Victorias Milling Co. vs.
Municipality of Victorias tax or fee for the regulation of business in which the company is engaged. To be
GR L-21183, 27 September 1968 En Banc, Sanchez (J): 9 concur
Facts:
 Ordinance 1 (1956) was approved by the municipal council of Victorias by
way of an amendment to 2 municipal ordinances separately imposing
license taxes on operators of sugar centrals and sugar refineries.
 The changes were: (1) with respect to sugar centrals, by increasing the rates
of license taxes; and (2) as to sugar refineries, by increasing the rates of
license taxes as well as teh range of graduated schedule of annual output
capacity.
 Victorias Milling questioned the validity of Ordinance 1 as it, among others,
allegedly singled out Victorias Milling Co. since it is the only operator of a
sugar central and a sugar refinery within the jurisdiction of the municipality.
Issue: Whether Ordinance 1 is discriminatory.
Held: The ordinance does not single out Victorias as the only object of the ordinance
but is made to apply to any sugar central or sugar refinery which may happen to
operate in the municipality. The fact that Victorias Milling is actually the sole
operator of a sugar central and a sugar refinery does not make the ordinance
discriminatory. The ordinance is unlike that in Ormoc Sugar Company vs. Municipal
Board of Ormoc City, which specifically spelled out Ormoc Sugar as the subject of
the taxation, the name of the company herein was never mentioned in the ordinance.
Progressive Development Corporation vs. Quezon
City GR 36081, 24 April 1989 Third Division, Feliciano (J): 4 concur
Facts:
 The City Council of Quezon City adopted Ordinance 7997 (1969) where
privately owned and operated public markets to pay 10% of the gross
receipts from stall rentals to the City, as supervision fee.
 Such ordinance was amended by Ordinance 9236 (1972), which imposed a
5% tax on gross receipts on rentals or lease of space in privately-owned
public markets in Quezon City.
 Progressive Development Corp., owned and operator of Farmer’s Market
and Shopping Center, filed a petition for prohibition against the city on the
ground that the supervision fee or license tax imposed is in reality a tax on
income the city cannot impose.
Issue: Whether the supervision fee / license tax is a tax on income.
Held: The 5% tax imposed in Ordinance 9236 does not constitute a tax on income,
nor a city income tax (distinguished from the national income tax by the Tax Code)
within the meaning of Section 2 (g) of the Local Autonomy Act, but rather a license
considered a license fee, the imposition must relate to an occupation or activity that
so engages the public interest in health, morals, safety and development as to require
regulations for the protection and promotion of such public interest; the imposition
must also bear a reasonable relation to the probable expenses of the regulation,
taking into account not only the costs of direct regulation but also its incidental
consequences as well. The gross receipts from stall rentals have been used only as a
basis for computing the fees or taxes due to the city to cover the latter’s
administrative expenses. The use of the gross amount of stall rentals, as basis for the
determination of the collectible amount of license tax, does not by itself convert or
render the license tax into a prohibited city tax on income. For ordinarily, the higher
the amount of stall rentals, the higher the aggregate volume of foodstuffs and related
items sold in the privately owned market; and the higher the volume of goods sold in
such market, the greater extent and frequency of inspection and supervision that may
be reasonably required in the interest of the buying public.
Product v. Fertiphil Corp.
G.R. No. 166006 March 14, 2008
REYES, R.T., J.
Lessons Applicable: Bet. private and public suit, easier to file public suit, Apply real
party in interest test for private suit and direct injury test for public suit, Validity test
varies depending on which inherent power
FACTS:
 President Ferdinand Marcos, exercising his legislative powers, issued LOI
No. 1465 which provided, among others, for the imposition of a capital
recovery component (CRC) on the domestic sale of all grades of fertilizers
which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and
Perticide Authority (FPA).
 FPA remits its collection to Far East Bank and Trust Company who applies
to the payment of corporate debts of Planters Products Inc. (PPI)
 After the Edsa Revolution, FPA voluntarily stopped the imposition of the
P10 levy.
 Upon return of democracy, Fertiphil demanded a refund but PPI refused.
 Fertiphil filed a complaint for collection and damages against FPA and PPI
with the RTC on the ground that LOI No. 1465 is unjust, unreaonable
oppressive, invalid and unlawful resulting to denial of due process of law.
 FPA answered that it is a valid exercise of the police power of the state in
ensuring the stability of the fertilizing industry in the country and that
Fertiphil did NOT sustain damages since the burden imposed fell on the
ultimate consumers.
RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation
ad is as such because it is NOT for public purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police
power
Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real party in interest"
or party who stands to be benefited or injured by the judgment in the suit. In public
suits, there is the right of the ordinary citizen to petition the courts to be freed from
unlawful government intrusion and illegal official action subject to the direct injury
test or where there must be personal and substantial interest in the case such that he
has sustained or will sustain direct injury as a result. Being a mere procedural
technicality, it has also been held that locus standi may be waived in the public
interest such as cases of transcendental importance or with far-reaching implications
whether private or public suit, Fertiphil has locus standi.
2. As a seller, it bore the ultimate burden of paying the levy which made its products
more expensive and harm its business. It is also of paramount public importance
since it involves the constitutionality of a tax law and use of taxes for public purpose.
