8/12/2019 tax batch 2

1/45

CIRvs. S.C. JOHNSON AND SON,INC., and CA

June 25, 1999Gonzaga-Reyes, J.

Mica Maurinne M. AdaoTopic: Doube Ta!a"ion

SUMMARY: S.C. Johnson and Son, Inc entered into a license agreement with SC

Johnson and Son USA. For the use of the trademark or technology, SC Johnson

(hil! was o"liged to #ay SC Johnson USA royalties "ased on a #ercentage of net

sales and su"$ected the same to %&' withholding ta on royalty. )ow, SC

Johnson and Son filed with the International *a Affairs +ivision (I*A+! of the

I- a claim for refund of over#aid withholding ta on royalties arguing that the

most favored nation ta rate of /0' on royalties as #rovided in the -1US ta

treaty in relation to the -12est 3ermany ta treaty should "e a##lied. I-

Commissioner did not act on said claim for refund so a #etition for review was

filed "efore the C*A. C*A ruled in favor of SC Johnson and Son. CA affirmed in

toto. SC set aside C*A and CA rulings. Since the -1US *a *reaty does notgive a matching ta credit of %0 #ercent for the taes #aid to the hili##ines on

royalties as allowed under the -12est 3ermany *a *reaty, SC Johnson cannot

"e deemed entitled to the /0 #ercent rate granted under the latter treaty for the

reason that there is no #ayment of taes on royalties under similar circumstances

as re4uired "y the most favoured clause.

+OCTRINE:

*he #ur#ose international agreement, entered into for the avoidance of dou"le

taation (e.g. -1US *a *reaty!, is to reconcile the national fiscal legislations of

the contracting #arties in order to hel# the ta#ayer avoid simultaneous taationin two different $urisdictions. *he a##arent rationale for doing away with dou"le

taation is of encourage the free flow of goods and services and the movement of

ca#ital, technology and #ersons "etween countries, conditions deemed vital in

creating ro"ust and dynamic economies

International $uridical dou"le taation is defined as the im#osition of com#ara"le

taes in two or more states on the same ta#ayer in res#ect of the same su"$ect

matter and for identical #eriods.

*o eliminate international $uridical dou"le taation, a ta treaty resorts to several

methods.

/. First, it sets out the res#ective rights to ta of the state of source or situsand of the state of residence with regard to certain classes of income orca#ital.

%. Second, the state of source is given a full or limited right to ta togetherwith the state ofresidence. In this case, the treaties make it incum"entu#on the state ofresidence to allow relief in order to avoid dou"le taation.

*here are two methods of relief 5 the eem#tion method and the credit method.

In the eem#tion method, the income or ca#ital which is taa"le in the state of

source or situs is eem#ted in the state of residence, although in some instances it

may "e taken into account in determining the rate of ta a##lica"le to the

ta#ayer6s remaining income or ca#ital.

7n the other hand, in the credit method, although the income or ca#ital which is

taed in the state of source is still taa"le in the state of residence, the ta #aid in

the former is credited against the ta levied in the latter.

*he "asic difference "etween the two methods is that in the eem#tion method,

the focus is on the income or ca#ital itself, whereas the credit method focuses

u#on the ta

FACTS:S.C. Johnson and Son, Inc., a domestic cor#oration organi8ed and o#eratingunder the hili##ine laws, entered into a license agreement with SC Johnson andSon, United States of America (USA!, a non1resident foreign cor#oration "asedin the U.S.A. #ursuant to which the SC Johnson (hil! was granted the right touse the trademark, #atents and technology owned "y the latter including the rightto manufacture, #ackage and distri"ute the #roducts covered "y the Agreementand secure assistance in management, marketing and #roduction from SC

Johnson and Son, U. S. A. *he said 9icense Agreement was duly registered withthe *echnology *ransfer oard of the ureau of atents, *rade :arks and*echnology *ransfer.

For the use of the trademark or technology, SC Johnson (hil! was o"liged to #aySC Johnson USA royalties "ased on a #ercentage of net sales and su"$ected thesame to %&' withholding ta on royalty #ayments which SC Johnson (hil! #aidfor the #eriod covering July /;;% to :ay /;;< in the total amount of /,=0>, otherwise known as the 9ocal Autonomy Act, is authori8ed to im#oseB

and that the ta amounts to a customs duty, fee or charge in violation of

8/12/2019 tax batch 2

9/45

#aragra#h / of Section % of -e#u"lic Act %%=> "ecause the ta is on "oth the saleand e#ort of sugar.

7rmoc City (*reasurer, :unici#al ord and :ayor! asserted that the taordinance was within city6s #ower to enact under the 9ocal Autonomy Act andthat the same did not violate the afore1cited constitutional limitations.

CFI rendered a decision that u#held the constitutionality of the ordinance anddeclared the taing #ower of defendant chartered city "roadened "y the 9ocalAutonomy Act to include all other forms of taes, licenses or fees not ecluded inits charter. ence, this #etition.

ISSUE: +ete( o( not te o(d%nan"e $assed to %!$osed ta2 on e2$o(t sa'eso- O(!o" S#a( Co!$an3 %s #n"onst%t#t%ona'6

RULING: Kes, it is unconstitutional for violating the e4ual #rotection clause asit only a##lies to 7rmoc Sugar Com#any and none other.

RATIO:

A##ellant 4uestions the authority of the defendant :unici#al oard to levy suchan e#ort ta, in view of Section %%EG of the -evised Administrative Code whichdenies from munici#al councils the #ower to im#ose an e#ort ta. Section %%EGin #art states@ It shall not "e in the #ower of the munici#al council to im#ose ata in any form whatever, u#on goods and merchandise carried into themunici#ality, or out of the same, and any attem#t to im#ose an im#ort or e#ortta u#on such goods in the guise of an unreasona"le charge for wharfage use of"ridges or otherwise, shall "e void.

Su"se4uently, however, Section % of -e#u"lic Act %%=> effective June /;, /;&;,gave chartered cities, munici#alities and munici#al districts authority to levy for#u"lic #ur#oses $ust and uniform taes, licenses or fees.

Anent the inconsistency "etween Section %%EG of the -evised AdministrativeCode and Section % of -e#u"lic Act %%=>, in;in 0ay Mining /o. 3. Municipai"yo% Ro!as,SC held the former to have "een re#ealed "y the latter.

*he Constitution in the "ill of rights #rovides@ . . . nor shall any #erson "edenied the e4ual #rotection of the laws. (Sec. / M/N, Art. III!

6e$a 3s. )aas@ (see doctrine!

A #erusal of the re4uisites instantly shows that the 4uestioned ordinance does notmeet them, for it taes only centrifugal sugar #roduced and e#orted "y the7rmoc Sugar Com#any, Inc. and none other.

At the time of the taing ordinance6s enactment, 7rmoc Sugar Com#any, Inc., itis true, was the only sugar central in the city of 7rmoc.

Still, the classification, to "e reasona"le, should "e in terms a##lica"le to futureconditions as well. *he taing ordinance should not "e singular and eclusive asto eclude any su"se4uently esta"lished sugar central, of the same class as#laintiff, for the coverage of the ta. As it is now, even if later a similar com#anyis set u#, it cannot "e su"$ect to the ta "ecause the ordinance e#ressly #ointsonly to 7rmoc City Sugar Com#any, Inc. as the entity to "e levied u#on.

owever, 7rmoc Sugar is not entitled to interestB on the refund "ecause the taeswere not ar"itrarily collected (Collector of Internal -evenue v. inal"agan!.At the time of collection, the ordinance #rovided a sufficient "asis to #recludear"itrariness, the same "eing then #resumed constitutional until declaredotherwise.

2-F7-, the decision a##ealed from is here"y reversed, the challengedordinance is declared unconstitutional and the defendants1a##ellees are here"yordered to refund the /%,0EG.&0 #laintiff1a##ellant #aid under #rotest. )o costs.So ordered.

*ILLEGAS *. HSUI CHIONG TSAIPAO

196ernandez, J

Jayson /. Aguiar

SUMMARY: *he :unici#al oard of :anila enacted an ordinance, Sec. / of which#rohi"its aliens from "eing em#loyed or to engage or #artici#ate in any #osition oroccu#ation or "usiness enumerated therein, whether #ermanent, tem#orary, or casual,

without first securing an em#loyment #ermit from the :ayor of :anila and #aying the#ermit fee of h#. &0.00. Oiolation of the ordinance was considered a criminal violation.iu Chiong *sai ao o who was em#loyed in :anila filed a #etition with the CFI#raying for the issuance of the writ of #reliminary in$unction and restraining order tosto# the enforcement of the ordinance and to declare the ordinance null and void. 7ne ofthe grounds cited was that the 7rdinance violates the e4ual #rotection clause "y notmaking a distinction "etween useful and non1useful occu#ations. *he CFI declared the7rdinance null and void.

DOCTRINE: *he 7rdinance violates the e4ual #rotection clause "ecause, in im#osingthe h#. &0.00 #ermit fee, it fails to consider valid su"stantial differences in situationamong individual aliens who are re4uired to #ay it. Although the e4ual #rotection clauseof the Constitution does not for"id classification, it is im#erative that the classificationshould "e "ased on real and su"stantial differences having a reasona"le relation to the

8/12/2019 tax batch 2

10/45

su"$ect of the #articular legislation. *he same amount of &0.00 is "eing collected fromevery em#loyed alien whether he is casual or #ermanent, #art time or full time orwhether he is a lowly em#loyee or a highly #aid eecutive.

FACTS: *he :unici#al oard of :anila enacted 7rdinance )o. =&

8/12/2019 tax batch 2

11/45

/. 7rdinance )o. /0, Series of /;>=1 im#osing an annual ta of h#. /&0.00 on occu#ationor eercise of a #rivilege of installation managerB

%. 7rdinance )o. ;, Series of /;>G1 im#osing an annual ta of h#. >0.00 for localde#osits in drums of com"usti"le and inflamma"le materials and an annual ta of h#.%00.00 for tin can factoriesB

E1 im#osing an annual ta of h#. /&0.00 on tin canfactories having a maimum out#ut ca#acity of , Se(%es o- ;

8/12/2019 tax batch 2

12/45

TIU *. CA1999

&anganiban, JJayson /. Aguiar

SUMMARY: Congress enacted -A G%%G which created Su"ic S#ecial conomic Pone.-esidents and "usinesses within the said 8one were given ta and duty incentives.

resident -amos issued ecutive 7rder ;G1A which #rovided that the Secured Areaconsisting of the fenced1in former Su"ic )aval ase shall "e the only com#letely ta andduty1free area in the Su"ic S#ecial conomic Pone (SSP!. *he #etitioners assail thevalidity of 7 ;G1A. *hey contend that the SSP encom#asses (/! the City of 7longa#o,(%! the :unici#ality of Su"ic in Pam"ales, and (

DOCTRINE: Classification, to "e valid, must (/! rest on su"stantial distinctions, (%! "egermane to the #ur#ose of the law, (

A##lication to the case at "ar@P#($ose o- RA =99=: Accelerate the conversion of military reservations into #roductiveuses

C'ass%-%"at%on: ig investors v. small investors

/. *here are s#bstant%a' d%--e(en"es"etween the "ig investors who are "eing lured toesta"lish and o#erate their industries in the so1called secured area and the #resent"usiness o#erators outside the area. 7n the one hand, we are talking of "illion1#esoinvestments and thousands of ne$, $o"s. 7n the other hand, definitely none of suchmagnitude. In the first, the economic im#act will "e nationalB in the second, only local.

