VINCENT Q.

PIGA

Taxation I

Atty. Rowena Mari, CPA

1. Luzon Stevedoring Corp. vs. CTA

GR L-30232, 29 July 1988
Facts: Luzon Stevedoring Corp. imported various engine parts and other equipment for
tugboat repair and maintenance in 1961 and 1962. It paid the assessed compensation tax
under protest. Unable to secure a tax refund from the Commissioner (for the amount of
P33,442.13), it filed a petition for review with the Court of Tax Appeals (CTA). The CTA
denied the petition, as well as the motion for reconsideration filed thereafter.

Issue: Whether the corporation is exempt from the compensation tax.

Ruling: As the power of taxation is a high prerogative of sovereignty, the relinquishment

of such is never presumed and any reduction or dimunition thereof with respect to its
mode or its rate, must be strictly construed, and the same must be couched in dear and
unmistakable terms in order that it may be applied. The corporations tugboats do not fall
under the categories of passenger or cargo vessels to avail of the exemption from
compensation tax in Section 190 of the Tax Code. It may be further noted that the
amendment of Section 190 of Republic Act 3176 was intended to provide incentives and
inducements to bolster the shipping industry and not the business of stevedoring, in
which the corporation is engaged in. Luzon Stevedoring Corp. is not exempt from
compensating tax under Section 190, and is thus not entitled to refund.
2. Rev. Fr. Casimiro Lladoc vs. Commissioner of Internal Revenue
GR No. L-19201, June 16, 1965
Facts: In 1957, the MB Estate Inc. of Bacolod City donated P10,000 in cash to the parish
priest of Victorias, Negros Occidental; the amount spent for the construction of a new
Catholic Church in the locality,m as intended. In1958, MB Estate filed the donors gift
tax return. In 1960, the Commissioner issued an assessment for donees gift tax against
the parish. The priest lodged a protest to the assessment and requested the withdrawal
thereof.
Issue: Whether the Catholic Parish is tax exempt.
Ruling: The phrase exempt from taxation should not be interpreted to mean exemption
from all kinds of taxes. The exemption is only from the payment of taxes assessed on
such properties as property taxes as contradistinguished from excise taxes. A donees gift
tax is not a property tax but an excise tax imposed on the transfer of property by way of
gift inter vivos. It does not rest upon general ownership, but an excise upon the use made
of the properties, upon the exercise of the privilege of receiving the properties. The
imposition of such excise tax on property used for religious purpose do not constitute an
impairment of the Constitution.
The tax exemption of the parish, thus, does not extend to excise taxes.

VINCENT Q. PIGA

Taxation I

Atty. Rowena Mari, CPA

3. Ernesto M. Maceda vs. Hon. Catalino Macaraig Jr.

GR No. 8829, June 8, 1993
FACTS:
The National Power Corporation (NAPOCOR) was created by Commonwealth Act No. 120.
In 1949, it was given tax exemption by Republic Act No. 358. In 1984, Presidential Decree
No. 1931 was passed removing the tax exemption of NAPOCOR and other government
owned and controlled corporations (GOCCs). There was a reservation, however, that the
president or the Minister of Finance, upon recommendation by the Fiscal Incentives Review
Board (FIRB), may restore or modify the exemption.

In 1985, the tax exemption was revived. It was again removed in 1987 by virtue of Executive
Order 93 which again provided that upon FIRB recommendation it can again be restored. In
the same year, FIRB resolved to restore the exemption. The same was approved by
President Corazon Aquino through Executive Secretary Catalino Macaraig, Jr. acting as her
alter ego. Ernesto Maceda assailed the FIRB resolution averring that the power granted to
the FIRB is an undue delegation of legislative power. Macedas claim was strengthened by
Opinion 77 issued by then DOJ Secretary Sedfrey Ordoez. Macaraig however did not give
credence to the opinion issued by the DOJ secretary.

ISSUE: Whether or not the Executive Secretary can validly ignore the legal opinion of the
Justice Secretary.

RULING: Yes. The Supreme Court first ruled that there is no undue delegation of legislative
power. First of all, since the NAPOCOR is a GOCC and is non-profit it can be exempt from
taxation. Also, Opinion 77 issued by DOJ Secretary Ordoez was validly overruled by
Macaraig. This action by Macaraig is valid because the Executive Secretary, by authority of
the President, has the power to modify, alter or reverse the construction of a statute given by
a department secretary pursuant to the presidents control power.

