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11. PCGG v. Cojuangco Petitioner: Republic of the Philippines, represented by the Presidential Commission on Good Government (PCGG Respondents: Cocofed, et al. and !allares, et al., "duardo #. Cojuangco $r. and the %andiganbayan (&irst 'ivision &acts: (mmediately after the 1)*+ "'%, Revolution, then President Cora-on C. ,.uino issued "/ecutive 0rder ("0 1os. 1, 2 and 13. 0n the e/plicit premise that 4vast resources of the government have been amassed by former President &erdinand ". #arcos, his immediate family, relatives, and close associates both here and abroad,4 the Presidential Commission on Good Government (PCGG 5as created by "/ecutive 0rder 1o. 1 to assist the President in the recovery of the ill6gotten 5ealth thus accumulated 5hether located in the Philippines or abroad. "/ecutive 0rder 1o. 2 states that the ill6 gotten assets and properties are in the form of ban7 accounts, deposits, trust accounts, shares of stoc7s, buildings, shopping centers, condominiums, mansions, residences, estates, and other 7inds of real and personal properties in the Philippines and in various countries of the 5orld. "/ecutive 0rder 1o. 13, on the other hand, empo5ered the PCGG, 5ith the assistance of the 0ffice of the %olicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under "0 1os. 1 and 2. Pursuant to these la5s, the PCGG issued and implemented numerous se.uestrations, free-e orders and provisional ta7eovers of allegedly ill6gotten companies, assets and properties, real or personal. ,mong the properties se.uestered by the Commission 5ere shares of stoc7 in the 8nited Coconut Planters !an7 (8CP! registered in the names of the alleged 9one million coconut farmers,9 the so6 called Coconut (ndustry (nvestment &und companies (C((& companies and Private Respondent "duardo Cojuangco $r. (hereinafter 9Cojuangco9 . :he first division of the %andiganbayan in Civil Case 1os. ;;<16,, ;;<<6!, and ;;<<6P allo5ed respondents C0C0&"', et al, !allares, et al, as 5ell as Cojuangco, et al, to e/ercise their right to vote their shares of stoc7 and to be voted upon in the 8CP! at the + #arch 2;;1 %toc7holder=s #eeting, and any subse.uent continuation or resetting thereof. :hey 5ere also permitted to perform such acts as 5ill normally follo5 in the e/ercise of these rights as stoc7holders. ,ll of the aforementioned persons are ac7no5ledged registered stoc7holders of the 8CP!. :he Republic of the Philippines (Republic contended that the %andiganbayan committed grave abuse of discretion in enjoining the Presidential Commission on Good Government (PCGG from voting the se.uestered shares of stoc7 in the 8CP! despite the fact that the se.uestration shares 5ere purchased 5ith coconut levy funds. :he same funds 5ere declared public in character. , previous resolution allo5ed the PCGG to vote the se.uestered shares. (ssues: 'o the coconut levy funds parta7e of the nature of ta/es> (f the ans5er is in the affirmative, do they constitute public funds> Court=s Ruling: :he %upreme Court held that the coconut levy funds parta7e of the nature of ta/es. Conse.uently, the government should be allo5ed to continue voting those shares inasmuch as they 5ere purchased 5ith coconut levy funds ? that are prima facie public in character or, at the very least, are clearly affected 5ith public interest. Rationale: :he right to vote se.uestered shares of stoc7 registered in the names of private individuals or entitles and alleged to have been ac.uired 5ith ill6gotten 5ealth shall, as a rule, be e/ercised by the registered o5ner. :he PCGG may, ho5ever, be granted such voting right provided in can (1 sho5 prima facie evidence that the 5ealth and@or the shares are indeed ill6gottenA and (2 demonstrate imminent danger of dissipation of the assets, thus necessitating their continued se.uestration and voting by the government until a decision, ruling 5ith finality on their o5nership, is promulgated by the proper court. Coconut levy funds parta7e of the nature of ta/es 5hich, in general, are enforced proportional contributions from persons and properties, e/acted by the %tate by virtue of its sovereignty for the support of government and for all public needs. !ased on this definition, a ta/ has three elements, namely: a it is an enforced proportional contribution from persons and propertiesA b it is imposed by the %tate by virtue of its sovereigntyA and c it is levied for the support of the government. :a/ation is done not merely to raise revenues to support the government, but also to provide means for the rehabilitation and the stabili-ation of a threatened industry, 5hich is so affected 5ith public interest as to be 5ithin the police po5er of the %tate :o avoid misunderstanding and confusion, the Court 5as categorical and positive than its earlier pronouncements: the coconut levy funds are not only affected 5ith public interestA they are, in fact, prima facie public funds. Public funds are those moneys belonging to the %tate or to any political subdivision of the %tateA more specifically, ta/es, customs duties and moneys raised by operation of la5 for the support of the government or for the discharge of its obligations. Baving conclusively sho5n that the se.uestered 8CP! shares 5ere purchased 5ith coconut levies, the Court held that these funds and shares are, at the very least, affected 5ith public interest.
2.
b.
13. PC,1:"R% PR0'8C:%, (1C., vs. &"R:(PB(C C0RP0R,:(01. &acts: President &erdinand #arcos, e/ercising his legislative po5ers, issued C0( 1o. 13+D 5hich provided, among others, for the imposition by the &ertili-er Pesticide ,uthority (&P, of a capital recovery component (CRC on thedomestic sale of all grades of fertili-ers in the Philippines. :he goal is to ma7e and 7eep respondent PP( viable. ,fter the1)*+ "dsa Revolution, &P, voluntarily stopped the imposition of the P1; levy. Kith the return of democracy, &ertiphildemanded from PP( a refund of the amounts it paid under C0( 1o. 13+D, but PP( refused to accede to the demand&ertiphil filed a complaint for collection and damages against &P, and PP( 5ith the R:C in #a7ati. (t .uestioned theconstitutionality of C0( 1o. 13+D for being unjust, unreasonable, oppressive, invalid and an unla5ful imposition thatamounted to a denial of due process of la5. &P,, through the %olicitor General, countered that the issuance of C0( 1o.13+D 5as a valid e/ercise of the police po5er of the %tate in ensuring the stability of the fertili-er industry in the country (ssue@Beld: Khether the levy is in e/ercise of police po5er or ta/ation po5er6 M"% Ratio: Ke agree 5ith the R:C that the imposition of the levy 5as an e/ercise by the %tate of its ta/ation po5er. Khile itis true that the po5er of ta/ation can be used as an implement of police po5er, the primary purpose of the levy isrevenue generation. (f the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes,then the e/action is properly called a ta/. ,n inherent limitation on the po5er of ta/ation is public purpose. :a/es aree/acted only for a public purpose. :hey cannot be used for purely private purposes or for the e/clusive benefit of private persons. :he purpose of a la5 is evident from its te/t or inferable from other secondary sources. Bere, 5e agree 5ith the R:C and that C, that the levy imposed under C0( 1o. 13+D 5as not for a public purpose because it e/pressly provided that the levy be imposed to benefit PP(, a private company. Note !he operative act doctrine states that acts done "hen a la" "as actually constitutional are valid even "hen that la" is later repealed. In this case, #$I %&'( "as actually unconstitutional to )egin "ith, PPI is not precluded from paying )ac* the money granted to it )y the said la".
2+. ,sia (nternational ,uctioneers, (nc. v. Commissioner of (nternal Revenue &acts: 0n ,ugust 2D, 2;;3, ,sia (nternational ,uctioneers, (nc. (I,(,J for brevity , a corporation 0perating 5ithin the %ubic %pecial "conomic None and is engaged in the importation and selling of used motor vehicles and heavy e.uipment, 5as assessed by the Commissioner of (nternal Revenue (IC(RJ for deficiency Falue ,dded :a/ and "/cise :a/ in the amounts of P 1;2,D<D,D2;.;; and P3,<<3,E1D.;;, respectively, or a total amount of P 1;+,*E;,2<D.;;, inclusive of penalties and interest, for auction sales conducted on &ebruary D, +, E, and *, 2;;3.,(, claimed that it filed a timely protest letter through registered mail on ,ugust <;, 2;;3 and submitted additional supporting documents on %eptember 23, 2;;3 and 1ovember 22, 2;;3. C(R=s failure to act on the protest prompted ,(, to file a petition for revie5 before the Court of :a/ ,ppeals on $une 2;, 2;;D. Bo5ever, the C(R filed a motion to dismiss on the ground of lac7 of jurisdiction since ,(,=s failure to file its protest 5ithin the <;6day reglamentary period rendered the assessment final and e/ecutory. ,fter trial, the Court of :a/ ,ppeals &irst 'ivision ruled that there 5as no sufficient evidence to prove the receipt of the protest letter by the C(R. ,(, filed a motion for reconsideration but 5as deniedA hence, this petition for revie5. 0n $anuary <;, 2;;*, ,(, filed a #anifestation and #otion 5ith Ceave of the Bonorable Court to 'efer or %uspend &urther Proceedings since it availed of the :a/ ,mnesty Program under Republic ,ct )3*;, 7no5n as the :a/ ,mnesty ,ct of 2;;E. 0n &ebruary D, 2;;*, the !ureau of (nternal Revenue issued a Certification of Oualification stating that ,(, Ihas availed and .ualified for :a/ ,mnesty for :a/able Mear 2;;D and Prior MearsJ pursuant to R, )3*;. (ssue: (s ,(, dis.ualified from availing itself of the :a/ ,mnesty under %ection * (a of R, )3*;> Beld: 1o. 8nder %ection * (a of the R, )3*; 5ithholding agents 5ith respect to their 5ithholding ta/ liabilities shall be dis.ualified to avail of the ta/ amnesty. (n this case, ,(, 5as not being assessed as 5ithholding agent that failed to 5ithhold or remit the deficiency F,: and e/cise ta/ but as a ta/payer 5ho is directly liable for the said ta/es. #oreover, R, )3*; does not e/clude from its coverage ta/payers operating 5ithin special economic -ones. Bence, ,(, is .ualified to avail of the :a/ ,mnesty under R, )3*;. Note Indirect !axes vs. +ithholding !axes. !he Commissioner of Internal Revenue ,CIRcontends that taxpayer is dis.ualified to avail itself of amnesty under Repu)lic Act No. /&01 )ecause it is 2deemed a "ithholding agent for deficiency value3added tax ,4A!- and excise taxes. !he CIR did not assess taxpayer as a "ithholding agent that failed to "ithhold or remit the deficiency 4A! and excise tax to the 5ureau of Internal Revenue under the relevant provisions of the National Internal Revenue Code. Indirect taxes, li*e value3added tax ,4A!- and excise tax, are different from "ithholding taxes. !o distinguish, in indirect taxes, the incidence of taxation falls on one person )ut the )urden thereof can )e shifted or passed on to another person, such as "hen
27. PASCUAL VS. SEC OF PUBLIC WORKS &,C:%: (n 1)D<, R, )2; 5as passed. :his la5 appropriated P*D,;;;.;; Ifor the construction, reconstruction, repair, e/tension and improvementJ of IPasig feeder road terminals. Pascual, then governor of Ri-al, assailed the validity of the la5. Be claimed that the appropriation 5as actually going to be used for private use for the terminals sought to be improved 5ere part of the ,ntonio %ubdivision. :he said %ubdivision is o5ned by %enator Nulueta 5ho 5as a member of the same %enate that passed and approved the same R,. Pascual claimed that Nulueta misrepresented in Congress the fact that he o5ns those terminals and that his property 5ould be unla5fully enriched at the e/pense of the ta/payers if the said R, 5ould be upheld. Pascual then prayed that the %ec of Public Kor7s be restrained from releasing funds for such purpose. Nulueta, on the other hand, perhaps as an afterthought, donated the said property to the City of Pasig. (%%8": Khether or not the appropriation is valid. B"C': :he donation of the property to the government to ma7e the property public does not cure the constitutional defect. :he fact that the la5 5as passed 5hen the said property 5as still a private property cannot be ignored. I(n accordance 5ith the rule that the ta/ing po5er must be e/ercised for public purposes only, money raised by ta/ation can be e/panded only for public purposes and not for the advantage of private individuals.J (nasmuch as the land on 5hich the projected feeder roads 5ere to be constructed belonged then to Nulueta, the result is that said appropriation sought a private purpose, and, hence, 5as null and void. :he rule is that if the public advantage or benefit is merely incidental in the promotion of a particular enterprise, suchdefect shall render the la5 invalid. 0n the other hand, if 5hat is incidental is the promotion of a private enterprise, the ta/ la5 shall bedeemed Pfor public purpose
2). #(,, vs. City of Parana.ue &,C:%: :he #anila (nternational ,irport ,uthority (#(,, operates the 1inoy ,.uino (nternational ,irport (1,(, Comple/ in ParaTa.ue City under "/ecutive 0rder 1o. );< (#(,, Charter , as amended. ,s such operator, it administers the land, improvements and e.uipment 5ithin the 1,(, Comple/. (n #arch 1))E, the 0ffice of the Government Corporate Counsel (0GCC issued 0pinion 1o. ;+1 to the effect that the Cocal Government Code of 1))1 (CGC 5ithdre5 the e/emption from real estate ta/ granted to #(,, under %ection 21of its Charter. :hus, #(,, paid some of the real estate ta/ already due. (n $une 2;;1, it received &inal 1otices of Real "state :a/ 'elin.uency from the City of ParaTa.ue for the ta/able years 1))2 to 2;;1. :he City :reasurer subse.uently issued notices of levy and 5arrants of levy on the airport lands and buildings. ,t the instance of #(,,, the 0GCC issued 0pinion 1o. 13E clarifying 0pinion 1o. ;+1, pointing out that %ec. 2;+ of the CGC re.uires persons e/empt from real estate ta/ to sho5 proof of e/emption. ,ccording to the 0GCC, %ec. 21 of the #(,, Charter is the proof that #(,, is e/empt from real estate ta/. #(,,, thus, filed a petition 5ith the Court of ,ppeals see7ing to restrain the City of Parana.ue from imposing real estate ta/ on, levying against, and auctioning for public sale the airport lands and buildings, but this 5as dismissed for having been filed out of time. Bence, #(,, filed this petition for revie5, pointing out that it is e/empt from real estate ta/ under %ec. 21 of its charter and %ec. 2<3 of the CGC. (t invo7es the principle that the government cannot ta/ itself as a justification for e/emption, since the airport lands and buildings, being devoted to public use and public service, are o5ned by the