3. Yes. Police power and the power of taxation are inherent powers of the state but
distinct and have different tests for validity. Police power is the power of the state to
enact the legislation that may interfere with personal liberty on property in order to
promote general welfare. While, the power of taxation is the power to levy taxes as
to be used for public purpose. The main purpose of police power is the regulation of
a behavior or conduct, while taxation is revenue generation. The lawful subjects and
lawful means tests are used to determine the validity of a law enacted under the
police power. The power of taxation, on the other hand, is circumscribed by inherent
and constitutional limitations.
In this case, it is for purpose of revenue. But it is a robbery for the State to tax the
citizen and use the funds generation for a private purpose. Public purpose does NOT
only pertain to those purpose which are traditionally viewed as essentially
governmental function such as building roads and delivery of basic services, but also
includes those purposes designed to promote social justice. Thus, public money may
now be used for the relocation of illegal settlers, low-cost housing and urban or
agrarian reform.
Compania General de Tobacos de Filipinas vs. Manila
GR L-16619, 29 June 1963 En Banc, Dizon (J): 8 concur, 2 took no part
Facts:
 Compania General de Tabacos de Filipinas (Tabacalera) paid the City of
Manila the fixed license fees prescribed by Ordinance 3358 for the years
1954 to 1957.
 In 1954, City Ordinance 3634 and 3816 were passed; where the term
“general merchandise” found therein included all articles in Sections 123 to
148 of the Tax Code (thus, also liquor under Sedctions 133 to 135).
 The Tabacalera paid its wholesaler’s and retailer’s taxes. In 1954, the City
Treasurer addressed a letter to an accounting firm, expressing the view that
liquor dealers paying the annual wholesale and retail fixed tax under
Ordinance 3358 are not subject to the wholesale aand retail deaklers’ taxes
prescribed by City Ordinances 3634, 3301, and 3816.
 The Tabacalera, upon learning of said stopped including quarterly sworn
declaratons required by the latter ordinances, and in 1957, demanded
refunde of the alleged overpayment.
 The claim was disallowed.
Issue: Whether there is a distinction between Ordinance 3358 and Ordinances 3634,
3301 and 3816, to prevent refund to the company.
Held: Generally, the term “tax” applies to all kinds of exactions which become
public funds. Legally, however, a license fee is a legal concept quite distinct from
tax: the former is imposed in the exercise of police power for purposes of regulation,
while the latter is imposed under the taxing power for the purpose of raising
revenues. Ordinance 3358 prescribes municipal license fees for the privilege to
engage in the business of selling liquor or alcohol beverages; considering that the
sale of intoxicating liquor is (potentially) harmful to public health and morals, and
must be subject to supervision or regulation by the State and by cities and
municipalities authorized to act in the premises. On the other hand, Ordinances 3634,
3301 and 3816 imposed taxes on the sales of general merchandise, wholesale or
retail, and are revenue measures enacted by the Municipal Board of Manila. Both a
license fee and a tax may be imposed on the same business or occupation, or for
selling the same article, without it being in violation of the rule against double
taxation. The contrary view of the Treasurer in its letter is of no consequence as the
government is not bound by the errors or mistakes committed by its officers,
specially on matters of law. The company, thus, is not entitled to refund.
Villanueva vs. Iloilo City
GR L-26521, 28 December 1968
En Banc, Castro (J): 8 concur
Facts:
 On 30 September 1946, the Municipal Board of Iloilo City enacted
Ordinance 86 imposing license tax fees upon tenement house (P25);
tenement house partly engaged or wholly engaged in and dedicated to
business in Baza, Iznart, and Aldeguer Streets (P24 per apartment); and
tenement house, padtly or wholly engaged in business in other streets (P12
per apartment).
 The validity of such ordinance was challenged by Eusebio and Remedios
Villanueva, owners of four tenement houses containing 34 apartments.
  The Supreme Court held the ordinance to be ultra vires.
 On 15 January 1960, however, the municipal board, believing that it
acquired authority to enact an ordinance of the same nature pursuant to the
Local Autonomy Act, enacted Ordinance 11 (series of 1960), Eusebio and
Remedios Villaniueva assailed the ordinance anew.
Issue: Whether Ordinance 11 violates the rule of uniformity of taxation.
Held: The Court has ruled that tenement houses constitute a distinct class of
property; and that taxes are uniform and equal when imposed upon all property of the
same class or character within the taxing authority.
The fact that the owners of the other classes of buildings in Iloilo are not imposed
upon by the ordinance, or that tenement taxes are imposed in other cities do not
violate the rule of equality and uniformity. The rule does not require that taxes for
the same purpose should be imposed in different territorial subdivisions at the
same time. So long as the burden of tax falls equally and impartially on all owners or
operators of tenement houses similarly classified or situated, equality and uniformity
is accomplished. The presumption that tax statutes are intended to operate uniformly
and equally were not overthrown herein
Meralco vs. Vera
GR L-29987, 22 October 1975
First Division, Munoz Palma (J): 4 concur, 1 took no part
Facts:
 Meralco is the holder of a franchise to construct, maintain, and operate an
electric light, heat , and power system in the City of Manila and its suburbs.
 In 1962 and 1963, Meralco imported and received from abroad copper
wires, transformers, and insulators for use in the operation of its business.
 The Collector of Customs, as deputy of the Commissioner of Internal
Revenue, levied and collected a compensating tax.
 Meralco claimed for refund for the said yeares, but such claims were either
not acted upon or denied by the Commissioner.