%. ig investors are the ones who can #our huge investments to s#ur economic growth in

the country and to generate em#loyment o##ortunities for the Fili#inos, the ultimategoals of the government for such conversion. *he classification is, therefore, e(!aneto te $#($oses o- te 'a1.

8/12/2019 tax batch 2

13/45

RATIO: )o. *he fundamental right of e4ual #rotection of the laws is not a"solute, "ut issu"$ect to reasona"le classification. If the grou#ings are characteri8ed "y su"stantialdistinctions that make real differences, one class may "e treated and regulated differentlyfrom another. *he classification must also "e germane to the #ur#ose of the law and musta##ly to all those "elonging to the same class.

Classification, to "e valid, must (/! rest on su"stantial distinctions, (%! "e germane to the#ur#ose of the law, (

From the very title itself, it is clear that -A G%%G aims #rimarily to acceera"e "#econ3ersion o% 'ii"ary reser3a"ions in"o produc"i3e uses. 7"viously, the lands coveredunder the /;>G :ilitary ases Agreement are its o"$ect. It was reasona"le for theresident to have delimited the a##lication of some incentives to the confines of theformer Su"ic military "ase. It is this s#ecific area which the government intends totransform and develo# from its s"a"us 8uo an"e as an a"andoned naval facility into a self1sustaining industrial and commercial 8one, #articularly for "ig foreign and local investorsto use as o#erational "ases for their "usinesses and industries. It will also "e easier tomanage and monitor the activities within the secured area, which is already fenced off,to #revent fraudulent im#ortation of merchandise or smuggling.

2hy the seeming "ias for "ig investors?

/. *here are s#bstant%a' d%--e(en"es"etween the "ig investors who are "eing lured toesta"lish and o#erate their industries in the so1called secured area and the #resent"usiness o#erators outside the area. 7n the one hand, we are talking of "illion1#esoinvestments and thousands of ne$, $o"s. 7n the other hand, definitely none of suchmagnitude. In the first, the economic im#act will "e nationalB in the second, only local.

%. ig investors are the ones who can #our huge investments to s#ur economic growth inthe country and to generate em#loyment o##ortunities for the Fili#inos, the ultimate goalsof the government for such conversion. *he classification is, therefore, e(!ane to te$#($oses o- te 'a1.

8/12/2019 tax batch 2

14/45

Tan &s. De' Rosa(%oc"ober +, 199

i"ug, J.6rancis

SUMMARY: etitioners in this case argue that the res#ondents, Sec. ofFinance and Commissioner of Internal -evenue eceeded their authority in#romulgating Section =, -evenue -egulations )o. %1;;=, the Sim#lified )et Income*aation Scheme (S)I*!, amending certain #rovisions of the )I-C and theother, the validity of Section =, -evenue -egulations )o. %1;;= is unconstitutional.%. 2hether or not the S)I* should "e a##lied to general #rofessional#artnershi#s

RATIO: /. )o, -A G>;= does not violate any of the #rovisions stated.

%. It is to "e a##lied to the #artners not the general #rofessional #artnershi# as anentity.

RULING: *an contends that the title of ouse ill )o. , #rogenitor of -AG>;=, does not e#ress what the law should "e considered as having ado#ted agross income taation scheme "ecause the deducti"le items have "eensignificantly reduced.

SC:9imiting allowa"le deductions from gross income is neither discordant with,nor o##osed to, the net income ta conce#t. *here are still various deductions,which are "y no means inconse4uential, continue to "e well #rovided under thenew law.

*an argues that -A G>;= desecrates the constitutional re4uirement that taationshall "e uniform and e4uita"le in that the law would now attem#t to ta single#ro#rietorshi#s and #rofessionals differently from the manner it im#oses the taon cor#orations and #artnershi#s.

SC: Uniformity of taation merely re4uires that all su"$ects or o"$ects oftaation, similarly situated, are to "e treated alike "oth in #rivileges and

lia"ilities. Uniformity does not forfend classification as long as@ (/! the standardsthat are used therefor are su"stantial and not ar"itrary, (%! the categori8ation isgermane to achieve the legislative #ur#ose, (! the classification a##liese4ually well to all those "elonging to the same class.

*he law shows the legislative intent to increasingly shift the income ta systemtowards the schedular a##roach(a system em#loyed where the income tatreatment varies and made to de#end on the kind or category of taa"le income ofthe ta#ayer! in the income taation of individual ta#ayers and to maintain, "yand large, the #resent glo"al treatmenton taa"le cor#orations. Suchclassification is valid

*an discussed his #erceived im"alance "etween the ta lia"ilities of thosecovered "y the amendatory law and those who are not.

SC: *he legislature has discretion to determine the nature (kind!, o"$ect(#ur#ose!, etent (rate!, coverage (su"$ects! and si"us(#lace! of taation. *he SCcannot delve into matters that rightly rest on legislative $udgment. ut when a tameasure "ecomes so unconsciona"le and un$ust as to amount to confiscation of#ro#erty, the Court may take cogni8ance. Such was not demonstrated in this case.

*an argues that the law violates the due #rocess clause

8/12/2019 tax batch 2

15/45

SC:*he due #rocess clause may correctly "e invoked only when there is a clearcontravention of inherent or constitutional limitations in the eercise of the ta#ower. *here is no such contravention in this case.

Carag, Ca"alles, Jamora and Somera 9aw 7ffices argue that res#ondentseceeded their authority in #romulgating Section =, -evenue -egulations )o. %1;

o!e"n#ent Code$ +'ese provisions "e!o%ed ta& e&e#'tions'"e!io(sl) *"anted to elect"ic coo'e"ati!es organi"ed under #.$.2%9, &'ile eeping e-eptions for electric cooperatives organi"ed underA %/09, or t'e Cooperative Code of t'e #'ilippines and registered &it't'e Cooperative $evelopent Aut'orit* (C$A). PHILRECA et al$alleged t'at t'is &as a violation of t'e eual protection clause, sinceelectric cooperatives under #$ 2%9 and A %/09 &ere siilarl* situated.+'e !C 'eld t'at t'ere &ere sustantial differences et&een t'e t&oand t'e classification ade * t'e la& &as reasonale. +'erefore, t'eassailed provisions of t'e Local overnent Code are constitutional.

+,C-RI.E: +'e guarant* of t'e eual protection of t'e la&s is notviolated * a la& ased on reasonale classification. Classification, to

8/12/2019 tax batch 2

16/45

e reasonale, ust (1) rest on sustantial distinctions (2) e geraneto t'e purposes of t'e la& (/) not e liited to e-isting conditions onl*and (3) appl* euall* to all eers of t'e sae class.

A la& &'ic' c'anges t'e ters of a legal contract et&een parties,eit'er in t'e tie or ode of perforance, or iposes ne& conditions, ordispenses &it' t'ose e-pressed, or aut'ori"es for its satisfactionsoet'ing different fro t'at provided in its ters, is la& &'ic' ipairst'e oligation of a contract and is null and void. +o constitute ipairent

of contracts, t'e la& ust affect a c'ange in t'e rig'ts of t'e parties &it'reference to eac' ot'er and not &it' respect to non4parties.

/AC-S: PHILRECA, an association of 119 electric cooperatives, andAgusan del Norte Electric Cooperative, Inc. (ANECO), Iloilo I ElectricCooperative, Inc. (ILECO I) and Isaela I Electric Cooperative, Inc.(I!ELCO I), electric cooperatives organi"ed under #$ 2%9 and registered&it' t'e National Electrification Adinistration (NEA), are uestioning t'econstitutionalit* of sections 193 and 234 of the Local o!e"n#entCode$ +'ese provisions "e!o%ed ta& e&e#'tions '"e!io(sl) *"anted toelect"ic coo'e"ati!es organi"ed under #.$. 2%9, &'ile eepinge-eptions for electric cooperatives organi"ed under A %/09, or t'eCooperative Code of t'e #'ilippines and registered &it' t'e Cooperative$evelopent Aut'orit* (C$A).

+'e polic* e'ind #$ 2%9, or t'e National ElectrificationAdinistration $ecree, &as t'e 5t'e total electrification of t'e #'ilippineson an area coverage asis5 t'e sae 5eing vital to t'e people and t'esound developent of t'e nation.5 It aied to 5proote, encourage andassist all pulic service entities engaged in suppl*ing electric service,particularl* electric cooperatives5 * 5giving ever* tenale support andassistance5 to t'e electric cooperatives under it. Accordingl*, !ection /9

of #.$. No. 2%9 provided for t'e follo&ing ta- incentives to electriccooperatives6

!EC+ION /9. Assistance to Cooperatives; Exemption from Taxes,Imposts, Duties, Fees; Assistance from the National PowerCorporation. 768 coo'e"ati!es 01 shall e 'e"#anentl) e&e#'tf"o# 'a)in* inco#e ta&es, and 8 shall e e&e#'t f"o# the'a)#ent 0a of all .ational o!e"n#ent local *o!e"n#ent and

#(nici'al ta&es and fees incl(din* f"anchise filin* "eco"dationlicense o" 'e"#it fees o" ta&es and an) fees cha"*es o" costsin!ol!ed in an) co("t o" ad#inist"ati!e '"oceedin* in hich it#a) e a 'a"t), and 0 of all d(ties o" i#'osts on fo"ei*n *oodsac5(i"ed fo" its o'e"ations,

+o finance t'e electrification proects, t'e #'ilippine overnent, entered

loan agreeents &it' t'e governent of t'e :nited !tates of Aericat'roug' t'e :nited !tates Agenc* for International $evelopent (:!AI$)&it' electric cooperatives. +'e loan provided6

!ection %.;. +a-es and $uties. +'e

8/12/2019 tax batch 2

17/45

RULI.:

8/12/2019 tax batch 2

18/45

e-isting conditions and appl* euall* to all eers of t'e sae class.

II$ >,. the .on=I#'ai"#ent Cla(se as !iolated= .,

+o fall &it'in t'e pro'iition on t'e ipairent of t'e oligation ofcontracts, t'e c'ange ust not onl* ipair t'e oligation of t'e e-istingcontract, ut t'e ipairent ust e sustantial. A la& &'ic' c'angest'e ters of a legal contract et&een parties, eit'er in t'e tie or ode of

perforance, or iposes ne& conditions, or dispenses &it' t'osee-pressed, or aut'ori"es for its satisfaction soet'ing different fro t'atprovided in its ters, is la& &'ic' ipairs t'e oligation of a contract andis t'erefore null and void. @oreover, to constitute ipairent, t'e la&ust affect a c'ange in t'e rig'ts of t'e parties &it' reference to eac'ot'er and not &it' respect to non4parties.