&,C:%: Reagan, an ,merican citi-en and an employee of !endi/ Radio, 'ivision of !endi/ ,viation Corporation, 5hich provides technical assistance to the 8% ,ir &orce, 5as assigned at Clar7 ,ir !ase. ) months thereafter before his tour of duty e/pired, he imported a ta/6free 1)+; Cadillac car 5ith accessories valued at U+,33<.*<, inclusive of freight, insurance and other charges. ,fter more than 2 months, he as7ed his !ase Commander at the Clar7 ,ir !ase for a permit to sell the car 5hich 5as granted provided that the sale should be made to a member of the 8% ,rmed &orces or a 8% citi-en employed in the 8% military base in the Philippines. Be then sold the car for U+,+;; to $ohnson, $r. 5ho 5as a member of the 8% #arine Corps in Cavite. $ohnson, $r. then sold the car to #eneses for P<2,;;;. ,s a result of the transaction thus made, respondent C(R fi/ed as his net ta/able income arising from the sale the amount of P1E,)12.<3, ma7ing him liable for income ta/ in the sum of P2,)E) plus the legal rate of interest. ,fter paying the income ta/, he sought a refund from C(R claiming that he is e/empt. Khile the action 5as pending, he filed the case 5ith the C:, see7ing the recovery of 5hat he paid plus the legal rate of interest. Reagan is imputing that the Clar7 ,ir &orce is foreign soil or territory and thus is beyond the government=s jurisdictional po5er to ta/. Bis ground is based upon an obiter dictum in a 1)+2 deicision (%%8": Khether the said income ta/ of P2,)E) 5as legally collected by the C(R from Reagan> (s Clar7 ,ir &orce foreign soil or territory> B"C':
<1. <1st (1&,1:RM P0%: "LCB,1G" vs. P0%,',% &,C:%: :he <1st (nfantry Post "/change is a post e/change constituted in accordance 5ith ,rmy regulations and the la5s of the 8nited %tates. in the course of its duly authori-ed business transactions, the "/change made many purchases of various and diverse commodities, goods, 5ares and merchandise from various merchants in the Philippines. :he Commissioner collected a sales ta/ of 1 1@2 H of the gross value of the commodities, etc. from the merchants 5ho sold said commodities to the "/change. , formal protest 5as lodged by the "/change. (%%8": Khether or not the petitioner is e/empt from the sales ta/ imposed against its suppliers. R8C(1G: :he court ruled in the negative. :a/es have been collected from merchants 5ho made sales to ,rmy Post "/changes since 1);3 (,ct 11*), %ection 1<) . %imilar ta/es are paid by those 5ho sell merchandise to the Philippine Government, and by those 5ho do business 5ith the 8% ,rmy and 1avy in the Philippines. Berein, the merchants 5ho effected the sales to the Post "/change are the ones 5ho paid the ta/A and it is the officers, soldiers, and civilian employees and their families 5ho are benefited by the post e/change to 5hom the ta/ is ultimately shifted. ,n ,rmy Post "/change, although an agency 5ithin the 8% ,rmy, cannot secure e/emption from ta/ation for merchants 5ho ma7e sales to the Post "/change. <2. R",G,1 F. C(R Petitioner 5as liable for the income ta/ arising from the sale of his automobile in the Clar7 &ield ,ir !ase 5hich clearly 5ithin the Philippine Government=s territorial jurisdiction to ta/. 1othing is better settled than that the Philippines being independent and sovereign, its authority may be e/ercised over its entire domain. :here is no portion thereof that is beyond its po5er. (ts la5s govern therein, and everyone to 5hom it applies must submit to its terms. :he ground occupied by an embassy is not in fact the territory of the foreign %tate to 5hich the premises belong through possession or o5nership. :he la5fulness or unla5fulness of acts there committed is determined by the territorial sovereign. :he first and crucial error imputed to the Court of :a/ ,ppeals to the effect that it should have held that the Clar7 ,ir &orce is foreign soil or territory for purposes of income ta/ legislation is clearly 5ithout support in la5. ,s thus correctly vie5ed, petitioner4s hope for the reversal of the decision completely fades a5ay. :here is nothing in the #ilitary !ases ,greement that lends support to such an assertion. (t has not become foreign soil or territory. :his country4s jurisdictional rights therein, certainly not e/cluding the po5er to ta/, have been preserved. ,s to certain ta/ matters, an appropriate e/emption 5as provided for. :he ruling relied upon 5as from the case %aura (mport and "/port Co. v. #eer, 5hich affirmed a decision rendered E months ago holding liable as an importer, 5ithin the contemplation of the 1(RC provision, the trading firm that purchased army goods from a 8% government agency in the
<3. C(R F. #,R8!"1( C0RP0R,:(01 &,C:%: #arubeni 5as a $apanese corporation engaged in the import and e/port, trading, and construction business. (t completed t5o contracts in 1)*3, the income from 5hich it did not declare. 0ne of the contracts 5as 5ith the 1ational 'evelopment Company (1'C in connection 5ith the construction of a 5harf@port comple/ in Ceyte. :he other contract 5as 5ith the Philippine Phosphate &ertili-er Corp (Philfos for the construction of an ammonia storage comple/ also in Ceyte. :he Commissioner of (nternal Revenue (C(R then made an assessment on #arubeni4s deficiency ta/es. (t found that the 1'C and Philpos contracts 5ere made on a Iturn67eyJ basis (a job in 5hich the contractor agrees to complete the 5or7 of building and installation to the point of readiness or occupancyA in other 5ords, the products are brought to the client complete and ready for use amounting to about P)+;#V. :he t5o contracts 5ere divided into t5o parts ? the offshore portion and the onshore portion. ,ll materials and e.uipment in the contract under the offshore portion 5ere manufactured and completed in $apan. ,fter manufacture, these 5ere transported to Ceyte and installed to the pier 5ith the use of bolts. (R found that #arubeni 5as liable for contractor4s ta/ on the offshore portion. #arubeni filed a petition 5ith the C:,, arguing that the income derived from the offshore portion should be e/empt from ta/ since it 5as derived outside of the Philippine jurisdiction. (10:": :here 5as another argument on ta/ amnesty plus a brief history on the project, but ( didn4t include this anymore since it4s not relevant to the topic (%%8": Khether the income of #arubeni is ta/able even if it claims that it 5as earned outside of the Philippines.
<<. C(R F. #(:%8!(%B( #":,C C0RP.: (1:"R1,:(01,C C0#(:M &,C:%: ,tlas Consolidated #ining entered into a Coan and %ales Contract 5ith #itsubishi. 8nder the Contract, #itsubishi 5ould lend ,tlas U2;# for the installation of a ne5 concentrator for copper production, and in turn, ,tlas 5ould sell to #itsubishi all the copper concentrates produced from the machine for the ne/t 1D years. :hereafter, #itsubishi applied for a loan 5ith "/imban7 of $apan so that it could comply 5ith its obligations under the contract. #itsubishi also applied for a loan 5ith a consortium of $apanese ban7s. :he total amount of both loans 5as U2;#. ,tlas made interest payments in favor of #itsubishi totaling P1<#. :he corresponding 1DH ta/ on the interest in the amount of P1.)# 5as 5ithheld and remitted to the Government. %ubse.uently, #itsubishi and ,tlas filed a claim for ta/ credit, re.uesting that the P1.)# be applied against their e/isting ta/ liabilities on the ground that the interest earned by #itsubishi on the loan 5as e/empt from ta/ as provided in the 1ational Revenue Code. (%%8": Khether the interest is ta/6e/empt. B"C': 1o, the interest is not e/empt from ta/. :he 1ational (nternal Revenue Code provides that income received from loans in the Philippines e/tended by financing institutions o5ned, controlled, or financed by foreign governments are e/empt from ta/. #itsubishi and ,tlas claim that the interest earned from the loan falls under the above e/emption because #itsubishi 5as merely acting as an agent of "/imban7, 5hich is a financing institution o5ned, controlled, and financed by the $apanese
, contractor=s ta/ is in the nature of an e/cise ta/ on the e/ercise of a privilege of selling services or labor rather than a sale of products. (t is directly collectible from the person e/ercising the privilege. !eing an e/cise ta/, it can be levied by the ta/ing authority only 5hen the acts, privileges or business are done or performed 5ithin the jurisdiction of said authority. Ci7e property ta/es, it cannot be imposed on an occupation or privilege outside the ta/ing district. (n this case, the ship loaders, boats and mobile e.uipment used in the construction projects 5ere all designed, engineered and fabricated in $apan. :hey 5ere merely shipped to Ceyte and assembled there. Khile the construction and installation 5or7 5ere completed 5ithin the Philippines, some pieces of e.uipment and supplies 5ere completely designed and engineered in $apan. %ince these services 5ere rendered outside the ta/ing jurisdiction of the Philippines, they are therefore not subject to the contractor=s ta/.
(i)
UNIFORMITY
!. TIU V. CA FACTS" Petitioners assail the C, decision and resolution that upheld the constitutionality and validity of "0 )E6,, according to 5hich the grant and enjoyment of the ta/ and duty incentives authori-ed under R, E22E (I,n ,ct ,ccelerating the Conversion of #ilitary Reservations (nto 0ther Productive 8ses, Creating the !ases Conversion and 'evelopment ,uthority for this Purpose, Providing &unds :herefor and for 0ther PurposesJ 5ere limited to the business enterprises and residents 5ithin the fenced6in area of the %ubic %pecial "conomic None (%%"N . ,mong others, %ection 12 of R, E22E provides that, I:he provision of e/isting la5s, rules and regulations to the contrary not5ithstanding, no ta/es, local and national, shall be imposed 5ithin the %ubic %pecial "conomic None. (n lieu of paying ta/es, three percent (<H of the gross income earned by all businesses and enterprises 5ithin the %ubic %pecial "conomic None shall be remitted to the 1ational Government, one percent (1H each to the local government units affected by the declaration of the -one in proportion to their population area, and other factors. (n addition, there is hereby established a development fund of one percent (1H of the gross income earned by all businesses and enterprises 5ithin the %ubic %pecial "conomic None to be utili-ed for the development of municipalities outside the City of 0longapo and the #unicipality of %ubic, and other municipalities contiguous to the base areas /// (n case of conflict bet5een national and local la5s 5ith respect to ta/ e/emption privileges in the %ubic %pecial "conomic None, the same shall be resolved in favor of the latterAJ "0 )E, 5hich clarified the application of the incentives provided thus: %ec. 1. 0n (mport :a/es and 'uties. W :a/ and duty6free importations shall apply only to ra5 materials, capital goods and e.uipment brought in by business enterprises into the %%"N. "/cept for these items, importations of other goods into the %%"N, 5hether by business enterprises or resident individuals, are subject to ta/es and duties under relevant Philippine la5s. :he e/portation or removal of ta/ and duty6free goods from the territory of the %%"N to other parts of the Philippine territory shall be subject to duties and ta/es under relevant Philippine la5s. %ec. 2. 0n ,ll 0ther :a/es. W (n lieu of all local and national ta/es (e/cept import ta/es and duties , all business enterprises in the %%"N shall be re.uired to pay the ta/ specified in %ection 12(c of R.,. 1o. E22E. Respondent Court held that Ithere is no substantial difference bet5een the provisions of "0 )E6, and %ection 12 of R, E22E. (n both, the X%ecured ,rea= is precise and 5ell6defined as X. . . the lands occupied by the %ubic 1aval !ase and its contiguous e/tensions as embraced, covered and defined by the 1)3E #ilitary !ases ,greement bet5een the Philippines and the 8nited %tates of
FACTS" R, 1o. E22E created the !ases Conversion and 'evelopment ,uthority (!C', , 5hich also created the %ubic %pecial "conomic None (%ubic %"N . ,side from granting incentives to %ubic %"N, R, E22E also granted the President is an e/press authority to create other %"Ns in the areas covered respectively by the Clar7 military reservation, the Kallace ,ir %tation in %an &ernando, Ca 8nion, and Camp $ohn Bay through e/ecutive proclamations. !C', entered into a #0, and "scro5 ,greement 5ith :81:"L and ,%(,K0RC', private corporations under the la5s of the !ritish Firgin (slands, preparatory to the formation of a joint venture for the development of Poro Point Ca 8nion and Camp $ohn Bay as premier tourist destinations and recreation centers. !C',, :81:"L and ,%(,K0RC' e/ecuted a $F, to put up the !aguio (nternational 'evelopment and #anagement Corporation 5hich 5ould lease areas 5ithin Camp $ohn Bay and Poro Point for the attainment of the tourist and recreation spots in Ca 8nion and Camp $ohn Bay. President Ramos issued Proclamation 1o. 32; 5hich established a %"N on a portion of Camp $ohn Bay. 2nd sentence of %ection < of said Proclamation provided for national and local ta/ e/emption 5ithin and granted other economic incentives to the $ohn Bay %pecial "conomic None. I%ection <: (nvestment Climate in $ohn Bay %pecial "conomic None.6 Pursuant to %ection D(m and %ection 1D of R, 1o. E22E, the $ohn Bay Poro Point 'evelopment Corporation shall implement all necessary policies, rules, and regulations governing the -one, including investment incentives, in consultation 5ith pertinent government departments. ,mong others, the -one shall have all the applicable incentives of the %pecial "conomic None under %ection 12 of Republic ,ct 1o. E22E and those applicable incentives granted in the "/port Processing Nones, the Petitioners filed this case to enjoin the respondents from implementing Proc. 32; for being unconstitutional on grounds of: &or being illegal and invalid in so far as it grants ta/ e/emptions thus amounting to unconstitutional e/ercise of by the President of po5er granted only to legislature Cimits po5ers and interferes 5ith the autonomy of the city Fiolates rule that all ta/es should be uniform and e.uitable ISSUE" 1. K@1 Proclamation 1o. 32; is constitutional by providing for national and local ta/ e/emption 5ithin and granting other economic incentives to the $ohn Bay %pecial "conomic None. 10, 2nd sentence, %ection < of said proclamation is unconstitutional. K@1 Proclamation 1o. 32; is constitutional for limiting or interfering 5ith the local autonomy of !aguio City.
