CASE DIGEST (Second Batch for July 20)Mactan Cebu Int’l Airport v MarcosDoctine: As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, so that security against its abuse is to be found only in the responsibility of the legislature w/c imposes the tax. Since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, TAXATION IS THE RULE, EXEMPTION THEREFROM IS THE EXCEPTION. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply. But it may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to GOCCs and all other units of Gov’t were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises.Facts:

1. Petitioner Mactan Cebu Internat’l Airport Authority (MCIAA) was created by virtue of RA 6958, mandated to “principally undertake the economical, efficient and effective control, management and supervision of the Mactan Internat’l Airport in the Province of Cebu and the Lahug Airport in Cebu City and such other airports as may be established in the Province of Cebu

2. Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of realty taxes in accordance with Section 14 of its Charter

3. In 1994, however, the OIC of Cebu City Treasurer demanded payment for realty taxes on several parcels of land belonging to the petitioner.

4. Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favour the a. aforecited Section 14 of RA 6958 w/c exempts it from payment of realty taxes.b. that it is an instrumentality of the Gov’t performing Gov’tal functions, citing Section 133 of the Local Gov’t Code of

1991 w/c puts limitations on the taxing powers of local Gov’t units.Issue:

Can the City of Cebu demand payment of realty taxes on several parcels of land belonging to the petitioner?Ruling:

Yes. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including Gov’t-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a Gov’t-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn.The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of LGUs. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to GOCCs and all other units of Gov’t were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of the development by paying the taxes and other charges due from them.

Pascual v Sec of Public WorksFacts:

1. Pet questions the constitutionality of RA 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof, an item of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals, w/c was lobbied by Sen. Zulueta to the municipal council of Pasig and to w/c the senaor also donated 85K

2. At the time of the passage and approval of said Act, the aforementioned feeder roads were nothing but projected and planned subdivision roads, not yet constructed w/in Antonio Subd. (prop of resp Jose Zulueta, RP senator) and do not connect any Gov’t property or any important premises to the main highway

3. That, such, said donation violated the provision of our fundamental law prohibiting members of Congress from being directly or indirectly financially interested in any contract with the Gov’t, and, hence, is unconstitutional

4. RTC upheld the validity of the donation ruling that the same is a contract over w/c petitioner has no interest so he cannot question it.

Issue:Constitutionality of RA 920

Ruling:Referring to the P85,000.00 appropriation for the projected feeder roads in question, the legality thereof depended upon whether said roads were public or private property when the bill, w/c, latter on, became Republic Act 920, was passed by Congress, or, when said bill was approved by the President and the disbursement of said sum became effective. Inasmuch as the land on w/c the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and void.Decision of lower court reversed. Case remanded to lower court for proceedings not contrary to SC ruling.

Gaston vs. Republic Planters BankDoctrine: To rule in petitioners' favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industryFacts:

1. Respondent Philippine Sugar Commission (PHILSUCOM, for short) was formerly the Gov’t office tasked with the function of regulating and supervising the sugar industry until it was superseded by its co-respondent Sugar Regulatory Administration under EO 18 (1986)

2. Although said Executive Order abolished the PHILSUCOM, its existence as a juridical entity was mandated to continue for three (3) more years "for the purpose of prosecuting and defending suits by or against it and enables it to settle and close its affairs, to dispose of and convey its property and to distribute its assets."

3. Petitioners, sugar producers, filed w/SC a writ of mandamus commanding Republic Planters Bank to distribute the shares of Philsucom to sugar planters who are its true and beneficial owners as these were from deductions of P1.00 oer picul from proceeds of sdaid sugar producers from 1978-79

4. Respondents argue that no trust results from Section 7 of P.D. No. 388 and that the stabilization fees collected are considered Gov’t funds under the Gov’t Auditing Code

Issues:1. whether the stabilization fees collected from sugar planters and millers pursuant to Section 7 of P.D. No. 388 are funds in

trust for them, or public funds2. whether shares of stock in respondent Bank paid for with said stabilization fees belong to the PHILSUCOM or to the different

sugar planters and millers from whom the fees were collected or levied.Ruling:

1. NO. The stabilization fees collected are in the nature of a tax, w/c is within the power of the State to impose for the promotion of the sugar industry. The collections made accrue to a "Special Fund," a "Development and Stabilization Fund." The tax collected is not in a pure exercise of the taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State.

2. 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 Gov’t. That is the essence of the trust intended. That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for their benefit nor make them the beneficial owners of the shares so purchased.

Tio v VRBDoctrine: It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation". Taxation has been made the implement of the state's police power. Only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere.Facts:

1. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry

2. a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal Revenue Code providing: There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos

3. the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the case as it was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated proliferation of film piracy."

4. the rationale behind the enactment of the decree was the proliferation and unregulated circulation of videograms resuting to the decline in theatrical attendance and substantial losses estimated at P450 Million annually in government revenues and to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and development of all business industries

Issues:1. a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject

matter thereof2. tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade3. no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 64. undue delegation of power and authority5. ex-post facto law6. over regulation of the video industry as if it were a nuisance

Ruling:1. The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object

of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title.2. 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 rest in the discretion of the authority which exercises it. The tax imposed is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax. 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.

3. 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.

4. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution. the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies concerned being "subject to the direction and control of the BOARD."

5. An ex post facto law is, among other categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." There is a rational connection

between the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in character.

6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment.

Caltex Philippines vs. Commission on Audit (COA)

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 1988 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.

Basco v PAGCORDoctrine: Local Gov’ts have no power to tax instrumentalities of the Nat’l Gov’t. LGUs, being mere Municipal corporations have no inherent right to impose taxes. Their "power to tax" therefore must always yield to a legislative act w/c is superior having been passed upon by the state itself w/c has the "inherent power to tax."Facts:

1. On July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Gov’t to regulate and centralize all games of chance authorized by existing franchise or permitted by law.