In t'is case, t'e loan contract does not grant an* ta- e-eption infavor of t'e orro&er or t'e eneficiar*. It sipl* states t'at t'e loanproceeds and t'e principal and interest of t'e loan, upon repa*ent *t'e orro&er, s'all e &it'out deduction of an* ta- or fee t'at a* epa*ale under #'ilippine la& as s(ch ta& o" fee ill e aso"ed ) the

o""oe" ith f(nds othe" than the loan '"oceeds . +'e provisions donot grant an* ta- e-eption in favor of an* part* to t'e contract. +'e*sipl* s'ift t'e ta- urden, if an*, on t'e transactions under t'e loanagreeents to t'e orro&er andor eneficiar* of t'e loan. +'us, t'e&it'dra&al * t'e Local overnent Code under !ections 19/ and 2/3 oft'e ta- e-eptions previousl* eno*ed * #=ILECA et. all. does notipair t'e oligation of t'e orro&er, t'e lender or t'e eneficiar* undert'e loan agreeents as in fact, no ta- e-eption is granted t'erein.

+ISP,SI-I@E: B=EEOE, t'e instant petition is $ENIE$ and t'eteporar* restraining order 'eretofore issued is LI+E$.

!O O$EE$.

PEPSI4COLA &. CITY OF )UTUANAugus" 2, 194/oncepcion, /.J.Da3e Anas"acio

SUMMARY: #epsi4Cola

8/12/2019 tax batch 2

19/45

II$ >,. it is (n

8/12/2019 tax batch 2

20/45

&ere ta-ed. +'e !C ruled t'at t'e et'od &as fair and t'at t'eclassification ade in ta-ing onl* 'orses used for racing &as ased ongood reasons.

+,C-RI.E: +'ere is eualit* and uniforit* in ta-ation if all articles orinds of propert* of t'e sae class are ta-ed at t'e sae rate.easonale classifications are valid and different t'ings are to etreated differentl*.

/AC-S: An action for a declarator* relief &as instituted * t'e ManilaRace Ho"ses -"aine"s Association Inc$o&ners of oarding stales forrace 'orses, claiing t'at t'eir rig'ts are affected * ,"dinance .o$3D of the Cit) of Manila. +'e* ade t'e @a*or of @anila defendantand pra*ed t'at said ordinance e declared violative of t'e #'ilippineConstitution. It &as declared valid, and so t'e* appealed.

ISSUES:

I$ >,. (sin* the n(#e" of ho"ses as asis fo" the ta& is fai"=YES

II$ >,. the ta& is disc"i#inato")=.,RULI.: +'e ta- is valid. :sing t'e nuer of 'orses is fair, and t'e la&aes a reasonale classification et&een 'orses used for racing andt'ose t'at are not.

RA-I,:

I$ >,. (sin* the n(#e" of ho"ses as asis fo" the ta& is fai"=YES

!ection 2 of t'e ordinances states t'at t'e asis of t'e license fees 5is t'enuer of race 'orses ept or aintained in t'e oarding stales to epaid * t'e aintainers at t'e rate of #1F.FF a *ear for eac' race 'orse.5

+'e nuer of 'orses is used in t'e assessent purel* as aet'od of fi-ing an euitale and practical distriution of t'e urdeniposed * t'e easure. ar fro eing ono-ious, t'e et'od is fairand ust. It is fair and ust t'at for a oarding stale &'ere onl* one 'orseis aintained to e e-acted a lesser aount t'an for a stale &'ere ore'orses are ept and fro &'ic' greater incoe is derived.

I$ >,. the ta& is disc"i#inato")=.,

In t'e case of Eastern Theatrical Co" Inc", vs" Alfonso , t'e Court

said t'at the"e is e5(alit) and (nifo"#it) in ta&ation if all a"ticles o"%inds of '"o'e"t) of the sa#e class a"e ta&ed at the sa#e "ate$ +'ere

&ould onl* e discriination if oarding stales of the same class usefor the same num%er of horses&ere ta-ed differentl*"

ro t'e vie&point of econoics and pulic polic*, t'e ta-ing ofoarding stales for race 'orses and not stales for 'orses used for ot'erpurposes aes sense. +'e o&ners of oarding stales for race 'orsesand t'e race 'orse o&ners t'eselves are a class %# themselves anappropriatel# taxe. O&ners of ot'er inds of 'orses are ta-ed less or notat all considering t'at euit* in ta-ation is generall* conceived in ters ofailit* to pa* in relation to t'e enefits received * t'e ta-pa*er and *t'e pulic fro t'e usiness or propert* ta-ed. Race ho"ses a"e de!otedto *a#lin* if le*ali?ed and thei" one"s de"i!e fat inco#e and the'(lic ha"dl) an) '"ofit f"o# ho"se "acin* and this (sinessde#ands "elati!el) hea!) 'olice s('e"!ision$ +'e differentiationconfors to t'e practical dictates of ustice and euit* and is notdiscriinator* &it'in t'e eaning of t'e Constitution.

+ISP,SI-I@E: Be are of t'e opinion t'at t'e trial court coitted noerror and t'e udgent is affired &it' costs against t'e plaintiff4appellants.

S%son, J(. &. An"etaJuy 24,19

6ernando, /J)ai

SUMMARY: Antero Sison Jr. filed this case for declaratory relief or#rohi"ition #roceeding against I- acting commissioner Ancheta, challengingthe validity of Section / of atas am"ansa lg. /

8/12/2019 tax batch 2

21/45

FACTS:

Antero Sison Jr. filed this case for declaratory relief or #rohi"ition #roceedingagainst I- acting commissioner Ancheta, challenging the validity of Section /of atas am"ansa lg. /

8/12/2019 tax batch 2

22/45

the a##lication of generali8ed rules removing all deducti"le items for allta#ayers within the class and fiing a set of reduced ta rates to "e a##lied to allof them. *a#ayers who are reci#ients of com#ensation income are set a#art as aclass. As there is #ractically no overhead e#ense, these ta#ayers are e notentitled to make deductions for income ta #ur#oses "ecause they are in the samesituation more or less. 7n the other hand, in the case of #rofessionals in the#ractice of their calling and "usinessmen, there is no uniformity in the costs ore#enses necessary to #roduce their income. It would not "e $ust then todisregard the dis#arities "y giving all of them 8ero deduction and

indiscriminately im#ose on all alike the same ta rates on the "asis of grossincome. *here is am#le $ustification then for the /To'ent%no &s. Se". o- F%nan"ec"ober +?, 1995

Mendoza, J.

6rancis

Q *here are a lot of constitutional issues in the case. I did not include most ofthem since :aam said concentrate on the to#ic in the sylla"us.

SUMMARY: *his is a motion for reconsideration of the / st*olentino vs. Sec.of Finance. *he same issues and arguments were made "y the #arties. *he SCsustained the validity of the law.

DOCTRINE: *he SC e#lained that the case cited "y the #etitioners involved

a license ta which is mainly for regulation, which was necessary for theeercise of the #rivilege or right. *he OA* is not a license ta "ut is im#osedon the sale, "arter, lease or echange of goods or #ro#erties or the sale orechange of services and the lease of #ro#erties #urely for revenue #ur#oses.

FACTS: -A GG/= sought to widen the ta "ase of the eisting OA* system andenhance its administration "y amending the )ational Internal -evenue Code. Inthe /st *olentino vs. Sec. of Finance case, the SC held that the statute isconstitutional. *he #arties filed a motion for reconsideration arguing the same#oints in the /stcase. I is again contending that "y removing the eem#tion ofthe #ress from the OA* while maintaining those granted to others, the lawdiscriminates against the #ress. It is also argued that even nondiscriminatory

taation of constitutionally guaranteed freedom is unconstitutional.

ISSUES: 2hether or not -A GG/= violates #ress freedom and religious freedom

RATIO: )o, -A GG/= does not violate freedom of the #ress and religiousfreedom

RULING: *he SC has held that the #ress is not eem#t from the taing #ower ofthe State and that what the constitutional guarantee of free #ress #rohi"its arelaws which single out the #ress or target a grou# "elonging to the #ress for

s#ecial treatment or which in any way discriminate against the #ress on the "asisof the content of the #u"lication.

Since the law granted the #ress a #rivilege, the law could take "ack the #rivilegeanytime without offense to the Constitution. *he reason is "y grantingeem#tions, the State does not forever waive the eercise of its sovereign#rerogative.

In 3ros$ean v. American ress Co, the large #a#ers were critical of Senator uey9ong who controlled the state legislature which enacted the license ta. *hecensorial motivation for the law was thus evident.

In :innea#olis Star R *ri"une Co. v. :innesota Commissioner of -evenue, the#ress, although could have "een made lia"le for the sales ta, was not made lia"le"ut was instead eem#ted and later made to #ay a s#ecial use ta on the cost of#a#er and ink which made these items the only items su"$ect to the use ta. *heU.S. Su#reme Court held that the differential treatment of the #ress suggests thatthe goal of regulation is not related to su##ression of e#ression, and such goal is#resum#tively unconstitutional. It would a##ear that even a law that favors the#ress is constitutionally sus#ect

*here were other eem#tions from the OA*, such as those #reviously granted toA9, #etroleum concessionaires, enter#rises registered with the #ortrocessing Pone Authority, and many more are likewise totally withdrawn, in

addition to eem#tions which are #artially withdrawn, in an effort to "roaden the"ase of the ta.

*he I says that the discriminatory treatment of the #ress is highlighted "y thefact that transactions, which are #rofit oriented, continue to en$oy eem#tionunder -.A. )o. GG/=. An enumeration of some of these transactions will showthat the eem#tions are granted for a #ur#ose. As the Sol13en says, sucheem#tions are granted, in some cases, to encourage agricultural #roduction and,in other cases, for the #ersonal "enefit of the end1user rather than for #rofit. Someeem#t transactions are@(a! 3oods for consum#tion or use which are in their original state (agricultural,marine and forest #roducts, cotton seeds in their original state, fertili8ers, seeds,

seedlings, fingerlings, fish, #rawn livestock and #oultry feeds! and goods or

8/12/2019 tax batch 2

23/45

services to enhance agriculture (milling of #alay, corn, sugar cane and raw sugar,livestock, #oultry feeds, fertili8er, ingredients used for the manufacture of feeds!.("! 3oods used for #ersonal consum#tion or use (household and #ersonal effectsof citi8ens returning to the hili##ines! or for #rofessional use, like #rofessionalinstruments and im#lements, "y #ersons coming to the hili##ines to settle here.

*he I asserts that it does not really matter that the law does not discriminateagainst the #ress "ecause even nondiscriminatory taation on constitutionallyguaranteed freedom is unconstitutional. I cites in :urdock v. ennsylvania

stating that the fact that the ordinance is nondiscriminatory is immaterial. Alicense ta certainly does not ac4uire constitutional validity "ecause it classifiesthe #rivileges #rotected "y the First Amendment along with the wares andmerchandise of hucksters and #eddlers and treats them all alike. Such e4uality intreatment does not save the ordinance. Freedom of #ress, freedom of s#eech,freedom of religion are in #referred #osition.H

*he Court was s#eaking in that case of a '%"ense ta2, which, unlike an ordinaryta, is !a%n'3 -o( (e#'at%on. Its im#osition on the #ress is unconstitutional"ecause it lays a #rior restraint on the eercise of its right.

