CIR vs. Algue Inc.

Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Facts:
 Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
 On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959,
amtg to P83,183.85
 A letter of protest or reconsideration was filed by Algue Inc on Jan 18
 On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who
refused to receive it on the ground of the pending protest
 Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent
Reyes, who deferred service of the warrant
 On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then
that he accepted the warrant of distraint and levy earlier sought to be served
 On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals
 CIR contentions:
- the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or
necessary business expense
- payments are fictitious because most of the payees are members of the same family in control of Algue and that
there is not enough substantiation of such payments
 CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees.
These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of
the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development
Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as
legitimate business expenses in its income tax returns

Ruling:
 Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, made in
accordance with law.
 RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged
 During the intervening period, the warrant was premature and could therefore not be served.
 Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on
conformed to the decision of CTA
 There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns
and paid the corresponding taxes thereon. CTA also found, after examining the evidence, that no distribution of
dividends was involved
 CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction
 Algue Inc. was a family corporation where strict business procedures were not applied and immediate issuance of
receipts was not required. at the end of the year, when the books were to be closed, each payee made an
accounting of all of the fees received by him or her, to make up the total of P75,000.00. This arrangement was
understandable in view of the close relationship among the persons in the family corporation
 The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate
Development Co. to Algue Inc. was P125K. After deducting the said fees, Algue still had a balance of P50,000.00 as
clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a
reasonable proportion, considering that it was the payees who did practically everything, from the formation of
the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties.
 Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and necessary
expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable
allowance for salaries or other compensation for personal services actually rendered xxx
 the burden is on the taxpayer to prove the validity of the claimed deduction
 In this case, Algue Inc. 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.
 Taxes are what we pay for civilization 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
 Taxation must 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

Algue Inc.’s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we
also find that the claimed deduction by Algue Inc. was permitted under the Internal Revenue Code and should therefore not
have been disallowed by the CIR

ABAKADA Guro Party List vs

Executive Secretary
Bills Must Originate EXCLUSIVELY from the
House of Representatives; Undue Delegation of
Legislative Power; Equal Protection Clause

ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY

G.R. No. 168056 September 1, 2005

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.

ALCANTARA and ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE
SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and
HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO,
JR., Respondent.

Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337
particularly Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of
Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following
conditions have been satisfied, to wit:

. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or

(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 ½%).

Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress

of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987
Philippine Constitution. They further argue that VAT is a tax levied on the sale or exchange
of goods and services and cannot be included within the purview of tariffs under the
exemption delegation since this refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on imported/exported goods. They also
said that the President has powers to cause, influence or create the conditions provided by
law to bring about the conditions precedent. Moreover, they allege that no guiding standards
are made by law as to how the Secretary of Finance will make the recommendation. They
claim, nonetheless, that any recommendation of the Secretary of Finance can easily be
brushed aside by the President since the former is a mere alter ego of the latter, such that,
ultimately, it is the President who decides whether to impose the increased tax rate or not.

Issues:

1. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and
Article VI, Section 26 (2) of the Constitution.
2. Whether or not there was an undue delegation of legislative power in violation of Article
VI Sec 28 Par 1 and 2 of the Constitution.
3. Whether or not there was a violation of the due process and equal protection under
Article III Sec. 1 of the Constitution.

Discussions:

1. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is
required by the Constitution to “originate exclusively” in the House of Representatives,
but Senate has the power not only to propose amendments, but also to propose its own
 version even with respect to bills which are required by the Constitution to originate in
the House. the Constitution simply means is that the initiative for filing revenue, tariff or
tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
2. In testing whether a statute constitutes an undue delegation of legislative power or not, it
is usual to inquire whether the statute was complete in all its terms and provisions when
it left the hands of the legislature so that nothing was left to the judgment of any other
appointee or delegate of the legislature.
3. The equal protection clause under the Constitution means that “no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.”

Rulings:

1. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively originated in
the House of Representatives, the Senate was acting within its constitutional power to
introduce amendments to the House bill when it included provisions in Senate Bill No.
1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily,
Article VI, Section 24 of the Constitution does not contain any prohibition or limitation
on the extent of the amendments that may be introduced by the Senate to the House
revenue bill.
2. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must
do it, and what is the scope of his authority; in our complex economy that is frequently
the only way in which the legislative process can go forward.
3. Supreme Court held no decision on this matter. The power of the State to make
reasonable and natural classifications for the purposes of taxation has long been
established. Whether it relates to the subject of taxation, the kind of property, the rates to
be levied, or the amounts to be raised, the methods of assessment, valuation and
collection, the State’s power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.

