1G.R. No.

L-59431 July 25, 1984

ANTERO M. SISON, JR., petitioner,
vs.
RUBEN B. ANCHETA,

FACTS:
The petitioner challenged the validity of BP 135 which further amend Sec. 21 of the National Internal Revenue
Code of 1977.

(The assailed provision provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income,
(c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of
taxable partnership, (f) adjusted gross income.)

Petitioner alleged that by virtue thereof, "he would be unduly discriminated against by the imposition of higher
rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon
fixed income or salaried individual taxpayers.
He characterized the above section as arbitrary amounting to class legislation and oppressive in character.
Therefore, there was a transgression of both the equal protection and due process clauses of the Constitution as
well as of the rule requiring uniformity in taxation.
The respondent contended that "Batas Pambansa Big. 135 is a valid exercise of the State's power to tax.

ISSUE:
Whether or not the imposition of a higher tax rate on taxable net income derived from business or profession than
on compensation is constitutionally infirm.

HELD:
This Court ruled against the petitioner. The power to tax, an inherent prerogative, has to be availed of to assure
the performance of vital state functions. It is the source of the bulk of public funds. Taxes being the lifeblood of
the government, their prompt and certain availability is of the essence.

(Note: The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the
powers of of government." It is manifest that the field of state activity has assumed a much wider scope, The reason was ‘"The
areas which used to be left to private enterprise and initiative and which the government was better equipped to administer for
the public welfare than is any private individual or group of individuals)

(Note: However, There are restrictions. The Constitution sets forth such limits . Adversely affecting as it does properly rights, both
the due process and equal protection clauses may properly be invoked. “The power to tax is not the power to destroy while this
Court sits.”The Constitution as the fundamental law overrides any legislative or executive, act that runs counter to it. In any case
therefore where it can be demonstrated that the challenged statutory provision — as petitioner here alleged — fails to abide by
its command, then this Court must so declare and adjudge it null.)

The petitioner’s mere allegation of arbitrariness did not suffice. There must be a factual foundation of such
unconstitutional taint. This is merely to adhere to the authoritative doctrine that where the due process and equal
protection clauses are invoked, there is a need for of such persuasive character as would lead to such a conclusion.
Absent such a showing, the presumption of validity must prevail.

(Note: It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support
in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. That would be a
clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an
authority not conferred. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not
for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds.)

If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding on the rest." That same formulation
applies as well to taxation measures. The Constitution does not require things which are different in fact or opinion
to be treated in law as though they were the same." Hence the constant reiteration of the view that classification
if rational in character is allowable.

(Lutz V. Araneta: this Court, ruled that"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.”)
According to the Constitution: "The rule of taxation shall be uniform and equitable." The rule of uniformity does
not call for perfect uniformity or perfect equality, because this is hardly attainable."
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for
purposes of taxation.

(Note: As clarified by Justice Tuason, where "the differentiation" complained of "conforms to the practical dictates of justice and
equity" it "is not discriminatory within the meaning of this clause and is therefore uniform.")

The Petitioner failed to take into consideration the distinction between a tax rate and a tax base. There is no legal
objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing
the applicable tax rate.
Taxpayers may be classified into different categories. It is enough that the classification must rest upon substantial
distinctions that make real differences.
In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of
classification is the susceptibility of the income to the application of generalized rules removing all deductible
items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all of them.
Taxpayers who are recipients of compensation income are set apart as a class. As there is practically no overhead
expense, these taxpayers are not entitled to make deductions for income tax purposes because they are in the same
situation more or less.
On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no
uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the
disparities by giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the
basis of gross income. There is ample justification then for the Batasang Pambansa to adopt the gross system of
income taxation to compensation income, while continuing the system of net income taxation as regards
professional and business income.
Therefore, the petition was dismissed considering the (1) lack of factual foundation to show the arbitrary character
of the assailed provision; 31 (2) the force of controlling doctrines on due process, equal protection, and uniformity
in taxation and (3) the reasonableness of the distinction between compensation and taxable net income of
professionals and businessman certainly not a suspect classification.
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:

FACTS:
The private respondent, a domestic corporation engaged in engineering and construction, received a letter from
the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959. Algue filed a protest or request for reconsideration. A warrant ot distraint and levy was presented to the
private respondent, through its counsel, who refused to receive it on the ground of pending protest. He produced
a copy of protest and gave it to the agent of CIR.

The counsel 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.Sixteen days later, Algue filed a petition for review of the decision of
the CIR.

The petitioner alleged that the claimed deduction of P75,000.00 was properly disallowed because it was not an
ordinary reasonable or necessary business expense.

The Court of Tax Appeals ruled against the respondent. 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. 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.

According to CTA, the amount was earned through the joint efforts of the persons among whom it was distributed.
It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its
agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto
and four other people (who were not respondent’s employees nor shareholders) worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its incorporation
largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. For this
sale, Algue 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 the aforenamed individuals.

The petitioner claimed that these payments were fictitious because most of the payees were members of the same
family in control of Algue. It was argued that no indication was made as to how such payments were made,
whether by check or in cash, and there was not enough substantiation of such payments. In short, the petitioner
suggested a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction.

The respondent’s President and Accountant testified that the payments were not made in one lump sum but
periodically and in different amounts. The CTA considered the fact that this was a family corporation where strict
business procedures were not applied and immediate issuance of receipts was not required. Even so, 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.

ISSUE:
1.Whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was
made on time and in accordance with law.
2. 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:
1. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or
ruling challenged. It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment"
and renders hopeless a request for reconsideration,"being "tantamount to an outright denial thereof and makes the
said request deemed rejected." But there is a special circumstance in the case at bar that prevents application of
this accepted doctrine.
Yes, The petition was filed seasonably. The Court of Tax Appelas ruled that the protest had the effect of
suspending the reglementary period which started on the date the assessment was received. The period started
running again only when the respondent was informed of the the implied rejection of the said protest and the
warrant was finally served.
2. According to SEC. 30. of Tax Code, in computing net income, there shall be allowed as deductions such as 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.

(Note: Revenue Regulations No. 2, Section 70 (1), provides “Compensation for personal services.--Among the ordinary and
necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or
other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is
whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation
payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may
be any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible.)

Yes, The Court ruled 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.

The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was
P125,000.00. 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.

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.

(Note: Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand,
such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is
therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of
taxation, which is the promotion of the common good, may be achieved.)

(Note: Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. 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.)
G.R. No. L-22074 April 30, 1965

THE PHILIPPINE GUARANTY CO., INC., petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

FACTS:

The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance contracts with foreign
insurance companies not doing business in the Philippines: thereby agreed to cede to the foreign reinsurers a
portion of the premiums on insurance it has originally underwritten in the Philippines.
Said insurance contracts were signed by in Manila Philippines, except the contract with Swiss Reinsurance
Company, which was signed in Switzerland. Although the said contract was signed in Switzerland, the same
specifically provided that its provision shall be construed according to the laws of the Philippines, thereby
manifesting a clear intention of the parties to subject themselves to Philippine law.
Philippine Guaranty Co., Inc. was required to keep a register in Manila where the risks ceded to the foreign
reinsurers where entered, and entry therein was binding upon the reinsurers.
A proportionate amount of taxes on insurance premiums not recovered from the original assured were to be paid
for by the foreign reinsurers.
The foreign reinsurers further agreed, in consideration for managing or administering their affairs in the
Philippines, to compensate the Philippine Guaranty Co., Inc., in an amount equal to 5% of the reinsurance
premiums.
Said premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it file its income tax
returns. Furthermore, it did not withhold or pay tax on them.
Consequently, the Commissioner of Internal Revenue assessed against petitioner withholding tax on the ceded
reinsurance premiums.
The petitioner protested the assessment on the ground that reinsurance premiums ceded to foreign reinsurers not
doing business in the Philippines are not subject to withholding tax. Its protest was denied and it appealed to the
Court of Tax Appeals.
The Court of Tax Appeals ordered the petitioner to pay to the Commissioner of Internal Revenue the total sum of
P375,345.00 as withholding income taxes for the years 1953 and 1954, plus the statutory delinquency penalties
thereon.
Philippine Guaranty Co, Inc. has appealed, questioning the legality of the Commissioner of Internal Revenue's
assessment for withholding tax on the reinsurance premiums ceded in 1953 and 1954 to the foreign reinsurers.
Petitioner maintained that the reinsurance premiums in question did not constitute income from sources within
the Philippines because the foreign reinsurers did not engage in business in the Philippines, nor did they have
office here.
Petitioner also contended that the reinsurance premiums are not income from sources within the Philippines
because they are not specifically mentioned in Section 37 of the Tax Code.
Petitioner Stressed at its reliance in good faith on the rulings of the Commissioner of Internal Revenue requiring
no withholding of the tax due on the reinsurance premiums in question relieved it of the duty to pay the
corresponding withholding tax thereon.

ISSUE:
Whether or not the reinsurance premiums ceded to foreign reinsures not doing business in the Philippines are
subject to tax.

HELD:
Yes, Section 24 of the Tax Code subjects foreign corporations to tax on their income from sources within the
Philippines. The word "sources" has been interpreted as the activity, property or service giving rise to the income.
The reinsurance premiums were income created from the undertaking of the foreign reinsurance companies to
reinsure Philippine Guaranty Co., Inc., against liability for loss under original insurances. Such undertaking, as
explained above, took place in the Philippines. These insurance premiums, therefore, came from sources within
the Philippines and, hence, are subject to corporate income tax.

(Note:The foreign insurers' place of business should not be confused with their place of activity. Business should not be continuity
and progression of transactions while activity may consist of only a single transaction. An activity may occur outside the place of
business. Section 24 of the Tax Code does not require a foreign corporation to engage in business in the Philippines in subjecting
its income to tax. It suffices that the activity creating the income is performed or done in the Philippines. What is controlling,
therefore, is not the place of business but the place of activity that created an income.)
The reinsurance contracts, however, show that the transactions or activities that constituted the undertaking to
reinsure Philippine Guaranty Co., Inc. against loses arising from the original insurances in the Philippines were
performed in the Philippines.

Section 37 is not an all-inclusive enumeration, for it merely directs that the kinds of income mentioned therein
should be treated as income from sources within the Philippines but it does not require that other kinds of income
should not be considered likewise.

The aforesaid petitioner’s defense of good faith might free from the payment of surcharges or penalties imposed
for failure to pay the corresponding withholding tax, but it certainly would not exculpate if from liability to pay
such withholding tax The Government is not estopped from collecting taxes by the mistakes or errors of its agents.

(Note:The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve
the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion,
a corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which come within the
State's territory, and facilities and protection which a government is supposed to provide.)

(Note: Considering that the reinsurance premiums in question were afforded protection by the government and the recipient foreign
reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden
of maintaining the state.)

WHEREFORE, the court affirmed the decision of CTA.

G.R. No. L-22734 September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

FACTS:
Atanasio Pineda died, survived by his wife and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer.
The estate was divided among and awarded to the heirs. Manuel B. Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the BIR investigated the income tax liability of the estate for the past 4
years and it found that the corresponding income tax returns were not filed. Thereupon, the representative of the
Collector of Internal Revenue filed said returns for the estate and issued an assessment.
Manuel B. Pineda, who received the assessment, appealed to the CTA and alleged that he was liable only to the
extent of his proportional share in the inheritance.
The Court of Tax Appeals ruled that Manuel B. Pineda was liable only for the payment corresponding to his share
in the estate.
The CIR has appealed to SC and has proposed to hold Manuel B. Pineda liable for the payment of all the taxes
found by the Tax Court to be due from the estate in the total amount of P760.28 instead of only for the amount of
taxes corresponding to his share in the estate.

(Note: Philippine Islands v. Pamintuan: “after the partition of an estate, heirs and distributees are liable individually for the
payment of all lawful outstanding claims against the estate in proportion to the amount or value of the property they have
respectively received from the estate.")

ISSUE:
Whether or not the BIR can collect the full amount of estate taxes from an heir's inheritance.

HELD:
Yes, the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he
received from the inheritance.His liability, however, cannot exceed the amount of his share.t
As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his
possession.
The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes for which said estate is liable.
(Note: Last paragraph of Section 315 of the Tax Code: If any person liable to pay the income tax, neglects or refuses to pay the
same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment
was made by the Commissioner of Internal Revenue until paid with interest, penalties, and costs that may accrue in addition
thereto upon all property and rights to property belonging to the taxpayer:)
By virtue of such lien, the Government has the right to subject the property in Pineda's possession, the P2,500.00,
to satisfy the income tax assessment in the sum of P760.28.
After such payment, Pineda will have a right of contribution from his co-heirs, to achieve an adjustment of the
proper share of each heir in the distributable estate.

(Note: The government has two ways of collecting the tax in question.
1:By going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received.
This action rests on the concept that hereditary property consists only of that part which remains after the settlement of all lawful
claims against the estate, for the settlement of which the entire estate is first liable.
Purpose: To achieve two results: first, payment of the tax; and second, adjustment of the shares of each heir in the distributed
estate as lessened by the tax.
2. Lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the taxpayer
for unpaid income tax, is by subjecting said property of the estate which is in the hands of an heir or transferee to
the payment of the tax Odue, the estate. - applicable to this case.)
(Note: The BIR should be given the necessary discretion to avail itself of the most expeditious way to collect the tax as may be
envisioned in the provision of Tax Code.
Reasoning: Taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And as afore-
stated in this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of the respective shares due to
the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the
Government recovered said tax.)
WHEREFORE, the Court ordered Pineda to pay to the Commissioner of Internal Revenue the sum of P760.28, without prejudice
to his right of contribution for his co-heirs. No costs. So ordered.
G.R. No. L- 41383 August 15, 1988
PHILIPPINE AIRLINES, INC., plaintiff-appellant,
vs.
ROMEO F. EDU in his capacity as Land

Facts:
PAL is a corporation exempt from payment of taxes.
Sometime in 1971, Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities including
PAL to pay motor vehicle registration fees.
Despite PAL's protestations, the Comissioner Romeo refused to register the appellant's motor vehicles unless the
aforesaid amount were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees
of its motor vehicles.
After paying under protest, the Pal’s counsel, wrote to Commissioner Edu demanding a refund of the amounts
paid, invoking the ruling in Calalang vs Lorenzo where it was held that motor vehicle registration fees are in
reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise.
Respondent Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit
Bus Lines, Inc., where it was held that registration fees of motor vehicles are not taxes, but regulatory fees imposed
as an incident of the exercise of the police power of the stat, therefore, it does not come within the exemption
granted to PAL. Hence, PAL filed the complaint in the Court of First Instance of Rizal. The trial Court ruled
against the petitioner.