Issue: Whether Meralco is exempt from payment of a compensating tax on poles,
wires, transformers and insulators imported by it for use in the operation of its
electric light, heat, and power system.
Held: Meralco is not exempt from paying the compensationg tax provided for in
Section 190 of the Tax Code, the prupose of which is to “place casual importers, who
are not merchants on equal forring with established merchants who pay sales tax on
articles imported by them.” Meralco’s claim for exemption from payment of
the compensating tax is not clear or expressed, contrary to the rule that “exemptions
from taxation are highly disfavored in law, and he who claims exemption must be
able to justify his claim by the clearest grant of organic or statute law.” Tax
exemptiion are strictly construed against the taxpayer, they being highly disfavored
and may almost be said to be “odious to the law.” When exemption is claimed, it
must be shown indubitably to exist, for every presumption is against it, and a well-
founded doubt is fatal to the claim.
Greenfield v. Meer
(Exemption from Taxation)
Facts
 Since the year 1933, the plaintiff has been continuously engaged in the
embroidery business.
 In 1935, the plaintiff began engaging in buying and selling mining stocks
and securities for his own exclusive account and not for the account of
others.
 The plaintiff has not been a dealer in securities as defined in section 84 (t)
of Commonwealth Act No. 466; he has no established place of business for
the purchase and sale of mining stocks and securities; and he was never a
member of any stock exchange.
 The plaintiff filed an income tax return where he claims a deduction of
P67,307.80 representing the net loss sustained by him in mining stocks
securities during the year 1939.
 The defendant disallowed said item of deduction on the ground that said
losses were sustained by the plaintiff from the sale of mining stocks and
securities which are capital assets, and that the loss arising from the sale of
the same should be allowed only to the extent of the gains from such sales,
which gains were already taken into consideration in the computation of the
alleged net loss of P67,307.80.
Issue: Whether the personal and additional exemptions granted bysection 23 of
Commonwealth Act No. 466 should beconsidered as a credit against or be deducted
from the netincome, or whether it is the tax on such exemptions that shouldbe
deducted from the tax on the total net income.
Held/Ratio: Personal and additional exemptions claimed by appellantshould be
credited against or deducted from the net income."Exception is an immunity or
privilege; it is freedom from acharge or burden to which others are subjected." (If
theamounts of personal and additional exemptions fixed in section23 are exempt
from taxation, they should not be included aspart of the net income, which is taxable.
There is nothing insaid section 23 to justify the contention that the tax on
personalexemptions (which are exempt from taxation) should first befixed, and then
deducted from the tax on the net income.
Manila Electric Co, Inc. vs Province of Laguna
G.R. No. 131359
Subject: Public Corporation
Doctrine: Power to generate revenues
Facts:
 MERALCO was granted franchise for the supply of electric light, heat and
power by certain municipalities of the Province of Laguna including, Biñan,
Sta Rosa, San Pedro, Luisiana, Calauan and Cabuyao.
 On 19 January 1983, MERALCO was likewise granted a franchise by the
National Electrification Administration to operate an electric light and
power service in the Municipality of Calamba, Laguna.
 On 12 September 1991, Republic Act No. 7160, otherwise known as the
“Local Government Code of 1991,” was enacted to take effect on 01
January 1992 enjoining local government units to create their own sources
of revenue and to levy taxes, fees and charges, subject to the limitations
expressed therein, consistent with the basic policy of local autonomy.
 Pursuant to the provisions of the Code, respondent province enacted Laguna
Provincial Ordinance providing for franchise tax at a rate of 50% of 1% of
the gross annual receipts. Provincial Treasurer, then sent a demand letter to
MERALCO for the corresponding tax payment.
 Petitioner MERALCO paid the tax, which then amounted to
P19,520,628.42, under protest.
 A formal claim for refund was thereafter sent by MERALCO to the
Provincial Treasurer of Laguna claiming that the franchise tax it had paid
and continued to pay to the National Government pursuant to P.D. 551
already included the franchise tax imposed by the Provincial Tax
Ordinance.
 MERALCO contended that the imposition of a franchise tax under Section
2.09 of Laguna Provincial Ordinance No. 01-92, insofar as it concerned
MERALCO, contravened the provisions of Section 1 of P.D. 551 which
provides “Any provision of law or local ordinance to the contrary
notwithstanding, the franchise tax payable by all grantees of franchises to
generate, distribute and sell electric current for light, heat and power shall
be two per cent (2%) of their gross receipts received from the sale of
electric current and from transactions incident to the generation, distribution
and sale of electric current… Such franchise tax shall be payable to the
Commissioner of Internal Revenue or his duly authorized representative.”
 On 28 August 1995, the claim for refund of petitioner was denied in a letter
signed by Governor Jose D. Lina. In denying the claim, respondents relied
on a more recent law, i.e., Republic Act No. 7160 or the Local Government
Code of 1991, than the old decree invoked by petitioner.
 On 14 February 1996, petitioner MERALCO filed with the RTC a
complaint for refund against the Province of Laguna and also Benito R.
Balazo in his capacity as the Provincial Treasurer of Laguna.
RTC dismissed the complaint holding that the power to tax exercised by the province
of Laguna was valid.
ISSUE: Whether or not the power to tax was validly exercised.