Compania de Tabacos v. City of Manila

Facts: Compania General de Tabacos de Filipinas (Tabacalera) paid the City of Manila the fixed
license fees prescribed by Ordinance 3358 for the years 1954 to 1957. In 1954, City Ordinance
3634 and 3816 were passed; where the term “general merchandise” found therein included all
articles in Sections 123 to 148 of the Tax Code (thus, also liquor under Sedctions 133 to 135).
The Tabacalera paid its wholesaler’s and retailer’s taxes. In 1954, the City Treasurer addressed a
letter to an accounting firm, expressing the view that liquor dealers paying the annual wholesale
and retail fixed tax under Ordinance 3358 are not subject to the wholesale aand retail deaklers’
taxes prescribed by City Ordinances 3634, 3301, and 3816. The Tabacalera, upon learning of
said stopped including quarterly sworn declaratons required by the latter ordinances, and in
1957, demanded refunde of the alleged overpayment. The claim was disallowed.

Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634, 3301 and
3816, to prevent refund to the company

Held: Yes. Generally, the term “tax” applies to all kinds of exactions which become public
funds. Legally, however, a license fee is a legal concept quite distinct from tax: the former is
imposed in the exercise of police power for purposes of regulation, while the latter is imposed
under the taxing power for the purpose of raising revenues. Ordinance 3358 prescribes municipal
license fees for the privilege to engage in the business of selling liquor or alcohol beverages;
considering that the sale of intoxicating liquor is (potentially) harmful to public health and
morals, and must be subject to supervision or regulation by the State and by cities and
municipalities authorized to act in the premises. On the other hand, Ordinances 3634, 3301 and
3816 imposed taxes on the sales of general merchandise, wholesale or retail, and are revenue
measures enacted by the Municipal Board of Manila.
Both a license fee and a tax may be imposed on the same business or occupation, or for selling
the same article, without it being in violation of the rule against double taxation. The contrary
view of the Treasurer in its letter is of no consequence as the government is not bound by the
errors or mistakes committed by its officers, specially on matters of law. The company, thus, is
not entitled to refund.

Facts: Compañia General de Tabacos de Filipinas (Tabacalera), as a duly licensed first class
wholesale and retail liquor dealer paid the City the fixed license fees prescribed by Ordinance
3358 for the years 1954 to 1957, inclusive. In 1954, City Ordinance 3634, amending City
Ordinance 3420, and City Ordinance 3816, amending City Ordinance 3301 were passed. By
reason thereof, the City Treasurer issued the regulations, according to which, the term “general
merchandise”, as used in said ordinances, includes all articles referred to in chapter 1, Sections
123 to 148 of the National Internal Revenue Code. Of these, Section 133-135 included liquor
among the taxable articles. Pursuant to said regulations, Tabacalera included its sales of liquor in
its sworn quarterly declaration submitted to the City Treasurer beginning from the third quarter
of 1954 to the second quarter of 1957, with a total value of P722, 501.09 and correspondingly
paid a wholesaler’s tax amounting to P13, 688 and a retailer’s tax amounting to P1,520, or a total
of P15,208. In 1954, the City, through its treasurer, addressed a letter to Messrs. Sycip, Gorres,
Velayo and Co., an accounting firm, expressing the view that liquor dealers paying the annual
wholesale and retail fixed tax under City Ordinance 3358 are not subject to the wholesale and
retail dealers’ taxes prescribed by City Ordinances 3634, 3301, and 3816. Upon learning of said
opinion, the Tabacalera stopped including its sales of liquor in its quarterly sworn declarations
submitted in accordance with the City Ordinances 3634, 3301, and 3816, and on 3 December
1957, it addressed a letter to the City Treasurer demanding refund of the alleged overpayment.
As the claim was disallowed, the Tabacalera filed the action in the CFI Manila to recover from
the City of Manila and its Treasurer, Marcelino Sarmiento the sum of P15,280.00 allegedly
overpaid by it as taxes on its wholesale and retail sales of liquor for the period from the third
quarter of 1954 to the second quarter of 1957, inclusive, under Ordinances 3634, 3301, and 3816.
The CFI Manila ordered the City Treasurer of Manila to refund the sum of P15,280 to Compañia
General de Tabacos de Filipinas. Hence, the appeal.
The Supreme Court reversed the decision appealed from, with the result that the case should be
dismissed, with costs.
1. Meaning of “tax”; Distinction of taxes and license fee
The term “tax” applies — generally speaking — to all kinds of exactions which become
public funds. The term is often loosely used to include levies for revenue as well as levies for
regulatory purposes. Thus license fees are commonly called taxes. Legally speaking, however,
license fee is a legal concept quite distinct from tax; the former is imposed in the exercise of
 police power for purposes of regulation, while the latter is imposed under the taxing power for
the purpose of raising revenues (MacQuillin, Municipal Corporations, Vol. 9, 3rd Edition, p. 26).