7. COCONUT OIL REFINERS ASSOCIATION INC. V. BCDA FACTS" R, E22E 5as enacted providing for the sound and balanced conversion of the Clar7 and %ubic military reservations and their e/tensions into alternative productive uses in the form of special economic -ones. President Ramos issued "0 *; 5hich declared that Clar7 (C%"N shall have all the applicable incentives granted to the %ubic %pecial "conomic and &ree Port None (%%"N under R, E22E. Petitioners claim that the said ".0 as 5ell as R, E22E are replete 5ith constitutional infirmities and must be declared invalid and void. Petitioner assails: "0 *; and !C', !oard Resolution: allo5ing the ta/ and duty6free sale at retail of consumer goods imported via clar7 for consumption outside C%"N. "0 )E, "0 )E6,: granting U1;; monthly and U2;; yearly ta/6free shopping privileges to %%"N residents living outside secured area of %%"N and to &ilipinos aged 1D and over residing outside %%"N Petitioners argue that the "/ecutive 'epartment, by allo5ing thru .uestioned issuances the setting up of ta/ and duty free shops and the removal of consumer ggoods and items from the -ones 5ithout payment of correspondning duties and ta/es arbitrarily provided additional e/emptions to the limitations imposed by R, E22E. ISSUE" (other issues: e.ual protection clause, preferential use of &ilipino labor, prohibition against unfair competition K@1 assailed issuances amounts to violation of the rule on separation of po5ers being e/ecutive legislation. HELD"
2.
HELD" M"%. :he 2nd %entence of %"C:(01 < of Proclamation 1o. 32; is hereby declared 18CC and F0(' and is accordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaid void provision. Proclamation 1o. 32;, 5ithout the invalidated portion, remains valid and effective. 8nder %ection 12 of R, 1o. E22E it is clear that 01CM :B" %8!(C %"N 5hich 5as granted by Congress 5ith ta/ e/emption, investment incentives and the li7e. :B"R" (% 10 "LPR"%% "L:"1%(01 0& :B" %,(' PR0F(%(01 (1 PR"%('"1:(,C PR0CC,#,:(01 1o. 32;. (%ection 12 7ept mentioning %ubic %pecial "conomic
Petitioners claim that the 5ording of R, E22E clearly limits the grant of ta/ incentives to the importation of ra5 materials and capital e.uipment only, hence they claim that assailed issuances constitute e/ecutive legislation for invalidly granting ta/ incentives in importation of consumer goods. :he court ho5ever said that to limit the ta/6free importation privilege of enterprises to those located inside the special -one only to ra5 materials clearly runs counter to the intention of the legislature to create a free port 5here Ifree flo5 of goods or capital 5ithin, into and out of the -onesJ is insured. :he records of the %enate containing the discussion of the concept of %"N in %ec 12a R, E22E sho5 the legislative intent that consumer goods entering the %%"N 5hich satisfy the needs of the -one and are consumed there are not subject to duties and ta/es in accordance 5ith Philippine la5s. ,ccording to %enator Guingona: :he %"N could embrace the needs of tourism, servicing, financing and other investment aspects. Bo5ever 5ith regard to the e/ecutive order issued by President Ramos concerning Clar7 as being a %"N (and thus enjoy ta/ e/emptions and incentives the court declared that such 5as an invalid e/ercise of e/ecutive legislation. ,s 5as decided in the case of Camp $ohn $ay, 5herein the court held that $ohn Bay 5as not granted any ta/ e/emption as it 5as not any5here stated in the la5. ,s in this case, R, E22E e/pressly provides for the grant of incentives to the %%"N it fails to ma7e any similar grant ho5ever to the other economic -ones including Clar7. :a/ and duty free incentives being in the nature of ta/ e/emptions the basis thereof should be categorically and unmista7ably e/pressed from the language of the statute.
#otion 'enied. :he Constitution does not really prohibit imposition of (ndirect :a/es. (t has been interpreted to mean simply that 'irect :a/es are to be preferred as much as possible 5hereas (ndirect :a/es should be minimi-ed. %ales :a/es are the oldest form of (ndirect :a/es. (t merelye/pandsthe base of the :a/. Resort to indirect ta/es should beminimi-ed but not avoid entirely because it is difficult, if not (#P0%%(!C", to avoid them by imposing such ta/es according to the :a/payers ability to pay. Khere F,: imposes regressive ta/ation, the Ca5 on F,: minimi-es the regressive effects of this imposition by providing for N"R0 Rating of certain transactions li7e Goods in its 0riginal %tate (Palay, Corn , "ducational %ervices, Kor7 of ,rt, "/port sales by person not F,: registered. :ransactions 5hich involve F,: are goods and services used or availed mainly by higher income group.
'. ABAKADA GURO PARTY LIST V. THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA FACTS" R.,. )<<E @ the "F,: Ca5, a F,: reform ,ct enacted on #ay 23, 2;;D. %ections 3, D and + of said ,ct amends %ections 1;+, 1;E and 1;*, respectively, of the 1(RC. %ection 3 imposes a 1;H F,: on sale of goods and properties, %ection D imposes a 1;H F,: on importation of goods, and %ection + imposes a 1;H F,: on sale of services and use or lease of properties. :his la5 authori-ed the President, upon recommendation of the %ecretary of &inance, to raise the F,: rate to 12H effective $anuary 1, 2;;+, if t5o conditions are satisfied: F,: collection as a percentage of G'P of the previous year e/ceeds 2 3@DH 1ational government deficit as a percentage of G'P of the previous year e/ceeds 1 SH maintaining the rate of 1;H until the conditions above too7 place. (t also inserted a provision imposing a E;H limit on the amount of input ta/ to be credited against the output ta/.
%. ARTURO TOLENTINO VS. SEC OF FINANCE & CIR FACTS" :he Case is about challenging the Constitutionality of R,EE1+ other5ise 7no5n as "/panded Falue ,dded :a/ ("F,: . , lot of issues 5ere thro5n li7e: (1 it did not originate e/clusively in the Bouse of RepresentativesA (2 :he Gro5ing !udget deYcit is not an "mergency, especially Philippines 5here budget deYcit is a chronic condition. :hese are motions directly Yled to the %upreme Court see7ing reconsideration to dismiss the case. :he enactment of R, EE1+ other5ise 7no5n as "F,: 5as brought about by the enormous budget deYcit of the Philippines. (t is an amendment 5hich see7s to restructure the F,: by 5idening its ta/ base. ,rturo :olentino together 5ith other petitioners li7e the CR"!, and other Civil %ociety riding on the popularity of the issue on "F,: to gain political grounds assents that "F ,: violates the rules that ta/es should be uniform and e.uitable and that Congress shall evolve a progressive system of :a/ation. CR"!, claims that F,: is regressive because the la5 imposes a Zat rate of 1;H and thus places the :a/ !urden on all ta/ payers 5ithout regard to their ability to pay. :he mandate of Congress is to evolve a progressive ta/ system. ISSUES"
Petitions 5ere thus filed assailing the constitutionality of the la5: ,!,[,', argued that Congress abandoned its e/clusive authority to fi/ ta/es by giving the President the authority upon the &inance %ec=s recommendation to raise F,: to 12H %en. Pimentel and Rep. "scudero argued that the la5 5as an undue delegation of legislative po5ers and a violation of due process Pilipinas %hell dealers argued that the F,: reform 5as arbitrary, oppressive and confiscatory.
Khether or not "F,: violates the rule that :a/es evolve a progressive system of :a/ation>
HELD"
ISSUE" D. K@1 R.,. )<<E is constitutional HELD" M"%, it is valid and constitutional. 1. Ca5 5as 10: an undue delegation of legislative po5er. Congress didn=t delegate the po5er to ta/ but the mere implementation of the la5 ? the ascertainment of facts contingent on conditions already provided. (n this case, the legislature made the operation of the 12H rate contingent upon 2 specified conditions. :hus, no discretion 5ould be e/ercised by the President, and he 5ould only e/ercise the ministerial duty of imposing the 12H rate. #oreover, the President can=t alter or modify @ nullify @ set aside the findings of fact of the %ecretary of &inance, 5ho 5ill ascertain the said conditions because the %o& 5ill not act as alter ego of President but ,G"1: of the legislative department. (). MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS* INC. V. DEPARTMENT OF FINANCE SECRETARY FACTS" Petitioner #isamis 0riental ,ssociation of Coco :raders, (nc. is a domestic corporation 5hose members, individually or collectively, are engaged in the buying and selling of copra in #isamis 0riental. :he petitioner alleges that prior to the issuance of Revenue #emorandum Circular 3E6)1 on $une 11, 1))1, 5hich implemented F,: Ruling 1);6);, copra 5as classified as agricultural food product under U 1;<(b of the 1ational (nternal Revenue Code and, therefore, e/empt from F,: at all stages of production or distribution. 8nder %ec. 1;<(b of the 1(RC, the sale of agricultural food products in their original state is e/empt from F,: at all stages of production or distribution. :he reclassification had the effect of denying to the petitioner the e/emption it previously enjoyed 5hen copra 5as classified as an agricultural food product under \1;<(b of the 1(RC. Petitioner challenges R#C 1o. 3E6)1 on various grounds. ISSUES" (1 Khether the !(R is the proper the competent government agency to determine the proper classification of food products. (2 Khether R#C 1o. 3E6)1 is discriminatory and violative of the e.ual protection clause of the Constitution. HELD" :he court, as to the first issue, ruled in the affirmative. :he !(R, as the government agency charged 5ith the implementation and interpretation of the ta/ la5s, is entitled to great respect. (n interpreting %ection 1;< of the 1(RC, the Commissioner of (nternal Revenue correctly gave it a strict construction consistent 5ith the rule that ta/ e/emptions must be strictly construed against the ta/payer and liberally in favor of the state. :he ruling 5as made by the Commissioner of (nternal "ven if F,: is regressive, it is still constitutional. :he constitution does 10: prohibit the imposition of indirect ta/es @ a regressive system of ta/ation. (t simply provides that Congress shall "F0CF" a progressive system of ta/ation, meaning direct ta/es must be preferred to indirect ta/es. (n the case of the F,:, the la5 minimi-es the regressive effects of this imposition by providing for -ero rating of certain transactions.
2.
:he 12H increase does 10: impose an unfair and unnecessary additional ta/ burden. !ecause of the country=s gloomy states of economic affairs, it is necessary to raise revenue to meet government e/penditures.
<.
:he E;H limitation on input ta/ does 10: violate due process and "PC (nput ta/ is 10: a property right but a %:,:8:0RM privilege, 5@c may be regulated. !esides, the unutili-ed input ta/ may be credited in the subse.uent periods or even refunded, so it is 10: completely lost. 1either does it violate "PC 5@ regard to the DH creditable 5ithholding ta/ imposed on payments made by the government for :,L,!C" :R,1%,C:(01%. :his is because it is applied e.ually to members of the same class. :a/able transactions 5ith the government are subject to a uniform DH rate, in contrast to its different rates prior to amendment. (t is clear that Congress intended to treat differently ta/able transactions 5ith the government.
3.
:he la5 is consistent 5@ 8niformity and ".uitability of :a/ation 8niformity of ta/ation means that all ta/able articles@property of the %,#" CC,%% be ta/ed at the %,#" R,:". (n this case, the ta/ la5 is uniform as it provides for a standard rate of 1;H @ 12H on all goods and
ISSUES" 1. Khether or not the DH franchise ta/ prescribed in %ection 2D) of the 1ational (nternal Revenue Code assessed against the private respondent on its gross receipts reali-ed before the effectivity of R.,6 1o. <*3< is collectible. Khether or not %ection 3 of R.,. 1o. <*3< is unconstitutional for being violative of the 9uniformity and e.uality of ta/ation9 clause of the Constitution. (f the abovementioned %ection 3 of R.,. 1o. <*3< is valid, 5hether or not it could be given retroactive effect so as to render uncollectible the ta/es in .uestion 5hich 5ere assessed before its enactment.