*he OA* is different. It is not a license ta. It is not a ta on the eercise of a

#rivilege, much less a constitutional right. It is im#osed on the sale, "arter, leaseor echange of goods or #ro#erties or the sale or echange of services and thelease of #ro#erties $#(e'3-o( (e&en#e $#($oses.

*o su"$ect the #ress to its #ayment is not to "urden the eercise of its right anymore than to make the #ress #ay income ta or su"$ect it to general regulation isnot to violate its freedom under the Constitution.

DISPOSITI*E: etitions are +IS:ISS+. -A GG/= is valid.

CI- O. 9I)3AK) 3U9F1Aly:isamis v. CA9C7

PHIL. RURAL ELECTRIC &.SECRETARY

June 1?, 2??+&uno, J.

Da3e Anas"acio

SUMMARY: PHILRECA, an association of 119 electric cooperatives,and Agusan del Norte Electric Cooperative, Inc. (ANECO), Iloilo IElectric Cooperative, Inc. (ILECO I) and Isaela I Electric Cooperative,Inc. (I!ELCO I), electric cooperatives organi"ed under #$ 2%9 andregistered &it' t'e National Electrification Adinistration (NEA), areuestioning t'e constitutionalit* of sections 193 and 234 of the Localo!e"n#ent Code$ +'ese provisions "e!o%ed ta& e&e#'tions'"e!io(sl) *"anted to elect"ic coo'e"ati!es organi"ed under #.$.2%9, &'ile eeping e-eptions for electric cooperatives organi"ed under

A %/09, or t'e Cooperative Code of t'e #'ilippines and registered &it't'e Cooperative $evelopent Aut'orit* (C$A). PHILRECA et al$alleged t'at t'is &as a violation of t'e eual protection clause, sinceelectric cooperatives under #$ 2%9 and A %/09 &ere siilarl* situated.+'e !C 'eld t'at t'ere &ere sustantial differences et&een t'e t&oand t'e classification ade * t'e la& &as reasonale. +'erefore, t'eassailed provisions of t'e Local overnent Code are constitutional.

+,C-RI.E: +'e guarant* of t'e eual protection of t'e la&s is notviolated * a la& ased on reasonale classification. Classification, toe reasonale, ust (1) rest on sustantial distinctions (2) e gerane

to t'e purposes of t'e la& (/) not e liited to e-isting conditions onl*and (3) appl* euall* to all eers of t'e sae class.

A la& &'ic' c'anges t'e ters of a legal contract et&een parties,eit'er in t'e tie or ode of perforance, or iposes ne& conditions, ordispenses &it' t'ose e-pressed, or aut'ori"es for its satisfactionsoet'ing different fro t'at provided in its ters, is la& &'ic' ipairst'e oligation of a contract and is null and void. +o constitute ipairentof contracts, t'e la& ust affect a c'ange in t'e rig'ts of t'e parties &it'reference to eac' ot'er and not &it' respect to non4parties.

/AC-S: PHILRECA, an association of 119 electric cooperatives, andAgusan del Norte Electric Cooperative, Inc. (ANECO), Iloilo I ElectricCooperative, Inc. (ILECO I) and Isaela I Electric Cooperative, Inc.(I!ELCO I), electric cooperatives organi"ed under #$ 2%9 and registered&it' t'e National Electrification Adinistration (NEA), are uestioning t'econstitutionalit* of sections 193 and 234 of the Local o!e"n#entCode$ +'ese provisions "e!o%ed ta& e&e#'tions '"e!io(sl) *"anted toelect"ic coo'e"ati!es organi"ed under #.$. 2%9, &'ile eepinge-eptions for electric cooperatives organi"ed under A %/09, or t'eCooperative Code of t'e #'ilippines and registered &it' t'e Cooperative$evelopent Aut'orit* (C$A).

+'e polic* e'ind #$ 2%9, or t'e National Electrification

8/12/2019 tax batch 2

24/45

Adinistration $ecree, &as t'e 5t'e total electrification of t'e #'ilippineson an area coverage asis5 t'e sae 5eing vital to t'e people and t'esound developent of t'e nation.5 It aied to 5proote, encourage andassist all pulic service entities engaged in suppl*ing electric service,particularl* electric cooperatives5 * 5giving ever* tenale support andassistance5 to t'e electric cooperatives under it. Accordingl*, !ection /9of #.$. No. 2%9 provided for t'e follo&ing ta- incentives to electriccooperatives6

!EC+ION /9. Assistance to Cooperatives; Exemption from Taxes,Imposts, Duties, Fees; Assistance from the National PowerCorporation. 768 coo'e"ati!es 01 shall e 'e"#anentl) e&e#'tf"o# 'a)in* inco#e ta&es, and 8 shall e e&e#'t f"o# the'a)#ent 0a of all .ational o!e"n#ent local *o!e"n#ent and#(nici'al ta&es and fees incl(din* f"anchise filin* "eco"dationlicense o" 'e"#it fees o" ta&es and an) fees cha"*es o" costsin!ol!ed in an) co("t o" ad#inist"ati!e '"oceedin* in hich it#a) e a 'a"t), and 0 of all d(ties o" i#'osts on fo"ei*n *oodsac5(i"ed fo" its o'e"ations,

+o finance t'e electrification proects, t'e #'ilippine overnent, entered

loan agreeents &it' t'e governent of t'e :nited !tates of Aericat'roug' t'e :nited !tates Agenc* for International $evelopent (:!AI$)&it' electric cooperatives. +'e loan provided6

!ection %.;. +a-es and $uties. +'e

8/12/2019 tax batch 2

25/45

/i"st, sustantial distinctions e-ist et&een cooperatives under#$ 2%9, and cooperatives under A %9/0. A cooperative under .A. No.%9/0 is >A? dul* registered association of persons &it' a coon ond ofinterest, &'o 'ave voluntaril* oined toget'er to ac'ieve a la&ful coonor social econoic end, #a%in* e5(itale cont"i(tions to the ca'ital"e5(i"ed and acce'tin* a fai" sha"e of the "is%s and enefits of the(nde"ta%in* in acco"dance ith (ni!e"sall) acce'ted coo'e"ati!e'"inci'les$ Cooperatives under A %9/0, the #e#e"s do not #a%es(stantial cont"i(tion to the ca'ital "e5(i"ed$ It is the *o!e"n#ent

that '(ts in the ca'ital in #ost cases. Anot'er principle ad'ered to *t'e Cooperative Code is t'e principle of susidiarit*, &'ic' eans t'att'e governent a* onl* engage in developent activities &'erecooperatives do not posses t'e capailit* nor t'e resources to do so andonl* upon t'e reuest of suc' cooperatives. +'e Cooperative Codeprovides6 the State "eco*ni?es the '"inci'le of s(sidia"it) under&'ic' t'e cooperative sector &ill initiate and regulate &it'in its o&n ranst'e prootion and organi"ation, training and researc', audit and supportservices relating to cooperatives &it' governent assistance &'erenecessar*8 governent assistance to cooperatives s'all e f"ee f"o#an) "est"iction and conditionalit) that #a) in an) #anne" inf"in*e('on the o

8/12/2019 tax batch 2

26/45

&it'dra&al * t'e Local overnent Code under !ections 19/ and 2/3 oft'e ta- e-eptions previousl* eno*ed * #=ILECA et. all. does notipair t'e oligation of t'e orro&er, t'e lender or t'e eneficiar* undert'e loan agreeents as in fact, no ta- e-eption is granted t'erein.

+ISP,SI-I@E: B=EEOE, t'e instant petition is $ENIE$ and t'eteporar* restraining order 'eretofore issued is LI+E$.

!O O$EE$.

99A+7C v. CI-

P(o&%n"e o- Ab(a &. He(nandoAugus" +1, 1916ernando, /.J.

&aoo . 0ernardo

SUMMARY: *he #rovincial assessor of A"ra assessed the #ro#erties ofthe -oman Catholic isho# of angued, Inc. for real estate ta.

*he isho# filed an action for declaratory relief in the CFI of A"ra. *heisho# merely alleged, 2I*7U* #roof, of eem#tion under theConstitution since the assessed #ro#erties are actually, directly andeclusively used "y the -oman Catholic isho# of angued, Inc. forreligious or charita"le #ur#oses. on. Judge ernando acce#ted theallegation on its face and ruled in favor of the isho#. *he rovince ofA"ra "rought the case to the SC. It contends that in failing to accord ahearing to it and deciding the case immediately in favor of theisho#, Judge ernando failed to a"ide "y the constitutional commandof #rocedural due #rocess.

*he issue is whether the ta eem#tion should "e granted. *he SC ruledthat in the a"sence of #roof of actual, direct, and eclusive use forcharita"le #ur#oses, the same should not "e granted.

DOCTRINE:

)#or": *o "e eem#t from realty taation, there must "e #roof of the actualand direct US of the lands, "uildings, and im#rovement for religious or

charita"le #ur#oses (+imaam#ao, %0//!.

@ong, erba"i' %ro' case@ Under the /;

8/12/2019 tax batch 2

27/45

7n the other hand, the heirs of :illare argue that the lot and "uilding werealso used I)CI+)*A99K for 7*- #ur#oses111as the #ermanentresidence of the resident of the College and his family, and also forcommercial #ur#oses, as there is a commercial esta"lishment renting theground floor of the "uilding.

*he SC ruled that the #ro#erties should "e taed, not "ecause secondfloor of the "uilding is used for residential #ur#oses, "ut "ecause thefirst floor thereof is "eing used for commercial #ur#oses. owever, since

only a #ortion is used for #ur#oses of commerce, it returned half of theassessed ta to the school involved.

DOCTRINE:

)#or"@ Idle landsH or #ro#erty used "y others for other #ur#oses althoughowned "y religious, educational and charita"le institutions could "esu"$ected to real estate ta (+imaam#ao, %0//!.

@ong, erba"i' %ro' case@ *he test of eem#tion from taation is theuse of the #ro#erty for #ur#oses mentioned in the Constitution(A#ostolic refect v. City *reasurer of aguio!.

It must "e stressed however, that while this Court allows a more li"eraland non1restrictive inter#retation of the #hrase eclusively used foreducational #ur#oses as #rovided for in Article OI, Section %%,#aragra#h < of the /;

8/12/2019 tax batch 2

28/45

6rancis

Q *here are a lot of constitutional issues in the case. I did not include most ofthem since :aam said concentrate on the to#ic in the sylla"us.

SUMMARY: *his is a motion for reconsideration of the / st*olentino vs. Sec.of Finance. *he same issues and arguments were made "y the #arties. *he SCsustained the validity of the law.