2. Ordinance 3358 a valid regulatory enactment for the sale of intoxicating liquors
Ordinance 3358 is clearly one that prescribes municipal license fees for the privilege to
engage in the business of selling liquor or alcoholic beverages, having been enacted by the
Municipal Board of Manila pursuant to its charter power to fix license fees on, and regulate, the
sale of intoxicating liquors, whether imported or locally manufactured. (Section 18 [p], RA as
amended). The license fees imposed by it are essentially for purposes of regulation, and are
justified, considering that the sale of intoxicating liquor is, potentially at least, harmful to public
health and morals, and must be subject to supervision or regulation by the state and by cities and
municipalities authorized to act in the premises. (MacQuillin, supra, p. 445).
3. Ordinance 3634, 3301 and 316 are revenue measures
On the other hand, it is clear that Ordinances Nos. 3634, 3301, and 3816 impose taxes on
the sales of general merchandise, wholesale or retail, and are revenue measures enacted by the
Municipal Board of Manila by virtue of its power to tax dealers for the sale of such merchandise.
(Section 10 [o], RA 409, as amended.)
4. Merchandise includes liquor; Merchandise defined
Under Ordinance 3634 the word “merchandise” as employed therein clearly includes
liquor. Aside from this, it was held in City of Manila vs. Inter-Island Gas Service Inc. (99 Phil.
847), that the word “merchandise” refers to all subjects of commerce and traffic; whatever is
usually bought and sold in trade or market; goods or wares bought and sold for gain;
commodities or goods to trade; and commercial commodities in general.
5. Tabacalera not subject to double taxation; License fee and tax may be imposed on same
subject matter
That Tabacalera is being subjected to double taxation is more apparent than real. What is
collected under Ordinance 3358 is a license fee for the privilege of engaging in the sale of liquor,
a calling in which not anyone or anybody may freely engage, considering that the sale of liquor
indiscriminately may endanger public health and morals. On the other hand, what the three
ordinances impose is a tax for revenue purposes based on the sales made of the same article or
merchandise. Both a license fee and a tax may be imposed on the same business or occupation,
or for selling the same article, this not being in violation of the rule against double taxation
(Bentley Gray Dry Goods Co., vs. City of Tampa 137 Fla. 641, 188 SO. 758; MacQuillin,
Municipal Corporations, Vol. 9, 3rd Edition, p. 83).
6. Government not bound by errors of its officers, specially on matters of law
The contention that the City is repudiating its previous view, expressed by its Treasurer
in a letter addressed to Messrs. Sycip, Gorres, Velayo & Co. in 1954, that a liquor dealer who
pays the annual license fee under Ordinance 3358 is exempted from the wholesalers and retailers
taxes under the other three ordinances is of no consequence. The government is not bound by the
errors or mistakes committed by its officers, specially on matters of law.

Facts: Petitioner Tabacalera filed an action before CFI Manila to recover the sum of P15, 280
allegedly overpaid by it as taxes on the wholesale and retail sales of liquor for the period from
the 3rd quarter of 1954 to the 2nd quarter of 1957 pursuant to Ordinances Nos. 3634, 3301 and
3816
 Tabacalera is a wholesale and retail liquor dealer and is paying the license feesprescribed by
Ordinance 3358 from 1954-1957 and also a wholesale and retail dealer of general
merchandise and is paying sales taxes required by Ordinance 3634, 3301 and 3816
 Tabacalera included its liquor sales in its sworn statements of wholesale, retail and grocery sales
of general merchandise.
 In 1954, the City Treasurer addressed a letter to an accounting firm, expressing the view that
liquor dealers who pays the annual license fees under Ordinance 3358 is exempted from
wholesale and retailers taxes under City Ordinances 3634, 3301, and 3816.

