a
special fund is plain from the special treatment given it by
E.O. 137. It is segregated from the general fund; and while
it is placed in what the law refers to as a "trust liability
account," the fund nonetheless remains subject to the
scrutiny and review of the COA. The Court is satisfied that
these measures comply with the constitutional description of
a "special fund." With regard to the alleged undue delegation
of legislative power, the Court finds that the provision
conferring the authority upon the ERB to impose additional
amounts on petroleum products provides a sufficient
standard by which the authority must be exercised. In
addition to the general policy of the law to protect the local
consumer by stabilizing and subsidizing domestic pump
rates, P.D. 1956 expressly authorizes the ERB to impose
additional amounts to augment the resources of the Fund.

11. CALTEX VS. COMMISSION ON AUDIT, 208

SCRA 755

FACTS:

Under Section 8 of Presidential Decree (P.D.) No. 1956,

as amended by Executive Order (E.O.) No. 137, the Oil
Stabilization Fund (OPSF) was created to minimize frequent
price changes caused by exchange rate adjustments. It will
be used to reimburse the oil companies for cost increase and
for possible cost under-recovery caused by reduction of
domestic prices of oil products.

In 1989, the Commission on Audit (COA) sent a letter

to Caltex Philippines, Inc. directing it to remit to the OPSF its
collection, excluding that unremitted for the years 1986 to
1988, of the additional tax on petroleum products authorized
under P.D. No. 1956. Awaiting such remittance, all of its
claims for reimbursement from the OPSF shall be
suspended. The total of its unremitted collections of the
above tax is P1,287,668,820.

Caltex requested the COA for an early release of its

reimbursement certificates from the OPSF. COA denied
Caltex’s request and directs it to forward payment of its
(Caltex’s) unremitted collections to the OPSF to facilitate
COA’s audit action on the reimbursement claims.

Caltex submitted a proposal to the COA for the

payment of the collections and the recovery of claims. COA
approved such proposal; however, it prohibited Caltex from
further offsetting remittance and reimbursements for the
present and succeeding years.

Caltex’s Contention: The Department of Finance

issued a Circular allowing reimbursement. Thus, denial of
claim for reimbursement would be inequitable. The New Civil
Code provisions on compensation and the Revised
Administrative Code provisions on retention of money for
satisfaction of indebtedness to Government allow offsetting.
Also, amounts due do not arise from taxation because P.D.
No. 1956 did not create source of taxation. Said law instead
established a special fund. The lack of public purpose behind
OPSF exactions differentiates it from tax.

COA’s Contention: There is no offsetting of taxes

against the claims that a taxpayer may have against the
government, as taxes do not arise from contracts nor
depend upon the will of the taxpayer, but are imposed by
law.

ISSUE:
 Whether or not the amounts due to the OPSF from
Caltex may be offsetted against its outstanding claims from
said fund.

HELD:

No. Taxation is no longer envisioned as a measure

merely to raise revenue to support the existence of the
government; taxes may be levied with a regulatory purpose
to provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as
to be within the police power of the State. There can be no
doubt that the oil industry is greatly imbued with public
interest as it vitally affects the general welfare. Any
unregulated increase in oil prices could hurt the lives of a
majority of the people and cause economic crisis of untold
proportions. It would have a chain reaction in terms of,
among others, demands for wage increases and upward
spiralling of the cost of basic commodities. The stabilization
then of oil prices is one of prime concern which the State
may properly address.

Also, P.D. No. 1956, as amended by E.O. 137, explicitly

provides that the source of OPSF is taxation. A taxpayer
may not offset taxes due from the claims that he may have
against the government. Taxes cannot be subject of
compensation because the government and the taxpayer
are not mutually creditors and debtors of each other
and a claim for taxes is not such a debt, demand, contract
or judgment as is allowed to be set-off.

Technically, in respect to taxes for the OPSF, the oil

companies merely act as agents for the Government in its
collection since taxes are, in reality, passed unto the
consuming public. In that capacity, Caltex as one of such
companies has the primary obligation to account for and
remit the taxes collected to the administrator of the OPSF.

12. ESSO STANDARD EASTERN, INC., vs. THE

COMMISSIONER OF INTERNAL REVENUE

FACTS:

Petitioner ESSO deducted from its gross income for

1959, as part of its ordinary and necessary business
expenses, the amount it had spent for drilling and
exploration of its petroleum concessions and margin fees it
had paid to the Central Bank on its profit remittances to its
New York head office. The CIR granted a tax credit of
P221,033.00 only, disallowing the claimed deduction for the
margin fees paid. The disallowance of the margin fees of
Pl,226,647.72 led to an income tax deficiency of
P434,232.92.

ESSO paid under protest and thereafter filed a claim for

refund of P39,787.94 as overpayment on the interest on its
deficiency income tax. The CIR denied the claims of ESSO
for refund on the ground that the margin fees paid to the
Central Bank could not be considered taxes or allowed as
deductible business expenses.

ISSUE:

Whether the margin fees paid to the Central Bank could

be considered as revenue measure.

HELD:

No. Republic Act 2009, entitled An Act to Authorize the

Central Bank of the Philippines to Establish a Margin Over
Banks' Selling Rates of Foreign Exchange is a police
measure. Since it is not a revenue measure, the margin fees
paid by the petitioner to the Central Bank on its profit
remittances to its New York head office is not deductible
from ESSO's gross income under Sec. 30(c) of the National
Internal Revenue Code.

A margin fee is not a tax but an exaction designed to

curb the excessive demands upon our international reserve.
A margin levy on foreign exchange is a form of exchange
control or restriction designed to discourage imports and
encourage exports, and ultimately, 'curtail any excessive
demand upon the international reserve' in order to stabilize
the currency.

A tax is levied to provide revenue for government

operations, while the proceeds of the margin fee are applied
to strengthen our country's international reserves. The
margin fee was imposed by the State in the exercise of its
police power and not the power of taxation.
 13. ERNESTO M. MACEDA vs. HON. CATALINO
MACARAIG, JR., G.R. No. 88291 June 8, 1993

FACTS:

On November 3, 1936, Commonwealth Act No. 120 was

enacted creating the National Power Corporation, a public
corporation. The main source of funds for the NPC was the
flotation of bonds in the capital markets and these bonds
shall be exempt from the payment of all taxes.

On June 4, 1949, R.A. No. 358 was enacted expressly

authorizing the NPC to incur other types of indebtedness,
aside from indebtedness incurred by flotation of bonds. The
law stated that any loans obtained were to be completely
tax exempt.

On June 2, 1954, R.A. No. 987 was enacted specifically

to withdraw NPC's tax exemption for real estate taxes. The
exemption was, however, restored by R.A. No. 6395.

Later on, R.A. No 6395 as amended by P.D. 380 was

issued and specified that NPC’s exemption includes all taxes
imposed “directly and indirectly” on all products used by NPC
in its operation.

On July 30, 1977, P.D. 1177 was issued and expressly

repealed the grant of tax privileges to any government-
owned or controlled corporation and all other units of
government, which include NPC.

After a series of withdrawal and restoration of NPC’s

tax exemption, the Fiscal Incentives Review Board,
possessing the power restore tax exemptions, issued a
resolution restoring NPC’s exemption.

Since 1976, oil firms never paid excise or specific and

ad valorem taxes for petroleum products sold and delivered
to NPC. Such taxes were paid on their sales of oil products
to NPC only in 1984, thus, NPC claimed for refund paid by
the oil companies to the BIR from 1984 to 1986 but only a
portion was approved claiming that all the deliveries of
petroleum products to NPC are tax exempt. Petitioner
contends that P.D. No. 938 repealed the indirect tax
exemption of NPC as the phrase "all forms of taxes etc.,"
does not expressly include "indirect taxes."

ISSUE:

Whether or not NPC still possessed indirect tax

exemption.

HELD:

Yes. NPC laws show that it has been the lawmaker's

intention that the NPC was to be completely tax exempt
from all forms of taxes — direct and indirect.

One common theme in all these laws is that the NPC

must be enable to pay its indebtedness which, as of P.D. No.
938, was P12 Billion in total domestic indebtedness, at any
one time, and U$4 Billion in total foreign loans at any one
time. The NPC must be and has to be exempt from all forms
of taxes if this goal is to be achieved.

P.D. No. 938 did not amend the same and so the tax
exemption provision in R.A. No. 6395, as amended by P.D.
No. 380, still stands. The tax exemption stood as is with the
express mention of "direct and indirect" tax exemptions. And
this "direct and indirect" tax exemption privilege extended to
"taxes, fees, imposts, other charges to be imposed" in the
future, an indication that the lawmakers wanted the NPC to
be exempt from all forms of taxes,direct and indirect.
Therefore, NPC had been granted tax exemption privileges
for both direct and indirect taxes under P.D. No. 938.

14. COMMISSIONER OF INTERNAL REVENUE vs.

JOHN GOTAMCO & SONS, INC., G.R. No. L-31092
February 27, 1987

FACTS:

The World Health Organization (WHO) is an

international organization which enjoys privileges and
immunities which are defined in the Host Agreement entered
into between the Republic of the Philippines and the said
Organization. The Agreement provides that the
Organization, its assets, income and other properties shall
be exempt from all direct and indirect taxes.
 WHO decided to construct a building to house its own
offices. In inviting bids for the construction of the building,
contractors were informed that there would be no taxes or
fees levied upon them for their work in connection with the
construction of the building as this will be considered an
indirect tax to the Organization caused by the increase of
the contractor's bid in order to cover these taxes. The
construction contract was awarded to respondent John
Gotamco & Sons, Inc.

The Commissioner of Internal Revenue sent a letter of

demand to Gotamco demanding payment of 3% contractor's
tax in the construction of the WHO's building contending
that the contractor's tax is a tax due primarily and directly
on the contractor, not on the owner of the building. Since
this tax has no bearing upon the WHO, it cannot be deemed
an indirect taxation upon it.

ISSUE:

Whether or not the 3% contractor’s tax assessed on

Gotamco is an “indirect tax”.

HELD:

Yes. Direct taxes are those that are demanded from the
very person who, it is intended or desired, should pay them
while indirect taxes are those that are demanded in the first
instance from one person in the expectation and intention
that he can shift the burden to someone else. The
contractor's tax is of course payable by the contractor but in
the last analysis it is the owner of the building that
shoulders the burden of the tax because the same is shifted
by the contractor to the owner as a matter of self-
preservation. Thus, it is an indirect tax.