2.
<.
(1.CIR V. LINGAYEN GULF ELECTRIC POWER CO. FACTS" Cingayen Gulf "lectric Po5er operates an electric po5er plant serving the municipalities of Cingayen and !inmaley, Pangaisnan, pursuant to municipal franchise granted it by the respective municipal councils. :he franchises provided that the grantee shall pay .uarterly to the Provincial :reasury of Pangasinan 1H ofthe gross earnings obtained through the privilege for the first 2; years (from 1)3+ , and 2H during the remaining 1D years of the life of the franchise. !ureau of (nternal Revenue (!(R assessed against and demanded from the private respondent deficiency franchise ta/es and surcharges for the years 1)3+ to 1)D3 applying the franchise ta/ rate of DH on gross receipts from #arch 1, 1)3* to 'ecember <1, 1)D3 as prescribed in %ection 2D) of the 1ational (nternal Revenue Code, instead of the lo5er rates as provided in the municipal franchises. :he private respondent protested the said assessment and re.uested for a conference 5ith a vie5 to settling the liability amicably. :he Commissioner denied the re.uest of the private respondent. :hus, the private respondent appealed to the Court of :a/ ,ppeals. Pending the hearing of the case, Republic ,ct (R.,. 1o. <*3< 5as passed granting to the private respondent a legislative franchise for the operation of the electric light, heat, and po5er system in the same municipalities of Pangasinan. %ection 3 thereof provides that:
QGR the grantee shall pay into the (nternal Revenue office of each #unicipality in 5hich it is supplying electric current to the public under this franchise, a ta/ e.ual to t5o per centum of the gross receipts from electric current sold or supplied under this franchise. :he grantee is hereby e/pressly e/empted and effective further upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts as provided for in the original franchise shall be collected, any provision of la5 to the contrary not5ithstanding.
HELD" 1. Ke find no merit in petitioner4s contention. R.,. 1o. <*3< granted the private respondent a legislative franchise in $une, 1)+<, amending, altering, or even repealing the original municipal franchises, and providing that the private respondent should pay only a 2H franchise ta/ on its gross receipts, 9in lieu of any and all ta/es and@or licenses of any 7ind, nature or description levied, established, or collected by any authority 5hatsoever, municipal, provincial, or national, no5 or in the future ... and effective further upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts ... shall be collected, any provision of la5 to the contrary not5ithstanding.9 :hus, by virtue of R.,6 1o. <*3<, the private respondent 5as liable to pay only the 2H franchise ta/, effective from the date the original municipal franchise 5as granted. , ta/ is uniform 5hen it operates 5ith the same force and effect in every place 5here the subject of it is found. 8niformity means that all property belonging to the same class shall be ta/ed ali7e :he Cegislature has the inherent po5er not only to select the subjects of ta/ation but to grant e/emptions. :a/ e/emptions have never been deemed violative of the e.ual protection clause. (t is true that the private respondents municipal franchises 5ere obtained under ,ct 1o. ++E 2 of the Philippine Commission, but these original franchises have been replaced by a ne5 legislative franchise, i.e. R.,. 1o. <*3<. :hus, it only effected the transfer of a ta/able property from one class to another. Given the validity of said la5, it should be applied retroactively so as to render uncollectible the ta/es in .uestion 5hich 5ere assessed before its enactment. :he .uestion of 5hether a statute operates retrospectively or only prospectively depends on the legislative intent. (n the instant case, ,ct 1o. <*3< provides that Ieffective G upon the date the original franchise 5as granted, no other ta/ and@or licenses other than the franchise ta/ of t5o per centum on the gross receipts G shall be collected, any provision to the contrary not5ithstanding.J Republic ,ct 1o. <*3< therefore specifically provided for the retroactive effect of the la5.
2.
<.
0n %eptember 1D, 1)+3, the respondent court ruled that the provisions of R.,. 1o. <*3< should apply and accordingly dismissed the claim of the Commissioner of (nternal Revenue. :he said ruling is no5 the subject of the petition at bar.
( . SISON V. ANCHETA FACTS" %ison assails the validity of !P 1<D 5@c further amended %ec 21 of the 1ational (nternal Revenue Code of 1)EE. :he la5 provides that there=d be a higher ta/ impost against income derived from professional income as opposed to regular income earners. %ison, as a professional businessman, and as ta/payer alleges that by virtue thereof, Ihe 5ould be unduly discriminated against by the imposition of higher rates of ta/ upon his income arising from the e/ercise of his profession vis6a6 vis those 5hich are imposed upon fi/ed income or salaried individual ta/payers.J Be characteri-es the above section as arbitrary amounting to class legislation, oppressive and capricious in character. :here is a transgression of both the e.ual protection and due process clauses of the Constitution as 5ell as of the rule re.uiring uniformity in ta/ation. ISSUE"
Khether the imposition of a higher ta/ rate on ta/able net income derived from business or profession than on compensation is constitutionally infirm. HELD" 1. 0n due process: 'ue process clause may be invo7ed 5here a ta/ing statute is so arbitrary that it finds no support in the Constitution. "/ample: 5hen ta/ation amounts to the confiscation of property, 5hich is a clear abuse of po5erA 5hen assailed ta/ 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 0n e.ual protection: :he Constitution does not re.uire things 5hich are different in fact or opinion to be treated in la5 as though they 5ere the same. ,t any rate, it is inherent in the po5er to ta/ that a state be free to select the subjects of ta/ation, and it has been repeatedly held that 4ine.ualities 5hich result from a singling out of one particular class for ta/ation, or e/emption infringe no constitutional limitation. 0n uniform ta/ation: ,ccording to the Constitution: 9:he rule of ta/ation shall be uniform and e.uitable.9 (t is met 5hen the ta/ operates 5ith the same force and effect in every place 5here the subject may be found. :he rule of uniformity does not call for perfect uniformity or perfect e.uality, because this is hardly attainable. %upreme Court held: 9".uality and uniformity in ta/ation means that all ta/able articles or 7inds of property of the same class shall be ta/ed at the same rate. :he ta/ing po5er has the authority to ma7e reasonable and natural classifications for purposes of ta/ation. Khere the differentiation complained of conforms to the practical dictates of justice and e.uity it 9is not discriminatory 5ithin the meaning of this clause and is therefore uniform.9 ,pparently, 5hat misled petitioner is his failure to ta7e into consideration the distinction bet5een a ta/ rate and a ta/ base. :here is no legal objection to a broader ta/ base or ta/able income by eliminating all deductible items and at the same time reducing the applicable ta/ rate. :a/payers may be classified into different categories. (t. is enough that the classification must rest upon substantial distinctions that ma7e real differences. (n the case of the gross income ta/ation embodied in !atas Pambansa !lg. 1<D, the, discernible basis of classification is the susceptibility of the income to the application of generali-ed rules removing all deductible items for all ta/payers 5ithin the class and fi/ing a set of reduced ta/ rates to be applied to all of them. :a/payers 5ho are recipients of compensation income are set apart as a class. ,s there is practically no overhead e/pense, these ta/payers are e not entitled to ma7e deductions for income ta/ purposes because they are in the same situation more or less. 0n the other hand, in the case of professionals in the practice of their calling and businessmen, there is no uniformity in the costs or e/penses necessary to produce their income. (t 5ould not be just then to disregard the disparities by giving all of them -ero deduction and indiscriminately impose on all ali7e the same ta/ rates on the basis of gross income. :here is ample justification then for the !atasang Pambansa to adopt the gross system of income ta/ation to compensation income, 5hile continuing the system of net income ta/ation as regards professional and business income.
((. VILLANUEVA V. CITY OF ILOILO FACTS" 0n %eptember <;, 1)3+ the municipal board of (loilo City enacted 0rdinance *+. :he %upreme Court, ho5ever, declared the ordinance ultra vires. 0n $anuary 1D, 1)+; the municipal board of (loilo City, believing that 5ith the passage of Republic ,ct 22+3, other5ise 7no5n as the Cocal ,utonomy ,ct, it had ac.uired the authority or po5er to enact an ordinance similar to that previously declared by the %upreme Court as ultra vires, enacted 0rdinance 11 (eleven , series of 1)+;, imposing municipal license ta/ on persons engaged in the business of operating tenement houses. (n (loilo City, the appellees "usebio Fillanueva and Remedios %. Fillanueva are o5ners of five tenement houses, aggregately containing 3< apartments, 5hile the other appellees and the same Remedios %. Fillanueva are o5ners of ten apartments. !y virtue of the ordinance in .uestion, the appellant City collected from spouses "usebio Fillanueva and Remedios %. Fillanueva, for the years 1)+;61)+3, the sum of PD,*23.<;, and from the appellees Pio %ian #elli-a, :eresita %. :opacio, and Remedios %. Fillanueva, for the years 1)+;61)+3, the sum of P1,<1E.;;. 0n $uly 11, 1)+2 and ,pril 23, 1)+3, the plaintiffs6appellees filed a complaint, and an amended complaint, respectively, against the City of (loilo, praying that 0rdinance 11, series of 1)+;, be declared 9invalid for being beyond the po5ers of the #unicipal Council of the City of (loilo to enact, and unconstitutional for being violative of the rule as to uniformity of ta/ation and for depriving said plaintiffs of the e.ual protection clause of the Constitution,9 and that the City be ordered to refund the amounts collected from them under the said ordinance. :he lo5er court rendered judgment declaring the ordinance illegal. ISSUES" (1 Khether or not the City of (loilo is empo5ered by the Cocal ,utonomy ,ct to impose tenement ta/es. (2 Khether or not 0rdinance 11, series of 1)+;, does violate the rule of uniformity of ta/ation. HELD" (1 Mes. :he lo5er court has interchangeably denominated the ta/ in .uestion as a tenement ta/ or an apartment ta/. Called by either name, it is not among the e/ceptions listed in %ection 2 of the Cocal ,utonomy ,ct. :he imposition by the ordinance of a license ta/ on persons engaged in the business of operating tenement houses finds authority in %ection 2 of the Cocal ,utonomy ,ct 5hich provides that chartered cities have the authority to impose municipal license ta/es or fees upon persons engaged in any occupation or business, or e/ercising privileges 5ithin their respective territories, and 9other5ise to levy for public purposes, just and uniform ta/es, licenses, or fees.9 (2 1o. :he ordinance is not violative of the rule of uniformity in ta/ation. :he %upreme Court has already ruled that tenement houses constitute a distinct class of property. (t has li7e5ise ruled that
2.
<.
(t is true that the uniformity essential to the valid e/ercise of the po5er of ta/ation does not re.uire identity or e.uality under all circumstances, or negate the authority to classify the objects of ta/ation. :he classification made in the e/ercise of this authority, to be valid, must, ho5ever, be reasonable and this re.uirement is not deemed satisfied unless: (1 it is based upon substantial distinctions 5hich ma7e real differencesA (2 these are germane to the purpose of the legislation or ordinanceA (< the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the presentA and (3 the classification applies e.ually to all those 5ho belong to the same class. :hese conditions are not fully met by the ordinance in .uestion. (ndeed, if its purpose 5as merely to levy a burden upon the sale ofsoft drin7s or carbonated beverages, there is no reason 5hy sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of !utuan should be e/empt from the ta/. Bence, decision appealed from is reversed. City of !utuan is sentenced to refund plaintiff and is restrained and prohibited permanently from enforcing said 0rdinance, as amended.
(!. PEPSI+COLA BOTTLING CO. V. CITY OF BUTUAN FACTS" Plaintiff, Pepsi6Cola !ottling Company of the Philippines, is a domestic corporation 5ith offices and principal place of business in Oue-on City. Plaintiff4s 5arehouse in the City of !utuan serves as storage for its products the 9Pepsi6Cola9 soft drin7s for sale to customers in the City of !utuan and all the municipalities in the Province of ,gusan. :hese 9Pepsi6Cola9 soft drin7s are bottled in Cebu City and shipped to the !utuan City 5arehouse of plaintiff for distribution and sale in the City of !utuan and all municipalities of ,gusan. 0n ,ugust 1+, 1)+;, the City of !utuan enacted 0rdinance 1o. 11; 5hich 5as subse.uently amended by 0rdinance 1o. 122 and effective 1ovember 2*, 1)+;. 0rdinance 1o. 11; as amended, imposes a ta/ on any person, association, etc., of P;.1; per case of 23 bottles of Pepsi6 Cola. :he plaintiff paid under protest the amount of P3.)2+.+< from ,ugust 1+ to 'ecember <1, 1)+; and the amount of P),2D;.3; from $anuary 1 to $uly <;, 1)+1. :he plaintiff filed a complaint for the recovery of the total amount of P13,1EE.;< paid under protest, on the ground that 0rdinance 1o. 11; as amended of the City of !utuan is illegal, that the ta/ imposed is e/cessive and that it is unconstitutional. :he Court of &irst (nstance ruled in favor of the defendant. ISSUE" Khether or not the disputed ordinance is void because it is highly unjust and discriminatory HELD" Mes. "ven if the burden in .uestion 5ere regarded as a ta/ on the sale of said beverages, it 5ould still be invalid, as discriminatory, and hence, violative of the uniformity re.uired by the Constitution and the la5, since only sales by 9agents or consignees9 of outside dealers 5ould be subject to the ta/. %ales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same e/ceeded those made by said agents or consignees of producers or merchants established outside the City of !utuan, 5ould be e/empt from the disputed ta/.
