COELI

CASE NO. 1

DEFINITION OF TAXATION

Paseo Realty & Development Corp v. CA, CTA, CIR | GR 119286, OCT. 13 2004

REFUND CTW ~ PUT X ONLY ~ NOT PRESENT EVIDENCE TO PROVE

FACTS: Paseo Realty filed its Income Tax Return for the calendar year 1989. It later filed a petition with the CTA for a
refund of excess creditable taxes withholding (CTW) and income taxes for the years 1989 and 1990.

CTA dismissed the petition. CA held that petitioner is not entitled to a refund because the latter did not specify the
amount to be refunded and the amount to be applied as tax credit to the succeeding taxable year, but only marked an
“X” to the box indicating “to be applied as tax credit to the succeeding taxable year” when the latter filed its income tax
return for the year 1989.

ISSUE: W/N the alleged excess taxes paid by a corporation during a taxable year should be refunded or credited against
its tax liabilities for the succeeding year

RULING: NO. The grant of refund is founded on the assumption that the tax return is valid. Without the tax return, it is
error to grant a refund since it would be impossible to determine whether the proper taxes have been assessed and
paid.

In this case, petitioner did not present evidence to prove that its claimed refund had already been automatically credited
against its 1990 tax liability. The burden of proof to establish the factual basis of claim for tax credit or refund lies on the
claimant. Tax refunds are construed strictly against the taxpayer.

MP: Taxation is a destructive power which interferes with the personal and property rights of the people and takes
from them a portion of their property for the support of the government. Statutes granting tax exemptions are
construed strictissimi juris  against the taxpayer and liberally in favor of the taxing authority.

COELI

CASE NO. 2

NATURE OF THE POWER OF TAXATION

Mactan Cebu International Airport Authority (MCIAA) v. Marcos, 261 SCRA 667 (1996)

EXEMPT FROM REALTY TAXES ~ WITHDRAWN

FACTS: MCIAA was created by virtue of RA 6958. Since the time of its creation, MCIAA enjoyed the privilege of
exemption from payment of realty taxes in accordance with Sec. 14 of its Charter.

The Office of the Treasurer of Cebu demanded for the payment of realty taxes on several parcels of land belonging to
the petitioner. Petitioner asserted that it is an instrumentality of the government performing governmental functions,
which puts limitations on the taxing powers of LGUs. The City insisted that MCIAA’s tax exemption privilege has been
withdrawn by virtue of Secs. 193 and 234 of the LGC, and it’s not an instrumentality of the government but merely a
GOCC performing proprietary functions.
ISSUE: Whether the MCIAA is exempted from realty taxes.

RULING: NO. There can be no question that under RA 6958 the petitioner is exempt from the payment of realty taxes.
Nevertheless, the exemption may be withdrawn at the pleasure of the taxing authority.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including GOCCs, Sec.
193 of the LGC prescribes the general rule: they are withdrawn upon the effectivity of the LGC, except those granted to
local water districts, cooperatives duly registered under RA 6938.

Upon the effectivity of the LGC, MCIAA’s exemption from such tax granted it in its charter has been withdrawn.

MP: As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its
very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by
the people through their Constitution.

COELI

CASE NO. 3

NATURE OF THE POWER OF TAXATION

Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte,

69 SCRA 460 (1976)

LOCAL AUTONOMY ACT ~ UNDUE DELEGATION ~ MUNICIPAL PROD TAX NULL & VOID

FACTS: Pepsi-Cola Bottling Company commenced a complaint before the CFI Leyte for that court to declare Sec. 2 of the
Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos.
23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null and void.

Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of one-sixteenth (1/16) of a centavo
for every bottle of soft drink corked, and Ordinance 27 levies and collects on soft drinks produced or manufactured a tax
of ONE CENTAVO (P0.01) on each gallon of volume capacity.

Aside from the undue delegation of authority, appellant contends that it allows double taxation, and that the subject
ordinances are void for they impose percentage or specific tax.

ISSUE: Whether Section 2 of Republic Act No. 2264 is an undue delegation of power .

RULING: NO.

