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FIRST DIVISION

[G.R. No. L-28896. February 17, 1988.]

COMMISSIONER OF INTERNAL

REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF

TAX APPEALS, respondents.

SYLLABUS

1. TAXATION; NATIONAL INTERNAL REVENUE CODE; DEFICIENCY INCOMETAXES; PERIOD TO APPEAL ASSESSMENT, SUSPENDED BY FILING OF

PROTEST. — According to Rep. Act No. 1125, the appeal may be made within

thirty days after receipt of the decision or ruling challenged. It is true that as a rule

the warrant of distraint and levy is "proof of the finality of the assessment" and

"renders hopeless a request for reconsideration," being "tantamount to an

outright denial thereof and makes the said request deemed rejected." But there is

a special circumstance in the case at bar that prevents application of this

accepted doctrine. The proven fact is that four days after the private respondent

received the petitioner's notice of assessment, it filed its letter of protest. This was

apparently not taken into account before the warrant of distraint and levy was

issued; indeed, such protest could not be located in the office of the petitioner. It

was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at

all, considered by the tax authorities. During the intervening period, the warrant

was premature and could therefore not be served. As the Court of Tax Appeals

correctly noted, the protest filed by private respondent was not pro forma and wasbased on strong legal considerations. It thus had the effect of suspending on

January 18, 1965, when it was filed, the reglementary period which started on the

date the assessment was received,viz.,January 14, 1965. The period started

running again only on April 7, 1965, when the private respondent was definitely

informed of the implied rejection of the said protest and the warrant was finally


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served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of

the reglementary period had been consumed.

2. ID.; ID.; INCOME TAX; DEDUCTION FROM GROSS INCOME; P75,000.00

PROMOTIONAL FEES; FOUND NECESSARY AND REASONABLE IN CASE ATBAR. — We agree with the respondent court that the amount of the promotional

fees was not excessive. The total commission paid by the Philippine Sugar Estate

Development Co. to the private respondent was P125,000.00. After deducting the

said fees, Algue still had a balance of P50,000.00 as clear profit from the

transaction. The amount of P75,000.00 was 60% of the total commission. This

was a reasonable proportion, considering that it was the payees who did

practically everything, from the formation of the Vegetable Oil Investment

Corporation to the actual purchase by it of the Sugar Estate properties. In the

present case, however, we find that the onus has been discharged satisfactorily.

The 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.

D E C I S I O N

CRUZ, Jp:

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 conflictinginterests of the authorities and the taxpayers so that the real purpose of taxation,

which is the promotion of the common good, may be achieved.

The main issue in this case is whether or not the Collector of Internal Revenue

correctly disallowed the P75,000.00 deduction claimed by private respondent


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Algue as legitimate business expenses in its income tax returns. The corollary

issue is whether or not the appeal of the private respondent from the decision of

the Collector of Internal Revenue was made on time and in accordance with law.

We deal first with the procedural question.

The record shows that on January 14, 1965, the private respondent, a domestic

corporation engaged in engineering, construction and other allied activities,

received a letter from the petitioner assessing it in the total amount of P83,183.85

as delinquency income taxes for the years 1958 and 1959.1 On January 18,

1965, Algue filed a letter of protest or request for reconsideration, which letter

was stamp-received on the same day in the office of the petitioner. 2On March 12,

1965, a warrant of distraint and levy was presented to the private respondent,through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the

ground of the pending protest.3 A search of the protest in the dockets of the case

proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR

agent Ramon Reyes, who deferred service of the warrant.4 On April 7, 1965,

Atty. Guevara was finally informed that the BIR was not taking any action on the

protest and it was only then that he accepted the warrant of distraint and levy

earlier sought to be served.5 Sixteen days later, on April 23, 1965, Algue filed a

petition for review of the decision of the Commissioner of Internal Revenue withthe Court of Tax Appeals.6

The above chronology shows that the petition was filed seasonably. According to

Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the

decision or ruling challenged.7 It is true that as a rule the warrant of distraint and

levy is "proof of the finality of the assessment"9 being "tantamount to an outright

denial thereof and makes the said request deemed rejected."10 But there is a

special circumstance in the case at bar that prevents application of this accepteddoctrine.

The proven fact is that four days after the private respondent received the

petitioner's notice of assessment, it filed its letter of protest. This was apparently

not taken into account before the warrant of distraint and levy was issued; indeed,

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such protest could not be located in the office of the petitioner. It was only after

Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered

by the tax authorities. During the intervening period, the warrant was premature

and could therefore not be served.

As the Court of Tax Appeals correctly noted,11 the protest filed by private

respondent was not pro forma and was based on strong legal considerations. It

thus had the effect of suspending on January 18, 1965, when it was filed, the

reglementary period which started on the date the assessment was

received,viz.,January 14, 1965. The period started running again only on April

7, 1965, when the private respondent was definitely informed of the implied

rejection of the said protest and the warrant was finally served on it. Hence, when

the appeal was filed on April 23, 1965, only 20 days of the reglementary period

had been consumed.

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly

disallowed because it was not an ordinary, reasonable or necessary business

expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, 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.

These were collected by the payees for their work in the creation of the Vegetable

Oil Investment Corporation of the Philippines and its subsequent purchase of the

properties of the Philippine Sugar Estate Development Company.