(#. ORMOC SUGAR CO.* VS. TREASURER OF ORMOC FACTS" 0n $anuary 2), 1)+3, the #unicipal !oard of 0rmoc City passed 0rdinance 1o. 3, %eries of 1)+3, imposing 9on any and all productions of centrifugal sugar milled at the 0rmoc %ugar Company, (nc., in 0rmoc City a municipal ta/ e.uivalent to one per centum (1H per e/port sale to the 8nited %tates of ,merica and other foreign countries.9 Payments for said ta/ 5ere made, under protest, by 0rmoc %ugar Company, (nc. on #arch 2;, 1)+3 for PE,;*E.D; and on ,pril 2;, 1)+3 for PD,;;;.;;, or a total of P12,;*E.D;. 0n $une 1, 1)+3, 0rmoc %ugar Company, (nc. filed before the Courtof &irst (nstance of Ceyte a complaint against the City of 0rmoc as 5ell as its :reasurer, #unicipal !oard and #ayor, alleging that the afore6stated ordinance is unconstitutional for being violative of the e.ual protection clause (%ec. 1Q1R, ,rt. (((, Constitution and the rule of uniformity of ta/ation (%ec. 22Q1R, ,rt. F(, Constitution , aside from being an e/port ta/ forbidden under %ection 22*E of the Revised ,dministrative Code. (t further alleged that the ta/ is neither a production nor a license ta/ 5hich 0rmoc City under %ection 1D677 of its charter and under %ection 2 of Republic ,ct 22+3, other5ise 7no5n as the Cocal ,utonomy ,ct, is authori-ed to imposeA and that the ta/ amounts to a customs duty, fee or charge in violation of paragraph 1 of %ection 2 of Republic ,ct 22+3 because the ta/ is on both the sale and e/port of sugar. :he Court of &irst (nstance, on ,ugust +, 1)+3, upheld the constitutionality of the ordinance and declared the ta/ing po5er of defendant chartered city broadened by the Cocal ,utonomy ,ct. ISSUE"
(%. BRITISH AMERICAN TOBACCO V CAMACHO FACTS" R.,. *23; 5as passed recodifying the 1(RC 5here %ec 132 5as renumbered %ec 13D. !ritish ,merican :obacco assailed the validity of %ec. 13D of the 1(RC (amended by R, *23; , arguing that the said provisions are violative of the e.ual protection and uniformity clause of the Constitution. %ection 13D provides for a four6tier ta/ rate based on net retail price per pac7 of cigarettes: (1 lo56priced, (2 medium6priced, (< high6priced, and (3 premiumpriced. %ection 13D further provides that 1"K !R,1'% (registered after $anuary 1, 1))E of cigarettes shall be ta/ed at their current retail price. (f the current net retail price has not been established, the suggested net retail price shall be used to determine the specific ta/ classification. 0n the other hand, old or e/isting brands (registered before $anuary 1, 1))E shall be ta/ed at their net retail price as of 0ctober 1, 1))+. (1et retail price ] price ^ 5hich cigarettes are sold on retail in 2; supermar7ets in ##A %uggested net retail price ] net retail price ^ 5hich brands of cigarettes are intended by the manufacturer to be sold . :o implement R, *23;, !(R issued a Revenue Regulation (RR 1o. 16 )E classifying e/isting brands of cigarettes as those e/isting or active (old brands prior to $anuary 1, 1))E, 5hile ne5 brands of cigarettes are those registered after $anuary 1, 1))E. ,nother Revenue Regulation 5as issued amending the first (RR 1o. )62;;< by providing !(R 5ith the po5er to periodically revie5 every t5o years @ earlier the current net retail price of ne5 brands to "%:,!C(%B @ 8P',:" their ta/ classification. (n $une 2;;1, !ritish ,merican :obacco introduced the Cuc7y %tri7e &ilter, Cuc7y %tri7e Cights and Cuc7y %tri7e #enthol Cights. Cuc7y %tri7e 5as ta/ed based on its suggested gross retail price from the time of its introduction in the mar7et in 2;;1 until the !(R mar7et survey in 2;;<. :he brands 5ere sold at P22.D3, P22.+1 and P21.2< so the applicable ta/ rate is P1<.33 per pac7. !,: no5 argues that the 9classification free-e provision9 violates the e.ual protection and uniformity of ta/ation clauses because the Cuc7y %tri7e brands are ta/ed based on their 1))+ net retail prices 5hile ne5 brands are ta/ed based on their present day net retail prices. :hus, Cuc7y %tri7e suffers from higher ta/es 5hile its competitors pay a lo5er amount. !,: further argued that the tobacco e/cise la5 5as discriminatory because under it, brands that entered the mar7et after 1))+ 5ere imposed ta/es based on their current retail prices
(7. PHILIPPINE TRUST COMPANY V. YATCO FACTS: Prior to the filing of these suits, and for a number of years, the plaintiffs6appellants had been paying capital and deposit ta/es 5ithout protest, formerly under section 111 of ,ct 1o. 11*), and later under section 13)) of the Revised ,dministrative Code of 1)1E, as amended. ,ppellants challenge the constitutionality of the aforesaid section of the Revised ,dministrative Code, principally on the grounds that it violates the rule regarding uniformity of ta/ation, and that it is discriminatory, and therefore violative of the e.ual protection clause of the Constitution. ,ppellants stoutly maintain that although the foregoing provision is of general application and operates on all ban7s of the same 7ind doing business in the Philippines, the e/emption of the 1ational City !an7 of 1e5 Mor7 from the impositions therein specifically provided (1ational City !an7 of 1e5 Mor7 v. Posadas ma7es the la5 discriminatory and violates the rule of uniformity in ta/ation ISSUE"
Republic ,ct )<<D (,ttrition ,ct of 2;;D 5as enacted to optimi-e the revenue6generation capability and collection of the !ureau of (nternal Revenue (!(R and the !ureau of Customs (!0C . :he la5 intends to encourage !(R and !0C officials and employees to e/ceed their revenue targets by providing a system of re5ards and sanctions through the creation of a Re5ards and (ncentives &und (&und and a Revenue Performance "valuation !oard (!oard . (t covers all officials and employees of the !(R and the !0C 5ith at least si/ months of service, regardless of employment status. :he &und is sourced from the collection of the !(R and the !0C in e/cess of their revenue targets for the year, as determined by the 'evelopment !udget and Coordinating Committee ('!CC . ,ny incentive or re5ard is ta7en from the fund and allocated to the !(R and the !0C in proportion to their contribution in the e/cess collection of the targeted amount of ta/ revenue. Petitioners, invo7ing their right as ta/payers filed this petition challenging the constitutionality of R, )<<D, a ta/ reform legislation, claim, among others, that limiting the scope of the system of re5ards and incentives only to officials and employees of the !(R and the !0C violates the constitutional guarantee of e.ual protection. :here is no valid basis for classification or distinction as to 5hy such a system should not apply to officials and employees of all other government agencies. ISSUES" Khether or not limiting the scope of the system of re5ards and incentives (under R, )<<D only to officials and employees of the !(R and the !0C violates the constitutional guarantee of e.ual protection. HELD" 1o. Petitioners have failed to overcome the presumption of constitutionality in favor of R, )<<D. :he e.ual protection clause recogni-es a valid classification, that is, a classification that has a reasonable foundation or rational basis and not arbitrary. Kith respect to R, )<<D, its e/pressed public policy is the optimi-ation of the revenue6generation capability and collection of the !(R and the !0C. %ince the subject of the la5 is the revenue6 generation capability and collection of the !(R and the !0C, the incentives and@or sanctions provided in the la5 should logically pertain to the said agencies. #oreover, the la5 concerns only the !(R and the !0C because they have the common distinct primary function of generating revenues for the national government through the collection of ta/es, customs duties, fees and charges. :he !(R performs the follo5ing functions: %ec. 1*. !he 5ureau of Internal Revenue . ? :he !ureau of (nternal Revenue, 5hich shall be headed by and subject to the supervision and control of the Commissioner of (nternal Revenue, 5ho shall be appointed by the President upon the recommendation of the %ecretary Qof the '0&R, shall have the follo5ing functions: (1 A;;3;; 6,9 =.883=1 688 16>3;* -33; 6,9 =?6/:3; 6,9 6==.5,1 -./ 688 /3<3,53; =.883=139@
:he 1)EE :a/ Code 5as later repealed by R, *323, or the 1ational (nternal Revenue Code of 1))E (1))E :a/ Code , and %ection 132, as amended by R, *23;, 5as renumbered as %ection 13D.
0n the other hand, the !0C has the follo5ing functions: %ec. 2<. !he 5ureau of Customs. ? :he !ureau of Customs 5hich shall be headed and subject to the management and control of the Commissioner of Customs, 5ho shall be appointed by the President upon the recommendation of the %ecretaryQof the '0&R and hereinafter referred to as Commissioner, shall have the follo5ing functions: (1 (2 (< C.883=1 =5;1.0 951i3;* 16>3; 6,9 1?3 =.//3;A.,9i,: -33;* =?6/:3; 6,9 A3,681i3;A A==.5,1 -./ 688 =5;1.0; /3<3,53; =.883=139A "/ercise police authority for the enforcement of tariff and customs la5sA //// //// ////
!oth the !(R and the !0C are bureaus under the '0&. :hey principally perform the special function of being the instrumentalities through 5hich the %tate e/ercises one of its great inherent functions ? ta/ation. (ndubitably, such substantial distinction is germane and intimately related to the purpose of the la5. Bence, the classification and treatment accorded to the !(R and the !0C under R, )<<D fully satisfy the demands of e.ual protection.
!). CIR V. FORTUNE TOBACCO (2)11) FACTS" !eginning $anuary 1, 1))E, Republic ,ct 1o. (R, *23;< too7 effect and a shift from ad valorem to specific ta/es 5as made. %ec 132 stated that: :he specific ta/ from any brand of cigarettes 5ithin the ne/t three (< years of effectivity of this ,ct shall not be lo5er than the ta/ Q5hichR is due from each brand on 0ctober 1, 1))+: Provided, ho5ever, :hat in cases 5here the specific ta/ rates imposed in paragraphs (1 , (2 , (< and (3 hereinabove 5ill result in an increase in e/cise ta/ of more than seventy percent (E;H , for a brand of cigarette, the increase shall ta7e effect in t5o tranches: fifty percent (D;H of the increase shall be effective in 1))E and one hundred percent (1;;H of the increase shall be effective in 1))*. :he rates of specific ta/ on cigars and cigarettes under paragraphs (1 , (2 , (< and (3 hereof, shall be increased by t5elve percent (12H on $anuary 1, 2;;;. Qemphases oursR :o implement R, *23; and pursuant to its rule6ma7ing po5ers, the C(R issued Revenue Regulation 1o. (RR 16)E 5hose %ection <(c and (d echoed the above6.uoted portion of %ection 132 of the 1)EE :a/ Code, as amended.
:he e/cise ta/ from any brand of cigarettes 5ithin the ne/t three (< years from the effectivity of R.,. 1o. *23; shall not be lo5er than the ta/, 5hich is due from each brand on 0ctober 1, 1))+Q.R (n the process, the C(R also perpetuated the une.ual ta/ treatment of similar goods that 5as supposed to be cured by the shift from ad valorem to specific ta/es. !1. BUREAU OF CUSTOMS EMPLOYEES ASSOC V. TEVES
ISSUES" FACTS" 1. 2. K@1 C(R 5ent beyond the terms of the la5 K@1 there 5as uniformity of ta/ation &ormer Pres. ,rroyo signed into la5 R.,. 1o. )<<D for the purpose of optimi-ing the revenue6 generation capability and collection of the !(Rand !0C and to encourage !(R and !0C officials and employees to e/ceed their revenue targets by providing a system of re5ards andsanctions through the creation of Re5ards and (ncentives &und and a Revenue Performance "valuation !oard.:he !oards in the !(R and !0C are composed of %ecretaries of &inance, !udget and their undersecretaries, 'ir Gen 1"', and his deputy 'irGen, Commissioners of !(R and !0C and their deputy commissioners, t5o representatives from ran7 and file employees and representativefrom the officials nominated by their recogni-ed organi-ation."ach !oard has the duty to: 1. 2. <. 3. D. +. Prescribe the rules and guidelines for the allocation, distribution and release of the &und %et criteria and procedures for removing from the service officials and employees 5hose revenue collection falls short of the target :erminate personnel in accordance 5ith the criteria adopted by the !oard Prescribe a system for performance evaluation Perform other functions, including the issuance of rules and regulations and %ubmit an annual report to Congress.