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

Held:
(Calalang vs Lorenzo: It appears that the expenditures of the Motor Vehicle Office are but a small portion—about 5 per centum—
of the total collections from motor vehicle registration fees. And as proof that the money collected is not intended for the
expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction and
maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is
to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their
express object is to provide revenue with which the Government is to discharge one of its principal functions—the construction
and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.)

Yes, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or
fees than those prescribed in this Act shall be imposed," thus implying that the charges therein imposed—though
called fees—are of the category of taxes.
It appeared clear from the provisions that the legislative intent and purpose behind the law requiring owners of
vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways
and to a much lesser degree, pay for the operating expenses of the administering agency.

(Note: 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.)
(Reasoning: Vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as we
know it would stand still, Congress found the registration of vehicles 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.")

However, the respondent was not required to refund the amount stated in the complaint filed by the petitioner.
The Court ruled that 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.
G.R. No. L-7859 December 22, 1955
WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme
Ledesma, plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.

FACTS:
Section 2 of Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar on
each picul of sugar manufactured; while section 3 levies on owners or persons in control of lands devoted to the
cultivation of sugar cane.
Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, sought
to recover from the CIR the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act,. He alleged
that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively,
which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied.
The Court of First Instance dismissed the action filed by the petitioner.

ISSUE:
Whether or not the tax imposition in the Commonwealth Act No. 567 is unconstitutional.

HELD
No, because 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"
The aforesaid tax was levied with a regulatory purpose, to provide means for the rehabilitation and stabilization
of the threatened sugar industry. The act is primarily an exercise of the police power.
Taxation may be used to implement the state's police power.
If objective and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to
raise funds for their prosecution and attainment.
The protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature
may determine within reasonable bounds what is necessary for its protection and expedient for its promotion.
The Court took judicial notice of the fact that sugar production is one of the great industries of our nation,; that it
gives employment to thousands of laborers in fields and factories; and that it is a great source of the state's wealth.
Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence it was
competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized
in turn.

(Note: The protection of a large industry constituting one of the great sources of the state's wealth and therefore directly or
indirectly affecting the welfare of so great a portion of the population of the State is affected to such an extent by public interests
as to be within the police power of the sovereign.)

(Note: Even if the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek
increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements
of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private
persons, constitutes expenditure of tax money for private purposes)
G.R. No. L-75697
VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA
COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents.

Facts:
The petitioner assailed the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the
Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry.

(Note: Province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale,
lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%)
of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality
where the tax is collected)

The Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of
the Philippines, and Philippine Motion Pictures Producers Association were permitted by the Court to intervene
in the case upon the allegations that their "survival and very existence is threatened by the unregulated
proliferation of film piracy."

(Note: The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:
1. The proliferation and unregulated circulation of videograms have greatly prejudiced the operations of moviehouses and
theaters, and have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the
collection of sales, contractor's specific, amusement and other taxes, thereby resulting in substantial losses estimated at P450
Million annually in government revenues;
2. Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of
videograms, and such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million
in taxes each year;
3. The unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the
more than 1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and
unemployment due to the shutdown of numerous moviehouses and theaters;
4. In order to ensure national economic recovery, it is imperative for the Government to create an environment conducive
to growth and development of all business industries, including the movie industry which has an accumulated investment of about
P3 Billion;
5. Proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie
industry upon which more than 75,000 families and 500,000 workers depend for their livelihood, but also provide an additional
source of revenue for the Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms;
6. The rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and
spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth
for civic efficiency and the development of moral character and promote their physical, intellectual, and social well-being)

Petitioner attacked the constitutionality of the DECREE on the ground that the tax imposed was harsh,
confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the
Constitution;

Issue:
Whether or not the tax imposed was harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the Constitution;

Held:
No, a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed.
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 "inequities which result from a singling out of one particular class for taxation or exemption infringe no
constitutional limitation". Taxation has been made the implement of the state's police power.
The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the
video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property
rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to
protect the movie industry, the tax remains a valid imposition.
The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization
that earnings of videogram establishments of around P600 million per annum have not been subjected to tax,
thereby depriving the Government of an additional source of revenue.
The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax
was to favor one industry over another.

(Note: The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare
that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it.)

(Note: The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof"
is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve.
It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if
all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and title)

(Note: The grant in Section 11 of the DECREE of authority to the BOARD is not a delegation of the power to legislate but
merely a conferment of authority or discretion as to its execution, enforcement, and implementation.)

(Note: Only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute
invalid
GR. No. 76778
June 6, 1990
FRANCISCO I. CHAVEZ, petitioner,
vs.
JAIME B. ONGPIN, in his capacity as Minister of Finance and FIDELINA CRUZ, in her capacity as
Acting Municipal Treasurer of the Municipality of Las Piñas, respondents, REALTY OWNERS
ASSOCIATION OF THE PHILIPPINES, INC., petitioner-intervenor.

FACTS:
The petitioner, Francisco I. Chavez, as a taxpayer and an owner of three parcels of land alleged the following:
that Executive Order No. 73 mandated an excessive increase in real property taxes by 100% to 400% on
improvements, and up to 100% on land; and that any increase in the value of real property brought about by the
revision of real property values and assessments would necessarily lead to a proportionate increase in real property
taxes.
The Realty Owners Association of the Philippines, Inc. also assailed the constitutionality of the said law only
insofar as the revision of the assessments and the effectivity thereof are concerned.

HELD:
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.
The government recognized the financial burden to the taxpayers that would result from an increase in real
property taxes. Hence, Executive Order No. 1019 was issued on April 18, 1985, deferring the implementation of
the increase in real property taxes resulting from the revised real property assessments, from January 1, 1985 to
January 1, 1988.
G.R. No. 193007
RENATO V. DIAZ
vs
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE,

FACTS:
Petitioners assailed the validity of the impending imposition of value-added tax (VAT) by the Bureau of Internal
Revenue (BIR) on the collections of tollway operators.
Petitioners claimed that, since the VAT would result in increased toll fees, they have an interest as regular users
of tollways in stopping the BIR action.
Petitioners hold the view that Congress did not intend to include toll fees within the meaning of sale of services
that are subject to VAT; that a toll fee is a users tax, not a sale of services; and that to impose VAT on toll fees
would amount to a tax on public service.
The government averred that the NIRC imposes VAT on all kinds of services of franchise grantees, including
tollway operations; and that the imposition of VAT on tollway operations has been the subject as early as 2003
of several BIR rulings and circulars.

(Note: Petitioners had no right to invoke the non-impairment of contracts clause since they clearly have no personal interest in
existing toll operating agreements between the government and tollway operators. At any rate, the non-impairment clause cannot
limit the States sovereign taxing power which is generally read into contracts.)

The government contended that the non-inclusion of VAT in the parametric formula for computing toll rates
cannot exempt tollway operators from VAT. Further, the imposition of VAT on toll fees would have very minimal
effect on motorists using the tollways.

ISSUE:
1. Whether or not the government is unlawfully expanding VAT coverage by including tollway operators and
tollway operations in the terms franchise grantees and sale of services under Section 108 of the Code; and
2. Whether or not the imposition of VAT on tollway operators a) amounts to a tax on tax and not a tax on services;
and (b) is not administratively feasible and cannot be implemented.

HELD:
1. No, the law imposes VAT on all kinds of services rendered in the Philippines for a fee, including those specified
in the list. The enumeration of affected services is not exclusive.
By qualifying services with the words all kinds, Congress has given the term services an all-encompassing
meaning. Thus, every activity that can be imagined as a form of service rendered for a fee should be deemed
included unless some provision of law especially excludes it.
The Toll Operation Decree establishes the legal basis for the services that tollway operators render. Essentially,
tollway operators construct, maintain, and operate expressways, also called tollways, at the operators expense. In
consideration for constructing tollways at their expense, the operators are allowed to collect government-approved
fees from motorists using the tollways until such operators could fully recover their expenses and earn reasonable
returns from their investments.
When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latters use of the tollway
facilities over which the operator enjoys private proprietary rights.
(Note:Section 108 subjects to VAT all kinds of services rendered for a fee regardless of whether or not the performance thereof
calls for the exercise or use of the physical or mental faculties. This means that services to be subject to VAT need not fall under
the traditional concept of services, the personal or professional kinds that require the use of human knowledge and skills.)

2. A The Court ruled that tollway fees are not taxes. Indeed, they are not assessed and collected by the BIR and
do not go to the general coffers of the government.
The fees paid by the public to tollway operators for use of the tollways, are not taxes in any sense.
(Note: A tax is imposed under the taxing power of the government principally for the purpose of raising revenues to fund public
expenditures. Toll fees, on the other hand, are collected by private tollway operators as reimbursement for the costs and expenses
incurred in the construction, maintenance and operation of the tollways, as well as to assure them a reasonable margin of income.)

Although toll fees are charged for the use of public facilities, therefore, they are not government exactions that
can be properly treated as a tax. Taxes may be imposed only by the government under its sovereign authority, toll
fees may be demanded by either the government or private individuals or entities, as an attribute of owners.
VAT on tollway operations is not really a tax on the tollway user, but on the tollway operator. Under Section 105
of the Code,
(Note: VAT is imposed on any person who, in the course of trade or business, sells or renders services for a fee. In other words, the
seller of services, who in this case is the tollway operator, is the person liable for VAT. The latter merely shifts the burden of VAT
to the tollway user as part of the toll fees.
For this reason, VAT on tollway operations cannot be a tax on tax even if toll fees were deemed as a users tax. VAT is assessed
against the tollway operators gross receipts and not necessarily on the toll fees. Although the tollway operator may shift the VAT
burden to the tollway user, it will not make the latter directly liable for the VAT. The shifted VAT burden simply becomes part
of the toll fees that one has to pay in order to use the tollways.)

(Note: The seller remains directly and legally liable for payment of the VAT, but the buyer bears its burden since the amount of
VAT paid by the former is added to the selling price. Once shifted, the VAT ceases to be a tax and simply becomes part of the cost
that the buyer must pay in order to purchase the good, property or service.)

B. Petitioners asserted that the substantiation requirements for claiming input VAT make the VAT on tollway
operations impractical and incapable of implementation. They claimed input VAT, the name, address and tax
identification number of the tollway user must be indicated in the VAT receipt or invoice. The manner by which
the BIR intends to implement the VAT by rounding off the toll rate and putting any excess collection in an escrow
account was also illegal, while the alternative of giving change to thousands of motorists in order to meet the
exact toll rate would be a logistical nightmare. Thus, according to them, the VAT on tollway operations is not
administratively feasible.

(Note: Administrative feasibility is one of the canons of a sound tax system. It simply means that the tax system should be capable
of being effectively administered and enforced with the least inconvenience to the taxpayer. Non-observance of the canon,
however, will not render a tax imposition invalid except to the extent that specific constitutional or statutory limitations are
impaired. Thus, even if the imposition of VAT on tollway operations may seem burdensome to implement, it is not necessarily
invalid unless some aspect of it is shown to violate any law or the Constitution.)

The Court ruled that any concern about how the VAT on tollway operations will be enforced must first be
addressed to the BIR on whom the task of implementing tax laws primarily and exclusively rests. The Court
cannot preempt the BIRs discretion on the matter, absent any clear violation of law or the Constitution.

(Note: Users tax means taxing those among the public who actually use a public facility instead of taxing all the public including
those who never use the particular public facility. A users tax is more equitable a principle of taxation mandated in the 1987
Constitution.)
(Note: Airport lands and buildings are properties of public dominion and that the collection of terminal fees for their use does not
make them private properties. Someone must pay for the maintenance of the road, either the public indirectly through the taxes
they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the
road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.)
(Note: The charging of fees to the public does not determine the character of the property whether it is for public dominion or not.
Article 420 of the Civil Code defines property of public dominion as one intended for public use. Even if the government collects
toll fees, the road is still intended for public use if anyone can use the road under the same terms and conditions as the rest of the
public.)
(Note: Although the petition does not strictly comply with the requirements of Rule 65, the Court has ample power to waive such
technical requirements when the legal questions to be resolved are of great importance to the public. The same may be said of the
requirement of locus standi which is a mere procedural requisite.)
(Note: The grant of tax exemption is a matter of legislative policy that is within the exclusive prerogative of Congress.)
[G. R. No. 131512. January 20, 2000]

LAND TRANSPORTATION OFFICE [LTO], represented by Assistant Secretary Manuel F. Bruan, LTO
Regional Office, Region X represented by its Regional Director, Timoteo A. Garcia; and LTO Butuan
represented by Rosita G. Sadiaga, its Registrar, petitioners,
vs.
CITY OF BUTUAN, represented in this case by Democrito D. Plaza II, City Mayor, respondents.

FACTS
The RTC held that the authority to register tricycles, the grant of the corresponding franchise, the issuance of
tricycle drivers' license, and the collection of fees therefore had all been vested in the LGU.
The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant petition
for review.
Respondent asserted that one of the salient provisions introduced by the LGC is in the area of local taxation which
allows LGUs to collect registration fees or charges along with the corresponding issuance of all kinds of licenses
or permits for the driving of tricycles.

(Note:The 1987 Constitution provides:"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.)
Relying on the aforesaid provision, the Sangguniang Panglungsod passed an ordinance provided for the payment
of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration of the vehicle, and
fees for the issuance of a permit for the driving thereof.
Petitioner LTO explained hat one of the functions of the national government that has been transferred to local
government units is the franchising authority over tricycles-for-hire of the Land Transportation Franchising and
Regulatory Board ("LTFRB") but not the authority of LTO to register all motor vehicles and to issue to qualified
persons of licenses to drive such vehicles.
(Note: Territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy in order to enable
them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of
national goals.