Parenthetically, it may be observed that the petitioner had originally claimed these

promotional fees to be personal holding company income12 but later conformed

to the decision of the respondent court rejecting this assertion.13 In fact, as the

said court found, the amount was earned through the joint efforts of the persons

among whom it was distributed. It has been established that the Philippine Sugar

Estate Development Company had earlier appointed Algue as its agent,

authorizing it to sell its land, factories and oil manufacturing process. Pursuant to

such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith

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O'Farell, and Pablo Sanchez worked for the formation of the Vegetable Oil

Investment Corporation, inducing other persons to invest in it.14 Ultimately, after

its incorporation largely through the promotion of the said persons, this new

corporation purchased the PSEDC properties.15 For this sale, Algue received as

agent a commission of P125,000.00, and it was from this commission that the

P75,000.00 promotional fees were paid to the aforenamed individuals.16

There is no dispute that the payees duly reported their respective shares of the

fees in their income tax returns and paid the corresponding taxes thereon.17 The

Court of Tax Appeals also found, after examining the evidence, that no

distribution of dividends was involved.18

The petitioner claims that these payments are fictitious because most of thepayees are members of the same family in control of Algue. It is argued that no

indication was made as to how such payments were made, whether by check or

in cash, and there is not enough substantiation of such payments. In short, the

petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by

involving an imaginary deduction.

We find that these suspicions were adequately met by the private respondent

when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus,

testified that the payments were not made in one lump sum but periodically and

in different amounts as each payee's need arose.19 It should be remembered

that this was a family corporation where strict business procedures were not

applied and immediate issuance of receipts was not required. Even so, at the end

of the year, when the books were to be closed, each payee made an accounting

of all of the fees received by him or her, to make up the total of

P75,000.00.20 Admittedly, everything seemed to be informal. This arrangement

was understandable, however, in view of the close relationship among thepersons in the family corporation.

We agree with the respondent court that the amount of the promotional fees was

not excessive. The total commission paid by the Philippine Sugar Estate

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Development Co. to the private respondent was P125,000.00.21 After deducting

the said fees, Algue still had a balance of P50,000.00 as clear profit from the

transaction. The amount of P75,000.00 was 60% of the total commission. This

was a reasonable proportion, considering that it was the payees who did

practically everything, from the formation of the Vegetable Oil Investment

Corporation to the actual purchase by it of the Sugar Estate properties.

This finding of the respondent court is in accord with the following provision of the

Tax Code:

"SEC. 30.Deductions from gross income. — In computing net income

there shall be allowed as deduction —

(a) Expenses:

(1)In general. — All the ordinary and necessary expenses paid or

incurred during the taxable year in carrying on any trade or business,

including a reasonable allowance for salaries or other compensation for

personal services actually rendered; . . ."22

and Revenue Regulations No. 2, Section 70 (1), reading as follows:

"SEC. 70.Compensation for personal services. — Among the ordinary

and necessary expenses paid or incurred in carrying on any trade or

business may be included a reasonable allowance for salaries or other

compensation for personal services actually rendered. The test of

deductibility in the case of compensation payments is whether they are

reasonable and are, in fact, payments purely for service. This test and its

practical application may be further stated and illustrated as follows:

"Any amount paid in the form of compensation, but not in fact as the

purchase price of services, is not deductible. (a) An ostensible salary

paid by a corporation may be a distribution of a dividend on stock. This is

likely to occur in the case of a corporation having few stockholders,

practically all of whom draw salaries. If in such a case the salaries are in

excess of those ordinarily paid for similar services, and the excessive

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payment correspond or bear a close relationship to the stockholdings of

the officers of employees, it would seem likely that the salaries are not

paid wholly for services rendered, but the excessive payments are a

distribution of earnings upon the stock. . . ." (Promulgated Feb. 11, 1931,

30 O.G. No. 18, 325.)

It is worth noting at this point that most of the payees were not in the regular

employ of Algue nor were they its controlling stockholders.23

The Solicitor General is correct when he says that the burden is on the taxpayer

to prove the validity of the claimed deduction. In the present case, however, we

find that the onus has been discharged satisfactorily. The private respondent has

proved that the payment of the fees was necessary and reasonable in the light ofthe 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 said that taxes are what we pay for civilized society. Without taxes, the

government would be paralyzed for lack of the motive power to activate and

operate it. Hence, despite the natural reluctance to surrender part of one's hard-

earned income to the taxing authorities, every person who is able to must

contribute his share in the running of the government. The government for its

part, is expected to respond in the form of tangible and intangible benefits

intended to improve the lives of the people and enhance their moral and material

values. This symbiotic relationship is the rationale of taxation and should dispel

the erroneous notion that it is an arbitrary method of exaction by those in the seat

of power.

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

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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.

We hold that the appeal of the private respondent from the decision of the

petitioner was filed on time with the respondent court in accordance with Rep.Act No. 1125. And we also find that the claimed deduction by the private

respondent was permitted under the Internal Revenue Code and should therefore

not have been disallowed by the petitioner.

ACCORDINGLY, the appealed decision of the Court of Tax Appeals is

AFFIRMEDin toto, without costs.

SO ORDERED.

Teehankee, C. J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

||| (Commissioner of Internal Revenue v. Algue, Inc., G.R. No. L-28896, [February

17, 1988], 241 PHIL 829-836)

EN BANC

[G.R. No. 99886. March 31, 1993.]

JOHN H. OSMEÑA, petitioner, vs. OSCAR ORBOS, in his

capacity as Executive Secretary; JESUS ESTANISLAO, in his

capacity as Secretary of Finance; WENCESLAO DELA PAZ, in

his capacity as Head of the Office of Energy Affairs; REX V.

TANTIONGCO, and the ENERGY REGULATORY

BOARD, respondents.

Nachura & Sarmiento for petitioner.