(MP IN CASE NO. 3) It is settled that the power of taxation is an essential and inherent attribute of sovereignty,
belonging as a matter of right to every independent government, without being expressly conferred by the people. 
(CASE 5) It is a power that is purely legislative and which the central legislative body cannot delegate either to the
executive or judicial department of the government without infringing upon the theory of separation of powers. The
exception, however, lies in the case of municipal corporations, to which, said theory does not apply.

Legislative powers may be delegated to local governments in respect of matters of local concern. By necessary
implication, the legislative power to create political corporations for purposes of local self-government carries with it the
power to confer on such local governmental agencies the power to tax.

  

(IN CASE NEEDED) Also, there is no validity to the assertion that the delegated authority can be declared
unconstitutional on the theory of double taxation. Moreover, double taxation, in general, is not forbidden by our
fundamental law, so that double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of
the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is
imposed by the State and the other by the city or municipality.

  
COELI

CASE NO. 77

EXEMPTION FROM TAXATION

Floro Cement v. Gorospe, 200 SCRA 480 (1991)

FACTS: The municipality of Lugait, Misamis Oriental, filed a verified complaint for collection of manufacturer’s and
exporter’s taxes against Floro Cement Corp. The municipality alleged that the imposition and collection of these taxes is
based on its Municipal Ordinance No. 5 & 10.

Floro Cement Corp set up the defense that it is not liable to pay manufacturer’s and exporter’s taxes alleging among
others that the municipality’s power to levy and collect taxes, fees, rentals, royalties or charges of any kind
whatsoever has been limited/withdrawn by Sec. 52 of PD 463 on Mineral Resources Development

CFI ordered Floro to pay the said taxes.

ISSUE: W/N ordinances mentioned apply to petitioner Floro

RULING: YES. The municipality's power to levy taxes on manufacturers and exporters is provided in Article 2, Sec. 19 of
P.D. No. 231 (LOCAL TAX CODE)

On the exemption claimed by Floro Cement Corp, the general rule is that any claim for exemption from the tax statute
should be strictly construed against the taxpayer. He who claims an exemption must be able to point out some
provision of law creating the right; it cannot be allowed to exist upon a mere vague implication or inference. It must
be shown indubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the claim. Floro
Cement Corp failed to meet this requirement.

MET

As held by the lower court, the exemption mentioned in Sec. 52 of P.D. No. 463 refers only to machineries, equipment,
tools for production, etc., as provided in Sec. 53 of the same decree. The manufacture and the export of cement do not
fall under the said provision for it is not a mineral product. It is not cement that is mined only the mineral products
composing the finished product.

COELI

CASE NO. 78

NATURE OF THE POWER OF TAXATION

Manila Electric Company v. Vera, 67 SCRA 351 (1975)

FACTS: Meralco is the holder of a franchise to construct, maintain, and operate an electric light, heat, and power system
in the City of Manila and its suburbs. In 1962 and 1963, Meralco imported and received from abroad copper wires,
transformers, and insulators for use in the operation of its business.  
The Collector of Customs, as deputy of the CIR, levied and collected a compensating tax.  Meralco claimed for refund for
the said years, but such claims were either not acted upon or denied by the Commissioner.

ISSUE: W/N Meralco is exempt from payment of a compensating tax on poles, wires, transformers and insulators
imported by it for use in the operation of its electric light, heat, and power system.

RULING: NO. Meralco is not exempt from paying the compensation tax provided for in Sec. 190 of the Tax Code.
Nowhere in petitioner's franchise declaring MERALCO exempt from paying a compensating tax on its imports of poles,
wires, transformers, and insulators. What MERALCO really wants the Court to do is to infer and imply that there is
such an exemption.

Meralco’s claim for exemption from payment of  the compensating tax is not clear or expressed, contrary to the rule
that “exemptions from taxation are highly disfavored in law,  and he who claims exemption must be able to justify his
claim by the clearest grant of organic or statute law.”  Tax exemption are strictly construed against the taxpayer, they
being highly disfavored and may almost be said to be “odious to the law.” When exemption is claimed, it must be
shown indubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the claim

COELI

CASE NO. 79

NATURE OF THE POWER OF TAXATION

CIR v. Guerrero, 21 SCRA 180 (1967)

FACTS: Guerrero was, during the years 1949 & 1950, a dealer in logs, which he used to sell to the Aparri Lumber
Company. The Collector of Internal Revenue made an assessment and demand requiring Guerrero to pay fixed and
percentage taxes and forest charges, as well as surcharges and penalties, in connection with his aforementioned
business transactions with the Aparri company.