HELD
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.
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. Although correlative to each other in many respects, the grant of one does not
necessarily carry with it the grant of the other.
The two powers are, by tradition and jurisprudence, separate and distinct powers, varying in their respective
concepts, character, scopes and limitations. To construe the tax provisions of Section 133(1) indistinctively would
result in the repeal to that extent of LTO's regulatory power which evidently has not been intended. If it were
otherwise, the law could have just said so in Section 447 and 458 of Book III of the Local Government Code in
the same manner that the specific devolution of LTFRB's power on franchising of tricycles has been provided.
Repeal by implication is not favored.
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.
G.R. No. L-25043 April 26, 1968
ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as
judicial co-guardians of JOSE ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren several properties.
To manage the said properties formed a partnership called Roxas y Compania.
The tenants who have all been tilling the lands in Nasugbu for generations expressed their desire to purchase from
the petitioners.
The Government, in consonance with the constitutional mandate to acquire big landed estates and apportion them
among landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings.
It turned out however that the Government did not have funds to cover the purchase price,
However, the petitioner allowed the tenants to buy the land for the said purchase price, but by installment.
The Commissioner of Internal Revenue demanded from the petitioners the payment of real estate dealer's tax for
1952.
The assessment for real estate dealer's tax was based on the fact that petitioners received house rentals from Jose
Roxas in the amount of P8,000.00.

(Note: Pursuant to Sec. 194 of the Tax Code, an owner of a real estate who derives a yearly rental income therefrom in the amount
of P3,000.00 or more is considered a real estate dealer and is liable to pay the corresponding fixed tax.)

The CIR justified his demand for the fixed tax on the fact that said partnership made profits from the purchase
and sale of securities. For the reason that petitioners subdivided its Nasugbu farm lands and sold them to the
farmers on installment, the CIR considered the partnership as engaged in the business of real estate, hence, 100%
of the profits derived therefrom was taxed.
The Petitioners protested the assessment but such protest was denied. The CTA sustained the said assessment.

HELD:
It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of
our Government to allocate lands to the landless. It was the bounden duty of the Government to pay the agreed
compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to subsequently subdivide them among
the farmers at very reasonable terms and prices.
However, the Government could not comply with its duty for lack of funds.
Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way and sold lands directly to the
farmers in the same way and under the same terms as would have been the case had the Government done it itself.

In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section
34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is
capital gain, taxable only to the extent of 50%.

(Note: Real estate dealer includes any person engaged in the business of buying, selling, exchanging, leasing or renting property
on his own account as principal and holding himself out as a full or part-time dealer in real estate or as an owner of rental property
or properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year - without any qualification
as to the persons paying the rentals.)
(Note: The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to
minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector
kill the "hen that lays the golden egg". And, in order to maintain the general public's trust and confidence in the Government this
power must be used justly and not treacherously. It does not conform with Our sense of justice in the instant case for the
Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call.)
G.R. No. L-67649 June 28, 1988
ENGRACIO FRANCIA, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

FACTS:
Engracio Francia is the registered owner of a residential lot and a two-story house built upon it situated at Pasay
City, Metro Manila.
On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of the
Philippines for the sum of P4,116.00.
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes.
Thus, on December 1977, his property was sold at public auction by the City Treasurer of Pasay City in order to
satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property.
Francia was not present during the auction sale since he was in Iligan City.
On March 3, 1979, Francia received a notice of petition filed by Ho Fernandez, seeking the issuance in his name
of a new certificate of title.
Upon verification through his lawyer, Francia discovered that a Final Bill of Sale had been issued in favor of Ho
Fernandez by the City Treasurer.
Francia filed a complaint to annul the auction sale.
The lower court ordered the Register of Deeds of Pasay City to issue a new Transfer Certificate of Title in favor
of the defendant Ho Fernandez over the parcel of land.
The Intermediate Appellate Court affirmed the decision of the lower court in toto.
The petitioner contented that his tax delinquency of P2,400.00 has been extinguished by legal compensation. He
claimed that the government owed him P4,116.00 when a portion of his land was expropriated. Hence, his tax
obligation had been set-off by operation of law.

Issue:
Whether or not the petitioner’s obligation to pay 2,400 for supposed tax delinquency can be off-set by the amount
of 4,116 which the government is indebted to the former.

Held:
No, The Court ruled that there was no legal basis for petitioner’s contention.

(Note: By legal compensation, obligations of persons, who in their own right are reciprocally debtors and creditors of each other,
are extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the requirements provided by Article 1279,
to wit:
(1) that each one of the obligors be bound principally and that he be at the same time a principal creditor of the other; (3)
that the two debts be due.)

The Court consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have
against the government. A person cannot refuse to pay a tax on the ground that the government owes him an
amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit
against the government.

(Note: Republic v. Mambulao Lumber Co: A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be
set-off under the statutes of set-off. Neither are they a proper subject of recoupment since they do not arise out of the contract or
transaction sued on.

(Note: The general rule based on grounds of public policy is well-settled that no set-off admissible against demands for taxes levied
for general or local governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature of
contracts between the party and party but grow out of duty to, and are the positive acts of the government to the making and
enforcing of which, the personal consent of individual taxpayers is not required.)

(Note: A taxpayer cannot refuse to pay his tax when called upon by the collector because he has a claim against the governmental
body not included in the tax levy.)

(Note: Corders v. Gonda: Internal revenue taxes can not be the subject of compensation: Reason: government and taxpayer are
not mutually creditors and debtors of each other' under Article 1278 of the Civil Code and a "claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off.")

There are other factors which compel us to rule against the petitioner. The tax was due to the city government
while the expropriation was effected by the national government.
Moreover, the amount of P4,116.00 paid by the national government for the 125 square meter portion of his lot
was deposited with the PNB long before the sale at public auction of his remaining property.
The petitioner admitted in his testimony that he knew about the P4,116.00 deposited with the bank but he did not
withdraw it. It would have been an easy matter to withdraw P2,400.00 from the deposit so that he could pay the
tax obligation thus aborting the sale at public auction.

(Note: Due process of law to be followed in tax proceedings must be established by proof and the general rule is that the purchaser
of a tax title is bound to take upon himself the burden off showing the regularity of all proceedings leading up to the sale.There is
no presumption of the regularity of any administrative action which results in depriving a taxpayer of his property through a tax
sale. This is actually an exception to the rule that administrative proceedings are presumed to be regular.)

(Note: As a general rule, gross inadequacy of price is not material when the law gives the owner the right to redeem as when a
sale is made at public auction, upon the theory that the lesser the price, the easier it is for the owner to effect redemption It is
notorious that the prices habitually paid by purchasers at tax sales are grossly out of proportion to the value of the land.)

WHEREFORE, IN VIEW OF THE FOREGOING, the petition for review is DISMISSED.

G.R. No. 125704. August 28, 1998]

PHILEX MINING CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE,

COURT OF APPEALS, and THE COURT OF TAX APPEALS, respondents.

Facts:
The BIR sent a letter to Philex asking it to settle its tax liabilities in the total amount of P123,821,982.52.
The petitioner protested the demand for payment of the tax liabilities stating that it has pending claims for VAT
input credit/refund for the taxes it paid in the amount of P119,977,037.02 plus interest. Therefore, these claims
for tax credit/refund should be applied against the tax liabilities.
The BIR insisted that the pending claims have not yet been established or determined with certainty, it follows
that no legal compensation can take place.
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. The Court of Appeals affirmed the Court of Tax Appeals observation.

Issue:
Whether or not the petitioner’s VAT input credit/refund should off-set its excise tax liabilities.

Held:
No, the Court made the pronouncement that taxes cannot be subject to compensation for the simple reason that
the government and the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity,
while taxes are due to the Government in its sovereign capacity.

(Note: We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against
the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater
than the tax being collected. The collection of tax cannot await the results of a lawsuit against the government.)

We fail to see the logic of Philexs claim for this is an outright disregard of the basic principle in tax law that taxes
are the lifeblood of the government and so should be collected without unnecessary hindrance. Evidently, to
countenance Philexs whimsical reason would render ineffective our tax collection system.

(Note: We cannot allow Philex 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.[25] 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.)

(Note: Despite our concern with the lethargic manner by which the BIR handled Philex's tax claim, it is a settled rule that in the
performance of governmental function, the State is not bound by the neglect of its agents and officers. Nowhere is this more true
than in the field of taxation. Again, while we understand Philex's predicament, it must be stressed that the same is not valid
reason for the non- payment of its tax liabilities. The adage "no one should take the law into his own hands" should have guided
Philex's action.)

(Note: First, if the BIR takes time in acting upon the taxpayer's claims for refund, the latter can seek judicial remedy before the
Court of Tax Appeals in the manner prescribed by law. Second, if the inaction can be characterized as willful neglect of duty, then
recourse under the Civil Code (Art. 27) and the Tax Code (Section 269) an also be availed of.

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED.

G.R. No. L-21183 September 27, 1968
VICTORIAS MILLING CO., INC., plaintiff-appellant,
vs.
THE MUNICIPALITY OF VICTORIAS, PROVINCE OF NEGROS OCCIDENTAL, defendant-
appellant.

Facts:
The disputed ordinance, approved by the municipal Council of Victorias, imposes license tax on operators of
sugar centrals.

(Note: Sugar Refinery with mill having a capacity of producing an annual output of from 1,750,001 bags of 100 lbs. or more shall
be required to pay an annual municipal license tax of — P40,000.00.)

The petitioner sought the nullity of the said ordinance and ordered the refund of all license taxes paid.
The reasons put forth by plaintiff were that: (a) the ordinance is discriminatory since it singles out plaintiff which
is the only operator of a sugar central and a sugar refinery within the jurisdiction of defendant municipality; (b)
it constitutes double taxation; and (c) the national government has preempted the field of taxation with respect to
sugar centrals or refineries.

The trial court ruled that said license taxes in dispute were unreasonable, and held that: "If the defendant has the
power to tax the plaintiff for purposes of revenue, it may do so by proper municipal legislation, but not in the
guise of a license tax."The Court declared the invalidity of the said ordinance and ordered the respondent to refund
to the plaintiff the license taxes paid.
Court is not, however, prepared to order the refund of all the license taxes paid by the plaintiff under to the plaintiff
any and all such license taxes paid under protest after notice of this decision.
Both plaintiff and defendant appealed direct to this Court.

Issue:
1. Whether or not the ordinance was passed by the defendant’s municipal council as a revenue measure.
2. Whether or not the ordinance is discriminatory since it singles out plaintiff which is the only operator of a sugar
central and a sugar refinery within the jurisdiction of the defendant municipality.
3. Whether or not the said ordinance constitutes double taxation.

Held:
1. Yes, the big amount of maximum annual tax set forth in the ordinance, P40,000.00 for sugar centrals, and
P40,000.00 for sugar refineries, convineed the Court that the license tax was really a revenue tax. Nothing in the
ordinance which would indicate that the tax imposed was merely for police inspection, supervision or regulation.

(Note: The term "license tax" has not acquired a fixed meaning. It is often "used indiscriminately to designate impositions exacted
for the exercise of various privileges." It does not refer solely to a license for regulation. In many instances, it refers to "revenue-
raising exactions on privileges or activities." On the other hand, license fees are commonly called taxes. But, legally speaking, the
latter are "for the purpose of raising revenues," in contrast to the former which are imposed "in the exercise of police power for
purposes of regulation.")

(Note: The designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a
license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the
ordinance. Thus, When no police inspection, supervision, or regulation is provided, nor any standard set for the applicant to
establish, but any and all persons engaged in the business designated, without qualification, may come, and a license on payment
of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct, the presumption is strong that the power
of taxation, and not the police power, is being exercised.”)

(Note: A municipality is authorized to impose three kinds of licenses: (1) license for regulation of useful occupations or enterprises;
(2) license for restriction or regulation of non-useful occupations or enterprises; and (3) license for revenue. The first two easily
fall within the broad police power granted under the general welfare clause. The third class, however, is for revenue purposes. It
is not a license fee, properly speaking, and yet it is generally so termed. It rests on the taxing power. That taxing power must be
expressly conferred by statute upon the municipality.)

The Court ruled that the said ordinance was promulgated not in the exercise of the municipality's regulatory power
but as a revenue measure — a tax on occupation or business. The authority to imMepose such tax is backed by
the express grant of power.

(Note: An ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial inquiry.
Much should be left thus to the discretion of municipal authorities. Courts will go slow in writing off an ordinance as unreasonable
unless the amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or confiscatory. A rule which has gained
acceptance is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made
subject to imposition.)

(Note: For, "if the charge exceeds the expense of issuance of a license and costs of regulation, it is a tax." And if it is, and it is
validly imposed, as in this case, "the rule that license fees for regulation must bear a reasonable relation to the expense of the
regulation has no application.")

2. No, the ordinance does not single out Victorias as the only object of the ordinance. Said ordinance is made to
apply to any sugar central or sugar refinery which may happen to operate in the municipality. The fact that
plaintiff is actually the sole operator of a sugar central and a sugar refinery does not make the ordinance
discriminatory.

3. (Petitioner’s contention: That in computing the amount of taxes to be paid by the sugar refinery the cost of the raw sugar
coming from the sugar central is not deducted; ergo, plaintiff is taxed twice on the raw sugar.)

(Note: Double taxation has been otherwise described as "direct duplicate taxation." For double taxation to exist, "the same property
must be taxed twice, when it should be taxed but once." Double taxation has also been "defined as taxing the same person twice
by the same jurisdiction for the same thing."