The Host Agreement, in specifically exempting the WHO

from "indirect taxes," contemplates taxes which, although
not imposed upon or paid by the Organization directly, form
part of the price paid or to be paid by it. The 3% contractor's
tax should be viewed as a form of an "indirect tax" On the
Organization, as the payment thereof or its inclusion in the
bid price would have meant an increase in the construction
cost of the building.
 15. SILKAIR (SINGAPORE) PTE, LTD., vs.
COMMISSIONER OF INTERNAL REVENUE

FACTS:

Silkair, an international airline company, filed for a

refund in the Bureau of Internal Revenue (BIR) an amount
of P4,567,450.79 which Silkair claims were excise taxes paid
on its purchases of jet fuel from Petron Corporation from
January to June 2000. Silkair subsequently filed a petition
for review in the Court of Tax Appeals (CTA) while the BIR
was deliberating on the application for refund. Silkair bases
its argument on Sec. 135 of the NIRC, specifically, the
passage which allows foreign international carriers to be
exempt from excise taxes on petroleum products if their
country exempts Philippine carriers from the same. In
support of this Silkair cites the Air Transport Agreement
between the Government of the Republic of the Philippines
and the Government of the Republic of Singapore (Air
Transport Agreement between RP and Singapore),
specifically the passage which reads:

“Fuel, lubricants, spare parts, regular equipment and

aircraft stores introduced into, or taken on board aircraft in
the territory of one Contracting party by, or on behalf of, a
designated airline of the other Contracting Party and
intended solely for use in the operation of the agreed
services shall, with the exception of charges corresponding
to the service performed, be exempt from the same customs
duties, inspection fees and other duties or taxes imposed in
the territories of the first Contracting Party , even when
these supplies are to be used on the parts of the journey
performed over the territory of the Contracting Party in
which they are introduced into or taken on board. The
materials referred to above may be required to be kept
under customs supervision and control.”

The Commissioner of Internal Revenue (CIR) opposed

the petition stating that: “The excise tax on petroleum
products is the direct liability of the manufacturer/producer,
and when added to the cost of the goods sold to the
buyer, it is no longer a tax but part of the price which the
buyer has to pay to obtain the article.”
 Silkair also argues that it is exempt from indirect taxes
because the Air Transport Agreement between RP and
Singapore grants exemption from the same customs duties,
inspection fees and other duties or taxes imposed in the
territory of the first Contracting Party.

The CTA agreed with the CIR and added that it should
be Petron who should file for a refund. Silkair cannot be
considered as the taxpayer because it merely shouldered the
burden of the excise tax and not the excise tax itself.

ISSUES:

1. Whether or not Silkair is the proper party to claim

refund or tax credit.

2. Whether or not Silkair is exempt from payment of

indirect taxes.

HELD:

1. No, it is not. The proper party to question, or seek a

refund of, an indirect tax is the statutory taxpayer,
the person on whom the tax is imposed by law and
who paid the same even if he shifts the burden
thereof to another.

Sec. 130 of the NIRC provides that: unless

otherwise specifically allowed, the return shall be filed
and the excise tax paid by the manufacturer or
producer before removal of domestic products from
place of production. Petron Corporation as the
manufacturer or producer, not Silkair, is the statutory
taxpayer which is entitled to claim a refund based on
Section 135 of the NIRC of 1997 and Article 4(2) of the
Air Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the

burden of the tax, the additional amount billed to
Silkair for jet fuel is not a tax but part of the price
which Silkair had to pay as a purchaser.

2. No, it is not. An exemption from all taxes

excludes indirect taxes, unless the exempting
statute, like a charter, is so couched as to include
 indirect tax from the exemption. The exemption
granted under Section 135 (b) of the NIRC of 1997
and Article 4(2) of the Air Transport Agreement
between RP and Singapore cannot, without a clear
showing of legislative intent, be construed as including
indirect taxes. Statutes granting tax exemptions must
be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority,
and if an exemption is found to exist, it must not
be enlarged by construction.

16. Commissioner vs. CA ( ℅ MAGLIBA, Rujhen)

17. Villanueva v. City of Iloilo, G.R. No. L-26521

December 28, 1968.

FACTS:

On September 30, 1946 the municipal board of Iloilo

City enacted Ordinance 86, imposing license tax fees as
follows: (1) tenement house (casa de vecindad), P25.00
annually; (2) tenement house, partly or wholly engaged in
or dedicated to business in the streets of J.M. Basa, Iznart
and Aldeguer, P24.00 per apartment; (3) tenement house,
partly or wholly engaged in business in any other streets,
P12.00 per apartment. The validity and constitutionality of
this ordinance were challenged by the spouses Eusebio
Villanueva and Remedies Sian Villanueva, owners of four
tenement houses containing 34 apartments. On January 15,
1960 the municipal board of Iloilo City, believing, obviously,
that with the passage of Republic Act 2264, otherwise
known as the Local Autonomy Act, it had acquired the
authority or power to enact an ordinance similar to that
previously declared by this Court as ultra vires, thus enacted
an “Ordinance Imposing Municipal License Tax on Persons
Engaged in the Business of Operating Tenement Houses”.

ISSUE:
 Whether or not the tax imposed by the ordinance falls
within any of the exception provided in Section 2 of the
Local Autonomy Act, thus imposing a double taxation.

HELD:

It is necessary to determine the true nature of the tax.

The appellees strongly maintain that it is a "property tax" or
"real estate tax," and not a "tax on persons engaged in any
occupation or business or exercising privileges," or a license
tax, or a privilege tax, or an excise tax. The tax in question
is not a real estate tax. A real estate tax is a direct tax on
the ownership of lands and buildings or other improvements
thereon and is payable regardless of whether the property is
used or not. The tax is usually single or indivisible, although
the land and building or improvements erected thereon are
assessed separately, except when the land and building or
improvements belong to separate owners. It is a fixed
proportion of the assessed value of the property taxed, and
requires, therefore, the intervention of assessors. It is
collected or payable at appointed times, and it constitutes a
superior lien on and is enforceable against the property
subject to such taxation, and not by imprisonment of the
owner. The tax imposed by the ordinance in question does
not possess the aforestated attributes.

Clearly, therefore, the tax in question is not a real

estate tax. "The spirit, rather than the letter, or an
ordinance determines the construction thereof, and the court
looks less to its words and more to the context, subject-
matter, consequence and effect. Accordingly, what is within
the spirit is within the ordinance although it is not within the
letter thereof, while that which is in the letter, although not
within the spirit, is not within the ordinance." It is within
neither the letter nor the spirit of the ordinance that an
additional real estate tax is being imposed; otherwise the
subject-matter would have been not merely tenement
houses. It is plain from the context of the ordinance that the
intention is to impose a license tax on the operation of
tenement houses, which is a form of business or calling.
Thus, there is no double taxation.

18. ALLIED BANKING Corporation vs. Quezon

City Government, G.R. No. 154126 October 11, 2005

FACTS:

On December 19, 1995, the Quezon City government

enacted City Ordinance No. 357, Series of 1995 Section 3 of
which reads: Section 3. The City Assessor shall undertake a
general provision of real property assessments using as
basis the newly approved schedule specified in Sections 1
and 2 hereof. He shall apply the new assessment level of
15% for residential and 40% for commercial and industrial
classification, respectively as prescribed in Section 8 (a) of
the 1993 Quezon City Revenue Code to determine the
assessed value of the land. On July 1, 1998, petitioner
purchased from Liwanag C. Natividad et al. a 1000 square
meter parcel of land located along Aurora Boulevard, Quezon
City. Petitioner paid the quarterly real estate tax for the
property from the first quarter of 1999 of to the third
quarter of 2000. Its tax payments for the 2nd, 3rd, and 4th
quarter of 1999, and 1st and 2nd quarter of 200 were,
however, made under protest. In its written protest,
petitioner assailed Section 3 of the ordinance as null and
void, contending that it is violative of the equal protection
and uniformity of taxation clauses of the Constitution and
that it is unjust, excessive, oppressive, unreasonable,
confiscatory and contrary to Section 130 of the Local
Government Code. Petitioner thereupon filed a petition for
prohibition and declaratory relief before the Quezon City RTC
for the declaration of nullity of Section 3 of the ordinance.
However, before respondents could file any responsive
pleading, respondent Quezon City Government enacted
Ordinance No. SP-1032, S-2001 which repealed the assailed
proviso in Section 3 of the 1995 Ordinance.

ISSUE:
 Whether or not Section 3 of City Ordinance No. 357
valid.

HELD:

No, The SC holds that the proviso in question is invalid

as it adopts a method of assessment or appraisal of real
property contrary to the Local Government Code, its
implementing Rules and Regulations and the Local
Assessment Regulations No. 1-92 issued by the Department
of Finance. Real properties shall be appraised at the current
and fair market value prevailing in the locality where the
property is situated and classified for assessment purposes
on the basis of its actual use. Local Assessment Regulations
No. 1-92 suggests three approaches in estimating the fair
market value, namely: (1) the sales analysis or market data
approach; (2) the income capitalization approach; and (3)
the replacement or reproduction cost approach. Given these
different approaches to guide the assessor, it can readily be
seen that the code did not intend to have a rigid rule for the
valuation of property, which is affected by a multitude of
circumstances which no rule could foresee or provide for.
Thus, what a thing has cost is no singular and infallible
criterion of its market value. Accordingly, this Court holds
that the proviso directing that the real property tax be based
on the actual amount reflected in the deed of conveyance or
the prevailing BIR zonal value is invalid not only because it
mandates an exclusive rule in determining the fair market
value but more so because it departs from the established
procedures stated in the Local Assessment Regulations No.
1-92 and unduly interferes with the duties statutorily placed
upon the local assessor by completely dispensing with his
analysis and discretion which the Code and the regulations
require to be exercised. An ordinance that contravened any
statute is ultra vires and void.

19. Chevron Philippines, Inc. vs. Bases

conversion Development Authority and Clark
 Development Corporation, G.R. No. 173863,
September 15, 2010.