HELD" %ection 13D states that during the transition period, i.e., 5ithin the ne/t three (< years from the effectivity of the :a/ Code, the e/cise ta/ from any brand of cigarettes shall not be lo5er than the ta/ due from each brand on 1 0ctober 1))+. :his .ualification, ho5ever, is conspicuously absent as regards the 12H increase 5hich is to be applied on cigars and cigarettes pac7ed by machine, among others, effective on 1 $anuary 2;;;. Clearly and unmista7ably, %ection 13D mandates a ne5 rate of e/cise ta/ for cigarettes pac7ed by machine due to the 12H increase effective on 1 $anuary 2;;; 5ithout regard to 5hether the revenue collection starting from this period may turn out to be lo5er than that collected prior to this date. !y adding the .ualification that the ta/ due after the 12H increase becomes effective shall not be lo5er than the ta/ actually paid prior to 1 $anuary 2;;;, Revenue Regulation 1o. 1E6)) effectively imposes a ta/ 5hich is the higher amount bet5een the ad valorem ta/ being paid at the end of the three (< 6year transition period and the specific ta/ under paragraph C, sub6paragraph (1 6(3 , as increased by 12H ? a situation not supported by the plain 5ording of %ection 13D of the :a/ Code.1+ &ollo5ing the principle of stare decisis,1our ruling in the present case should no longer come as a surprise. :he proviso in %ection 1 of RR 1E6)) clearly 5ent beyond the terms of the la5 it 5as supposed to implement, and therefore entitles &ortune :obacco to claim a refund of the overpaid e/cise ta/es collected pursuant to this provision. :he amount involved in the present case and the C(R=s firm insistence of its arguments nonetheless compel us to ta7e a second loo7 at the issue, but our findings ultimately lead us to the same conclusion. (ndeed, 5e find more reasons to disagree 5ith the C(R=s construction of the la5 than those stated in our 2;;* &ortune :obacco ruling, 5hich 5as largely based on the application of the rules of statutory construction. Rule of uniformity of ta/ation violated by the proviso in %ection 1, RR 1E6)) ,lthough the brands all belong to the same category, the proviso in %ection 1, RR 1E6)) authori-ed the imposition of different (and grossly disproportionate ta/ rates (see column Q'R . (t effectively e/tended the .ualification stated in the third paragraph of %ection 13D(c of the 1))E :a/ Code that 5as supposed to apply only during the transition period:
Petitioner !ureau of Customs "mployees ,ssociation (!0C", contends that enactment and implementation of R.,. 1o. )<<D are tainted 5ith constitutional infirmities. Pursuant to R, )<<D and its (RR, Collection 'istrict Performance Contracts 5as disseminated to lo5er ran7ing officials and employees for signing. !0C", contends that the target 5as impossible to meet due to governments o5n policies on reduced tariff rates and ta/ brea7s to big business, the occurrence of natural calamities and because of other economic factors. !0C", claimed that some !0C employees 5ere coerced and forced to sign the performance contract. :he personnel 5ere threatened if they 5ill not sign they 5ould face possible reassignment, reshuffling, or 5orse be placed on floating status. Petition 5as filed to the %upreme Court. !0C", argued among others, that its members and other !0C employees are in great danger of losing their jobs should they failed to meet the re.uired target, in clear violation of their constitutional right of security of tenure and the irrespective families prejudice. 'uring the first year implementation of R, )<<D, !0C employees e/erted commendable efforts and e/ceed their target of 1)+! of as much as2! for that year alone. Bo5ever this 5as attained because oil companies made advance ta/ payments to !0C. Re5ards are given, 5hich they described as unjust, unfair, dubious and fraudulent because only top officials of !0C got huge re5ard 5hile the employees received only P*,D;;.;;. ISSUES" 1. K01 R,)<<D and its (RR violate the right to due process
HELD"
1.
%ection E of R, )<<D clearly give due consideration that may affect the level of collection. (n the same manner, e/emptions 5ere set, contravening !0C",=s claim that its members may be removed for unattained target collection even due to causes 5hich are beyond their control. #oreover, an employee=s right to be heard is not at all prevented and his right to appeal is not deprived of him. (n fine, a !(R or !0C official or employee in this case cannot be arbitrarily removed from the service 5ithout according him his constitutional right to due process. :he la5 concerns only the !(R and the !0C because they have the common distinct primary function of generating revenues for the national government through the collection of ta/es, customs duties, fees and charges. !oth the !(R and the !0C are bureaus under the '0&. :hey principally perform the special function of being the instrumentalities through 5hich the %tate e/ercises one of its great inherent functionsW ta/ation. (ndubitably, such substantial distinction is germane and intimately related to the purpose of the la5. Bence, the classification and treatment accorded to the !(R and the !0C under R, Q1o.R )<<D fully satisfy the demands of e.ual protection. :his case there 5as a valid delegation of legislative po5er. :he court ruled that the test for validity of delegation of legislative po5er 5ere fully satisfied. R, )<<D ade.uately states the policy and standards to guide the President in fi/ing revenue targets and the implementing agencies carrying out the provisions of the la5 as stated in %ection 2 'eclaration of Policy. :he court has recogni-ed the follo5ing as sufficient standards: Public (nterest, $ustice and e.uity, public convenience and 5elfare and simplicity, economy and 5elfare. (n this case, the declared policy optimi-ation of the revenue6generation capability and collection of the !(R and !0C is infused 5ith public interest
Pursuant to the la5, several private respondents applied for and 5ere granted Certificates of Registration and :a/ "/emption by the %!#,. :heir respective certificates states that: :he Company shall be entitled to ta/ and duty6free importation of ra5 materials, capital e.uipment, and household and personal items for use solely on the %ubic !ay &reeport None. Congress subse.uently passed R, )<<3 effective $an. 1, 2;;D 5hich states that all importations of cigars, cigarettes, distilled spirits, fermented li.uors and 5ines into the %!&, including those intended to be transhipped to other free ports in the Philippines, shall be treated as ordinary importations subject to all applicable ta/es, duties and charges, including e/cise ta/es. (%ec. + 0n &eb. <, 2;;D, former !(R Commissioner Payano, re.uested the Customs Commissioner $ereos to immediately collect the e/cise ta/ due on imported alcohol and tobacco products brought to the 'uty &ree Philippines ('&P and &reeport -ones. 0n &eb. E, 2;;D, %!#, issued a #emorandum directing the departments concerned to re.uire locators@importers in the %!& to pay the corresponding duties and ta/es on their importations of cigars, cigarettes, li.uors and 5ines before said items are cleared and released from the &reeport. Bo5ever, certain %!& locators 5hich 5ere e/clusively engaged in the transhipment of cigarette products for foreign destinations 5ere allo5ed by the %!#, to process their import documents subject to their submission of an 8nderta7ing 5ith the !ureau of Customs. 0n &eb. 1D, 2;;D, private respondents 5rote the offices of the Collector of Customs and the %!#, ,dministrator re.uesting for a reconsideration of the directives in the imposition of duties and ta/es on cigars, cigarettes, li.uor and 5ines. 'espite these letters, they 5ere not allo5ed to file any 5arehouse entry for shipment. :hus, the private respondent enterprises, brought before the R:C of 0longapo City a civil action for declatory relief to have certain provisions of R, )<<3 declared unconstitutional. :hese are their arguments: R, )<<3 should not be interpreted as altering, modifying or amending the provisions of R, E22E because repeals by implication are not favoured , general la5 li7e R, )<<3 cannot amend R, E22E, 5hich is a special la5 :he assailed la5 violates the one6bill6one6subject rule embodied in %ec. 2+ ,rt. F( of the Constitution as 5ell as the constitutional proscription against the impairment of the obligations of contracts. :he private respondents also prayed for the issuance of a 5rit of preliminary injunction and@or :emporary Restraining 0rder (:R0 and preliminary mandatory injunction alleging that great and
2.
<.
(ii)
NON+IMPAIRMENT
!2. REPUBLIC OF THE PHILIPPINES VS. CAGUIOA FACTS" (n 1))2, Congress enacted Republic ,ct 1o. E22E also 7no5n as the !ases Conversion and 'evelopment ,ct of 1))2 5hich created the %ubic %pecial "conomic and &reeport None (%!& and the %ubic !ay #etropolitan ,uthority (%!#, (ncluded in R, E22E:
! . MERALCO V. PROVINCE OF LAGUNA FACTS" #eralco 5as granted by several municipalities of the Province of Caguna a franchise to operate. (n 1))1 Republic ,ct 1o. E1+; 5as issued in 5hich enjoined local government units to create their o5n sources of revenue and to levy ta/es, fees and charges, subject to the limitations e/pressed therein, consistent 5ith the basic policy of local autonomy. Pursuant to this respondent province enacted Caguna Provincial 0rdinance 1o. ;16)2, effective ;1 $anuary 1))< 5hich imposed ta/es on businesses enjoying a franchise at a rate of fifty percent (D;H of one percent (1H of the gross annual receipts, 5hich shall include both cash sales and sales on account reali-ed during the preceding calendar year 5ithin this province, including the territorial limits on any city located in the province. Petitioner #eralco paid the said ta/ under protest. , formal claim for refund 5as thereafter sent by #eralco to the Provincial :reasurer claiming that the franchise ta/ it had paid and continued to pay to the 1ational Government pursuant to P.'. DD1 already included the franchise ta/ imposed by the Provincial :a/ 0rdinance. #eralco also contended that Caguna=s imposition of franchise ta/ contravened the provisions of P.'. DD1 %ection 1 5hich provided that the franchise ta/ payable by all grantees of franchises to generate, distribute and sell electric current for light, heat and po5er shall be t5o per cent (2H of their gross receipts received from the sale of electric current and from transactions incident to the generation, distribution and sale of electric current. :he issue 5as brought to a trial court, 5herein a decision 5as made in favor of the Province of Caguna, hence this petition. ISSUE" Khether the imposition of franchise ta/ by the Province of Caguna is violative of the non6 impairment clause of the Constitution. HELD" :he imposition of franchise ta/ 5as deemed a valid e/ercise of po5er by the local government of Caguna.
HELD" :he arguments raised by private respondents 5hich pertain to the constitutionality of R, )<<3 subject matter of the case pending litigation before the trial court have no bearing in resolving the present petition. 0n the issue of the issuance of the preliminary injunction and the petitioners petition for certiorari: :he 5rit of certiorari to nullify and set aside the 0rder of #ay 3, 2;;D as 5ell as the Krit of Preliminary (njunction issued by respondent Caguioa is granted. ,s a rule, courts should avoid issuing a 5rit of preliminary injunction 5hich 5ould in effect dispose of the main case 5ithout trial. , court may issue a 5rit of preliminary injunction only 5hen the petitioner assailing a statute has made out a case of unconstitutionality or invalidity strong enough, in the mind of the judge, to overcome the presumption of validity, in addition to a sho5ing of a clear legal right to the remedy sought. :a/ e/emption being a mere statutory privilege, may be modified or 5ithdra5 at 5ill by the granting authority. :a/ation is subject to restrictions 5hich rest on the discretion of the authority e/ercising it. ,s a general rule, ta/ e/emptions are construed strictissimi juris against the ta/payer and liberally in favor of the ta/ing authority. :he burden of proof rests upon the party claiming e/emption to prove that it is in fact covered by the e/emption so claimed. (n case of doubt, non6e/emption is favored.
8nder the present Constitution, 5here there is neither a grant nor a prohibition by statute, ta/ po5er must be deemed to e/ist, although Congress may provide statutory limitations and guidelines. :his rule=s purpose is to safeguard the viability and self6sufficiency of local government units by directly granting them general and broad ta/ po5ers. Bo5ever this delegation is not absolute and unconditional as the legislature must see to it that (a the ta/payer 5ill not be over6 burdened or saddled 5ith multiple and unreasonable impositionsA (b each local government unit 5ill have its fair share of available resourcesA (c the resources of the national government 5ill not be unduly disturbedA and (d local ta/ation 5ill be fair, uniform, and just. :he Cocal Government Code contains a provision 5hich also provides for the 5ithdra5al of all ta/ e/emptions that it may have previously granted as in this case. :he 1))1 Code e/plicitly authori-es provincial governments, not5ithstanding Iany e/emption granted by any la5 or other special la5, / / / (to impose a ta/ on businesses enjoying a franchise. (t has also been held the oft used term in ta/ e/emptions in Ilieu of all ta/esJ should be deemed to give 5ay to this po5er of the Cocal Governments to 5ithdra5 such e/emptions. :he Courts have also vie5ed its previous rulings on ta/ e/emption cases as laying stress on the legislative intent of the amendatory la5 5hether the ta/ e/emption privilege is to be 5ithdra5n or not rather than on 5hether the la5 can or cannot 5ithdra5 the ta/ e/emption, 5ithout violating the constitution. Khile the Court often refers to ta/ e/emptions in special franchises as being in the nature of contracts and as a part of inducement for carryon on the franchise, they are far from being strictly contractual in nature. Contractual ta/ e/emptions are those agreed to by the ta/ing authority in contracts, such as those contained in government bonds or debentures, la5fully entered into by them under enabling la5s in 5hich the government, acting in its private capacity, sheds its cloa7 of authority and 5aives its governmental immunity. :a/ e/emptions of this 7ind may not be revo7ed 5ithout impairing the obligations of contracts. :hey should not ho5ever be confused 5ith ta/ e/emptions granted under franchises. , franchise parta7es the nature of a grant 5hich is beyond the purvie5 of the non6impairment clause of the Constitution. :he 1)*E Constitution is e/plicit that no franchise for the operation of a public utility shall be granted e/cept under the condition that such privilege shall be subject to amendment, alteration or repeal by Congress as and 5hen the common good so re.uires.