No, the Court ruled that the sid ordinance does not constitute double taxation.
First. The two taxes cover two different objects. Section 1 of the ordinance taxes a person operating sugar centrals
or engaged in the manufacture of centrifugal sugar. While under Section 2, those taxed are the operators of sugar
refinery mills. One occupation or business is different from the other.
Second. The disputed taxes are imposed on occupation or business. Both taxes are not on sugar. The amount
thereof depends on the annual output capacity of the mills concerned, regardless of the actual sugar milled.
G.R. No. L-16254 February 21, 1922

G.A. CUUNJIENG, plaintiff-appellee,

vs.
FRED L. PATSTONE, engineer of the city of Manila, defendant-appellant.

Facts:
The Petitioner planned to build a warehouse on Azcarraga Street, but the respondent refused to issue a building
permit on the ground that the former failed to comply with the ordinance.
The said ordinance requires any person who desires to build establishments shall pay one-half of the assessed
value of the city land as license fee for the use and occupation of said land and shall construct arcades on the
street.
The petitioner refused to comply with the ordinance in question on the grounds that the arcade was unnecessary
and unsuitable for his warehouse; and that the ordinance in exacting the payment of a fee of one-half of the
assessed value of the city of land covered by the arcade, was in excess of the legislative powers of the Municipal
Board and, therefore, unconstitutional.

Issue:
Whether or not under the charter, the city of Manila may, under the guise of a licence fee and as a prerequisite for
the issuance for a building permit, exact the payment of one-half of the assessed value of the portion of the
sidewalk covered by the arcade.

Held:
No, the Court ruled that imposing a fee equal to one-half of the assessed value of the portion of the sidwalk
covered by the arcade in question, the Municipal Board of the city of Manila exceeded its powers.
The construction of buildings is a useful enterprises and the amount of the license fee should therefore be limited
to the cost of licensing, regulating, and suverveillance.
It appears that without the arcade the normal fee for the building permit would have been about P31, with the
arcade the fee exacted is P525.60. It does not appear tha the cost of licensing, regulaitng, and surveillance would
be materially increased through the construction of the arcade, and it is therefore clear that the excess fee is
imposed for the purpose of revenue.
There is nothing in the character of the city of Manila indicating an intention on the part of the Legislature to
confer power on the Municipal Board to impose a license tax for revenue on the construction of buildings.
The power conferred in relation to such construction is considered merely as police power from which, as we
have seen, taxing power is not inferred.
Under the circumstances, to hold the validity would amount to judicial legislation.

(Note: We must bear in mind that legislative powers in regard to taxes and licences are not inherent in municipal corporations
but must be granted by statute either expressly or by necessary implication.Section 2444 authorizing the fixing of fees for building
permits and that if the charge in question possesses any validity whatever it must be as a license fee under that subsection.)

(Note: The charge of one-half of the assessed value imposed on applicants for building permits can therefore, not beconsidered as
rent, and to be valid must either be a tax or a licence fee.)

(Note: The allowable amount of a license fee or tax depends so much on the special circumstances of each particular case, but the
adjudications appear to recognize three classes been taken into consideration in determining the reasonableness of the license fee:
First, license for the regulation of useful occupation or enterprises.
Second, license for the regulation or restriction of non-useful occupation or enterprises.
Third, license for revenue only.)

(Note: The first two of these classes is based on the exercise of the police power. The conferred power to regulate and to issue such
licenses carries with it the right to fix a license fee.)

(Cooley on Constitutional Limitations: A right to license an employment does not imply a right to charge a license fee therefore
with a view to revenue, unless such seems to be the manifest purpose of the power; but the authority of the corporation will be
limited to such a charge for the license as will cover the necessary expenses of issuing it, and the additional labor of officers and
other expenses thereby imposed.

(Note: Licenses for non-useful occupations are also incidental to the police power and the right to exact a fee may be implied from
the power to license regulate, but in fixing the amount of the license fees the municipal corporations are allowed a much wider
discretion in this class of cases than in the former, and aside from applying the well-known legal principle that muncipal ordinances
must not be unreasonable, oppressive, or tyrannical, courts have, as a general rule, declined to interfere with such discretion. Hence
license fees clearly in the nature of privilege taxes for revenue have frequently been upheld, especially in cases of licenses for the
sale of liquors.)

(Note: The fee in the third class of cases, those for revenue purposes, is not a license fee properly speaking but is generally so
termed. It rests upon the taxing power as distinguished from the police power, and the power of the municipality to exact such
fees must be expressly granted by character or statute and is not to be implied from the conferred power to license and regulate
merely.

(Judge Cooley: A license is issued under the police power; but the exaction of a license fee with a view to revenue would be an
exercise of the power of taxation; and the character must plainly show an intent to confer that power, or the municipal corporation
cannot assume it.)

The judgment of the Court of First Instance holding that the city of Manila has the power to require the
construction of arcades in certain circumstances but that the license fee prescribed by city ordinance was illegal,
was therefore hereby affirmed.
G.R. No. L-22356 July 21, 1967

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

vs.
PEDRO B. PATANAO, defendant-appellee.

Facts:
The respondent was the holder of an ordinary timber license with concession at Esperanza, Agusan, and as such
was engaged in the business of producing logs and lumber for sale.
He failed to file income tax returns for 1953 and 1954, and although he filed income tax returns for 1951, 1952
and 1955, the same were false and fraudulent because he did not report substantial income earned by him from
his business.
The petitioner, through the Deputy Commissioner of Internal Revenue, sent a letter of demand with enclosed
income tax assessment to the defendant requiring him to pay the said amount.
Despite the repeated demands the defendant refused, failed and neglected to pay said taxes. Thus, assessment for
the payment of the taxes in question has become final, executory and demandable, because it was not contested
before the Court of Tax Appeal.
The respondent moved to dismiss the complaint on two grounds, namely: (1) that the action was barred by prior
judgment, defendant having been acquitted in criminal cases, which were prosecutions for failure to file income
tax returns and for non-payment of income taxes; and (2) that the action has prescribed.
The trial court ruled that the accused once acquitted is exempt from both criminal and civil responsibility because
when a criminal action is instituted, civil action arising from the same offense is impliedly instituted unless the
offended party expressly waives the civil action or reserves the right to file it separately. In this case, there was
no waiver or reservation to file a separate civil case. Thus, the failure to obtain conviction on a charge of non-
payment of income taxes is fatal to any civil action to collect the payment of said taxes.
The petitioner assailed the ruling as erroneous.

Issue:
Whether or not the acquittal of the taxpayer in the criminal proceeding does not necessarily entail exoneration
from his liability to pay the taxes.

Held:
(Note: Civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of
any criminal act committed by him. The criminal liability arises upon failure of the debtor to satisfy his civil obligation.)

Yes, the acquittal in the said criminal cases cannot operate to discharge defendant appellee from the duty of paying
the taxes which the law requires to be paid, since that duty is imposed by statute.
Said obligation is not a consequence of the felonious acts charged in the criminal proceeding, nor is it a mere civil
liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal
acts charged.

Wherefore, the order appealed from is hereby set aside. The records of this case was remanded to the court of
origin for further proceeding.
G.R. No. L-41631 December 17, 1976
HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as
Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF
MANILA, petitioners,
vs.
HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of Manila,
Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

Facts:
The Municipal Board of Manila enacted an ordinance regulating the operation of public markets and prescribing
fees and rentals of stalls.
Respondent Federation of Manila Market Vendors sought the declaration of nullity of the said ordinance. They
bewailed that the market stall fees imposed in the disputed ordinance were diverted to the exclusive private use
of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the
said corporation in a "Management and Operating Contract."
The respondent judge rendered its decision, declaring the nullity of the said ordinance on the primary ground of
non-compliance with the requirement of publication under the Revised City Charter.
Forthwith, petitioners brought the matter to the SC through the present petition for review on certiorari.

Held:
The assumption was of course saddled on erroneous premise. The fees collected did not go direct to the private
coffers of the corporation.
Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is
the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the
ordinance.
So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is
public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised.
It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used
in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual
or private corporation.
Wherefore, the Court upheld the validity of the said ordinance.

(Note: A charter provision may be impliedly modified or superseded by a later statute. A subsequent general law similarly
applicable to all cities prevails over any conflicting charter provision, for the reason that a charter must not be inconsistent with
the general laws and public policy of the state. Otherwise stated, a charter must yield to the constitution and general laws of the
state.)

(General Rule: Section 47 of the Local Tax Code provides that any question or issue raised against the legality of any tax ordinance,
or portion thereof, shall be referred for opinion to the city fiscal in the case of tax ordinance of a city. The opinion of the city fiscal
is appealable to the Secretary of Justice, whose decision shall be final and executory unless contested before a competent court
within thirty days.)
(Exception: Where the question litigated upon is purely a legal one, the rule does not apply. The principle may also be disregarded
when it does not provide a plain, speedy and adequate remedy.)

(Note: Local governments may collect fees or rentals for the occupancy or use of public markets and premises. They can provide
for and regulate market stands, stalls and privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the
use of, lease, sell or otherwise dispose of stands, stalls or marketing privileges.)

(Note: The function of the committee is purely recommendatory as the underscored phrase suggests, its recommendation is without
binding effect on the Municipal Board and the City Mayor.The native power of the Municipal Board to legislate remains
undisturbed even in the slightest degree. It can move in its own initiative and the Market Committee cannot demur.)
G.R. No. L-10405 December 29, 1960
WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-appellees.

Facts:
Petitioner Wenceslao Pascual, as Provincial Governor of Rizal, claimed that at the time of the passage and
approval of Republic Act 920 (which appropriates funds for Public Work), at the aforementioned feeder roads
were "nothing but projected and planned subdivision roads, not yet constructed; and that the aforementioned
Antonio Subdivision as well as the lands on which said feeder roads were to be construed were private properties
of Jose C. Zulueta, who, at the time of the passage and approval of said Act, was a member of the Senate of the
Philippines.
He also alleged that Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering to donate said
projected feeder roads to the municipality of Pasig, Rizal. Thus, such donation said violated the provision of our
fundamental law prohibiting members of Congress from being directly or indirectly financially interested in any
contract with the Government.
Therefore, inasmuch as the projected feeder roads in question were private property at the time of the passage and
approval of, the appropriation of P85,000.00 therein made, for the construction, reconstruction, repair, was illegal
and, therefore, void ab initio.
Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue".
The lower court rendered its decision, holding that, since public interest is involved in this case, the Petitioner
have the requisite personalities" to question the constitutionality of the aforesaid Republic Act; that "the
legislature is without power appropriate public revenues for anything but a public purpose; and that the
instructions and improvement of the feeder roads in question, if such roads where private property, would not be
a public purpose.

Issue:
Whether or not the appropriation in question was "clearly for a private, not a public purpose.”.

Held:
Yes.
Referring to the P85,000.00 appropriation for the projected feeder roads in question, the legality thereof depended
upon whether said roads were public or private property when the bill was approved by the President and the
disbursement of said sum became effective.
Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent
Zulueta, the result was that said appropriation sought a private purpose, and hence, was null and void.
The donation to the Government, over five (5) months after the approval and effectivity of said Act, made, for
the purpose of legalizing the appropriation in question, did not cure its aforementioned basic defect. Consequently,
a judicial nullification of said donation need not precede the declaration of unconstitutionality of said
appropriation.

(Note: Legislature must only appropriate public revenue for public purpose. It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their
promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of
private enterprises or business, does not justify their aid by the use public money.)
(Reason: Public funds may be used only for public purpose.)
(General rule: The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon
events occurring, or acts performed.
Exception: When thee latter consists of an amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute.)

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the lower court for
further proceedings not inconsistent with this decision.
G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.

Facts:
Petitioner Pepsi-Cola Bottling Company of the Philippines, Inc sought the declaration of unconstitutionality of
Section 2 of Republic Act No. 2264 on the ground of undue delegation of taxing power as well as ordinances nos.
23 and 27 for the reason of double taxation.
Municipal Ordinance No. 23 levies and collects from soft drinks producers and manufacturers a tax of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked."
On the other hand, Municipal Ordinance No. 27 levies and collects on soft drinks produced or manufactured
within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon of volume
capacity.
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'
The Court of First Instance of Leyte rendered judgment "upholding the constitutionality of [Section 2, Republic
Act No. 2264 and ordinances Nos. 23 and 27; and ordering the plaintiff to pay the taxes due under the said
ordinances.
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals which in turn
elavated the case to the SC.

Issue:
1. Whether or not Section 2 of Republic Act 2264 was an undue delegation of power, confiscatory,and oppressive.
2. Whether or not ordinances Nos. 23 and 27:
A. constitute double taxation for the reason that these two ordinances cover the same subject matter and impose
practically the same tax rate.
B. impose percentage or specific taxes.

Held:
(Note: : 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.)
(General rule: 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.
(Exception: In the case of municipal corporations. Legislative powers may be delegated to local governments in respect of matters
of local concern.)

1. Local governments are granted the autonomous authority to create their own sources of revenue and to levy
taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of
revenue and to levy taxes, subject to such limitations as may be provided by law.
No, it cannot be said that 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.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice
to invalidate the said law as confiscatory and oppressive.

(Note: When it is said that the taxing power may be delegated to municipalities and the like, it is meant that there may be
delegated such measure of power to impose and collect taxes as the legislature may deem expedient.)

(General Rule: The constitutional injunction against deprivation of property without due process of law may be passed over under
the guise of the taxing power.)
(Exception: When the taking of the property is in the lawful exercise of the taxing power, as when
(1) the tax is for a public purpose;
(2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and
collection of certain kinds of taxes notice and opportunity for hearing are provided.

(Note: Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is
imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and
collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of
the tax will result in an injury rather than a benefit to such taxpayer.)
(Note: Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by
judicial inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally
not necessary to due process of law.)
(Note: The delegated authority cannot be declared unconstitutional on the theory of double taxation.
It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may
not be exercised. Moreover, double taxation, in general, is not forbidden by our fundamental law. Double taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for
the same purpose,but not in a case where one tax is imposed by the State and the other by the city or municipality.)

2. A. No, there is difference between the two ordinances which clearly lies in the tax rate of the soft drinks
produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one
centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity.
The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as
a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter.
Petrioner in its brief admitted that respondent were only seeking to enforce Ordinance No. 27, series of 1962.
Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought to
compel compliance by the petitioner of the provisions of said Ordinance No. 27, series of 1962. The
aforementioned admission shows that only Ordinance No. 27, series of 1962 was being enforced by respondents.