The Solicitor General for public respondents.

D E C I S I O N


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NARVASA,C.J.,p:

The petitioner seeks the corrective, 1 prohibitive and coercive remedies provided

by Rule 65 of the Rules of Court, 2 upon the following posited grounds,viz.:3

1) the invalidity of the "TRUST ACCOUNT" in the books of account of the Ministry

of Energy (now the Office of Energy Affairs) created pursuant to § 8, paragraph 1,

of P.D. No. 1956, as amended, "said creation of a trust fund being contrary to

Section 29 (3) Article VI of the Constitution;"4

2) the unconstitutionality of § 8, paragraph 1 (c) of P.D. No. 1956 as amended

by Executive Order No. 137 for "being an undue and invalid delegation of

legislative power to the Energy Regulatory Board;"5

3) the illegality of the reimbursements to oil companies, paid out of the Oil Price

Stabilization Fund, 6 because it contravenes § 8 paragraph 2(2) of P.D. 1956 as

amended; and

4) the consequent nullity of the Order dated December 10, 1990 and the

necessity of a rollback of the pump prices and petroleum products to the levels

prevailing prior to the said Order.

It will be recalled that on October 10, 1984 President Ferdinand Marcos

issued P.D. 1956 creating a Special Account in the General Fund, designated as

the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse

oil companies for cost increases in crude oil and imported petroleum products

resulting from exchange rate adjustments and from increases in the world market

prices of crude oil.Cdpr

Subsequently the OPSF was reclassified into a "trust liability account," in virtue of

E.O 1024, 7 and ordered released from the National Treasury to the Ministry of

Energy. The same Executive Order also authorized the investment of the fund in

government securities, with the earnings from such placements accruing to the

fund.LLjur

President Corazon C. Aquino amended P.D. 1956. She promulgated Executive

Order No. 137 on February 27, 1987 expanding the grounds for reimbursement

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to oil companies for possiblecost under recovery incurred as a result of the

reduction of domestic prices of petroleum products the amount of the under

recovery being left for determination by the Ministry of Finance.

Now, the petition alleges that the status of the OPSF as of March 31 1991showed a "Terminal Fund Balance deficit" of some P12.877 billion; 8 that to abate

the worsening deficit, "the Energy Regulatory Board issued an Order on

December 10, 1990, approving the increase in pump prices of petroleum

products," and at the rate of recoupment the OPSF deficit should have been fully

covered in a span of six (6) months, but this notwithstanding, the respondents —

Oscar Orbos, in his capacity as Executive Secretary; Jesus Estanislao, in his

capacity as Secretary of Finance; Wenceslao de la Paz, in his capacity as Head

of the Office of Energy Affairs; Chairman Rex V. Tantiongco and the Energy

Regulatory Board —"are poised to accept process and pay claims not authorized

under P.D 1956."9

The petition further avers that the creation of the trust fund violates § 29(3),

Article VI of the Constitution, reading as follows:

"(3) All money collected on any tax levied for a special purpose shall be

treated as a special fund and paid out for such purposes only. If the

purpose for which a special fund was created has been fulfilled or

abandoned, the balance, if any, shall be transferred to the general funds

of the Government."

The petitioner argues that "the monies collected pursuant to P.D. 1956 as

amended, must be treated as a 'SPECIAL FUND,' not as a 'trust account' or a

'trust fund,' and that "if a special tax is collected for a specific purpose the

revenue generated therefrom shall 'be treated as a special fund' to be used only

for the purpose indicated, and not channeled to another government objective."

10 Petitioner further points out that since "a 'special fund' consists of monies

collected through the taxing power of a State,such amounts belong to the State,

although the use thereof is limited to the special purpose/objective for which it

was created."11

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He also contends that the "delegation of "legislative authority" to the ERB violates

§ 28 (2) Article VI of the Constitution,viz.:

"(2) The Congress may, by law, authorize the President to fix, within

specified limits, and subject to such limitations and restrictions as it mayimpose, tariff rates, import and export quotas, tonnage and wharfage

dues, and other duties or imposts within the framework of the national

development program of the Government";

and inasmuch as the delegation relates to the exercise of the power of

taxation, "the limits, limitations and restrictions must be quantitative, that is,

the law must not only specify how to tax, who (shall) be taxed (and) what the

tax is for, but also impose a specific limit on how much to tax."12

The petitioner does not suggest that a "trust account" is illegal per se, but

maintains that the monies collected, which form part of the OPSF should be

maintained in aspecial account of the general fund for the reason that

theConstitution so provides, and because they are, supposedly,taxes levied for a

special purpose. He assumes that the Fund is formed from a tax undoubtedly

because a portion thereof is taken from collections ofad valorem taxes and the

increases thereon.cdphil

It thus appears that the challenge posed by the petitioner is premised primarily on

the view that the powers granted to the ERB under P.D. 1956, as amended,

partake of the nature of the taxation power of the State. The Solicitor General

observes that the "argument rests on the assumption that the OPSF is a form of

revenue measure drawing from a special tax to be expended for a special

purpose." 13 The petitioner's perceptions are, in the Court's view, not quite

correct.

To address this critical misgiving in the position of the petitioner on these issues,

the Court recalls its holding inValmonte v. Energy Regulatory Board, et al."14 —

'The foregoing arguments suggest the presence of misconceptions about

the nature and functions of the OPSF. The OPSF is a 'Trust Account'

which was established 'for the purpose of minimizing the frequent price



12/50

changes brought about by exchange rate adjustment and/or changes in

world market prices of crude oil and imported petroleum

products."15 Under P.D. No. 1956, as amended by Executive Order No.