!!. CAGAYAN ELECTRIC POWER V. CIR FACTS" :his is about the liability of petitioner Cagayan "lectric Po5er _ Cight Co., (nc. for income ta/ amounting to PED,13).E< for the more than seven6month period of the year 1)+) in addition to franchise ta/. :he petitioner is the holder of a legislative franchise, Republic ,ct 1o. <23E, under 5hich its payment of <H ta/ on its gross earnings from the sale of electric current is 9in lieu of all ta/es and assessments of 5hatever authority upon privileges, earnings, income, franchise, and poles, 5ires, transformers, and insulators of the grantee, from 5hich ta/es and assessments the grantee is hereby e/pressly e/empted9 (%ec. < . 0n $une 2E, 1)+*, Republic ,ct 1o. D3<1 amended section 23 of the :a/ Code by ma7ing liable for income ta/ all corporate ta/payers not specifically e/empt under paragraph (c (1 of said section and section 2E of the :a/ Code not5ithstanding the 9provisions of e/isting special or general la5s to the contrary9. :hus, franchise companies 5ere subjected to income ta/ in addition to franchise ta/. Bo5ever, in petitioner4s case, its franchise 5as amended by Republic ,ct 1o. +;2;, effective ,ugust 3, 1)+), by authori-ing the petitioner to furnish electricity to the municipalities of Fillanueva and $asaan, #isamis 0riental in addition to Cagayan de 0ro City and the municipalities of :agoloan and 0pol. :he amendment reenacted the ta/ e/emption in its original charter or neutrali-ed the modification made by Republic ,ct 1o. D3<1 more than a year before. !y reason of the amendment to section 23 of the :a/ Code, the Commissioner of (nternal Revenue in a demand letter dated &ebruary 1D, 1)E< re.uired the petitioner to pay deficiency income ta/es for 1)+*6to 1)E1. :he petitioner contested the assessments. :he Commissioner cancelled the assessments for 1)E; and 1)E1 but insisted on those for 1)+* and 1)+). :he petitioner filed a petition for revie5 5ith the :a/ Court, 5hich on &ebruary 2+, 1)*2 held the petitioner liable only for the income ta/ for the period from $anuary 1 to ,ugust <, 1)+) or before
(iii)
!7. AMERICAN BIBLE SOCIETY V. CITY OF MANILA FACTS" (n the course of its ministry, plaintiff4s Philippine agency has been distributing and selling bibles and@or gospel portions thereof (e/cept during the $apanese occupation throughout the Philippines and translating the same into several Philippine dialects. :he acting City :reasurer of the City of #anila informed plaintiff that it 5as conducting the business of general merchandise since 1ovember, 1)3D, 5ithout providing itself 5ith the necessary #ayor4s permit and municipal license, in violation of 0rdinance 1o. <;;;, as amended, and 0rdinances 1os. 2D2), <;2* and <<+3, and re.uired plaintiff to secure, 5ithin three days, the corresponding permit and license fees, together 5ith compromise covering the period from the 3th .uarter of 1)3D to the 2nd .uarter of 1)D<, in the total sum of PD,*21.3D. Plaintiff protested against this re.uirement, but the City :reasurer demanded that plaintiff deposit and pay under protest the sum of PD,*)1.3D, if suit 5as to be ta7en in court regarding the same. :o avoid the closing of its business as 5ell as further fines and penalties in the premises, plaintiff paid to the defendant under protest the said permit and license fees in the aforementioned amount, giving at the same time notice to the City :reasurer that suit 5ould be ta7en in court to .uestion the legality of the ordinances under 5hich, the said fees 5ere being collected, 5hich 5as done on the same date by filing the complaint that gave rise to this action. (n its complaint plaintiff prays that judgment be rendered declaring the said #unicipal 0rdinance 1o. <;;;, as amended, and 0rdinances 1os. 2D2), <;2* and <<+3 illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of PD,*)1.3D paid under protest.
'efendant ans5ered the complaint, maintaining in turn that said ordinances 5ere enacted by the #unicipal !oard of the City of #anila by virtue of the po5er granted to it by section 2333, subsection (m62 of the Revised ,dministrative Code, superseded on $une 1*, 1)3), by section 1*, subsection (1 of Republic ,ct 1o. 3;), 7no5n as the Revised Charter of the City of #anila, and praying that the complaint be dismissed, 5ith costs against plaintiff. R:C dismissed the complaint. ISSUES" 1. 2. K01 the ordinances of the City of #anila, 1os. <;;;, as amended, and 2D2), <;2* and <<+3, are constitutional and valid K01 the provisions of said ordinances are applicable or not to the case at bar.
HELD" 'ecision appealed from is R"F"R%"'. M"%, it is valid. 0rdinance <;;; is of general application and not particularly directed against institutions li7e the plaintiff, and it does not contain any provisions 5hatever prescribing religious censorship nor restraining the free e/ercise and enjoyment of any religious profession. :he necessity of the permit is made to depend upon the po5er of the City to license or ta/ said business, trade or occupation. :he license fees re.uired to be paid .uarterly in %ection 1 of said 0rdinance 1o. 2D2), 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 9dealers in general merchandise9 5hich, it is alleged, cover the business or occupation of selling bibles, boo7s, etc. :he business of 9retail dealers in general merchandise9 is e/pressly enumerated in subsection (o , section 1* of Republic ,ct 1o. 3;)A hence, an ordinance prescribing a municipal ta/ 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 . #oreover, the .uestioned ordinances are still in force, having been promulgated by the #unicipal !oard of the City of #anila under the authority granted to it by la5. 0rdinance 1o. 2D2), as amended, cannot be applied to appellant, for in doing so it 5ould impair its free e/ercise and enjoyment of its religious profession and 5orship as 5ell as its rights of dissemination of religious beliefs. Kith respect to 0rdinance 1o. <;;;, as amended, 5hich re.uires the obtention the #ayor4s permit before any person can engage in any of the businesses, trades or occupations enumerated therein, it does 10: impose any charge upon the enjoyment of a right granted by the Constitution, nor ta/ the e/ercise of religious practices. 0rdinance 1o. <;;; cannot be considered unconstitutional, even if applied to plaintiff %ociety. !ut as 0rdinance 1o. 2D2) of the City of #anila, as amended, is not applicable, 0rdinance 1o. <;;;, as amended is also inapplicable to said business, trade or occupation of the plaintiff. :he license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious literature. :he po5er to ta/ the e/ercise of a privilege is the po5er to control or
!%. CIR V. BISHOP OF THE MISSIONARY DISTRICT FACTS" :he #issionary 'istrict (#issionary 'istrict of the Philippine (slands of the Protestant "piscopal Church the 8.%.,. , a duly established religious order in the Philippines, received from the #issionary %ociety ('omestic and &oreign #issionary %ociety of the Protestant "piscopal Church in the 8% various shipments of materials, supplies, e.uipment and other articles intended for use in the construction and operation of the ne5 %t. Cu7e4s Bospital in Oue-on City and the !rent Bospital and %t. %tephen4s Bigh %chool. :he #issionary 'istrict also received from a certain Killiam #innis of Canada a stove for the use of the !rent Bospital. 0n these shipments, the Commissioner of (nternal Revenue levied and collected the total amount of P11*,*3E as compensating ta/. :he !ishop of the #issionary 'istrict filed claims for refund on the ground that under R, 1)1+, the materials and articles received by him 5ere e/empt from the payment of compensating ta/. ,s the t5o6year period for recovery of ta/ 5as about to e/pire, the !ishop filed a petition for revie5 in the Court of :a/ ,ppeals, 5ithout a5aiting action on his claim for refund. %ubse.uently, he also filed t5o supplemental petitions for revie5 covering other shipments received by him and on 5hich he had paid compensating ta/es. :he C(R denied respondent4s claim for refund on the ground that %t. Cu7e4s Bospital 5as not a charitable institution and, therefore, 5as not e/empt under the la5. Be also contends that the importations in .uestion cannot be considered 9donations9 because the #issionary %ociety, 5hich made the shipments, and the #issionary 'istrict in the Philippines are not different persons but rather are one and the same, the latter being a mere branch of the former. ,fter trial, the :a/ Court rendered a decision holding the shipments e/empt from ta/ation ordering the petitioner to refund to the respondent the amount of P11*,*3E. (t denied the petitioner=s a motion for reconsideration of its decision. ISSUE"
HELD" M"%. Petitions is denied. :his Court has already held that the follo5ing re.uisites must concur in order that a ta/payer may claim e/emption under the la5 (1 the imported articles must have been donatedA (2 the donee must be a duly incorporated or established international civic organi-ation, religious or charitable society, or institution for civic religious or charitable purposesA and (< the articles so imported must have been donated for the use of the organi-ation, society or institution or for free distribution and not for barter, sale or hire. !y stipulation of the parties, the respondent !ishop is admitted to be a corporation sole duly registered 5ith the %ecurities and "/change Commission and that the #issionary 'istrict is a 9duly incorporated and established religious society.9 :hey are, therefore, entities separate and distinct from the #issionary. :he fact that the #issionary 'istrict, of 5hich respondent is the !ishop, is a branch of the #issionary %ociety is of no moment. (t is a branch only in religious matters, in matters of faith and dogma. (n other respects, it is independent. :he :a/ Court4s finding that the materials and supplies 5ere purchased by the #issionary %ociety 5ith money obtained from contributions from other people 5ho should be considered the real donors is also assailed as being based on the uncorroborated testimony of Robert #eyer, :reasurer of the #issionary 'istrict, 5ho it is said, did not have personal 7no5ledge of the matter testified to by him. :his is not so. ,s respondent points out, the various deeds of donation state in paragraph < that the 9#issionary %ociety is a non6profit organi-ation and derives its support from voluntary contributions.9 C(R denied respondent4s claim for refund because pursuant to the last proviso of R, 1)1+, the %ecretary of &inance issued 'epartment 0rder 1o. 1* on 0ctober 2;, 1)D*, stating that Bospitals that admit pay patients and charity patients ... are not charitable institutions for purposes of Republic ,ct 1o 1)1+. (t should be enough to point out that the admission of pay patients does not detract from the charitable character of a hospital, if, as in the case of %t. Cu7e4s Bospital, its funds are devoted e/clusively to the #aintenance of the institution. :he %ecretary of &inance cannot limit or other5ise .ualify the enjoyment of this e/emption granted under R, 1)1+ in implementing the la5.
:he %upreme Court issued a resolution ordering parties to sho5 cause 5hy the Bead of the 'iocese should or should not be substituted in lieu of Cladoc. (t also issued a resolution ordering the Bead of the 'iocese to present issues and defenses he might 5ish to raise. :he Roman Catholic !ishop of !acolod, manifested that it 5as submitting itself to the jurisdiction and orders of this Court and that it 5as presenting, by reference, the brief of petitioner &r. Cladoc as its o5n and for all purposes. ISSUE" Khether or not &r Cladoc should be liable for the assessed donee4s gift ta/ on the P1;,;;;.;; donated for the construction of the Fictorias Parish Church. HELD" :he ta/ liability e/ists` Bo5ever, &r. Cladoc is 10: personally liable for the said gift ta/. (nstead, the %upreme Court ordered that the Bead of the 'iocese (!ishop of !acolod should pay the said gift ta/.
Petitioners also operate 5ithin the premises of the hospital the 9%t. Catherine4s %chool of #id5ifery9. :he students practice in the %t. Catherine4s Bospital, as 5ell as in the %t. #ary4s Bospital, 5hich is also o5ned by the petitioners. ISSUE" Khether or not the lot, building and other improvements occupied by the %t. Catherine Bospital are e/empt from the real property ta/ and 5hether or not the said properties are used e/clusively for charitable or educational purposes. HELD" "/empted from real property ta/. (t should be noted, ho5ever, that, according to the very statement of facts made in the decision appealed from, of the thirty6t5o (<2 beds in the hospital, t5enty (2; are for charity6patientsA that 9the income reali-ed from pay6patients is spent for improvement of the charity 5ardsA9 and that 9petitioners, as directress9 of said hospital, 9does not receive any salary,9 although its resident physician gets a monthly salary of P1E;.;;. 9(n other 5ords, 5here rendering charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made 5ill not deprive the hospital of its benevolent character9 #oreover, the e/emption in favor of property used e/clusively for charitable or educational purposes is 9not limited to property actually indispensable9 therefor but e/tends to facilities 5hich are 9incidental to and reasonably necessary for9 the accomplishment of said purposes, such as, in the case of hospitals, 9a school for training nurses, a nurses4 home, property use to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities for student nurses, interns and residents9 Kithin the purvie5 of the Constitutional e/emption from ta/ation, the %t. Catherine4s Bospital is, therefore, a charitable institution, and the fact that it admits pay6patients does not bar it from claiming that it is devoted e/clusively to benevolent purposes, it being admitted that the income derived from pay6patients is devoted to the improvement of the charity 5ards, 5hich represent almost t5o6thirds (2@< of the bed capacity of the hospital, aside from 9out6charity patients9 5ho come only for consultation. ,gain, the e/istence of 9%t. Catherine4s %chool of #id5ifery9, 5ith an enrollment of about 2;; students, 5ho practice partly in %t. Catherine4s Bospital and partly in %t. #ary4s Bospital, 5hich, li7e5ise, belongs to petitioners herein, does not, and cannot, affect the e/emption to 5hich %t. Catherine4s Bospital is entitled under our fundamental la5. 0n the contrary, it furnishes another ground for e/emption for or 9all lands, building and improvements used e/clusively for religious, charitable or educational purposes shall be e/empt from ta/ation,9 pursuant to the Constitution, regardless of 5hether or not material profits are derived from the operation of the institutions in .uestion. (n other 5ords, Congress may, if it deems fit to do so, impose ta/es upon such 9profits9, but said 9lands, buildings and improvements9 are beyond its ta/ing po5er.