2. To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly repealed, amended or modified.

3. Under its Charter, Section 13 par. (2) of P.D. 1869, PAGCOR is exempted, as the franchise holder, from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether Nat’l or Local."

Issue:1. Constitutionality of PD 1896. If

a. it violates the equal protection clause of the constitution in that it legalizes PAGCOR — conducted gambling, while most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices;

b. P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees; c. the exemption clause in P.D. 1869 is violative of the principle of local autonomy

Ruling:1. Constitutional

a. Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not mean that Gov’t cannot regulate it in the exercise of its police power. Along with the taxing power and ED, police power is inborn in the very fact of statehood and sovereignty.

b. The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes. Its "power to tax" therefore must always yield to a legislative act w/c is superior having been passed upon by the state itself w/c has the "inherent power to tax." The Charter of the City of Manila is subject to control by Congress being a municipal corporation w/c is a mere creature of Congress. And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. Local Gov’ts have no power to tax instrumentalities of the Nat’l Gov’t. PAGCOR is a Gov’t owned or controlled corporation with an original charter, PD 1869.

c. The power of LGUs to "impose taxes and fees" is always subject to "limitations" w/c Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked," its "exemption clause" remains as an exception to the exercise of the power of local Gov’ts to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

Garcia v ESDoctrine: Customs duties w/c are assessed at the prescribed tariff rates are very much like taxes w/c are frequently imposed for both revenue-raising and for regulatory purposes. Thus, it has been held that "customs duties" is "the name given to taxes on the importation and exportation of commodities. Most commonly, customs duties, w/c constitute taxes in the sense of exactions the proceeds of w/c become public funds — have either or both the generation of revenue and the regulation of economic or social activity as their moving purposesFacts:

1. The President issued an EO No. 438 w/c imposed, across the board, including crude oil and other oil products, additional (5%) duty ad valorem.

2. The Tariff Commission held public hearings on said EO and submitted a report to the President for consideration and appropriate action.

3. Meantime, EO No. 475 was issued by the President, on 15 August 1991 reducing the rate of additional duty on all imported articles from nine percent (9%) to five percent (5%) ad valorem, except in the cases of crude oil and other oil products w/c continued to be subject to the additional duty of nine percent (9%) ad valorem.

4. The President then issued EO No. 478, dated 23 August 1991, w/c levied (in addition to the aforementioned additional duty of nine percent (9%) ad valorem and all other existing ad valorem duties) a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products.

Issues:1. W/N EO Nos. 475 and 478 are violative of the Consti w/c provides that all appropriation, revenue or tariff bills, bills

authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the Congress2. W/N the questioned EOs contravene the Tariff and Customs Code, w/c Section authorizes the President, according to

petitioner, to increase, reduce or remove tariff duties... ONLY when necessary to protect local industries or products but not for the purpose of raising additional revenue for the Gov’t

Ruling:1. There is explicit constitutional permission to Congress to authorize the President "subject to such limitations and restrictions

is [Congress] may impose" to fix "within specific limits" "tariff rates and other duties or imposts Section 28(2) of Article VI of the Constitution provides as follows:The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonage and wharfage dues, and other duties or imposts within the framework of the nat’l development program of the Gov’t.

2. The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401, the pertinent provisions thereof.

a. Sec. 104. All tariff sections, chapters, headings and subheadings and the rates of import duty under Section 104 of PD No. 34 and all subsequent amendments issued under Executive Orders and Presidential Decrees are hereby adopted and form part of this Code. The rates of duty herein provided or subsequently fixed pursuant to Section 401 of this Code shall be subject to periodic investigation by the Tariff Commission and may be revised by the President upon recommendation of the NEDA

b. 401. In the interest of nat’l economy, general welfare and/or nat’l security, and subject to the limitations herein prescribed, the President, upon recommendation of NEDA is hereby empowered: (1) to increase, reduce or remove existing protective rates of import duty...

CIR v BOACDoctrine: The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government. The test of taxability is the "source"; and the source of an income is that activity ... which produced the income.Facts:

1. British overseas airways corp. (BOAC) a wholly owned British Corporation, organized and existing under the laws of the United Kingdom, is engaged in international airlines business.

2. From 1959 to 1972, it has no landing rights for traffic purposes in the Philippines and was not granted a Certificate of public convenience and necessity to operate in the Philippines by the Civil Aeronautics Board

3. But it maintained a general sales agent in the Philippines which was responsible for selling BOAC tickets covering passengers and cargoes.

4. The CIR assessed deficiency income taxes against BOAC.Issue:

1. W/N the revenue derived by BOAC from sales of tickets in PH for air transportation, while having no landing rights here, constitute income of BOAC from Philippine sources, and, accordingly, taxable.

2. W/N during the fiscal years in question BOAC is a resident foreign corporation doing business in PH or has an office or place of business in PH.

Ruling:1. "Gross income" includes gains, profits, and income derived from salaries, wages or compensation for personal service of

whatever kind and in whatever form paid, or from profession, vocations, trades, business, commerce, sales, and income derived from any source whatever. The definition is broad and comprehensive to include proceeds from sales of transport documents. The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The site of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government.Sec. 37 of the Tax Code is not an all-inclusive enumeration of items to be considered as sources of income. Therefore, although there was no mention of transportation, it may be included.

2. It is our considered opinion that BOAC is a resident foreign corporation. In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character. BOAC, during the periods covered by the subject - assessments, maintained a general sales agent in the Philippines. The activities performed by the agent for BOAC were in exercise of the functions which are normally incident to, and are in progressive pursuit of, the purpose and object of its organization as an international air carrier.