HELD:
Prefatorily, it might be well to recall that local governments do not have the inherent
power to tax except to the extent that such power might be delegated to them either
by the basic law or by statute. Presently, under Article X of the 1987 Constitution, a
general delegation of that power has been given in favor of local government units.
Under the regime of the 1935 Constitution no similar delegation of tax powers was
provided, and local government units instead derived their tax powers under a
limited statutory authority. Whereas, then, the delegation of tax powers granted at
that time by statute to local governments was confined and defined (outside of which
the power was deemed withheld), the present constitutional rule (starting with the
1973 Constitution), however, would broadly confer such tax powers subject only to
specific exceptions that the law might prescribe.
Under the now prevailing Constitution, where there is neither a grant nor a
prohibition by statute, the tax power must be deemed to exist although Congress may
provide statutory limitations and guidelines. The basic rationale for the current rule is
to safeguard the viability and self-sufficiency of local government units by directly
granting them general and broad tax powers. Nevertheless, the fundamental law did
not intend the delegation to be absolute and unconditional; the constitutional
objective obviously is to ensure that, while the local government units are being
strengthened and made more autonomous,[6] the legislature must still see to it that
(a) the taxpayer will not be over-burdened or saddled with multiple and unreasonable
impositions; (b) each local government unit will have its fair share of available
resources; (c) the resources of the national government will not be unduly disturbed;
and (d) local taxation will be fair, uniform, and just. The 1991 Code explicitly
authorizes provincial governments, notwithstanding “any exemption granted by any
law or other special law, x x x (to) impose a tax on businesses enjoying a franchise.”
Indicative of the legislative intent to carry out the Constitutional mandate of vesting
broad tax powers to local government units, the Local Government Code has
effectively withdrawn under Section 193 thereof, tax exemptions or incentives
theretofore enjoyed by certain entities. The Code, in addition, contains a general
repealing clause in its Section 534 which states that “All general and special laws,
acts, city charters, decrees, executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent with any of the provisions
of this Code are hereby repealed or modified accordingly.”
WHEREFORE, the instant petition is hereby DISMISSED. No costs.
ASIATIC PETROLEUM CO. (P.I.), LTD., plaintiff-appellee, vs.A. LLANES,
provincial treasurer of Cebu, defendant-appellant
G.R. No. L-25386 October 20, 1926
FACTS:
  Asiatec Petroleum appealed at the Supreme Court against Llanes for the
purpose of recovering the sum of P3,523.02 from the Provincial Treasurers
of Cebu.
 Way back August 22, 1919 plaintiff and the defendants made a contract of
lease of the Shell Island.
 The said island owned by Asiatec Petroleum Co. whereby Government
leased to said company for the term of fifty years a piece of land, having an
area of one and one-half hectares, situated adjacent to the Island of Mactam,
municipality of Opon, Province of Cebu.
 The plaintiff made some improvements.
 At the time of the making of the lease, the land referred to was accustomed
to be covered by water at high tide; but it was needed by the lessee as a site
for tanks to be used in the storage of petroleum.
 In order to reclaim the site and protect the improvements thereon from the
sea, it was necessary for the company to build a concrete and cement
foundation, protected by retaining walls of the same material.
 Under section 344 of the Administrative Code especially exempts from
local taxation property owned by the United States of America or by the
Government of the Philippine Islands. On the other hand Act No. 2874; and
in section 113 of this Act there is a general provision that all the lands
granted by virtue of said Act, except homesteads, shall be subject to the
ordinary taxes which shall be paid by the grantee even though the title
remains in the Government.
ISSUE: Whether or not the law Act No. 2874 section 113 which provides all the
lands granted by virtue of said Act, except homesteads, shall be subject to the
ordinary taxes which shall be paid by the grantee even though the title remains in the
Government. be given a retroactive effect.
Ruling:
Street, J.:
Court decide that the Lessee is not taxable in respect to the land which is the subject
of the lease, it is subject to taxation with respect to the improvements. The appealed
judgment must therefore be modified by reducing the recovery to the amount paid
upon the land, namely, P2,270.88; and this refund must, under section 1579 of the
Administrative Code, be made without interest.
It being understood that the recovery is limited to the amount last above stated,
without interest, the same is affirmed, without costs.
AVANCEÑA, C. J.
Act No. 1654 which, in making inapplicable, in leases of reclaimed seashore land,
the exemption in favor of the Government from taxation, has made reference not
only to, the land but also to the improvements thereon. If these improvements made
by the lessee were to be considered the property of the lessee during the lease, the
law would not have referred to them inasmuch seven without this reference said
improvements would be subject to taxation. It is my opinion that the Government,
being the owner of the land on which the improvements were made, upon which
taxes are sought to be levied, and as these improvements have been by the plaintiff,
as lessee, without the right to remove them, they must be held to be Government
property and are also exempt from taxation.
COLLECTOR VS FIREMANS FUND INSURANCE
Facts:
 Fireman’s Funds Insurance is a resident foreign insurance corporation
organized under the laws of the United States, authorized and duly licensed
to do business in the Philippines.
 From 1952-1958, the company entered into various insurance contracts
involving causality, fire and marine risks, for which the corresponding
insurance policies were issued.
 From 1952-1956, documentary stamps were bought and affixed to the
corresponding pages of the policy register, instead of on the insurance
policies issued.