 The Tabacalera, upon learning of such stopped including quarterly sworn declarations required by
the latter ordinances, and in 1957, demanded refund of the alleged overpayment.

Petitioner argued: in connection with its liquor sales it should pay the license fees but not the
municipal sales taxes and since it already paid the license fees, the sales taxes paid by it
amounting to P15,208 under the 3 ordinances in an overpayment by mistake and should be
refundable
 City of Manila argued: Tabacalera should pay the license fees prescribed by Ordinance 3358 as
well as the sales taxes imposed by the 3 other ordinances. And assuming it should not pay the
sales taxes with regard its liquor sales, it is not entitled to refund because, itvoluntarily paid the
amount, overpayment was mistake of law due to negligence and the government for public
improvements and services already used the amount
ISSUE: Is petitioner entitled to refund? NO.
HELD:
 The term "tax" applies—generally speaking—to all kinds of exaction which become public funds.
The term is often loosely used to include levies for revenue as well as levies for regulatory
purposes. Thus license fees are commonly called taxes.
 Legally speaking, license fee is a legal concept quite distinct from tax
 License fee is imposed in the exercise of police power for purposes of regulation
 Tax is imposed under the taxing power for the purpose of raising revenues
 The Ordinance 3358 prescribes municipal license fees for the privilege of engaging in business of
selling liquor and was enacted by Municipal Board of Manila pursuant to its charger power to fix
license fees and regulate the sales of intoxicating liquor (imported/local)
 The license fees imposed is justified and is for its regulation because such fee is a license for the
privilege of engaging in such business because not anyone or anybody may freely engage in such
and that the liquor is potentially harmful to public health and morals, and must be subject to
supervision or regulation by the state and by cities and municipalities
 As for the sales taxes on general merchandise they are revenue measures by respondents by virtue
of its power to tax dealers for the sale of such merchandise
 Both a license fee and tax may be imposed on the same business or occupation or for selling same
article without violating rule on double taxation
Note:
 Merchandise - all subjects of commerce and traffic; whatever sold and bought in trade or market’
goods bought and sold for gain; commodities to trade; commercial commodities in general
 Regarding the letter by the treasurer that a liquor dealer who pays the annual license fee is
exempted from sales taxes is without merit, because the government is not bound by the errors
by its officers.

OSMEÑA vs. ORBOS

220 SCRA 703
GR No. 99886, March 31, 1993

" To avoid the taint of unlawful delegation of the power to tax, there must be a standard
which implies that the legislature determines matter of principle and lays down fundamental
policy."

FACTS: 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: Is there 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.

PHILIPPINE AIRLINES, INC. v. EDU

PHILIPPINE AIRLINES, INC. v. EDU
G.R. No. L- 41383, August 15, 1988

FACTS:
The Philippine Airlines (PAL) is a corporation engaged in the air transportation business
under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt from the
payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate
(Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known as the
Land and Transportation and Traffic Code, requiring all tax exempt entities, among them PAL to
pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest, registration
fees of its motor vehicles. After paying under protest, PAL through counsel, wrote a letter dated
May 19,1971, to Land Transportation Commissioner Romeo Edu (Edu) demanding a refund of
the amounts paid. Edu denied the request for refund. Hence, PAL filed a complaint against Edu
and National Treasurer Ubaldo Carbonell (Carbonell).

The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which
in turn certified the case to the Supreme Court.