FACTS:

On June 28, 2002, the Board of Directors of respondent

Clark Development Corporation (CDC) issued and approved
Policy Guidelines on the Movement of Petroleum Fuel to and
from the Clark Special Economic Zone. In one of its
provisions, it levied royalty fees to suppliers delivering
Coastal fuel from outside sources for Php0.50 per liter for
those delivering fuel to Clark Special Economic Zone (CSEZ)
locators not sanctioned by CDC and Php1.00 per litter for
those bringing-in petroleum fuel from outside sources. The
policy guidelines were implemented effective July 27, 2002.

The petitioner Chevron Philippines Inc (formerly Caltex

Philippines Inc) received a Statement of Account from CDC
billing them to pay the royalty fees amounting to
Php115,000 for its fuel sales from Coastal depot to Nanox
Philippines from August 1 to September 21, 2002. Petitioner,
contending that nothing in the law authorizes CDC to impose
royalty fees based on a per unit measurement of any
commodity sold within the special economic zone, protested
against the CDC and Bases Conversion Development
Authority (BCDA). They alleged that the royalty fees
imposed had no reasonable relation to the probably
expenses of regulation and that the imposition on a per unit
measurement of fuel sales was for a revenue generating
purpose, thus, akin to a “tax”.

Upon appeal, CA dismissed the case. CA held that in

imposing the royalty fees, CDC was exercising its right to
regulate the flow of fuel into CSEZ under the vested
exclusive right to distribute fuel within CSEZ pursuant to its
Joint Venture Agreement (JVA) with Subic Bay Metropolitan
Authority (SBMA) and Coastal Subic Bay Terminal, Inc.
(CSBTI) dated April 11, 1996. The fact that revenue is
incidentally also obtained does not make the imposition a
tax as long as the primary purpose of such imposition is
regulation. Respondents contended that the purpose of
royalty fees is to regulate the flow of fuel to and from the
CSEZ and revenue (if any) is just an incidental product.
They viewed it as a valid exercise of police power since it is
aimed at promoting the general welfare of public.

ISSUE:

Whether or not the act of CDC in royalty fees can be

considered as a valid exercise of police power.

HELD:

Yes. SC held that CDC was within the limits of the

police power of the State when it imposed royalty fees.

In distinguishing tax and regulation as a form of police

power, the determining factor is the purpose of the
implemented measure. If the purpose is primarily to raise
revenue, then it will be deemed a tax even though the
measure results in some form of regulation. On the other
hand, if the purpose is primarily to regulate, then it is
deemed a regulation and an exercise of the police power of
the state, even though incidentally, revenue is generated.

In this case, SC held that the subject royalty fee was

imposed for regulatory purposes and not for generation of
income or profits. The Policy Guidelines was issued to ensure
the safety, security, and good condition of the petroleum
fuel industry within the CSEZ. The questioned royalty fees
form part of the regulatory framework to ensure “free flow
or movement” of petroleum fuel to and from the CSEZ. The
fact that respondents have the exclusive right to distribute
and market petroleum products within CSEZ pursuant to its
JVA with SBMA and CSBTI does not diminish the regulatory
purpose of the royalty fee for fuel products supplied by
petitioner to its client at the CSEZ.

20. COMMISSIONER OF INTERNAL REVENUE,

Petitioner, vs. KUDOS METAL CORPORATION,
Respondent.

FACTS:

On April 15, 1999, respondent Kudos Metal Corporation

filed its Annual Income Tax Return (ITR) for the taxable year
1998.

Pursuant to a Letter of Authority dated September 7,

1999, the Bureau of Internal Revenue (BIR) served upon
respondent three Notices of Presentation of Records.
Respondent failed to comply with these notices, hence, the
BIR issued a Subpeona Duces Tecum dated September 21,
2006, receipt of which was acknowledged by respondent's
President, Mr. Chan Ching Bio.

A review and audit of respondent's records then

ensued.

Nelia Pasco (Pasco), respondent's accountant, executed

a Waiver of the Defense of Prescription received by the BIR
Enforcement Service and by the BIR Tax Fraud Division and
accepted by the Assistant Commissioner of the Enforcement
Service.This was followed by a second Waiver of Defense of
Prescription.

On August 25, 2003, the BIR issued a Preliminary

Assessment Notice for the taxable year 1998 against the
respondent. This was followed by a Formal Letter of Demand
with Assessment Notices for taxable year 1998, dated
September 26, 2003 which was received by respondent on
November 12, 2003.

Respondent challenged the assessments by filing its

"Protest on Various Tax Assessments" on December 3, 2003
and its "Legal Arguments and Documents in Support of
Protests against Various Assessments".

Believing that the government's right to assess taxes

had prescribed, respondent filed on August 27, 2004 a
Petition for Review with the CTA. Petitioner in turn filed his
Answer.
On October 4, 2005, the CTA Second Division issued a
Resolution canceling the assessment notices issued against
respondent for having been issued beyond the prescriptive
period. It found the first Waiver of the Statute of Limitations
incomplete and defective for failure to comply with the
provisions of Revenue Memorandum Order.

CTA En Banc affirmed the cancellation of the

assessment notices. Although it ruled that the Assistant
Commissioner was authorized to sign the waiver pursuant to
Revenue Delegation Authority Order (RDAO) No. 05-01, it
found that the first waiver was still invalid based on the
second and third grounds stated by the CTA Second
Division.

Petitioner argues that the government's right to assess

taxes is not barred by prescription as the two waivers
executed by respondent, through its accountant, effectively
tolled or extended the period within which the assessment
can be made. In disputing the conclusion of the CTA that the
waivers are invalid, petitioner claims that respondent is
estopped from adopting a position contrary to what it has
previously taken. Petitioner insists that by acquiescing to the
audit during the period specified in the waivers, respondent
led the government to believe that the "delay" in the process
would not be utilized against it. Thus, respondent may no
longer repudiate the validity of the waivers and raise the
issue of prescription.

Respondent maintains that prescription had set in due

to the invalidity of the waivers executed by Pasco, who
executed the same without any written authority from it, in
clear violation of RDAO No. 5-01. As to the doctrine of
estoppel by acquiescence relied upon by petitioner,
respondent counters that the principle of equity comes into
play only when the law is doubtful, which is not present in
the instant case.

ISSUES:

Whether or not the Court Of Tax Appeals En Banc erred

in ruling that the Government's right to assess unpaid taxes
of respondent prescribed.
HELD:

The petition is bereft of merit.

Section 203 of the National Internal Revenue Code of

1997 (NIRC) mandates the government to assess internal
revenue taxes within three years from the last day
prescribed by law for the filing of the tax return or the actual
date of filing of such... return, whichever comes later.
Hence, an assessment notice issued after the three-year
prescriptive period is no longer valid and effective.

Petitioner does not deny that the assessment notices

were issued beyond the three-year prescriptive period, but
claims that the period was extended by the two waivers
executed by respondent's accountant.

We do not agree.

Section 222 of the NIRC and RMO-20-90, which lays

down the procedure for the proper execution of waivers,
were not complied with. Most importantly, the date of
acceptance by the BIR was not indicated so there is no way
to determine if the suspension was made within the
prescriptive period. Due to the defects in the waivers, the
period to assess or collect taxes was not extended.
Consequently, the assessments were issued by the BIR
beyond the three-year period and are void.

We find no merit in petitioner's claim that respondent is

now estopped from claiming prescription since by executing
the waivers; it was the one which asked for additional time
to submit the required documents.

BIR cannot hide behind the doctrine of estoppel to

cover its failure to comply with RMO 20-90 and RDAO 05-01,
which the BIR itself issued. As stated earlier, the BIR failed
to verify whether a notarized written authority was given by
the respondent to its accountant, and to indicate the date of
acceptance and the receipt by the respondent of the
waivers. Having caused the defects in the waivers, the BIR
must bear the consequence. It cannot shift the blame to the
taxpayer. To stress, a waiver of the statute of limitations,
being a derogation of the taxpayer's right to security against
prolonged and unscrupulous investigations, must be
carefully and strictly construed.

21. Francisco I. Chavez vs. Jaime B. Ongpin and

Fidelina Cruz, G.R. No. 76778. June 6, 1990.

FACTS:

Section 21 of Presidential Decree No. 464 provides that

every five years starting calendar year 1978, there shall be
a provincial or city general revision of real property
assessments. The revised assessment shall be the basis for
the computation of real property taxes for the five
succeeding years.

On the strength of the aforementioned law, the general

revision of assessments was completed in 1984. However,
Executive Order No. 1019 was issued, which deferred the
collection of real property taxes based on the 1984 values to
January 1, 1988 instead of January 1, 1985.

On November 25, 1986, President Corazon Aquino

issued Executive order No. 73. It states that beginning
January 1, 1987, the 1984 assessments shall be the basis of
the real property collection. Thus, it effectively repealed
Executive Order No. 1019.

Francisco Chavez, a taxpayer and a land-owner,

questioned the constitutionality of Executive Order No. 73.
He alleges that it will bring unreasonable increase in real
property taxes. In fact, according to him, the application of
the assailed order will cause an excessive increase in real
property taxes by 100% to 400% on improvements and up
to 100% on land.

ISSUE:

Whether or not Executive Order no. 73 imposes

unreasonable increase in real property taxes, thus, should
be declared unconstitutional.

HELD:

No. The attack on Executive Order No. 73 has no legal

basis as the general revision of assessments is a continuing
process mandated by Section 21 of Presidential Decree No.
464. If at all, it is Presidential Decree No. 464 which should
be challenged as constitutionally infirm. However, Chavez
failed to raise any objection against said decree.

Without Executive Order No. 73, the basis for collection

of real property taxes will still be the 1978 revision of
property values. Certainly, to continue collecting real
property taxes based on valuations arrived at several years
ago, in disregard of the increases in the value of real
properties that have occurred since then, is not in
consonance with a sound tax system. Fiscal adequacy, which
is one of the characteristics of a sound tax system, requires
that sources of revenues must be adequate to meet
government expenditures and their variations.

22. Taganito Mining Corporation vs

Commissioner of Internal Revenue, CTA Case No.
4702, April 28, 1995.

FACTS:

Petitioner Taganito Mining Corporation is a domestic

corporation operating contract to explore, develop and
utilize mineral deposits found in a specified portion of a
mineral reservation area located in Surigao del Norte and
owned by the government of the Philippines. In exchange for
the privilege given, it is obliged to pay royalty to the
government over and above other taxes.