 The Commissioner assessed and demanded from the company the payment
of documentary stamps for the years 1952-1958, plus compromise penalties.
Issue: Whether the affixture of documentary stamp on pages other than those
authorized by law is tantamount to failure to pay the same.
Held:
Although the documentary stamps were affixed to papers other than those authorized
by law, it is not tantamount to failure to pay the same as the company purchased and
paid the documentary stamps corresponding to the various insurance policies.
Sections 210, 232, 221, 237 and 239 of the Tax Code have the overriding purpose to
collect taxes, and the steps involving documentary taxes (purchase, affixture, and
cancellation) are but a means to that end. Although the insurance policies with the
Corresponding documentary stamps affixed are the best evidence to prove payment
of said documentary stamp tax, it does not preclude the admissibility of other proofs
which are uncontradicted and considerable weight. Still, whenever the interpretation
of statute levying taxes or duties are in doubt, such statutes are to be construed
most strongly against the government and in favor of the subjects or citizens, because
burdens are not to be imposed, nor presumed to be imposed beyond what statutes
expressly and clearly import.
There is no justification for the government which has already realized the revenue,
which is the object of the imposition of the subject stamp tax, to require payment of
the same tax for the same documents.
[G.R. No. L-9408. October 31, 1956.]
EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF INTERNAL
REVENUE and THE COURT OF TAX APPEALS, Respondents.
FACTS:
 Petitioner claimed in his 1951 income tax return the deduction of the sum of
P12,837.65 as a loss consisting in a portion of his war damage claim which
had been duly approved by the Philippine War Damage Commission under
the Philippine Rehabilitation Act of 1946 but which was not paid and never
been paid pursuant to a notice served upon him by said Commission that
said part of his claim will not be paid until the United States Congress
should make further appropriation.
 He claims that said amount of P12,837.65 represents a “business asset”
within the meaning of said Act which he is entitled to deduct as a loss in his
return for 1951.
 March 31, 1952- Petitioner filed his income tax return for 1951 with the
treasurer of Bacolod City wherein he claimed the amount of P12,837.65 as a
deductible item from his gross income pursuant to General Circular No. V-
123 issued by the Collector of Internal Revenue. This circular was issued
pursuant to certain rules laid down by the Secretary of Finance
 An assessment notice demanding the payment of P9,419 was sent to
Petitioner, who paid the tax in monthly installments, the last payment
having been made on January 2, 1953
 August 30, 1952- the Secretary of Finance, through the Collector of Internal
Revenue, issued General Circular No. V-139, which not only revoked and
declared void his general Circular No. V- 123 but laid down the rule that
losses of property which occurred during the period of World War II from
fires, storms, shipwreck or other casualty, or from robbery, theft, or
embezzlement are deductible in the year of actual loss or destruction of said
property.
 The amount of P12,837.65 was disallowed as a deduction from the gross
income of Petitioner for 1951 and the Collector of Internal Revenue
demanded from him the payment of the sum of P3,546 as deficiency income
tax for said year.
 When the petition for reconsideration filed by Petitioner was denied, he
filed a petition for review with the Court of Tax Appeals. In due time, this
court rendered decision affirming the assessment made by Respondent
Collector of Internal Revenue. This is an appeal from said decision
ISSUE #1: Whether or not claim for losses of property during the war period for the
year 1950 may be deducted from the income tax of the petitioner for 1951 as
declared in the circular issued by the Secretary of Finance
HELD. NO.
First, assuming that said amount represents a portion of the 75% of his war damage
claim which was not paid, the same would not be deductible as a loss in 1951
because the last installment he received from the War Damage Commission, together
with the notice that no further payment would be made on his claim, was in 1950. In
the circumstance, said amount would at most be a proper deduction from his 1950
gross income.
Said amount cannot be considered as a “business asset” which can be deducted as a
loss in contemplation of law because its collection is not enforceable as a matter of
right, but is dependent merely upon the generosity and magnanimity of the U. S.
government. There was absolutely no law under which Petitioner could claim
compensation for the destruction of his properties during the battle for the liberation
of the Philippines. The payments of claims by the War Damage Commission merely
depended upon its discretion to be exercised in the manner it may see fit, but the
non-payment of which cannot give rise to any enforceable right,
The Philippine Rehabilitation Act which authorized the payment by the United States
Government of war losses suffered by property owners in the Philippines was passed
only on August 30, 1946, long after the losses were sustained. It cannot be said
therefore, that the property owners had any conclusive assurance during the years
said losses were sustained, that the compensation was to be paid therefor. As diligent
property owners, they should adopt the safest alternative by considering such losses
deductible during the year when they were sustained
Petitioner’s contention that during the last war and as a consequence of enemy
occupation in the Philippines “there was no taxable year” within the meaning of our
internal revenue laws because during that period they were unenforceable, is without
merit. It is well known that our internal revenue laws are not political in nature and
as such were continued in force during the period of enemy occupation and in effect
were actually enforced by the occupation government. As a matter of fact, income
tax returns were filed during that period and income tax payment were effected and
considered valid and legal. Such tax laws are deemed to be the laws of the occupied
territory and not of the occupying enemy.
‘Law once established continues until changed by some competent legislative power.
It is not changed merely by change of sovereignty. ‘There can be no break or
interregnun in law. From the time the law comes into existence with the first-felt
corporateness of a primitive people it must last until the final disappearance of
human society. Once created, it persists until a change takes place, and when
changed it continues in such changed condition until the next change and so forever.
