Taxation Cases MT:

1. Chamber of Real Estate and Builder’s Association, Inc. vs Romulo

 Nature of Taxation
- Taxation is inherent in nature, being an attribute of sovereignty.
- In other words, the legislature wields the power to define what tax shall be imposed,
why it should be imposed, how much tax shall be imposed, against whom (or what) it
shall be imposed and where shall it be imposed.
 Provisions indirectly affecting taxation (Due process)
- In Sison, Jr. vs Ancheta, et. al., we held that the due process clause may properly be
invoked to invalidate, in appropriate cases, arevenue measure when it amounts to a
confiscation of property. But in the same case, we also explained that we will not strike
down a revenue measure as unconstitutional (for being violative of the due process
clause) on the mere allegation or arbitrariness by the taxpayer.
 Provisions indirectly affecting taxation (Equal Protection)
- The real estate industry is, by itself, a class and can be validly treated differently from
other business enterprises. What distinguishes the real estate business from other
manufacturing enterprises, for purposes of the imposition of the CW, is not their
productions processes but the prices of their goods sold and the number of transactions
involved

2. Pepsi-Cola Bottling Company of the Phil. Vs Mun. of Tanauan

 Nature of Taxation
- 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.
 Inherently Legislative (General Rule)
- The power to tax 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.

Power of Taxation compared with other powers

3. Gerochi vs Department of Energy

 Poice power
- If generation of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if the regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.
 Necessity Theory
- The theory behind the exercise of the power to tax emanates from necessity, without
taxes, government cannot fulfill its mandate of promoting the general welfare and well
being of the people.

4. Commissioner of Internal Revenue vs Central Luzon Drug Corporation

 Power of eminent domain
- Be it stressed that the privilege enjoyed by senior citizens does not come directly from
the State, but rather from the private establishments concerned. Accordingly, the tax
 credit benefit granted these establishments can be deemed as just compensation for
private property taken by the State for public use.
- Besides, the taxation power can also be used as an implement for the exercise of the
power of eminent domain. Tax measures are but “enforced contributions exacted on
pain of penal sanctions” and “clearly imposed for a public purpose”.
- In recent years, the power to tax has indeed become a most effective tool to realize
social justice, public welfare and the equitable distribution of wealth.

5. Commissioner of Internal Revenue vs Algue, Inc., and the Court of Tax Appeals
 Benefits Protection theory (Symbiotic relationship)
- Despite the natural reluctance to surrender part of one’s hard earned income to the
taxing authorities, every person who is able to must contribute his share in the running
of the government. The government for its part is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the people and enhance
their moral and material values. This symbiotic relationship is the rationale of taxation
and should dispel the erroneous notion that it is an arbitrary method of exaction by
those in the seat of power.

6. ABAKADA GURO PARTY LIST vs Executive Secretary Eduardo Ermita

 Benefits Protection theory (Symbiotic relationship)
- The expenses of government, having for their object the interest of all, should be borne
by everyone, and the more man enjoys the advantages of society, the more he ought to
hold himself honored in contributing to those expenses.
 Delegation to administrative agencies (Exception to the inherently legislative)
- Clearly, the legislature may delegate to executive officers or bodies the power to
determine certain facts or conditions, or the happening of contingencies, on which the
operation of a statute is, by its tersm made to depend, but the legislature must prescribe
sufficient standards, policies or limitations on their authority.
- While the power to tax cannot be delegated to executive agencies, details as to the
enforcement and administration of an exercise of such power may be left to them,
including the power to determine the existence of facts on which its operation depends.
- In the present case, in making his recommendation to the President on the existence of
either of the two conditions, the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate; he is acting as the agent of the legislative
department, to determine and declare the event upon which its expressed will is to take
effect.
- Thus, being the agent of Congress and not of the President, the President cannot alter or
modify or nullify, or set aside the findings of the Secretary of Finance and to substitute
the judgment of the former for that of the latter.

7. Tolentino vs Secretary of Finance and Commissioner of Internal Revenue

 Rational/Grounds for Tax Exemption
- The PPI says that the discriminatory treatment of the press is highlighted by the fact that
transactions, which are profit-oriented, continue to enjoy exemption under R.A. 7716
but an enumeration of some of these transactions will suffice to show that by and large
this is not so and that the exemptions are granted for a purpose.
 - As the Solicitor General says, such exemptions are granted, in some cases, to encourage
agricultural production and, in other cases for the personal benefit of the end-user
rather than for a profit.

 Revocation of tax exemption

- Since the law granted the press a privilege, the law could take back the privilege anytime
without offense to the Constitution. The reason is simple: by granting exemptions, the
State does not forever waive the exercise of its sovereign prerogative; indeed, in
withdrawing the exemption, the law merely subjects the press to the same tax burden to
which other businesses have long ago been subject.

8. Commissioner of Internal Revenue vs Fortune Tobacco Corporation

 Exception (Tax exemption)
- There is parity between tax refund and tax exemption only when the former is based
either on a tax exemption statute or a tax refund statute. Obviously, that is not the
situation here since Fortune Tobacco’s claim for refund is premised on its erroneous
payment of the tax, or better still, the government’s exaction in the absence of a law.
- A claim for tax refund may be based on statutes granting tax exemption or tax refund
and in such case, the rule of strict interpretation against the taxpayer is applicable as the
claim for refund partakes of the nature of an exemption, a legislative grace, which cannot
be allowed unless granted in the most explicit and categorical language.
- Tax refunds or tax credits, on the other hand, are not founded principally on legislative
grace but on the legal principle which underlies all quasi-contracts abhorring a person’s
unjust enrichment at the expense of another.
- As a necessary corollary, when the taxpayer’s entitlement to a refund stands undisputed,
the State should not misuse technicalities and legalisms, however, exalted, to keep
money not belonging to it.
- The government is not exempt from the application of solution indebti, a basic postulate
proscribing one, including the State, from enriching himself or herself at the expense of
another