DOCTRINE: *he SC e#lained that the case cited "y the #etitioners involveda license ta which is mainly for regulation, which was necessary for the

eercise of the #rivilege or right. *he OA* is not a license ta "ut is im#osedon the sale, "arter, lease or echange of goods or #ro#erties or the sale orechange of services and the lease of #ro#erties #urely for revenue #ur#oses.

FACTS: -A GG/= sought to widen the ta "ase of the eisting OA* system andenhance its administration "y amending the )ational Internal -evenue Code. Inthe /st *olentino vs. Sec. of Finance case, the SC held that the statute isconstitutional. *he #arties filed a motion for reconsideration arguing the same#oints in the /stcase. I is again contending that "y removing the eem#tion ofthe #ress from the OA* while maintaining those granted to others, the lawdiscriminates against the #ress. It is also argued that even nondiscriminatorytaation of constitutionally guaranteed freedom is unconstitutional.

ISSUES: 2hether or not -A GG/= violates #ress freedom and religious freedom

RATIO: )o, -A GG/= does not violate freedom of the #ress and religiousfreedom

RULING: *he SC has held that the #ress is not eem#t from the taing #ower ofthe State and that what the constitutional guarantee of free #ress #rohi"its arelaws which single out the #ress or target a grou# "elonging to the #ress fors#ecial treatment or which in any way discriminate against the #ress on the "asisof the content of the #u"lication.

Since the law granted the #ress a #rivilege, the law could take "ack the #rivilegeanytime without offense to the Constitution. *he reason is "y grantingeem#tions, the State does not forever waive the eercise of its sovereign#rerogative.

In 3ros$ean v. American ress Co, the large #a#ers were critical of Senator uey9ong who controlled the state legislature which enacted the license ta. *hecensorial motivation for the law was thus evident.

In :innea#olis Star R *ri"une Co. v. :innesota Commissioner of -evenue, the#ress, although could have "een made lia"le for the sales ta, was not made lia"le"ut was instead eem#ted and later made to #ay a s#ecial use ta on the cost of

#a#er and ink which made these items the only items su"$ect to the use ta. *he

U.S. Su#reme Court held that the differential treatment of the #ress suggests thatthe goal of regulation is not related to su##ression of e#ression, and such goal is#resum#tively unconstitutional. It would a##ear that even a law that favors the#ress is constitutionally sus#ect

*here were other eem#tions from the OA*, such as those #reviously granted toA9, #etroleum concessionaires, enter#rises registered with the #ortrocessing Pone Authority, and many more are likewise totally withdrawn, inaddition to eem#tions which are #artially withdrawn, in an effort to "roaden the

"ase of the ta.

*he I says that the discriminatory treatment of the #ress is highlighted "y thefact that transactions, which are #rofit oriented, continue to en$oy eem#tionunder -.A. )o. GG/=. An enumeration of some of these transactions will showthat the eem#tions are granted for a #ur#ose. As the Sol13en says, sucheem#tions are granted, in some cases, to encourage agricultural #roduction and,in other cases, for the #ersonal "enefit of the end1user rather than for #rofit. Someeem#t transactions are@(a! 3oods for consum#tion or use which are in their original state (agricultural,marine and forest #roducts, cotton seeds in their original state, fertili8ers, seeds,seedlings, fingerlings, fish, #rawn livestock and #oultry feeds! and goods or

services to enhance agriculture (milling of #alay, corn, sugar cane and raw sugar,livestock, #oultry feeds, fertili8er, ingredients used for the manufacture of feeds!.("! 3oods used for #ersonal consum#tion or use (household and #ersonal effectsof citi8ens returning to the hili##ines! or for #rofessional use, like #rofessionalinstruments and im#lements, "y #ersons coming to the hili##ines to settle here.

*he I asserts that it does not really matter that the law does not discriminateagainst the #ress "ecause even nondiscriminatory taation on constitutionallyguaranteed freedom is unconstitutional. I cites in :urdock v. ennsylvaniastating that the fact that the ordinance is nondiscriminatory is immaterial. Alicense ta certainly does not ac4uire constitutional validity "ecause it classifiesthe #rivileges #rotected "y the First Amendment along with the wares and

merchandise of hucksters and #eddlers and treats them all alike. Such e4uality intreatment does not save the ordinance. Freedom of #ress, freedom of s#eech,freedom of religion are in #referred #osition.H

*he Court was s#eaking in that case of a '%"ense ta2, which, unlike an ordinaryta, is !a%n'3 -o( (e#'at%on. Its im#osition on the #ress is unconstitutional"ecause it lays a #rior restraint on the eercise of its right.

*he OA* is different. It is not a license ta. It is not a ta on the eercise of a#rivilege, much less a constitutional right. It is im#osed on the sale, "arter, leaseor echange of goods or #ro#erties or the sale or echange of services and thelease of #ro#erties $#(e'3-o( (e&en#e $#($oses.

8/12/2019 tax batch 2

29/45

*o su"$ect the #ress to its #ayment is not to "urden the eercise of its right anymore than to make the #ress #ay income ta or su"$ect it to general regulation isnot to violate its freedom under the Constitution.

DISPOSITI*E: etitions are +IS:ISS+. -A GG/= is valid.

LUON STE*EDORING &.

TRINIDAD)ep"e'ber 2+, 1922Jo#nson, J.

Denn

SUMMARY: 9u8on Stevedoring Com#any is engaged in the stevedoring"usiness. It loads and unloads cargo from vessels in #ort, at certain rates ofcharge #er unit of cargo. All the work done "y 9u8on is conducted under thesu#ervision of the officers of the shi#s and under the instruction given to the9u8ons men "y the shi# ca#tains. *rinidad, as the Collector of Internal-evenue, levied and assessed #ercentage ta on 9u8ons gross recei#ts. 9u8on#aid under #rotest, and later filed this #resent action to recover from *rinidad the

sum it #aid. *rinidads defense was that the assessment of #ercentage ta on9u8on was #ro#er "ecause it was a Tcontractor under Section />=% of Act %G//.CFI held in favour of 9u8on, so *rinidad a##ealed. SC held that 9u8on was nota Tcontractor under section />=% of Act %G//. *herefore, the ta 9u8on #aidwas illegally collected and should "e re#aid.

DOCTRINE@ -evenue laws im#osing taes on "usiness must "e strictlyconstrued in favour of the citi8en. *he definition of leicogra#hers cannotalways "e ado#ted as a correct meaning for statutory words and #hrases. *heintention of the 9egislature and the o"$ect which it intended to attain must "etaken into consideration for the #ur#ose of determining the meaning of wordsand #hrases used, rather than the set definition of leicogra#hers. In construing a

word or e#ression in the statue susce#ti"le of two or more meanings, the courtwill ado#t that inter#retation most in accord with the manifest #ur#ose of thestatue as gathered from the contet.

FACTS:laintiff 9u8on Stevedoring Com#any is a cor#oration duly organi8edunder the laws of the hili##ine Islands, engaged in the stevedoring "usiness inthe City of :anila.1 Its "usiness consists of loading and unloading cargo from vessels in #ort, at

certain rates of charge #er unit of cargo. All the work done "y it is conductedunder the direct su#ervision of the officers of the shi#s and under theinstruction given to 9u8on6s men "y the ca#tain and officers of said shi#s. Infact, no lia"ility attaches to 9u8on for the im#ro#er loading or unloading of

vessels, the ca#tain "eing res#onsi"le for said work. Su#ervision is so direct,that no discretion is left to 9u8on nor its men.

9u8on Stevedoring filed this action to recover from defendant 2enceslao*rinidad as Internal -evenue Collector, the sum of %,>%%.E/, which it had #aidunder #rotest.1 In *rinidads s#ecial defense, he alleged that during the first 4uarter of the

year /;%/, 9u8on was engaged in "usiness as a contractor, its gross recei#tsfrom said "usiness during said 4uarter amounting to %>%,%E/.=%, to every #erson, #artnershi#or cor#oration who entered into a contract.

1 7therwise, it would not have "een necessary to have mentioned in the same sectionother classes of "usiness, such as warehousemen, #ro#rietors of dockyards and#ersons selling light, heat, or #ower, as well as #ersons engaged in conductingtele#hone or telegra#h line or echanges, and #ro#rietors of steam laundries and ofsho#s for the constructions and re#air of "icycles or vehicles of any kind, andkee#ers of hotels and restaurants, etc.

1 If the general and "road meaning is to "e given to the word contractor as used inSection />=%, it would include the ff@ "anders, merchants, "rokers, lawyers, farmersin the sale of their #roduct, and every #erson who enter into a contractor of whatevernature or character, school1teachers in the #u"lic and #rivate schools, commonla"orers who work "y the day under a contract, all #ersons loaning money u#on#romissory notes.

8/12/2019 tax batch 2

30/45

C7)C9USI7)@ *he word contractor, as used in Section />=%, must have alimited and a very restricted meaning. It cannot have the "road meaning whichwould include every #erson who entered into a contract.

*he CFI, in its decision, relied u#on the definition given in vol. /< Cor#us Juris@1 7ne who agrees to do anything for anotherB one who eecutes #lans under a

contractB one who contracts or covenants, whether with a government orother #u"lic "ody or with #rivate #arties, to furnish su##lies, or to constructworks, or to erect "uildings, or to #erform any work or service, at a certain

#rice to rate, as a #aving contractor, or a la"or contractorB one who contractsto #erform work, or su##ly articles on a large scale, at a certain #rice or rate,as in "uilding houses or #rovisioning troo#s, or constructing a railroad.

1 Although, in a general sense, every #erson who enters into a contract may "ecalled a contractor, yet the word, for want of a "etter one, has come to "eused with s#ecial reference to a #erson who, in the #ursuit of an inde#endent"usiness, undertakes to do a s#ecific #iece or $o" or work for other #ersons,using his own means and methods without su"mitting himself to control asto the #etty details.

1 The true test of a 'contractor' would seem to be that he renders the ser!ce!n the course of an !nde"endent occu"at!on# re"resent!n$ the w!ll of h!sem"lo%er onl% as to the result of h!s wor and not as to the means b%

wh!ch !t !s accom"l!shed.

@a%%ery 3. ni"ed )"a"es Gypsu' /o.@ *he general rule, variously stated, is thatwhen a #erson lets out work to another, the contractee reserving no control overthe work or workmen, the relation of contractor and contractee eists and not thatof master and servant, and the contractee is not lia"le for the negligence orim#ro#er eecution of the work "y the contractor.

0ro$n 3s. Ger'an-A'erican:a Tcontractor is one who contracts or covenantseither with . . . a #u"lic "ody or #rivate #arties . . . to . . . contract works or erect"uildings . . . at a certain #rice or rate.1 Said definition was ado#ted from the Century +ictionary. *he definition of

leicogra#hers, however, cannot always "e ado#ted as a correct meaning forstatutory words and #hrases.

1 *he intention of the 9egislature and the o"$ect which it intended to attainmust "e taken into consideration for the #ur#ose of determining the meaningof words and #hrases used, rather than the set definition of leicogra#hers.