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

RULING:
Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax. Such is the case of motor vehicle
registration fees. The motor vehicle registration fees are actually taxes intended for additional
revenues of the government even if one fifth or less of the amount collected is set aside for the
operating expenses of the agency administering the program.
Progressive Development Corporation v. Quezon CityFacts:
The City Council of QC passed an ordinance known as the Market Code of QC, which
imposed a5% supervision fee on gross receipts on rentals or lease of privately-owned
market spaces in QC.In case of failure of the owners of the market spaces to pay the tax
for three consecutive months, theCity shall revoke the permit of the privately-owned
market to operate.
Progressive Development Corp, owner and operator of Farmer’s Market, filed a petition fo
rprohibition against QC on the ground that the tax imposed by the Market Code was in
reality a tax onincome, which the municipal corporation was prohibited by law to impose.
Issue:
Whether or not the supervision fee is an income tax or a license fee
Held:
It is a license fee. A LICENSE FEE is imposed in the exercise of the police power
primarily forpurposes of regulation, while TAX is imposed under the taxing power primarily
for purposes of raisingrevenues.If the generating of revenue is the primary purpose and
regulation is merely incidental, theimposition is a tax; but if regulation is the primary
purpose, the fact that incidentally, revenue is alsoobtained does not make the imposition a
tax.To be considered a license fee, the imposition must relate to an occupation or activity
that soengages the public interest in health, morals, safety, and development as to require
regulation forthe protection and promotion of such public interest; the imposition must
also bear a reasonablerelation to the probable expenses of regulation, taking into account
not only the costs of directregulation but also its incidental consequences.
In this case, the Farmers’ Market is a privately
-owned market established for the rendition of serviceto the general public. It warrants
close supervision and control by the City for the protection of thehealth of the public by
insuring the maintenance of sanitary conditions, prevention of fraud upon thebuying public,
etc.Since the purpose of the ordinance is primarily regulation and not revenue generation,
the tax is alicense fee. The use of the gross amount of stall rentals as basis for
determining the collectibleamount of license tax does not, by itself, convert the license
tax into a prohibited tax on income.Such basis actually has a reasonable relationship to the
probable costs of regulation and supervision
of Progressive’s kind of business, since ordinarily, the higher the amount of rentals, the
higher the
volume of items sold.The higher the volume of goods sold, the greater the extent and
frequency of supervision andinspection may be required in the interest of the buying
public.
Facts:
The City Council of Quezon City adopted Ordinance 7997 (1969) where privately owned
and operated public markets to pay 10% of the gross receipts from stall rentals to the
City, as supervision fee. Such ordinance was amended by Ordinance 9236 (1972), which
imposed a 5% tax on gross receipts on rentals or lease of space in privately-owned public
markets in Quezon City. Progressive
Development Corp., owner and operator of Farmer’s Market and Shopping Center, filed a
petition for
prohibition against the city on the ground that the supervision fee or license tax imposed
is in reality a tax on income the city cannot impose.
Issue:
Whether the supervision fee / license tax is a tax on income
Held:
The 5% tax imposed in Ordinance 9236 does not constitute a tax on income, nor a city
income tax (distinguished from the national income tax by the Tax Code) within the
meaning of Section 2 (g) of the Local Autonomy Act, but rather a license tax or fee for
the regulation of business in which the company is engaged. To be considered a license fee,
the imposition must relate to an occupation or activity that so engages the public interest
in health, morals, safety and development as to require regulations for the protection and
promotion of such public interest; the imposition must also bear a reasonable relation to
the probable expenses of the regulation, taking into account not only the costs of direct
regulation but also its incidental consequences as well. The gross receipts from stallrentals
have been used only as a basis for computing the fees or taxes due to the city to cover the
latter’s administrative expenses. The use of the gross amou
nt of stall rentals, as basis for thedetermination of the collectible amount of license tax,
does not by itself convert or render thelicense tax into a prohibited city tax on income.
For ordinarily, the higher the amount of stall rentals,the higher the aggregate volume of
foodstuffs and related items sold in the privately owned market;and the higher the volume
of goods sold in such market, the greater extent and frequency ofinspection and
supervision that may be reasonably required in the interest of the buying public.

Tolentino v. Secretary of Finance

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. RA 7716 seeks to widen the tax
base of the existing VAT system and enhance its administration by amending the National
Internal Revenue Code. There are various suits challenging the constitutionality of RA 7716
on various grounds.

One contention is that RA 7716 did not originate exclusively in the House of
Representatives as required by Art. VI, Sec. 24 of the Constitution, because it is in fact the
result of the consolidation of 2 distinct bills, H. No. 11197 and S. No. 1630. There is also a
contention that S. No. 1630 did not pass 3 readings as required by the Constitution.