B. (Note: The taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to
extend to almost "everything, accepting those which are mentioned therein." As long as the text levied under the authority of a city
or municipal ordinance is not within the exceptions and limitations in the law. The limitation applies, particularly, to the
prohibition against municipalities and municipal districts to impose on articles subject to specific tax except gasoline, under the
provisions of the National Internal Revenue Code.")

No, The imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity"
on all soft drinks produced or manufactured under Ordinance No. 27 did not partake of the nature of a percentage
tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on the sales.

Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as
distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches
firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films,
playing cards, saccharine, opium and other habit-forming drugs. Soft drink is not one of those specified.

(Note: An increase in the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal
corporations are allowed much discretion in determining the reates of imposable taxes. This is in line with the constutional policy
of according the widest possible autonomy to local governments in matters of local taxation. Unless the amount is so excessive as
to be prohibitive, courts will go slow in writing off an ordinance as unreasonable.)
G.R. No. L-28271 July 25, 1975
SMITH, BELL AND CO. (PHIL.), INC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent

Facts:
The Petitioner imported 119 cases of "Chatteau Gay" wine which it declared as "still wine" and paid thereon the
specific tax of P1.00 per liter of volume capacity. To determine the correct amount of the specific tax due on the
petitioner's importation, the respondent ordered it tested and analyzed in its Laboratory.
The analyst who conducted the laboratory test reported that Chatteau Gay "is a delicate table wine, and concluded
that it should be classified as "sparkling wine."
The Commissioner assessed the petitioner a deficiency specific tax on the 119 cases of imported Chatteau Gay in
the sum of P11,713.90 under Section 134(a) of the Tax Code which imposes a specific tax of P12.00 per liter of
volume capacity on sparkling wines.
The petitioner contended that the assessment was unconstitutional because Section 134(a) of the Tax Code lays
down an insufficient and hazy standard by which the policy and purpose of the law may be ascertained and as
well gives the Commissioner blanket authority to decide what is or is not the meaning of "sparkling wines." He
claimed that there was an abdication of legislative power violative of the established doctrine, delegata potestas
non potest delegate, and the due process clause of the Constitution.
The respondent disagreed on the ground that Tax Code specifies the articles subject to specific taxes, classify
wines in several categories, and prescribe the corresponding amounts of tax to be paid.
The Commissioner's position was sustained by the Court of Tax Appeals.

(Note: Section 134 of the Tax Code provides: There shall be collected, per liter of volume capacity, the following taxes:
(a) Sparkling wines, regardless of proof, twelve pesos.
(b) Still wines containing fourteen per centum of alcohol or less, except those produced from casuy and duhat, one peso.
(c) Still wines containing more than fourteen per centum of alcohol, two pesos.
Imitation wines containing more than twenty-five per centum of alcohol shall be taxed as distilled spirits.)

Held:
There can be no uncertainty that the purpose of the abovequoted provision is to impose a specific tax on wines
and imitation wines.
The sole object of the sub-enumeration that follows is to prescribe the amount of the tax specifically to be paid
for each type of wine and/or imitation wine so classified and described.
The section therefore clearly and indubitably discloses the legislative will, leaving to the officers charged with
implementation and execution by determining whether a particular kind of wine or imitation wine falls in one
class or another.
In the performance of this function, the internal revenue officers are demonstrably guided by the sound established
practices and technology of the wine industry, an industry as aged and widely dispersed as one can care to know.
On the basis of the test made, the Commissioner ordered the corresponding deficiency assessment to be issued.
Having chosen to engage in the wine trading business, the petitioner was bound to know the kinds of wine it deals
in, particularly insofar as such knowledge may be relevant to the proper appreciation of its tax liabilities, and
cannot take comfort in its pretended ignorance of what sparkling wine is.
ACCORDINGLY, the decision of the Court of Tax Appeals was affirmed.
G.R. No. L-29646 November 10, 1978
MAYOR ANTONIO J. VILLEGAS, petitioner,
vs.
HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO ARCA, respondents.

Facts:
Ordinance No. 6537 was passed by the Municipal Board of Manila which prohibits aliens from being employed
or to engage in any occupation or business, whether permanent, temporary or casual, without first securing an
employment permit from the Mayor of Manila and paying the permit fee of P50.00.
Private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, sought the declaration of
unconstitutionality of the said ordinance on the following grounds:
1. As a police power measure, it fails to prescribe any standard to guide and/or limit the action of the Mayor, thus,
violating the fundamental principle on illegal delegation of legislative powers:
2. It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus, deprived of their rights
to life, liberty and property and therefore, violates the due process and equal protection clauses of the Constitution.
Petitioner argued that such ordinance cannot be declared null and void on the ground that it violated the rule on
uniformity of taxation because the rule on uniformity of taxation applies only to purely tax or revenue measures
and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of the police power of the state, it
being principally a regulatory measure in nature.
However, Respondent judge declared the said ordinance as null and void.

Issue:
1. Whether or not the said ordinance violated the ff:
A. Principle against undue delegation of legislative power
B. Due process and equal protection clauses.

Held:
(Note: The contention that Ordinance No. 6537 is purely tax and noy revenue measure. While it is true that the first part which
requires that the alien shall secure an employment permit from the Mayor involves the exercise of discretion and judgment in the
processing of applications for such permits and therefore is regulatory in character, the second part which requires the payment of
P50.00 as employee's fee is not regulatory but a revenue measure. It is obvious that the purpose of the ordinance is to raise money
under the guise of regulation.)

A. Yes, because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the
power.
It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to
guide or limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumerates no
conditions for its grant or refusal, and entirely lacks standard, such ordinance is invalid, being an undefined and
unlimited delegation of power to allow or prevent an activity per se lawful.
(Note:Authority and discretion to grant and refuse permits of all classes conferred upon the id not uncontrolled discretion but
legal discretion to be exercised within the limits of the law.)

B. Yes, The ordinance in question violates the due process of law and equal protection rule of the Constitution.
Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold
or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a
means of livelihood.
While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien is
admitted, he cannot be deprived of life without due process of law. This guarantee includes the means of
livelihood. The shelter of protection under the due process and equal protection clause is given to all persons,
both aliens and citizens.
(Note: P50.00 fee was unreasonable not only because it is excessive but because it fails to consider valid substantial differences
in situation among individual aliens who are required to pay it.
Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification
should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation.)
G.R. No. L-46720 June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,

vs.
THE COLLECTOR OF INTERNAL REVENUE

Facts:
Birdie Lillian Eye, wife of Clyde Milton Eye, died at Los Angeles, California, the place of her alleged last
residence and domicile.
Among the properties she left her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated
Mining Company organized and existing under the laws of the Philippines, with its principal office in the City of
Manila.
The petitioner, Wells Fargo Bank & Union Trust Company, was duly appointed trustee of by the will.
The Federal and State of California's inheritance taxes due on said shares have been duly paid. Respondent CIR
sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax, to which petitioner objected.
The petitioner filed a declaratory judgment in the lower court with the statement that such transmission by will
of the said 35,000 stock should not be subject to Philippine inheritance tax.
The Court of First Instance of Manila ruled against the petitioner.
Petitioner appealed and alleged that the Philippine inheritance tax is not a tax property, but upon transmission by
inheritance,; and that, as to intangibles, like the shares of stock in question, their situs is in the domicile of the
owner thereof, and, therefore, their transmission by death necessarily takes place under his domiciliary laws.

Issue:
Whether or not the Philippine government has the power to tax the said 35,000 stock.

Held:
(Note: In cases where the owner of intangibles confines his activity to the place of his domicile, then it is the identify owner at
his domicile which gives jurisdiction to tax.
But when the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit
of the laws of another state, in such a way as to bring his person or properly within the reach of the tax gatherer there, the reason
for a single place of taxation no longer obtains.)

Yes.
The actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein. And besides,
the certificates of stock have remained in this country up to the time when the deceased died in California, and
they were in possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom
they have been delivered and indorsed in blank.
For all practical purposes, then, Syrena McKee had the legal title to the certificates of stock held in trust for the
true owner thereof.
In other words, the owner residing in California has extended here her activities with respect to her intangibles so
as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the
Philippine Government to tax must be upheld.

(Note: Two fundamental considerations:

(1) upon the recognition of the inherent power of each government to tax persons, properties and rights within its jurisdiction;
and
(2) As to intangibles, the government has the power to impose an inheritance tax upon transmission, by death of a non-resident,
of shares of stock in a domestic corporation, regardless of the situs of their corresponding certificates.

(Note: Shares or corporate stock be taxed at the domicile of the shareholder and also at that of the corporation which the taxing
state has created and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's
domicile. protection, benefit, and power over the subject matter are not confined to either state.)
G.R. No. L-65773-74 April 30, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX APPEALS, respondents.
Quasha, Asperilla, Ancheta, Peña, Valmonte & Marcos for respondent British Airways.

Facts:
BOAC, a 100% British Government-owned corporation, is engaged in the international airline business.
Consequently, it did not carry passengers and/or cargo to or from the Philippines, although during the period
covered by the assessments, it maintained a general sales agent in the Philippines — Wamer Barnes and Company,
Ltd., and later Qantas Airways — which was responsible for selling BOAC tickets covering passengers and
cargoes.
BOAC was assessed deficiency income taxes, interests, and penalty for the fiscal years 1968-1969 to 1970-1971
in the aggregate amount of P549,327.43, and the additional amounts of P1,000.00 and P1,800.00 as compromise
penalties for violation of Section 46.
BOAC requested that the assessment be countermanded and set aside.
However, the CIR not only denied the BOAC request for refund in the but also re-issued the said deficiency
income tax assessment.
The Tax Court held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner Barnes and
Company did not constitute BOAC income from Philippine sources "since no service of carriage of passengers
or freight was performed by BOAC within the Philippines" and, therefore, said income is not subject to Philippine
income tax.

Issue:
1. Whether or not the revenue derived by private respondent from sales of tickets in the Philippines for air
transportation, while having no landing rights here, constitute income of BOAC from Philippine sources, and,
accordingly, taxable.
2. Whether or not during the fiscal years in question BOAC s a resident foreign corporation doing business in the
Philippines or has an office or place of business in the Philippines.

Held:
1. Yes.
For the source of income to be considered as coming from the Philippines, it is sufficient that the income is
derived from activity within the Philippines.
In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The tickets
exchanged hands here and payments for fares were also made here in Philippine currency. The site of the source
of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory,
enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of
wealth should share the burden of supporting the government.

(Note:Section 37(a) of the Tax Code, which enumerates items of gross income from sources within the Philippines, namely: (1)
interest, (21) dividends, (3) service, (4) rentals and royalties, (5) sale of real property, and (6) sale of personal property, does not
mention income from the sale of tickets for international transportation.
However, that does not render it less an income from sources within the Philippines. Section 37, by its language, does not intend
the enumeration to be exclusive. It merely directs that the types of income listed therein be treated as income from sources within
the Philippines.)

(Note: The absence of flight operations to and from the Philippines is not determinative of the source of income or the site of
income taxation.)

BOAC was an off-line international airline at the time pertinent to this case. The test of taxability is the "source";
and the source of an income is that activity ... which produced the income. Unquestionably, the passage
documentations in these cases were sold in the Philippines and the revenue therefrom was derived from a activity
regularly pursued within the Philippines. It cannot alter the fact that income from the sale of tickets was derived
from the Philippines. The word "source" conveys one essential idea, that of origin, and the origin of the income
herein is the Philippines.

2. Yes, BOAC is a resident foreign corporation.

(Note: There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. The term implies a
continuity of commercial dealings and arrangements, and contemplates the performance of acts or works or the exercise of some of
the functions normally incident to, and in progressive prosecution of commercial gain
(Note: In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct
and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character.)

BOAC, during the periods covered by the subject - assessments, maintained a general sales agent in the
Philippines, That general sales agent was engaged in (1) selling and issuing tickets; (2) breaking down the whole
trip into series of trips (3) receiving the fare from the whole trip; and (4) consequently allocating to the various
airline companies.
Those activities were in exercise of the functions which are normally incident to the purpose and object of its
organization as an international air carrier. In fact, the regular sale of tickets, its main activity, is the very lifeblood
of the airline business, the generation of sales being the paramount objective. There should be no doubt then that
BOAC was "engaged in" business in the Philippines through a local agent during the period.

(Note: Under Section 20 of the 1977 Tax Code:

(h) the term resident foreign corporation engaged in trade or business within the Philippines or having an office or place of
business therein.
(i) The term "non-resident foreign corporation" applies to a foreign corporation not engaged in trade or business within the
Philippines and not having any office or place of business therein.)

(Note: A transportation ticket is not a mere piece of paper. When issued by a common carrier, it constitutes the contract between
the ticket-holder and the carrier. It gives rise to the obligation of the purchaser of the ticket to pay the fare and the correspondin
g obligation of the carrier to transport the passenger upon the terms and conditions set forth thereon.)

(Note: A common carrier's tax is an excise tax, being a tax on the activity of transporting, conveying or removing passengers and
cargo from one place to another. It purports to tax the business of transportation. Being an excise tax, the same can be levied by
the State only when the acts, privileges or businesses are done or performed within the jurisdiction of the Philippines.)
[G.R. No. 137377. December 18, 2001]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MARUBENI CORPORATION,

respondent.

