tax law cases principles

Tax law 1Case digest part 1

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MISAEL P. VERA, et al. petitioners, vs. HON. JOSE F. FERNANDEZ, et al. respondents. G.R. No. L-31364 March 30, 1979

The BIR filed a motion for allowance of claim and for payment of taxes representing the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes. The Administrator opposed the motion. Alleging that the claim was already barred by prescription under the Rules of Court which provides that all claims for money against the decedent arising from the contracts –xxx- are barred forever.

ISSUE: Whether the government can validly collect taxes even if already considered barred by prescription under the Rules of Court.

SC RULING:The provisions of Rules of Court may reasonably be presumed to have been

also in the mind of the Court AS NOT affecting the provisions of the National Internal Revenue Code.

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. (Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. As already shown, taxes may be collected even after the distribution of the estate of the decedent among his heirs.

CIR, Petitioner, vs. SAN ROQUE POWER CORPORATION, Respondent. G.R. No. 187485 February 12, 2013, G.R. No. 196113 TAGANITO MINING CORPORATION, Petitioner, vs. CIR, Respondent. G.R. No. 197156 PHILEX MINING CORPORATION, Petitioner, vs. CIR, Respondent.

CIR v. San Roque Power Corporation


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San Roque filed an application for tax refund or credit and due to the inaction of CIR, they referred the case to the CTA before expiration of 120 days upon filing of application for tax refund to the CIR. Relying on the Atlas Doctrine which states: “that the two-year prescriptive period should be counted from the date of payment of the output VAT, not from the close of the taxable quarter when the sales involving the input VAT were made.”

However, The CTA found legal basis to partially grant San Roque’s claim. The CIR filed a Petition for Review before the CTA EB praying for the denial of San Roque’s claim for refund or tax credit in its entirety but was dismissed by the CTA EB. The Court En Banc has squarely and exhaustively ruled on this issue in this wise: The respondent is also covered by the two (2) year prescriptive period. We have repeatedly held that the claim for refund with the BIR and the subsequent appeal to the Court of Tax Appeals must be filed within the two-year period.

Taganito Mining Corporation v. CIRTaganito filed with the CIR a letter claiming a tax credit/refund of its

supposed input VAT. Likewise, they filed an Application for Tax Credits/Refunds. As the statutory period within which to file a claim for refund for said input VAT is about to lapse without action on the part of the CIR, Taganito filed its petition for review with the CTA without waiting for the 120-day period to lapse.

The CTA partially granted Taganito’s claim.The CIR filed a Motion for Partial Reconsideration Opposition on the Motion for Partial Reconsideration and praying that Taganito’s entire claim for refund be denied. The CTA EB found that Taganito’s judicial claim was prematurely filed.

Philex Mining Corporation v. CIRPhilex filed its claim for refund/tax credit with the One Stop Shop Center of

the Department of Finance. However, due to [the CIR’s] failure to act on such claim, Philex filed a Petition for Review. The CTA denied Philex’s claim due to prescription.

ISSUES: Whether the following can be validly imposed:1. BIR Ruling on tax refund claims is strictly construed against taxpayer.2. Tax refund cannot be claimed as matter of right.3. Prospectively application of Tax Ruling

SC RULING:1. YES. Because taxes are the lifeblood of the nation. The Philippines has

been struggling to improve its tax efficiency collection for the longest time


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with minimal success. Consequently, the Philippines has suffered the economic adversities arising from poor tax collections, forcing the government to continue borrowing to fund the budget deficits. This Court cannot turn a blind eye to this economic malaise by being unduly liberal to taxpayers who do not comply with statutory requirements for tax refunds or credits. The tax refund claims in the present cases are not a pittance. Many other companies stand to gain if this Court were to rule otherwise. The dissenting opinions will turn on its head the well-settled doctrine that tax refunds are strictly construed against the taxpayer.

2. NO. The mere fact that a taxpayer has undisputed excess input VAT, or that the tax was admittedly illegally, erroneously or excessively collected from him, does not entitle him as a matter of right to a tax refund or credit. Strict compliance with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is essential and necessary for such claim to prosper. Well-settled is the rule that tax refunds or credits, just like tax exemptions, are strictly construed against the taxpayer. The burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit.