CIR v Japan AirlinesFacts:

1. Respondent Japan Air Lines (JAL) is a foreign corporation engaged in the business of international air carriage. 2. From 1959 to 1963, JAL did not have planes that lifted or landed passengers and cargo in the Philippines as it had not been

granted then by the Civil Aeronautics Board (CAB) a certificate of public convenience and necessity to operate here. 3. However, since mid-July, 1957, JAL had maintained an officeat Manila w/c did not sell tickets but was maintained merely for

the promotion of the company's public relations and to hand out brochures, literature and other information playing up the attractions of Japan as a tourist spot and the services enjoyed in JAL planes.

4. In 1957, JAL constituted the PAL as its general sales agent in the Philippines. It sold for and in behalf of JAL, plane tickets and reservations for cargo spaces which were used by the passengers or customers on the facilities of JAL.

5. In 1972, JAL received deficiency income tax assessment notices and a demand letter from CIR inclusive of 50% surcharge and interest, for years 1959 through 1963

6. JAL protested and said assessments alleging that as a non-resident foreign corporation, it was taxable only on income from Philippine sources as determined under Section 37 of the Tax Code, and there being no such income during the period in question, it was not liable for the deficiency income tax liabilities assessed

Issues:1. W/N JAL IS A FOREIGN CORPORATION ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES.2. W/N PROCEEDS FROM SALES OF JAL TICKETS SOLD IN THE PHILIPPINES ARE TAXABLE AS INCOME FROM SOURCES WITHIN

THE PHILIPPINES.Ruling:

1. There is no specific criterion as to what constitutes `doing' or `engaging in' or `transacting' business. The term implies continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization. There being no dispute that JAL constituted PAL as local agent to sell its airline tickets, there can be no conclusion other than that JAL is a resident foreign corporation, doing business in the Philippines. Indeed, the sale of tickets is the very lifeblood of the airline business, the generation of sales being the paramount objective.

2. Under Section 24 of Commonwealth Act No. 466 otherwise known as the "National Internal Revenue Code of 1939", the applicable law in the case at bar, resident foreign corporations are taxed thirty percentum (30%) upon the amount by which their total net income exceed one hundred thousand pesos. JAL is liable to pay 30% of its total net income for the years 1959 through 1963

Iloilo Bottlers v City of IloiloDoctrine: The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege of distributing, manufacturing or bottling softdrinks. Being an excise tax, it can be levied by the taxing authority only when the acts, privileges or businesses are done or performed within the jurisdiction of said authority.

Facts:1. Pet is engaged in the business of bottling softdrinks under the trade name of Pepsi Cola And 7-up and selling the same to its

customers, with a bottling plant situated at Iloilo and which is outside the jurisdiction of def]2. Ordinance No. 5, Series of 1960 which ordinance was successively amended by Ordinance No. 28, Series of 1960, imposes

municipal license tax on all firms engaged in the distribution, manufacture or bottling of coca-cola, pepsi cola, tru-orange, seven-up and other soft drinks within the jurisdiction of the City of Iloilo, def.

3. A certain Santiago Syjuco sold its Iloilo bottling plant to pet in 1966 w/c was later transferred to a diff municipality but is still in Iloilo

4. Before the sale, Syjuco was paying the abovementioned municipal tax but when pet transferred the plant, it stopped paying the tax

5. Pet contends it must not be bound to pay said tax anymore beca. It is situated outside the City of Iloilo andb. It is not a distributor as it sells products directly to consumers

6. plaintiff is already paying the National Government a percentage Tax of 71/t, as manufacturer's sales tax on all the softdrinks it manufactures

7. On July 12,1972, Iloilo Bottlers, Inc. filed a complaint docketed as Civil Case No. 9046 with the Court of First Instance of Iloilo praying for the recovery of the sum of P3,329.20, which amount allegedly constituted payments of municipal license taxes under Ordinance No. 5 series of 1960, as amended, that the company paid under protest.

Issues:1. W/N pet is engaged in the independent business of distributing soft-drinks, its activity of selling is merely an incident to, or is

a necessary consequence of its main or principal business of bottling, NOT liable under the city tax ordinance. 2. W/N it is liable to pay tax under the ordinance when it is not a manufacturer or bottler w/plant inside the territorial

jurisdiction of the cityRuling:

1. This Court has always recognized that the right to manufacture implies the right to sell/distribute the manufactured products. Hence, for tax purposes, a manufacturer does not necessarily become engaged in the separate business of selling simply because it sells the products it manufactures. There are two marketing systems in manufacturing of products:

a. First is when the principal business of manufacturing. Here, manufacturer enters into sales transactions and invoices the sales at its main office where purchase orders are received and approved before delivery orders are sent to the company's warehouses, where in turn actual deliveries are made. The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office.

b. Second is when the company is engaged in a separate business of selling. Here, sales transactions are entered into and perfected at stores or warehouses maintained by the company. Any one who desires to purchase the product may go to the store or warehouse and there purchase the merchandise.

In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. Truck sales were made independently of transactions in the main office. The delivery trucks were therefore much the same as the stores and warehouses under the second marketing system, a corporation was engaged in the separate business of selling or distributing soft-drinks, independently of its business of bottling them. Sales were made by Iloilo Bottlers, Inc. in Iloilo City. Thus, We have no option but to declare the company liable under the tax ordinance.

2. The second ground is manifestly devoid of merit. It is clear from the ordinance that three types of activities are covered: (1) distribution, (2) manufacture and (3) bottling of softdrinks. A person engaged in any or all of these activities is subject to the tax.

Wells Fargo v CIRDoctrine: If that power of the PH to tax is to be conceded, the guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is challenged, which is not, on considerations repugnant to such guaranty of due process or that of the equal protection of the laws, as, when the law is alleged to be arbitrary, oppressive or discriminatory. As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct grounds, resolution has proceeded upon express or implied recognition of the sovereign taxing power as exerted by governments in the exercise of jurisdiction upon any one of these grounds.Facts:

1. Birdie Lillian Eye, who died in LA, California, left her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining Company, an anonymous partnership, organized and existing under the laws of the Philippines

2. Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee3. The Federal and State of California's inheritance taxes due on said shares have been duly paid.4. Respondent Collector of Internal Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance

tax, to which petitioner-appellant objected.5. CFI rendered judgment, holding that the transmission by will of the said 35,000 shares of stock is subject to Philippine

inheritance tax.Issue:

1. W/N as to intangibles, like the shares of stock, their situs is in the domicile of the owner and their transmission by death necessarily takes place under his domiciliary laws

Ruling:1. In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein.

Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of inheritance of any share issued by any corporation of sociedad anonima organized or constituted in the Philippines, is subject to the tax therein provided. This provision has already been applied to shares of stock in a domestic corporation which were owned by a British subject. The settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time of his death. But it has been relaxed because of either of two fundamental considerations: (1) upon the recognition of the inherent power of each government to tax persons, properties and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle that as to intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which may be entered into with respect thereto.The owner residing in California has extended here her activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.

Board of Assessment Appeals, Laguna v CTA, NWSADoctrine: Taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost of the operation of the Government, and a tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation.Facts:

1. NWSA is a public corporation created by virtue of Republic Act No. 1383, and that it is owned by the Gov’t as well as all property comprising waterworks and sewerage systems placed under it

2. Under RA 1383, properties of all the existing local government-owned waterworks and sewerage systems all over the Philippines, including the Cabuyao-Sta. Rosa-Biñan (CSB) Waterworks System owned by the Province of Laguna were taken over by NWSA

3. By the time of the take-over of CSB Waterworks System, the same was self-supporting and revenue-producing, but that all its surplus income are not declared as profits as this surplus are or may be invested for the expansion thereof

4. Provincial Assessor of Laguna assessed, for purposes of real estate taxes, the property comprising CSB5. NWSA protested claiming that the property described under Tax Declaration No. 5987 are exempted from the payment of

real estate taxes in view of the nature and kind of said property and functions and activities of petitioner, as provided in RA No. 1383

6. Board of Assessment Appeals overruled the protestIssues:

1. W/N CSB is held by the gov’t in its proprietary character and is therefore taxable 2. W/N all corporations, agencies or instrumentalities owned or controlled by the Government are subject to taxation under RA

No. 104Ruling:

1. We ruled that the assets of the water system of the City of Cebu, which the NAWASA had sought to take over, pursuant to the provisions of Republic Act No. 1383 — as it did in the case at bar, with respect to the Cabuyao-Sta. Rosa-Biñan Waterworks System — are patrimonial property of said city, which held it in a proprietary character, not in its governmental capacity.

2. Upon the other hand, in exempting from taxation "property owned by the Republic of the Philippines, any province, city, municipality or municipal district . . .," said section 3(a) of Republic Act No. 470 makes no distinction between property held in a sovereign, governmental or political capacity and those possessed in a private, proprietary or patrimonial character. And where the law does not distinguish neither may we. Taxes are financial burdens imposed for the purpose of raising revenues with which to defray the cost of the operation of the Government, and a tax on property of the Government, whether national or local, would merely have the effect of taking money from one pocket to put it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation.

NDC v CebuDoctrine: It is undeniable that to any municipality the principal source of revenue with which it would defray its operation will came from real property taxes. While ordinary public lands are tax exempt because title thereto belongs to the Republic, Sec. 115 subjects them to real estate tax even before ownership thereto is transferred in the name of the beneficiaries. But non-disposable pub lands reserved by the Gov’t are tax exempt. However, improvements made thereon are taxable.Facts:

1. NDC is GOCCexisting by virtue of C.A. 182 and E.O. 399, is authorized to engage in commercial, industrial, mining, agricultural and other enterprises necessary or contributory to economic development or important to public interest. It also operates, in furtherance of its objectives, subsidiary corporations one of which is the now defucnt National Warehousing Corporation (NWC).

2. President issued Proclamation No. 430 reserving Block no. 4, Reclamation Area No. 4, of Cebu City, consisting of 4,599 square meters, for warehousing purposes under the administration of NWC. Subsequently, in 1940, a warehouse with a floor area of 1,940 square meters more or less, was constructed thereon.

3. E.O. 93 dissolved NWC 8 with NDC taking over its assets and functions4. Cebu assessed and collected from NDC real estate taxes on the land and the warehouse thereon. 5. NDC wrote the City Assessor demanding full refund of the real estate taxes paid to CEBU claiming that the land and the

warehouse standing thereon belonged to the Republic and therefore exempt from taxation6. CEBU contends that the properties have ceased to be tax exempt under the Assessment Law. 17 when the government

disposed of them in favor of NDC7. On the other hand, NDC maintains the Sec. 3 of the Assessment Law, which exempts properties owned by the Republic from

real estate tax, includes subject properties in the exemption.Issues:

1. W/N NDC is exempted from payment of the real estate taxes on the land reserved by the President for warehousing purposes

2. W/N NDC may recover in refund unprotested real estate taxes it paid from 1948 to 1970Ruling:

1. YES. What appears to have been ceded to NWC (later transferred to NDC), in the case before Us, is merely the administration of the property while the government retains ownership of what has been declared reserved for warehousing purposes under Proclamation No. 430. While ordinary public lands are tax exempt because title thereto belongs to the Republic, Sec. 115 subjects them to real estate tax even before ownership thereto is transferred in the name of the beneficiaries. As We view it, the effect of reservation under Sec. 83 is to segregate a piece of public land and transform it into non-alienable or non-disposable under the Public Land Act. Section 115, on the other hand, applies to disposable public lands. Clearly, therefore, Sec. 115 does not apply to lands reserved under Sec. 83. Consequently, the subject reserved public land remains tax exempt. However, as regards the warehouse constructed on a public reservation, a different rule should apply because "[t]he exemption of public property from taxation does not extend to improvements on the public lands made pre-emptioners, homesteaders and other claimants, or occupants, at their own expense, and these are taxable by the state.