Facts:
Respondent Marubeni Corporation, a foreign corporation existing under the laws of Japan is engaged in general
import and export trading, financing and the construction business.
It is duly registered to engage in such business in the Philippines and maintains a branch office in Manila.
Petitioner examined the books of accounts of the Manila branch office of respondent corporation and found that
the latter have undeclared income from two (2) contracts in the Philippines, both of which were completed in
1984.
Petitioners recommended an assessment for deficiency income. Respondent received a letter from petitioner
assessing respondent several deficiency taxes.
Petitioner found that the NDC and Philphos contracts (which were executed in the philippines) were for a piece
of work and since the projects called for the construction and installation of facilities in the Philippines, the entire
income therefrom constituted income from Philippine sources, hence, subject to internal revenue taxes.
The respondent filed petitions questioning the deficiency income.
Executive Order (E.O.) No. 41 declaring a one-time amnesty covering unpaid income taxes for the years 1981 to
1985 was issued. In accordance with the terms of E.O. No. 41, respondent filed its tax amnesty return.
The CTA found that respondent had properly availed of the tax amnesty under E.O. and declared the deficiency
taxes subject of said case as deemed cancelled and withdrawn.
Petitioner challenged the decision of the tax court in the CA. The latter dismissed the petition and affirmed the
decision of the CTA.

Held:
The situs of the two projects is in the Philippines, and the materials provided and services rendered were all done
and completed within the territorial jurisdiction of the Philippines. Accordingly, respondents entire receipts from
the contracts, including its receipts from the Offshore Portion, constitute income from Philippine sources. The
total gross receipts covering both labor and materials should be subjected to contractors tax in accordance with
the ruling in Commissioner of Internal Revenue v. Engineering Equipment & Supply Co.
While the construction and installation work were completed within the Philippines, the evidence is clear that
some pieces of equipment and supplies were completely designed and engineered in Japan. All services for the
design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I
were made and completed in Japan. These services were rendered outside the taxing jurisdiction of the Philippines
and are therefore not subject to contractors tax.

(Note: A tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons
otherwise guilty of evasion or violation of a revenue or tax law.
It partakes of an absolute forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders
who wish to relent a chance to start with a clean slate.
A tax amnesty, much like a tax exemption, is never favored nor presumed in law.
If granted, the terms of the amnesty, like that of a tax exemption, must be construed strictly against the taxpayer and liberally in
favor of the taxing authority. For the right of taxation is inherent in government. The State cannot strip itself of the most essential
power of taxation by doubtful words. If a doubt arises as to the intent of the legislature, that doubt must be resolved in favor of
the state.)

(Note: Contractors tax is a tax imposed upon the privilege of engaging in business.[45] It is generally in the nature of an excise
tax on the exercise of a privilege of selling services or labor rather than a sale on products.)
G.R. No. L-40296 November 21, 1984
ALLIED THREAD CO., INC., and KER & COMPANY, LTD., petitioners,
vs.
HON. CITY MAYOR OF MANILA, HON. CITY TREASURER OF MANILA, HON. LORENZO
RELOVA, in his capacity as Presiding Judge, Branch II, CFI of Manila, respondents.

Facts:
Municipal Board of the City of Manila enacted Ordinance No. 7516 imposing on manufacturers, importer porters
or producers, doing business in the City of Manila, business taxes based on gross sales on a graduated basis.
Petitioner Allied Id Co., inc. is engaged in the business of manufacturing sewing thread and yarn under duly
registered marks and labels. It operates its factory and maintains an office in Pasig, Rizal. In order to sell its
products in Manila and in other parts of the Philippines, Petitioner Allied engaged the services of a sales broker,
Ker & Company, Ltd.,the latter deriving commissions from every sale made for its principal.
Having been affected by the aforementioned Ordinance, being manufacturers and sales brokers, the petitioners
sought the declaration of the unconstitutionality of the said ordinance.
Petitioner Allied Thread Co claimed that it should not be subjected to the said Ordinance, because it does not
operate or maintain a branch office in Manila and that its principal office and factory are located in Pasig, Rizal.
The Court of First Instance of Manila upheld the validity of the said ordinance and found petitioner Allied to be
the proper subject thereto.

Issue:
Whether or not the Petitioner Allied should not be subjected to the said ordinance on the ground that it did not
maintain office or branch office in the City of Manila.

Held:
No, Allied Thread Co., Inc. admitted that it does business in the City of Manila through a broker or agent, Ker &
Company, Ltd.
Doing business in the City of Manila is all that is required to fall within the coverage of the Ordinance.
It should be noted that Ordinance No. 7516 as amended imposes a business tax on manufacturers, importers or
producers doing business in the City of Manila. The tax imposition here is upon the performance of an act,
enjoyment of a privilege, or the engaging in an occupation, and hence is in the nature of an excise tax.
The power to levy an excise upon the performance of an act or the engaging in an occupation does not depend
upon the domicile of the person subject to the excise nor upon the physical location of the property and in
connection with the act or occupation taxed, but depends upon the place in which the act is performed or
occupation engaged in.
Thus, the gauge for taxability under the said Ordinance No. 7516 as amended does not depend on the location of
the office, but attaches upon the place where the respective sale transaction(s) is perfected and consummated.
WHEREFORE, the petition is hereby dismissed for lack of merit.
G.R. No. L-18125 May 31, 1963
BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA, petitioner,
vs.
COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE AUTHORITY
(NAWASA), respondents.
Gabriel V. Valero and Rodolfo F. de Gorostiza for petitioner.
Manuel B. Roño for respondent National Waterworks and Sewerage Authority.
CONCEPCION, J.:

Facts:

Issue:
Whether or not the water pipes, reservoir, intake and buildings used by herein respondent NAWASA, in the
operation of its waterworks system, are subject to real estate tax.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this
stipulation of facts. 1äwphï1.ñët
The parties have submitted in the Court of Tax Appeals a stipulation of facts. The pertinent parts thereof are to
the effect:
1. That the petitioner National Waterworks and Sewerage Authority (NWSA) is a public corporation created by
virtue of Republic Act No. 1383, and that it is owned by the Government of the Philippines as well as all property
comprising waterworks and sewerage systems placed under it:.
2. That, pursuant to the provisions of Republic Act No. 1383, petitioner NWSA took over all the property of the
former Metropolitan Water District and all the existing local government-owned waterworks and sewerage
systems all over the Philippines, including the Cabuyao-Sta. Rosa-Biñan Waterworks System owned by the
Province of Laguna (Section 8, Republic Act No. 1283);
3. That the functions and activities of petitioner NWSA, as enumerated in Republic Act No. 1383, more
particularly Section 2 thereof, are the same and identical with the functions of the defunct Metropolitan Water
District, particularly Section 2, Act 2832, is amended;
4. That petitioner National Waterworks and Sewerage Authority (NWSA) has no capital stock divided into shares
of stocks, no stockholders, and is not authorized by its Charter to distribute dividends; and, on the other hand,
whatever surplus funds it has realized, may and will after meeting its yearly obligations, have been, are and may
be, used for the construction, expansion and improvement of its waterworks and sewer services;
5. That at the time that the Cabuyao-Sta. Rosa-Biñan Waterworks System was taken over by petitioner NWSA in
1956, the former was self-supporting and revenue-producing, but that all its surplus income are not declared as
profits as this surplus are or may be invested for the expansion thereof;
6. That in the year 1956 the Provincial Assessor of Laguna assessed, for purposes of real estate taxes, the property
comprising the Cabuyao-Sta. Rosa-Biñan Waterworks System and described in Tax Declaration No. 5987 (Exh.
"A-l") which, as stated in Paragraph 2 hereof, herein petitioner NWSA had taken over;
7. That against the above-mentioned assessment made by the Provincial Assessor of Laguna, petitioner NWSA
protested, claiming that the property described under Tax Declaration No. 5987 (Exh. "A-l") are exempted from
the payment of real estate taxes in view of the nature and kind of said property and functions and activities of
petitioner, as provided in Republic Act No. 1383;.
8. That the said protest of petitioner NWSA was overruled on appeal before the herein respondent Board of
Assessment Appeals, hence the present petition for review filed by petitioner;
xxx xxx xxx"
After appropriate proceedings, the Court of Tax Appeals rendered the aforementioned decision reversing the
action taken by petitioner Board, which, accordingly, has brought the case to us for review, under the provisions
of Republic Act No. 1125, contending that the properties in question are subject to real estate tax because: (1)
although said properties belong to the Republic of the Philippines, the same holds it, not in its governmental,
political or sovereign capacity, but in a private, proprietary or patrimonial character, which, allegedly, is not
covered by the exemption contained in section 3(a) of Republic Act No. 470; and 2) this exemption, even if
applicable to patrimonial property, must yield to the provisions of section 1 of Republic Act No. 104, under which
all corporations, agencies or instrumentalities owned or controlled by the Government are subject to taxation,
according to petitioner appellant.
Sections 2 and 3(a) of Commonwealth Act No. 470 provide:
SEC. 2. Incidence of real property tax. — Except in chartered cities, there shall be levied, assessed, and collected,
an annual ad valorem tax on real property, including land, buildings, machinery, and other improvements not
hereinafter specifically exempted.
SEC. 3. Property exempt from tax. — The exemptions shall be as follows:
(a) Property owned by . . . the Republic of the Philippines, any province, city, municipality or municipal district.
...
It is conceded, in the stipulation of facts, that the property involved in this case "is owned by the Government of
the Philippines". Hence, it belongs to the Republic of the Philippines and falls squarely within the letter of the
above provision. This notwithstanding, petitioner Board maintains that respondent NAWASA is not entitled to
the benefits of the exemption established in said section 3(a), inasmuch as, in the case of the City of Cebu vs.
NAWASA, G. R. No. L-12892, decided on April 30, 1960, we ruled that the assets of the water system of the
City of Cebu, which the NAWASA had sought to take over, pursuant to the provisions of Republic Act No. 1383
— as it did in the case at bar, with respect to the Cabuyao-Sta. Rosa-Biñan Waterworks System — are patrimonial
property of said city, which held it in a proprietary character, not in its governmental capacity.
We did not declare, however, in the Cebu case that said assets were subject to taxation. In that case we merely
reiterated the doctrine, laid down in the case of City of Baguio vs. NAWASA, G. R. No. L-12032, decided on
August 31, 1959, that municipal corporations hold in their proprietary character, the assets of their respective
waterworks, which, accordingly, cannot be taken or appropriated by the National Government and placed under
the NAWASA without payment of just compensation. Neither the Cebu case nor that of Baguio sustains the theory
that said assets are taxable.
Upon the other hand, in exempting from taxation "property owned by the Republic of the Philippines, any
province, city, municipality or municipal district . . .," said section 3(a) of Republic Act No. 470 makes no
distinction between property held in a sovereign, governmental or political capacity and those possessed in a
private, proprietary or patrimonial character. And where the law does not distinguish neither may we, unless there
are facts and circumstances clearly showing that the lawmaker intended the contrary, but no such facts and
circumstances have been brought to our attention. Indeed, the noun "property" and the verb "owned" used in said
section 3(a) strongly suggest that the object of exemption is considered more from the view point of dominion,
than from that of domain. Moreover, taxes are financial burdens imposed for the purpose of raising revenues with
which to defray the cost of the operation of the Government, and a tax on property of the Government, whether
national or local, would merely have the effect of taking money from one pocket to put it in another pocket
(Cooley on Taxation, Sec. 621, 4th Edition.) Hence, it would not serve, in the final analysis, the main purpose of
taxation. What is more, it would tend to defeat it, on account of the paper work, time and consequently, expenses
it would entail. (The Law on Local Taxation, by Justiniano Y. Castillo, p. 13.)
Section 1 of the Republic Act No. 101, upon which petitioner relies, reads:
. . . All corporations, agencies, or instrumentalities owned or controlled by the government shall pay such duties,
taxes, fees and other charges upon their transaction, business, industries, sale, or income as are imposed by law
upon individuals, associations or corporations engaged in any taxable business, industry, or activity except on
goods or commodities imported or purchased and sold or distributed for relief purposes as may be determined by
the President of the Philippines.
This provision is inapplicable to the case at bar for it refers only to duties, taxes, fees and other charges upon
"transaction, business, industry, sale or income" and does not include taxes on property like real estate tax.
WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to costs. It is
so ordered.
G.R. No. 163072 April 2, 2009
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner,
vs.
CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY
TREASURER OF PASAY, and CITY ASSESSOR OF PASAY, Respondents.

Facts:
Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino
International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the
Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then
President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land,
including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA
Complex is located along the border between Pasay City and Parañaque City.
On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for
the taxable years 1992 to 2001. MIAA’s real property tax delinquency for its real properties located in NAIA
Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows:
On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for
the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the
City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property
taxes remain unpaid.
On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer
for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from
imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.
On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to
impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which
the Court of Appeals denied. Hence, this petition.
The Court of Appeals’ Ruling
The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code,
which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to
natural or juridical persons, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational
institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21
of EO 903 has been withdrawn upon the effectivity of the Local Government Code.
Issue:
The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property
tax.

