TAX 2 Digests (Locgov)

 

Taxation II A2010 GARCIA V EXECUTIVE SECRETARY  BASTIDA V CUSTOMS COLLECTOR 35 SCRA 448 Castro; October 24, 1970

FACTS -Layug, a customs customs examiner discovered discovered in the airport airport in the the two two Mini Minifo fons ns (wir (wire e reco record rder er)) of Bast Bastid ida a consigned to a certain priest in Italy various checks, money orders, and traveler's checks all payable in US dollars amounting to a total total of $13,780 and $3,149.50 $3,149.50 and several US dollar bills of different denominations in the total amount of P630. The Customs authorities authorities seized the two cardboard boxes and all the contents thereof, thereof, alleging alleging violation violation of Section Section 1363(f) 1363(f) and (m) sub-paragraphs 3 and 4, of the Revised Administrative Code, Code, 1 as well as Central Central Bank Bank Circula Circularr 20 as implemented implemented by Circular Circular 42 2 (in relation relation to Section 1363 1363 [f] of the same Code) because because althou although gh an Export Control Control Committee Committee permit and Central Bank export license covered the exportation of the Minifons, the various checks, money orders and dollar bills were not covered by any Central Bank license. Central Bank, promulgated Circular 133 permitting any person to buy US dollars at the prevailing market rate and export the same without prior specific licensing from the Central Bank. Bank. Circul Circular ar furthe furthermo rmore re repeal repealed ed all previo previous us circulars circulars inconsiste inconsistent nt therewith. therewith. Bastida Bastida contended contended that the bulk of the property seized consists of checks which are not subject to forfeiture because they are not "merchandise" as contemplated by Sections 1363 and 1419 of the Revised Administrative Code, and that even assuming arguendo that the properties seized fall within the meaning of "merchandise" as defined by the said Code, their forfeiture forfeiture has become academic in view of the repeal of Central Bank Circulars 20 and 42 by Circular 133. CTA affirmed.

ISSUES What is a Merchandise?

HELD  The Revised Administrative Code defines merchandise when when used used with with refe refere renc nce e to impo import rtat atio ions ns or exportation exportations, s, includes includes goods, wares, wares, and in general general anything that may be made the subject of importation or exportation exportation.. Checks, Checks, money orders and dollar dollar bills

Prof.Movido

properly fall within the concept of "merchandise" as used in the Revised Administrative Code. US Dollars are merchandise. merchandise. Checks as bills bills of exchange, are negotiable instruments and may be bought and sold like a commodity. commodity. Money orders, also considered as bills of exchange of limited negotiability, possess the same attributes as other negotiable instruments. Thus, they may be bought and sold like checks. Disposition ACCORD ACC ORDINGL INGLY, Y, the decision decision of the Court of Tax Appeals appealed from is affirmed, at petitioner's cost.

GARCIA V EXECUTIVE SECRETARY 

TAÑADA V ANGARA Panganiban; 272 SCRA 18; May 2, 1997 NATURE Petiti Petition on for certio certiorar rari, i, prohib prohibiti ition on and mandam mandamus us prayin praying g (1) for the nullif nullifica icatio tion, n, on consti constitut tution ional al ground grounds, s, of the Phil. Phil. Senate Senate’s ’s concur concurren rence ce in the Presidential ratification of the WTO Agreement and (2) for for the the proh prohib ibit itio ion n of its its impl implem emen enta tati tion on and and enforcement

FACTS -Like many other developing countries, the Philippines   joined joined WTO as a founding founding member with the goal of  improv improving ing “Phili “Philippi ppine ne access access to foreig foreign n markets markets,, especi especiall ally y its major major tradin trading g partne partners, rs, throug through h the redu reduct ctio ion n of tari tariff ffs s on its its expo export rts, s, part partic icul ular arly ly agricultural and industrial products.” -Argu -Arguin ing g main mainly ly (1) (1) that that the the WTO WTO requ requir ires es the the Philippines to place nationals and products of membercountries countries on the same footing footing as Filipinos Filipinos and local products products and (2) that the WTO intrudes, intrudes, limits and/or impairs the constitutional powers of both Congress and the Supreme Court, the instant instant petition before this Court assails assails the WTO Agreement Agreement for violating violating the mandate of the 1987 Constitution .1 Petitioners claim 1

Article II, Sec. 19. The State shall develop a self-reliant and independent independent national economy effectively controlled by Filipinos. Article XII, Sec. 10. xxx The Congress shall enact measures that will encourage the formation and operation of enterprises whose whose capital capital is wholly wholly owned owned by Filipinos. Filipinos. In the grant of 

that the WTO proviso derogates from the Legislature’s power to tax. [Note: [Note: While While the Consti Constitut tution ion allows allows Congre Congress ss to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duti duties es or impo impost sts, s, such such auth author orit ity y is subj subjec ectt to “spe “speci cifi fied ed limi limits ts and and . . . such such limi limita tati tion ons s and and restrictio restrictions” ns” as Congress Congress may provide provide (e.g., (e.g., through through Sec. 401 of the Tariff and Customs Code).]

ISSUE WON the provisions provisions of the WTO Agreement unduly limit, limit, restri restrict ct and impair impair Philip Philippin pine e sovere sovereign ignty ty (legislative power)

HELD: NO -While sovereignty sovereignty has traditiona traditionally lly been deemed absolute and all-encompassing on the domestic level, it is however subject subject to restrictio restrictions ns and limitations limitations voluntaril voluntarily y agreed to by the Philippines, Philippines, expressly expressly or implie impliedly dly,, as a member member of the family family of nation nations. s. Unquestiona Unquestionably, bly, the Constituti Constitution on did not envision envision a hermit-type isolation of the country from the rest of  the world. By the doctrine of incorporation, the country is boun bound d by gene genera rall lly y acce accept pted ed prin princi cipl ples es of  inte intern rnat atio iona nall law, law, whic which h are are cons consid ider ered ed to be automatical automatically ly part of our own laws. One of the oldest and most fundamental fundamental rules in internatio international nal law is pacta sunt servanda – international agreements must be performed in good faith. -By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations nations may surrender surrender some aspects aspects of their state power in exchange for greater benefits granted granted by or derived from a convention or pact. The sovereignty of  a state state theref therefore ore cannot cannot in fact and in realit reality y be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of  membership in the family of nations and (2) limitations imposed by treaty stipulations. -The underlying consideration in this partial surrender of sovereignty sovereignty is the reciprocal reciprocal commitment commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its rights, rights, privilege privileges, s, and concessio concessions ns covering covering the national national economy and patrimony, the State shall give preference to qualified Filipinos. Sec. 12. The State shall promote the preferential use of Filipino labor, labor, domestic domestic material materials s and locally produced produced goods, and adopt measures that help make them competitive.

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citize citizens. ns. The same same recipr reciproci ocity ty charac character terize izes s the Philippine commitments under WTO-GATT. Other Relevant Relevant Statements Statements of the Court: The WTO Agreement grants developing countries a more lenient treatme treatment, nt, giving giving their their domest domestic ic indust industrie ries s some some protection from the rush of foreign competition. -With -With resp respec ectt to tari tariff ffs s in gene genera ral, l, pref prefer eren enti tial al treatment is given to developing countries in terms of  the amount of tariff tariff reduction reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries – including the Philippin Philippines es – are required required to effect an average average tariff reduction of only 24% within ten (10) years. -In resp respec ectt to dome domest stic ic subs subsid idy, y, GATT GATT requ requir ires es developed developed countries to reduce domestic support to agricultura agriculturall products by 20% over six (6) years, years, as compared compared to only 13% for developing developing countries countries to be effected within ten (10) years. -In regard to export subsidy for agricultural products, GATT requires developed countries countries to reduce their budgetary budgetary outlays for export subsidy subsidy by 36% and export volumes receiving export subsidy by 21% within a period period of six (6) years. For developing developing countries, however, however, the reduction reduction rate is only two-thirds two-thirds of that prescribed for developed countries and a longer period of ten (10) years within which to effect such reduction. -Moreover, GATT itself has provided built-in protection from unfair foreign foreign competition competition and trade practices practices includ including ing anti-d anti-dumpi umping ng mea measur sures, es, counte counterva rvaili iling ng measur mea sures es and safegu safeguard ards s agains againstt import import surges surges.. Where Where local local busine businesse sses s are jeopar jeopardiz dized ed by unfair unfair foreign competition, the Philippines can avail of these measures. -There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. economy. Quite the contrary, contrary, the weaker weaker situat situation ions s of develo developin ping g nation nations s like like the Philippines have been taken into account; thus, there would be no basis to say that in joining joining the WTO, the respondents respondents have gravely gravely abused abused their discretion. discretion.  True, they have made a bold decision to steer the ship of state state into into the yet unchar uncharted ted sea of econom economic ic liberalization. But such decision cannot be set aside on the ground ground of grave grave abuse abuse of discre discretio tion, n, simply simply because because we disagree disagree with it or simply because we believe only in other economic policies.

Prof.Movido

-The -The cons consti titu tuti tion onal al poli policy cy of a "sel "self-r f-rel elia iant nt and and independent independent national economy" does not necessaril necessarily y rule out the entry of foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international community." The WTO relian reliance ce on "most "most favore favored d nation nation," ," "natio "national nal treatment," and "trade without discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Epilogue -It is true that broad constitutional principles require the State to develop an independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally true that such principles principles – while serving as judicial judicial and legislati legislative ve guides – are not in themselves sources of causes of  action. Moreover, there are other equally fundamental constitutio constitutional nal principles relied upon by the Senate which which mandate mandate the pursui pursuitt of a "trade "trade policy policy that that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity" and the promotion of industries "which are competitive competitive in both domestic and foreign foreign markets," markets," thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced by the adopti adoption on of the genera generally lly accept accepted ed princi principle ples s of  international law as part of the law of the land and the adhe adhere renc nce e of the the Cons Consti titu tuti tion on to the the poli policy cy of  cooperation and amity with all nations. Disposition Petition is dismissed for lack of merit.

UY CHACO SONS V COLLECTOR OF CUSTOMS G.R. No. L-7618 TRENT; March 27, 1913

- The white lead referred referred to was imported imported into the Philippine Islands directly from the US in one bottom withou withoutt transs transship hipmen mentt en route; route; that that same same was produced in the United States from pig lead imported into the United States from Spain, and that no duty

was paid upon said pig lead upon its importation into US, notwithstanding the fact that the tariff law of  the United States in force at the time of its importation imposed a tax thereon. - The same was put into a bonded warehouse upon its arrival in the US, and was then subjected to what is known as the "Dutch" of "Stack" process. - No duty was paid upon any of the foreign material (used in the Dutch of Stack process) imported into the United States, and which was used in the production of  the white lead as imported into the Philippine Islands. - The duty prescribed by the US Tariff Law of 1909 was not applied to the pig lead in question because the importers took advantage of the provisions of section 23 (quoted post) of the said law. This section permits of the the impo import rtat atio ion n of fore foreig ign n mate materi rial als s for for the the manufacture of articles in the United States without the payment of duty, provided the finished article is export exported ed direct directly ly to foreig foreign n countr countries ies or to the Philippine Islands. - The white white lead lead was manufactu manufactured red under these these cond condit itio ions ns,, and and the the pig pig lead lead ente enteri ring ng into into its its compositio composition n thereby thereby escaped escaped the imposition imposition of the duty prescribed for that article by paragraph 182 of the United States Tariff Law.

ISSUE(S) 1.

WON the the manufac manufactur tured ed articl article e is to be admitte admitted d into into Philip Philippin pine e Island Islands s free free of duty duty under under the above facts.

HELD Ratio Reasoning Section 5 of the United States Tariff Law:   That in consideration of the exemption aforesaid, all articles, the growth, product, or manufacture of  the United United States States,, upon upon which which no drawba drawback ck of  customs duties has been allowed therein, shall be admitted to the Philippine Islands from the United States free of duty. Section 12 of Philippine Tariff Law:  That all articles, except rice, the growth, product, or manufa manufactu cture re of the United United States States and its possessions “to which the customs tariff in •

NATURE An appe appeal al from from a judg judgmen mentt of the the CFI CFI of Mani Manila la confirming a decision of the Collector of Customs to the effect that white lead manufactured in a bounded warehouse in the United States from pig lead imported from Spain without the payment of duty is not entitled to free entry into the Philippine Islands.

FACTS

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Taxation II A2010 force force in the United United States States is applie applied d and upon which no drawback of custom duties therein, n, going going into into the had been been allowe allowed’ d’ therei

Philip Philippin pine e Island Islands s shall shall hereaf hereafter ter be admitte admitted d therein free of customs duty when the same are shipped directly from the country of origin to the country of destination. - Uy Chaco claims these provisions provisions are harmonious harmonious with each other, while the Collector claims that Sec. 12 of the Philippine Tariff law prevails over Sec. 5. - It is a well-recogn well-recognized ized rule of construction construction that a statute repeals prior enactments in so far as the same are inconsistent inconsistent and irreconcilable irreconcilable with it. If by no construction can both provisions stand together, the later Act must prevail as expressing the latest will of  the Legislature. US Tariff Tariff Law: Law: August August 5, 1909, 1909, at 5:05 5:05 PM effective August 6, 1909. Phil Phil Tariff Tariff Law: August August 5, 1909, 1909, 5:08 5:08 PM, effective after sixty days (subsequent both as the time of passage and the time of taking effect). - In this regard, Sec. 12 prevails over Sec. 5. - Uy Chaco claims that the “to which” clause qualifies the term “possessi “possessions.” ons.” Collector Collector on the other hand claims that it limits the term “articles.” - This This provis provision ion does not limit limit the term term “artic “articles les” ” because it must be considered that such construction of the section imposes two conditions upon an article which would enter the Philippine Islands free of duty: (1) It must be an article of American growth, product, or manufacture "to which the customs tariff in force in the United States is applied;" and (2) "upon which no drawback of customs duties has been allowed”. The •

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tariff in force in the United States is not applied to any articl article e of purel purely y domes domestic tic origin origin.. As

American articles of purely domestic origin would fail to comp comply ly with with the the firs firstt cond condit itio ion, n, it woul would d be unnecessary unnecessary to consider consider whether whether they could comply with the second. Clearl Clearly, y, by the additio addition n of the words "and "and its posses possessio sions" ns" it was desire desired d to furthe furtherr extend extend the privil privilege ege of free free entry entry into into Philip Philippin pine e Islands Islands of  American articles by including not only what might be called called the United United States States proper proper,, but someth something ing additional additional.. So the words "and its possessions" possessions" were added to avoid any doubt that it was the intention of  Congress Congress that not only articles from the mainland mainland should should be permitted permitted to enter the Philippine Philippine Islands

free, but also articles from other territories within the  jurisdiction of the United States. - Unrestricted, the phrase "the United States and its posses possessio sions" ns" would would includ include e the Philip Philippin pine e Island Islands s themse themselve lves, s, as well as the Island Islands s of Guam Guam and  Tutuila, which were meant to be excluded. But if we allow the "to which" clause to modify "possessions" all ambiguity immediately disappears. - Articles of American origin coming from the mainland or from from any territ territory ory under under the jurisdic jurisdictio tion n of the United States, to which the tariff in force in the United States is applied, are to be admitted free, provided

only there is no drawback drawback of customs customs duties. duties.

(The preamble of that Act provides that it shall apply to the United States and all of its possessions except the Phil Philip ippi pine ne Isla Island nds s and and the the Isla Island nds s of Guam Guam and and  Tutuila.) - Again, it will be noted that the words "is applied" are used used in the "to which" which" clause clause,, while while in the "upon "upon which" clause clause the verb is "has been allowed." allowed." Now, while we are ready to concede concede that the United States States  Tariff is applied to every article of American growth, product, or manufacture containing foreign material, in the sense that the tariff tariff was applied applied to the foreign material contained in such article upon its importation into the country, we cannot assent to the statement that the tariff is applied to the finished article which seeks entrance into the Philippine Islands. - The tariff spends its force when the foreign foreign

material contained in the finished article enters the country as raw material, material, and has nothing further to do with it. In point of time, the application of the tariff to the article occurs before a drawback of  duties, and there is therefore more reason to place the verb of the "to which" clause in the past than there is for expressing the action of the "upon which" clause in the past. American articles wholly of domestic origin cannot possib possibly ly labor labor under under the disqua disqualif lifica icatio tion n of a drawba drawback ck of United United States States custom customs s duties duties,, as none are ever assessed. American articles made wholly or in part of foreign materials which foreign materials enter the United States without the payment of duty by reason of  thei theirr bein being g on the the free free list list may may ente enterr the the Philippines free of duty for the same reason. American articles made wholly or in part of foreign materials, which foreign materials paid the regular duty upon entering the United States, may also enter the Philippines free, provided they can show •

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Prof.Movido that no drawback of the duty collected has been allowed. - In this case, the shipment of white lead, which is the subject subject of this controversy, controversy, although although in one sense an article of American manufacture, is not comprehended within any of these three classes. •

DRAWBA DRA WBACK CK - a device resorted to for enabling a commodity commodity affected by taxes to be exported and sold in the foreign markets upon the same terms as if it had not been taxed at all.