3. YES. In one case, it was ruled that the Commissioner of Internal Revenue is precluded from adopting a position contrary to one previously taken where injustice would result to the taxpayer. Also in another case, it was ruled that the BIR rulings have no retroactive effect where a grossly unfair deal would result to the prejudice of the taxpayer, as in this case.

4. Decision on the following cases:

a. SAN ROQUE CASE San Roque failed to comply with the 120-day waiting period, the

time expressly given by law to the Commissioner to decide whether to grant or deny San Roque’s application for tax refund or credit. It is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The waiting period has been in our statute books for more than fifteen (15) years before San Roque filed its judicial claim.

San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003At the time San Roque filed its judicial claim, the law as applied and administered by the BIR was that the Commissioner had 120 days to act on administrative claims. This was in fact the position of the BIR prior to the issuance of BIR Ruling No. DA-489-03. Indeed,


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San Roque never claimed the benefit of BIR Ruling No. DA-489-03 or RMC 49-03, whether in this Court, the CTA, or before the Commissioner.

b. TAGANITO CASE: Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December

2003, which expressly ruled that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review." Taganito filed its judicial claim after the issuance of BIR Ruling No. DA-489-03 but before the adoption of the Aichi doctrine. Thus, Taganito is deemed to have filed its judicial claim with the CTA on time.

Truly, Taganito can claim that in filing its judicial claim prematurely without waiting for the 120-day period to expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03, which shields the filing of its judicial claim from the vice of prematurity.

c. PHILEX CASE: Philex’s situation is not a case of premature filing of its judicial claim

but of late filing, indeed very late filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means non-exhaustion of the 120-day period for the Commissioner to act on an administrative claim. Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim prematurely but filed it long after the lapse of the 30-day period following the expiration of the 120-day period. In fact, Philex filed its judicial claim 426 days after the lapse of the 30-day period.

Dissenting Opinion:- Although I recognize the well-settled rule in taxation that tax refunds

or credit, just like tax exemptions, are strictly construed against taxpayers, reason dictates that such strict construction properly applies only when what is being construed is the substantive right to refund of taxpayers. When courts themselves have allowed for procedural liberality, then they should not be so strict regarding procedural lapses that do not really impair the proper administration of justice. After all, the higher objective of procedural rule is to insure that the substantive rights of the parties are protected.

- In a dissenting opinion in a case involving VAT law, Justice Tinga well said: "Taxes may be inherently punitive, but when the fine line


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between damage and destruction is crossed, the courts must step forth and cut the hangman's noose. Justice Holmes once confidently asserted that ‘the power to tax is not the power to destroy while this Court sits’ and we should very well live up to this expectation not only of the revered Holmes, but of the Filipino people who rely on this Court as the guardian of their rights. At stake is the right to exist and subsist despite taxes, which is encompassed in the due process clause." (Emphasis supplied)

CIR, petitioner, vs. MANUEL B. PINEDA, respondent.( G.R. No. L-22734, September 15, 1967 )

After the estate proceedings of decedent Pineda, the CIR investigated the income tax liability of the estate and it found that the corresponding income tax returns were not filed. Thereupon, the representative of the CIR filed said returns for the estate on the basis of information and data obtained from the aforesaid estate proceedings.

Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the heirs."

CTA reversed the decision of the Commissioner on the ground that his right to assess and collect the tax has prescribed.

CIR appealed for the liability of Manuel for the payment of all the taxes instead of only for the amount of taxes corresponding to his share in the estate.

Manuel B. Pineda opposes on the ground that as an heir he is liable for unpaid income tax due the estate only up to the extent of and in proportion to any share he received.

ISSUE: Whether the CIR can validly collect under the law the tax by subjecting the property of the estate which is in the hands of an heir or transferee to the payment of the tax due.

SC RULING: YES. The Bureau of Internal Revenue should be given, in instances like the

case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And as afore-stated in this case the suit seeks to achieve only one objective:


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payment of the tax. The adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government recovered said tax.