2. Since the reservation is exempt from realty tax, the erroneous tax payments collected by CEBU should be refunded to NDC. Protest is not a requirement in order that a taxpayer who paid under a mistaken belief that it is required by law, may claim for a refund. Section 54 of Commonwealth Act No. 470 does not apply to petitioner which could conceivably not have been expected to protest a payment it honestly believed to be due.

Tan v Del RosarioDoctrine: Uniformity of taxation, like the kindred concept of equal protection, merely require that all subjects or objects of taxation similarly situated are to be treated alike both privileges and liabilities. Uniformity, does not offend classification as long as

a. it rest on substantial distinctions, b. it is germane to the purpose of the law. c. It is not limited to existing conditions only and d. must apply equally to all members of the same class.

With the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power.

Facts:1. Petitioners challenge the constitutionality of RA 7496 or the simplified income taxation scheme (SNIT) under Arts (26) and

(28) and III (1). 2. The SNIT contained changes in the tax schedules and different treatment in the professionals3. petitioners assail it as unconstitutional for being violative of the equal protection clause in the constitution.

Issue:1. Constitutionality of RA 7496

Ruling:1. No. uniformity of taxation, like the kindred concept of equal protection, merely require that all subjects or objects of taxation

similarly situated are to be treated alike both privileges and liabilities. Uniformity, does not offend classification as long as it rest on substantial distinctions, it is germane to the purpose of the law. It is not limited to existing only and must apply equally to all members of the same class. The legislative intent is to increasingly shift the income tax system towards the scheduled approach in taxation of individual taxpayers and maintain the present global treatment on taxable corporations. This classification is neither arbitrary nor inappropriate. With the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment. Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being violative of due process must perforce fail.The income tax on professional partnership is imposed not on the professional partnership, which is tax exempt, but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits. There is, then and now, no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through partnership (whether registered or not) with others in the exercise of a common profession.

Villegas vs. Hiu Chong Tsai Pao HoFacts:

1. On February 22, 1968, the Municipal Board of Manila passed City Ordinance No. 6537. The said city ordinance was also signed by then Manila Mayor Antonio J. Villegas

2. Section 1 of the said city ordinance prohibits aliens from being employed or to engage or participate in any position or occupation or business enumerated therein, whether permanent, temporary or casual, without first securing an employment permit from the Mayor of Manila and paying the permit fee of P50.00 except

a. persons employed in the diplomatic or consular missions of foreign countries, b. or in the technical assistance programs of both the Philippine Government and any foreign government, c. and those working in their respective households, and members of religious orders or congregations, sect or

denomination, who are not paid monetarily or in kind..\3. Hui Chiong Tsai Pao Ho (Tsai Pao Ho) who was employed in Manila filed a petition with the CFI of Manila to declare City

Ordinance No. 6537 as null and void for being discriminatory and violative of the rule of the uniformity in taxation. 4. Pet contends it is not aa tax measure but a regulatory measure in exercise of police power5. The trial court declared City Ordinance No. 6537 null and void. Villegas filed the present petition.

Issue:1. Whether or not the 50.00 employment permit fee imposed by virtue of Ordinance No. 6537 is a violation of the equal

protection clause.2. W/N the Ordinance provides guidelines for its implementation3. W/N it is a taax or regulatory measure4. W/N it is violative of due process

Ruling:1. The P50.00 fee is unreasonable

a. not only because it is excessive but because it fails to consider valid substantial differences in situation among individual aliens who are required to pay it.

b. Although the equal protection clause of the Constitution does not forbid classification, it is imperative that the classification should be based on real and substantial differences having a reasonable relation to the subject of the particular legislation.

c. The same amount of P50.00 is being collected from every employed alien whether he is casual or permanent, part time or full time or whether he is a lowly employee or a highly paid executive.

2. Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in the exercise of the power which has been granted to him by the ordinance. It has been held that where an ordinance of a municipality fails to state any policy or to set up any standard to guide or limit the mayor's action, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, such ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an activity per se lawful.

3. There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. It is obvious that the purpose of the ordinance is to raise money under the guise of regulation.

4. Requiring a person before he can be employed to get a permit from the City Mayor of Manila who may withhold or refuse it at will is tantamount to denying him the basic right of the people in the Philippines to engage in a means of livelihood. While it is true that the Philippines as a State is not obliged to admit aliens within its territory, once an alien is admitted, he cannot be deprived of life without due process of law.

Eastern Theatrical Co. vs. Alfonso Doctrine: The fact that some places of amusement are not taxed while others, is no argument at all against the equality and uniformity of the tax imposition. 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.Facts:

1. Ordinance No. 2958 of the City of Manila: AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS, THEATERS VAUDEVILLE COMPANIES THEATRICAL SHOWS AND BOXING EXHIBITION AND PROVIDING FOR OTHER PURPOSES.

2. Resp allege Manila is authorized by the Revised administrative Code the Municipal Board of the City of Manila to enact Ordinance No. 2958: Section 2444 (m) of the Revised Administrative code reads as follows: To tax fix the license fee and regulate the business of hotels restaurants refreshment places, cafes, lodging houses, boarding houses livery garages warehouses, pawnshops theaters, cinematographs...

3. petitioner assail the validity off the ordinance:a. For violation the uniformity and equality of taxation and thee equal protection of the laws under the Constitution b. because the Municipal Board of Manila exceeded and over-stepped the power granted it the Charter of the City of

Manila; c. it contravenes violates and is inconsistent with, existing national legislation more particularly revenue and tax laws d. it is unfair, unjust, arbitrary capricious unreasonable oppressive and is contrary to and violation our basic and

recognizes principles of taxation and licensing laws.4. The NIRC also taxes cinemaatographs for the national govt. SEC. 260. Amusement taxes. — There shall be collected from the

proprietor, lessee, or operation of theater cinematographs, concert halls, circuses, boxing exhibition...5. Ordinance No. 2958 does not specify the kind of the tax sought to be imposed but the seven schedules and other details of

said ordinance are, in every respect, identical with the amusement tax provided by section 260 of Commonwealth Act No. 466.