1 Reenue laws !m"os!n$ taes on bus!ness must be str!ctl% construed !nfaor of the c!t!(en) In construing a word or e#ression in the statutesusce#ti"le of two or more meanings, the court will ado#t that inter#retationmost in accord with the manifest #ur#ose of the statute as gathered from thecontet. 2here a #articular word is o"scure or of dou"tful meaning, taken "yitself, its o"scurity or dou"t may "e removed "y reference to associatewords.

*he cases (:urray v. Currie, -ankin v. :erchants, and aas v. hiladel#hia! relied u#on"y *rinidad as authority do not su##ort his contention in view of the definition of acontractor "ecause in these cases, the stevedore was acting on its own "ehalf, and theshi#s officers had no control over it.

DISPOSITI*E:laintiff 9u8on Stevedoring is not a contractor in the sensethat that word is used in said Section />=% of Act )o. %G//, and therefore the tait #aid under #rotest was illegally collected and should "e re#aid.

Lo(eno &. PosadasJune 1, 19+

@aure, J.Deaino, J.A.D.).

Apoogies %or "#e eng"#. decided "o incude a "#e 'a""ers discussed by "#e/our" in case MaBa' as(s. T#e par" o% "#e case ree3an" "o "#e syabus "opic is in

Ra"io 5>. aso incuded a discussion on "#e co'pu"a"ion o% "#e iabii"ies.

SUMMARY: *his case originates from an action in the CFI, for a tarefund, filed "y a"lo 9oren8o (9oren8oH!, the trustee of *homasanley6s (*homasH! estate against Juan osadas, the Collector of Internal-evenue (the CollectorH!. anley died and left a will. Initially, .J.:.:oore (:ooreH!, was the trustee of the estate "ut he resigned, then9oren8o was a##ointed in :oore6s stead. +uring the time of 9oren8o6strusteeshi#, the Collector assessed an inheritance ta. MInheritance *a V%,0&%.G>, including #enalties for delin4uencies. *he realty was worth%G,;%0, the #ersonalty, />=&, and a deduction of >E0.E/ was allowed.*he #enalties consisted of a /' monthly interest from the time the ta wasdue, u# to the date of #ayment, and a surcharge of %&' on the ta itself.!*he Collector filed a motion in court #raying that 9oren8o "e ordered to#ay the ta, which was granted "y the court. 9oren8o #aid under #rotest.*he Collector refused to refund the ta so 9oren8o filed the initial actionwith the CFI. *he CFI dismissed the action, along with the Collector6scounterclaim for interest. 9oren8o a##ealed. *he SC decided in favor ofthe Collector.

DOCTRINE: BTa2 Gene(a' P(%n"%$'es o- Ta2at%on Ta2at%onUnde('3%n Teo(3 and )as%s Ne"ess%t3 Teo(3 )ene-%t4Re"e%&edP(%n"%$'e

/! *aes are essential to the very eistence of government (+o""ins v.rie County, etc.!%! *he o"ligation to #ay taes de#ends on the necessity of money forsu##ort of the state, not the #rivileges en$oyed "y or even the #rotection

8/12/2019 tax batch 2

31/45

afforded to citi8ens (+o""ins v. rie County!

FACTS:

:ay %G, /;%%@ *homas anley died. e left a will, as well as real and

#ersonal #ro#erty.

*he will #rovided that, among others,@

Any money left was to "e given to :atthew anley(:atthew,H *homas6 ne#hew!

*he real estate *homas owned was not to "e solddis#osed fora #eriod of /0 years after his death. *he real estate was to "ehandled "y my eecutors,H while the #roceeds were to "egiven to :atthew, solely for the education of *homas6 "rothers6children (i.e., :atthew6s si"lings! and their descendants

After /0 years of *homas6 death, :atthew may dis#ose of the#ro#erty according to :atthew6s discretion.

June />, /;%%@ ro"ate #roceedings for the will, as well as settlement

and distri"ution of the estate were initiated in the CFI L Pam"oanga

:arch /0, /;%>@ *he Pam"oanga CFI a##ointed a trustee, :oore, who

was one of the eecutors named. Fe"ruary %;, /;

/! *he inheritance ta accrues u#on the transmission, transfer, or devolution ofthe decedent6s #ro#erty, made effective "y their death.%! It should "e "ased on the time the decedent died.

>! *he law at the time of the decedent6s death. )o, no retroactive effect can "egiven since there is no clear legislative intent.&! Kes. *he estate should #ay the additional interest. (For the #art of the caserelated to the sylla"us to#ic, see -atio &!>!.

RATIO:/! Accrual of inheritance ta and when it should "e satisfied

/. According to Sec. /&. *he o"ligation to #ay the inheritance ta did not arise on thedate of anley6s death. *he situation in the instant case is thatthere is no fiduciary heir, first heir, legatee, or donee. ased onthe Administrative Code (Secs. /&>< and /&>>!, the ta shouldhave "een #aid "efore the delivery of the #ro#erties to :oore(the first trustee! on :arch /0, /;%>.

%! oint of reference for com#uting inheritance ta/. laintiff 9oren8o argues that the inheritance ta should "e

"ased on the value of the estate in /;

8/12/2019 tax batch 2

32/45

that follow it do not do so as much these days. esides, thoseare rules in other $urisdictions. ere, the Court holds thattransmission through inheritance is taa"le at the time of deathdes#ite #ost#onement of actual en$oyment or #ossession.

fees should also "e deducted "ased on Sec. /&

resorted to for ta1collection are not #enal laws.

&!2hether additional interest must "e #aid "y the estate/. *he Court has #reviously held (in US v. 9a"adan! that mere

failure to #ay one6s ta does not make one delin4uent as ata#ayer unless and until the whole #eriod for #aying the ta,where no #enalties are yet im#osed, ela#ses without #ayment"eing made.

%. *he Collector argues that it is the duty of the eecutor (:oore,then su"se4uently, 9oren8o! to #ay the inheritance ta "efore

the decedent6s #ro#erty is delivered to the trustee, "ecausedelivery to the trustee is delivery to the cestui 4ue trust, who isthe "eneficiary contem#lated in Sec. /&>>("! of theAdministrative Code.

. u"lic #olicy was also considered in this case. *o allow acontrary decision would "e disastrous, leaving the #ayment oftaes virtually at the whim of the #eo#le.

/. *aes are essential to the government6s eistence(+o""ins v. rie County, etc.!

%. *he o"ligation to #ay taes de#ends on the necessityof money for su##ort of the state, not the #rivilegesen$oyed "y or even the #rotection afforded to citi8ens(+o""ins v. rie County!

. 3enerally, ta statutes should "e construed as to avoidthe chances of ta evasion ha##ening.

&. art of the #u"lic #olicy nature of this case revolvesaround the #rom#t #ayment of taes.

/. )o court is allowed to grant in$unctions torestrain the collection of internal revenuetaes (Administrative Code!. )ot even duringtimes of u#heaval like riots (9im Co Chui v.osadas! could the Collector etend the time

for #aying.

8/12/2019 tax batch 2

33/45

%. Any delay could have disastrousconse4uences (+ows v. Chicago, etc.!

&! *he delin4uency occurred on :arch /0, /;%>, when :oore "ecametrustee.)o #ayment was made within /0 days after notice and demand "ythe Collector, so a surcharge of %&' should "e added #ursuant to theAdministrative Code. +emand was made u#on :oore on 7cto"er /=, /;=&! V %;,! Com#uting the enaltiesH (sums collecti"le (total of %,%00./;! under Sec./&>> of the Admin Code@

/>=&. January /;;%. Under Section < ofsaid Act, it states that this act shall take effect u#on its a##rovalH. owever,res#ondents #romulgated --. )o. /1;% which contained a #rovision stating thatMtNhese regulations shall take effect on com#ensation income from January /,/;;%H. *he SC held that -A G/=G took effect on Jan

8/12/2019 tax batch 2

34/45

Congress enacted -e#. Act G/=G& and G% of the )ational Internal-evenue Code in relation to -e#u"lic Act )o. G/=G, these -egulations arehere"y #romulgated #rescri"ing the collection at source of income ta onco'pensa"ion inco'e paid on or a%"er January 1, 1992Y.

Sec.

8/12/2019 tax batch 2

35/45

e s"ressed "#e necessi"y o% passing "#e 'easure "o 'i"iga"e "#e e%%ec"s o% "#ecurren" in%a"ion and o% "#e i'pe'en"a"ion o% "#e saary s"andardiza"ion a$Ce "#en rei"era"ed "#a" "#e increase in "#e prices o% co''odi"ies #as eroded "#epurc#asing po$er o% "#e peso despi"e "#e recen" saary increases ande'p#asized "#a" "#e 0i $i ser3e "o co'pensa"e "#e ad3erse e%%ec"s o% in%a"ionon "#e "a!payers. . . .

Ote( obse(&at%ons b3 te Co#(t

1 -AG/=G s#eaks of the ad$ustments that it #rovides for, as ad$ustments "o "#e po3er"y"#res#od e3e. Certainly, the #overty threshold level is the #overty threshold

level at the time -AG/=G was enacted "y Congress, not #overty threshold levels in%u"uro, at which time there may "e need of further ad$ustments in #ersonaleem#tions.

1 *he #ersonal and additional eem#tions #rovided under -AG/=Gare %i!ed a'oun"stowhich an individual ta#ayer is entitled. In the end, it is the lower1income and themiddle1income grou#s of ta#ayers who stand to "enefit most from the increase of#ersonal and additional eem#tions. *o that etent, the act is a so"%a' 'e%s'at%onintended to alleviate in #art the #resent economic #light of the lower incometa#ayers. It is intended to remedy the inade4uacy of the eisting #ersonal andadditional eem#tions for individual ta#ayers.

1 -AG/=G says that the increased #ersonal eem#tions that it #rovides for shall"e availa"le thenceforth, that is, after said -A shall have "ecome effective.o *hese eem#tions are availa"le u#on the filing of #ersonal income ta

returns which is, under the )I-C, done not later than the /&th day ofA#ril after the end of a calendar year.

o *hus, under -AG/=G, which "ecame effective on "o decide.

2-F7-, Sections /, < and & of -evenue -egulations )o. /1;% which#rovide that the regulations shall take effect on com#ensation income earned orreceived from / January /;;% are here"y S* ASI+. *hey should take effecton com#ensation income earned or received from / January /;;/.

Since this decision is #romulgated after /& A#ril /;;%, the individual ta#ayers entitled tothe increased eem#tions on com#ensation income earned during calendar year /;;/ whomay have filed their income ta returns on or "efore /& A#ril /;;% (later etended to %>A#ril /;;%! without the "enefit of such increased eem#tions, are entitled to thecorres#onding ta refunds andor credits, and res#ondents are ordered to effect suchrefunds andor credits.

CIR &. SOLID)ANK;o3e'ber 25, 2??+

&anganiban, J.