Conquest or colonization is impotent to bring law to an end; inspite of change of
constitution, the law continues unchanged until the new sovereign by legislative act
creates a change.’“
ISSUE #2: Whether or not the Secretary of Finance has the authority to issue such
circular
HELD: YES. The Secretary of Finance is vested with authority to revoke, repeal or
abrogate the acts or previous rulings of his predecessor in office because the
construction of a statute by those administering it is not binding on their successors if
thereafter the latter become satisfied that a different construction should be given. It
is true that under the authority of section 338 of the National Internal Revenue Code
the Secretary of Finance, in the exercise of his administrative powers, caused the
issuance of General Circular No. V-123 as an implementation or interpretative
regulation of section 30 of the same Code, under which the amount of P12,837.65
was allowed to be deducted “in the year the last installment was received with notice
that no further payment would be made until the United States Congress makes
further appropriation therefor”, but such circular was found later to be wrong and
was revoked. Thus, when doubts arose as to the soundness or validity of such
circular, the Secretary of Finance sought the advice of the Secretary of Justice.
ISSUE #3: Whether or not General Circular No. V-139 cannot be given retroactive
effect because that would affect and obliterate the vested right acquired by Petitioner
under the previous circular
HELD: NO. General Circular No. V-123, having been issued on a wrong
construction of the law, cannot give rise to a vested right that can be invoked by a
taxpayer. The reason is obvious; a vested right cannot spring from a wrong
interpretation. This is too clear to require elaboration.
“It seems too clear for serious argument that an administrative officer cannot change
a law enacted by Congress. A regulation that is merely an interpretation of the statute
when once determined to have been erroneous becomes nullity. An erroneous
construction of the law by the Treasury Department or the collector of internal
revenue does not preclude or estop the government from collecting a tax which is
legally due.”
“Art. 2254. — No vested or acquired right can arise from acts or omissions which
are against the law or which infringe upon the rights of others.”
Wherefore, the decision appealed from is affirmed Without pronouncement as to
costs.
Tanada vs. Tuvera
GR L-63915, 24 April 1985
En Banc, Escolin (J): 1 concur, 2 concur with reservation, 1 on leave, 1 took no part
Facts:
 Invoking the people’s right to be informed on matters of public concern as
well as the principle that laws to be valid and enforceable must be published
in the Official Gazette or otherwise effectively promulgated, Tañada, et.al.
Seek a writ of mandamus to compel public officials to publish presidential
decrees, letters of instructions, general orders, proclamation, executive
orders, letter of implementation and administrative orders.
Issue: Whether the unpublished laws have binding force and effect.
Held:
The publication in the Official Gazette is required to give the general public adequate
Notice of the various laws which are to regulate their actins and conduct as citizens.
Publication is necessary to apprise the public of the contents of regulations and make
penalties binding on the person affected thereby. The publication of all presidential
issuances of a “public nature” or “of general applicability” is a mandated by
law, and is a requirement of due process. Presidential decrees that provide for fines,
forfeitures or penalties for their violation or otherwise impose a burden on the
people, such as tax and revenue measures fall within this category. Before a person
may be bound by law, he must be first be officially and specifically informed
of its contents. When not published, such shall have no force and effect. However,
the implementation/enforcement of the presidential decrees prior to their publication
in the Gazette is an operative facts, which may have consequences which cannot be
justly ignored.
(Note: The aspect of “operative facts” was dropped in subsequent resolution.)
ACCENTURE, INC, petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondents.
G.R. No. 190102. July 11, 2012. SERENO, J
FACTS:
 Accenture is a domestic corporation claiming an administrative claim for
VAT refund or the issuance of Tax Credit Certificate (TCC) filed with the
DOF in 1 July 2004.
 The DOF did not act on the claim. Thus, Accenture filed a petition for
review with the CTA.
 In 13 November 2008, CTA denied the petition of Accenture for failing to
prove that the latter's sale of services to the alleged foreign clients qualified
for zero percent VAT.
CTA ruled that Accenture's services would qualify for zero-rating under the 1997
Tax Code only if the recipient of the services was doing business outside of the
Philippines, similar to the 2007 SC ruling on the case of CIR v. Burmeister and Wain
Scandinavian Contractor Mindanao, Inc. (Burmeister) Accenture questions the
Division's application to this case of the pronouncements made in Burmeister.
 According to petitioner, the provision applied to the present case was
Section 102 (b) of the 1977 Tax Code, and not Section 108 (B) of the 1997
 Tax Code, which was the law effective when the subject transactions were
entered into and a refund was applied for.
ISSUE: Whether or not the contention of SC’s rulings is applicable to the denial of
Accenture’s claim for tax refund
RULING:
SC ruled in the instant case that the recipient of the service must be doing business
outside the Philippines for the transaction to qualify for zero-rating under Section
108 (B) of the Tax Code. IT upholds the position of the CTA en banc that, because
Section 108 (B) of the 1997 Tax Code is a verbatim copy of Section 102 (b) of the
1977 Tax Code, any interpretation of the latter holds true for the former. Moreover,
even though Accenture's Petition was filed before Burmeister was promulgated, the
pronouncements made in that case may be applied to the present one without
violating the rule against retroactive application.