137 dated 27 February 1987, this Trust Account may be funded from any

of the following sources:

"a) Any increase in the tax collection from ad valorem tax

or customs duty imposed on petroleum products subject to tax

under this Decree arising from exchange rate adjustment, as may

be determined by the Minister of Finance in consultation with the

Board of Energy;

b) Any increase in the tax collection as a result of the liftingof tax exemptions of government corporations, as may be

determined by the Minister of Finance in consultation with the

Board of Energy;

c) Any additional amount to be imposed on petroleum

products to augment the resources of the Fund through an

appropriate Order that may be issued by the Board of Energy

requiring payment of persons or companies engaged in the

business of importing, manufacturing and/or marketing petroleum

products;

d) Any resulting peso cost differentials in case the actual

peso costs paid by oil companies in the importation of crude oil

and petroleum products is less than the peso costs computed

using the reference foreign exchange rate as fixed by the Board of

Energy."

xxx xxx xxx

The fact that the world market prices of oil, measured by the spot market

in Rotterdam, vary from day to day is of judicial notice. Freight rates for

hauling crude oil and petroleum products from sources of supply to the

Philippines may also vary from time to time. The exchange rate of the

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13/50

peso vis-a-vis the U.S. dollar and other convertible foreign currencies

also changes from day to day. These fluctuations in world market prices

and in tanker rates and foreign exchange rates would in a completely

free market translate into corresponding adjustments in domestic prices

of oil and petroleum products with sympathetic frequency. But domestic

prices which vary from day to day or even only from week to week would

result in a chaotic market with unpredictable effects upon the country's

economy in general.The OPSF was established precisely to protect

local consumers from the adverse consequences that such frequent oil

price adjustments may have upon the economy.Thus, the OPSF serves

as a pocket, as it were, into which a portion of the purchase price of oil

and petroleum products paid by consumers as well as some taxrevenues are inputted and from which amounts are drawn from time to

time to reimburse oil companies, when appropriate situations arise, for

increases in, as well as under recovery of, costs of crude importation.

The OPSF is thus a buffer mechanism through which the domestic

consumer prices of oil and petroleum products are stabilized, instead of

fluctuating every so often, and oil companies are allowed to recover

those portions of their costs which they would not otherwise recover

given the level of domestic prices existing at any given time. To the

extent that some tax revenues are also put into it, the OPSF is in effect a

device through which the domestic prices of petroleum products are

subsidized in part. It appears to the Court that the establishment and

maintenance of the OPSF is well within that pervasive and non-waivable

power and responsibility of the government to secure, the physical and

economic survival and well-being of the community, that comprehensive

sovereign authority we designate as the police power of the State. The

stabilization, and subsidy of domestic prices of petroleum products and

fuel oil — clearly critical in importance considering, among other things,

the continuing high level of dependence of the country on imported

crude oil — are appropriately regarded as public purposes."dctai


14/50

Also of relevance is this Court's ruling in relation to the sugar stabilization fund

the nature of which is not far different from the OPSF. InGaston v. Republic

Planters Bank,16 this Court upheld the legality of the sugar stabilization fees and

explained their nature and character, viz.:

"The stabilization fees collected are in the nature of a tax, which is within

the power of the State to impose for the promotion of the sugar industry

(Lutz v. Araneta, 98 Phil. 148).The tax collected is not in a pure exercise

of the taxing power.It is levied with a regulatory purpose, to provide a

means for the stabilization of the sugar industry.The levy is primarily in

the exercise of the police power of the State (Lutz v. Araneta, supra).

xxx xxx xxx

"The stabilization fees in question are levied by the State upon sugar

millers, planters and producers for a special purpose — that of 'financing

the growth and development of the sugar industry and all its

components, stabilization of the domestic market including the foreign

market.' The fact that the State has taken possession of moneys

pursuant to law is sufficient to constitute them state funds, even though

they are held for a special purpose (Lawrence v. American Surety Co.

263 Mich. 586, 249 ALR 535, cited in 42 Am Jur Sec. 2, p. 718). Having

been levied for a special purpose, the revenues collected are to be

treated as a special fund, to be, in the language of the statute,

'administered in trust' for the purpose intended. Once the purpose has

been fulfilled or abandoned, the balance if any, is to be transferred to the

general funds of the Government. That is the essence of the trust

intended (SEE 1987 Constitution, Article VI, Sec. 29(3), lifted from the

1935 Constitution, Article VI, Sec. 23(1).17

The character of the Stabilization Fund as a special kind of fund is

emphasized by the fact that the funds are deposited in the Philippine

National Bank and not in the Philippine Treasury, moneys from which

may be paid out only in pursuance of an appropriation made by law



15/50

(1987) Constitution, Article VI, Sec. 29 (3), lifted from the

1935 Constitution, Article VI, Sec. 23(1)." (emphasis supplied.)

Hence, it seems clear that while the funds collected may be referred to as taxes,

they are exacted in the exercise of the police power of the State. Moreover, thatthe OPSF is a special fund is plain from the special treatment given it by E.O.

137. It is segregated from the general fund; and while it is placed in what the law

refers to as a "trust liability account," the fund nonetheless remains subject to the

scrutiny and review of the COA. The Court is satisfied that these measures

comply with the constitutional description of a "special fund." Indeed, the practice

is not without precedent.