CAMP JOHN HAY DEVELOPMENT CORPORATION, Petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, et al., Respondents. G.R. No. 169234, October 2, 2013FACTS:

- Petitioner filed with the Board of Tax Assessment Appeals (BTAA) challenging the validity and propriety of the issuances of the City Assessor.

- Petitioner claimed that there was no legal basis for the issuance of the assessments because it was allegedly exempted from paying taxes, national and local, including real property taxes, pursuant to RA No. 7227, otherwise known as the Bases Conversion and Development Act of 1992.

- BTAA enjoined petitioner to first comply therewith, particularly as to the payment under protest of the subject real property taxes before the hearing of its appeal.

- The CBAA remanded the case to the LBAA for further proceedings subject to a full and up-to-date payment of the realty taxes on subject properties as assessed by the respondent City Assessor of Baguio City, either in cash or in bond.

- CTA En Banc found that petitioner has indeed failed to comply with Section 252 of RA No. 7160or the LGC of 1991. Hence, it dismissed the petition and affirmed the subject Resolutions of the CBAA which remanded the case to the LBAA for further proceedings subject to compliance with said Section, in relation to Section 7, Rule V of the Rules of Procedure before the LBAA.

ISSUE: Whether it is in accordance with the law to compel petitioner to first comply as to the payment under protest of the subject real property taxes before the hearing of its appeal.

SC RULING:YES. The trial court has no jurisdiction to entertain a Petition for Prohibition absent petitioner’s payment under protest, of the tax assessed as required by Sec.64 of the RPTC. Payment of the tax assessed under protest, is a condition sine qua non


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before the trial court could assume jurisdiction over the petition and failure to do so, the RTC has no jurisdiction to entertain it.

The restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, this Court holds that petitioner is considered a taxable entity in this case.

To reiterate, the restriction upon the power of courts to impeach tax assessment without a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled. The right of local government units to collect taxes due must always be upheld to avoid severe erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of RA No. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.

THE PHILIPPINE GUARANTY CO., INC., petitioner, vs. CIR and CTA, respondents. G.R. No. L-22074, April 30, 1965

The Philippine Guaranty Co., Inc., entered into reinsurance contracts with foreign insurance companies not doing business in the Philippines. It ceded to the foreign reinsurers a portion of the premiums on insurance it has originally underwritten in the Philippines, in consideration for the assumption by the latter of liability on an equivalent portion of the risks insured.


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The aforementioned premiums were excluded by Philippine Guaranty Co., Inc. from its gross income when it filed its income tax returns. Furthermore, it did not withhold or pay tax on them. The CIR assessed against Philippine Guaranty Co., Inc. withholding tax on the ceded reinsurance premiums.

Philippine Guaranty Co, Inc. questioned the legality of the CIRs assessment for withholding tax on the reinsurance premiums ceded to the foreign reinsurers. Petitioner maintain that the reinsurance premiums in question did not constitute income from sources within the Philippines because the foreign reinsurers did not engage in business in the Philippines, nor did they have office here.

Petitioner further contends that the reinsurance premiums are not income from sources within the Philippines because they are not specifically mentioned in Section 37 of the Tax Code.

ISSUE: Whether the taxes imposed on income from sources within the Philippines which are NOT specifically mentioned in the Tax Code in accordance with the law.

SC RULING:YES. The reinsurance premiums were income created from the undertaking

of the foreign reinsurance companies to reinsure Philippine Guaranty Co., Inc., against liability for loss under original insurances. Such undertaking, as explained above, took place in the Philippines. These insurance premiums, therefore, came from sources within the Philippines and, hence, are subject to corporate income tax.

Enumeration of income in the Tax Code is not an all-inclusive, for it merely directs that the kinds of income mentioned therein should be treated as income from sources within the Philippines but it does not require that other kinds of income should not be considered likewise.

The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which come within the State's territory, and facilities and protection which a government is supposed to provide. Considering that the reinsurance premiums in question were afforded protection by the government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of maintaining the state.


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COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ALGUE, INC., and THE COURT OF TAX APPEALS, respondents. G.R. No. L-28896 February 17, 1988FACTS:

Private respondent received a letter from the CIR (petitioner) with regard to the delinquency income taxes. 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. Such warrant was reconsidered by the CTA.