The Court’s Ruling:

The petition is meritorious.
In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and
234 of the Local Government Code which read:
SECTION 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
effectivity of this Code.
SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious
cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious,
charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government owned or controlled corporations engaged in the supply and distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environment protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.
The Court of Appeals held that as a government-owned corporation, MIAA’s tax exemption under Section 21 of
EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992.
In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA case), this Court already resolved
the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006
MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals,
seeking to restrain the City of Parañaque from imposing real property tax on, levying against, and auctioning for
public sale the airport lands and buildings located in Parañaque City. The only difference between the 2006 MIAA
case and this case is that the 2006 MIAA case involved airport lands and buildings located in Parañaque City
while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case
raised the same threshold issue: whether the local government can impose real property tax on the airport lands,
consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court
held:
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the
1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10)
of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject
to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to
the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local
Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is
given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of
public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public service or
for the development of the national wealth.
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings
of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public
use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.7 (Emphasis in the original)
The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code
of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a
government "instrumentality" may or may not be a "government-owned or controlled corporation." Obviously,
the term government "instrumentality" is broader than the term "government-owned or controlled corporation."
Section 2(10) provides:
SEC. 2. General Terms Defined.– x x x
(10) Instrumentality refers to any agency of the national Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or controlled corporations.
The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the
Introductory Provisions of the Administrative Code of 1987:
SEC. 2. General Terms Defined.– x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and
owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the
case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That
government-owned or controlled corporations may further be categorized by the department of Budget, the Civil
Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.
The fact that two terms have separate definitions means that while a government "instrumentality" may include a
"government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify
as a "government-owned or controlled corporation."
A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show
that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not
qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case:
A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA
is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital
stock divided into shares. MIAA has no stockholders or voting shares. x x x
Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares
and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not
divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.
xxx
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines
a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees
or officers." A non-stock corporation must have members. Even if we assume that the Government is considered
as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit
20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a
non-stock corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes.
MIAA, a public utility, is organized to operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or
controlled corporation. What then is the legal status of MIAA within the National Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with
corporate powers. x x x
When the law vests in a government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises
the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same
time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are
not inconsistent with the provisions of this Executive Order."9
Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is
exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local
government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under
Section 133(o)11 of the Local Government Code, local government units have no power to tax instrumentalities
of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay
properties.
Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use,
and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However,
under the same provision, if MIAA leases its real property to a taxable person, the specific property leased
becomes subject to real property tax.12 In this case, only those portions of the NAIA Pasay properties which are
leased to taxable persons like private parties are subject to real property tax by the City of Pasay.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the
Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA
Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the
City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property
tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport
Authority, except for the portions that the Manila International Airport Authority has leased to private parties.
No costs.
SO ORDERED.
[G.R. No. 127410. January 20, 1999]
CONRADO L. TIU, JUAN T. MONTELIBANO JR. and ISAGANI M. JUNGCO, petitioners, vs. COURT
OF APPEALS, HON. TEOFISTO T. GUINGONA JR., BASES CONVERSION AND DEVELOPMENT
AUTHORITY, SUBIC BAY METROPOLITAN AUTHORITY, BUREAU OF INTERNAL REVENUE,
CITY TREASURER OF OLONGAPO and MUNICIPAL TREASURER OF SUBIC,
ZAMBALES, respondents.

Facts
The Congress, with the approval of the President, passed into law RA 7227 entitled An Act Accelerating the
Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for
this Purpose, Providing Funds Therefor and for Other Purposes.
Section 12 thereof created the Subic Special Economic Zone and granted thereto special privileges. One of such
privileges is the non-imposition of taxes, local and national within the Subic Special Economic Zone. In lieu of
paying taxes, three percent (3%) of the gross income earned by all businesses and enterprises within the Subic
Special Economic Zone shall be remitted to the National Government, one percent (1%) each to the local
government units affected by the declaration of the zone.
President Fidel V. Ramos issued E.O which states that “Tax and duty-free importations shall apply only to raw materials,
capital goods and equipment brought in by business enterprises into the SSEZ. Except for these items, importations of other goods
into the SSEZ are subject to taxes and duties.
The President clarified, through E.O, that “the Secured Area consisting of the presently fenced-in former Subic Naval Base
shall be the only completely tax and duty-free. Business enterprises and individuals (Filipinos and foreigners) residing within the
Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption
items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer
items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties.”
The petitioners challenged before this Court the constitutionality of EO 97-A for allegedly being violative of their
right to equal protection of the laws. They also contended that the said E.O narrowed down the area within which
the special privileges granted to the entire zone would apply to the present fenced-in former Subic Naval Base
only. It has thereby excluded the residents of the first two components of the zone from enjoying the benefits
granted by the law. It has effectively discriminated against them, without reasonable or valid standards, in
contravention of the equal protection guarantee.
The Court of Appeals justified the limited application of the tax incentives as being within the prerogative of the
legislature, pursuant to its avowed purpose of serving some public benefit or interest.

Issue:
Whether or not Executive Order No. 97-A violates the equal protection clause of the Constitution.

Held:
No. The said Order is not violative of the equal protection clause; neither is it discriminatory. Rather, the Court
find real and substantive distinctions between the circumstances obtaining inside and those outside the Subic
Naval Base, thereby justifying a valid and reasonable classification.

(Note: The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the
groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated
differently from another. The classification must also be germane to the purpose of the law and must apply to all those belonging
to the same class.)

(Note: The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile
discrimination or the oppression of inequality. It is not intended to prohibit legislation which is limited either [by] the object to
which it is directed or by [the] territory within which it is to operate. It does not demand absolute equality among residents; it
merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and
liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a
specified class, if it applies alike to all persons within such class, and reasonable grounds exist for making a distinction between
those who fall within such class and those who do not.)

(Note: Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be
limited to existing conditions only, and (4) apply equally to all members of the same class.)

1. Substantial Distinctions
There are substantial differences between the big investors who are being lured to establish and operate their
industries in the so-called secured area and the present business operators outside the area.
On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand,
definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local.
Even more important, at this time the business activities outside the secured area are not likely to have any impact
in achieving the purpose of the law, which is to turn the former military base to productive use for the benefit of
the Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and incentives
accorded in RA 7227.
Additionally, as the Court of Appeals pointed out, it will be easier to manage and monitor the activities within
the secured area, which is already fenced off, to prevent fraudulent importation of merchandise or smuggling.
(Note: It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As long as there are
actual and material differences between territories, there is no violation of the constitutional clause. And of course, anyone,
including the petitioners, possessing the requisite investment capital can always avail of the same benefits by channeling his or
her resources or business operations into the fenced-off free port zone.)

2. Germane to the purpose of law

It is clear that RA 7227 aims to accelerate the conversion of military reservations into productive uses or convert
the lands formerly occupied by the US military bases into economic or industrial areas. In furtherance of such
objective, Congress deemed it necessary to extend economic incentives to attract and encourage investors, both
local and foreign.
It was reasonable for the President to have delimited the application of some incentives to the confines of the
former Subic military base. It is this specific area which the government intends to transform and develop from
an abandoned naval facility into a self-sustaining industrial and commercial zone, particularly for big foreign and
local investors to use as operational bases for their businesses and industries. Businessmen are the ones who can
pour huge investments to spur economic growth in the country and to generate employment opportunities for the
Filipinos, the ultimate goals of the government for such conversion. The classification is, therefore, germane to
the purposes of the law. And as the legal maxim goes, The intent of a statute is the law.

3. Not limited to existing conditions only

The classification set forth by the executive issuance does not apply merely to existing conditions. As laid down
in RA 7227, the objective is to establish a self-sustaining, industrial, commercial, financial and investment center
in the area. There will, therefore, be a long-term difference between such investment center and the areas outside
it.

4. Apply equally to all members of the same class

The classification applies equally to all the resident individuals and businesses within the secured area. The
residents, being in like circumstances or contributing directly to the achievement of the end purpose of the law,
are not categorized further. Instead, they are all similarly treated, both in privileges granted and in obligations
required.

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution are hereby
AFFIRMED.
G.R. No. L-22814 August 28, 1968
PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant, vs.
CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,
THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendants-appellees.

Facts:
Ordinance No. 110, imposes a tax of P0.10 per case of 24 bottles of Pepsi-Cola.
The petitioner paid under protest the amount of P4,926.63 from August 16 to December 31, 1960 and the amount
of P9,250.40 from January 1 to July 30, 1961. Thereafter, the petitioner sought the recovery the sums paid by it
and collected by the respondent and claimed that the tax imposed is excessive and unconstitutional.
Plaintiff maintained that the disputed ordinance is null and void.
The Court of First Instance of Agusan dismissed plaintiff's complaint, with costs.

Issue:
Whether or not the disputed ordinance is null and void because:
(1) it partakes of the nature of an import tax;
(2) it amounts to double taxation;
(3) it is excessive, oppressive and confiscatory;
(4) it is highly unjust and discriminatory; and
(5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional
delegation of legislative powers.

Held:

1. Yes. The tax prescribed was imposed only upon "any agent and/or consignee of any person, association, partnership, company
or corporation engaged in selling ... soft drinks or carbonated drinks."Thus, it would seem that the intent was then to levy a tax
upon the sale of said merchandise.
As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax,
unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged
in business outside the City. Besides, the tax would not be applicable to such agent and/or consignee, if less than
1,000 cases of soft drinks are consigned or shipped to him every month. When we consider, also, that the tax
"shall be based and computed from the cargo manifest or bill of lading ... showing the number of cases" — not
sold — but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and
carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax
partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of
law.

2. No. Double taxation, in general, is not forbidden by our fundamental law. The Court have not adopted, as part
thereof, the injunction against double taxation found in the Constitution of the United States and of some States
of the Union.

3. No. The tax of "P0.10 per case of 24 bottles," of soft drinks or carbonated drinks — in the production and sale
of which plaintiff is engaged — or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive,
or confiscatory.

4. Yes, Even however, if the burden in question were regarded as a tax on the sale of said beverages, it would still
be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law,
since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers,
not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same
exceeded those made by said agents or consignees of producers or merchants established outside the City of
Butuan, would be exempt from the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or
equality under all circumstances, or negate the authority to classify the objects of taxation.

The classification made in the exercise of this authority, to be valid, must, however, be reasonable6 and this
requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real
differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not
only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4)
the classification applies equally all those who belong to the same class.
These conditions are not fully met by the ordinance in question. Indeed, if its purpose were merely to levy a
burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by sealers other
than agents or consignees of producers or merchants established outside the City of Butuan should be exempt
from the tax.

5. No. The general principle against delegation of legislative powers, in consequence of the theory of separation
of powers is subject to one well-established exception, namely: legislative powers may be delegated to local
governments — to which said theory does not apply — in respect of matters of local concern.
WHEREFORE, the decision appealed from is hereby reversed, and ordered the City of Butuan to refund to
petitioner the amounts collected from and paid under protest by the latter, and prohibited permanently from
enforcing said Ordinance.
G.R. No. L-1104 May 31, 1949
EASTERN THEATRICAL CO., INC., ET AL., plaintiffs-appellants,
vs.
VICTOR, ALFONSO as City Treasurer of Manila, THE MUNICIPAL BOARD OF THE CITY OF
MANILA, and JUAN NOLASCO, as Mayor of the City of Manila, defendants-appellees.

Facts:
Twelve corporation engaged in motion picture business impugned the validity of Ordinance No. 2958 of the City
of Manila which imposes fee on the price of every admission ticket sold by cinematographs, theaters vaudeville companies
theatrical shows and boxing exhibition and providing for other purposes.
The petitioners, operator of theaters in Manila and distributor of local or imported films impugned the said
ordinance as null and void upon on the ground for violation the Constitution regarding the uniformity and equaliof
taxation and thee equal protection of the laws. The petitioners insisted that ordinance in question does not tax
"many more kinds of amusements" than those therein specified, such as "race tracks, cockpits, cabarets, concert
halls, circuses, and other places of amusement."
The respondents alleged that the graduated tax required by said ordinance being applied to all cinematographs,
theaters, vaudeville companies similarly situated without distinction or exception does not violate the prohibition
against uniformity and equality of taxation.
The Court of first Instance rendered a decision upholding the validity of the said ordinance.
The respondent court contended that the lower court erred in holding that the Municipal Board of the City of
Manila had the power to enact the said ordinance.

Issue:
Whether or not the said ordinance violated the principle of equality and uniformity of taxation enjoined by the
Constitution.

Held:
No, the Court ruled that the petitioner’s argument has no merit. The fact that some places of amusement are not
taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows, and boxing
exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at all against the
equality and uniformity of the tax imposition.
Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate.
The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; and
the petitioners cannot point out what places of amusement taxed by the ordinance do not constitute a class by
themselves and which can be confused with those not included in the ordinance.
The judgment of the trial court is affirmed with costs against appellants.
G.R. No. L-4376 May 22, 1953
ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,
vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY
MAYOR, all of the City of Manila, respondents-appellees.

Facts:
The disputed ordinance which confers upon the municipal board the power "to tax motor and other vehicles
operating within the City of Manila the provisions of any existing law to the contrary notwithstanding."
The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor
vehicles, and G. Manlapit, Inc., a member of said association, challenged the validity of the ordinance on the
following grounds that:
(1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal
Board of the City of Manila;
(2) said ordinance offends against the rule of uniformity of taxation; and
The respondents, contended that the challenged ordinance imposes a property tax which is within the power of
the City of Manila, and that the tax in question does not violate the rule of uniformity of taxation, nor does it
constitute double taxation.
The Court of First Instance of Manila sustained the validity of the ordinance and dismissed the petition.

Issue:
1. Whether or not the tax imposed is property tax.
2. Whether or not the ordinance is unconstitutional on the ground that it offends against the rule of uniformity of
taxation.

Held:
1. No.
The Court find that its title refers to it as "An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the
City of Manila", and that in its section 1 it provides that the tax should be 1 percent ad valorem per annum. It also provides that
the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair,
maintenance and improvement of its streets and bridges." Considering the wording used in the ordinance in the light in
the purpose for which the tax is created, the Court did not consider the tax thus imposed as property tax.

The Court ruled that while it refers to property tax and it is fixed ad valorem, it could not reject the idea that it
was merely levied on motor vehicles operating within the City of Manila with the main purpose of raising funds
to be expended exclusively for the repair, maintenance and improvement of the streets and bridges in said city. It
is for this reason that the Court believed that the ordinance in question merely imposes a license fee although
under the cloak of an ad valorem tax to circumvent the prohibition above adverted to.

(Note: The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the
natural and legal effect of the language employed in the act or ordinance, and not by the name by which it is described, or by the
mode adopted in fixing its amount.)
(If it is clearly a property tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on
the other hand, if the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax,
even though it is graduated according to the property used in such business, or on the gross receipts of the business.)

(Note: While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should not be
taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or
a license tax.)
(Thus, it has been held that "If a tax is in its nature an excise, it does not become a property tax because it is proportioned in
amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily
must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the
performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise."”)

2. Yes, The ordinance infringes the rule of the uniformity of taxation ordained by our Constitution.
The ordinance exacts the tax upon all motor vehicles operating within the City of Manila.
It does not distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it
distinguish between a motor vehicle registered in the City of Manila and one registered in another place but
occasionally comes to Manila and uses its streets and public highways.
The distinction is important if we note that the ordinance intends to burden with the tax only those registered in
the City of Manila as may be inferred from the word "operating" used therein.
(Note: The word "operating" denotes a connotation which is akin to a registration, for under the Motor Vehicle Law no motor
vehicle can be operated without previous payment of the registration fees.)