With regard to the allegedundue delegation of legislative power, the Court findsthat the provision conferring the authority upon the ERB to impose additional

amounts on petroleum products provides a sufficient standard by which the

authority must be exercised. In addition to the general policy of the law to protect

the local consumer by stabilizing and subsidizing domestic pump rates, § 8(c)

of P.D. 1956 18 expressly authorizes the ERB to impose additional amountsto

augment the resources of the Fund.

What petitioner would wish is the fixing of some definite, quantitative restriction,

or "a specific limit on how much to tax." 19 The Court is cited to this requirement

by the petitioner on the premise that what is involved here is the power of

taxation; but as already discussed, this is not the case. What is here involved is

not so much the power of taxation its police power. Although the provision

authorizing the ERB to impose additional amounts could be construed to refer to

the power of taxation, it cannot be overlooked that the overriding consideration is

to enable the delegate to act with expediency in carrying out the objectives of the

law which are embraced by the police power of the State.

The interplay and constant fluctuation of the various factors involved in the

determination of the price of oil and petroleum products, and the frequently

shifting need to either augment or exhaust the Fund, do not conveniently permit

the setting of fixed or rigid parameters in the law as proposed by the petitioner. To


16/50

do so would render the ERB unable to respond effectively so as to mitigate or

avoid the undesirable consequences of such fluidity. As such, the standard as it

is expressed, suffices to guide the delegate in the exercise of the delegated

power, taking account of the circumstances under which it is to be exercised.

For a valid delegation of power, it is essential that the law delegating the power

must he (1) complete in itself, that is it must set forth the policy to be executed by

the delegate and (2) it must fix a standard — limits of which are sufficiently

determinate or determinable — to which the delegate must conform.20

". . . As pointed out in Edu v. Ericta: To avoid the taint of unlawful

delegation, there must be a standard, which implies at the very least that

the legislature itself determines matters of principle and lays downfundamental policy. Otherwise, the charge of complete abdication may

he hard to repel. A standard thus defines legislative policy, marks its

limits, maps out its boundaries and specifies the public agency to apply

it. It indicates the circumstances under which the legislative command is

to be effected. It is the criterion by which the legislative purpose may be

carried out. Thereafter, the executive or administrative office designated

may in pursuance of the above guidelines promulgate supplemental

rules and regulations. The standard may either be express or implied. If

the former, the non-delegation objection is easily met. The standard

though does not have to be spelled out specifically. It could be implied

from the policy and purpose of the act considered as a whole.' "21

It would seem that from the above-quoted ruling, the petition for prohibition

should fail.

The standard, as the Court has already stated, may even be implied. In that light,

there can be no ground upon which to sustain the petition, inasmuch as the

challenged law sets forth a determinable standard which guides the exercise of

the power granted to the ERB. By the same token, the proper exercise of the

delegated power may be tested with ease. It seems obvious that what the law

intended was to permit the additional imposts for as long as there exists a need



17/50

to protect the general public and the petroleum industry from the adverse

consequences of pump rate fluctuations. "Where the standards set up for the

guidance of an administrative officer and the action taken are in fact recorded in

the orders of such officer, so that Congress, the courts and the public are

assured that the orders in the judgment of such officer conform to the legislative

standard, there is no failure in the performance of the legislative functions."22

This Court thus finds no serious impediment to sustaining the validity of the

legislation; the express purpose for which the imposts are permitted and the

general objectives and purposes of the fund are readily discernible, and they

constitute a sufficient standard upon which the delegation of power may be

justified.

In relation to the third question — respecting the illegality of the reimbursements

to oil companies, paid out of the Oil Price Stabilization Fund, because allegedly in

contravention of § 8, paragraph 2 (2) of P.D. 1956, as amended23 — the Court

finds for the petitioner.cda

The petition assails the payment of certain items or accounts in favor of the

petroleum companies (i.e., inventory losses, financing charges, fuel oil sales to

the National Power Corporation, etc.) because not authorized by law. Petitioner

contends that "these claims are not embraced in the enumeration in § 8 of P.D.

1956 since none of them was incurred 'as a result of the reduction of domestic

prices of petroleum products,'" 24 and since these items are reimbursements for

which the OPSF should not have responded, the amount of the P12.877 billion

deficit "should be reduced by P5,277.2 million."25 It is argued "that under the

principle ofejusdem generisthe term 'other factors' (as used in § 8 of P.D. 1956)

can only include such 'other factors' which necessarily result in the reduction of

domestic prices of petroleum products."26

The Solicitor General, for his part, contends that "(t)o place said (term) within the

restrictive confines of the rule ofejusdem generis would reduce (E.O. 137) to a

meaningless provision."

http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote22_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote23_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote25_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote26_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote22_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote23_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote25_0http://cdasiaonline.com/jurisprudences/16465?hits%5B%5D%5Bid%5D=16465&hits%5B%5D%5Btype%5D=Jurisprudence&path=%2Fjurisprudences%2Fsearch&q%5Bcitation_finder%5D=&q%5Bfull_text%5D=&q%5Bissue_no%5D=99886&q%5Bponente%5D=&q%5Bsyllabus%5D=&q%5Btitle%5D=&q%5Butf8%5D=%E2%9C%93&q%5Byear_end%5D=&q%5Byear_start%5D=#footnote26_0


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This Court, inCaltex Philippines, Inc. v. The Honorable Commissioner on Audit,

et al., 27 passed upon the application ofejusdem generis to paragraph 2 of § 8

of P.D. 1956, viz.:

"The rule ofejusdem generis states that 'where words follow anenumeration of persons or things, by words of a particular and specific

meaning, such general words are not to be construed in their widest

extent, but are held to be as applying only to persons or things of the

same kind or class as those specifically mentioned.'28A reading of

subparagraphs (i) and (ii) easily discloses that they do not have a

common characteristic. The first relates to price reduction as directed by

the Board of Energy while the second refers to reduction in internalad

valorem taxes. Therefore, subparagraph (iii) cannot be limited by the

enumeration in these subparagraphs. What should be considered for

purposes of determining the 'other factors' in subparagraph (iii) is the first

sentence of paragraph (2) of the Section which explicitly allows the cost

under recovery only if such were incurred as aresult of the reduction of

domestic prices of petroleum products."