Denn

S#!!a(3: Solid"ank filed its Zuarterly ercentage *a -eturns reflecting its grossrecei#ts. It later alleged that the total included gross recei#ts from #assive incomewhich was already su"$ected to %0' F2*. In one case, the C*A held that the %0'F2* should not form #art of its taa"le gross recei#ts for #ur#oses of com#uting thegross recei#ts ta. Solid"ank, relying on the strength of this decision, filed with theI- a letter1re4uest for the refund or ta credit. It also filed a #etition for reviewwith the C*A, which ordered CI- to refund the over#aid amounts. 7n a##eal, theCA stated that the %0' F2* did not form #art of the taa"le gross recei#ts "ecausethe F2* was not a"t#a''3received "y the "ank "ut was directly remitted to thegovernment. *he CI- claims that although the F2* was not actually received "ySolid"ank, the fact that the amount redounded to the "anks "enefit makes it #art of

the taa"le gross recei#ts in com#uting the 3ross -ecei#ts *a. Solid"ank says theCA ruling is correct. SC ruled in favour of CI- and held that the F2* forms #art ofthe taa"le gross recei#ts for #ur#oses of com#uting 3ross -ecei#ts *a.

Do"t(%ne:In the construction and inter#retation of ta statutes and of statutes in general, the#rimary consideration is to ascertain and give effect to the intention of thelegislature. *he Court ought to im#ute to the lawmaking "ody the intent to o"ey theconstitutional mandate, as long as its enactments fairly admit of such construction.

2hile courts will not enlarge "y construction the governments #ower oftaation, neither will they #lace u#on ta laws so loose a construction as to #ermitevasions, merely on the "asis of fanciful and insu"stantial distinctions. 2hen thelegislature im#oses a ta on income and another on "usiness, the im#osition must "eres#ected. *he *a Code should "e so construed, if need "e, as to avoid em#ty

8/12/2019 tax batch 2

36/45

declarations or #ossi"ilities of crafty ta evasion schemes.

A taing act will "e construed, and the intent and meaning of the legislatureascertained, from its language. Its clarity and im#lied intent must eist to u#hold thetaes as against a ta#ayer in whose favor dou"ts will "e resolved. .

Court.s Introduct!on1 Under the *a Code (*C!, the earnings of "anks from #assiveH income are su"$ect

to a %0' final withholding ta (F2*!. *his ta is withheld at source and is thus notactually and #hysically received "y the "anks, "ecause it is #aid directly to thegovernment "y the entities from which the "anks derived the income. A#art from the%0' F2*, "anks are also su"$ect to a &' gross recei#ts ta (3-*! which is im#osed"y the *C on their gross recei#ts, including the #assiveH income.

1 Since the %0' F2* is constructively received "y the "anks and forms #art of theirgross recei#ts or earnings, it follows that it is su"$ect to the &' 3-*. After all, theamount withheld is #aid to the government on their "ehalf, in satisfaction of theirwithholding taes. *hat they do not actually receive the amount does not alter thefact that it is remitted for their "enefit in satisfaction of their ta o"ligations.

o If there were no withholding ta system in #lace in the hil., this %0'

#ortion of the #assiveH income of "anks would actually "e #aid to the

"anks and then remitted "y them to the government in #ayment of theirincome ta. *he institution of the withholding ta system does not alter thefact that the %0' #ortion of their #assiveH income constitutes #art oftheir actual earnings, ece#t that it is #aid directly to the government ontheir "ehalf in satisfaction of the final income ta due on their #assiveHincomes.

.FACTS: For the calendar year /;;&, Solid"ank seasona"ly filed its Zuarterlyercentage *a -eturns reflecting gross recei#ts in the total amountof/,>G>,=;/,=;> with corres#onding gross recei#ts ta #ayments in the sumof G.=0. Solid"ank alleges that the total gross recei#ts included thesum of of the *C. It is included under*itle O. 7ther ercentage *aesH of the *C and is not su"$ect towithholding.

1 7n the other hand, the %0' F2* falls under Section %>(e!(/! of *itle II.*a on Income.H It is a ta on #assive income, deducted and withheld atsource "y the #ayor1cor#oration andor #erson as withholding agent.

1 A #erusal of these #rovisions clearly shows that two t%"es of taes are

!noled !n the "resent controers%: (/! the 3-*, which is a #ercentage taBand (%! the F2*, which is an income ta. As a "ank, #etitioner is covered"y "oth taes.

3SC. //;. Ta! on ban(s and non-ban( %inancia in"er'ediaries.L *here shall "e collected a ta ongross recei#ts derived from sources within the hili##ines "y all "anks and non1"ank financialintermediaries in accordance with the following schedule@(a! 7n interest, commissions and discounts from lending activities as well as income fromfinancial leasing, on the "asis of remaining maturities of instruments from which such recei#ts arederived.

)othing in this Code shall #reclude the Commissioner from im#osing the same ta herein #rovidedon #ersons #erforming similar "anking activities.H

http://sc.judiciary.gov.ph/jurisprudence/2003/jun2003/146749.htmhttp://sc.judiciary.gov.ph/jurisprudence/2003/jun2003/146749.htm

8/12/2019 tax batch 2

37/45

1 A #ercentage ta is a national ta measured "y a certain #ercentage of thegross selling #rice or gross value in money of goods sold, "artered orim#ortedB or of the gross recei#ts or earnings derived "y any #erson engagedin the sale of services. It is not su"$ect to withholding.

1 An income ta, on the other hand, is a national ta im#osed on the net or thegross income reali8ed in a taa"le year. It is su"$ect to withholding.

In a withholding ta system, the #ayee is the ta#ayer, the #erson on whom theta is im#osedB the #ayor, a se#arate entity, acts as no more than an agent of thegovernment for the collection of the ta in order to ensure its#ayment. 7"viously, this amount that is used to settle the ta lia"ility is deemedsourced from the #roceeds constitutive of the ta "ase. *hese #roceeds are eitheractual or constructive. Since there is no actual recei#t "y the "ank of the amountwithheld, what needs to "e determined is !f there !s construct!e rece!"t thereof.

Construct!e Rece!"t 3ersus Actual Rece!"tCI-@ *here is constructive recei#t of the interest on de#osits and yield on de#ositsu"stitutes.Solid"ank@ ven if there is, Section >(e! of -- /%1E0 governs the situation.

1 Said #rovision states that the ta rates to "e im#osed on the grossrecei#ts of "anks, non1"ank financial intermediaries, financingcom#anies, and other non1"ank financial intermediaries not #erforming4uasi1"anking activities shall "e "ased on all i tems ofincome actually received.

1 Since there is no actual recei#t, the F2* is not to "e included in the ta"ase for com#uting the 3-*.

SU-: C7U-* a##lied on the recei#t of income the rules on actual andconstructive #ossession #rovided in Arts. &

8/12/2019 tax batch 2

38/45

the ta#ayers "enefitB and it is not necessary that there must "ea law or regulation which would eem#t such monies andrecei#ts within the meaning of gross recei#ts under the *C.

In the construction and inter#retation of ta statutes and of statutes in general, the#rimary consideration is to ascertain and give effect to the intention of thelegislature. Courts ought im#ute to the lawmaking "ody the intent to o"ey theconstitutional mandate, as long as its enactments fairly admit of suchconstruction. In fact, no ta can "e levied without e#ress authority of

law, "ut the statutes are to receive a reasona"le construction with a view tocarrying out their #ur#ose and intent.H1 A look into Sections %>(e!(/! and //; of the *C would show that the first

im#oses an income taB the second, a #ercentage ta. *he legislature clearlyintended two different taes. *he F2* is a ta on #assive income, while the3-* is on "usiness. *he withholding of one is not e4uivalent to the #aymentof the other.

2hile courts will not enlarge "y construction the governments #ower oftaation, neither will they #lace u#on ta laws so loose a construction as to#ermit evasions, merely on the "asis of fanciful and insu"stantial distinctions.2hen the legislature im#oses a ta on income and another on "usiness, the

im#osition must "e res#ected. *he *a Code should "e so construed, if need "e,as to avoid em#ty declarations or #ossi"ilities of crafty ta evasion schemes.

A taing act will "e construed, and the intent and meaning of the legislatureascertained, from its language. Its clarity and im#lied intent must eist to u#holdthe taes as against a ta#ayer in whose favor dou"ts will "e resolved. )o suchdou"ts eist with res#ect to the *a Code, "ecause the income and #ercentagetaes we have cited earlier have "een im#osed in clear and e#ress language forthat #ur#ose.

On ta eem"t!onSolid"ank@ I am entitled to a refund on the "asis of ecess 3-* #ayments.

SC@ 2e disagree.1 *a refunds are in the nature of ta eem#tions. Such eem#tions are strictly

construed against the ta#ayer, "eing highly disfavored and almost said to"e odious to the law.H ence, those who claim to "e eem#t from the#ayment of a #articular ta must do so under clear and unmistaka"le termsfound in the statute. *hey must "e a"le to #oint to some #ositive #rovision,not merely a vague im#lication, of the law creating that right.

1 Since ta refunds are in the nature of ta eem#tions, these are deemed to "ein derogation of sovereign authority and to "e construed s"ric"issi'i*urisagainst the #erson or entity claiming the eem#tion.H

1 *he /;EG Constitution itself #rovides for the mechanism for granting taeem#tions. *hey certainly cannot "e granted "y im#lication or mere

administrative regulation. In the instant case, Solid"ank has not "een a"le to

satisfactorily show that its F2* on interest income is eem#t from the3-*.

No 5ouble Taat!on*he two taes, su"$ect of this litigation, are different from each other. *he "asisof their im#osition may "e the same, "ut their natures are different. *he Courtfinds that there is no dou"le taation.1 +ou"le taation means taing the same #ro#erty twice when it should "e

taed only onceB that is, taing the same #erson twice "y the same

$urisdiction for the same thing.H 7therwise descri"ed as direct du#licatetaation,H the two taes must "e im#osed on the same su"$ect matter, for thesame #ur#ose, "y the same taing authority, within the same $urisdiction, duringthe same taing #eriodB and they must "e of the same kind or character.

o % different su"$ect matters@ F2* 1 the #assive income generated in the form

of interest on de#osits and yield on de#osit su"stitutes, 3-* 1 the #rivilegeof engaging in the "usiness of "anking

o Although "oth taes are national in sco#e and are im#osed "y the same

taing authority for the same #ur#ose of raising revenues, the taing#eriods they affect are different. F2* is deducted and withheld as soon asthe income is earned, 3-* is neither deducted nor withheld, "ut is #aidonly after every taa"le 4uarter in which it is earned.

o +ifferent kinds or characters@ F2* 1 an income ta su"$ect to withholding,

3-* 1 a #ercentage ta not su"$ect to withholding.

DISPOSITI*E: CA +ecision -O-S+ and S* ASI+. *he %0' F2* ona "anks interest income forms #art of the taa"le gross recei#ts in com#uting the&' gross recei#ts ta.

Collector v. 9a *ondenaSerafica v. *reasurer of 7rmoc-oas v. -affertyecson v. CACI- v. CACI- v. *elefunken

CIR &. LHUILLIERJuy 15, 2??+

8/12/2019 tax batch 2

39/45

Da3ide, Jr., /J@uciano, ;oe /#ris"ian .