Issue:
Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) ofthe Constitution

Held:
The argument that RA 7716 did not originate exclusively in the House of Representatives as
required by Art. VI, Sec. 24 of the Constitution will not bear analysis. To begin with, it is not
the law but the revenue bill which is required by the Constitution to originate exclusively in
the House of Representatives. To insist that a revenue statute and not only the bill which
initiated the legislative process culminating in the enactment of the law must substantially
be the same as the House bill would be to deny the Senate’s power not only to concur with
amendments but also to propose amendments. Indeed, what the Constitution simply means
is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the
public debt, private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the members of
the House can be expected to be more sensitive to the local needs and problems. Nor does
the Constitutionprohibit the filing in the Senate of a substitute bill in anticipation of its receipt
of the bill from the House, so long as action by the Senate as a body is withheld pending
receipt of the House bill.

The next argument of the petitioners was that S. No. 1630 did not pass 3 readings on
separate days as required by the Constitution because the second and third readings were
done on the same day. But this was because the President had certified S. No. 1630 as
urgent. The presidential certification dispensed with the requirement not only of printing but
also that of reading the bill on separate days. That upon the certification of a billby the
President the requirement of 3 readings on separate days and of printing and distribution
can be dispensed with is supported by the weightof legislative practice.
 G.R. No. 159796 July 17, 2007
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST
CONSUMERS NETWORK, INC. (ECN), petitioners
vs
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC),
NATIONAL POWER CORPORATION (NPC), POWER SECTOR ASSETS AND
LIABILITIES MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER
UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY INC.
(PECO),respondents.
FACTS:
On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of 2001.
Petitioners Romeo P. Gerochi and company assail the validity of Section 34 of the EPIRA Law
for being an undue delegation of the power of taxation. Section 34 provides for the imposition of
a “Universal Charge” to all electricity end users after a period of (1) one year after the effectively
of the EPIRA Law. The universal charge to be collected would serve as payment for government
debts, missionary electrification, equalization of taxes and royalties applied to renewable energy
and imported energy, environmental charge and for a charge to account for all forms of cross
subsidies for a period not exceeding three years. The universal charge shall be collected by the
ERC on a monthly basis from all end users and will then be managed by the PSALM Corp.
through the creation of a special trust fund.

ISSUE:
Whether or not there is an undue delegation of the power to tax on the part of the ERC

HELD:
No, the universal charge as provided for in section 34 is not a tax but an exaction of the
regulatory power (police power) of the state. The universal charge under section 34 is incidental
to the regulatory duties of the ERC, hence the provision assailed is not for generation of revenue
and therefore it cannot be considered as tax, but an execution of the states police power thru
regulation.

Moreover, the amount collected is not made certain by the ERC, but by the legislative
parameters provided for in the law (RA 9136) itself, it therefore cannot be understood as a rule
solely coming from the ERC. The ERC in this case is only a specialized administrative agency
which is tasked of executing a subordinate legislation issued by congress; which before
execution must pass both the completeness test and the sufficiency of standard test. The court in
appreciating Section 34 of RA 9136 in its entirety finds the said law and the assailed portions
free from any constitutional defect and thus deemed complete and sufficient in form.

Republic of the Philippines v Bacolod-Murcia (1966)

Republic of the Philippines v Bacolod-Murcia GR No. L-19824, L-19825, L-19826

July 9, 1966

FACTS:
RA 632 created the Philippine Sugar Institute, a semi-public corporation. In 1951, the Institute acquired
the Insular Sugar Refinery for P3.07 million payable in installments from the proceeds of the Sugar tax to
be collected under RA 632. The operation of the refinery for 1954 to 1957 was disastrous as the Institute
suffered tremendous losses. Contending that the purchase of refinery with money from the Institute’s fund
was not authorized under RA 632, and that the continued operation of the refinery is inimical to their
interest, Bacolod-Murcia Milling Co., Ma-ao Sugar Central, Talisay-Silay Milling Co. and the Central
Azucarera del Danao refused to continue with their contribution to said fund. The trial court found them
liable under RA 632. Hence, this petition.

ISSUE:
Are the milling companies liable?

RULING:
Yes. The special assessment or levy for the Philippine Sugar Institute Fund is not so much an exercise of
the power of
taxation, nor the imposition of a special assessment, but the exercise of police power for the general
welfare of the entire country. It is, therefore, an exercise of a sovereign power which no private citizen
may lawfully resist.
Section 2a of the charter authorizes Philsugin to acquire the refinery in question. The financial loss
resulting from the operation thereof is no means an index that the industry did profit therefrom, as other
gains of a different nature (such as experience) may have been realized.