The Court thus holds, that the reimbursement of financing charges is not

authorized by paragraph 2 of § 5 of P.D. 1956, for the reason that they were notincurred as a result of the reduction of domestic prices of petroleum products.

Under the same provision, however, the payment of inventory losses is upheld as

valid, being clearly a result of domestic price reduction, when oil companies incur

a cost under recovery for yet unsold stocks of oil in inventory acquired at a higher

price.

Reimbursement for cost under recovery from the sales of oil to the National

Power Corporation is equally permissible, not as coming within the provisions

of P.D. 1956, but in virtue of other laws and regulations as held inCaltex 29 and

which have been pointed to by the Solicitor General. At any rate, doubts about

the propriety of such reimbursements have been dispelled by the enactment



19/50

of R.A. 6952, establishing the Petroleum Price Standby Fund, § 2 of which

specifically authorizes the reimbursement of "cost under recovery incurred as a

result of fuel oil sales to the National Power Corporation."

Anent the overpayment refunds mentioned by the petitioner, no substantivediscussion has been presented to show how this is prohibited by P.D. 1956. Nor

has the Solicitor General taken any effort to defend the propriety of this refund. In

fine, neither of the parties, beyond the mere mention of overpayment refunds,

has at all bothered to discuss the arguments for or against the legality of the so-

called overpayment refunds. To be sure, the absence of any argument for or

against the validity of the refund cannot result in its disallowance by the Court.

Unless the impropriety or illegality of the overpayment refund has been clearly

and specifically shown, there can be no basis upon which to nullify the same.

Finally, the Court finds no necessity to rule on the remaining issue, the same

having been rendered moot and academic. As of date hereof, the pump rates of

gasoline have been reduced to levels below even those prayed for in the petition.

WHEREFORE, the petition is GRANTED insofar as it prays for the nullification of

the reimbursement of financing charges, paid pursuant to E.O. 137, and

DISMISSED in all other respects.

SO ORDERED.

||| (Osmeña v. Orbos, G.R. No. 99886, [March 31, 1993])

EN BANC

[G.R. No. L-41383. August 15, 1988.]

PHILIPPINE AIRLINES, INC., plaintiff-appellant, vs. ROMEO

F. EDU, in his capacity as Land Transportation Commissioner,

and UBALDO CARBONELL, in his capacity as National

Treasurer, defendants-appellants.


20/50

Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

SYLLABUS

1. STATUTORY CONSTRUCTION; TERM "FEES" IN REGISTRATION OF

VEHICLES AS REGULATORY TAX; EXPLAINED. — It is clear from the

provisions of Section 73 of Commonwealth Act 123 and Section 61 of the Land

Transportation and Traffic Code that the legislative intent and purpose behind the

law requiring owners of vehicles to pay for their registration is mainly to raise

funds for the construction and maintenance of highways and to a much lesser

degree, pay for the operating expenses of the administering agency. On the other

hand, thePhilippine Rabbit case mentions a presumption arising from the use ofthe term "fees" which appears to have been favored by the legislature to

distinguish fees from other taxes such as those mentioned in Section 13 of Rep.

Act 4136 referring to taxes other than those imposed on the registration,

operation or ownership of a motor vehicle (Sec. 89, b, Rep. Act 4136, as

amended). Fees may be properly regarded as taxes even though they also serve

as an instrument of regulation.

2. TAXATION; MOTOR VEHICLE REGISTRATION FEES; IF THE PURPOSE ISPRIMARILY REVENUE; THEN THE EXACTION IS PROPERLY CALLED A TAX.

— Taxation may be made the implement of the state's police power (Lutzv.

Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if revenue is, at

least, one of the real and substantial purposes, then the exaction is properly

called a tax. Such is the case of motor vehicle registration fees. The same

provision appears as Section 59(b) in the Land Transportation Code. It is patent

therefrom that the legislators had in mind a regulatory tax as the law refers to the

imposition on the registration, operation or ownership of a motor vehicle as a "tax

or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the

imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the registration

or operation or on the ownership of any motor vehicle, or for the exercise of the

profession of chauffeur . . ." making the intent to impose a tax more apparent.


21/50

Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax,"

where the law could have referred to an original tax and not onein additionto the

tax already imposed on the registration, operation, or ownership of a motor

vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act

4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be

an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special

permit fees for certain types of motor vehicles (Sec. 10) and additional fees for

change of registration (Sec. 11). These are not to be understood as taxes

because such fees are very minimal to be revenue-raising. Thus, they are not

mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration

fee and chauffeurs' license fee. Such fees are to go into the expenditures of the

Land Transportation Commission as provided for in the last proviso of Sec. 61.

3. ID.; ID.; NATURE AND PURPOSE. — We rule that motor vehicle registration

fees as at present exacted pursuant to the Land Transportation and Traffic

Code are actually taxes intended for additional revenues of government even if

one fifth or less of the amount collected is set aside for the operating expenses of

the agency administering the program.