- Any materials used in the manufacture of such goods, and any packages, coverings, coverings, vessels, vessels, brands, and labels labels used in putting putting up the same may, under the regula regulatio tions ns of the Secret Secretary ary of the Treasu Treasury, ry, be conveyed without the payment of revenue tax or duty into into any bonded bonded manufac manufactur turing ing wareho warehouse use,, and imported goods may, under the aforesaid regulations, be transferred without the exaction of duty from any bonded warehouse warehouse into any bonded manufacturing manufacturing warehouse; but this privilege shall not be held to apply to implements, machinery, or apparatus to be used in t he he co on ns tr tr uc uc ti tio n or r ep ep a aiir of an ny y bo on nd e ed d manufacturing warehouse or for the prosecution of the business carried on therein. - if we accede accede to the proposi propositio tion n that that articl articles es so manufactured manufactured are admitted admitted free into the Philippin Philippines es under section 12, is not only to afford these bonded manufacturin manufacturing g warehousemen warehousemen a better better market in the Phil Philip ippi pine ne Isla Island nds s than than is allo allowe wed d to fore foreig ign n manufacturer manufacturers, s, but to give them a preference preference in that mark market et over over thos those e Ameri America can n indus industr trie ies s whic which h manufacture the same article of materials have paid d ut ut y. y. A nd nd th is is ad dv va n ntt ag ag e o ve ve r le g gii ti ti ma ma te te manufacturers may be greater than might at first be supposed. - It is clear that under the proposed exemption from Philippine customs duties of articles manufactured in bond, bond, those those America American n manufa manufactu cturer rers s who are not conducting their business under bond are placed at a distinct disadvantage in competing with their bonded brothers in the Philippine market. If the manufactured article (white lead in this case) produced under bond in the United States is to be allowed free entry into the Philippines, it is subject to no duty at all. - By section section 5 of its own customs customs tariff, the United States States remits remits the duty upon certain articles articles coming from the Philippine Islands. In the same section, and "in consideration" for the exemptions provided, it is set

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forth that all articles articles of American American growth, product, or manufa manufactu cture re upon upon which which no drawba drawback ck of custom customs s duties duties has been allowed in the United United States States shall be admitted to the Philippines free of duty. - Upon examination of the registration placed upon the free entry of American merchandise into the Philippine Island Islands, s, i.e., i.e., that that there there shall shall be no drawba drawback ck of  customs customs duties thereon, thereon, there appears the further further indi indica cati tion on of the the view view Cong Congre ress ss took took upon upon this this question. - A drawback of customs duty presupposes a collection of customs customs duty, and a custom customs s duty duty can only be collected upon imports. - Every article article imported imported into the Philippines Philippines and from which which revenu revenue e is obtain obtained ed for the suppor supportt of our Government could escape the payment of this revenue by simply being subjected to a manufacturing process under bond in the United States. Not only would this pro tanto deprive the Philippin Philippine e Government Government of its revenues make its revenue tariff a "vain and useless thing," thing," but in exact proportion proportion to the magnitude of  such a movement it would deprive the United States of  a preferential market in the Philippines, which was the "considerat "consideration" ion" for the exemption from duty coming into the United States of certain Philippine products.

DISPOSITION  Judgment is affirmed.

COMMISSIONER V DELGADO 184 SCRA 579 PADILLA, J PADILLA,  J.; .; April 26, 1990

Prof.Movido

decisi decision on reduce reduced d the fine fine origin originall ally y impose imposed d petitioner from P58,400.00 to only P18,000.00.

by

ISSUE/S 1. WON CTA erred in reducing the fine

HELD 1. YES Section 2523 of the Tariff and Customs Customs Code Ratio Section reads: If the gross weight of any article described in the manifest exceeds exceeds by more than 20% the gross weight as declared declared in the manifest or bill of lading thereof, thereof, and the Collector Collector shall be of the opinion that such such discre discrepan pancy cy was due to the carele carelessn ssness ess or incomp incompete etency ncy of the master master or pilot pilot in command command,, owner or employee of the vessel or aircraft, a fine of  not more than 15% of the value of the article may be imposed upon the importing vessel. Respondent court itself found there was Reasoning Respondent inexcusable laxity on the part of the master or owner of the vessel, resulting in the excessive discrepancy in the declared weight of the cargo, and held that the fine fine impose imposed d by petiti petitione onerr was not really really unjust unjust,, oppressive and confiscatory and not more than 15% of  the value of the merchandise. The decisi decision on of respon responden dentt court court is Disposition   The hereby MODIFIED by setting aside the reduction in fine therein ordered, and REINSTATING the administrative fine of P58,400.00 imposed in the petitioner's decision.

NOTE: A cargo manifest is a bill of lading; a list of the cargo and passengers being transported in a vessel.

RODRIGUEZ V CA Infra

NATURE Petition for Review from decision of the CTA

COMMISSIONER V CTA

FACTS - The vessel SS Eurygenes arrived in the port of Manila and discharged a shipment of 123 bales of assorted textile remnants The gross weight of the shipment as declared in the Bill of Lading was 61,500 pounds. But upon upon exam examin inat atio ion n and and appr apprai aisa sall by cust custom oms s authorities, it was found that the actual weight thereof  was 136,343 pounds. - Respondent CTA found the vessel, represented by its agent, private respondent Delgado Shipping Agency, to have have violat violated ed Sec. Sec. 2523 2523 of the Tariff Tariff and Customs Customs Code. But respondent Court of Tax Appeals in its said

188 SCRA 61 FELICIANO; July 30, 1990

FACTS - Fe Fern rnan ando do Ever Everet ett" t",, a vess vessel el owne owned d by priv privat ate e respondent respondent Everett Steamship Steamship Corporation Corporation arrived in the port port of Manila Manila,, discha dischargi rging ng assort assorted ed textil textile e remnan remnants. ts. In its Bill of Lading Lading,, it declar declared ed that that its shipment was 17,500 lbs. Upon examination by custom authoritie authorities, s, the actual actual weight of the shipment shipment was found to be 62,869 lbs. - The The Chie Chieff of the Law Divis Divisio ion n of the Burea Bureau u of 

Cust Custom oms s aske asked d the the resp respon onde dent nt to expl explai ain n the the discre discrepan pancy. cy. The respon responden dentt said said that that it was the shipper was the one who provided the particulars of  the subject shipment, including the weight thereof. - The Bureau of Customs was not satisfied with the explanation and initiated an administrative proceeding against the respondent. The Collector of customs rendered a decision finding the "Fernando Everett" or its owner liable for a fine of P22,617.00 representing fifteen percent (15%) of the total value of the shipment, for violation of Section 2523 of the Tariff and Customs Code. Section 2523 reads as follows: Sec. 2523. Discrepancy between actual & declared weight of  manifested article. ? If the gross weight of any article or package described in the manifest exceed by more than twenty per centum the gross weight as declared in the manifest or bill of lading thereof, and the Collector shall be of the opinion that such discrepancy was due to the carelessness or incompetency of the master or pilot in command, owner or employee of the vessel or aircraft, a fine of not more than fifteen per centum of the value of the package or article in respect to which the discrepancy exists, may be imposed upon the importing vessel or aircraft. - The Commissioner of Customs affirmed the decision of the collector. Upon appeal by the respondent to the CTA, the CTA affirmed the decision but reduced the fine to P5000. The petitioner herein wants to reinstate the fine imposed by the Commissioner.

ISSUE/S 1. WON there is a duty on the part of the captain of a vessel or of a shipowner to determine the true weight of cargo to be loaded on board the vessel 2. WON the discrepancy discrepancy in the instant case between the actual and the declared weight of the shipment involved was due to the carelessness or incompetency of the captain of the vessel 3. WON the reduction of the fine was proper

HELD 1. YES vessel's 's master master,, owner owner or employe employees es are Ratio A vessel indeed burdened with the duty "to check and verify the

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correct weight of its cargo Reasoning In Commissioner of Customs v. Court of  Tax Appeals and Delgado Shipping Agencies, 1 this Court held that a duty of verifying the correct weight of  a cargo shipment is imposed by Section 2523 of the  Tariff and Customs Code itself: 5. Finally, contrary to respondent's contention, the vessel's master, owner or employee are duty bound under the cited codal section under pain of the penalty of fine therein provided to check and verify the correct weight of the cargo or shipment so as to prevent a misdeclaration or underdeclaration of  weight. The vessel master's discharge of such obligation imposed by law to properly determine and verify the weight of cargos carried by it is certaintly pertinent to and important for the proper assessment of the collectible custom duties and taxes, and is not a burdensome task in the present era of containerized cargos 2. YES Reasoning A difference of more than twenty percent (20%) between the actual gross weight of a shipment and its declar declared ed gross gross weight weight is not a de minimis minimis matter; on the contrary, it is sufficiently substantial so as reason reasonabl ably y to give give rise rise to a presum presumpti ption on  juris tantum that some negligence or failure to exercise exercise some technical duty had occurred. The actual practice of the Commissioner of Customs in cases of this kind may be seen seen to be based based upon upon such such presum presumpti ption; on; where where a discre discrepan pancy cy of more more than than twenty twenty percent percent (20%) of the stated weight is shown, the Collector of  Customs Customs requires, as noted earlier, earlier, the vessel, vessel, its captain or owner to show cause why an administrative fine should not be imposed upon the offending vessel under Section 2523 of the Tariff and Customs Code.  The greater the discrepancy between declared gross weight and actual gross weight of a shipment, the stronger that presumption becomes until at some point it is well-nigh conclusive. In the case of the "Fernando Everett", the discrepancy amounted to 259 per centum of the declared declared gross weight. weight. Given Given that that level level of  discre discrepan pancy, cy, there there must must have have been been either either gross gross negl neglig igen ence ce amou amount ntin ing g to bad bad fait faith, h, or obvi obviou ous s

Prof.Movido

incompetence, on the part of the captain of the vessel or the shipowner shipowner or its employees in failing to detect the gross gross underd underdecl eclara aratio tion n of the weight weight of the shipment. 3. No. Reasoning The Reasoning  The authority is lodged in the Collector of  Customs Customs and the Commissioner Commissioner of Customs Customs and not either in the Court of Tax Appeals or this Court. The public public responde respondent nt Court Court of Tax Appeals Appeals was not warranted warranted in substituti substituting ng its judgment for that of the Commissioner of Customs as to the amount of the fine properly imposable in the circumstances of this case, unless, of course, a grave abuse of discretion. There was no showin showing g of such abuse. abuse. The CTA merely merely reduced the fine since it felt that the 15% fine was "harsh and unreasonable" stating that this was the first offense of the "Fernando Everett". Disposition Petition is granted.

COMM V DELGADO supra

REPUBLIC V PERALTA 150 SCRA 37 Feliciano J; May 20, 1987 FACTS: -Quality Tobacco Corporation (Insolvent) filed for voluntary insolvency. In the voluntary insolvency proceedings commenced in May 1977 several claims of  creditors were filed which included separation pays for employee unions, inspection fees of the BOC and Customs Duties and Taxes. -the trial court ruled that the separation pay claims of  the NLRC were preferred over the claims of the BOC and BIR based on Art.110 of the Labor Code. -The BOC and BIR questioned such preference. ISSUE: WON separation pay claims are preferred over duties and taxes in insolvency proceedings. Held: YES -"duties, taxes and fees due [on specific movable property of the insolvent] to the State or any subdivision thereof" (Article 2241 [1]) and "taxes due upon the [insolvent's] land or building (2242 [1])"stand first in preference in respect of the particular movable

or immovable property to which the tax liens have attached. Article 2243 is quite explicit: "[T]axes mentioned in number 1, Article 2241 and number 1,  Article 2242 shall first be satisfied . satisfied . " The claims listed in numbers 2 to 13 in Article 2241 and in numbers 2 to 10 in Articles 2242, all come after taxes in order of  precedence; such claims enjoy their privileged character as liens and may be paid only to the extent that taxes have been paid from the proceeds of the specific property involved (or from any other sources) and only in respect of the remaining balance of such proceeds. BUT… -the claim of the Bureau of Customs for unpaid customs duties and taxes enjoys the status of a specially preferred credit under Article 2241, No. 1, of  the Civil Code only in respect of the articles articles importation of which by the Insolvent resulted in the assessment of the unpaid taxes and duties, and which are still in the custody or subject to the control of the Bureau of Customs. The goods imported on one occasion are not subject to a lien for customs duties and taxes assessed upon other importations though also effected by the I nsolvent. Customs duties and taxes which remain unsatisfied after levy upon the imported articles on which such duties and taxes are due, would have to be paid out of the Insolvent's "free property" in accordance with the order of preference embodied in Article 2244 of the Civil Code. Such unsatisfied customs duties and taxes would fall within Article 2244, No. 9, of the Civil Code and hence would be ninth in priority

RODRIGUEZ V CA 248 SCRA 288 PUNO; September 18, 1995

FACTS - Petiti Petitione oners rs Angel, Angel, Eulogi Eulogio, o, Jose Jose (all (all surnam surnamed ed Rodriguez) and Tomas Ngo, together with Manuel Pena (deceased) and Alfredo Fiesta (at large) were charged with a violation of Sec 3602 in relation to Sec 3601 of  the Tariff and Customs Code. - Sep 9, 1983: the S/S Neptune Agate arrived at the Manila Manila Internation International al Port from HK carrying, carrying, among others, a 40-foot container van containing 29,000 kilos consisting consisting of 44,885,015 44,885,015 yards of 100% cotton-dyed cotton-dyed fabric. The fabric had a home consumption value of  U.S. $93,809.68 and a dutiable value of P1,032,047.10

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and was consigned to "Philippine Inter-Fashion, Inc.," a domestic corporation engaged in the manufacture of  garments for export. - Meanwhile, Meanwhile, Ernesto Ereno filed with the Bureau of  Custom Customs s a Specia Speciall Permit Permit to Transf Transfer er seekin seeking g to transf transfer er the said said contai container ner van from the Manila Manila Intern Internati ationa onall Contai Container ner Port Port to Custom Customs s Bonded Bonded Warehouse No. 725 of the Philippine Inter-Fashion, Inc. at Bagong Bagong Bayan, Dasmariñas, Dasmariñas, Cavite. The permit permit appeared to have been approved and signed by the proper Customs authorities on the basis of which said container was released. The container was loaded on a truck to be escorted by Customs guard (Fiesta) until its receipt receipt at the Customs Customs Bonded Warehouse Warehouse at Cavite. Cavite. Once outside the Customs zone, the truck didn’t go to Cavite but went to White Plains Subdivision in QC. - The truck truck entere entered d the subdivis subdivision ion towards towards the dire direct ctio ion n of Pena Pena's 's resi reside denc nce. e. The The vehi vehicl cle e was was maneuvering maneuvering when it hit the perimeter perimeter wall at the other end of the subdivision. Forthwith, Pena informed son-in-law, Eulogio Rodriguez, who lived in the same compou compound, nd, to remove remove the cargo cargo from from the stalle stalled d vehicl vehicle e and transfer transfer the same same to their their compou compound. nd. Eulogio acceded to this request. - The following morning, morning, Eulogio Eulogio called his brothers, brothers, Angel and Jose, to help him transport the textile to Paranaque. They were delivered some 80 rolls of the textile textile to the residence residence of Tomas Ngo. They made another delivery in the afternoon. - The next day, Jose and Angel were on their way to make a 3rd delivery when they were intercepted by agents of the Customs Customs Intelligen Intelligence ce and Investigation Investigation Division. - Earlier, Col. Guillermo Parayno, Jr., then Chief of the Custom Customs s Intell Intellige igence nce and Investi Investigat gation ion Divisi Division, on, notice noticed d that that the contai container ner van consig consigned ned to the Philippine Philippine Inter-Fashion, Inter-Fashion, Inc., was missing missing from the contai container ner yard. On inquir inquiry, y, the Pres of the said company denied ordering any shipment from abroad and claimed that they were not expecting any such cargo. Immediately, Immediately, Col. Parayno Parayno formed teams to trace the movement of the container. - A team of agents was on its way to White Plains subdivision when they spotted the delivery van. They orde ordere red d the the driv driver er to stop stop.. The The agen agents ts foun found d petitioners Angel and Jose Rodriguez, a driver and a helper. They opened the van and found it full of textile.  The driver and helper disclosed that they came from the residence of Pena and that they were taking them to Paranaque.

- The team proceeded to Pena 's residence where Col. Parayno informed Pena that they were going to search his house for the textile. Pena denied possessing or keeping any textile and invited Col. Parayno and his men inside inside his house. house. The Custom Customs s agents agents looked looked around and found behind Pena's house a structure that appeared to be a stock room. They opened the room and found nothing. They noticed another room behind, opened it and found it full of the same textile as those they saw in the delivery van. - Pena informed them that the stock room belonged to Eulogio Eulogio who also owned the house behind it. Pena likewise claimed that the textile belonged to a certain "Rolly" whose truck hit the subdivision wall near his house house and that the textil textile e was being stored stored in his compound until delivery to Paranaque. - The next day, Customs agents, armed with search warrant, warrant, went to Ngo's residence residence in Paranaque. They discovered discovered in his bodega several several rolls of the same textile they found in the delivery van and in Pena's compound. The agents seized all the textile they found in the delivery delivery van, in Pena's Pena's compound and in Ngo's reside residence nce.. They They conduc conducted ted an invest investiga igatio tion n and discovered that the container van did not belong to the consignee and that it was released from the container port by virtue of a Special Permit to Transfer in which all signatures signatures of the approving Customs personnel, personnel, except for one, were forged. - Rodriguez brothers claim that the textile belonged to one "Rolly" who asked Pena for help to transport transport it after his truck met an accident near Pena's residence. Eulogio claimed that Pena in turn asked him to transfer the textile from the stalled truck and keep them safe in his servants' servants' quarters. Rolly returned returned the following following morning morning and again requested requested him, through through Pena, to transport the textile to Paranaque for a consideration of P4k. Eulogio agreed. He however was not feeling very well, so he called up Jose and requested him to deliver the cargo to Paranaque. Angel happened to be in Jose's house and so they proceeded to White Plains and with some of their helpers loaded textile into one of Pena's vans. They followed Rolly, who was in his car, to the residence of Ngo in Paranaque. Ngo met them and the cargo was unloaded in his house. The brother and their helpers returned to White Plains without Rolly and made another delivery in the afternoon. They were on their way to make a 3rd delivery the following day when they were intercepted by the Customs agents. - Ngo, Ngo, for for his his defe defens nse, e, clai claime med d that that he mere merely ly purchased purchased the textile textile from Rolly who offered offered 30,000

Prof.Movido yards to him in Divisoria. Rolly allegedly assured him that that he got the textile textile from an auctio auction n sale sale at the Bureau of Customs and that all customs duties and taxes thereon had already been paid. - TC found them guilty. CA affirmed. MFR denied.