On appeal, petitioner contended that the claimed deduction was properly disallowed because it was not an ordinary reasonable or necessary business expense.

The Court of Tax Appeals held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees.

ISSUE: Whether CIR correctly disallowed the deduction claimed and proven by private respondent Algue as legitimate business expenses in its income tax returns and that the payment of the fees was necessary and reasonable.

SC RULING:NO. It is said that taxes are what we pay for civilization 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 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.

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made


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in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.

CREBA., Petitioner, vs. SEC. ROMULO, et al. Respondents. G.R. No. 160756, March 9, 2010

CREBA assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable withholding tax (CWT) on sales of real properties classified as ordinary assets as it violates the due process clause because it levies income tax even if there is no realized gain.

Petitioner also seeks to nullify some of the prescribed rules and procedures for the collection of CWT on the sale of real properties categorized as ordinary assets, and these revenue regulations are contrary to law for two reasons: first, they ignore the different treatment by RA 8424 of ordinary assets and capital assets and second, respondent Secretary of Finance has no authority to collect CWT, much less, to base the CWT on the gross selling price or fair market value of the real properties classified as ordinary assets.

They also asserted that the government collects income tax even when the net income has not yet been determined. They contravene the equal protection clause as well because the CWT is being levied upon real estate enterprises but not on other business enterprises, more particularly those in the manufacturing sector.

ISSUE:

a. Whether the persons challenging the constitutionality of MCIT and CWT have standing to do so.

b. Whether the imposition of the MCIT on domestic corporations and the imposition of CWT on income from sales of real properties classified as ordinary assets are valid under the law.

c. Whether the MCIT to a corporation’s gross income is tantamount to a confiscation of capital because gross income, unlike net income, is not "realized gain."

SC RULING:a. YES. The Court has the discretion to take cognizance of a suit which

does not satisfy the requirements of an actual case, ripeness or legal standing when paramount public interest is involved. The questioned MCIT and CWT affect not only petitioners but practically all domestic corporate


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taxpayers in our country. The transcendental importance of the issues raised and their overreaching significance to society make it proper for us to take cognizance of this petition.

b. YES. The Tax Reform Act introduces for the first time a new concept called the [MCIT] so as to minimize tax evasion, tax avoidance, tax manipulation in the country and for administrative convenience. … This will go a long way in ensuring that corporations will pay their just share in supporting our public life and our economic advancement.

Domestic corporations owe their corporate existence and their privilege to do business to the government. They also benefit from the efforts of the government to improve the financial market and to ensure a favorable business climate. It is therefore fair for the government to require them to make a reasonable contribution to the public expenses.

c. NO. Taxes are the lifeblood of the government. Without taxes, the government can neither exist nor endure. The exercise of taxing power derives its source from the very existence of the State whose social contract with its citizens obliges it to promote public interest and the common good.

Taxation is an inherent attribute of sovereignty. It is a power that is purely legislative. Essentially, this means that in the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. It has the authority to prescribe a certain tax at a specific rate for a particular public purpose on persons or things within its jurisdiction. In other words, the legislature wields the power to define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or what) it shall be imposed and where it shall be imposed.

Like any other statute, tax legislation carries a presumption of constitutionality.The constitutional safeguard of due process is embodied in the fiat "[no] person shall be deprived of life, liberty or property without due process of law." In Sison, Jr. v. Ancheta, et al., we held that the due process clause may properly be invoked to invalidate, in appropriate cases, a revenue measure when it amounts to a confiscation of property. But in the same case, we also explained that we will not strike down a revenue measure as unconstitutional (for being violative of the due process clause) on the mere allegation of arbitrariness by the taxpayer. There must be a factual foundation to such an unconstitutional taint. This merely adheres to the authoritative doctrine that, where the due process clause is invoked, considering that it is not a fixed rule but rather a broad standard, there is a need for proof of such persuasive character.