4. ID.; ID.; UNDER THE AMENDED FRANCHISE, PHILIPPINE AIRLINES IS

NOT EXEMPTED FROM THE PAYMENT OF ANY TAX, FEE, OR OTHERCHARGES ON THE REGISTRATION AND LICENSING OF MOTOR VEHICLES.

— The claim for refund is made for payments given in 1971. It is not clear from

the records as to what payments were made in succeeding years. 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 that period. However, an amended franchise was given to PAL in

1979. PAL's current franchise is clear and specific. It has removed the ambiguity

found in the earlier law. Under Section 13 of Presidential Decree No. 1590, PAL

is not exempt from the payment of any tax, fee, or other charge on the registration

and licensing of motor vehicles. Such payments are already included in the basic

tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D.


22/50

1590 and may no longer be exacted. Hence, the prayer for refund of registration

fees paid in 1991 is DENIED.

D E C I S I O N

GUTIERREZ, JR., Jp:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory

fees?

This question has been brought before this Court in the past. The parties are, in

effect, asking for a re-examination of the latest decision on this issue.

This appeal was certified to us as one involving a pure question of law by the

Court of Appeals in a case where the then Court of First Instance of Rizal

dismissed the plaintiff-appellant's complaint for refund of registration fees paid

under protest.cdrep

The disputed registration fees were imposed by the appellee, Commissioner

Romeo F. Edu, pursuant to Section 8, Republic Act No. 4136, otherwise known

as the Land Transportation and Traffic Code.

The Philippine Airlines (PAL) is a corporation organized and existing under the

laws of the Philippines and engaged in the air transportation business under a

legislative franchise, Act No. 4271, as amended by Republic Act Nos. 2360 and

2667. Under its franchise, PAL is exempt from the payment of taxes. The

pertinent provision of the franchise provides as follows:

"Section 13. In consideration of the franchise and rights hereby granted,

the grantee shall pay to the National Government during the life of this

franchise a tax of two per cent of the gross revenue or gross earning

derived by the grantee from its operations under this franchise. Such tax

shall be due and payable quarterly and shall be in lieu of all taxes of any

kind, nature or description, levied, established or collected by any


23/50

municipal, provincial or national authority; Provided, that if, after the audit

of the accounts of the grantee by the Commissioner of Internal Revenue,

a deficiency tax is shown to be due, the deficiency tax shall be payable

within the ten days from the receipt of the assessment. The grantee shall

pay the tax on its real property in conformity with existing law."

On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of

1956) PAL has, since 1956, not been paying motor vehicle registration fees.

Sometime in 1971, however, appellee Commissioner Romeo F. Edu, issued a

regulation requiring all tax exempt entities, among them PAL to pay motor vehicle

registration fees.

Despite PAL's protestations, the appellee refused to register the appellant's motorvehicles unless the amounts imposed under Republic Act 4136 were paid. The

appellant thus paid, under protest, the amount of P19,529.75 as registration fees

of its motor vehicles.cdrep

After paying under protest, PAL through counsel, wrote a letter dated May 19,

1971, to Commissioner Edu demanding a refund of the amounts paid, invoking

the ruling inCalalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that

motor vehicle registration fees are in reality taxes from the payment of which PALis exempt by virtue of its legislative franchise.

Appellee Edu denied the request for refund basing his action on the decision

inRepublic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970)

to the effect that motor vehicle registration fees are regulatory exactions and not

revenue measures and, therefore, do not come within the exemption granted to

PAL under its franchise. Hence, PAL filed the complaint against Land

Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo

Carbonell with the Court of First Instance of Rizal, Branch 18 where it was

docketed as Civil Case No. Q-15862.

Appellee Romeo F. Edu, in his capacity as LTC Commissioner, and Ubaldo

Carbonell, in his capacity as National Treasurer, filed a motion to dismiss alleging

that the complaint states no cause of action. In support of the motion to dismiss,


24/50

defendants reiterated the ruling inRepublic v. Philippine Rabbit Bus Lines, Inc.,

(supra) that registration fees of motor vehicles are not taxes, but regulatory fees

imposed as an incident of the exercise of the police power of the state. They

contended that while Act 4271 exempts PAL from the payment of any tax except

two per cent on its gross revenue or earnings, it does not exempt the plaintiff from

paying regulatory fees, such as motor vehicle registration fees. The resolution of

the motion to dismiss was deferred by the Court until after trial on the merits.

On April 24, 1973, the trial court rendered a decision dismissing the appellant's

complaint "guided by the later ruling laid down by the Supreme Court in the case

ofRepublic v. Philippine Rabbit Bus Lines, Inc. (supra)." From this judgment, PAL

appealed to the Court of Appeals which certified the case to us.

Calalang v. Lorenzo (supra) andRepublic v. Philippine Rabbit Bus Lines,

Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively, discuss

the main points of contention in the case at bar.

Resolving the issue in thePhilippine Rabbit case, this Court held:

"The registration fee which defendant-appellee had to pay was imposed

by Section 8 of the Revised Motor Vehicle Law (Republic Act No.

587 [1950]). Its heading speaks of 'registration fees.' The term isrepeated four times in the body thereof. Equally so, mention is made of

the 'fee for registration.' (Ibid., Subsection G) A subsection starts with a

categorical statement 'No fees shall be charged.' (Ibid., Subsection H)

The conclusion is difficult to resist therefore that the Motor Vehicle Act

requires the payment not of a tax but of a registration fee under the

police power. Hence the inapplicability of the section relied upon by

defendant-appellee under the Back Pay Law. It is not held liable for a tax

but for a registration fee. It therefore cannot make use of a backpay

certificate to meet such an obligation.