Issues:1. W/N RAC grants the power to tax amusement or NIRC repealed that provision of RAC2. W/N the ordinance violated the principle of equality and uniformity of taxation enjoined by the Constitution

Ruling:1. The conflict pointed out by them is imaginary. Both provisions of law may stand together and be enforced at the same time

without any incompatibility among themselves2. The argument has absolutely no merit. The fact that some places of amusement are not taxed while others, is no argument

at all against the equality and uniformity of the tax imposition. 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 appellants 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.

Ormoc Sugar vs. The Treasurer of Ormoc CityDoctrine: Four requisites for reasonable qualification to comply with the equal protection clause were set forth. As to the third requisite, the classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff.

Facts:1. Ordinance No. 4 of 1964 ws passed imposing "on any and all productions of centrifugal sugar milled at the Ormoc Sugar

Company, Inc., Ormoc City a municipal tax equivalent to one 1% per export sale to US and other foreign countries.2. Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc.3. Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte a complaint against the City of Ormoc as well as its

Treasurer, Municipal Board and Mayor, alleging that the afore-stated ordinance is unconstitutional a. for violating the equal protection clauseb. uniformity of taxationc. for being a tax forbidden by the RACd. that the tax is neither a production nor a license tax allowed by the charter of Ormoce. the tax amounts to a customs duty, fee or charge in violation of RA 2264 because the tax is on both the sale and

export of sugar.f. Defendants asserted that the tax ordinance was within defendant city's power to enact under the Local Autonomy Act and that

the same did not violate any constitutional limitation.g. CFI upheld the Constitutionality of the Ordinance and declared the taxing power of defendant chartered city broadened by the

Local Autonomy Act to include all other forms of taxes, licenses or fees not excluded in its charter.

Issues:1. W/N the Ormoc Municipality has the authority to levy such an export tax in violation of RAC2. W/N the constitutional limits on the power of taxation, specifically the equal protection clause and rule of uniformity of taxation, were infringed

Ruling:1. RAC divests municipal councils to impose a tax in any form whatever, upon goods and merchandise carried into the municipality. But that Section of the RAC was repealed by Section 2 of Republic Act 2264 (An Act Increasing the Autonomy of LGUs) which gave chartered cities, municipalities and municipal districts authority to levy for public purposes just and uniform taxes, licenses or fees2. We ruled that the equal protection clause applies only to persons or things identically situated and does not bar a reasonable classification of the subject of legislation, and a classification is reasonable where

a. it is based on substantial distinctions which make real differences; b. these are germane to the purpose of the law; c. the classification applies not only to present conditions but also to future conditions which are substantially identical to those of the present; d. the classification applies only to those who belong to the same class.

The Ordinance did not meet letter c because it excludes any subsequently established sugar central, of the same class as plaintiff, for the coverage of the tax. Any sugar central to be established in the future will not be subject to this tax.But petitioner is not entitled to refund of what it paid because at the time of collection, the ordinance provided a sufficient basis to preclude arbitrariness, the same being then presumed constitutional until declared otherwise.

Manila Race Horse Trainers Association vs. dela FuenteDoctrine: It was said there is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate. Equity in taxation is generally conceived in terms of ability to pay in relation to the benefits received by the taxpayer and by the public from the business or property taxed.Facts:

1. It is maintained that the Ordinance No. 3065 under consideration is a tax on race horses as distinct from boarding stables. The basis of license fee is the number of race horses kept or maintained in the boarding stables to be paid by the maintainers at the rate of P10.00 a year for each race horse and that an empty stable for race horse pays no license fee at all

Issue:1. Constitutionality of Ordinance No. 3065 for being discriminatory and savors of class legislation

Ruling:1. From the context of Ordinance No. 3065, the intent to tax or license stables and not horses is clearly manifest.

a. The tax is assessed not on the owners of the horses but on the owners of the stables. The number of horses is used in the assessment purely as a method of fixing an equitable and practical distribution of the burden imposed by the measure. It is but fair and just that for a boarding stable where only one horse is maintained proportionately less amount should be exacted

b. There is equality and uniformity in taxation if all articles or kinds of property of the same class are taxed at the same rate. Applying this criterion to the present case, there would be discrimination if some boarding stables of the same class used for the same number of horses were not taxed or were made to pay less or more than others.

c. The owners of boarding stables for race horses and the race horse owners themselves, who may carry the taxation burden are a class by themselves and appropriately taxed because they have the ability to pay, while owners of other kinds of horses are taxed less or not at all

d. Race horses are devoted to gambling if legalized, their owners derive fat income and the public hardly any profit from horse racing, and this business demands relatively heavy police supervision. Taking everything into account, the differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not discrimatory within the meaning of the Constitution.

Association of Customs Brokers vs. Municipal BoardDoctrine: The character of the tax as a property tax or a license or occupation tax must be determined by its incidents, and from the natural and legal effect of the language employed and not by the name or mode adopted in fixing its amount. If the tax is levied upon persons on account of their business, it will be construed as a license or occupation tax. It is also unconstitutional for infringing upon the uniformity of taxation for it does not distinguish between a motor vehicle for hire and for purely private use, a motor vehicle registered in the Manila or in another place but occasionally comes to Manila and uses its streets and public highways.

Facts:1. Pet, composed of all brokers and public service operators of motor vehicles in Manila challenges the validity of Ordinance No. 3379 on the ground that

a. while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila;b. said ordinance offends against the rule of uniformity of taxation;c. it constitutes double taxation.