In July to December, 1989, petitioner removed,

shipped and sold substantial quantities of Benefited Nickel
Silicate ore and chromite ore and paid 5% excise taxes in
the amount of ₱6, 277, 993.65 based on the amount and
weight shown in the provisional invoice issued by it. These
metallic minerals are then shipped to Japanese buyers which
are analysed allegedly by independent surveyors upon
unloading at its port of destination. That analysis abroad
would oftentimes reveal a variance in market values for the
metallic minerals between that indicated in the temporary or
provisional invoice submitted by the petitioner and that
indicated in the final calculation sheet presented by the
buyers. Further, the price indicated in the final invoice is the
determinative of the amount that the buyer will eventually
pay petitioner. However, petitioner claims that there has
been overpayment of excise taxes already paid to the
government and argued that if it based its excise taxes on
the amount shown in the final invoice, which they assert is
the actual market value, they would have been required to
pay a lesser amount (₱5, 915, 364.83), hence, entitled to
claim for a refund of ₱362, 628.82. Petitioner further argued
that even the government in receiving the royalties due it
from the mining corporation based the 5% for nickel and 8%
for chromite royalty fees in the amount indicated in the final
invoice, which is the rate determined after its analysis
abroad.

Respondent argued among others and raised in her

memorandum the issue of prescription claiming that the
petitioner’s right to claim for a refund is already barred
having been filed beyond the two-year prescriptive period,
counted from the time specified by the law for payment and
not on the date of actual payment. The law requires that
excise taxes on mineral products should be paid upon
removal of the minerals as provided under Section 151 (c)
of the Tax Code. And lastly, she attacked the petitioner’s
failure to post a bond when it subscribed to quarterly
payments of the said taxes, the last payment of which was
made on January 19, 1990.

Petitioner maintains in its memorandum that

prescription not having been raised by respondent can no
longer raise it in issue.

ISSUE:

Whether or not petitioner is entitled to a refund.

HELD:

No. The Supreme court has ruled that if a tax is paid on

installments or only in part, the period is counted from the
date of the last or final payment until the entire tax liability
is fully paid. The period should be counted from full payment
because it is only then that one can determine if there was
overpayment.

As to the issue of prescription, Section 230 of the Tax

Code provides that the two-year prescriptive period for the
recovery of the tax erroneously or illegally collected shall be
reckoned from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after
payment.

Further, the law refers to the actual market value of

the minerals at the time these minerals were moved away
from the position it occupied, obviously referring to
Philippine valuation and analysis because it is in this country
where these minerals were extracted, removed and
eventually shipped abroad. The law even requires payment
of excise taxes upon the removal of the mineral or mineral
product or quarry resources from the locality where mined
or upon removal from customs custody in the case of
importations. Furthermore, it would be impossible for one to
comply with the date prescribed by law for the payment of
excise tax on the valuation done in the Philippines and then
later claim for a refund if it appears that the final analysis
accomplished abroad reveal a much lower price. This set-up
established by the petitioner is contrary to the principle of
administrative feasibility which is one of the basic principles
of a sound tax system. Tax laws should be capable of
convenient, just and effective administration which is why it
fixes a standard or a uniform tax base upon which taxes
should be paid.

Moreover, royalty, as distinguished from excise tax, is

rightfully paid to the government based on the amount
indicated in the final invoice because it is this amount which
will be received by the seller from the buyer as consideration
for the sale of mineral products.

Lastly, it is well settled that tax refund cases partake of

the nature of an exemption and hence, cannot be allowed
unless granted in the most explicit and categorical language.

23. Roxas vs. CTA ( ℅ PEKAS, Odani)

24. Tanada vs. Angara (GATT case)

The case is submitted to the Supreme Court for a

petition for certiorari, mandamus, and prohibition by Senator
Wigberto Tanada, together with other lawmakers, taxpayers,
and various non-government organizations in an attempt to
nullify the Philippine ratification of the World Trade
Organization (WTO) Agreement noting that it goes against
some of the provisions of the Constitution.

FACTS:

On April 15, 1994, Respondent Rizalino Navarro,

then Secretary of the Department of Trade and Industry,
representing the Government of the Republic of the
Philippines, signed in Marrakesh, Morocco, the Final Act
Embodying the Results of the Uruguay Round of
Multilateral Negotiations.

Secretary Navarro on behalf of the Republic of the

Philippines, agreed: (a) to submit, as appropriate, the WTO
Agreement for the consideration of their respective
competent authorities, with a view to seeking approval of
the Agreement in accordance with their procedures; and (b)
to adopt the Ministerial Declarations and Decisions.

On April 15, 1994, Respondent Rizalino Navarro,

then Secretary of the Department of Trade and Industry,
representing the Government of the Republic of the
Philippines, signed in Marrakesh, Morocco, the Final Act
Embodying the Results of the Uruguay Round of
Multilateral Negotiations.

Secretary Navarro on behalf of the Republic of the

Philippines, agreed: (a) to submit, as appropriate, the WTO
Agreement for the consideration of their respective
competent authorities, with a view to seeking approval of
the Agreement in accordance with their procedures; and (b)
to adopt the Ministerial Declarations and Decisions.

On August 13, 1994, the members of the Philippine

Senate received another letter from the President of the
Philippines stating the same information as above.

On December 9, 1994, the President of the Philippines

certified the necessity of the immediate adoption of P.S.
1083, a resolution entitled Concurring in the Ratification of
the Agreement Establishing the World Trade Organization.

On December 14, 1994, the Philippine Senate adopted

Resolution No. 97 which Resolved, as it is hereby resolved,
that the Senate concur, as it hereby concurs, in the
ratification by the President of the Philippines of the
Agreement Establishing the World Trade Organization.

From the foregoing facts, the petitioners argued that

the requirements of the WTO will run counter as to the
provisions of the Constitution because the “Filipino First”
policy of the country will be impaired and that certain
provisions in the WTO also limit the powers of both the
Congress and the Supreme Court.

ISSUES:

(1) Whether or not the petition present a justiciable

controversy. Otherwise stated, whether or not the petition
involve a political question over which this court has no
jurisdiction.

(2) Whether or not the provisions of the WTO

agreement and its three annexes contravene Sec. 19, Article
II, and Secs. 10 and 12, Article XII, of the Philippine
Constitution.

(3) Whether or not the provisions of said agreement

and its annexes limit, restrict, or impair the exercise of
legislative power by Congress.

(4) Whether or not said provisions unduly impair or

interfere with the exercise of judicial power by this court in
promulgating rules on evidence.

(5) Whether or not the concurrence of the Senate in

the WTO Agreement and its annexes are sufficient and/or
valid, considering that it did not include the final act,
ministerial declarations and decisions, and the
understanding on commitments in financial services.

HELD:

(1) The petition no doubt raises a justiciable

controversy. However, in deciding to take jurisdiction over
this petition, this Court will not review the wisdom of the
decision of the President and the Senate in enlisting the
country into the WTO, or pass upon the merits of trade
liberalization as a policy espoused by said international
body. Neither will it rule on the propriety of the
government’s economic policy of reducing/removing tariffs,
taxes, subsidies, quantitative restrictions, and other
import/trade barriers. Rather, it will only exercise its
constitutional duty to determine whether or not there had
been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Senate in ratifying
the WTO Agreement and its three annexes.

Note that the second issue is the lis mota or the main
issue of the case.

These are the supposed Constitutional provisions that

were allegedly violated by the WTO:

“Article II, Sec. 19: The State shall develop a self-

reliant and independent national economy effectively
controlled by Filipinos.”

“Article XII, Sec. 10: The Congress shall enact

measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos. In the
grant of rights, privileges, and concessions covering the
national economy and patrimony, the State shall give
preference to qualified Filipinos.”

“Article XII, Sec. 12: The State shall promote the

preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make
them competitive.”

The Supreme Court cited several cases, such as

Kilosbayan, Incorporated vs. Morato and Basco vs. Pagcor,
noting that the Constitutional provisions are not self-
executory but they “are used by the judiciary as aids or as
guides in the exercise of its power of judicial review, and by
the legislature in its enactment of laws.”

The Supreme Court further held, “On the other hand,

Secs. 10 and 12 of Article XII, apart from merely laying
down general principles relating to the national economy and
patrimony, should be read and understood in relation to the
other sections in said article, especially Secs. 1 and 13
thereof which read:

“Section 1. The goals of the national economy are a

more equitable distribution of opportunities, income, and
wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the
people; and an expanding productivity as the key to raising
the quality of life for all, especially the underprivileged.”

The State shall promote industrialization and full

employment based on sound agricultural development and
agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are
competitive in both domestic and foreign markets. However,
the State shall protect Filipino enterprises against unfair
foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy

and all regions of the country shall be given optimum
opportunity to develop.

As pointed out by the Solicitor General, Sec. 1 lays

down the basic goals of national economic development, as
follows:
 1. A more equitable distribution of opportunities,
income and wealth;

2. A sustained increase in the amount of goods and

services provided by the nation for the benefit of the people;
and

3. An expanding productivity as the key to raising the

quality of life for all especially the underprivileged.

With these goals in context, the Constitution then

ordains the ideals of economic nationalism (1) by expressing
preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national
economy and patrimony and in the use of Filipino labor,
domestic materials and locally-produced goods; (2) by
mandating the State to adopt measures that help make
them competitive; and (3) by requiring the State to develop
a self-reliant and independent national economy effectively
controlled by Filipinos. In similar language, the Constitution
takes into account the realities of the outside world as it
requires the pursuit of a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange
on the basis of equality and reciprocity; and speaks of
industries which are competitive in both domestic and
foreign markets as well as of the protection of Filipino
enterprises against unfair foreign competition and trade
practices.”

Looking at the provisions of the WTO, one of the main

goals of such agreement was to protect the weak and
developing economies, which then further strengthens the
Supreme Court’s decision that the WTO cannot be rendered
unconstitutional because instead of it going against the
Constitutional provisions of the Philippines, it actually helps
the country to become more economically stable. The
Supreme Court noted, “Within the WTO, developing
countries can form powerful blocs to push their economic
agenda more decisively than outside the Organization. This
is not merely a matter of practical alliances but a negotiating
strategy rooted in law. Thus, the basic principles underlying
the WTO Agreement recognize the need of developing
countries like the Philippines to share in the growth in
international trade commensurate with the needs of their
economic development.”