"Any vestige of any doubt as to the correctness of the above conclusion

should be dissipated by Republic Act No. 5448. ([1968]. Section 3


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thereof as to the imposition of additional tax on privately-owned

passenger automobiles, motorcycles and scooters was amended

by Republic Act No. 5470 which is (sic) approved on May 30, 1969.) A

special science fund was thereby created and its title expressly sets forth

that a tax on privately-owned passenger automobiles, motorcycles and

scooters was imposed. The rates thereof were provided for in its Section

3 which clearly specifies that 'additional tax' was to be paid as

distinguished from the registration fee under the Motor Vehicle Act.

There cannot be any clearer expression therefore of the legislative will,

even on the assumption that the earlier legislation could by stretching the

point be susceptible of the interpretation that a tax rather than a fee was

levied. What is thus most apparent is that where the legislative bodyrelies on its authority to tax it expressly so states, and where it is

enacting a regulatory measure, it is equally explicit." (at p. 216)

In direct refutation is the ruling inCalalang v.Lorenzo (supra), where the Court,

on the other hand, held:

"The charges prescribed by the Revised Motor Vehicle Law for the

registration of motor vehicles are in section 8 of that law called 'fees.' But

the appellation is no impediment to their being considered taxes if taxes

they really are. For not the name but the object of the charge determines

whether it is a tax or a fee. Generally speaking, 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. Hence, 'a charge

fixed by statute for the service to be performed by an officer, where the

charge has no relation to the value of the services performed and where

the amount collected eventually finds its way into the treasury of the

branch of the government whose officer or officers collected the charge,

is not a fee but a tax.' (Cooley on Taxation, Vol. 1, 4th ed., p. 110.)

"From the data submitted in the court below, it appears that the

expenditures of the Motor Vehicle Office are but a small portion — about


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5 per centum — of the total collections from motor vehicle registration

fees. And as proof that the money collected is not intended for the

expenditures of that office, the law itself provides that all such money

shall accrue to the funds for the construction and maintenance of public

roads, streets and bridges. It is thus obvious that the fees are not

collected for regulatory purposes, that is to say, as an incident to the

enforcement of regulations governing the operation of motor vehicles on

public highways, for their express object is to provide revenue with which

the Government is to discharge one of its principal functions — the

construction and maintenance of public highways for everybody's use.

They are veritable taxes, not merely fees.cdphil

"As a matter of fact, the Revised Motor Vehicle Law itself now regards

those fees as taxes, for it provides that 'no other taxes or fees than those

prescribed in this Act shall be imposed,' thus implying that the charges

therein imposed — though called fees — are of the category of taxes.

The provision is contained in section 70, of subsection (b), of the law, as

amended by section 17 of Republic Act 587, which reads:

"'Sec. 70 (b) No other taxes or fees than those prescribed

in this Act shall be imposed for the registration or operation or on

the ownership of any motor vehicle, or for the exercise of the

profession of chauffeur, by any municipal corporation, the

provisions of any city charter to the contrary

notwithstanding:Provided, however, That any provincial board,

city or municipal council or board, or other competent authority

may exact and collect such reasonable and equitable toll fees for

the use of such bridges and ferries, within their respective

jurisdiction, as may be authorized and approved by the Secretary

of Public Works and Communications, and also for the use of

such public roads, as may be authorized by the President of the

Philippines upon the recommendation of the Secretary of Public

Works and Communications, but in none of these cases, shall any


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toll fees be charged or collected until and unless the approved

schedule of tolls shall have been posted legibly in a conspicuous

place at such toll station.'" (at pp. 213-214)

Motor vehicle registration fees were matters originally governed by the RevisedMotor Vehicle Law (Act 3992 [1932] as amended by Commonwealth Act 123 and

Republic Acts Nos. 587 and 1603).LibLex

Today, the matter is governed by Rep. Act 4136 [1964] otherwise known as

the Land Transportation Code, (as amended by Rep. Acts Nos. 5715 and 6374,

P.D. Nos. 382, 843, 896, 1057 and BP Blg. 43, 74 and 398).

Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and

remained unrevised by Rep. Act Nos. 587 and 1603) states:

Section 73.Disposal of moneys collected. — Twenty per centum of the

money collected under the provisions of this Act shall accrue to the road

and bridge funds of the different provinces and chartered cities in

proportion to the cedula sales during the next previous year and the

remaining eighty per centum shall be deposited in the Philippine

Treasury to create a special fund for the construction and maintenance

of national and provincial roads and bridges, as well as the streets andbridges in the chartered cities to be alloted by the Secretary of Public

Works and Communications for projects recommended by the Director of

Public Works in the different provinces and chartered cities . . ."

Presently, Sec. 61 of the Land Transportation and Traffic Code provides:

"Sec. 61.Disposal of Monies Collected. — Monies collected under the

provisions of this Act shall be deposited in a special trust account in the

National Treasury to constitute the Highway Special Fund, which shall beapportioned and expended in accordance with the provisions of the

'Philippine Highway Act of 1935.' Provided, however, That the amount

necessary to maintain and equip the Land Transportation Commission

but not to exceed twenty per cent of the total collection during one year,


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shall be set aside for the purpose. (As amended by RA 6374, approved

August 6 1971)."

It appears clear from the above provisions that the legislative intent and purpose

behind the law requiring owners of vehicles to pay for their registration is mainlyto raise funds for the construction and maintenance of highways and to a much

lesser degree, pay for the operating expenses of the administering agency. On

tax case list

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