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We have long recognized that the method of withholding tax at source is a procedure of collecting income tax which is sanctioned by our tax laws. The withholding tax system was devised for three primary reasons: first, to provide the taxpayer a convenient manner to meet his probable income tax liability; second, to ensure the collection of income tax which can otherwise be lost or substantially reduced through failure to file the corresponding returns and third, to improve the government’s cash flow. This results in administrative savings, prompt and efficient collection of taxes, prevention of delinquencies and reduction of governmental effort to collect taxes through more complicated means and remedies.

ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. 115455 August 25, 1994 FACTS: These are various suits for certiorari and prohibition, challenging the constitutionality of Republic Act No. 7716 otherwise known as Expanded Value Added Tax (EVAT).

One specific argument of the petitioners against the VAT is that it is regressive and that it violates the requirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve a progressive system of taxation."

ISSUE: Whether such various arguments on taxation is subject to judicial review.

SC RULING:Not all of questions raised are judicially cognizable, because not all provisions of the Constitution are self executing and, therefore, judicially enforceable. The other departments of the government are equally charged with the enforcement of the Constitution, especially the provisions relating to them.

Indeed, the absence of threat of immediate harm makes the need for judicial intervention less evident and underscores the essential nature of petitioners' attack on the law on the grounds of regressivity, denial of due process and equal protection and impairment of contracts as a mere academic discussion of the merits of the law. For the fact is that there have even been no notices of assessments issued to petitioners and no determinations at the administrative levels of their claims so as to illuminate the actual operation of the law and enable us to reach sound judgment regarding so fundamental questions as those raised in these suits.

Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required by the Constitution to do is to "evolve a progressive


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system of taxation." This is a directive to Congress, just like the directive to it to give priority to the enactment of laws for the enhancement of human dignity and the reduction of social, economic and political inequalities, or for the promotion of the right to "quality education". These provisions are put in the Constitution as moral incentives to legislation, not as judicially enforceable rights.

We are told, however, that the power of judicial review is not so much power as it is duty imposed on this Court by the Constitution and that we would be remiss in the performance of that duty if we decline to look behind the barriers set by the principle of separation of powers.

It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in what is essentially a case that at best is not ripe for adjudication. That duty must still be performed in the context of a concrete case or controversy, as Art. VIII, 5(2) clearly defines our jurisdiction in terms of "cases," and nothing but "cases." That the other departments of the government may have committed a grave abuse of discretion is not an independent ground for exercising our power. Disregard of the essential limits imposed by the case and controversy requirement can in the long run only result in undermining our authority as a court of law. For, as judges, what we are called upon to render is judgment according to law, not according to what may appear to be the opinion of the day.

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants, vs. THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants- appellants. G.R. No. L-4817 May 26, 1954 FACTS:

Object of the suit is the annulment of Ordinance No. 3398 of the City of Manila. The ordinance in questioned imposes a municipal occupation tax on persons exercising various professions in the city and penalizes non-payment of the tax. The ordinance was enacted pursuant to the Revised Charter of the City of Manila, which empowers the Municipal Board of said city to impose a municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various professions above referred to.

Plaintiffs paid the tax under protest and then brought the present suit for the purpose already stated. The lower court upheld the validity of the provision of law authorizing the enactment of the ordinance but declared the ordinance itself illegal and void on the ground that the penalty there in provided for


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non-payment of the tax was not legally authorized. From this decision both parties appealed to this Court.

Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the said tax, it has withheld that authority from other chartered cities, not to mention municipalities.

ISSUE: Whether the following is well within the jurisdiction of the Court:1. The determination what entities should be empowered to impose

occupation tax.2. What constitutes exercise or pursuit of a profession in the city.

SC RULING:1. NO. We do not think it is for the courts to judge what particular cities or

municipalities should be empowered to impose occupation taxes in addition to those imposed by the National Government. That matter is peculiarly within the domain of the political departments and the courts would do well not to encroach upon it. Moreover, as the seat of the National Government and with a population and volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers a more lucrative field for the practice of the professions, so that it is but fair that the professionals in Manila be made to pay a higher occupation tax than their brethren in the provinces.

2. YES. What constitutes exercise or pursuit of a profession in the city is a matter of judicial determination. The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am. Jur., 341.)

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