2. CFI sustained its validity 3. Manila asserts RA 409 confers upon the municipal board the power "to tax motor and other vehicles operating within the City of Manila the provisions of any existing law to the contrary notwithstanding." And that this power is broad enough to impose property tax on motor operating w/in city limits4. The Ordinance reads, "An Ordinance Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in its section it provides that the tax should be 1 per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its streets and bridges."

Issue:The Constitutionality of the ordinanceAnd w/n it is a property tax

Ruling:Motor Vehicles Law provides that no fees other than those fixed in the Act may be exacted from motor vehicle owner or operators except those lawful and equitable insular, local, municipal property tax. It applies to all motor vehicles and limits the broad grant of power conferred upon the City of Manila by its Charter to impose taxes. When the charter provides that Manila can impose a tax on motor vehicles operating within its limit, it can only refer to property tax as a different interpretation would make it repugnant to the Motor Vehicle Law. As a rule an ad valorem tax is a property tax but it should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. If a tax is in its nature an excise, it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise.

The ordinance in question is a excise tax, a licese fee in the guise of a property tax to circumvent the prohibition under the Motor Vehicles Act. Said law prohibits the collection of fees from motor vehicles because it already provides for fees representing the participation of the public utility on the repair, maintenance and improvement of pub highways and bridges w/c is the purpose of the property tax imposed by Manila.

It is also unconstitutional for infringing upon the uniformity of taxation for it does not distinguish between a motor vehicle for hire and for purely private use, a motor vehicle registered in the Manila or in another place but occasionally comes to Manila and uses its streets and public highways.

American Bible Society v City of ManilaDoctrine: It is one thing to impose a tax on the income or property of a preacher. It is quite another to exact a tax from him for the privilege of delivering a sermon. Those who can tax the exercise of this religious practice can make its exercise so costly as to deprive it of the resources necessary for its maintenance. In a former case the Supreme Court expressed the opinion that the right to enjoy freedom of the press and religion occupies a preferred position as against the constitutional right of property owners.Facts:1. pet is a non-profit missionary corp registered and doing buss in the Philippines2. The defendant appellee is a municipal corporation with powers that are to be exercised in conformity with the provisions of the Revised Charter of the City of Manila3. In the course of its ministry, the Philippine agency of the American Bible Society has been distributing and selling bibles and/or gospel portions thereof throughout the Philippines and translating the same into several Philippine dialects4. The acting City Treasurer of Manila required the society to secure the corresponding Mayors’ permit and municipal license fees in vioation of Ordinance No. 3000, as amended, and Ordinances No. 2529 w/c requires all businesses, trade or occupation wc Manila is empowered to license or to tax, to secure a permit from the mayor and license from the treasurer, and imposes on retail dealers of general merchandise, among others, quarterly license fees based on their gross sales 5. The society paid such under protest, and filed suit questioning the legality of the ordinances under which the fees are being collected asserting that the ordinances provide for religious censorship and restrain the free exercise and enjoyment of its religious profession and further alleges that RAC prov based on w/c the ordinances were made are already reppealed by the charter of MlaIssue:W/N the municipal ordinances violate the freedom of religious profession and worship.

Ruling:YES!

a. Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that no law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and enjoyment of religious profession and worship.

b. The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. Any restraints of such right can only be justified like other restraints of freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent.

c. NIRC exempts from taxation corporations or associations organized and operated exclusively for religious, charitable, or educational purposes but income derived from any proprietary activity and property shall be taxed.

d. It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or occupation of selling said "merchandise" for profit.

e. eOrdinance No. 3000 cannot be considered unconstitutional, even if applied to plaintiff Society. But as Ordinance No. 2529 of the City of Manila is not applicable to petitioner, then Ordinance 3000 is allso inapplicable.

Province of Abra v HernandoDoctrine: Exemption from taxation is not favored and is never presumed, so that if granted, it must be strictly construed against the taxpayer. There must be proof of the actual and direct use of the lands, buildings, and improvements for religious (or charitable) purposes to be exempted from taxation.

Facts:1. The provincial assessor made a tax assessment on the properties of the Roman Catholic Bishop of Bangued. 2. The bishop claims tax exemption from real estate tax based on the provisions of Section 17, paragraph 3, Article VII of the 1973 Constitution. 3. He filed an action for declaratory relief. Judge Hernando of the CFI Abra presided over the case. 4. The petitioner province filed a motion to dismiss, based on lack of jurisdiction, which was denied. 5. It was followed by a summary judgment granting the exemption without hearing the side of the petitioner.6. The Supreme Court granted the petition, set aside the June 19, 1978 resolution, and ordered the respondent judge, or whoever is acting on his behalf, to hear the case on merit; without costs.

Issue:W/N admin remedies were exhaustedExemption of bishop’s porp from taxation

Ruling:In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based primarily on the lack of jurisdiction, as the validity of a tax assessment may be questioned before the Local Board of Assessment Appeals and not with a court. There was also mention of a lack of a cause of action, but only because, in its view, declaratory relief is not proper, as there had been breach or violation of the right of government to assess and collect taxes on such property.The 1935 and the 1973 Constitutions differ in language as to the exemption of religious property from taxes as they should not only be “exclusively” but also “actually” and “directly” used for religious purposes. Exemption from taxation is not favored and is never presumed, so that if granted, it must be strictly construed against the taxpayer. There must be proof of the actual and direct use of the lands, buildings, and improvements for religious (or charitable) purposes to be exempted from taxation.Hear the case on the merits.

Abra Valley v AquinoDoctrine: Exemption in favour of property used exclusively for charitable or educational purposes is ‘not limited to property actually indispensable’ therefor but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes. It must be stressed however, that while this Court allows a more liberal and non-restrictive interpretation of the phrase "exclusively used for educational purposes" as provided for in the 1935 Philippine Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. But the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence.