There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary
stay or for short errands, and it cannot be denied that they contribute in no small degree to the deterioration of the
streets and public highway. The fact that they are benefited by their use they should also be made to share the
corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and
which renders it offensive to the Constitution.
Wherefore, the court declared the ordinance null and void.
G.R. No. L-9637 April 30, 1957
AMERICAN BIBLE SOCIETY, plaintiff-appellant,
vs.
CITY OF MANILA, defendant-appellee.

The petitioner has been distributing and selling bibles throughout the Philippines and translating the same into
several Philippine dialects.
The acting City Treasurer of the City of Manila informed the petitioner that it was conducting the business of
general merchandise without providing itself with the necessary Mayor's permit and municipal license. He
required the petitioner to secure, within three days, the corresponding permit and license fees..
To avoid the closing of its business, the petitioner paid to the respondent under protest the said permit and license
fees, giving at the same time notice that suit would be taken in court to question the legality of the ordinances.
Petitioner proved that it has been in existence in the Philippines since 1899, and that its parent society is in New
York,; that its contiguous real properties located at Isaac Peral are exempt from real estate taxes; and that it was
never required to pay any municipal license fee or tax before the war, nor does the American Bible Society in the
United States pay any license fee or sales tax for the sale of bible therein.
Plaintiff claimed that it never made any profit from the sale of its bibles, which are disposed of for as low as one
third of the cost, and that in order to maintain its operating cost it obtains substantial remittances from its New
York office and voluntary contributions and gifts from certain churches, both in the United States and in the
Philippines, which are interested in its missionary work.
The respondent retorted that the admissions of petitioner’s lone witness who testified on cross-examination that
bibles bearing the price of 70 cents each from plaintiff-appellant's New York office are sold here by plaintiff-
appellant at P1.30 each; those bearing the price of $4.50 each are sold here at P10 each; those bearing the price
of $7 each are sold here at P15 each; and those bearing the price of $11 each are sold here at P22 each, clearly
show that plaintiff's contention that it never makes any profit from the sale of its bible, is evidently untenable.
The lower court dismissed the case for lack of merit.
Not satisfied with this verdict, the petitioner took up the matter to the Court of Appeals which certified the case
to the SC for the reason that the errors assigned to the lower Court involved only questions of law.

Issue:
1. Whether or not the ordinances of the City of Manila are constitutional.

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the
free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religion test shall be required for the exercise of civil or political rights.

Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional and illegal in so far as its society is concerned, because they provide
for religious censorship and restrain the free exercise and enjoyment of its religious profession, to wit: the
distribution and sale of bibles and other religious literature to the people of the Philippines.

Before entering into a discussion of the constitutional aspect of the case, We shall first consider the provisions of
the questioned ordinances in relation to their application to the sale of bibles, etc. by appellant. The records, show
that by letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a Mayor's permit in
connection with the society's alleged business of distributing and selling bibles, etc. and to pay permit dues in the
sum of P35 for the period covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's
failure to secure the permit required by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance
is of general application and not particularly directed against institutions like the plaintiff, and it does not contain
any provisions whatever prescribing religious censorship nor restraining the free exercise and enjoyment of any
religious profession. Section 1 of Ordinance No. 3000 reads as follows:

SEC. 1. PERMITS NECESSARY. — It shall be unlawful for any person or entity to conduct or engage in any of
the businesses, trades, or occupations enumerated in Section 3 of this Ordinance or other businesses, trades, or
occupations for which a permit is required for the proper supervision and enforcement of existing laws and
ordinances governing the sanitation, security, and welfare of the public and the health of the employees engaged
in the business specified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A PERMIT
THEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITY TREASURER.
The business, trade or occupation of the plaintiff involved in this case is not particularly mentioned in Section 3
of the Ordinance, and the record does not show that a permit is required therefor under existing laws and
ordinances for the proper supervision and enforcement of their provisions governing the sanitation, security and
welfare of the public and the health of the employees engaged in the business of the plaintiff. However, sections
3 of Ordinance 3000 contains item No. 79, which reads as follows:

79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business,
trade or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th quarter of
1945 to the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50 as compromise, Ordinance No.
2529, as amended by Ordinances Nos. 2779, 2821 and 3028 prescribes the following:

SEC. 1. FEES. — Subject to the provisions of section 578 of the Revised Ordinances of the City of Manila, as
amended, there shall be paid to the City Treasurer for engaging in any of the businesses or occupations below
enumerated, quarterly, license fees based on gross sales or receipts realized during the preceding quarter in
accordance with the rates herein prescribed: PROVIDED, HOWEVER, That a person engaged in any businesses
or occupation for the first time shall pay the initial license fee based on the probable gross sales or receipts for
the first quarter beginning from the date of the opening of the business as indicated herein for the corresponding
business or occupation.

xxx xxx xxx

GROUP 2. — Retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the payment
of any municipal tax, such as (1) retail dealers in general merchandise; (2) retail dealers exclusively engaged in
the sale of . . . books, including stationery.

xxx xxx xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No. 2529, as
amended, are not imposed directly upon any religious institution but upon those engaged in any of the business
or occupations therein enumerated, such as retail "dealers in general merchandise" which, it is alleged, cover the
business or occupation of selling bibles, books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of said legal body,
as amended by Act No. 3659, approved on December 8, 1929, empowers the Municipal Board of the City of
Manila:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and (b) retail dealers
in new (not yet used) merchandise, which dealers are not yet subject to the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general merchandise, and
(2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books, including stationery, paper and office
supplies, . . .: PROVIDED, HOWEVER, That the combined total tax of any debtor or manufacturer, or both,
enumerated under these subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned
herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were enacted in virtue
of the power that said Act No. 3669 conferred upon the City of Manila. Appellant, however, contends that said
ordinances are longer in force and effect as the law under which they were promulgated has been expressly
repealed by Section 102 of Republic Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly repealed the
provisions of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge, although
Section 2444 (m-2) of the former Manila Charter and section 18 (o) of the new seemingly differ in the way the
legislative intent was expressed, yet their meaning is practically the same for the purpose of taxing the
merchandise mentioned in both legal provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended,
are to be considered as still in full force and effect uninterruptedly up to the present.
Often the legislature, instead of simply amending the pre-existing statute, will repeal the old statute in its entirety
and by the same enactment re-enact all or certain portions of the preexisting law. Of course, the problem created
by this sort of legislative action involves mainly the effect of the repeal upon rights and liabilities which accrued
under the original statute. Are those rights and liabilities destroyed or preserved? The authorities are divided as
to the effect of simultaneous repeals and re-enactments. Some adhere to the view that the rights and liabilities
accrued under the repealed act are destroyed, since the statutes from which they sprang are actually terminated,
even though for only a very short period of time. Others, and they seem to be in the majority, refuse to accept this
view of the situation, and consequently maintain that all rights an liabilities which have accrued under the original
statute are preserved and may be enforced, since the re-enactment neutralizes the repeal, therefore, continuing the
law in force without interruption. (Crawford-Statutory Construction, Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider concept of
taxation and is different from the provisions of Section 2444(m-2) that the former cannot be considered as a
substantial re-enactment of the provisions of the latter. We have quoted above the provisions of section 2444(m-
2) of the Revised Administrative Code and We shall now copy hereunder the provisions of Section 18, subdivision
(o) of Republic Act No. 409, which reads as follows:

(o) To tax and fix the license fee on dealers in general merchandise, including importers and indentors, except
those dealers who may be expressly subject to the payment of some other municipal tax under the provisions of
this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of
the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles,
(2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be
prescribed for each class but where commodities of different classes are sold in the same establishment, it shall
not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax
prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance.

For purposes of this section, the term "General merchandise" shall include poultry and livestock, agricultural
products, fish and other allied products.

The only essential difference that We find between these two provisions that may have any bearing on the case
at bar, is that, while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or
both, enumerated under subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned
therein, shall not be in excess of P500 per annum, the corresponding section 18, subsection (o) of Republic Act
No. 409, does not contain any limitation as to the amount of tax or license fee that the retail dealer has to pay per
annum. Hence, and in accordance with the weight of the authorities above referred to that maintain that "all rights
and liabilities which have accrued under the original statute are preserved and may be enforced, since the
reenactment neutralizes the repeal, therefore continuing the law in force without interruption", We hold that the
questioned ordinances of the City of Manila are still in force and effect.

Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the President of
the Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads as follows:

(ii) To tax, license and regulate any business, trade or occupation being conducted within the City of Manila, not
otherwise enumerated in the preceding subsections, including percentage taxes based on gross sales or receipts,
subject to the approval of the PRESIDENT, except amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former Charter of the
City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's counsel, the
business of "retail dealers in general merchandise" is expressly enumerated in subsection (o), section 18 of
Republic Act No. 409; hence, an ordinance prescribing a municipal tax on said business does not have to be
approved by the President to be effective, as it is not among those referred to in said subsection (ii). Moreover,
the questioned ordinances are still in force, having been promulgated by the Municipal Board of the City of
Manila under the authority granted to it by law.

The question that now remains to be determined is whether said ordinances are inapplicable, invalid or
unconstitutional if applied to the alleged business of distribution and sale of bibles to the people of the Philippines
by a religious corporation like the American Bible Society, plaintiff herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends
that it is unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession
and worship of appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of
religious profession and worship. "Religion has been spoken of as a profession of faith to an active power that
binds and elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his
relations to His Creator and to the obligations they impose of reverence to His being and character, and obedience
to His Will (Davis vs. Beason, 133 U.S., 342). The constitutional guaranty of the free exercise and enjoyment of
religious profession and worship carries with it the right to disseminate religious information. Any restraints of
such right can only be justified like other restraints of freedom of expression on the grounds that there is a clear
and present danger of any substantive evil which the State has the right to prevent". (Tañada and Fernando on the
Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at bar the license fee herein involved is imposed
upon appellant for its distribution and sale of bibles and other religious literature:

In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be obtained before
a person could canvass or solicit orders for goods, paintings, pictures, wares or merchandise cannot be made to
apply to members of Jehovah's Witnesses who went about from door to door distributing literature and soliciting
people to "purchase" certain religious books and pamphlets, all published by the Watch Tower Bible & Tract
Society. The "price" of the books was twenty-five cents each, the "price" of the pamphlets five cents each. It was
shown that in making the solicitations there was a request for additional "contribution" of twenty-five cents each
for the books and five cents each for the pamphlets. Lesser sum were accepted, however, and books were even
donated in case interested persons were without funds.

On the above facts the Supreme Court held that it could not be said that petitioners were engaged in commercial
rather than a religious venture. Their activities could not be described as embraced in the occupation of selling
books and pamphlets. Then the Court continued:

"We do not mean to say that religious groups and the press are free from all financial burdens of government. See
Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444. We have here something
quite different, for example, from a tax on the income of one who engages in religious activities or a tax on
property used or employed in connection with activities. It is one thing to impose a tax on the income or property
of a preacher. It is quite another to exact a tax from him for the privilege of delivering a sermon. The tax imposed
by the City of Jeannette is a flat license tax, payment of which is a condition of the exercise of these constitutional
privileges. The power to tax the exercise of a privilege is the power to control or suppress its enjoyment. . . .
Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the
resources necessary for its maintenance. Those who can tax the privilege of engaging in this form of missionary
evangelism can close all its doors to all those who do not have a full purse. Spreading religious beliefs in this
ancient and honorable manner would thus be denied the needy. . . .

It is contended however that the fact that the license tax can suppress or control this activity is unimportant if it
does not do so. But that is to disregard the nature of this tax. It is a license tax — a flat tax imposed on the exercise
of a privilege granted by the Bill of Rights . . . The power to impose a license tax on the exercise of these freedom
is indeed as potent as the power of censorship which this Court has repeatedly struck down. . . . It is not a nominal
fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in no way
apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities whose enjoyment
is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their exercise.
That is almost uniformly recognized as the inherent vice and evil of this flat license tax."

Nor could dissemination of religious information be conditioned upon the approval of an official or manager even
if the town were owned by a corporation as held in the case of Marsh vs. State of Alabama (326 U.S. 501), or by
the United States itself as held in the case of Tucker vs. Texas (326 U.S. 517). In the former case the Supreme
Court expressed the opinion that the right to enjoy freedom of the press and religion occupies a preferred position
as against the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of
press and religion, as we must here, we remain mindful of the fact that the latter occupy a preferred position. . . .
In our view the circumstance that the property rights to the premises where the deprivation of property here
involved, took place, were held by others than the public, is not sufficient to justify the State's permitting a
corporation to govern a community of citizens so as to restrict their fundamental liberties and the enforcement of
such restraint by the application of a State statute." (Tañada and Fernando on the Constitution of the Philippines,
Vol. 1, 4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, provides:

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. — The following organizations shall not be taxed
under this Title in respect to income received by them as such —

(e) Corporations or associations organized and operated exclusively for religious, charitable, . . . or educational
purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real
or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and
says that such exemption clearly indicates that the act of distributing and selling bibles, etc. is purely religious
and does not fall under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the
business or occupation of selling said "merchandise" for profit. For this reason We believe that the provisions of
City of Manila Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair
its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of
religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any
person can engage in any of the businesses, trades or occupations enumerated therein, We do not find that it
imposes any charge upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious
practices. In the case of Coleman vs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise,
circulars, handbooks, advertising, or literature of any kind, whether said articles are being delivered free, or
whether same are being sold within the city limits of the City of Griffin, without first obtaining written permission
from the city manager of the City of Griffin, shall be deemed a nuisance and punishable as an offense against the
City of Griffin, does not deprive defendant of his constitutional right of the free exercise and enjoyment of
religious profession and worship, even though it prohibits him from introducing and carrying out a scheme or
purpose which he sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to
plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiff-
appellant and defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein
for, as stated before, it would impair plaintiff's right to the free exercise and enjoyment of its religious profession
and worship, as well as its rights of dissemination of religious beliefs, We find that Ordinance No. 3000, as
amended is also inapplicable to said business, trade or occupation of the plaintiff.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement
as to costs. It is so ordered.