Case #1

CIR vs Cebu Portland Cement Company

FACTS: By virtue of a decision of the CTA, as modified on appeal by the Supreme Court, the CIR was
ordered to refund to Cebu Portland Cement Company the amount of P 359,408.98, representing
overpayments of ad valorem taxes on cement produced and sold by it. When respondent moved for a
writ of execution, petitioner opposed on the ground that the private respondent had an outstanding
sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there
was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. The
CTA granted the CIR’s motion.

The CIR claims that the refund should be charged against the tax deficiency of the private respondent on
the sales of cement under Section 186 of the Tax Code. His position is that cement is a manufactured
and not a mineral product and therefore not exempt from sales taxes. The petitioner also denies that
the sales tax assessments have already prescribed because the prescriptive period should be counted
from the filing of the sales tax returns, which had not yet been done by the private respondent.

Meanwhile, the private respondent disclaims liability for the sales taxes, on the ground that cement is
not a manufactured product but a mineral product. As such, it was exempted from sales taxes. Also, the
alleged sales tax deficiency could not as yet be enforced against it because the tax assessment was not
yet final, the same being still under protest and still to be definitely resolved on the merits. Besides, the
assessment had already prescribed, not having been made within the reglementary five-year period
from the filing of the tax returns.

ISSUE: WON sales tax was properly imposed upon private respondent.

HELD: Yes, because cement has always been considered a manufactured product and not a mineral
product. This matter was extensively discussed and categorically resolved in Commissioner of Internal
Revenue v. Republic Cement Corporation, decided on August 10, 1983, stating that cement qua cement
was never considered as a mineral product within the meaning of Section 246 of the Tax Code,
notwithstanding that at least 80% of its components are minerals, for the simple reason that cement is
the product of a manufacturing process and is no longer the mineral product contemplated in the Tax
Code (i.e.; minerals subjected to simple treatments) for the purpose of imposing the ad valorem tax.
The argument that the assessment cannot as yet be enforced because it is still being contested loses
sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of
taxes could be postponed by simply questioning their validity, the machinery of the state would grind to
a halt and all government functions would be paralyzed.
 Case #2

COMMISSIONER v. ALGUE, INC. GR No. L-28896, February 17, 1988

158 SCRA 9

FACTS:
The Philippine Sugar Estate Development Company had earlier appointed Algue Inc., as its agent,
authorizing it to sell its land, factories and oil manufacturing process. Vegetable Oil Investment
Corporation purchased the PSEDC properties. For this sale, Algue Inc., received as agent a commission of
P126, 000.00, and it was from this commission that the P75, 000.00 promotional fees were paid to
Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez.

Private respondent corporation Algue, Inc. filed its income tax returns for 1958 and 1959 showing
deductions, for promotional fees paid, from their gross income, thus lowering their taxable income.
Commissioner of Internal Revenue contends that the claimed deduction is not allowed because it was
not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it
differently. Agreeing with Algue Inc., it held that the said amount had been legitimately paid by the
private respondent for actual services rendered. The payment was in the form of promotional fees.

ISSUE:

Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by private respondent Algue as legitimate business expenses in its income tax
returns.

HELD:
No. Private respondent has proved that the payment of the fees was necessary and reasonable in the
light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in
an experimental enterprise and involve themselves in a new business requiring millions of pesos. This
was no mean feat and should be, as it was, sufficiently recompensed.

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

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If
it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.
 Case #3

PAL VS EDU
G.R. No. L-41383, August 15, 1988
164 SCRA 320

FACTS:
PAL is engaged in air transportation business under a legislative franchise wherein it is exempt from tax
payment. PAL has not been paying motor vehicle registration since 1956. The Land Registration
Commissioner required all tax exempt entities including PAL to pay motor vehicle registration fees.
Despite PAL’s contentions, they paid under protest the registration fees. They then later demanded
refund for the amounts paid. But the demand was denied on the grounds that motor vehicle registration
fees are regulatory and not revenue measures and, therefore, do not come within the exemption
granted to PAL