#). HERRERA V. BUECON CITY BOARD OF ASSESSMENT APPEALS FACTS" 'irector of the !ureau of Bospitals authori-ed the petitioners to establish and operate the 9%t. Catherine4s Bospital9. 0n or about $anuary <, 1)D<, the petitioners sent a letter to the Oue-on City ,ssessor re.uesting e/emption from payment of real estate ta/ on the lot, building and other improvements comprising the hospital stating that the same 5as established for charitable and humanitarian purposes and not for commercial gain. ,fter an inspection of the premises and after a careful study of the case, the e/emption from real property ta/es 5as granted effective the years 1)D<, 1)D3 and 1)DD. %ubse.uently, ho5ever, in a letter the Oue-on City ,ssessor notified the petitioners that the previously mentioned properties 5ere re6classified from e/empt to 9ta/able9 and thus assessed for real property ta/es effective 1)D+. :he petitioners appealed the assessment to the Oue-on City !oard of ,ssessment ,ppeals, 5hich, in a decision affirmed the decision of the City ,ssessor. :he building involved in this case is principally used as a hospital. (t is mainly a surgical and orthopedic hospital 5ith emphasis on obstetrical cases, the latter constituting );H of the total number of cases registered therein. :he hospital has thirty6t5o (<2 beds, of 5hich t5enty (2; are for charity6patients and t5elve (12 for pay6patients. (t is made to appear that there are t5o 7inds of charity patients W (a those 5ho come for consultation only (9out6charity patients9 A and (b those 5ho remain in the hospital for treatment (9lying6in6patients9 . :he out6charity patients are given free consultation and prescription, although sometimes they are furnished 5ith free medicines. :he charity lying6in6patients are given free medical service and medicine although the food served to the pay6patients is very much better than that given to the former.
#2. CIR <. COURT OF APPEALS* COURT OF TAX APPEALS 6,9 YOUNG MENDS CHRISTIAN ASSOCIATION OF THE PHILIPPINES* INC. #1. THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA <. THE PROVINCIAL BOARD OF ILOCOS NORTE FACTS" :he Roman Catholic ,postolic Church, represented by the !ishop of 1ueva %egovia, possesses and is the o5ner of a parcel of land in the municipality of %an 1icolas, (locos 1orte, all four sides of 5hich face on public streets. 0n the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden and in 5hich there is a stable and a 5ell for the use of the convent. (n the center is the remainder of the churchyard and the church. 0n the north is an old cemetery 5ith t5o of its 5alls still standing, and a portion 5here formerly stood a to5er, the base of 5hich still be seen. :he Province of (locos 1orte re.uired the Church to pay the land ta/ on the lot adjoining the convent and the lot 5hich formerly 5as the cemetery 5ith the portion 5here the to5er stood. :he !ishop paid under protest and then filed an action for the recovery of the amounts paid, alleging that the collection of this ta/ is illegal. ISSUE" Khether or not the parcels of land are e/empt from ta/. HELD" :he lots are e/empt from land ta/. :he Province of (locos 1orte 5as ordered to refund the amounts paid. FACTS" M#C, is a non6stoc7, non6profit institution, 5hich conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives. (n 1)*;, M#C,, among others, an amount of income (about PE;;7V from leasing out a portion of its premises to small shop o5ners, li7e restaurants and canteen operators, and from par7ing fees collected from non6members. :he C(R thus issued an assessment to M#C, totaling about P31D7V including surcharge and interest, for deficiency income ta/, deficiency e/panded 5ithholding ta/es on rentals and professional fees and deficiency 5ithholding ta/ on 5ages. M#C, protested the assessment and filed a letter. (n reply, the C(R denied the claims of M#C,.M#C, thus filed a petition to the C:, to ta7e out the ta/es and C:, ruled in favor of M#C,. C(R filed a petition 5ith the C, to reverse, but C, affirmed C:,4s decision. ISSUE" K@1 the income derived from rentals of real property o5ned by M#C, (established as 9a 5elfare, educational and charitable non6profit corporation9 is subject to income ta/ under the 1(RC and Constitution HELD" M"%, the income derived by M#C, from rentals of its real property is subject to income ta/. 8nder the 1(RC: Khile %ection 2E of the 1(RC provides that non6profit organi-ations and clubs shall not be ta/ed on their income, it also provides that this e/emption 5ill not apply to income derived from 1 properties, real or personal, and 2 any other activities conducted for profit shall be subject to ta/ (amended by P' 13DE . !ecause ta/es are the lifeblood of the nation, the Court has al5ays applied the doctrine of strict interpretation in construing ta/ e/emptions. , claimed e/emption must e/pressly be granted in a statute stated in a language too clear to be mista7en. :he phrase 9any of their activities conducted for profitJ does not .ualify the 5ord Iproperties.J :his ma7es income from the property of the organi-ation ta/able, regardless of ho5 that income is used 66 5hether for profit or for lofty non6 profit purposes. :hus, the e/emption claimed by the M#C, is e/pressly disallo5ed by the very 5ording of the aforementioned la5. 8nder the Constitution: M#C, submits that ,rticle F(, %ection 2* of the Constitution e/empts Icharitable institutionsJ from the payment not only of property ta/es but also of income ta/ from any source. Bo5ever, it is clear from the debates and opinions of the constitutional framers that the e/emption does not pertain to income ta/ but only property ta/es.
:he e/emption in favor of the convent in the payment of the land ta/ (sec. <33 QcR ,dministrative Code refers to the home of the parties 5ho presides over the church and 5ho has to ta7e care of himself in order to discharge his duties. (t therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground destined to the ordinary incidental uses of man. "/cept in large cities 5here the density of the population and the development of commerce re.uire the use of larger tracts of land for buildings, a vegetable garden belongs to a house and, in the case of a convent, it use is limited to the necessities of the priest, 5hich comes under the e/emption. (n regard to the lot 5hich formerly 5as the cemetery, 5hile it is no longer used as such, neither is it used for commercial purposes and, according to the evidence, is no5 being used as a lodging house by the people 5ho participate in religious festivities, 5hich constitutes an incidental use in religious functions, 5hich also comes 5ithin the e/emption.
M#C, also posits that it is an 9educational instititution9 5ithin the purvie5 of ,rt L(F, %ec 3. &or the M#C, to be granted the e/emption, it must prove 5ith substantial evidence that: it falls under the classification non6stoc7, non6profit educational institutionA and the income it see7s to be e/empted from ta/ation is used actually, directly, and e/clusively for educational purposes. Bo5ever, no evidence 5as submitted by M#C, to prove that they met the re.uisites. :he term Ieducational institutionJ or Iinstitution of learningJ has ac.uired a 5ell67no5n technical meaning, of 5hich the members of the Constitutional Commission are deemed cogni-ant. 8nder the "ducation ,ct of 1)*2, such term refers to schools, 5hich is synonymous 5ith formal education 0R a school seminary, college, or educational establishment. :he Court, upon e/amining the I,mended ,rticles of (ncorporationJ and I!y6Ca5sJ of the M#C,, but found nothing in them that even hints that it is a school or an educational institution. "ven if M#C, is an educational institution, the Court also notes that M#C, did not submit proof of the proportionate amount of the subject income that 5as actually, directly and e/clusively used for educational purposes. NOTE: ,if 9ir as*s a)out ho" this differs "ith $!<=R cases- !he cases relied on )y >?CA do not support its cause. >?CA of ?anila v. CIR and A)ra 4alley College, Inc. v. A.uino are not applica)le, )ecause the controversy in )oth cases involved exemption from the payment of property tax, not income tax. <ospital de 9an @uan de 6ios, Inc. v. Pasay City is not in point either, )ecause it involves a claim for exemption from the payment of regulatory fees, specifically electrical inspection fees, imposed )y an ordinance of Pasay City 33 an issue not at all related to that involved in a claimed exemption from the payment if income taxes imposed on property leases. In @esus 9acred <eart College v. Com. $f Internal Revenue, the party therein, "hich claimed an exemption from the payment of income tax, "as an educational institution "hich su)mitted su)stantial evidence that the income su)ject of the controversy had )een devoted or used solely for educational purposes. $n the other hand, >?CA in the present case had not given any proof that it is an educational institution, or that of its rent income is actually, directly and exclusively used for educational purposes.
HELD" Petition 5as partially granted. ,s a charitable institution, Cung Center is e/empt from real property ta/es but those portions that are leased to private entities are ta/able. Charity may be applied to almost anything that tend to promote the 5ell6being of social man. :he test 5hether an enterprise is charitable or not is 5hether it e/ists to carry out a purpose reorgani-ed in la5 as charitable or 5hether it is maintaining for gain, profit or private advantage. 8nder P'1*2<, petitioner is a non6profit and non6stoc7 corporation to be administered by the 0ffice of the President 5ith the #inistry of Bealth and the #inistry of Buman %ettlements. (t 5as organi-ed for the 5elfare and benefit of the &ilipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines. Bence, its medical services are to be rendered to the public in general in any and all 5al7s of life including those 5ho are poor and needy 5ithout discrimination. ,s a general principle, a charitable institution does not lose its character as such and its e/emption from ta/es simply because it derives income from paying patients, 5hether out6patient or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object 5hich it is intended to achieve and no money inures to the private benefit of any of the persons managing or operating the institution. (n this case, petitioner adduced substantial evidence that it spent its income, including the subsidies from government for 1))1 and 1))2 for its patients and for the operation of the hospital. (t even incurred a net loss in those years from its operations. "ven though petitioner is a charitable institution, the Court held that the portions of its real property leased to private entities are not e/empt as they are not actually, directly and e/clusively used for charitable purposes. P'1*2< holds that petitioner does not enjoy any property ta/ e/emption privileges for its real properties as 5ell as the building. :he ta/ e/emption under the Constitution only covers property ta/.
# . LUNG CENTER OF THE PHILIPPINES V. BUECON CITY FACTS" Cung Center is a non6stoc7 and non6profit entity established by P' 1o. 1*2<. (t is the registered o5ner of a parcel of land located at Oue-on ,ve, OC. "rected in the middle of the aforesaid lot is a hospital 7no5n as the Cung Center of the Philippines. , big space at the ground floor is being leased to private parties as canteen and small store spaces as 5ell as to medical practitioners 5ho use the same as private clinics for their patients 5hom they charge for their professional fees. Cung Center accepts paying and non6paying patients and renders medical services to both paying and non6paying out6patients. ,side from its income from paying patients, it receives annual subsidies from the government.
8nder the 1)*E Constitution, petitioner is burdened to prove that it is a charitable institution and its real properties are ,C:8,CCM, '(R"C:CM ,1' "LCC8%(F"CM used for charitable purposes. (f real property is used for one or more commercial purposes, it is not e/clusively used for the e/empted purposes but is subject to ta/ation. Khat is meant by actual, direct and e/clusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for 5hich the charitable institution is organi-ed, not the use of the income from the real property that is determinative of 5hether the property is used for ta/6e/empt purposes. Petitioner had failed to prove that the entirety of its real property is actually, directly and e/clusively used for charitable purposes. :he portions of the land leased to private entities as 5ell as those parts of the hospital leased to private individuals are not e/empt from such ta/es. 0n the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients 5hether paying or non6paying are e/empt from real property ta/es.
#(. CIR V. ST. LUKEDS MEDICAL CENTER FACTS" %t. Cu7e=s #edical Center, (nc. (%t. Cu7e=s is a hospital organi-ed as a non6stoc7 and non6profit corporation.:he !(R assessed %t. Cu7e=s deficiency ta/es for 1))* comprised of deficiency income ta/, value6added ta/, and 5ithholding ta/. :he !(R claimed that %t. Cu7e=s should be liable for income ta/ at a preferential rate of 1;H as provided for by %ection 2E(! . &urther, the !(R claimed that %t. Cu7e=s 5as actually operating for profit in 1))* because only 1<H of its revenues came from charitable purposes. #oreover, the hospital=s board of trustees, officers and employees directly benefit from its profits and assets. 0n the other hand, %t. Cu7e=s maintained that it is a non6stoc7 and non6profit institution for charitable and social 5elfare purposes e/empt from income ta/ under %ection <;(" and (G of the 1(RC. (t argued that the ma7ing of profit per se does not destroy its income ta/ e/emption. ISSUE" Khether %t. Cu7e=s is liable for deficiency income ta/ in 1))* under %ection 2E(! of the 1(RC, 5hich imposes a preferential ta/ rate of 1;a on the income of proprietary non6profit hospitals. HELD" %ection 2E(! of the 1(RC does not remove the income ta/ e/emption of proprietary non6profit hospitals under %ection <;(" and (G . %ection 2E(! on one hand, and %ection <;(" and (G on the other hand, can be construed together 5ithout the removal of such ta/ e/emption. %ection 2E(! of the 1(RC imposes a 1;H preferential ta/ rate on the income of (1 proprietary non6profit educational institutions and (2 proprietary non6profit hospitals. :he only .ualifications for hospitals are that they must be proprietary and non6profit. IProprietaryJ means private, follo5ing the definition of a Iproprietary educational institutionJ as Iany private school maintained and