The Supreme Court also said that the WTO’s rules and
provisions would ultimately encourage domestic industries to
gradually develop into robust industries so as to be on the
same footing as foreign markets.

Although the WTO did not yet exist during the

formation of the 1987 Constitution, the Constitution is
designed to meet not only the present events but also future
and unknown circumstances.

(3) & (4) The petitioners claimed that one of the WTO
provisions derogates from the power to tax, which is
lodged in the Congress. And while the Constitution allows
Congress to authorize the President to fix tariff rates, import
and export quotas, tonnage and wharfage dues, and other
duties or imposts, such authority is subject to specified
limits and such limitations and restrictions as Congress may
provide.

Such WTO proviso states: Each Member shall ensure

the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed
Agreements.

Petitioners maintain that this undertaking unduly limits,

restricts and impairs Philippine sovereignty, specifically the
legislative power which under Sec. 2, Article VI of the 1987
Philippine Constitution is vested in the Congress of the
Philippines. It is an assault on the sovereign powers of the
Philippines because this means that Congress could not pass
legislation that will be good for our national interest and
general welfare if such legislation will not conform with the
WTO Agreement, which not only relates to the trade in
goods but also to the flow of investments and money as well
as to a whole slew of agreements on socio-cultural matters.

The Supreme Court answered, “By their inherent

nature, treaties really limit or restrict the absoluteness of
sovereignty. By their voluntary act, nations may surrender
some aspects of their state power in exchange for greater
benefits granted by or derived from a convention or pact.
After all, states, like individuals, live with coequals, and in
pursuit of mutually covenanted objectives and benefits, they
also commonly agree to limit the exercise of their otherwise
absolute rights. Thus, treaties have been used to record
agreements between States concerning such widely diverse
matters as, for example, the lease of naval bases, the sale
or cession of territory, the termination of war, the regulation
of conduct of hostilities, the formation of alliances, the
regulation of commercial relations, the settling of claims, the
laying down of rules governing conduct in peace and the
establishment of international organizations. The
sovereignty of a state therefore cannot in fact and in reality
be considered absolute. Certain restrictions enter into the
picture: (1) limitations imposed by the very nature of
membership in the family of nations and (2) limitations
imposed by treaty stipulations.”

For the fourth issue, the petitioners contended that:

“Petitioners aver that paragraph 1, Article 34 of the General
Provisions and Basic Principles of the Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS)
intrudes on the power of the Supreme Court to promulgate
rules concerning pleading, practice and procedures.” To
which the Supreme Court held, “By and large, the
arguments adduced in connection with our disposition of the
third issue -- derogation of legislative power - will apply to
this fourth issue also. Suffice it to say that the reciprocity
clause more than justifies such intrusion, if any actually
exists. Besides, Article 34 does not contain an unreasonable
burden, consistent as it is with due process and the concept
of adversarial dispute settlement inherent in our judicial
system.”

(5)Petitioners allege that the Senate concurrence in the

WTO Agreement and its annexes -- but not in the other
documents referred to in the Final Act, namely the
Ministerial Declaration and Decisions and the Understanding
on Commitments in Financial Services -- is defective and
insufficient and thus constitutes abuse of discretion. They
submit that such concurrence in the WTO Agreement alone
is flawed because it is in effect a rejection of the Final Act,
which in turn was the document signed by Secretary
Navarro, in representation of the Republic upon authority of
the President. They contend that the second letter of the
President to the Senate which enumerated what constitutes
the Final Act should have been the subject of concurrence of
the Senate.

A final act, sometimes called protocol de culture, is an

instrument which records the winding up of the proceedings
of a diplomatic conference and usually includes a
reproduction of the texts of treaties, conventions,
recommendations and other acts agreed upon and signed by
the plenipotentiaries attending the conference. It is not the
treaty itself. It is rather a summary of the proceedings of a
protracted conference which may have taken place over
several years.

As to the nullification of the Philippine ratification

of the WTO Agreement:

There was no grave abuse of discretion because the

findings were only mere abuse of discretion. To nullify an
act, it must be so gross and patent “to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law.
 Thus, the failure on the part of the petitioner to show
grave abuse of discretion resulted in the dismissal of the
petition.

The Supreme Court also added, “As to whether the

nation should join the worldwide march toward trade
liberalization and economic globalization is a matter that our
people should determine in electing their policy makers.
After all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a
member.”

“Duly enriched with original membership, keenly aware

of the advantages and disadvantages of globalization with its
online experience, and endowed with a vision of the future,
the Philippines now straddles the crossroads of an
international strategy for economic prosperity and stability
in the new millennium. Let the people, through their duly
authorized elected officers, make their free choice.”

25. LTO vs. City of Butuan

FACTS:

This case is about the Registration, Issuance of

Licenses and Franchises that the City of Butuan claims that
under the Local Government Code or RA 7610 they have
such power.

Butuan City claims that under the 1987 Constitution

which states that "Each local government unit shall have the
power to create its own sources of revenues and to levy
taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local governments.
The power to grant franchises, to register and issue licenses
in the operation of Tricycles is vested upon them. The RTC of
Butuan in its decision granted such power to the City of
Butuan anchoring its decision on the Constitution and the
provisions of the Local Government Code stating that LGU’s
shall employ means to raise its own revenue for its
existence. City of Butuan further contends that the power to
issue franchises, grant licenses and the power to oversee
the registration of tricycles has been transmitted to them by
the National Government. LTO countered that only the
power to grant franchises is the only power delegated to the
Local Government. A timely motion for reconsideration was
filed by LTO to the Court of Appeals which dismissed the
same. Aggrieved, the LTO comes before the Supreme Court
through a petition for certiorari.

ISSUE:

Whether or not under the present set up the power of

the Land Registration Office ("LTO") to register, tricycles in
particular, as well as to issue licenses for the driving thereof,
has likewise devolved to local government units.

HELD:

The LGU can only exercise the power to grant the

franchises for the operation of tricycles and not the power to
issue licenses and to grant registration however the power
granted is still subject to the supervision of the DOTC. The
specific provision states "Operating Conditions:

1. For safety reasons, no tricycles should operate on

national highways utilized by 4 wheel vehicles greater than 4
tons and where normal speed exceed 40 KPH. However, the
SB/SP may provide exceptions if there is no alternative
routes.

2. Zones must be within the boundaries of the

municipality/city. However, existing zones within more than
one municipality/city shall be maintained, provided that
operators serving said zone shall secure MTOP's from each
of the municipalities/cities having jurisdiction over the areas
covered by the zone.
 3. A common color for tricycles-for-hire operating in the
same zone may be imposed. Each unit shall be assigned and
bear an identification number, aside from its LTO license
plate number.
4. An operator wishing to stop service completely, or to
suspend service for more than one month, should report in
writing such termination or suspension to the SB/SP which
originally granted the MTOP prior thereto. Transfer to
another zone may be permitted upon application.

5. The MTOP shall be valid for three (3) years,

renewable for the same period. Transfer to another zone,
change of ownership of unit or transfer of MTOP shall be
construed as an amendment to an MTOP and shall require
appropriate approval of the SB/SP.

6. Operators shall employ only drivers duly licensed by

LTO for tricycles-for-hire.

7. No tricycle-for-hire shall be allowed to carry more

passengers and/or goods than it is designed for.

8. A tricycle-for-hire shall be allowed to operate like a

taxi service, i.e., service is rendered upon demand and
without a fixed route within a zone.”

The newly delegated powers pertain to the franchising

and regulatory powers theretofore exercised by the LTFRB
and not to the functions of the LTO relative to the
registration of motor vehicles and issuance of licenses for
the driving thereof The Commissioner of Land Transportation
and his deputies are empowered at anytime to examine and
inspect such motor vehicles to determine whether said
vehicles are registered, or are unsightly, unsafe, improperly
marked or equipped, or otherwise unfit to be operated on
because of possible excessive damage to highways, bridges
and other infrastructures. The LTO is additionally charged
with being the central depository and custodian of all records
of all motor vehicles. The reliance made by respondents on
the broad taxing power of local government units,
specifically under Section 133 of the Local Government
Code, is tangential. Police power and taxation, along with
eminent domain, are inherent powers of sovereignty which
the State might share with local government units by
delegation given under a constitutional or a statutory fiat. All
these inherent powers are for a public purpose and
legislative in nature but the similarities just about end there.
The basic aim of police power is public good and welfare.
Taxation, in its case, focuses on the power of government to
raise revenue in order to support its existence and carry out
its legitimate objectives. The power over tricycles granted
under Section 458(a)(3)(VI) of the Local Government Code
to LGUs is the power to regulate their operation and to grant
franchises for the operation thereof. The exclusionary clause
contained in the tax provisions of Section 133(1) of the Local
Government Code must not be held to have had the effect of
withdrawing the express power of LTO to cause the
registration of all motor vehicles and the issuance of licenses
for the driving thereof. These functions of the LTO are
essentially regulatory in nature, exercised pursuant to the
police power of the State, whose basic objectives are to
achieve road safety by insuring the road worthiness of these
motor vehicles and the competence of drivers prescribed by
R. A. 4136. Not insignificant is the rule that a statute must
not be construed in isolation but must be taken in harmony
with the extant body of laws. Wherefore the decision to
enjoin the Land Transportation Office in the registration and
issuance of licenses is reversed and set aside.

26. Tan vs. Del Rosario, G.R. No. 109289 October 3,

1994

FACTS:

Two consolidated cases assail the validity of RA 7496 or

the Simplified Net Income Taxation Scheme ("SNIT"), which
amended certain provisions of the NIRC, as well as the Rules
and Regulations promulgated by public respondents
pursuant to said law.

Petitioners posit that RA 7496 is unconstitutional as it

allegedly violates the following provisions of the
Constitution:

•Article VI, Section 26(1) — Every bill passed by the

Congress shall embrace only one subject which shall be
expressed in the title thereof.
 •Article VI, Section 28(1) — The rule of taxation shall
be uniform and equitable. The Congress shall evolve a
progressive system of taxation.