The Internal Revenue Regional Director issued a warrant of distraint and levy against the properties of Guerrero, in order
to effect the collection of his tax liabilities. Guerrero claimed that he is not liable because he bought the logs for the
company, as agent thereof.

ISSUE: W/N Guerrero is liable for the payment of said taxes and charges.

RULING: YES. The logs involved in the assessment were obtained from illegal sources, and that the forest charges due
thereon had not been paid. Since these charges "are liens on the products and collectible from whomsoever is in
possession" thereof, "unless he can show that he has the required auxiliary and official invoice and discharge permit" —
which Guerrero has not shown — it follows that he is bound to pay the aforementioned forest charges and surcharges.

MP: The natural rule is that everyone in the State must contribute to the support of the government. Exemptions are
in derogation of sovereignty; hence, they must be strictly construed against the person claiming it. (not in full text)
COELI

CASE NO. 148

Nor shall any person be denied the equal protection of the laws (Sec. 1, Art. III, 1987 Constitution)

Eastern Theatrical Co., Inc. v. Alfonso, 83 Phil. 852 (1949)

FACTS: The municipal board of Manila enacted Ordinance 2958 (series of 1946) imposing a fee on the price of every
admission ticket sold by cinematograph theaters, vaudeville companies, theatrical shows and boxing exhibitions, in
addition to fees imposed under Ordinance 1600.

Eastern Theatrical Co., among others, question the validity of ordinance, on the ground that it is unconstitutional for
being contrary to the provisions on uniformity and equality of taxation and the equal protection of the laws inasmuch as
the ordinance does not tax other kinds of amusement, such as race tracks, cockpits, cabarets, concert halls, circuses, and
other places of amusement.

ISSUE: W/N the ordinance violates the rule on uniformity and equality of taxation.

RULING: NO. 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; and the theater companies cannot point out what places of amusement taxed by the ordinance
do not constitute a class by themselves and which can be confused with those not included in the ordinance. The fact
that some places of amusement are not taxed while others, like the ones herein, are taxed is no argument at all against
the equality and uniformity of the tax imposition.

COELI

CASE NO. 149

Nor shall any person be denied the equal protection of the laws

British American Tobacco v. Jose Isidro N. Camacho

G.R. No. 163583, August 20, 2008, 562 SCRA 511

FACTS:

Prior to the entry of petitioners in the cigarette market of the PH, the country already established a 4-tiered tax system
bracketing each cigarette companies based on their net retail price and assigning higher excise taxes to those with
higher retail prices.

NIRC (National Internal Revenue Code) provides a classification freeze provision where companies classified on October
1996 shall remain in their classification until revised by Congress and new companies shall be classified according to
their current net retail price.

Petitioner, manufacturer of Lucky Strikes cigarettes, entered the scene on June 2001 and was classified as a premium-
priced cigarette. Petitioner now claims that the freeze provision is violative of equal protection as it allows old
companies to enjoy their previous classification even when in reality their net retail price is already higher than that
prescribed by their brackets absent a legislation from congress reclassifying them.

ISSUE: W/N the classification freeze provision violates the equal protection and uniformity of taxation clauses of the
Constitution.

RULING: NO. In tax legislations, the standard required is that of Rational Basis Test where a legislative classification, to
survive an equal protection challenge must be shown to rationally further a legitimate state interest. The court
enumerates the state interests which Congress considered in creating the classification freeze provision which are:
prevention of potential corruption, promotion of fair competition, simplification of tax administration, buoyant and
stable revenue generation and ease of projecting revenues.

The petitioner’s challenge on due process cannot stand because the petitioner in the first place, failed to prove the
following: that older brands have pierced their brackets, that such piercing has a detrimental effect to the market, that
the said provision is a hindrance to encouraging competition in the market.

MP: A levy of tax is not unconstitutional because it is not intrinsically equal and uniform in its operation. The
uniformity rule does not prohibit classification for purposes of taxation (not in full text)