ISSUES 1. WON the CA erred erred in convic convictin ting g petiti petitione oners rs of  smuggling.

HELD 1. NO. Ratio While it is true that the evidence does not show their their partic participa ipatio tion n in the releas release e of the smuggl smuggled ed cargo, petitioners were actually found to have been in possession possession of the textile after its release. Petitioners Petitioners have have neve neverr disp disput uted ed but but in fact fact admi admitt tted ed thei theirr posses possessio sion n of the textil textile e and as a result result of this this admission, admission, they are presumed presumed to have been engaged in smuggling pursuant to the last paragraph of Section 3601 of the Code. The burden of proof shifted to them.   To To rebu rebutt this this pres presump umpti tion on,, it is not not enou enough gh for for petitioner petitioners s to claim good faith and lack of knowledge of the unlawful source of textile. textile. Petitioners Petitioners should have presented evidence to support their claim. Reasoning Petitioners ascribe all their acts to Pena who has long since died and to Rolly who has since disappeared disappeared,, if he ever existed. Their testimony testimony is hearsay and self-serving. On the contrary, contrary, the evidence evidence shows that the truck carrying the textile left the container port for Pena's residence. The truck was allowed to enter the private subdivision because Pena was a registered homeowner and he sought permission for it to go to his house. Clearl Clearly, y, the contai container ner was actual actually ly intend intended ed for delivery at Pena's compound. It is diffic difficult ult to compre comprehen hend d why the Rodrig Rodriguez uez brothers went out of their way to help Rolly whom they never knew when Pena provided the delivery van and Rolly himself had some helpers to load and unload the cargo. The brothers brothers were businessme businessmen. n. Eulogio Eulogio and Angel were engaged in general merchandise and had their own stores at the Zaragosa Shopping Center in  Tondo, Manila. Eulogio said that Pena gave him the job because he wanted him to earn extra money. This claim he made incred incredibl ible e by the fact that that the brothers brothers were to transport transport the textile for a fee of P4,000.00. P4,000.00. If they needed the extra money, they never bothered bothered to ask for it or any portion thereof from Rolly or Pena. Rolly

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did not return to White Plains after the first delivery but but Jose Jose and and Ange Angell cont contin inue ued d to work work and and even even intended to finish the job without exerting any effort to ensure payment therefor. Ngo's claim likewise likewise cannot cannot be given credence. He testified that he asked Rolly if the taxes on the textile had had been been paid paid,, and and that that Roll Rolly y answ answer ered ed in the the affirm affirmati ative ve and in fact fact assure assured d him that he would would present the tax receipts later. After the first delivery, Rolly said that he needed the receipts receipts to show the authorities during the delivery. And yet Ngo, who was enga engage ged d in the the buy buy and and sell sell busi busine ness ss of plas plasti tic c materi materials als and textil textile, e, never never bother bothered ed to check check or glance at these tax receipts. Rolly disappeared without leaving any receipts with Jose and Angel and neither did the brothers ask for said receipts. Indeed, Indeed, petitioner petitioners' s' claim of good faith and lack of  knowledge knowledge of the origin of the textile textile cannot stand in the light of contrary evidence. As the lower courts well found, petitioners have miserably failed to rebut the presumption presumption that they were engaged engaged in smuggling at the time they were apprehended. Disposition IN VIEW WHEREOF, the petition is DENIED and the Decision Decision dated February 28, 1990 and the Resolution Resolution dated November November 9, 1993 of the Court of  Appeals in CA-G.R. CR No. 06220 are hereby affirmed. Costs against petitioners.

COMM V CAMPOS RUEDA 188 SCRA 613 Medialdea; August 20, 1990 FACTS: -Campos Rueda Corporation imported 46 cartons (consisting of 27,000 pieces) of Tungsol flashers. Before the goods arrived at the port of Manila, Campos Rueda filed with the Collector of Customs of Manila a request for value information for the declaration of the imported flashers under Tariff Heading No. 85.09 of  the Tariff and Customs Code at 30% ad valorem duty, for classification purpose. The Customs appraiser however, re-classified the goods under Tariff Heading No. 85.19 of the Tariff and Customs Code at 50% ad  valorem. valorem. -Campos Rueda paid duties and taxes in protest. The refund of which was granted by the CTA -Commissioner of Customs appealed decision ISSUE: WON the classification of the imported Tungsol Tungsol flashers should fall under Tariff Heading No. 85.09 at

30% ad valorem or under Tariff Heading No. 8-5.19 at 50% ad valorem, both under the Tariff and Customs Code. (Simply WON refund was correct) HELD: YES -  Tariff Heading No. 85.09 of the Tariff and Customs Code provides: 85.09. Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor vehicles ad val. 30%. On the other hand, the same Code provides under  Tariff Heading No. 85.19: 85.19. Electrical apparatus for making and breaking electrical circuits, for the protection of electrical circuits, or for making connections to or in electric circuits (for example, switches, relays, fuses, lighting arresters, surge suppressors, plugs, lamp-holders and  junction boxes); resistors, fixed or variable (including potentiometers), other than heating resistors, printed circuits, switch boards (other than telephone switchboards) and control panels -Petitioner contends that the imported flashers should be classified under Tariff Heading No. 85.19. The documents covering the importation of the goods show that they are "electrical lighting and signalling parts." Hence, being parts only of a whole signalling equipment, the flashers by themselves cannot function as a signalling equipment. The imported article can be considered merely as electrical apparatus for making and breaking electrical circuits falling under Tariff  Heading No. 85.19 of the Tariff and Customs Code. -Private respondent Campos Rueda Corporation, on the other hand, contends that the imported flashers should be classified under Tariff Heading No.85.09 contending that the subject importations are electrical apparatus used on motor vehicles for signalling purposes, that is, to signal right or left hand turn by means of electrical flashers in front and at the rear of motor vehicles. -SC: Parts of machines, apparatus of appliances which are suitable for use solely or p rincipally with a particular kind of machine or with a number of  machines falling within a specific heading, as a rule, are to be classified with the machines in the same heading There being a clear showing that the the subject imported flashers are to he used solely and principally to signal or indicate a right or left hand turn in front and at the rear of motor vehicles, they should be classified under Tariff Heading No. 85.09 as electrical lighting and signalling equipment.

Prof.Movido - In the case of La of  La Compaña General de Tobacos de Filipinas v. United States , 8 Phil. 438, it was ruled that:  The general purpose for which an article is used must govern the assessment of duty; any other rule would lead to confusion and injustice. It is the general use to which articles are chiefly adopted and for which they are chiefly used that determine their character within the meaning of the Tariff laws. It is the predominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or special use which any particular importer may make of the articles imported (Hartranft v. Langfeld, 125 U.S., 128).

COCONUT OIL REFINERS ASSOCIATION V TORRES G.R. No. 132527 AZCUNA; July 29, 2005 FACTS - On March 13, 1992, RA 7227 was enacted, providing for, for, among among other other things things,, the sound sound and balanc balanced ed conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones. - Sec12 of RA 7227 provides: [a] that the Subic Special Economic Economic Zone (SSEZ) shall be developed into a selfsustai sustainin ning, g, indust industria rial, l, commer commercia cial, l, financ financial ial and investment center, [b] that SSEZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital capital w/in, into and exported exported out of SSEZ, as well as provide incentives incentives such such as tax tax and and duty duty-fr -free ee impo import rtat atio ions ns of raw raw materials, capital and equipment. But, exportation or removal of goods from SSEZ to other parts of Phils. shall be subject to customs duties and taxes under the  TCCP and other relevant tax laws of the Phils. - Sec Sec 15 (On (On Clar Clark k and and othe otherr econ economi omic c zone zones) s) auth author oriz izes es the the Pres Pres.. to crea create te by exec execut utiv ive e proclamatio proclamation n a Special Special Economic Economic Zone covering covering the lands occupied by the Clark military reservations and its contiguous extensions. - On April 3, 1993, Pres. Ramos issued EO 80, which declared, among others, that Clark shall have all the applicable incentives granted to SSEZ under RA 7227. Pursuant to EO 80, the BCDA passed Board Resolution No. 93-05-034, allowing the tax and duty-free sale at retail retail of consum consumer er goods goods import imported ed via Clark Clark for consumption outside the CSEZ

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- President then issued EO 97, “Clarifying the Tax and Duty Free Incentive Within the SSEZ Pursuant to RA. 7227.” 7227.” In part part it says that: [a] Tax and duty-f duty-free ree importations shall apply only to raw materials, capital goods and equipment …[b]The exportation or removal of tax and duty-free goods from SSEZ to other parts of  Phils Phils shall shall be subject subject to duties duties and taxes taxes under under relevant Phil laws. - EO 97-A was also also issu issued ed.. Sec. Sec.1 1 says says:: The The ff. ff. guidelines shall govern the tax and duty-free privilege w/in the Secured Area of SSEZ: The The Secu Secure red d Area Area shal shalll be the the only only 1.1 comple completel tely y tax and duty-f duty-free ree area area in the SSEFPZ. SSEFPZ. Business Business enterprises enterprises and individual individuals s (Filipinos (Filipinos and foreigners) foreigners) residing residing w/in the Secured Area are free to import raw materials, materials, capital goods, equipment, equipment, and consumer consumer items tax and duty-free. duty-free. Consumption Consumption items, however, must be consumed within the Secured Area. Area. Rem Remova ovall of raw materi materials als,, capita capitall goods, goods, equipment equipment and consumer consumer items out of the Secured Area for sale to non-SSEFPZ non-SSEFPZ registered registered enterprises enterprises shall be subject to the usual taxes and duties.... Residents of the SSEFPZ living outside the 1.2. Secure Secured d Area Area “can “can purcha purchase se and bring out of the Secured Area to other parts of the Philippine territory consum consumer er items items worth worth not exceed exceeding ing US$100 US$100 per month per person. Only residents age 15 and over are entitled to this privilege.” Filipinos not residing within the SSEFPZ “can 1.3. purchase and bring out of the Secured Area to other parts of Phils Phils consumer consumer items worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this privilege.” - Petitioners filed the petition against Exec. Sec. Torres, the Bases Conversion Development Authority (BCDA), the Clark Development Development Corporation Corporation (CDC) and the Subic Subic Bay Metrop Metropoli olitan tan Author Authority ity (SBMA) (SBMA),, from from continuing continuing with, the operation operation of tax and duty-free duty-free shops located at the SSEZ and CSEZ, and to declare the following issuances as unconstitutional, illegal, and void: EO 80, Sec5; EO 97-A, and the Board Resolution of BCDA, Sec. 4.

ISSUES 1 WON WON RA 7227 7227 allo allowe wed d only only tax tax and and duty duty-f -fre ree e importation importation of raw materials, materials, capital and equipment, equipment, thus EO 97-A constitutes executive legislation 2 WON WON Sec. Sec.5 5 EO 80, and Sec. Sec. 4 of BCDA Board Board Resolu Resolutio tion n No. 93-05-0 93-05-034 34 consti constitut tute e execut executive ive

legislation in providing for tax and duty free privileges, contrary to RA 7227. 3 WON the questioned issuances constitute executive legislation for allowing the removal of consumer goods and items from the zones w/o paymen paymentt duties duties and taxes in violation of RA 7227 as Sec 12 provides for the taxation taxation of goods that are exported exported or removed removed from the SSEZ to other parts of the Phils.

HELD 1 NO. - While it is true that Sec 12 (b) of RA 7227 mentions mentions only raw materials, capital and equipment, this does not necessarily mean that the tax and duty-free buying privilege privilege is limited to these types of articles to the exclusion exclusion of consumer consumer goods. goods. In construing construing statutes, statutes, the true intent of the Legislature must be considered. - There appears to be no logic logic in following the narrow interpreta interpretation tion petitioners petitioners urge. To limit the tax-free tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of  the Legislature to create a free port where the “free flow of  goods or capital within, into, and out of the zones” is insured. - The phrase “tax and duty-free importations of raw materials, capital and equipment” was merely cited as an example of incentives that may be given to entities operating operating within the zone. The Senate proceedings proceedings clearly negate the narrow interpretation of petitioners. - HOWEVER, the second sentences of paragraphs 1.2 and 1.3 of EO 97-A , allowing tax and duty-free individuals, even in a removal of goods to certain individuals, limited amount, from the Secured Area of the SSEZ,

are null and void for being contrary to Sec. 12 of  RA 7227 which clearly provides that “exportation or removal of goods from the territory of SSEZ to other parts of the Philippine Philippine territory territory shall shall be subject to customs duties and taxes under the Customs and Tariff  Code and other relevant tax laws of the Phils.”

2 YES. - While Sec. 12 of RA7227 expressly provides for the grant of incentives to the SSEZ, it fails to make any simi simila larr gran grantt in favo favorr of othe otherr econ econom omic ic zone zones, s, including including the CSEZ. Tax and duty-free incentives incentives being being in the nature nature of tax exemptio exemptions, ns, the basis basis thereo thereoff should should be catego categoric ricall ally y and unmista unmistakab kably ly expr expres esse sed d from from the the lang langua uage ge of the the stat statut ute. e. Consequently, in the absence of any express grant of 

Prof.Movido tax and duty-free privileges to the CSEZ in RA 7227, there would be no legal basis to uphold the questioned portions portions of two issuance issuances: s: Sec 5 of EO 80 and Sec Sec 4 of BCDA Board Resolution No. 93-05-034, which both pertain pertain to the CSEZ. In a similar case John Hay v Lim, SC sust sustai aine ned d the the argu argumen mentt and and rule ruled d that that the the incentives incentives under RA 7227 are exclusive exclusive only to the SSEZ. The President, President, therefore, therefore, had no authority to extend their application to John Hay.

3. MOOT and ACADEMIC. The removal of goods from SSEZ w/out payment of customs duties and taxes is not authorized by RA 7227 - On Sept. 26, 1997, EO 444 was issued, curtailing the duty-free shopping privileges in the SSEZ and the CSEZ “to prevent abuse of duty-free privilege and to protect local industries industries from unfair competition competition.” .” A perusal perusal provisions of EO 444 indicates that effective January 1, 1999, the grant of duty-free duty-free shopping privileges privileges to domestic domestic tourists tourists and to residents residents living adjacent to SSEZ and the CSEZ had been revoked. - Oct. 20, 2000, EO 303 was issued, amending EO 444. Sec 2 of EO 303 declared that “all special shopping privileges as granted under Section 3 of EO 444 are hereby deemed terminated. terminated. The grant of duty free shopping shopping privileges privileges shall be restricted restricted to qualified qualified individual individuals s as provided by law.” At that point, the shopping privileges currently being enjoyed by OFWs, Balikbayans, and tourists traveling to and from foreign destinatio destinations, ns, draw authority authority not from the issuances issuances being assailed herein, but from EO 46 and RA 6768, both enacted prior to promulgation of RA 7227. - Thus, it appears that petitioners’ petitioners’ objection objection to the allowa allowance nce of tax-fr tax-free ee remova removall of goods goods from from the special special economic economic zones as previously previously authorized authorized by the questi questione oned d issuan issuances ces has become become moo moott and academic. In any event, Sec 12 (b) of RA. 7227, clearly provides that that “expor “exportat tation ion or remova removall of goods goods from from SSEZ SSEZ territory to other parts of the Phil. territory shall be subj subjec ectt to cust custom oms s duti duties es and and taxe taxes s unde underr the the Customs and Tariff Code and other relevant tax laws of  the Philippines.” Thus, the removal of goods from the SSEZ to other parts of the Philippine territory without paymen paymentt of said said custom customs s duties duties and taxes taxes is not authorized by RA 7227.

Re Other Issues: [a] No violation of equal protection clause clause:: It satisf satisfies ies the requis requisite ites s for reason reasonabl able e classification. [b] No unfair competition: The mere fact

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that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance issuance unconstitu unconstitutiona tionall for espousing espousing unfair compet competiti ition. on. Suffic Suffice e it to say that that Congre Congress ss had  justifiable reasons in granting incentives to the private respon responden dents, ts, in accord accordanc ance e RA 7227’s 7227’s policy policy of  developing the SSEZ into a self-sustaining entity that will generate employment and attract foreign and local invest investmen ment. t. [c] No violat violation ion of prefer preferent ential ial use of  Filipino labor: While the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises enterprises,, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair.

GARCIA V EXECUTIVE SECRETARY   July 3, 1992; FELICIANO FACTS - EO 438 imposed, imposed, in addition addition to any other duties, duties, taxes taxes and charges charges impose imposed d by law on all article articles s imported into the Philippines, an additional duty of 5% ad valorem. This additional duty was imposed across the board on all imported articles, articles, including including crude oil and other oil products imported into the Philippines. - EO 443 increased the additional duty from 5% to 9% ad valorem. - EO 475 reduced the rate of additional duty on all imported articles from 9% to 5% ad valorem, except in the cases of crude oil and other oil products products which

continued continued to be subject subject to the additional additional duty of 9% ad valorem. - EO 478 levied in addition to the additional duty of 9% ad valorem and all other existing ad valorem duties a special duty of P0.95 per liter or P151.05 per barrel of  imported crude oil and P1.00 per liter of imported oil products. - Petitioner assails the validity of EOs 4 75 and 478.