•Article III, Section 1 — No person shall be deprived of

. . . property without due process of law, nor shall any
person be denied the equal protection of the laws.

Petitioners contended that public respondents exceeded

their rule-making authority in applying SNIT to general
professional partnerships. Petitioner contends that the title
of HB 34314, progenitor of RA 7496, is deficient for being
merely entitled, "Simplified Net Income Taxation Scheme for
the Self-Employed and Professionals Engaged in the Practice
of their Profession" (Petition in G.R. No. 109289) when the
full text of the title actually reads, 'An Act Adopting the
Simplified Net Income Taxation Scheme For The Self-
Employed and Professionals Engaged In The Practice of Their
Profession, Amending Sections 21 and 29 of the National
Internal Revenue Code,' as amended. Petitioners also
contend it violated due process.

The Solicitor General espouses the position taken by

public respondents. The Court has given due course to both
petitions.

ISSUES:

1. Whether or not the tax law is unconstitutional for

violating due process.
2. Whether or not public respondents exceeded their
authority in promulgating Section 6, Revenue Regulations
No. 2-93, to carry out RA 7496.

HELD:

1. NO. The due process clause may correctly be

invoked only when there is a clear contravention of inherent
or constitutional limitations in the exercise of the tax power.
No such transgression is so evident in herein case.

Uniformity of taxation, like the concept of equal

protection, merely requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in
privileges and liabilities. Uniformity does not violate
classification as long as: (1) the standards that are used
therefor are substantial and not arbitrary, (2) the
categorization is germane to achieve the legislative purpose,
(3) the law applies, all things being equal, to both present
and future conditions, and (4) the classification applies
equally well to all those belonging to the same class.

What is apparent from the amendatory law is the

legislative intent to increasingly shift the income tax system
towards the schedular approach in the income taxation of
individual taxpayers and to maintain, by and large, the
present global treatment on taxable corporations. The Court
does not view this classification to be arbitrary and
inappropriate.

2. No. There is no evident intention of the law, either

before or after the amendatory legislation, to place in an
unequal footing or in significant variance the income tax
treatment of professionals who practice their respective
professions individually and of those who do it through a
general professional partnership.

27. COMMISSIONER OF INTERNAL REVENUE and

COMMISSIONER OF CUSTOMS, petitioners, vs.
HON. APOLINARIO B. SANTOS, in his capacity as
Presiding Judge of the Regional Trial Court,
Branch 67, Pasig City; ANTONIO M. MARCO;
JEWELRY BY MARCO & CO., INC., and GUILD OF
PHILIPPINE JEWELLERS, INC., respondents.

FACTS:

On August 5, 1988, Felicidad L. Viray, then Regional

Director, Region No. 4-A of the Bureau of Internal Revenue,
acting for and in behalf of the Commissioner of Internal
Revenue, issued Regional Mission Order No. 109-88 to BIR
officers, led by Eliseo Corcega, to conduct surveillance,
monitoring, and inventory of all imported articles of Hans
Brumann, Inc., and place the same under preventive
embargo. The duration of the mission was from August 8 to
August 20, 1988.
 On August 17, 1988, pursuant to the aforementioned
Mission Order, the BIR officers proceeded to the
establishment of Hans Brumann, Inc., served the Mission
Order, and informed the establishment that they were going
to make an inventory of the articles involved to see if the
proper taxes thereon have been paid. They then made an
inventory of the articles displayed in the cabinets with the
assistance of an employee of the establishment. They listed
down the articles, which list was signed by the assistant
employee. They also requested the presentation of proof of
necessary payments for excise tax and value-added tax on
said articles.

The BIR officers requested the establishment not to sell

the articles until it can be proven that the necessary taxes
thereon have been paid. Accordingly, Mr. Hans Brumann,
the owner of the establishment, signed a receipt for Goods,
Articles, and Things Seized under Authority of the National
Internal Revenue Code (dated August 17, 1988),
acknowledging that the articles inventoried have been seized
and left in his possession, and promising not to dispose of
the same without authority of the Commissioner of Internal
Revenue pending investigation.

Subsequently, BIR officer Eliseo Corcega submitted to

his superiors a report of the inventory conducted and a
computation of the value-added tax and ad valorem tax on
the articles for evaluation and disposition.

Mr. Hans Brumann, the owner of the establishment,

never filed a protest with the BIR on the preventive embargo
of the articles.

On October 17, 1988, a Letter of Authority was issued

by Deputy Commissioner Eufracio D. Santos to BIR officers
to examine the books of accounts and other accounting
records of Hans Brumann, Inc., for "stocktaking
investigation for excise tax purposes for the period January
1, 1988 to present". In a letter dated October 27, 1988, in
connection with the physical count of the inventory (stocks
on hand) pursuant to said Letter of Authority, Hans
Brumann, Inc. was requested to prepare and make available
to the BIR the documents indicated therein.
 Hans Brumann, Inc., did not produce the documents
requested by the BIR.

Similar Letter of Authority were issued to BIR officers

to examine the books of accounts and other accounting
records of Miladay Jewels, Inc., Mercelles, Inc., Solid Gold
International Traders, Inc., and Diagem Trading Corporation
for "stocktaking/investigation far excise tax purpose for the
period January 1, 1988 to present."

In the case of Miladay Jewels, Inc. and Mercelles, Inc.,

there is no account of what actually transpired in the
implementation of the Letters of Authority.

In the case of Solid Gold International Traders

Corporation, the BIR officers made an inventory of the
articles in the establishment. The same is true with respect
to Diagem Traders Corporation.

On November 29, 1988, Antonio M. Marco and Jewelry

By Marco & Co., Inc. filed with the Regional Trial Court a
petition for declaratory relief with writ of preliminary
injunction and/or temporary restraining order against the
petitioners and Revenue Regional Director Felicidad L. Viray
praying that Sections 126, 127(a) and (b) and 150(a) of the
National Internal Revenue Code and Hdg. No. 71.01, 71.02,
71.03, and 71.04, Chapter 71 of the Tariff and Customs
Code of the Philippines be declared unconstitutional and
void, and that the Commissioner of Internal Revenue and
Customs be prevented or enjoined from issuing mission
orders and other orders of similar nature.

On February 9, 1989, the petitioners filed their answer

to the petition.

On October 16, 1989, the respondents filed a Motion

with Leave to Amend Petition by including as petitioner the
Guild of Philippine Jewelers, Inc., which motion was granted.
 Hon. Apolinario B. Santos, Presiding Judge of Branch 67
of the Regional Trial Court of Pasig City rendered a decision
declaring Sections 126, 127(a) and (b) and 150(a) of the
National Internal Revenue Code and Hdg. No. 71.01, 71.02,
71.03, and 71.04, Chapter 71 of the Tariff and Customs
Code of the Philippines INOPERATIVE and WITHOUT FORCE
and EFFECT.

ISSUE:

Whether or not the Regional Trial Courts have the

authority to declare a tax law inoperative and without force
and effect or otherwise unconstitutional.

HELD:

NO. There is no doubt in the Court's mind, despite

protestations to the contrary, that respondent judge
encroached upon matters properly falling within the province
of legislative functions. In citing as basis for his decision
unproven comparative data pertaining to differences
between tax rates of various Asian countries, and concluding
that the jewelry industry in the Philippines suffers as a
result, the respondent judge took it upon himself to supplant
legislative policy regarding jewelry taxation. In advocating
the abolition of local tax and duty on jewelry simply because
other countries have adopted such policies, the respondent
judge overlooked the fact that such matters are not for him
to decide. There are reasons why jewelry, a non-essential
item, is taxed as it is in this country, and these reasons,
deliberated upon by our legislature, are beyond the reach of
judicial questioning.

The trial court is not the proper forum for the

ventilation of the issues raised by the private respondents.
The arguments they presented focus on the wisdom of the
provisions of law which they seek to nullify. Regional Trial
Courts can only look into the validity of a provision, that is,
whether or not it has been passed according to the
procedures laid down by law, and thus cannot inquire as to
the reasons for its existence. Granting arguendo that the
private respondents may have provided convincing
arguments why the jewelry industry in the Philippines should
not be taxed as it is, it is to the legislature that they must
resort to for relief, since with the legislature primarily lies
the discretion to determine the nature (kind), object
(purpose), extent (rate), coverage (subjects) and situs
(place) of taxation. This Court cannot freely delve into those
matters which, by constitutional fiat, rightly rest on
legislative judgment.

28. MACEDA vs ERB

FACTS:

Petroleum companies, Caltex, Shell and Petron, filed

separate applications with the Energy Regulatory Board to
increase the wholesale posted prices of petroleum products,
and meanwhile, for provisional authority to increase
temporarily such wholesale posted prices pending further
proceedings.

The Board, in a joint Order, granted provisional relief

and authorized said applicants provisional increase of P1.42
per liter.

Petitioners submit that the Board, in decreeing an

increase, had created a new source for the Oil Price
Stabilization Fund (OPSF), or otherwise that it had levied a
tax, a power vested in the legislature, and/or that it had “re-
collected” ad valorem taxes on oil which RA No. 6965 had
abolished.

ISSUE:

Whether or not the Order constitutes an act of taxation.

HELD:

Senator Maceda's attack on the Order in question on

premises that it constitutes an act of taxation or that it
negates the effects of Republic Act No. 6965, cannot
prosper.

The Board Order authorizing the proceeds generated by

the increase to be deposited to the OPSF is not an act of
taxation. It is authorized by Presidential Decree No. 1956, as
amended by Executive Order No. 137, as follows:

SECTION 8. There is hereby created a Trust Account in

the books of accounts of the Ministry of Energy to be
designated as Oil Price Stabilization Fund (OPSF) for the
purpose of minimizing frequent price changes brought about
by exchange rate adjustments and/or changes in world
market prices of crude oil and imported petroleum products.
The Oil Price Stabilization Fund (OPSF) may be sourced from
any of the following:

● Any increase in the tax collection from ad valorem tax

or customs duty imposed on petroleum products
subject to tax under this Decree arising from exchange
rate adjustment, as may be determined by the Minister
of Finance in consultation with the Board of Energy;

● Any increase in the tax collection as a result of the

lifting of tax exemptions of government corporations,
as may be determined by the Minister of Finance in
consultation with the Board of Energy;

● Any additional amount to be imposed on petroleum

products to augment the resources of the Fund through
an appropriate Order that may be issued by the Board
of Energy requiring payment by persons or companies
engaged in the business of importing, manufacturing
and/or marketing petroleum products;

● Any resulting peso cost differentials in case the actual

peso costs paid by oil companies in the importation of
crude oil and petroleum products is less than the peso
costs computed using the reference foreign exchange
rates as fixed by the Board of Energy.