4. Atlas Fertilizer Corp. vs. Commissioner of Internal Revenue

G.R. No. L-26698, October 30, 1980
FACTS:
These two (2) cases are appeals by way of certiorari from the decision dated August 24, 1966 of the Court of
Tax Appeals granting Atlas Fertilizer Corporation a tax credit in the sum of P81,899.00 which may be applied
by said corporation in pay of its outstanding and/or future liability for internal revenue taxes.
Petitioner Atlas Fertilizer Corporation was granted by the Secretary of Finance a certificate of tax exemption
under Republic Act No. 901 as a new and necessary industry for engaging in the manufacture of fertilizer.
While petitioner was still enjoying partial tax exemption of 50% as a new and necessary industry under
Republic Act No. 901, Republic Act No. 3050, which took effect on June 17, 1961, granted tax exemption to
any person, partnership, company or corporation engaged or which shall engage in the manufacture of of
whatever nature from the payment, among others, of compensating taxes on their importation of capital
goods, equipment, snare raw materials, supplies containers and fuel To implement z Republic Act No. 3050,
the Department of Finance issued Department Order No. 105, dated September 15, 1961, which provides,
among others, as follows:
Fertilizer manufacturer ... which are granted tax exemption under Republic Act No. should
likewise file appellant com/implications for tax exemption under Republic Act No. 3050,
indicating therein, among other things, that the applicant waives the benefits of tax
exemption authorized under Republic Act No. 3127.

VINCENT Q. PIGA

Taxation I

Atty. Rowena Mari, CPA

On the basis of the tax exemption granted by the Secretary of Finance under Republic Act No. 3050,
petitioner filed with responded on June 21, 1963 a claim for tax at of the compensating taxes amounting to P
83,629.00. The Commissioner's argues that AFC cannot enjoy simultaneous tax exemtions under the two
EOs and refused to issue a letter of tax credit alleging that the 50% tax exemption availed under RA 901
precludes the company from availing full tax credit from RA 3050. Therefore the tax claim should be
adjusted to cover only 50%.
On June 22, 1963, the day after petitioner had filed its for tax credit with respondent, petitioner filed a
petition for review with this Court seek an order to compel respondent to issue the corresponding letter of tax
credit.
The Commissioner's argues that AFC cannot enjoy simultaneous tax exemtions under the two EOs.
ISSUE:
WON PETITIONER HAS IN EFFECT ABANDONED AND GIVEN UP ITS PARTIAL EXEMPTION
PRIVILEGE UNDER REPUBLIC ACT NO. 901 BY SEEKING TO APPLY ITS TAX EXEMPTION UNDER
REPUBLIC ACT NO. 3050.
RULING:
The Commissioner's contention is without merit. Department, Order No. 105 issued by the Secretary of
Finance expressly directed fertilizer manufacturers enjoying benefits under R.A. No. 901 to likewise apply for
the benefits of R.A. No. 3050.
In compliance with said directive, AFC filed its application for total exemption under R. A. No. 3050 which
was granted by the Secretary of Finance. R. A. No. 901 grants partial exemption while R. A. 3050 grants
total exemption. Once a manufacturer of fertilizer chose to come under R. A. 3050, his partial exemption
under R. A. 901 ceased. When AFC availed of the total exemption under R. A. No. 3050, it has in effect
given up the partial exemption which it was enjoying under R. A. No. 901. In effect, he enjoyed only one
exemption benefit, the full exemption under R. A. No. 3050.
Therefore, the SC affirmed the decision of the Court of Tax Appeals.

5. Ormoc Sugar Company Inc. vs. The Treasurer of Ormoc City et al.
G.R. No. 23794, February 17, 1968
Facts: The Municipal Board of Ormoc City passed Ordinance No. 4 imposing on any
and all productions of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in
Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to USA
and other foreign countries. Payments for said tax were made, under protest, by Ormoc
Sugar Company, Inc. Ormoc Sugar Company, Inc. filed before the Court of
First Instance of Leyte a complaint against theCity of Ormoc as well as its Treasurer,
Municipal Board and Mayor alleging that the ordinance is unconstitutional for being
violative of the equal protection clause and the rule of uniformity of taxation. The court
rendered a decision that upheld the constitutionality of theordinance. Hence, this appeal.
Issue: Whether or not constitutional limits on the power of taxation, specifically the
equal protection clause and rule of uniformity of taxation, were infringed?
Ruling: Yes. Equal protection clause applies only to persons or things identically situated
and does not bar a reasonable classification of the subject of legislation, and a
classification is reasonable where 1) it is based upon substantial distinctions; 2) these are
germane to the purpose of the law; 3) the classification applies not only to present
conditions, but also to future conditions substantially identical to those present; and 4) the
classification applies only to those who belong to the same class. A perusal of the
requisites shows that the questioned ordinance does not meet them, for it taxes only
centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none
other. The taxing ordinance should not be singular and exclusive as to exclude any
subsequently established sugar central for the coverage of the tax.
3

VINCENT Q. PIGA

Taxation I

Atty. Rowena Mari, CPA