ISSUES 1. WON the EOs 475 & 478 violate Section 24, Article VI of the 1987 Constitution 2. WON the EOs 475 & 478 contravene Section 401 of  the Tariff and Customs Code

HELD 1. NO. Under Section 24, Article VI of the Constitution, the enactment of appropriat appropriation, ion, revenue and tariff  tariff  bills, like all other bills is, of course, within the province of the the Legi Legisl slat ativ ive e rath rather er than than the the Exec Execut utiv ive e Department. It does not follow, however, that therefore EOs 475 and 478, assuming they may be characterized as revenue measures, are prohibited to the President, that they must be enacted instead by the Congress of  the Philippines. - Section 28(2) of Article VI of the Constitution gives explicit explicit constituti constitutional onal permission permission to Congress Congress to authorize the President "subject to such limitations and restrictio restrictions ns as [Congress] [Congress] may impose" impose" to fix "within specific specific limits" "tariff "tariff rates . . . and other duties or imposts . . . ." - The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401, the pertinent provisions thereof. These are the provisions provisions which the President President explicitly explicitly invoked invoked in promulgating Executive Orders Nos. 475 and 478. 2. NO. In the first first place, place, there there is nothin nothing g in the language of either Section 104 or of 401 of the Tariff  and Customs Code that suggest that the President is authorized to act under the Tariff and Customs Code only "to protect local industries and products for the sake of the national economy, general welfare and/or nati nation onal al secu securi rity ty." ." The The word words s "pro "prote tect ctiv ive" e" and and "protection" are simply not enough to support the very broad and encompassin encompassing g limitation limitation which petitioner petitioner seeks to rest on those two (2) words. - In the second second place, place, petiti petitione oner's r's singul singular ar theory theory collides with a very practical fact - that the Bureau of  Customs Customs which administers administers the Tariff Tariff and Customs

Prof.Movido Code, is one of the 2 principal traditional generators or producers of governmental revenue, the other being the Bureau Bureau of Intern Internal al Revenue Revenue.. There There is a third third agency, agency, non-traditi non-traditional onal in character character that generates generates lower but still comparable levels levels of revenue revenue for the government - PAGCOR. - In the third place, customs duties which are assessed at the prescribed tariff rates are very much like taxes which are frequently imposed for both revenue-raising and for regulatory regulatory purposes. purposes. It is the name given to taxe taxes s on the the impo import rtat atio ion n and and expo export rtat atio ion n of  commo commodi diti ties es,, the the tari tariff ff or tax tax asse assess ssed ed upon upon merchandise imported from, or exported to, a foreign country. - The levying levying of customs customs duties on imported imported goods may have in some measure the effect of protecting local industries where such local industries actually exis existt and and are are prod produc ucin ing g comp compar arab able le good goods. s. Simult Simultane aneous ously, ly, howeve however, r, the very very same same custom customs s duti duties es inev inevit itab ably ly have have the the effe effect ct of prod produc ucin ing g governmental governmental revenues. Customs duties duties like internal internal revenue taxes are rarely, if ever, designed to achieve one policy objective objective only. Most commonly, commonly, customs duties, which constitute taxes in the sense of exactions the proceeds proceeds of which which become public public funds funds have either either or both both the generati generation on of revenu revenue e and the regula regulatio tion n of economi economic c or social social activi activity ty as their their moving purposes and frequently, it is very difficult to say which, in a particular instance, is the dominant or principal objective. - In the instant instant case, case, since since the Philipp Philippine ines s in fact fact produces 10% - 15% of the crude oil consumed here, the imposition of increased tariff rates and a special duty on imported imported crude oil and imported imported oil products products may be seen to have some "protective" impact upon indigenous indigenous oil production. production. For the effective effective price price of  imported crude oil and oil products is increased. At the same same time, time, it cannot cannot be gainsa gainsaid id that that substa substanti ntial al reve revenu nues es for for the the gove govern rnme ment nt are are rais raised ed by the the imposition imposition of such increased increased tariff tariff rates or special special duty. - In the fourth place, petitioner's concept is a stiflingly narrow one. Section 401 of the Tariff and Customs Customs Code establishes establishes general general standards standards with which the exercise of the authority delegated by that provision to the President must be consistent: that authority must be exercised in "the interest of national economy, gene genera rall welf welfar are e and/ and/or or nati nation onal al secu securi rity ty." ." The The protection of consumers, who after all constitute the very great bulk of our population, population, is at the very least

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as important a dimension of "the national economy, gene genera rall welf welfar are e and and nati nation onal al secu securi rity ty"" as the the protection of local industries. And so customs duties may be reduced reduced or even removed precisely precisely for the purpose of protecting consumers from the high prices and shoddy quality quality and inefficient inefficient service service that tariffprotected protected and subsidized subsidized local manufacture manufacturers rs may otherwise impose upon the community. - It seems also important to note that tariff rates are commonly established and the corresponding customs duties duties levied levied and collected upon articles and goods which are not found at all and not produced in the Philippines. In such cases, customs duties may be seen to be imposed either for revenue purposes purely or perh perhap aps, s, in cert certai ain n case cases, s, to disc discou oura rage ge any any importation importation of the items involved. involved. In either either case, it is clear clear that that custom customs s duties duties are levied levied and impose imposed d entire entirely ly apart apart from from whethe whetherr or not there are any competing local industries to protect. Disposition Petition DISMISSED

PART I - LOCAL TAXATION MERALCO V. CBAA MERALCO SECURITIES INDUSTRIAL CORP. v CBAA 114 SCRA 261 AQUINO; May 31, 1982 NATURE Special Civil Action for certiorari

FACTS - Pursuant to a pipeline concession issued under the Petroleum Petroleum Act of 1949 (RA 387), Meralco Securities Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and buried buried not less than 1 meter below the surface along the shoulder of the public highway. - The pipes are embedded in the soil and are firmly and solidly welded together. The valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end. In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hard-metal hard-metal pipe-cutter pipe-cutter after digging digging or excavating excavating them them out of the ground ground where they are buried buried.. In points where the pipeline traversed rivers or creeks,

the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land. - However, However, segments of the pipeline pipeline can be moved from from one place to anothe anotherr as shown in the permit permit issu issued ed by the the Secr Secret etar ary y of Publ Public ic Work Works s and and Communications which provides that the government reserves the right to require the removal or transfer of  the pipes pipes by and at the conces concessio sionai naire' re's s expens expense e shou should ld they they be affe affect cted ed by any any road road repa repair ir or improvement. - Pursu Pursuant ant to the Assess Assessment ment Law, Law, the provin provincia ciall assess assessor or of Laguna Laguna treate treated d the pipeli pipeline ne as real real property. - Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna which upheld the assessments. - Meralco Securities brought the case to the Central Board of Assessment Assessment Appeals, Appeals, which ruled ruled that the pipeline is subject to realty tax.

ISSUES WON the pipeline is subject to real property tax

HELD  YES. - Sec 2 of the Assessment Law: realty tax is due "on real property, including land, buildings, machinery, and other improvements" improvements" not specificall specifically y exempted exempted in section 3 thereof. - Sec 38 Real Property Tax Code: Incidence of Real Property Property Tax . There There shall shall be levied levied,, assess assessed ed and collected in all provinces, cities and municipalities an annual ad valorem tax  on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted. - The pipeline of Meralco Securities does not fall within any of the classes of exempt real property enumerated in Sec 3 of the Assessment Law and Sec 40 of the Real Property Tax Code. - Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of  the soil in which it is placed. - Article Article 415[l] and [3] CC provides that real property may consist of  constructions of all kinds adhered to the soil and everything attached to an immovable in a fixe fixed d mann manner er,, in such a way way that that it cannot cannot be

Prof.Movido separated therefrom without breaking the material or deterioration of the object. - The pipeline system is indubitably indubitably a construction construction adhering to the soil. It is attached to the land in such a way that it cannot be separated separated therefrom therefrom without without dismantling the steel pipes which were welded to form the pipeline. - Insofa Insofarr as the pipeline pipeline uses valves valves,, pumps pumps and control devices to maintain the flow of oil, it is in a sense sense machine machinery ry within within the meaning meaning of the Real Property Tax Code. - Note Note that that what what are being charact characteri erized zed as real real proper property ty are not the steel pipes but the pipeli pipeline ne system as a whole. - A pipe pipeli line ne for for conv convey eyin ing g petr petrol oleu eum m has has been been regarded as real property for tax purposes. - Meralco Meralco Securities Securities contends that the Petroleum Petroleum Law exempt exempts s it from the payment payment of realty realty taxes, taxes, as predicated on Art 102 of that law exempting Meralco Securities Securities from local taxes and making it liable liable for taxes of general application. Meralco Securities argues that the realty tax is a local tax or levy and not a tax of  general application. - Real Realty ty tax tax has has alwa always ys been been impo impose sed d by the the lawmak lawmaking ing body and later by the Presiden Presidentt of the Philippines in the exercise of his lawmaking powers, as shown in section 342 et seq. of the Revised Admin Code, Act No. 3995, Commonwealth Act No. 470 and PD 464. - The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the proceeds of the tax accrue to the province, city, municip municipali ality ty and barrio barrio where the realty realty taxed taxed is situated (Sec. 86, PD 464). In contrast, a local tax is imposed by the municipal or city council by virtue of  the Local Tax Code, PD 231. Dispositive Petition Petition dismissed; dismissed; questioned questioned decision decision and resolution affirmed.

CALTEX V. CBAA AND CITY ASSESSOR OF PASAY  114 SCRA 196 May 31, 1982 FACTS - Caltex was assessed realty tax on machinery & equipment installed in its gas stations on leased lands. (underground tanks, elevanted tanks, elevated water tanks, water tanks, gasoline pumps, etc.)

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- Those are loaned by Caltex to gas station operators under lease agreement. The operators must return return them. The lessor of the land doesn’t doesn’t become the owner of the machines & equipment. - City Assessor of Pasay said said those are taxable realty. City Board of Tax Appeals said they’re personalty. - Assessor appealed to to Central Board of Assessment Appeals. - Central Board of Assessment Appeals said they’re real prop. - Caltex filed this this certiorari petition. petition.

ISSUE WON the equipment / machineries are real or personal property

HELD REAL PROP - bec as appurtenances to the gas station, they’re necessary to the operation of the gas station. - bec improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty. Standard Oil v. Jaramillo

FELS ENERGY, INC v. THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS G.R. No. 168557 and

NPC v. LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor G.R. No. 170628 Callejo, Sr. / February 16, 2007 Nature: Certiorari Facts:  These are consolidated cases assailing CA decisions - These that were dismissed on the ground of prescription. -In 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored moo red at Balaya Balayan n Bay in Calaca Calaca,, Batang Batangas. as. The

Energy Conversion Agreement was for a period of 5 years. Article 10 of which reads: 10.1 10.1 RESPON RESPONSIB SIBILIT ILITY. Y. NAPOCO NAPOCOR R shall shall be responsible for the payment of (a) all taxes, import  duties, fees, charges and other levies imposed by the National Government of the Republic of the Philippines or any agency agency or instru instrumen mental tality ity thereo thereoff to which which POLAR may be or become subject to or in relation to the perfor performanc mance e of their their obliga obligatio tions ns under under this this agreement (other than (i) taxes imposed or calculated  on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction   permi permitt fees, fees, enviro environme nmenta ntall permit permit fees fees and other  other  similar fees and charges) and (b) all real estate taxes and assessments, rates and other charges in respect  of the Power Barges. -Subsequentl -Subsequently, y, Polar Energy, Inc. assigned assigned its rights rights under under the agreeme agreement nt to FELS. FELS. The NPC initiall initially y opposed the assignment of rights. -In 1995, FELS received an assessment of real property taxes on the power barges from Provincial Provincial Assessor Andaya of Batangas Batangas City. The assessed tax, which likewi likewise se covere covered d those those due for 1994, 1994, amo amount unted ed to P56,184,088.40 per annum. FELS referred the matter to NPC, NPC, remi remind ndin ing g it of its its obli obliga gati tion on unde underr the the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of  the Provincial Assessor. -NPC sought reconsidera reconsideration tion of Andaya’s Andaya’s decision decision to assess assess real real proper property ty taxes taxes on the power power barges barges.. However, the motion was denied on and the Provincial Assessor Assessor advised NPC to pay the assessment. assessment. This prompted NPC to file a petition with the Local Board of  Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as nontaxable items; it also prayed that should LBAA find the barges barges to be taxabl taxable, e, the Provin Provincia ciall Assess Assessor or be directed to make the necessary corrections. -In its Answer to the petition, the Provincial Assessor aver averre red d that that the the barg barges es were were real real prop proper erty ty for for purposes of taxation under Sec. 199(c) of RA No. 7160. -Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of Finance (DOF) had rendered an opinion where it is clearly stated that power barges are not real property subject to real property assessment. -the LBAA rendered a Resolution denying the petition and ordered FELS to pay the real estate tax. The LBAA ruled that the power plant facilities, while they may be

Prof.Movido classi classifie fied d as movabl movable e or person personal al proper property, ty, are nevertheless nevertheless considered considered real property property for taxation taxation purpos purposes es becaus because e they they are instal installed led at a specif specific ic location location with a character character of permanency. permanency. The LBAA also pointed out that the owner of the barges, FELS, a private corporation is the one being taxed, not NPC. A mere mere agreem agreement ent making making NPC respon responsib sible le for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. -Aggrieved, -Aggrieved, FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA). -In1996, -In1996, the Provincial Provincial Treasurer Treasurer of Batangas Batangas City issued a Notice of Levy and Warrant by Distraint over the power barges, barges, seeking to collect collect real property property taxes amounting to P232,602,125.91. FELS then filed a Moti Motion on to Lift Lift Levy, Levy, pray prayin ing g that that the the Prov Provin inci cial al Assess Assessor or be furthe furtherr restra restraine ined d by the CBAA CBAA from from enfo enforc rcin ing g the the disp disput uted ed asse assess ssme ment nt duri during ng the the pendency of the appeal which was granted by CBAA. -Meantime, the NPC filed a Motion for Intervention in the proceedings before the CBAA w/c was approved by the CBAA. -During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the paymen paymentt of real real proper property ty taxes taxes assess assessed ed by the Provincial Assessor (in the event that the judgment be unfavorable to them). The bonds were duly approved by the CBAA. -the CBAA found the power barges exempt from real property tax and that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Sec 234(c) of R.A. No. 7160. As to the other  jurisdict  jurisdictional ional issue, the CBAA ruled that prescripti prescription on did not preclude the NPC from pursuing its claim for tax exemption in accordance with Sec 206 of R.A. No. 7160. -The Provincial Assessor filed a MFR. CBAA reversed its earlier decision affirming that of the LBAA’s. FELS and NPC filed separate MFRs, which were timely opposed by the Provincial Provincial Assessor. Assessor. The CBAA denied the said motions. Both appealed to the CA. - CA held that the right to question the assessment of  the Provincial Provincial Assessor had already already prescribed prescribed upon the failure of FELS to appeal the disputed assessment to the LBAA within the period prescribed by law. Since FELS had lost the right to question the assessment, the

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Taxation II A2010 right of the Provincial Government to collect the tax was already absolute. absolute. (NPC and FELS filed several other MFRs but those were denied as well.)

Issues: 1. 2.

WON the the appea appeall before before the the LBAA LBAA was was timetimebarred WON the the power power barges barges are real real prope property rty thus thus subject to real property taxes

HELD: 1. Yes. - FELS argued argued that when NPC moved to have the assessment reconsidered, the running of the period to file an appeal with the LBAA was tolled. NPC posits that the 60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for reconsideration. - SC citing Callanta case: The last action of the local assessor on a particular assessment shall be the notice of assessment; assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA.  The procedure likewise does not permit the property owner owner the remedy remedy of filing filing a MFR before before the local local assessor. -Sec 226 of LGC provides: SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of  receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. -The notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained the following statement: If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt hereof, appeal to the Board of Assessment Appeals of the  province by filing a petition under oath on the form  prescribed for the purpose, together with copies of   ARP/Tax Declaration and such affidavits or documents submitted in support of the appeal. -Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a

motion for reconsideration of the Provincial Assessor’s decision, a remedy not sanctioned by law. -The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property. It follows then that the determination made by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess properties for taxation purposes subject to appeal before the LBAA. -SC quoting CA decision: (citing Meralco v. Barlis) If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due with respect to the taxpayer’s property becomes absolute upon the expira expiratio tion n of the period period to appeal appeal.It .It also also bears bears stressing stressing that the taxpayer’s taxpayer’s failure failure to question question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus, prec preclu ludi ding ng the the taxp taxpay ayer er from from ques questi tion onin ing g the the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits. - Elementary is the rule that the perfection of an appeal within the period therefore is both mandatory and jurisdictional, and failure in this regard renders the decision final and executory. 2. YES. As found by the appellate court, the CBAA and LBAA power barges are real property property and are thus subject to real property tax. Tax assessments by tax examiners examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, bodies, which have acquired acquired expertise in their field, are generally binding and conclusive upon the Court. -Art. 415 (9) NCC provides that "[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" coast" are considered considered immovable immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other other implem implement ents s intend intended ed by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. -SC affirmed the findings of the LBAA and CBAA that the owner of the taxable properties is FELS, which in fine, is the entity being taxed by the local government. It follows then that FELS cannot escape liability from

Prof.Movido the payment of realty taxes by invoking its exemption in Sec. 234 (c) of R.A. No. 7160 (LGC). - The mere undert undertaki aking ng of petiti petitione onerr NPC under Sect Sectio ion n 10.1 10.1 of the the Agre Agreeme ement nt,, that that it shal shalll be responsible for the payment of all real estate taxes and assess assessmen ments, ts, does does not justif justify y the exempt exemption ion.. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas. -It must be pointe pointed d out that the protra protracte cted d and circuitous litigation has seriously resulted in the local government’s deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnit magnitude ude,, acknowl acknowledg edging ing in its very very nature nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due due must must alwa always ys be uphe upheld ld to avoi avoid d seve severe re tax tax erosion. -This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy enjoy genuin genuine e and meaning meaningful ful local local autono autonomy my to empower them to achieve their fullest development as self-relian self-reliantt communities communities and make them effective partners in the attainment of national goals. Dispositive: Petition DENIED.

REYES V ALMANZOR 196 SCRA 322 PARAS; APRIL 26, 1991 FACTS Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. S aid tenants were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. -On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby

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Taxation II A2010 disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently, the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the tenants. -In 1973, respondent City Assessor of Manila reclassified and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They averred that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties. They argued that the income approach should have been used in determining the land values instead of the comparable sales approach which the City Assessor adopted. The Boardof Tax Assessment Appeals, however, considered the assessments valid. -The Reyeses appealed to the Central Board of  Assessment Appeals, which subsequently affirmed the decision. Petitioner's subsequent motion for reconsideration was denied. Hence, this petition.