SUMMARY: *he CI- issued -evenue :emorandum 7rder /&1;/ and-evenue :emorandum Circular >%>.

CIRS MOTION TO DISMISS@ CI- filed with the C*A a motion to dismiss onthe ground that it did not state a cause of action, as there was no action yet on the

#rotest

LHUILLIERS OPPOSITION TO THE MOTION TO DISMISS @ 9huilliero##osed the motion to dismiss and moved for the issuance of a writ of#reliminary in$unction #raying that the I- "e en$oined from enforcing thewarrant of distraint and levy.

CTA DECISION@ *he C*A first denied the motion to dismiss and granted9huilliers motion for #reliminary in$unction.

7n the merits, the C*A ruled in favor of 9huillier and held@/. -:7 /&1;/ and -:C >

8/12/2019 tax batch 2

40/45

c. Sec. < of + //> states that #rinci#al "usiness activity of a#awnsho# is lending money

d. ence, a #awnsho# easily falls under the definition%. -:7 /&1;/ and -:C >. awnsho#s are strictly regulated "y the Central ank #ursuant to theawnsho# -egulation Act or +//>a. *here is no s#ecial law governing lending investors". +ue to the wide differences "etween the %, #awnsho#s had never

"een considered as lending investors for ta #ur#oses&. #ressio unius est eclusion alterius

a. It was not the intention of 9egislature to im#ose #ercentage taes on#awnsho#s

". If it were so, it would have "een included as among the "usinesssu"$ect to ta

c. *here can never "e a taation "y im#lication

ISSUE@ 27) #awnsho#s are su"$ect to the &' lending investors ta

RULING: )7. awnsho#s are not lending investors for the #ur#oses ofim#osing &' lending investors ta. *he assailed issuances are invalid for notconforming to law and for lack of #u"lication.

RATIO@

I. tent of the #ower of the Commissioner of Internal -evenue in makingrulesA. -:7 /&1;/ and -:C >& )I-C of /;GG, asamended "y 7 %G, %00=, and%0

8/12/2019 tax batch 2

41/45

%. SC7)+@ Congress never intended #awnsho#s to "e treated inthe same way as lending investors

a. Sec. //=, )I-C /;GG, was "asically lifted from Sec. /G&)I-C;/;E= which treated "oth ta su"$ects differently

". oth )I-C /;GG and )I-C /;E= dealt with #awnsho#s andlending investors differently

c. It was the intent of Congress to deal with "oth su"$ectsdifferently(/! ence, we must conform to this legislative intent

. F7U-*@ I- had ruled several times #rior to the issuance of-:7 /&1;/ and -:C >

8/12/2019 tax batch 2

42/45

CIR &. )ENGUET CORPORATIONJuy , 2??5

Tinga, J@uciano, ;oe /#ris"ian .

/on%using case *us" because #a3e no idea #o$ AT $or(s.

SUMMARY: enguet Cor#oration a##lied for and was granted "y the I-8ero1rated status on its sale of gold to Central ank. -elying on this 8ero1rated

status, enguet entered into transactions with the Central ank that resulted inin#ut OA* incurred in relation to the su"$ect sales of gold. *he CI- issueddeficiency assessment against enguet when, after a##lying enguetscredita"le in#ut OA* costs against the retroactive /0' OA* levy, thereresulted a "alance of ecess out#ut OA*. *he "asis of the disallowances and thedeficiency assessment was a I- -uling I- OA* -uling 00E1;% which wasissued su"se4uent to the consummation of the sales of gold to Central ank.enguet #rotested alleging that the retroactive a##lication was #re$udicial to it.*he SC agreed and held that enguet should not "e taed at /0'.

DOCTRINE: -ulings, circulars, rules, and regulations #romulgated "y the CI-would have no retroactive a##lication if to so a##ly them would "e #re$udicial

to the ta#ayer. -emem"er that the ta#ayer has the o#tion not to take on anyOA* #ayment for his transactions "y eercising his right to #ass on the OA*costs. In this case, the retroactive a##lication of the Second OA* -ulingunilaterally forfeited or withdrew this o#tion from enguet.

2hile it is true that the government is not esto##ed from collectingtaes which remain un#aid on account of the errors or mistakes of its agentsandor officials and there could "e no vested right arising from an erroneous

inter#retation of the law. *hese #rinci#les must give way to ece#tions "asedon and in kee#ing with the interest of $ustice and fair#lay.

FACTS: Under Sec. ;; )I-C, as amended "y 7 %G< (/;EG!, then in effect, any#erson who, in the course of trade or "usiness, sells, "arters or echanges goods,

renders services, or engages in similar transactions and any #erson who im#ortsgoods is lia"le for out#ut OA* at rates of either /0' or 0' (8ero1rated!de#ending on the classification of the transaction under Sec. /00 of the )I-C.

ersons registered under the OA* system are allowed to recogni8e in#utOA*, or the OA* due from or #aid "y it in the course of its trade or "usiness onim#ortation of goods or local #urchases of goods or service, including lease oruse of #ro#erties, from a OA* registered #erson.

In Jan /;EE, enguet Cor#oration a##lied for and was granted "y theI- 8ero1rated/0status on its sale of gold to Central ank.

1F researc#ed and apparen"y "#ere are so'e goods and ser3ices "#a" are zero-

ra"ed. T#is 'eans "#a" "#eyBre "a!abe %or AT, bu" "#e AT ra"e is zero per cen".% you se zero-ra"ed goods or ser3ices, you can generay recai' AT on any

+e#uty CI- Santos issued a OA* -uling

8/12/2019 tax batch 2

43/45

It held that no #re$udice had "efallen enguet "y the retroactivea##lication of the Second OA* -uling. ence, no violation of Sec. %>=.

CA DECISION ON APPEAL@ enguet a##ealed to the CA. *he CA reversedthe C*A. It held@

/. enguet suffered financial damage e4uivalent to the sum of thedisa##roved claimsa. ad enguet known that such sales were su"$ect to /0' OA*

(which rate was not the #revailing rate at the time of transaction!,

enguet would have #assed on the cost to Central ank%. -emedies which the C*A su##osed would eliminate any resultant

#re$udice to enguet were not sufficient #alliatives as the monetaryvalues #rovided in the su##osed remedies do not a##roimate themonetary values of ta credits that enguet lost after im#lementation ofthe Second OA* -uling.

ence, CI- filed the instant etition for -eview, 4uestioning the CA decision.

ISSUE:27) enguets sale of gold to Central ank during the #eriod whensuch was classified "y I- Issuances as 8ero1rated could "e taed validly at a/0' rate after the consummation of the transactions involved

RULING@ )7, it cannot "e validly taed. *he retroactive a##lication of the OA*-uling is #re$udicial to enguet and hence should not "e a##lied to it.

RATIO@

I. 7n the validity of the Second OA* -ulingA. *he SC held that it need not rule on the validity of the assailed OA*

-uling. *he Court need not invalidate the I- issuances which have the

force and effect of law, unless the issue of validity is so crucially atthe heart of controversy that the Court cannot resolve the case

without having to strike down the issuances.C. *he very lis mota of the case is whether the Second OA* -uling

may validly "e given retroactive effect

II. +iscussion on OA* (Ta(e no"e o% "#ese principes since i" is ree3an" "o"#e 'ain issue>A. OA* is a #ercentage ta im#osed at every stage of the distri"ution

#rocess on the sale, "arter, echange, or lease of good or #ro#ertiesand rendition of services in the course of trade or "usiness, or theim#ortation of goods.

. OA* is an indirect ta, which may "e shifted to the "uyer,transferee, or lessee of the goods, #ro#erties, or services

/. *he #arty directly lia"le for the #ayment of the ta is the seller

C. In transactions taed at /0' rate@/. 2hen at the end of any given taa"le 4uarter the out#ut OA*

eceeds the in#ut OA*, ecess shall "e #aid to the government%. 2hen in#ut OA* eceeds out#ut OA*, ecess would "e

carried over to OA* lia"ilities for the succeeding 4uarter or4uarters

+. 7n the other hand, transactions which are taed at 8ero1rate do notresult in any out#ut ta/. In#ut OA* attri"uta"le to 8ero1rated sales could "e refunded or

credited against other internal revenue taes at the o#tion of theta#ayer

. In "oth situations, the ta#ayer has the o#tion not to carry any OA*cost/. In a 8ero1rated transaction, ta#ayer is allowed to recover in#ut

ta from the I- without need to #ay out#ut ta%. In a /0' rated OA*, the ta#ayer is allowed to #ass on "oth

in#ut and out#ut OA* to the "uyer= )I-C

. +etermination of 27) enguet had suffered #re$udice is a factualissue/. *he SC is not a trier of facts

%. In the eercise of the SCs #ower of review, findings of facts ofthe CA are conclusive and "inding on the SCa. C* when findings of fact a 4uo are conflicting". 9ike in the case at "ar

C. -emem"er that the ta#ayer has the o#tion not to take on any OA*#ayment for his transactions "y eercising his right to #ass on theOA* costs. In this case, the retroactive a##lication of the SecondOA* -uling unilaterally forfeited or withdrew this o#tion fromenguet/. FFC*@ enguet "ecame the une#ected and unwilling

de"tor to the I- of the amount e4uivalent to the total OA*costs of its #roduct

8/12/2019 tax batch 2

44/45

a. A lia"ility it #reviously could have recovered from the I-in a 8ero1rated scenario or at least #assed on to the Centralank had it known that it would have "een taed at a /0'rate

%. ence, enguet suffered economic #re$udice when itsconsummated sales of gold to the Central ank were taken outof the 8ero1rated category

IO. enguet cannot "e faulted for relying on the I-s inter#retation of laws

and regulationsA. At the time when the su"$ect transactions were consummated, the

#revailing I- regulations relied u#on "y enguet ordained thatgold sales to Central ank were 8ero1rated

. *he I- inter#reted@/. Sec. /00 )I-C in relation to Sec. % 7 &E/ which #rescri"ed

that gold sold to the Central ank shall "e considered e#ortand therefore shall "e su"$ect to the e#ort and #remium duties

%. I- also considered Sec. /=; Central ank Circular )o. ;=0which states that all sales of gold to the Central ank areconsidered constructive e#orts

C. 2hile it is true that the government is not esto##ed from collecting

taes which remain un#aid on account of the errors or mistakes ofits agents andor officials and there could "e no vested right arisingfrom an erroneous inter#retation of the law/. *hese #rinci#les must give way to ece#tions "ased on and in

kee#ing with the interest of $ustice and fair#lay%. very #erson must, in the eercise of his rights and in the

#erformance of his duties, act with $ustice, give everyone hisdue, and o"serve honesty and good faith

DISPOSITI*E:etition +)I+. CA +ecision AFFI-:+. enguet sufferedfinancial damage e4uivalent to the sum of the disa##roved claims "y theretroactive a##lication of the I- OA* -uling.

8/12/2019 tax batch 2

45/45

TAXATION 1 | B2015CASE DIGESTS

3;