Evidently, authorities have been unable to collect

enough taxes necessary to replenish the OPSF as provided
by Presidential Decree No. 1956, and hence, there was no
available alternative but to hike existing prices.

The OPSF, as the Court held in the aforecited CACP

cases, must not be understood to be a funding designed to
guarantee oil firms' profits although as a subsidy, or a trust
account, the Court has no doubt that oil firms make money
from it. As we held there, however, the OPSF was
established precisely to protect the consuming public from
the erratic movement of oil prices and to preclude oil
companies from taking advantage of fluctuations occurring
every so often. As a buffer mechanism, it stabilizes domestic
prices by bringing about a uniform rate rather than leaving
pricing to the caprices of the market.

In all likelihood, therefore, an oil hike would have

probably been imminent, with or without trouble in the Gulf,
although trouble would have probably aggravated it.

29. ATTORNEYS HUMBERTO BASCO, EDILBERTO

BALCE, SOCRATES MARANAN AND LORENZO
SANCHEZ, petitioners, vs. PHILIPPINE
AMUSEMENTS AND GAMING CORPORATION
(PAGCOR), respondent, G.R. No. 91649, May 14,
1991.

FACTS:

In 1977, the Philippine Amusements and Gaming

Corporation (PAGCOR) was created by Presidential Decree
1067-A. PD 1067-B meanwhile granted PAGCOR the power
“to establish, operate and maintain gambling casinos on land
or water within the territorial jurisdiction of the Philippines.”
PAGCOR’s operation was a success hence in 1978, PD 1399
was passed which expanded PAGCOR’s power. In 1983,
PAGCOR’s charter was updated through PD 1869. PAGCOR’s
charter provides that PAGCOR shall regulate and centralize
all games of chance authorized by existing franchise or
permitted by law. Section 1 of PD 1869 provides:

Section 1. Declaration of Policy. It is hereby

declared to be the policy of the State to centralize and
integrate all games of chance not heretofore authorized by
existing franchises or permitted by law.

Atty. Humberto Basco and several other lawyers

assailed the validity of the law creating PAGCOR. They claim
that PD 1869 is unconstitutional because a) it violates the
equal protection clause and b) it violates the local autonomy
clause of the constitution.
Basco et al argued that PD 1869 violates the equal
protection clause because it legalizes PAGCOR-conducted
gambling, while most other forms of gambling are outlawed,
together with prostitution, drug trafficking and other vices.

Anent the issue of local autonomy, Basco et al contend

that P.D. 1869 forced cities like Manila to waive its right to
impose taxes and legal fees as far as PAGCOR is concerned;
that Section 13 par. (2) of P.D. 1869 which exempts
PAGCOR, as the franchise holder from paying any “tax of
any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or
Local” is violative of the local autonomy principle.

ISSUE:

1. Whether or not PD 1869 violates the equal

protection clause.
2. Whether or not PD 1869 violates the local autonomy
clause.

HELD:

1. No. Just how PD 1869 in legalizing gambling

conducted by PAGCOR is violative of the equal protection is
not clearly explained in Basco’s petition. The mere fact that
some gambling activities like cockfighting (PD 449) horse
racing (RA 306 as amended by RA 983), sweepstakes,
lotteries and races (RA 1169 as amended by BP 42) are
legalized under certain conditions, while others are
prohibited, does not render the applicable laws, PD. 1869 for
one, unconstitutional.

Basco’s posture ignores the well-accepted meaning of

the clause “equal protection of the laws.” The clause does
not preclude classification of individuals who may be
accorded different treatment under the law as long as the
classification is not unreasonable or arbitrary. A law does not
have to operate in equal force on all persons or things to be
conformable to Article III, Sec 1 of the Constitution. The
“equal protection clause” does not prohibit the Legislature
from establishing classes of individuals or objects upon
which different rules shall operate. The Constitution does not
require situations which are different in fact or opinion to be
treated in law as though they were the same.

2. No. Section 5, Article 10 of the 1987 Constitution

provides:

Each local government unit shall have the power to

create its own source of revenue and to levy taxes, fees, and
other charges subject to such guidelines and limitation as
the congress may provide, consistent with the basic policy
on local autonomy. Such taxes, fees and charges shall
accrue exclusively to the local government.

A close reading of the above provision does not violate

local autonomy (particularly on taxing powers) as it was
clearly stated that the taxing power of LGUs are subject to
such guidelines and limitation as Congress may provide.

Further, the City of Manila, being a mere Municipal

corporation has no inherent right to impose taxes. The
Charter of the City of Manila is subject to control by
Congress. It should be stressed that “municipal corporations
are mere creatures of Congress” which has the power to
“create and abolish municipal corporations” due to its
“general legislative powers”. Congress, therefore, has the
power of control over Local governments. And if Congress
can grant the City of Manila the power to tax certain
matters, it can also provide for exemptions or even take
back the power.

Further still, local governments have no power to tax

instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original
charter, PD 1869. All of its shares of stocks are owned by
the National Government. Otherwise, its operation might be
burdened, impeded or subjected to control by a mere Local
government.
 This doctrine emanates from the “supremacy” of the
National Government over local governments.

30. LOZADA VS. COMMISSIONER

FACTS:

Petitioner Lozada claims that he is a taxpayer and a

bonafide elector of Cebu City and a transient voter of
Quezon City, Metro Manila, who desires to run for the
position in the Batasang Pambansa; while petitioner Romeo
B. Igot alleges that, as a taxpayer, he has standing to
petition by mandamus the calling of a special election as
mandated by the 1973 Constitution. As reason for their
petition, petitioners allege that they are "... deeply
concerned about their duties as citizens and desirous to
uphold the constitutional mandate and rule of law ...; that
they have filed the instant petition on their own and in
behalf of all other Filipinos since the subject matters are of
profound and general interest. "

The respondent COMELEC, represented by counsel,

opposes the petition alleging, substantially, that 1)
petitioners lack standing to file the instant petition for they
are not the proper parties to institute the action; 2) this
Court has no jurisdiction to entertain this petition; and 3)
Section 5(2), Article VIII of the 1973 Constitution does not
apply to the Interim Batasang Pambansa.

ISSUE:

Whether or not petitioners lack standing to file the

instant petition for they are not the proper parties to
institute the action.

HELD:
 As taxpayers, petitioners may not file the instant
petition, for nowhere therein is it alleged that tax money is
being illegally spent. The act complained of is the inaction of
the COMELEC to call a special election, as is allegedly its
ministerial duty under the constitutional provision above
cited, and therefore, involves no expenditure of public funds.
It is only when an act complained of, which may include a
legislative enactment or statute, involves the illegal
expenditure of public money that the so-called taxpayer suit
may be allowed. What the case at bar seeks is one that
entails expenditure of public funds which may be illegal
because it would be spent for a purpose that of calling a
special election which, as will be shown, has no authority
either in the Constitution or a statute.

As voters, neither have petitioners the requisite interest

or personality to qualify them to maintain and prosecute the
present petition. The unchallenged rule is that the person
who impugns the validity of a statute must have a personal
and substantial interest in the case such that he has
sustained, or will sustain, direct injury as a result of its
enforcement. In the case, the alleged inaction of the
COMELEC to call a special election to fill-up the existing
vacancies in the Batasang Pambansa, standing alone, would
adversely affect only the generalized interest of all citizens.
Petitioners' standing to sue may not be predicated upon an
interest of the kind alleged here, which is held in common by
all members of the public because of the necessarily
abstract nature of the injury supposedly shared by all
citizens. Concrete injury, whether actual or threatened, is
that indispensable element of a dispute which serves in part
to cast it in a form traditionally capable of judicial resolution.
When the asserted harm is a "generalized grievance" shared
in substantially equal measure by all or a large class of
citizens, that harm alone normally does not warrant exercise
of jurisdiction. As adverted to earlier, petitioners have not
demonstrated any permissible personal stake, for petitioner
Lozada’s interest as an alleged candidate and as a voter are
not sufficient to confer standing. Petitioner Lozada does not
only fail to inform the Court of the region he wants to be a
candidate but makes indiscriminate demand that special
election be called throughout the country.

31. Chavez vs. PCGG ( ℅ BALUYAN, Janina)

32. GONZALES VS. NARVASA, GR No. 140835,

August 14 2000.

FACTS:

Petitioner Ramon A. Gonzales, in his capacity as a

citizen and taxpayer, filed a petition for prohibition and
mandamus filed on December 9, 1999, assailing the
constitutionality of the creation of the Preparatory
Commission on Constitutional Reform (PCCR) and of the
positions of presidential consultants, advisers and assistants.
The Preparatory Commission on Constitutional Reform
(PCCR) was created by President Estrada on November 26,
1998 by virtue of Executive Order No. 43 (E.O. No. 43) in
order “to study and recommend proposed amendments
and/or revisions to the 1987 Constitution, and the manner of
implementing the same.” Petitioner disputes the
constitutionality of the PCCR based on the grounds that it is
a public office which only the legislature can create by way
of a law.

ISSUE:

Whether or not the petitioner has a legal standing to

assail the constitutionality of Executive Order No. 43.

HELD:

The Court dismissed the petition. A citizen acquires

standing only if he can establish that he has suffered some
actual or threatened injury as a result of the allegedly illegal
conduct of the government; the injury is fairly traceable to
the challenged action; and the injury is likely to be
redressed by a favorable action. Petitioner has not shown
that he has sustained or is in danger of sustaining any
personal injury attributable to the creation of the PCCR. If at
all, it is only Congress, not petitioner, which can claim any
“injury” in this case since, according to petitioner, the
President has encroached upon the legislature’s powers to
create a public office and to propose amendments to the
Charter by forming the PCCR. Petitioner has sustained no
direct, or even any indirect, injury.