ISSUE WON the board erred in adopting the “comparable sales approach” method in fixing the assessed value of  appellants’ properties

HELD  YES. Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only be uniform, but must also be equitable and progressive. Uniformity has been defined as that principle by which all taxable articles or kinds of  property of the same class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]).  Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is progressive when its rate goes up depending on the resources of  the person affected (Ibid  ( Ibid .). .). The power to tax "is an

attribute of sovereignty". In fact, it is the strongest of  all the powers of government. -But for all its plenitude the power to tax is not unconfined as there are restrictions. Adversely effecting as it does property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum of  Chief Justice Marshall that "the power to tax involves the power to destroy." The web or unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is not the power to destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]). -In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra). supra).  The taxing power has the authority to make a reasonable and natural classification for purposes of  taxation but the government's act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different both in the privileges conferred and the liabilities imposed ( Ibid ., ., p. 662). -Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must be "appraised at its current and fair market value." By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. -Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property.

Prof.Movido Nothing can justify or support their view as it is of   judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were com parable with other residential properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. At this point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with no end to it in sight. -Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the promotion of  the common good, may be achieved (Commissioner of  Internal Revenue v. Algue Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.

SESBRENO v. CBAA GR 106588 Panganiban; March 24, 1997 FACTS -Petitioner bought land with improvements in Cebu in 1980. 1980. He declar declared ed the proper property ty on the land as a residential house of strong materials with floor area of  60sqm. Effective Effective 1980, the declared declared property was assessed by the City Assessor of Cebu City at a market valu value e of P60, P60,00 000. 0.00 00 and and an asse assess ssed ed valu value e of  P36,900.00. -Duri -During ng a tax-m tax-map appi ping ng oper operat atio ion n cond conduct ucted ed in February 1989, the field inspectors of the Cebu City Assessor discovered that the real property was actually

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a residential building consisting of 4 storeys with a fifth storey used as a roof deck. The building had a total floor area of 500.20 sqm. The area for each floor was 100.04 sqm. The building building was found to have been made of Type II-A materials. materials. On October 17, 1990, thes these e findi finding ngs s were were conf confir irme med d by the the Boar Board d of  Commissioners in an ocular inspection conducted on the subject property. -Base -Based d on the the find findin ings gs of the the fiel field d insp inspec ecto tors rs,, Respondent City Assessor of Cebu City issued a new tax declaration effective in the year 1989, canceling the old one, and assessing the building therein at a net market value of P499,860.00 and an assessed value of  P374,900.00. The 1981-1984 Schedule of Market Value was applied in the assessment. -Petitione -Petitionerr protested protested the new assessment for being "excessive "excessive and unconsciona unconscionable," ble," contending contending that it was was incr increa ease sed d by more more than than 1,00 1,000% 0%.. The The CBAA CBAA dismissed dismissed his protest. protest. His appeal was met with an additional assessment of back taxes.

ISSUES 1) WON the raising raising of the issue issue of back back taxes taxes on appeal to the CBAA was proper 2) WON petitioner is liable for back taxes a) applicability of Sec 24, PD 464 (interpretation of  “for the first time”) b) definition of market value (petitioner is contending that the market value of the property, including the land land was P100,000 P100,000,, the amount amount he paid paid when when he bought it) c) applicability of Sec 23, PD 464

HELD 1) YES. An appelate court is clothed with ample authority to review matters, even if they are not assigned as errors errors in their their appeal appeal,, if it finds finds that their their considerati consideration on is necessary necessary in arriving arriving at a just decision of the case. -Altho -Although ugh the forego foregoing ing specif specifica ically lly referr referred ed to "appellate courts," there appears no reason why these should not apply to appellate administrative agencies, where rules of procedure are liberally construed. 2) YES. a) Arguing that he should not be liable for back taxes, petitioner states that Respondent CBAA should have applied Section 24, instead of Section 25, of PD 464.

 These statutory provisions read: "Section 24. Date of effectivity of    Assessment or Reassessment. — All assessments or reasse reassessm ssment ents s made made after after the first day of   January of any year shall take effect on the first day of January of the succeeding year: Provided, however, That the reassessment of real property due to its (1) partial or total destruction, or to (2) a major change in its actual use, or to any (3) great and sudden inflation inflation or deflation deflation of real property values, (4) or to the gross illegality of  the assessme assessment nt when when made made or to any other abnormal cause, shall be made within ninety days from the date any such cause or causes occurred, the same to take effect at the beginning of the quarter next following the reassessment. Section 25.  Assessment of Property Subject  to Back Taxes. Taxes. — Real property declared for the first time shall have back taxes assessed against it for the period during which it would have been liable liable if assessed from the first in proper course but in no case for more than ten years prior to the year of initial assessment; Provided, however, that the back taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period. -If said taxes are paid before the expiration of the tax collection period next ensuing, no penalty for delinq delinquen uency cy shall shall be impose imposed, d, otherw otherwise ise the taxes shall be subject to all the penalties to which they would have been liable had they originally become become delinq delinquen uentt after after assess assessment ment of the property in the usual course." -Petitioner says that CBAA was wrong in applying Sec 25 beca becaus use e the the prop proper erty ty has has been been decl declar ared ed for for assessment as early as 1980 (and before that by the previous owner) and not “for the first time” in 1989. He is of course wrong in his interpretation of “for the first time.” time.” In a similar case, it was held that it should not be understood to apply only to real estate that have (sic) never been declared; as within the meaning of  such such phrase phrase,, the excess excess areas areas result resulting ing from from the revision revision must be understood as never having been declared before. b) Market Value — is defined defined as "the highest highest price estimated in terms of money which the property will buy if exposed for sale in the open market allowing allowing a reasonable reasonable time to find a purchaser purchaser who buys with knowledge of all uses to which it is adapted and for which it is capable of being used." It is also referred to

Prof.Movido as "the price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure." (Sec 3(n), PD 464) -Contrary -Contrary to petitioner petitioner's 's contention, contention, acquisition acquisition cost cannot be and is not the sole basis of the current and fair market value of a property. The current value of  like like proper propertie ties s and their their actual actual or potent potential ial uses, uses, among amo ng others others,, are also also consid considere ered. d. Unscru Unscrupul pulous ous sellers of real estate often understate the selling price in the deed of sale sale to minimi minimize ze their their tax liabilit liability. y. Moreover, Moreover, the value of real property property does not remain remain stagnant; stagnant; it is unrealistic unrealistic to expect expect that the current current market value of a property is the same as its cost of  acquis acquisiti ition on ten years ago. In this this light, light, a genera generall revision of real property assessment is required by law every five (5) years to ensure that real properties are assessed at their current and fair market values. c) Petitioner argues that the CBAA erred in refusing to apply Section 23 of PD 464 which provides: Section 23. Certification of Revised Values to the the Secr Secret etar ary y of Fina Financ nce. e. — When When the the provincial or city assessor shall have finished a general revision of property assessments for any province, municipality or city, he shall so certify to the Secretary of Finance and the assessments shall become effective and taxes shall accrue and be payable thereunder thereunder in accordance accordance with the provisions of this Code. -Petitione -Petitionerr claims that Respondent Respondent City Assessor Assessor of  Cebu City has not yet completed the general revision of property assessments for years 1981-1984 and has not yet submitted the certification required by Section 23 of PD 464 to the Secretary of Finance; hence, he may not yet be held liable to pay any assessment. He was wrong, of course, because the general revision in question was approved by the Sec Fin on May 22, 984, effective July 1, 1987. (hello, 1989 na!)

ALLIED BANKING CORPORATION V QUEZON CITY GOVERNMENT G.R. No. 154126 CARPIO-MORALES; October 15, 2005 NATURE Appeal by certiorari under Rule 45

FACTS

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-On December 19, 1995, the Quezon City government enacte enacted d City City Ordina Ordinance nce No. 357, 357, Series Series of 1995, 1995, Section 3 of which reads: Section 3. The City Assessor shall undertake a general revision of real property assessments using as basis the newly approved schedule specified in Sections 1 and 2 hereof. He shall apply the new assessment assessment level of 15% for residential residential and 40% for commercial commercial and industrial classification, respectively as prescribed in Section 8 (a) of the 1993 Quezon City Revenue Code to determine the assessed value of the land. Provided;

howeve however, r, that that parcel parcels s of land land sold, sold, ceded, ceded, transf transferr erred ed and convey conveyed ed for remune remunerat ratory ory cons consid ider erat atio ion n afte afterr the the effe effect ctiv ivit ity y of this this revision shall be subject to real estate tax based on the actual amount reflected in the deed of  convey conveyanc ance e or the curren currentt approv approved ed zonal zonal valuat valuatio ion n of the Bureau Bureau of Intern Internal al Revenu Revenue e prevailing at the time of sale, cession, transfer and and conv convey eyan ance ce,, whic whiche heve verr is high higher er,, as evidenced by the certificate of payment of the capital gains tax issued therefor.

-Petitioner purchased from Liwanag C. Natividad a 1,000 square meter parcel of land in the amount of  P38,000,000.00. -Prior to the sale, Natividad had been paying P85,050.00 as annual real property tax based on the property’s fair market value of P4,500,000.00 and assessed value of P1,800,000.00. -After its acquisition of the property, petitioner was, in accordance with Section 3 of the ordinance, required to pay P102,600.00 as quarterly real estate tax ( or P410,400.00 annually), with the market value of the property pegged at P38,000,000.00 – the consideration appearing in the Deed of Absolute Sale, and its assessed value at P15,200,000.00. -Petitioner paid the quarterly real estate tax under protest. In its protest with the City Treasurer, petitioner assailed Section 3 of the ordinance as null and void -Petitioner later sent a demand letter to the QC  Treasurer’s Office seeking a refund of the real estate taxes it erroneously collected from it. It was denied on the ground that the ordinance is presumed valid and legal unless otherwise declared by a court of  competent jurisdiction. -Petitioner filed on August 11, 2000 a petition for prohibition and declaratory relief before the Quezon City RTC for the declaration of n ullity of Section 3 of  the ordinance; the enjoining of respondents – Quezon City Treasurer, Quezon City Assessor, and City Mayor

of Quezon City – from further implementing the ordinance; for the Quezon City Treasurer to be ordered to refund the amount representing the real property tax erroneously collected and paid under protest; and for respondents to pay attorney’s attorney’s fees and costs of the suit. -On March 6, 2001, respondent Quezon City Government enacted Ordinance No. SP-1032, S-2001 which repealed the assailed proviso in Section 3 of the 1995 Ordinance. -Respondents moved to dismiss dismiss the petition, averring that the passage of the repealing ordinance had rendered the petition moot and academic. -Petitioner opposed the motion, alleging that while its action for the declaration of nullity of the proviso was rendered moot and academic by its repeal, its claim for refund and attorney’s fees had not been mooted, and the trial court still had to determine if Section 3 of the ordinance “is null and void ab initio and perforce, may not be enforced during the intervening period from the time of its enactment until the time of its repeal.” -TC granted respondents’ motion to dismiss -MFR denied, hence, this appeal ISSUE WON Section 3, Quezon City Ordinance No. 357, Series of 1995, which was abrogated for be eiing UNCONSTITUTIONAL can be the basis of collecting real estate taxes prior to its repeal

HELD No. -The proviso in question is invalid as it adopts a method of assessment or appraisal of real property contrary to the Local Government Code, its Implementing Rules and Regulations and the Local Assessment Regulations No. 1-92 issued by the Department of Finance. -Under these immediately stated authorities, real properties shall be appraised at the current and fair market value prevailing in the locality where the property is situated situated and classified for assessment purposes on the basis of its actual use. -This Court holds that the proviso directing that the real property tax be based on the actual amount reflected in the deed of conveyance or the prevailing BIR zonal value is invalid not only because it mandates an exclusive rule in determining the fair market value but more so because it departs from the established procedures stated in the Local Assessment Regulations

Prof.Movido No. 1-92 and unduly interferes with the duties statutorily placed upon the local assessor by completely dispensing with his analysis and discretion which the Code and the regulations require to be exercised. An ordinance that contravenes any statute statute is ultra vires and void.

-Using the consideration appearing in the deed of conveyance to assess or appraise real properties is not only illegal since “the appraisal, assessment, assessment, levy and collection of  real property tax shall not be let to any private person,” but it will completely destroy the fundamental principle in real property taxation – that real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever whoever uses it. Necessarily, allowing the parties to a private sale to dictate the fair market value of the property will dispense with the distinctions of actual use stated in the Code and in the regulations. regulations. -The invalidity of the assessment or appraisal system adopted by the proviso is not cured even if the proviso mandates the comparison of the stated consideration as against the prevailing BIR zonal value, whichever is higher, because an integral part of that system still permits valuing real property in disregard of its “actual use.” -The provision is null and void ab initio for being ultra vires and for contravening the provisions of the Local Government Code, its implementing regulations and the Local Assessment Regulations No. 1-92. 1-92. As such, it acquired no legal effect and conferred no rights from its inception. Disposition Petition granted (Petitioner’s claim for refund, however, must be lodged with the Local Board of  Assessment Appeals, if it is not barred by the statute of limitations *non-exhaustion of admin remedies)

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V MARCOS QUIMPO V. MENDOZA 107 SCRA 73 GUERRERO, AUGUST 31, 1981 NATURE petition to review on certiorari

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FACTS -Quimpo, an owner of a building in CDO, was assessed P20k for 1969, P400 annual realty tax payable in 4 equal installments. Quimpo was able to pay the first 3 monthly installments but was not able to pay the last installment. -On August the following year, he wanted to pay P124.00 (P100 tax due + P24 penalty) to Mendoza, the City Treasurer of CDO, but Mendoza required him to pay P196 (P100 + P96 penalty based on City Charter of  CDO). Quimpo consigned P124 with Clerk of Court then instituted mandamus with damages against Mendoza in CFI -CFI: dismissed based on Padilla v. City of Pasay and City Treasurer 1. Pay P96 penalty = 2% of original tax which is P400 2. no authority to entertain suit for failure of Quimpo to comply with provisions of Charter of CDO on payment of tax

ISSUE (relevant lang, ung iba remedies and damages na eh) WON the basis for computing the tax penalty should be the tax payable for the said year or only the installment unpaid

HELD Only base deficiency on unpaid installment Ratio. We rule for the petitioner, following the general rule in the interpretation of tax statutes that such statutes are construed most strongly against the government and in favor of the taxpayer. Moreover, simple logic, fairness and reason cannot countenance an exaction or a penalty for an act faithfully done in compliance with the law. Since p etitioner is allowed by law to pay his real estate tax in four equal installments due and payable on four specified dates and having paid the first three (3) installments faithfully and religiously, it is manifest injustice, sheer arbitrariness and abuse of power to penalize him for doing so when he fails to pay the fourth and last installment. Reasoning. Padilla v. City of Pasay not applicable to the case as the said case was decide before RA 5447 took effect in January 1, 1969. Petitioner was being assessed real property tax for 1969 so RA 5447 applies to the petitioner already. RA 5447 amends city charters by providing that real property tax is due and payable in 4 equal installments. Thus, each installment is due and payable on or before a specified statutory

Prof.Movido

limit. Default in 1 installment, the penalty for delinquency should be computed starting the day after the due date when the tax payer should have paid. Disposition. WHEREFORE, judgment is hereby rendered ordering petitioner to pay to the City  Treasurer of Cagayan de Oro City the amount of  P116.00 representing full payment of the last installment of P100.00 on the realty tax for the year 1969 and the tax penalty of P16.00 for eight months of  his delinquency from January, 1970 to August, 1970; and ordering said City Treasurer to accept the aforesaid payment, issue the official receipt therefor and a tax clearance certificate covering the aforementioned real estate tax and penalty. N o costs.  Judgment modified. SO ORDERED.

may find justificat justification ion under the concept of incidental incidental use, which is complimentary to the main or primary purpose educational, the lease of the first floor thereof  to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. - The trial court court correctly correctly arrived arrived at the conclusion conclusion that the school building as well as the lot where it is built, should be taxed, not because the second floor of  the same is being used by the Director and his family for residential residential purposes, purposes, but because because the first floor thereo thereoff is being being used used for commerc commercial ial purpos purposes. es. However, However, since only a portion is used for purposes of  commerce, it is only fair that half of the assessed tax be returned to the school involved.

NAPOCOR V PRESIDING JUDGE

ABRA VALLEY COLLEGE, INC. v AQUINO FACTS

190 SCRA 477 FERNAN; October 16, 1990

 June 15,1988 ; Paras

- Petitione Petitionerr filed a complaint complaint in the CFI CFI of Abra to annul and declare void the "Notice of Seizure" and the "Notice of Sale" and sale in a public auction of its lot and building located in Bangued, Abra for non-payment of real estate taxes and penalties. The ground floor of  the said building building is being being used used and rented rented by a commercial establishment (Northern Marketing Corp.), while the second floor is the permanent residence of  the Director of the college and his family. - Petitioner argues that the primary use of the the school lot and building building is the basic and controllin controlling g guide, guide, norm and standard to determine tax exemption, and not the mere incidental use thereof.