Facts:1. Petitioner Abra Valley College is an educational corporation and institution of higher learning duly incorporated with the SEC.2. Municipal and Provincial treasurers issued a Notice of Seizure upon the petitioner for the college lot and building for the

satisfaction of said taxes thereon. 3. The treasurers served upon the petitioner a Notice of Sale, the sale being held on the same day. 4. Dr. Paterno Millare, then municipal mayor of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving

the sale of the college lot and building. The certificate of sale was correspondingly issued to him. 5. Pet filed a complaint in the court a quo to annul and declare void the “Notice of Seizure” and the “Notice of Sale” of its lot

and building for non-payment of real estate taxes and penalties amounting 6. Parties entered into a stipulation of facts adopted and embodied by the trial court in its questioned decision. 7. The trial court ruled for the government, holding that the second floor of the building is being used by the director for

residential purposes and that the ground floor used and rented by Northern Marketing Corporation, a commercial establishment, and thus the property is not being used “exclusively” for educational purposes.

8. Instead of perfecting an appeal, petitioner availed of the instant petition for review on certiorari with prayer for preliminary injunction before SC.

9. Under the 1935 Philippine Constitution, and Republic Act No. 409, otherwise known as the Assessment Law

Issue:W/N petitioner’s building should be tax exempt

Ruling:Partly yes. The 1935 Philippine Constitution, expressly grants exemption from realty taxes for “Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable or educational purposes.” This constitution is relative to the Assessment Law.

a. an institution used exclusively for religious, charitable and educational purposes, and as such, it is entitled to be exempted from taxation; notwithstanding that it keeps a lodging and a boarding house and maintains a restaurant for its members (YMCA case). b. A lot which is not used for commercial purposes but serves solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental use in religious functions (Bishop of Nueva Segovia case).c. Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school building as well as the lot where it is built, should be taxed, not because the second floor of the same is being used by the Director and his family for residential purposes, but because the first floor thereof is being used for commercial purposes. However, since only a portion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the school involved.

Herrera v QCBAADoctrine: The exemption in favour of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose. "All lands, building and improvements used exclusively for religious, charitable or educational purposes shall be exempt from taxation," pursuant to the Constitution, regardless of whether or not material profits are derived from the operation of the institutions in question. In other words, Congress may, if it deems fit to do so, impose taxes upon such "profits", but said "lands, buildings and improvements" are beyond its taxing power.

Facts:1. In 1952, the Director of the Bureau of Hospitals authorized Jose V. Herrera and Ester Ochangco Herrera to establish and

operate the St. Catherine’s Hospital. 2. In 1953, the Herreras sent a letter to the Quezon City Assessor requesting exemption from payment of real estate tax on the

hospital, stating that the same was established for charitable and humanitarian purposes and not for commercial gain. 3. The exemption was granted effective years 1953 to 1955. 4. In 1955, however, the Assessor reclassified the properties from “exempt” to “taxable” effective 1956, as it was ascertained

a. that out 32 beds in the hospital, 12 of which are for pay-patients; andb. a school of midwifery is also operated within the premises of the hospital.

5. CTA ruled that it should not be exempted from paying real estate taxes because St. Catherine's Hospital "has a pay ward for ... pay-patients, who are charged for the use of the private rooms, operating room, laboratory room, delivery room, etc., like other hospitals operated for profit" and that "petitioners and their family occupy a portion of the building for their residence."

Issue:Whether St. Catherine’s Hospital is exempt from realty tax.

Ruling:YES. The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted exclusively to the maintenance of the institution as a public charity. The exemption in favour of property used exclusively for charitable or educational purpose is not limited to property actually indispensable therefore, but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purpose, such as in the case of hospitals — a school for training nurses; a nurses’ home; property used to provide housing facilities for interns, resident doctors, superintendents and other members of the hospital staff; and recreational facilities for student nurses, interns and residents. Within the purview of the Constitution, St. Catherine’s Hospital is a charitable institution exempt from taxation."All lands, building and improvements used exclusively for religious, charitable or educational purposes shall be exempt from taxation," pursuant to the Constitution, regardless of whether or not material profits are derived from the operation of the institutions in question. In other words, Congress may, if it deems fit to do so, impose taxes upon such "profits", but said "lands, buildings and improvements" are beyond its taxing power.

Lung Center v QCDoctrine: As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.Facts:

1. Lung Center is a non-stock and non-profit entity established by virtue of PD No. 1823. 2. It is the registered owner of a parcel of land at Quezon Avenue 3. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines.

a. A big space at the ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services.

b. almost one-half of the entire area on the left side of the building is vacant and idlec. while a big portion on the right side is being leased for commercial purposes to a private enterprise known as the

Elliptical Orchids and Garden Center.4. The petitioner accepts paying and non-paying patients and receives annual subsidies from the government.5. Both the land and the hospital building of the petitioner were assessed for real property taxes.6. The petitioner filed a Claim for Exemption from real property taxes with the City Assessor, predicated on its claim that it is a

charitable institution averring that a minimum of 60% of its hospital beds are exclusively used for charity patients.7. The petitioner’s request was denied, and a petition was, thereafter, filed before QC Local Board of Assessment Appeals8. Director of petitioner was earlier sued for graft charges for entering into a lease contract over 7,663.13 square meters of the

property in 1990 for only P20,000 a month, when the monthly rental should be P357,000 a month as determined by CoA9. Instead of complying with the directive of the COA for the cancellation of the contract for being grossly prejudicial to the

government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000.

Issues:1. W/N Lung Center is a charitable institution2. Should it be real property tax exempt

Ruling:1. On the first issue, we hold that the petitioner is a charitable institution. To determine whether an enterprise is a charitable

institution/entity or not, the elements which should be considered include the (SPASIPAC)a. statute creating the enterprise, b. its corporate purposes, c. its constitution and by-laws, d. the methods of administration, e. the nature of the actual work performed, f. the character of the services rendered, g. the indefiniteness of the beneficiaries, h. and the use and occupation of the properties.

It was organized for the welfare and benefit of the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the Philippines.

2.