HELD: Instant petition is DENIED. The decision of CTA En Banc is AFFIRMED.
GULF AIR COMPANY, PHILIPPINE BRANCH (GF), Petitioner, v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
G.R. No. 182045 : September 19, 2012
Facts:
 Petitioner Gulf Air Company Philippine Branch (GF) is a branch of Gulf
Air Company, a foreign corporation duly organized in accordance with the
laws of the Kingdom of Bahrain.
 In 2001, GF availed of the Voluntary Assessment Program of the Bureau of
Internal Revenue (BIR) under Revenue Regulations 8-2001 for its 1999 and
2000 Income Tax and Documentary Stamp Tax and its Percentage Tax for
the third quarter of 2000, paying a total of P 11,964,648.00.
 GF also made a claim for refund of percentage taxes for the first, second
and fourth quarters of 2000.
 In connection with this, a letter of authority was issued by the BIR
authorizing its revenue officers to examine GFs books of accounts and other
records to verify its claim.
 After its submission of several documents and an informal conference with
BIR representatives, GF received its Preliminary Assessment Notice on
November 4, 2003 for deficiency percentage tax amounting to P
32,745,141.93.
 On the same day, GF also received a letter denying its claim for tax credit or
refund of excess percentage tax remittance for the first, second and fourth
quarters of 2000, and requesting the immediate settlement of the deficiency
tax assessment.
 GF then received the Formal Letter of Demand, for the payment of the total
amount of P 33,864,186.62.
 In response, it filed a letter to protest the assessment and to reiterate its
request for reconsideration on the denial of its claim for refund.
 On June 30, 2004, the Deputy Commissioner, Officer-in-Charge of the
Large Taxpayers Service of the BIR, denied GFs written protest for lack of
factual and legal basis and requested the immediate payment of the P
33,864,186.62 deficiency percentage tax assessment.
 Aggrieved, GF filed a petition for review with the CTA. The CTA affirmed
the decision of the BIR and ordered the payment of P 41,117,734.01 plus
20% delinquency interest.
 GF elevated the case to the CTA En Banc which promulgated its Decision
on January 30, 2008 dismissing the petition and affirming the decision of
the CTA in Division. It found that Revenue Regulations No. 6-66 was the
applicable rule because the period involved in the assessment covered the
first, second and fourth quarters of 2000 and the amended percentage tax
returns were filed on October 25, 2001. Revenue Regulations No. 15-2002,
which took effect on October 26, 2002, could not be given retroactive effect
because it was declarative of a new right as it provided a different rule in
determining gross receipts.
 GF subsequently filed a motion for reconsideration but the same was denied
by the CTA En Banc in its March 12, 2008 Resolution. Hence, this petition.
Issue: W/N the definition of "gross receipts," for purposes of computing the 3%
Percentage Tax under Section 118(A) of the 1997 National Internal Revenue Code
(NIRC), should include special commissions on passengers and special commissions
on cargo based on the rates approved by the Civil Aeronautics Board.
Ruling: Affirmative.
Section 118(A) of the NIRC states that: Sec. 118. Percentage Tax on International
Carriers. (A) International air carriers doing business in the Philippines shall pay a
tax of three percent (3%) of their quarterly gross receipts.
Pursuant to this, the Secretary of Finance promulgated Revenue Regulations No. 15-
2002, which prescribes that "gross receipts" for the purpose of determining Common
Carriers Tax shall be the same as the tax base for calculating Gross Philippine
Billings Tax. Section 5 of the same provides for the computation of "Gross
Philippine Billings":
Sec. 5. Determination of Gross Philippine Billings.
(a) In computing for "Gross Philippine Billings," there shall be included the total
amount of gross revenue derived from passage of persons, excess baggage, cargo
and/or mail, originating from the Philippines in a continuous and uninterrupted
flight, irrespective of the place of sale or issue and the place of payment of the
passage documents.
This expressly repealed Revenue Regulations No. 6-66 that stipulates a different
manner of calculating the gross receipts:
There is no doubt that prior to the issuance of Revenue Regulations No. 15-2002
which became effective on October 26, 2002, the prevailing rule then for the purpose
of computing common carriers tax was Revenue Regulations No. 6-66. While the
petitioners interpretation has been vindicated by the new rules which compute gross
revenues based on the actual amount received by the airline company as reflected on
the plane ticket, this does not change the fact that during the relevant taxable period
involved in this case, it was Revenue Regulations No. 6-66 that was in effect.
As such, absent any showing that Revenue Regulations No. 6-66 is inconsistent with
the provisions of the NIRC, its stipulations shall be upheld and applied accordingly.
This is in keeping with our primary duty of interpreting and applying the law.
Regardless of our reservations as to the wisdom or the perceived ill-effects of a
particular legislative enactment, the court is without authority to modify the same as
it is the exclusive province of the law-making body to do so.
Moreover, the validity of the questioned rules can be sustained by the application of
the principle of legislative approval by re-enactment. Under the aforementioned legal
concept, "where a statute is susceptible of the meaning placed upon it by a ruling of
the government agency charged with its enforcement and the Legislature thereafter
re-enacts the provisions without substantial change, such action is to some extent
confirmatory that the ruling carries out the legislative purpose." Thus, there is tacit
approval of a prior executive construction of a statute which was re-enacted with no
substantial changes.