ISSUE WON the entire entire buildi building ng is used used exclus exclusive ively ly for educational purposes ( hence exempt from property tax)

HELD NO ( 1st floor taxable, 2 nd floor tax exempt) - In the phrase phrase "exclusiv "exclusively ely used for educati educationa onall purposes" as provided for in Article VI, Section 22 of  the 1935 1935 Consti Constitut tution ion,, reason reasonabl able e emphas emphasis is has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stat stated ed,, the the use use of the the scho school ol buil buildi ding ng or lot lot for for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floo floorr of the the main main buil buildi ding ng in the the case case at bar bar for for residentia residentiall purposes purposes of the Director and his family,

FACTS -the province of Misamis Oriental filed a complaint with the RTC of Cagayan Cagayan de Oro against NAPOCOR NAPOCOR for the collection collection of real property tax and special education fund fund tax tax amou amount ntin ing g to P11, P11,10 105, 5,00 008. 8.10 10 and and P11,104,658.10 respectively. Petitioner, citing PD 242, moved to dismiss on the ground that the court had no   juris jurisdic dictio tion n since since disput disputes es betwee between n govern government ment agencies (and GOCC’s) should be adjudicated by the Secret Secretary ary of Justic Justice. e. The court court denied denied the motion motion.. Petitioner Petitioner filed a supplementa supplementall motion motion to dismiss, dismiss, citing Fiscal Incentive Review Board (FIRB) Resolution 10-85, restoring petitioner’s tax and duty exemption privileges. The court denied petitioner’s second motion to dismiss. Barangay Aplaya, Misamis Oriental filed a complaint in intervention, contending that since under law, 10% of the real property taxes collected within its   jurisdict jurisdiction ion accrue to its general general funds, funds, petitioner’ petitioner’s s non-payment adversely affects its interests.

ISSUE WON NAPOCOR is exempt from real property taxes

HELD 1. NO. Sec. 23 of PD 1177 provides that “all units of  government, including GOCC’s shall pay income taxes, customs duties and other taxes and fees as imposed under revenue laws”. Petitioner contends that only its exem exempt ptio ions ns from from taxe taxes s paya payabl ble e to the the nati nation onal al

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government government was withdrawn withdrawn and not those payable to government branches. Clearly, the law makes no such distinctio distinction n and the provision provision should be taken in its plain meaning—that is, that all exemptions have been lifted. This is echoed in PD 1931 which affirms that all such tax privileges have been repealed. -In NAPOCOR v Albay, the Court held that the State had no reason to decry the taxation taxation of NAPOCOR’s NAPOCOR’s properties properties since the real property property taxes would in any case case be used used to financ finance e develo developmen pmentt and nation nation-building, building, particularly particularly in the local government government level. level. Such proceeds are divided among the province, city or municipality where the subject property is located and appl applie ied d to that that LGU LGU for for its its own own use use and and bene benefi fitt (including barrios like Barangay Aplaya). The 1% tax for the Special Special Educat Education ion Fund Fund is likewi likewise se divide divided d among the LGUs. Disposition WHEREFORE, the petition is DISMISSED

THE CITY GOVERNMENT OF QUEZON CITY vs. BAYAN TELECOMMUNICATIONS, TELECOMMUNICATIO NS, INC GARCIA; March 6, 2006 NATURE Petition for review on certiorari

FACTS Resp Respon onde dent nt Bayan Bayan Tele Teleco commu mmuni nica cati tion ons, s, Inc. Inc. (Bayantel) is a legislative franchise holder under RA 3259 3259 to establ establish ish and operat operate e radio radio statio stations ns for dome domest stic ic tele teleco comm mmun unic icat atio ions ns,, radi radiop opho hone ne,, broadcasting and telecasting. - Sect Sectio ion n 14 of RA 3259 3259 prov provid ides es for for real realty ty tax tax exemption of Bayantel but it shall be liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the franchise, as other persons or corporations may be required by law to pay. - R A 7 16 16 0 (Local ( Local Government Government Code of 1991) took effe effect ct.. Sect Sectio ion n 232 232 of the the Code Code gran grants ts loca locall government government units within the Metro Manila Manila Area the power power to levy levy tax on real real proper propertie ties s such such as land, buildi building, ng, machine machinery ry and other other improv improveme ements nts not specifically exempted. - Complementin Complementing g the above provision is the second paragr paragraph aph of Sectio Section n 234 the same Code which which withdrew withdrew any exemption from realty tax heretofore heretofore grante granted d to or enjoye enjoyed d by all persons, persons, natural natural or  juridical.

Prof.Movido

- Few months months after the LGC LGC took effect, effect, Congress Congress enacte enacted d RA 7633, 7633, ame amendi nding ng Bayant Bayantel’ el’s s origin original al franchise. The amendatory law restored the realty tax  exemption of Bayantel. - Bayantel Bayantel owned several several real properties properties on which it maintained various telecommunications facilities in QC (head office and Operations Operations Center, land, building building equipment, Exchange Center) - In 1993, 1993, the govern governmen mentt of Quezon Quezon City, City, pursuant pursuant to the taxing taxing power vested vested on local government units by Section 5, Article X of the 1987 Consti Constitut tution ion in relati relation on to Sectio Section n 232 of the LGC, enacte enacted d City City Ordina Ordinance nce,, otherw otherwise ise known known as the Quezon City Revenue Code (QCRC), imposing, under Sectio Section n 5 thereo thereof, f, a real real proper property ty tax on all real real proper propertie ties s in Quezon Quezon City, City, and, and, reiter reiterati ating ng in its Sectio Section n 6, the withdrawa withdrawall of exempt exemption ion from from real real prop proper erty ty tax tax unde underr Sect Sectio ion n 234 234 of the the LGC LGC . Furthermore, Furthermore, much like the LGC, the QCRC, QCRC, under its Section Section 230, withdrew tax exemption exemption privilege privileges s in general. - Conformably with the City’s Revenue Code, Code, new tax declarations declarations for Bayantel’s Bayantel’s real properties properties in Quezon Quezon City City were were issued issued by the City Assess Assessor or and were received by Bayantel. - Meanwh Meanwhile ile,, on March 16, 1995, RA 7925 7925 ( Public Telecommunic Telecommunication ations s Policy Policy Act of the Philippin Philippines) es) envi envisa sage ged d to leve levell the the play playin ing g fiel field d amon among g telecommunications companies, took effect. - Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city from the roll of taxable real properties. DENIED. - Appeal with the Local Board of Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property taxes assessed against it by the Quezon City government. - On account thereof, the Quezon City Treasurer sent out notices notices of delinq delinquen uency cy for the total total amount amount of  P43,878,208 P43,878,208.18, .18, followed by the issuance issuance of several several warr warran ants ts of levy levy agai agains nstt Baya Bayant ntel el’s ’s prop proper erti ties es preparatory to their sale at a public auction.

ISSUES 1.

WON WON Bayan Bayante tel’ l’s s real real proper properti ties es in Quez Quezon on City City are exempt from real real proper property ty taxes taxes under its legislative franchise

2.

WON the City’s City’s Revenue Revenue Code pursuant pursuant to which the city treasurer of Quezon City levied real property taxes against against Bayantel’s Bayantel’s real properties properties located within within the City effectively effectively

3.

withdr withdrew ew the tax exempt exemption ion enjoye enjoyed d by Bayantel under its franchise, as amended WON Congres Congress s actuall actually y did did exempt exempt Bayantel’s Bayantel’s properties properties at all by virtue of Section Section 11 of  Rep. Act No. 7633

HELD 1. YES. The legislative intent expressed in the phra phrase se “exc “exclu lusi sive ve of this this fran franch chis ise” e” cann cannot ot be construed other than distinguishing between two (2) sets of properties, be they they real or personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used in its radio or teleco telecommun mmunica icatio tions ns busine business, ss, and (b) those those properties which are not so used. It is worthy to note that the properties properties subject of the present present controversy controversy are only those which are admittedly admittedly falling under the first category.  To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively effectively works works to grant or delegate delegate to local governments of Congress’ inherent power to tax the franchisee’s properties belonging to the second group of properties properties indicated indicated above, above, that is, all properties properties which, “exclusive of this franchise,” are not actually and directly directly used in the pursuit pursuit of its franchise. franchise. As may may be reca recall lled ed,, the the taxi taxing ng powe powerr of loca locall govern governmen ments ts under under both both the 1935 and the 1973 Constituti Constitutions ons solely solely depended depended upon an enabling enabling law. Absent such enabling law, local government units were without authority to impose and collect taxes on real prop proper erti ties es with within in thei theirr resp respec ecti tive ve terr territ itor oria iall   jurisdict jurisdictions. ions. While Section 14 of Rep. Act No. 3259 may be validly validly viewed as an implied delegation delegation of  power to tax, the delegation under that provision, as couched, couched, is limited to impositions impositions over properti properties es of  the franchisee franchisee which are not actually, directly directly and exclus exclusive ively ly used used in the pursui pursuitt of its franch franchise ise.. Necessarily, other properties of Bayantel directly used in the pursuit of its business are beyond the pale of the delegated delegated taxing taxing power of local local governments. governments. In a very real sense, therefore, real properties of Bayantel, save those exclusi exclusive ve of its franchise, franchise, are subject subject to realty realty taxes. Ultimately, Ultimately, therefore therefore,, the inevitable inevitable result was that all realties which are actually, directly and exclusively used in the operation of its franchise are “exempted” from any property tax. 2. NO. While the system of local government taxation has changed with the onset of the 1987 Constitution,

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the power of local local govern governmen mentt units units to tax is still still limited. Reasoning: a. Mactan Cebu International Airport Authority case.   The power to tax is primarily vested in the Congress; however, however, in our jurisdiction jurisdiction,, it may be exercised exercised by local legislative bodies, no longer merely be virtue of a valid valid delega delegatio tion n as before before,, but pursua pursuant nt to direct direct author authority ity conferre conferred d by Sectio Section n 5, Articl Article e X of the Constituti Constitution. on. Under the latter, latter, the exercise exercise of the powe powerr may be subj subjec ectt to such such guid guidel elin ines es and and limita limitatio tions ns as the Congre Congress ss may provid provide e which, which, however, must be consistent with the basic policy of  local autonomy. b. Comment of Fr. Bernas on on the effect of Section 5 on the fiscal position of municipal corporations Section 5 does not change the doctrine that municipal corpor corporati ations ons do not posses possess s inhere inherent nt powers powers of  taxa taxati tion on.. What What it does does is to confer confer munici municipa pall corpor corporati ations ons a genera generall power power to levy levy taxes taxes and otherwise create sources sources of revenue. They no longer longer have to wait for a statutory grant of these powers. The power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. Moreover, Moreover, these limitation limitations s must be “consisten “consistentt with the basic policy policy of local autonomy. autonomy.” ” The important important legal effect of Section 5 is thus to reverse the principle that that doub doubts ts are are reso resolv lved ed agai agains nstt muni munici cipa pall corporation corporations. s. Henceforth, Henceforth, in interpreting interpreting statutory statutory provisions on municipal fiscal powers, doubts will be resolv resolved ed in favor favor of munici municipal pal corpora corporatio tions. ns. It is understood, understood, however, however, that taxes imposed by local government government must be for a public public purpose, purpose, uniform within a locality, must not be confiscatory, and must be within the jurisdiction of the local unit to pass. c. Philippine Philippine Long Distance Distance Telephone Telephone Company, Inc. (PLDT) vs. City of Davao: Davao :   The grant of taxing taxing powers to local government government units under the Constitution and the LGC does not affect affect the power power of Congre Congress ss to grant grant exempt exemption ions s to certai certain n persons, persons, pursua pursuant nt to a declared declared national national policy. policy. The legal effect effect of the constitutio constitutional nal grant to local governments governments simply simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. 3. YES. RA 7633 was enacted subsequent to the LGC.  This subsequent piece of legislation as an express and

Prof.Movido

real intention on the part of Congress to once again remove from the LGC’s delegated taxing power, all of  the franchisee’s (Bayantel’s) properties that are actually, directly and exclusively used in the p ursuit of  its franchise.

DISPOSITION Petition DENIED

MANILA INTERNATIONAL AIRPORT AUTHORITY V CA THE CITY OF DAVAO V RTC AND GSIS G.R. No. 127383  TINGA; August 18, 2005 FACTS - GSIS Davao City branch office received a Notice of  Public Auction scheduling the public bidding of GSIS properties located in Matina and Ulas, Davao City for non-payment non-payment of realty realty taxes for the years 1992 to 1994 1994 tota totali ling ng PP29 PP295, 5,72 721. 1.61 61.. The The auct auctio ion n was was subsequently reset by virtue of a deadline extension allowed by Davao City for the payment of delinquent real property taxes. - GSIS received received Warrants of Levy and Notices Notices of Levy on three parcels parcels of land owned by the GSIS. Another Another Notice Notice of Public Auction Auction was received received by the GSIS, setting the date of auction sale. - GSIS GSIS file filed d a Petition Petition for Certiorari Certiorari,, Prohibitio Prohibition, n, Mandamus And/Or Declaratory Relief  with the RTC of  Davao City. It also sought the issuance of a TRO which was granted. It also issued an Order  issuing a writ of  preliminary injunction effective for the duration of the suit. - RTC concluded that notwithstanding the enactment of  the Local Local Govern Governmen mentt Code, Code, the GSIS GSIS retain retained ed its exemption from all taxes, including real estate taxes.  The RTC cited Section 33 of PD No. 1146, the Revised Gove Govern rnme ment nt Serv Servic ice e Insu Insura ranc nce e Act Act of 1977 1977,, as amended amended by P. D. No. 1981, which mandated mandated such exemption. - The RTC conceded that the tax exempting statute, P.D. P.D. No. No. 1146, 1146, was was enac enacte ted d prio priorr to the the Loca Locall Government Code. However, it noted that the earlier earlier law had prescribed two conditions in order that the tax exemption exemption provided therein could be withdrawn withdrawn by future enactments, enactments, namely: (1) that Section Section 33 be expressly and categorically repealed by law; and (2) that a provision be enacted to substitute the declared

policy of exemption from any and all taxes as an essential factor for the solvency of the GSIS fund. - Petiti Petitione oners rs argue argue that that the exempti exemption on grante granted d in Section 33 of P.D. No. 1146 was effectively withdrawn upon the enactment of the Local Government Code. - GSIS contends contends that the requisites requisites for repeal are laid down in Section 33 of P.D. No. 1146, as amended, namely that it be done expressly and categorically by law, and that a provision be enacted to substitute the declared declared policy policy of exempti exemption on from taxes as an essential factor for the solvency of the GSIS fund.

ISSUE WON Sections 234 and 534 of the Local Government Code Code,, whic which h have have with withdr draw awn n real real prop proper erty ty tax tax exempt exemption ions s of govern government ment owned owned and contro controlle lled d corporation corporations, s, have also withdrawn withdrawn from the GSIS its right to be exempted from payment of the realty taxes sought to be levied by Davao City.

HELD - YES.  The GSIS’s tax-exempt status was withdrawn in 1992 by the Local Government Code but restored by the Government Government Service Service Insurance Insurance System System Act of  1997, the operative provision of which is Section 39. The subject real property taxes for the years 1992 to 1994 were assessed against GSIS while the Local Government Code provisions prevailed and, thus, may be collected by the City of Davao. - A presidential decree enacted a year earlier, P.D. No. 1931, effectively withdrew all tax exemption privileges granted to GOCCs. - Whether Marcos was aware of the effect of P.D. No. 1931 1931 on the the GSIS GSIS’s ’s taxtax-ex exem empt pt stat status us or the the ramificatio ramifications ns of the decree thereon thereon is unknown; unknown; but appa appare rent ntly ly,, he imme immedi diat atel ely y reco recons nsid ider ered ed the the withdrawal of the exemptions on the GSIS. Thus, P.D. No. 1981 was enacted, expressly stating that the taxexempt status of the GSIS under Section 33 of P.D. No. 1146 remained in place, notwithstanding the passage of P.D. No. 1931. - P.D. No. 1981 also attempted attempted to proscribe proscribe future attempts to alter the tax-exempt status of the GSIS by imposing imposing unorthodox unorthodox conditions conditions for its future repeal. repeal.  Thus, a second paragraph was added to Section 33, containing the restrictions relied upon by the RTC. - Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government, Government, its agencies agencies and instrumenta instrumentalitie lities, s, as

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evidenced by these cited provisions which “otherwise provided.” - This This Court, Court, in Mactan, acknowledged acknowledged that under Section 133, instrumentalities were generally exempt from all forms of local government government taxation, unless otherwise provided in the Code. On the other hand, Section 232 “otherwise provides” insofar as it allowed local government government units to levy an ad valorem valorem real property tax, irrespective of who owned the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the phrase “not “not here herein inaf afte terr spec specif ific ical ally ly exem exempt pted ed.” .” The The exemptions exemptions from real property taxes are enumerated in Section 234, which specifically states that only real properties owned “by the Republic of the Philippines or any of its political subdivisions” are exempted from the paymen paymentt of the tax. tax. Clearl Clearly, y, instru instrument mentali alitie ties s or GOCCs do not fall within the exceptions under Section 234. - Unlike Unlike most most other other GOCCs, GOCCs, there is a statut statutory ory provision— Section 33 of P.D. No. 1146, as amended— whic which h impo impose ses s cond condit itio ions ns on the the subs subseq eque uent nt withdr withdrawa awall of the GSIS’s GSIS’s tax exempt exemption ions. s. The RTC  justified the affirmance of the tax exemptions based on the non-compliance non-compliance by the Local Government Government Code with these conditionalit conditionalities, ies, and not by reason of a general general propositio proposition n that GOCCs or instrument instrumentaliti alities es remain exempt from local government taxation. - It does not appear that at the very least, the second conditionality of Section 33 has been met. No provision has been enacted “to substitute the declared policy of  exempt exemption ion from any and all taxes as an essent essential ial factor for the solvency of the fund.” Yet the Court is averse to employing this framework, for we recognize a fundame fundamenta ntall flaw flaw in Section Section 33, partic particula ularly rly the amendatory second paragraph introduced by P.D. No. 1981. - The second paragraph of Section 33 of P.D. No. 1146, as amended, amended, effectivel effectively y imposes imposes restricti restrictions ons on the competency of the Congress to enact future legislation on the taxability taxability of the GSIS. This places an undue restraint restraint on the plenary power of the legislature legislature to amend or repeal laws, especially considering that it is a lawmaker’s act that imposes such burden. Only the Cons Consti titu tuti tion on may may oper operat ate e to prec preclu lude de or plac place e restrictions on the amendment or repeal of laws. It is evident that we cannot render effective the amendatory second paragraph of Section 33 as the RTC did, for by doing so, we would be giving sanction sanction to a disingenuo disingenuous us means employed employed through through

Prof.Movido

legislativ legislative e power to bind subsequent subsequent legislators legislators to a particular mode of repeal. - Thus, the two conditionalities of Section 33 cannot bear relevance on whether the Local Government Code remove removed d the tax-exem tax-exempt pt status status of the GSIS. The express express withdrawal withdrawal of all tax exemptions exemptions accorded to all persons, natural or juridical, as stated in Section 193 of the Local Government Government Code, applies without impediment to the present case.