ISSUE:
Whether or not registration fees as to motor vehicles are taxes to which PAL is exempted.
Is PAL entitled to a refund

HELD: YES
Taxes are for revenue whereas fees are exactions for purposes of regulation and inspection, and are for
that reason limited in amount to what is necessary to cover the cost of the services rendered in that
connection. It is the object of the charge, and not the name, that determines whether a charge is a tax
or a fee. The money collected under Motor Vehicle Law is not intended for the expenditures of the MV
Office but accrues to the funds for the construction and maintenance of public roads, streets and
bridges. As fees are not collected for regulatory purposes as an incident to the enforcement of
regulations governing the operation of motor vehicles on public highways but to provide revenue with
which the Government is to construct and maintain public highways for everyone’s use, they are
veritable taxes, not merely fees.

PAL is thus exempt from paying such fees, except for the period between June 27, 1968 to April 9, 1979
where its tax exemption in the franchise was repealed. An amended franchise was given to
PAL in 1979. Section 13 of Presidential Decree No. 1590 provides that PAL is now
exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor
vehicles

2. NO
The claim for refund is made for payments given in 1971. Any registration fees collected between June
27, 1968 and April 9, 1979, were correctly imposed because the tax
exemption in the franchise of PAL was repealed during the period.
 Case #4

Municipality of Makati vs CA

FACTS: An expropriation proceeding for a piece of land filed by the Municipality of Makati against
Admiral Financial and Credit Corp resulted with the Municipality having to pay P 5,291,666.00 less initial
payments by the municipality. After that, private respondent filed a writ for execution for the balance.
Regional Trial Court granted the motion and directed the bank to deliver the said balance. Subsequent
motions for reconsideration and appeal to the respondent Court of Appeals by the municipality in order
to stop the garnishment
.
ISSUE: WON the court can validly subject government accounts/property to garnishment.

HELD: The court ruled that the Municipality of Makati's accounts or property cannot be held for
garnishment as government's fund, held for public use, cannot be held for garnishment. In this
jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless
otherwise provided for by statute

However, the court still held the Municipality liable for the assessed value of the land and improvements
because the private respondent should be entitled to just compensation. considering that valuable
property has been taken, the compensation to be paid fixed and the municipality is in full possession
and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality
has had more than reasonable time to pay full compensation
 Case #5

CIR vs Tokyo Shipping Co

Tokyo Shipping is a foreign corporation that owns and operates tramper vessel M/V Gardenia. Sometine
in December, NASUTRA chartered M/V Gardenia to load 16,500 metric tons of raw sugar in the
Philippines. Tokyo Shipping’s representative paid the required income and common carrier’s taxes.
Upon arriving, however, the vessel found no sugar for loading. It appeared that NASUTRA and private
respondent’s agent mutually agreed to have the vessel sail for Japan without any cargo.

Claiming the pre-payment of income and common carrier’s taxes as erroneous since no receipt was
realized from the charter agreement Tokyo Shipping instituted a claim for tax credit or refund of the
sum before petitioner commissioner of Internal.

Tokyo Shipping filed a petition in the CTA which was contested by CIR. As special and affirmative
defenses, it alleged the following: that taxes are presumed to have been collected in accordance with
law; that in an action for refund, the burden of proof is upon the taxpayer to show that taxes are
erroneously or illegally collected and the taxpayer’s failure to sustain said burden is fatal to the action
for refund; and that claims for refund are construed strictly against tax claimants. Court ruled in favor of
Tokyo Shipping

Issue: WON Tokyo Shipping is entitled to a tax refund.

Held: Yes

Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident foreign corporation
engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from
sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be
shown to have earned income sourced from the Philippines. The respondent court held that sufficient
evidence has been adduced by the private respondent proving that it derived no receipt from its charter
agreement with NASUTRA.

Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund
without any unreasonable delay what it has erroneously collected.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly,
equally and uniformly, lest the tax collector kill the “hen that lays the golden egg.” And, in order to
maintain the general public’s trust and confidence in the Government this power must be used justly
and not treacherously.
 Case #6

TIO v. VRB

GR No. L-75697, June 18, 1987

151 SCRA 208

"The public purpose of a tax may legally exist even if the motive which impelled the legislature to
impose the tax was to favor one industry over another."

