DIGEST- TAX CASES PART II

INHERENT

1.

a. LUTZ vs. ARANETA GR L-7859 December 22, 1955

Contention:

Taxes collected under Commonwealth act, Section 3 is unconstitutional and void,

being levied for the aid and support of the sugar industry exclusively, which in plaintiff's
opinion is not a public purpose for which a tax may be constitutionally levied

SC:

It appears rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. At any rate, it is inherent in
the power to tax that a state be free to select the subjects of taxation, and it has been
repeatedly held that "inequalities which result from a singling out of one particular class
for taxation, or exemption infringe no constitutional limitation"

2.

c. PEPSI COLA BOTTLING COMPANY OF THE PHILIPPINES, INC. vs MUNICIPALITY OF

TANAUAN, LEYTE GR L-31156 February 27, 1976

Contention:

Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the
legislative power to enact and vest in local governments the power of local taxation

SC:

The power of taxation is an essential and inherent attribute of sovereignty,

belonging as a matter of right to every independent government, without being expressly
conferred by the people. It is a power that is purely legislative and which the central
legislative body cannot delegate either to the executive or judicial department of the
government without infringing upon the theory of separation of powers. The exception,
however, lies in the case of municipal corporations, to which, said theory does not apply.
Legislative powers may be delegated to local governments in respect of matters of local
concern. This is sanctioned by immemorial practice. By necessary implication, the
legislative power to create political corporations for purposes of local self-government
carries with it the power to confer on such local governmental agencies the power to tax.
4.

a. BISAYA LAND TRANSPORTATION CO., INC vs. COLLECTOR OF INTERNAL REVENUE

L-12100 and L-11812, May 29, 1959

Contention:

The company maintains that the equipment and materials it purchased from
agencies of the US government are not subject to compensating tax because they were
acquired not for business purpose but in furtherance of the war efforts.

SC:

The company was engaged in business as a public utility operation and such
services as it may have rendered to the armed forces were merely incidental to the said
business. Neither it is exempt from common carrier’s percentage tax by reason of such
service to the armed forces, because the party being taxed is not said organization, but
the company.

EQUAL PROTECTION

2.

b. KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS vs. CIR,

GR81311, 81820, 81921, 82152, June 30 1988

Contention

EO 273, Sec. 103(r) of the National Internal Revenue Code, more particularly the
phrase which makes the customs broker an exception to the exemption of VAT under
the new, unduly discriminates against customs brokers

SC:

The phrase "except customs brokers" is not meant to discriminate against

customs brokers. It makes the services of customs brokers subject to the payment of the
VAT and to distinguish customs brokers from other professionals who are subject to the
payment of an occupation tax under the Local Tax Code. The distinction of the customs
brokers from the other professionals who are subject to occupation tax under the Local
Tax Code is based upon material differences, in that the activities of customs brokers
(like those of stock, real estate and immigration brokers) partake more of a business,
rather than a profession.

h. Punsalan vs. The Municipal Board of the City of Manila, GR L-4817, May 26, 1954

Contention:

Ordinance 3398 is unjust and oppressive because it creates discrimination within

a class in that while professionals with offices in Manila have to pay the tax, outsiders
 who have no offices in the city but practice their profession therein are not subject to the
tax.

SC:

Legislature may, in its discretion, select what occupations shall be taxed, and in
the exercise of that discretion it may tax all, or it may select for taxation certain classes
and leave the others untaxed. Moreover, as the seat of the National Government and
with a population and volume of trade many times that of any other Philippine city or
municipality, Manila, no doubt, offers a more lucrative field for the practice of the
professions, so that it is but fair that the professionals in Manila be made to pay a higher
occupation tax than their brethren in the provinces.

n. VERA et. al, vs. CUEVAS, GR L-33693-94, May 31, 1979

Contention:

Section 169 of the Tax Code requires all condensed skimmed milk and all milk in
whatever form, from which the fatty part has been removed totally or in part shall be
marked with "This milk is not suitable for nourishment for infants less than one year of
age," or with other equivalent words.

Section 169 is being enforced only against manufacturers of filled milk product
(fatty part is removed and substituted with coconut oil), and not as against
manufacturers of condensed skimmed milk, in which, fatty part has been removed and
substituted with vegetable or corn oil.

SC:

The enforcement of Section 169 against manufacturers engaged in filled milk

product only, but not against other persons similarly situated, such as manufacturers of
condensed skimmed milk amounts to an unconstitutional denial of the equal protection
of the laws, for the law, if not equally enforced, would similarly offend against the
Constitution. There is likewise different tax treatment when both manufacturers belong to
the same class or are similarly situated.

UNIFORMITY, EQUITABILITY AND PROGRESSIVITY OF TAX

9.

a. CHURCHHILL, et al. vs. CONCEPCION GR 11572 Sept. 22, 1916

Contention

The tax imposed by Act no. 2432 on electric signs, billboards, and spaces used
for posting or displaying temporary signs, and all signs displayed on premises not
occupied by buildings is void for lack of uniformity, because it is not graded according to
 value; because the classification on which it is based is mere arbitrary selection and not
based on any reasonable ground.

SC

Uniformity in taxation means that all taxable articles or kinds of property, of the
same class, shall be taxed at the same rate. It does not mean that lands, chattels,
securities, incomes, occupations, franchises, privileges, necessities, and luxuries, shall
all be assessed at the same rate. Different articles may be taxed at different amounts,
provided the rate is uniform on the same class everywhere, with all people, and at all
times.

A tax is uniform when it operates with the same force and effect in every place
where the subject of it is found. It does not signify an intrinsic, but simply a geographical,
uniformity, and such uniformity is the only uniformity which is prescribed by the
Constitution. A tax is uniform, within the constitutional requirement, when it operates with
the same force and effect in every place where the subject of it is found. "Uniformity," as
applied to the constitutional provision that all taxes shall be uniform, means that all
property belonging to the same class shall be taxed alike.

In other words, "the rule of taxation" upon such signs is uniform throughout the
Islands. The rule does not require taxes to be graded according to the value of the
subject or subjects upon which they are imposed, especially those levied as privilege or
occupation taxes.

TAX EXEMPTION PROPERTY ACTUALLY, DIRECTLY AND EXCLUSIVELY FOR

RELIGIOUS AND EDUCATION PURPOSES

11.

a. LLADOC vs. COMMISSIONER OF INTERNAL REVENUE, GR L-19201, June 16, 1965

Contention:

The assessment of the gift tax against the Catholic Parish of Victorias, Negros
Occidental, of which petitioner was the priest would not be valid, for such would be a clear
violation of the provisions of the Constitution.

SC:

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and
all lands, buildings, and improvements used exclusively for religious purposes. The
exemption is only from the payment of taxes assessed on such properties enumerated, as
property taxes, as contra distinguished from excise taxes. In the present case, what the
Collector assessed was a donee's gift tax; the assessment was not on the properties
themselves. It did not rest upon general ownership; it was an excise upon the use made of
the properties, upon the exercise of the privilege of receiving the properties. Manifestly, gift
tax is not within the exempting provisions of the section just mentioned. A gift tax is not a
property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos,
the imposition of which on property used exclusively for religious purposes, does not
constitute an impairment of the Constitution. The phrase "exempt from taxation," as
employed in the Constitution should not be interpreted to mean exemption from all kinds of
taxes. And there being no clear, positive or express grant of such privilege by law, in favor of
petitioner, the exemption herein must be denied.