CITY ASSESSOR OF CEBU V ASSOCIATION OF BENEVOLA DE CEBU, INC 524 SCRA 128 Velasco, J; June 6, 2007 NATURE Petition for review on certiorari

FACTS - Respondent, Respondent, a non stock, non profit profit organizati organization, on, is the owner of a hospital in Cebu. It constructed the CHH Medi Medica call Arts Arts Cent Center er whic which h was was clas classi sifi fied ed as Commercial Clinic by the local government. The City Assessor of Cebu assessed the center as commercial and imposed an assessed assessed value of P9.8 million million which was equivalent to 35% of the value of the building and not the 10% specia speciall assess assessment ment imposed imposed on the hospital and two other separate buildings. - Repondent Repondent filed letter letter petition petition with the Assessment Appeal Board for reconsider reconsideration ation claiming that rate should be only 10%. - Assessor claimed that the new building was not part of the hospital hospital being 100 meters meters away from the hospital and was being used as commercial clinic for renting out to physicians. In turn, the doctors charged consultation fees for diagnosis and treatment. Hence, the commercial nature of the building. - The Local and Central Board ruled that assessment should be only 10%. The Local Board ratiocinated that hospitals have plenty of spaces leased out to medical practitione practitioners rs similar to the new building. building. Hence the treatment in so far as assessment is concerned should be the same as that of the hospital. - CA on appeal affirmed the decision of the Boards. - Hence this appeal to the SC.

ISSUE/S WON CA committed committed an error in affirming affirming the decision decision

of the Boards

HELD No. It is undisp undispute uted d that that the doctors doctors and medical medical specialists holding clinics in the new building are those accredited by the hospital, that is, they are consultants of the hospital and the ones who can treat patients confined in the hospital. This fact alone takes away the new building building from being categorized categorized as commercial since a tertiary hospital is required by law to have a pool of physicians who comprises the required medical depart departmen ments ts in variou various s fields fields.. These These accred accredite ited d physic physician ians s normal normally ly would would hold hold office office within within the premises premises of the hospital. hospital. In which case, there is no question question as to the conduct of their business business in the ambit of diagnosis, diagnosis, treatment, treatment, and or confinement confinement of  patien patients. ts. Their Their transf transfer er to a more more spacio spacious us and convenient convenient place and location location for the benefit of the hospitals patients does not remove them from being an integral part of the overall operation of the hospital. Disposition Petition is denied.

CALTEX V. CBAA AND CITY ASSESSOR OF PASAY  114 SCRA 196 May 31, 1982 FACTS * See Facts under Part A. - Chris

ISSUE WON certiorari is the proper remedy for Caltex (SolGen contends that it’s the CTA w/c has exclusive appellate  jurisdiction over this case)

HELD  YES (SolGen is not correct.) - The Central Board of Assessment Appeals has appellate jurisdiction over decisions of local boards of  assessment appeals and is in the same category as the CTA. - The Real Property Tax Code says the decision of  CBAA becomes final & executory after 15 days fr receipt of its decision. decision. Within that period, period, reconsideration may be filed. Code doesn’t provided provided for review of Board’s decision by SC. Consequently, the only remedy available for seeking review by SC of  the decision of CBAA is the special civil action of  certiorari. Caltex was right.

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Taxation II A2010 CHAVEZ V ONGPIN 186 SCRA 331 MEDIALDEA ; June 6, 1990

NATURE Petition seeking to declare unconstitutional EO 73

FACTS - EO 73 (Novemb (November er 25, 1986) which provided provided for collection collection of real property property taxes based on 1984 real property values, under section 21 of the real property tax code as amended WHEREAS - collection of real property taxes is still based on the 1978 revision of property values - latest general revision of real property assessments completed in 1984 has rendered the 1978 revised values obsolete - collection of real property taxes based on the 1984 real property property values values was deferred deferred to take effect on   January January 1, 1988 instead instead of January 1, 1986, thus depriving the local government units of an additional source of revenue - urgent urgent need for local governments governments to augment augment their financial resources to meet the rising cost of  rendering effective services to the people DO HEREBY ORDER (1) Real property values as of December 31, 1984 as determined by the local assessors during the latest general general revision revision of assessments assessments shall take effect beginn beginning ing January January 1, 1987 1987 for purpos purposes es of real real property tax collection - MEMO ORDER 77 issued suspending implementation of EO 73 until June 30, 1987 - Chavez Chavez (taxpayer (taxpayer and owner of 3 parcels of  land) alleges > EO 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating excessive increase in real property taxes by 100% to 400% on improvements and up to 100% on land > any increase in the value of real property brought about by the revision revision of real property property values and asse assess ssme ment nts s woul would d nece necess ssar aril ily y lead lead to a proportionate increase in real property taxes > sheer oppression is the result of increasing real proper property ty taxes taxes at a period period of time time when when harsh harsh economic conditions prevail

> increase in the market values values of real property property as reflec reflected ted in the schedule schedule of values values was brough broughtt about only by inflation and economic recession - Realty Owners Association of the Philippines, Inc. (ROAP) (ROAP) (national (national associati association on of ownersownerslessors) joins Chavez and additionally alleges > PD 464 464 is uncon unconst stit itut utio iona nall as it impo impose ses s an additional one percent (1%) tax on all property owners to raise funds for education, education, as real property tax is admittedly a local tax for local governments > General Revision of Assessments does not meet the requirement requirements s of due process process as regards regards publication publication,, notice notice of hearin hearing, g, opport opportuni unity ty to be heard heard as it auth author oriz izes es "rep "repla lace ceme ment nt cost cost"" of buil buildi ding ngs s (improvements) which is not provided in PD 464, but only in an administrative regulation of the Department of Finance > Joint Local Assessment/Treasury Regulations No. 286 is even more oppressive and unconstitutional as it imposes successive increase of 150% over the 1986 tax

Prof.Movido 3) The Central Board will decide within 12 months from date of receipt.Th receipt.The e decision decision of the Central Board of  Assessment Appeals shall become final and executory after the lapse of 15 days from the date of receipt of  the decision (Sec 36). - without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values. Certainly, Certainly, to continue continue collecting collecting real property property taxes based on valuations arrived at several years ago, in disr disreg egar ard d of the the incr increa ease ses s in the the valu value e of real real properties properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which which is one of the characte characteris ristic tics s of a sound sound tax system, system, requires that sources of revenues revenues must be adequate to meet government expenditures and their variations. Disposition Petition DISMISSED

PHILIPPINE PETROLEUM CORPORATION V MUNICIPALITY OF PILILLA, RIZAL GR 90776 PARAS; June 3, 1991

ISSUE WON EO 73 is unconstitutional as regards the revision of the assessments and effectivity thereof 

HELD NO - no legal basis on attacking EO 73 since the general revisi revision on of assess assessmen ments ts is a contin continuin uing g proces process s mandated by PD 464 Sec 21 (make a general revision of real property assessments once every five years and if property values greatly change, with approval of Sec Fin, make gen revision before the fifth year). - Furthermore, PD 464 furnishes the

PROCEDURE BY WHICH A TAX ASSESSMENT MAY  BE QUESTIONED 1) Within Within 60 days from the date date of receipt receipt of the written notice of assessment, any owner who doubts the assessment assessment of his property, property, may appeal to the Local Board of Assessment Appeals with petition under oath, copies of the tax declarations and documents in support of the appeal (Sec 30). Decision shall be made within 120 days from receipt of appeal (Sec 34). 2) In case the owner or administrator of the property or the assessor is not satisfied with the decision of the Local Board of Assessment Appeals, he may, within 30 days from the receipt of the decision, appeal to the Central Board of Assessment Appeals (Sec 34)

NATURE Petition for certiorari decision of RTC (which upheld the legality of taxes, fees, and charges b eing imposed in Pililla under Municipal Tax Ord. No.1

FACTS - Philippine Petroleum Corporation (PPC) is engaged in the manufacture of lubricated oil basestock which is a petroleum product, with its refinery plant situated at Malaya, Pililla, Rizal, conducting its business activities within the territorial jurisdiction of the Municipality of  Pililla. PPC owns and maintains an oil refinery including forty-nine forty-nine storage tanks for its petroleum products products in Mala Malaya ya,, Pili Pilill lla. a. Unde Underr Sect Sectio ion n 142 142 of NIRC NIRC,, manufa manufactu ctured red oils oils and other other fuels fuels are subjec subjectt to specific tax - Muni Munici cipa pali lity ty of Pili Pilill lla a enac enacte ted d Muni Munici cipa pall Tax Tax Ordinance No. 1(“The Pililla Tax Code of 1974) on June 14, 1974 (took effect on July 1, 1974). Sections 9&10 of said ordinance imposed a tax on business, except for those for which fixed taxes are provided provided in the Local Local Tax Code Code on manufa manufactu cturer rers, s, import importers ers,, or producers of any article of commerce of whatever kind or nature nature,, includ including ing brewer brewers, s, distil distiller lers, s, rectif rectifier iers, s, repackers, and compounders of liquors, distilled spirits and/or and/or wines, wines, as well well as mayor' mayor's s permit permit,, sanita sanitary ry

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inspection inspection fee and storage permit fee for flammable, flammable, combustible combustible or explosive explosive substances, substances, while Section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. - On Apri Aprill 13, 13, 1974 1974,, P.D P.D . 436 was promul promulgat gated ed increasing the specific tax on lubricating oils, gasoline, bunker bunker fuel fuel oil, oil, diesel diesel fuel oil and other other simila similarr petroleum petroleum products levied under Sections 142, 144 and 145 NIRC, NIRC, and granti granting ng provin provinces ces,, cities cities and municipalities certain shares in the specific tax on such products in lieu of local taxes imposed on petroleum  products.  products. - provincial provincial circular circular 6-77 was issued issued directing directing all city and municipal treasurers to refrain from collecting the so-called so-called storage fee on flammable flammable or combustible combustible materials materials imposed under the local tax ordinance ordinance of  their their respec respectiv tive e locali locality, ty, said said fee partak partaking ing of the nature of a strictly revenue measure or service charge - enforcing the municipal tax ordinance, Pililla filed a complaint against PPC for payment of almost 8.8million as business tax, storage storage permit fees, mayor’s permit and sanitation inspection fees.

ISSUE 1. WON whethe whetherr or not PPC PPC whose whose oil produc products ts are subject to specific tax under the NIRC, is still liable to pay pay (a) (a) tax tax on busi busine ness ss and and (b) (b) stor storag age e fees fees,, considerin considering g Provincial Provincial Circular No. 6-77; and mayor's mayor's permit and sanitary inspection fee to Pililla, based on Municipal Ordinance No. 1. 2. WON the mayor had authority to waive payment of  the mayor’s permit and sanitary sanitary inspection inspection fees (a contention of PPC on appeal)

HELD 1a. YES (but not to prescribed portion) Municipal Tax Ordinance Ordinance No. 1 imposing imposing the Ratio Municipal assailed assailed taxes, fees and charges is valid especially especially Section 9(A) which according to RTC "was lifted in toto and/or is a literal literal reproduction reproduction of Sec. 19(a) of the Local Tax Code." It conforms with the mandate of the law amending the Local Tax Code is Reasoning PD426 amending deemed to have repealed Provincial Circular Nos. 2673 and 26 A-73 (ordering local treasurers to refrain from collecting collecting local tax imposed imposed on manufacturer manufacturers, s, wholesalers, retailers, etc. prior to the effectivity of the local tax code) when Sec. 19&19(a) were carried over into into PD42 PD426 6 and and no exem exempt ptio ions ns were were give given n to manufacturers, wholesalers, retailers, etc. in petroleum products.

- Well-settled is the rule that administrative regulations must be in harmony with provisions of the law. In case of discrepancy between a statute and an implementing rule or regulation, the former prevails - while Section Section 2 of PD436 prohibits prohibits the imposition imposition of  local taxes on petroleum products, said decree did not amend Sec.19&19(a) of PD231 as amended by PD426, wherein the municipality is granted the right to levy taxes taxes on busine business ss of manufa manufactu cturer rers, s, import importers ers,, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from tax on the article itself. Thus, if the imposition of tax on business of manuf manufac actu ture rers rs,, etc. etc. in petr petrol oleu eum m prod produc ucts ts contravenes a declared national policy, it should have been expressly stated in PD 436. - The exercise exercise by local governments governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 would be tantamount to restricting their power to tax by mere administrative issuances. Under Section 5, Article X, 1987 Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments. (Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, fees, and charge charges s subjec subjectt to such such guidel guideline ines s and  limitation limitations s as the Congress may provide, provide, consistent  with the basic policy of local autonomy  . . .) 1b. NO Ratio Storage permit fee being imposed by Pililla's tax ordinance is a fee for the installation and keeping in storage storage of any flammable, combustible combustible or explosive explosive substances. Inasmuch as said storage makes use of  tanks owned not by the municipality of Pililla, but by petitioner PPC, same is obviously not a charge for any servic service e render rendered ed by the munici municipal pality ity as what what is envisioned in Section 37 of their tax code. Reasoning Provincial Circular No. 6-77 enjoining all city and municipal treasurers to refrain from collecting the so-called storage fee on flammable or combustible materials imposed in the local tax ordinance of their respec respectiv tive e locali locality ty frees frees PPC from from the paymen paymentt of  storage permit fee. 2. NO Ratio "Since the power to tax includes the power to exempt exempt thereo thereoff which which is essent essential ially ly a legisl legislati ative ve prerogative, it follows that a municipal mayor who is an executive officer may not unilaterally withdraw such an expression of a policy thru the enactment of a tax.”

Prof.Movido Waiver er part partak akes es of the the natu nature re of an Reasoning Waiv exemption. It is an ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority.  Tax exemptions are looked upon with disfavor. Thus, in the absence of a clear and express exemption from the paym paymen entt of said said fees fees,, the the waiv waiver er cann cannot ot be recognized. recognized. As already stated, it is the law-making law-making body, and not an executive like the mayor, who can make an exemption. Under Section 36 of the Code, a permit fee like the mayor's permit, shall be required before any individual or juridical entity shall engage in any business or occupation under the provisions of the Code. However, since the Local Tax Code does not provide the prescriptive prescriptive period period for collection collection of local taxes, Articl Article e 1143 1143 of the Civil Code applies. applies. Said law provides that an action upon an obligation created by law prescribes within ten (10) years from the time the right of action accrues. The Municipality of Pililla can therefore enforce the collection of the tax on business of petitioner PPC due from 1976 to 1986, and NOT the tax that had accrued prior to 1976. Petition is partially partially granted. Decision Decision Disposition Petition modified

PLDT V PROVINCE OF LAGUNA GR No 151899 Garcia; August 16, 2005 FACTS: -PLDT holds a legislative franchise under Act No. 3436.In 1991, RA 7082 consolidated the terms and conditions of its franchise, wherein Section 12 embodies the “in-lieu-of-all taxes” clause, whereunder PLDT shall pay a franchise tax equivalent to three percent (3%) of all its gross receipts, which franchise tax shall be “in lieu of all taxes”. -On 1992, RA7160(Local Gov’t Code) took effect. Section 137 of the Code, in relation to Section 151 thereof, grants provinces and other local government units the power to impose local franchise tax on businesses enjoying a franchise. -By Section 193 of the same Code, all tax exemption privileges then enjoyed by all persons, whether natural or juridicial, save those expressly mentioned therein, were withdrawn, necessarily including those taxes from which PLDT is exempted under the “in-lieu-of-all taxes” clause in its charter.

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-Pursuant to the Local Government Code, the Province of Laguna, through its local legislative assembly, enacted Provincial Ordinance No. 01-92, made effective January 1, 1993, imposing a franchise tax upon all businesses enjoying a franchise, PLDT included. -On January 28, 1998, PLDT, in compliance with the aforementioned Ordinance, paid the Province of  Laguna its local franchise tax liability for the year 1998 (P1,081,212.10). -Prior thereto, Congress enacted RA 7925(Public  Telecommunications Policy Act of the Philippines), which contained “most-favored treatment” clause (sec23) providing for an equality of treatment in the telecommunications industry. -The Bureau of Local Government Finance (BLGF) of  DOF, issued a ruling to the effect that as of the effectivity date of the Public Telecommunications Policy Act of the Philippines, PLDT, among other telecommunication companies, became exempt payment of franchise and business taxes imposable by LGUs under Sections 137 and 143 of the LGC However, PLDT shall be liable to pay the franchise and business taxes on its gross receipts realized from  January 1, 1992 up to March 15, 1995, during which period PLDT was not enjoying the ‘most favored clause’ provision of RA 7025 . -Thus, refused to pay the Province of Laguna its local franchise tax liability for 1999. And, on December 22, 1999, it even filed with the Office of the Provincial  Treasurer a written claim for refund of the amount it paid as local franchise tax for 1998.

ISSUE: WON PLDT Should be exempt from payment of local franchise tax

Prof.Movido

in its decisions therein as well as in its en banc Resolution in Davao. - In PLDT vs. City of Davao, and again in PLDT vs. City of Bacolod, et al., this Court has interpreted Section 23 of Rep. Act No. 7925. There, we ruled that Section 23 does not operate to exempt PLDT from the payment of  franchise tax. We quote what we have said in Davao and reiterated in Bacolod. - In sum, it does not appear that, in approving §23 of  R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, we hold that §23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of  local franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the amount of P3,681,985.72 for the period covering the first to the fourth quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third quarter of 1998. - The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if  it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. - Petitioner’s theory will leave the Government with the burden of having to keep track of all granted telecommunications franchises, lest some companies be treated unequally. It is different if Congress enacts enacts a law specifically granting uniform advantages, favor, privilege, exemption or immunity to all telecommunications entities.