Neither does he claim that his rights or privileges have

been or are in danger of being violated, nor that he shall be
subjected to any penalties or burdens as a result of the
PCCR’s activities. Clearly, petitioner has failed to establish
his locus standi so as to enable him to seek judicial redress
as a citizen.

Furthermore, a taxpayer is deemed to have the

standing to raise a constitutional issue when it is established
that public funds have been disbursed in alleged
contravention of the law or the Constitution. It is readily
apparent that there is no exercise by Congress of its taxing
or spending power. The PCCR was created by the President
by virtue of E.O. No. 43, as amended by E.O. No. 70. Under
section 7 of E.O. No. 43, the amount of P3 million is
“appropriated” for its operational expenses “to be sourced
from the funds of the Office of the President.” Being that
case, petitioner must show that he is a real party in interest
- that he will stand to be benefited or injured by the
judgment or that he will be entitled to the avails of the suit.
Nowhere in his pleadings does petitioner presume to make
such a representation.

33. BAYAN vs. Executive Secretary, G.R. No.

138570, October 10, 2000

FACTS:

After much negotiation with the respective

representatives of both the Philippines and the United States
of America (US) that started on July 18, 1997, then
President Fidel V. Ramos approved said agreement, which
was respectively signed by Department of Foreign Affairs
(DFA) Secretary Domingo Siazon and US Ambassador
Thomas Hubbard on February 10, 1998.

On October 5, 1998, then President Joseph E. Estrada,

through respondent Secretary of Foreign Affairs, ratified the
Visiting Forces Agreement(VFA).

The VFA, for which Senate concurrence was sought and

received on May 27, 1999. On June 1, 1999, the VFA
officially entered into force after an Exchange of Notes
between respondent Secretary Siazon and US Ambassador
Hubbard.

The VFA’s Articles’ constitutionality were challenged on

several grounds. Regarding duties, taxes and other similar
charges, the following Article provides:

Article VII

Importation and Exportation

1. United States Government equipment, materials,

supplies, and other property imported into or acquired
in the Philippines by or on behalf of the United States
armed forces in connection with activities to which this
agreement applies, shall be free of all Philippine duties,
taxes and other similar charges. Xxx

2. Reasonable quantities of personal baggage, personal

effects, and other property for the personal use of
United States personnel may be imported into and used
in the Philippines free of all duties, taxes and other
similar charges during the period of their temporary
stay in the Philippines. xxx

ISSUE:

Whether or not the petitioners have legal standing as

concerned citizens, taxpayers or legislators to question the
constitutionality of the VFA.

HELD:
 No. A party bringing a suit challenging the
constitutionality of a law, act, or statute must show ―not
only that the law is invalid, but also that he has sustained or
in is in immediate, or imminent danger of sustaining some
direct injury as a result of its enforcement, and not merely
that he suffers thereby in some indefinite way. He must
show that he has been, or is about to be, denied some right
or privilege to which he is lawfully entitled, or that he is
about to be subjected to some burdens or penalties by
reason of the statute complained of.

Petitioners failed to show, to the satisfaction of this

Court, that they have sustained, or are in danger of
sustaining any direct injury as a result of the enforcement of
the VFA. As taxpayers, petitioners have not established that
the VFA involves the exercise by Congress of its taxing or
spending powers. A taxpayer’s suit refers to a case where
the act complained of directly involves the illegal
disbursement of public funds derived from taxation.

Clearly, inasmuch as no public funds raised by taxation

are involved in this case, and in the absence of any
allegation by petitioners that public funds are being
misspent or illegally expended, petitioners, as taxpayers,
have no legal standing to assail the legality of the VFA.

Similarly, the petitioner-legislators (Tanada, Arroyo,

etc.) do not possess the requisite locus standi to sue. In the
absence of a clear showing of any direct injury to their
person or to the institution to which they belong, they
cannot sue.

The Integrated Bar of the Philippines (IBP) is also

stripped of standing in these cases. The IBP lacks the legal
capacity to bring this suit in the absence of a board
resolution from its Board of Governors authorizing its
National President to commence the present action.

Consolidated petitions for certiorari and injunction were

dismissed.

34. RAOUL B. DEL MAR vs. PHILIPPINE

AMUSEMENT AND GAMING CORPORATION, BELLE
 JAI-ALAI CORPORATION, FILIPINAS GAMING
ENTERTAINMENT TOTALIZATOR CORPORATION

FACTS:

The Philippine Amusement and Gaming Corporation is a

government-owned and controlled corporation organized
and existing under Presidential Decree No. 1869 which was
enacted on July 11, 1983. Pursuant to Sections 1 and 10 of
P.D. No. 1869, respondent PAGCOR requested for legal
advice from the Secretary of Justice as to whether or not it
is authorized by its Charter to operate and manage jai-alai
frontons in the country. In its Opinion No. 67, Series of 1996
dated July 15, 1996, the Secretary of Justice opined that the
authority of PAGCOR to operate and maintain games of
chance or gambling extends to jai-alai which is a form of
sport or game played for bets and that the Charter of
PAGCOR amounts to a legislative franchise for the
purpose. Similar favorable opinions were received by
PAGCOR from the Office of the Solicitor General per its letter
dated June 3, 1996 and the Office of the Government
Corporate Counsel under its Opinion No. 150 dated June 14,
1996. Thus, PAGCOR started the operation of jai-alai
frontons.

On June 17, 1999, respondent PAGCOR entered into

an Agreement with private respondents Belle Jai Alai
Corporation (BELLE) and Filipinas Gaming Entertainment
Totalizator Corporation (FILGAME) wherein it was agreed
that BELLE will make available to PAGCOR the required
infrastructure facilities including the main fronton, as well as
provide the needed funding for jai-alai operations with no
financial outlay from PAGCOR, while PAGCOR handles the
actual management and operation of jai-alai.

Petitioners Raoul B. del Mar, Federico S. Sandoval II,

Michael T. Defensor, and intervenor Juan Miguel Zubiri,
are suing as taxpayers and in their capacity as members of
the House of Representatives questioning the validity of the
agreement.

ISSUE:

Whether or not the petitioners have legal standing to

file a taxpayer's suit.
HELD:

No, the petitioners have no legal standing to file a

taxpayer's suit because the record is barren of evidence that
the operation and management of jai-alai by the PAGCOR
involves expenditure of public money.
A party suing as a taxpayer must specifically prove that
he has sufficient interest in preventing the illegal
expenditure of money raised by taxation. In essence,
taxpayers are allowed to sue where there is a claim of illegal
disbursement of public funds, or that public money is being
deflected to any improper purpose, or where petitioners
seek to restrain respondent from wasting public funds
through the enforcement of an invalid or unconstitutional
law.
In the petitions at bar, the Agreement entered into
between PAGCOR and private respondents BELLE and
FILGAME will show that all financial outlay or capital
expenditure for the operation of jai-alai games shall be
provided for by the latter. Thus, the Agreement provides,
among others, that: PAGCOR shall manage, operate and
control the jai-alai operation at no cost or financial risk to it
(Sec. 1[A][1]); BELLE shall provide funds, at no cost to
PAGCOR, for all capital expenditures (Sec. 1[B][1]); BELLE
shall make available to PAGCOR, at no cost to PAGCOR, the
use of the integrated nationwide network of on-line
computerized systems (Sec. 1[B][2]); FILGAME shall make
available for use of PAGCOR on a rent-free basis the jai-alai
fronton facilities (Sec. 1 [C][1]); BELLE & FILGAME jointly
undertake to provide funds, at no cost to PAGCOR, for pre-
operating expenses and working capital (Sec. 1 [D][1]); and
that BELLE & FILGAME will provide PAGCOR with goodwill
money in the amount of P 200 million (Sec. 1 [D][2]). In
fine, the record is barren of evidence that the operation and
management of jai-alai by the PAGCOR involves expenditure
of public money.
Be that as it may, the court finds and so holds that as
members of the House of Representatives, petitioners have
legal standing to file the petitions considering that the case
involves an issue of overarching significance to our society.
 35. MIRANDA vs. CARREON, G.R. No. 143540. April
11, 2003

FACTS:

Vice Mayor Amelita appointed the respondents while

serving as acting mayor of Santiago City to various positions
in the city government. Their appointments were made
permanent based on the evaluation made by the City
Personnel Selection and Promotion Board (PSPB) created
pursuant to Republic Act No. 7160.The Civil Service
Commission (CSC) approved the appointments.

When Mayor Jose Miranda reassumed his post he

issued an order terminating the respondents they performed
poorly during the probationary period. Respondents
appealed to the CSC which reversed the order of Mayor
Miranda.
Meanwhile, the COMELEC disqualified Mayor Jose
Miranda as a mayoralty candidate in the 1998 May elections.
His son Joel G. Miranda, herein petitioner, substituted for
him and was proclaimed Mayor of Santiago City who then
filed a motion for reconsideration of the CSC Resolution but
was denied.

Petitioner then filed with the Court of Appeals a petition

for review on certiorari. The CA affirmed in toto the CSC
resolution. The petitioner filed a motion for reconsideration,
but before it could be resolved the proclamation of the
petitioner as Mayor was set aside and Vice Mayor Navarro
was declared as City Mayor who then filed a Motion to
Withdraw the Motion for Reconsideration which was granted
hence the herein respondents were reinstated.

In this petition, petitioner Joel G. Miranda contends

that the Court of Appeals erred in affirming the CSC
Resolution declaring that the termination of respondents
services is illegal and ordering their reinstatement to their
former positions with payment of backwages.
 The respondents claim that since petitioner ceased to
be Mayor of Santiago City, he has no legal personality to file
the instant petition and, therefore, the same should be
dismissed.

The petitioner contends that as a taxpayer, he has a

legal interest in the case at bar, hence, can lawfully file this
petition.

ISSUE:

Whether or not the case at bar qualifies as a taxpayer’s

suit.

HELD:

No. It bears stressing that a taxpayer’s suit refers to a

case where the act complained of directly involves the illegal
disbursement of public funds from taxation. The issue in this
case is whether respondent’s services were illegally
terminated. Clearly, it does not involve the illegal
disbursement of public funds, hence, petitioner’s action
cannot be considered a taxpayer's suit. Petitioner insists
though that as a taxpayer, he is a real party-in-interest such
contention is misplaced. Section 2, Rule 3 of the same Rules
provides that a real party in interest is the party who stands
to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in
interest.