FACTS:
PD 1987 created the Videogram Regulatory Board. Sometime after its promulgation, PD 1994 (DECREE)
was enacted. Petitioner then, assailed the constitutionality of the decree citing especially Section 10
thereof, which imposes a tax of 30% on the gross receipts payable to the local government. Petitioner
contends that aside from its being a rider and not germane to the subject matter thereof, and such
imposition was being harsh, confiscatory, oppressive and/or unlawfully restraints trade in violation of
the due process clause of the Constitution as well as that it was an undue delegation of legislative power

ISSUE:
Whether or not the decree is a valid exercise of taxing power of the state?

HELD:
Yes. It is beyond serious question that a tax does not cease to be valid merely because it regulates,
discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited
in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as those rest in the discretion of the authority which exercises it. In
imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against
erroneous and oppressive taxation.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose
the tax was to favor one industry over another.

Also there was no undue delegation of the power to legislate but merely a conferment of authority or
discretion as to its execution, enforcement, and implementation.

NOTE: Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently
summarizes the justification in that grave emergencies corroding the moral values of the people and
betraying the national economic recovery program necessitated bold emergency measures to be
adopted with dispatch.
 Case #7

CALTEX v. CIR 208 SCRA 755

GR 92585, 8 May 1992

Facts:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund
(OPSF), excluding that unremitted for 1986 and 188 of the additional tax on petroleum products
authorized under Section 8 of PD 1956; and that pending such remittance, all its claims for
reimbursement from the OPSF shall be held in abeyance. Caltex requested COA, notwithstanding an
early release of its reimbursement certificates from the OPSF, which COA denied. On 31 May 1989,
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the
proposal but prohibited Caltex from further offseting remittances and reimbursements for the current
and ensuing years. Caltex moved for reconsideration.

Issue:
Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex’ outstanding claims
from said funds?

Held:
Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of
government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public interest as to be within the police
power of the state. PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is
taxation. A taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be the subject of compensation because the government and taxpayer are not mutually
creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or
judgment as is allowed to be set-off.
 Case #8

PHIL. GUARANTY CO., INC. v. CIR

GR No. L-22074, April 30, 1965
13 SCRA 775

FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts with foreign insurance companies not doing business in the country, thereby ceding to foreign
reinsurers a portion of the premiums on insurance it has originally underwritten in the Philippines. The
premiums paid by such companies were excluded by the petitioner from its gross income when it filed
its income tax returns for 1953 and 1954. Furthermore, it did not withhold or pay tax on them.
Consequently, the CIR assessed against the petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the assessment on the ground that the premiums are not
subject to tax for the premiums did not constitute income from sources within the Philippines because
the foreign reinsurers did not engage in business in the Philippines, and CIR's previous rulings did not
require insurance companies to withhold income tax due from foreign companies.

ISSUE:
Are insurance companies not required to withhold tax on reinsurance premiums ceded to foreign
insurance companies, which deprives the government from collecting the tax due from them?

HELD:
No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist
an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public
improvement designed for the enjoyment of the citizenry and those which come within the State's
territory, and facilities and protection which a government is supposed to provide. Considering that the
reinsurance premiums in question were afforded protection by the government and the recipient
foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums
and reinsurers should share the burden of maintaining the state.

The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding of tax
due on reinsurance premiums may free the taxpayer from the payment of surcharges or penalties
imposed for failure to pay the corresponding withholding tax, but it certainly would not exculpate it
from liability to pay such withholding tax. The Government is not estopped from collecting taxes by the
mistakes or errors of its agents.
 Case #9

Chavez vs Ongpin

Facts: Chavez, owner of some number of parcels of land challenges the constitutionality of EO 73, which
increased the assessment for real property taxes. Intervenor Realty Owners Association of the Phil
(ROAP) also challenged the constitutionality of EO 73 and EO 464, the latter order having been the basis
for the enactment of EO 73.

Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should be declared
unconstitutional.

Held: Negative.

The attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a
continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential
Decree No. 464 which should be challenged as constitutionally infirm. However, Chavez failed to raise
any objection against said decree. It was ROAP, the intervenor, which questioned the constitutionality
thereof.

To continue collecting real property taxes based on valuations arrived at several years ago, in disregard
of the increases in the value of real properties that have occurred since then, is not in consonance with a
sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires
that sources of revenues must be adequate to meet government expenditures and their variations.
 Case #10

ANTERO M. SISON, JR., petitioner, vs.

RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy
Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO Deputy Commissioner, Bureau of Internal
Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit,
and CESAR E. A. VIRATA, Minister of Finance, respondents.
G.R. No. L-59431 July 25, 1984
160 SCRA 654

Facts:
Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1) unduly
discriminated against him by the imposition of higher rates upon his income as a professional, that it
amounts to class legislation, and that it transgresses against the equal protection and due process
clauses of the Constitution as well as the rule requiring uniformity in taxation.

Issue:
Whether BP 135 violates the due process and equal protection clauses, and the rule on uniformity in
taxation?

Held:
There is a need for proof of such persuasive character as would lead to a conclusion that there was a
violation of the due process and equal protection clauses. Absent such showing, the presumption of
validity must prevail. Equality and uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate.

The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. Where the differentiation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the clause and is therefore
uniform.

Taxpayers may be classified into different categories, such as recipients of compensation income as
against professionals. Recipients of compensation income are not entitled to make deductions for
income tax purposes as there is no practically no overhead expense, while professionals and
businessmen have no uniform costs or expenses necessary to produce their income. There is ample
justification to adopt the gross system of income taxation to compensation income, while continuing the
system of net income taxation as regards professional and business income.
 Case #11

PAL vs Secretary of Finance

 Case #12

Tolentino vs Sec of Finance

G.R. No. 115455
235 SCRA 630

FACTS:
The valued-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale
or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or
properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act
No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the
National Internal Revenue Code.

The Chamber of Real Estate and Builders Association (CREBA) contends that the imposition of VAT on sales and
leases by virtue of contracts entered into prior to the effectivity of the law would violate the constitutional
provision of “non-impairment of contracts.”

ISSUE:
Whether R.A. No. 7716 is unconstitutional on ground that it violates the constitutional provision of
“nonimpairment of contracts.”?

RULING:
No. The Supreme Court the contention of CREBA, that the imposition of the VAT on the sales and leases of real
estate by virtue of contracts entered into prior to the effectivity of the law would violate the constitutional
provision of non-impairment of contracts, is only slightly less abstract but nonetheless hypothetical. It is enough to
say that the parties to a contract cannot, through the exercise of prophetic discernment, fetter the exercise of the
taxing power of the State. For not only are existing laws read into contracts in order to fix obligations as between
parties, but the reservation of essential attributes of sovereign power is also read into contracts as a basic
postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance
of a government which retains adequate authority to secure the peace and good order of society. In truth, the
Contract Clause has never been thought as a limitation on the exercise of the State's power of taxation save only
where a tax exemption has been granted for a valid consideration.

Such is not the case of PAL in G.R. No. 115852, and the Court does not understand it to make this claim. Rather, its
position, as discussed above, is that the removal of its tax exemption cannot be made by a general, but only by a
specific, law.

Further, the Supreme Court held the validity of Republic Act No. 7716 in its formal and substantive aspects as this
has been raised in the various cases before it. To sum up, the Court holds:

(1) That the procedural requirements of the Constitution have been complied with by Congress in the
enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of statutes - beyond those
prescribed by the Constitution - have been observed is precluded by the principle of separation of
powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with the free
exercise of religion, nor deny to any of the parties the right to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the law is regressive,
oppressive and confiscatory and that it violates vested rights protected under the Contract Clause are
prematurely raised and do not justify the grant of prospective relief by writ of prohibition.
 Case #13

Tan v Del Rosario

 Case #14

CIR v CTA