In this case, Revenue Regulations No. 6-66 was promulgated to enforce the
provisions of Title V, Chapter I (Tax on Business) of Commonwealth Act No. 466
(National Internal Revenue Code of 1939), under which Section 192, pertaining to
the common carriers tax, can be found:
The legislature is presumed to have full knowledge of the existing revenue
regulations interpreting the aforequoted provision of law and, with its subsequent
substantial re-enactment, there is a presumption that the lawmakers have approved
and confirmed the rules in question as carrying out the legislative purpose.Hence, it
can be concluded that with the continued duplication of the NIRC provision on
common carriers tax, the law-making body was aware of the existence of Revenue
Regulations No. 6-66 and impliedly endorsed its interpretation of the NIRC and its
definition of gross receipts.
Commissioner vs. Burroughs Ltd.
GR L-6653, 19 June 1986
Second Division, Paras (J): 4 concur
Facts:
 Burroughs Ltd is a foreign corporation authorized to engage in business in
the Philippines. Its branch office in Makati applied with the Central Bank
for authority to remit to its parent company abroad, branch
profits. It paid 15% branch profit remittance tax.
 The branch, however, later claimed for a refund or credit contending that
the branch profit remittance tax pursuant to a BIR ruling of 21 January
1980.
The Court of Tax Appeals granted the company’s petition.
 The Commissioner filed a petition for certiorari, claiming Memorandum
Circular 8-82 (17 March 1982) should apply.
Issue: Whether the Memorandum Circular 8-82 should be retroactively applied.
Held: Revenue Ruling of 21 January 1980 remains to apply in the case as the
company paid the tax on 14 March 1979. Memorandum Circular 8-82 cannot be
given retroactive effect in the light of Section 327 of the tax code. The retroactive
application of the Circular would deprive the company the substantial amount of
P172,058.90. The misstates or omits material facts from his return or I any document
required of him by the BIR, or where the facts subsequently gathered by the BIR are
materially different from the facts on which the ruling is based, or where the
taxpayer acted in bad faith to allow the retroactive application of the circular.
Estate of Benigno Toda Jr.
G.R. No. 147188. September 14, 2004
DAVIDE, JR., C.J.
Lessons Applicable: Tax evasion v. Tax avoidance
FACTS:
 March 2, 1989: Cibeles Insurance Corp. (CIC) authorized Benigno P. Toda
Jr., President and Owner of 99.991% of outstanding capital stock, to sell the
Cibeles Building and 2 parcels of land which he sold to Rafael A. Altonaga
on August 30, 1987 for P 100M who then sold it on the same day to Royal
Match Inc. for P 200M.
 CIC included gains from sale of real property of P 75,728.021 in its annual
income tax return while Altonaga paid a 5% capital gains tax of P 10M
 July 12, 1990: Toda sold his shares to Le Hun T. Choa for P 12.5M
evidenced by a deed of ale of shares of stock which provides that the buyer
is free from all income tax liabilities for 1987, 1988 and 1989.
 Toda Jr. died 3 years later.
 March 29, 1994: BIR sent an assessment notice and demand letter to CIC
for deficiency of income tax of P 79,099, 999.22
 January 27, 1995: BIR sent the same to the estate of Toda Jr.
  Estate filed a protest which was dismissed - fraudulent sale to evade the Generally, a sale of or exchange of assets will have an income tax incidence only
35% corporate income tax for the additional gain of P 100M and that there when it is consummated but such tax incidence depends upon the substance of the
is in fact only 1 sale. transaction rather them mere formalities.
 Since it is falsity or fraud, the prescription period is 10 years from the
discovery of the falsity or fraud as prescribed under Sec. 223 (a) of the
NIRC

CTA: No proof of fraudulent transaction so the applicable period is 3 years after the
last day prescribed by law for filing the return
CA: affirmed
CIR appealed

ISSUE: W/N there is falsity or fraud resulting to tax evasion rather than tax
avoidance so the period for assessment has not prescribed.

HELD: YES. Estate shall be liable since NOT yet prescribed.

Tax avoidance and tax evasion are the two most common ways used by taxpayers in
escaping from taxation. Tax avoidance is the tax saving device within the means
sanctioned by law. This method should be used by the taxpayer in good faith and at
arm’s length. Tax evasion, on the other hand, is a scheme used outside of those
lawful means and when availed of, it usually subjects the taxpayer to further or
additional civil or criminal liabilities.

Tax evasion connotes the integration of three factors:

1. the end to be achieved, i.e., the payment of less than that known by the
taxpayer to be legally due, or the non-payment of tax when it is shown that
a tax is due
2. an accompanying state of mind which is described as being evil, in bad
faith, willfull,or deliberate and not accidental; and
3. a course of action or failure of action which is unlawful.

All are present in this case. The trial balance showed that RMI debited P 40M as
"other-inv. Cibeles Building" that indicates RMI Paid CIC (NOT Altonaga)

Fraud in its general sense, is deemed to comprise anything calculated to deceive,

including all acts, omissions, and concealment involving a breach of legal or
equitable duty, trust or confidence justly reposed, resulting in the damage to another,
or by which an undue and unconscionable advantage is taken of another.

Here, it is obvious that the objective of the sale to Altonaga was to reduce the
amount of tax to be paid especially that the transfer from him to RMI would then
subject the income to only 5% individual capital gains tax, and not the 35%
corporate income tax.