HELD: -We note, quite interestingly, that except for the particular local government units involved in the earlier case of PLDT vs. City of Davao and the very recent case of PLDT vs. City of Bacolod, et al., the arguments presently advanced by petitioner on the issues raised herein are but a mere reiteration if not repetition of the very same arguments it has already raised in the two (2) earlier PLDT cases. For sure, the errors presently assigned are substantially the same as those in Davao and in Bacolod, all of which have been adequately addressed and passed upon by this Court

LUZ YAMANE (CITY TREASURER OF MAKATI) VS. BA LEPANTO CONDOMINIUM G.R. No. 154993  Tinga, J. (2005 ) FACTS -Respondent -Respondent BA-Lepanto BA-Lepanto Condominium Condominium Corporatio Corporation n (the “Corporation”) “Corporation”) is a duly organized condominium condominium corpor corporati ation on constit constitute uted d in accord accordanc ance e with with the Condominium Act, which owns and holds title to the

common and limited common areas of the BA-Lepanto Condominium (the “Condominium”), situated in Paseo de Roxas, Makati City. City. Its membership comprises comprises the various unit owners of the Condominium. -On 15 December December 1998, the Corporatio Corporation n received a Notice of Assessment dated 14 December 1998 signed by the City Treasurer. The Notice of Assessment stated that the Corporation is “liable to pay the correct city busine business ss taxes, taxes, fees fees and charge charges,” s,” comput computed ed as totaling P1,601,013.77 for the years 1995 to 1997.The Notice Notice of Assessment Assessment was silent silent as to the statutory statutory basis of the business taxes assessed. -Through -Through counsel, counsel, the Corporatio Corporation n responded responded with a written tax protest dated 12 February 1999, addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment. -Proceeding from the premise that its tax liability arose from Section 3A.02(m) of the Makati Revenue Code, the Corporation proceeded to argue that under both the Makati Code and the Local Local Govern Governmen mentt Code, Code, “business” is defined as “trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit.” It was submitted that the Corporation, as a condominium corporation, was organized not for profit, profit, but to hold title over the common areas of the Condominium Condominium,, to manage the Condominium Condominium for the unit owners, and to hold title to the parcels of land on which the Condominium was located. Neither was the Corp Corpor orat atio ion n auth author oriz ized ed,, unde underr its its arti articl cles es of  incorporati incorporation on or by-laws to engage in profit-maki profit-making ng activities. The assessments it did collect from the unit owners were for capital expenditures expenditures and operating operating expenses. -The protest was rejected by the City Treasurer in a letter letter dated dated 4 March March 1999. 1999. She insisted insisted that the collection of dues from the unit owners was effected primarily “to sustain and maintain the expenses of the common common areas, areas, with with the end view view of gettin getting g full full appr apprec ecia iati tive ve livi living ng valu values esfo forr the the indi indivi vidu dual al condom condomini inium um occupa occupants nts and to comman command d better better marketable marketable prices for those occupants” occupants” who would in the future future sell sell their their respec respectiv tive e units. units. Thus, Thus, she concluded since the “chances of getting higher prices for well-managed common areas of any condominium are better and more effective that condominiums with poor [sic] managed common areas,” the corporation activity “is a profit venture making ”. -From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati

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On 1 March 2000, the Makati RTC Branch 57 rendered a Decision dismissing the appeal for lack of merit. The Corporation filed a petition for review under Rule 42 with the CA.

ISSUE 1. Whether or not the RTC in deciding an appeal taken taken from from a denial denial of protes protestt by the local local treasurer exercises appellate jurisdiction jurisdiction 2. Whether or not the City of Makati may collect business taxes on condominium corporations HELD 1. NO, it is part of RTC’s original jurisdiction -There are discernible conflicting views on the issue.  The first, as expressed by the Court of Appeals, holds that the RTC, in reviewing denials of protests by local treasu treasurer rers, s, exerci exercises ses appell appellate ate juris jurisdic dictio tion. n. This This position is anchored on the language of Section 195 of  the Local Local Govern Government ment Code which which states states that that the remedy of the taxpayer whose protest is denied by the loca locall trea treasu sure rerr is “to “to appe appeal al with with the the cour courtt of  competent jurisdiction.”] jurisdiction.” ] Apparently though, the Local Government Government Code does not elaborate elaborate on how such “appeal” should be undertaken. -The other view, as maintained by the City Treasurer, is that the jurisdiction exercised by the RTC is original in character. This is the first time that the position has been presented to the court for adjudication. Still, this argument argument does find jurispruden jurisprudential tial mooring in our ruling in Garcia v. De Jesus, where the Court proffered the following distinction between original jurisdiction and appellate jurisdiction: “Original jurisdiction is the power of the Court to take judicial cognizance of a case instituted instituted for judicial judicial action for the first time under conditions provided by law. Appellate jurisdiction is the authority of a Court higher in rank to re-examine the final order or judgment of a lower Court which tried the case now elevated for judicial review. -The -The quot quoted ed defi defini niti tion ons s were were take taken n from from the the comme comment ntar arie ies s of the the este esteem emed ed Just Justic ice e Flor Floren enz z Regalado. With the definitions as beacon, the review taken by the RTC over the denial of the protest by the local treasurer treasurer would fall within within that court’s original  jurisdict  jurisdiction. ion. In short, short, the review is the initial judicial cognizance of the matter. Moreover, labeling the said review review as an exerci exercise se of appell appellate ate jurisd jurisdict iction ion is inappropriate, since the denial of the protest is not the   judgm judgment ent or order order of a lower lower court, court, but of a local local government official.

2. NO. -The power of local government units to impose taxes within within its territ territori orial al juris jurisdic dictio tion n derive derives s from from the Constitution itself, which recognizes the power of these units “to create its own sources of revenue and to levy taxes, fees, and charges subject to such guidelines and limitation limitations s as the Congress Congress may provide, provide, consistent consistent with with the basic basic policy policy of local local autono autonomy. my.” ” These These guidelines and limitations as provided by Congress are in main contained contained in the Local Government Code of  1991 (the “Code”), which provides for comprehensive instances instances when and how local government government units may impo impose se taxe taxes. s. The The sign signif ific ican antt limi limita tati tion ons s are are enumer enumerate ated d primari primarily ly in Sectio Section n 133 of the Code, Code, which which includ include e amo among ng others others,, a prohib prohibiti ition on on the imposi impositio tion n of income income taxes taxes except except when when levied levied on banks and other financia financiall institutions institutions.. None of the other other genera generall limita limitatio tions ns under under Sectio Section n 133 find find application to the case at bar. -The most most well-kn well-known own mode mode of local local govern governmen mentt taxation taxation is perhaps perhaps the real property tax, which is governed by Title II, Book II of the Code, and which bears no application application in this case. A different different set of  provisions, found under Title I of Book II, governs other taxes mposable by local government government units, units, including including business taxes. Under Section 151 of the Code, cities such as Makati are authorized to levy the same taxes fees and charges as provinces and municipalities. It is in Article II, Title II, Book II of the Code, governing governing municipal municipal taxes, where the provisions provisions on business business taxation relevant to this petition may be found. -As stated earlier, local tax on businesses is authorized under Section 143 of the Local Government Code. The word “business” itself is defined under Section 131(d) of the Code as “trade or commercial activity regularly engaged engaged in as a means of livelihood livelihood or with a view to profit profit.” .” This This defini definitio tion n of “busin “business ess” ” takes takes on importance, since Section 143 allows local government units to impose local taxes on businesses other than those specified specified under the provision. provision. Moreover, Moreover, even those business activities specifically named in Section 1 43 43 a re re t he he ms ms el elv e es s su sc sc e ep p ti tib le le to b ro ro ad ad interpretation. For example, Section 143(b) authorizes the imposi impositio tion n of busine business ss taxes taxes on wholes wholesale alers, rs, distributors, or dealers in any article of commerce of  whatever kind or nature. -It is thus imperative that in order that the Corporation may be subjected to business taxes, its activities must fall within the definition of business as provided in the Local Government Code. And to hold that they do is to

Prof.Movido ignore ignore the very statutory statutory nature of a condominium condominium corporation.   The The creati creation on of the condom condomini inium um corpor corporati ation on is sanctioned by Republic Act No. 4726, otherwise known a s t he he C on on do do mi mi ni ni um um A ct ct . U n nd de err t he he l aw aw , a condominium is an interest in real property consisting of a separa separate te intere interest st in a unit unit in a reside residenti ntial, al, industrial industrial or commercial commercial building and an undivided undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of  the building. To enable the orderly administration over these common areas which are jointly owned by the various unit owners, the Condominium Act permits the creati creation on of a condom condomini inium um corpor corporati ation, on, which which is specially formed for the purpose of holding title to the commo common n area area,, in whic which h the the hold holder ers s of sepa separa rate te inte intere rest sts s shal shalll auto automat matic ical ally ly be membe members rs or shareholders, to the exclusion of others, in proportion to the appurtenant appurtenant interest interest of their respective respective units. units.  The necessity of a condominium corporation has not gained widespread widespread acceptance and even is merely permissible under the Condominium Act. Nonetheless, the condominium corporation has been resorted to by many condominium projects, such as the Corporation in this case. -We can elicit elicit from the Condomin Condominium ium Act that that a condominium corporation is precluded by statute from engaging in corporate activities other than the holding of the common areas, areas, the admini administr strati ation on of the condom condomini inium um projec project, t, and other other acts acts necess necessary ary,, incidental incidental or convenient convenient to the accomplishment accomplishment of  such purposes. Neither the maintenance of livelihood, nor the procurement of profit, fall within the scope of  permissible permissible corporate corporate purposes purposes of a condominium condominium corporation under the Condominium Act. -Obviously, -Obviously, none of these stated corporate purposes purposes are geared towards maintainin maintaining g a livelihoo livelihood d or the obtention obtention of profit. profit. Even though though the Corporation Corporation is empowered to levy assessments or dues from the unit owners, these amounts collected are not intended for the incurr incurrenc ence e of profit profit by the Corpor Corporati ation on or its members, but to shoulder the multitude of necessary expens expenses es that that arise arise from from the mainte maintenanc nance e of the Condominium Condominium Project. Project. Just as much is confirmed by Section Section 1, Article Article V of the Amended By-Laws, By-Laws, which enumerate the particular expenses to be defrayed by the regula regularr assess assessmen ments ts collec collected ted from from the unit unit owners owners.. These These would would includ include e the salari salaries es of the empl employ oyee ees s of the the Corp Corpor orat atio ion, n, and and the the cost cost of 

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mainte maintenan nance ce and ordina ordinary ry repair repairs s of the common common areas.

ERICSON TELECOMMUNICATIONS INC VS CITY OF PASIG G.R. No. 176667 November 22,2007; Austria-Martinez

ISSUE

Actual receipt of interest income is not limited to physical physical receipt. Actual receipt may either either be physical receipt or constructive receipt. When the

depository bank deducts the final withholding tax and remits remits it to the govern governmen mentt for the accoun accountt of the lending lending bank. Thus, Thus, the intere interest st income income actual actually  ly  received received by the lending bank, both physically physically and  constructiv constructively, ely, is the net interest interest plus the amount  withheld as final tax . -The concept of a withholding tax on income obviously and necessarily necessarily implies that the amount of the tax with withhe held ld come comes s from from the the inco income me earn earned ed by the the taxpay taxpayer. er. Since Since the amo amount unt of the tax withheld withheld constitutes income earned by the taxpayer, then that amount manifestly forms part of the taxpayer's gross receipts. Because the amount withheld belongs to the taxp taxpay ayer er,, he can can tran transf sfer er its its owne owners rshi hip p to the the government in payment of his tax liability. The amount withhe withheld ld indubi indubitab tably ly comes comes from from income income of the taxpayer, and thus forms part of his gross receipts.  The law is clear. Gross receipts include money or its equiva equivalen lentt actual actually ly or constr construct uctive ively ly receiv received ed in considerati consideration on of services services rendered or articles articles sold, exchanged or leased, whether actual or constructive. Revenue Regulations No. 16-2005 dated September 1, 200520 200520 defined defined and gave examples examples of "construct "constructive ive receipt", to wit: SEC. 4. 108-4. Definition of Gross Receipts . -- x x x "Constructive receipt " occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts: (1) deposit in banks which are made available to the seller of services without restrictions; (2) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and (3) transfer of the amounts retained by the payor to the account of the contractor.  There is, therefore, constructive receipt, when the consideration for the articles sold, exchanged or leased, or the services rendered has already been placed under the control of the person who sold the goods or rendered the services without any restriction by the payor. In contrast, contrast, gross revenue revenue cove covers rs mone money y or its its equiva equivalen lentt actual actually ly or constr construct uctive ively ly receiv received, ed,

depository bank withholds the final tax to pay the tax liabil liability ity of the lending lending bank, bank, there there is prior prior to the withholding a constructive receipt by the lending bank o f th e a mo mo un un t w it it hh hh e elld . F ro ro m t he he a mo mo un un t constr construct uctive ively ly receiv received ed by the lendin lending g bank, bank, the

consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow

1. WON respon responden dentt is author authorize ized d to levy levy busine business ss taxes 2. WON the local business tax on contractors should be based on gross receipts. receipts .

HELD 1. Yes

NATURE

RATIO

Petition for review

Respondent is authorized to levy business taxes under Section Section 143 in relation relation to Section Section 151 of the Local Government Code. Insofa Insofarr as petiti petitione onerr is concer concerned ned,, the applic applicabl able e provision is subsection (e), Section 143 of the same Code Code coveri covering ng contra contracto ctors rs and other other indepe independe ndent nt contractors, to wit: SEC. 143. Tax on Business Business.. - The municipa municipalit lity y may impose taxes on the following businesses: xxxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding calendar year in the amount of: (Amount of Tax Per Annum) 2. YES

FACTS Ericss Ericsson on Telecommu Telecommunic nicati ations ons is engaged engaged in the design, engineering, and m ar ark e etting of   telecommunication facilities/system. In an Assessment Notice Notice dated October October 25, 2000 2000 issued issued by the City   Treasurer Treasurer of Pasig City, petitioner petitioner was assessed assessed a business tax deficiency for the years 1998 and 1999 amou amount ntin ing g to P9,4 P9,466 66,8 ,885 85.0 .00 0 and and P4,9 P4,993 93,6 ,682 82.0 .00, 0, respectively, based on its gross revenues as reported in its audited audited financial statements statements for the years 1997 and 1998. Petitioner filed a Protest dated December 21, 2000, claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue.  The City of Pasig (respondent) issued another Notice of  Assessment to petitioner on November 19, 2001, this time based on business business tax deficiencies deficiencies for the years 2000 2000 and 2001, 2001, amo amount unting ing to P4,665 P4,665,77 ,775.5 5.51 1 and P4,710 P4,710,24 ,242.9 2.93, 3, respec respectiv tively ely,, based based on its gross gross reve revenu nues es for for the the year years s 1999 1999 and and 2000 2000.. Agai Again, n, peti petiti tion oner er file filed d a Prot Protes estt on Janu Januar ary y 21, 21, 2002 2002,, reiter reiterati ating ng its positi position on that that the local local busine business ss tax should should be based based on gross receipts receipts and not gross gross revenue. Respondent Respondent denied petitioner petitioner's 's protest protest and gave the latter latter 30 days within which to appeal the denial. This prompted petitioner to file a petition for review 1 with the Regional Trial Court (RTC) of Pasig, Branch 168, pray prayin ing g for for the the annu annulm lmen entt and and canc cancel ella lati tion on of  petitioner petitioner's 's deficiency deficiency local business taxes totaling totaling P17,262,205.66. Respondent Respondent and its City Treasurer Treasurer filed a motion motion to dism dismis iss s on the the grou ground nds s that that the the cour courtt had had no  jurisdiction over the subject matter and that petitioner had no legal legal capacity capacity to sue. sue. The RTC denied the motion. motion. CA set aside said decision decision and dismissed dismissed the complaint. Petitioner now comes before the Court via a Petition for Review on Certiorari.

Prof.Movido

RATIO   The The above above provis provision ion specif specifica ically lly refers refers to gross receipts receipts which is defined defined under Section Section 131 of the Local Government Code, as follows: (n) "Gross Sales or Receipts" include the total amount of money or its equivalent representing the contract price, price, compen compensat sation ion or servic service e fee, fee, includ including ing the amount amo unt charge charged d or materi materials als suppli supplied ed with with the servic services es and the deposi deposits ts or advanc advance e payment payments s actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales, sales return, return, excise excise tax, and value-added tax (VAT); In Com Commis missio sioner ner of Interna Internall Revenu Revenue e v. Bank Bank of  Commerce, Commerce,17 the Court interpreted gross receipts as including those which were actually or constructively received, viz.: viz.:

includ including ing the value value of servic services es render rendered ed or articles sold, exchanged or leased, the payment of whic which h is yet yet to be rece receiv ived ed. This is in

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of economic economic benefits benefits (cash, receivables, and other assets) arising from the ordinary operating activities of  an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends), which is measured at the fair value value of the consider considerati ation on receiv received ed or receivable.

CITY OF LAS PIÑAS PIÑAS V SEALED AIR (PHIL), INC

PETRON CORP V MAYOR TIANGCO, et al. G.R. No. 158881  Tinga; April 16, 2008 FACTS - Petron maintains a depot or bulk plant in Navotas throug through h which which it sells sells diesel diesel fuels fuels for commerc commercial ial fishing in and around Manila Bay. - Petron was assessed taxes by respondent Mayor Toby  Tiangco for the gross sale of diesel from 1997-2001 in the amount of P6, 259,087.62. Petron protested citing citing Art. 232 (h) of the IRR of the LGC and a BLGF ruling dated July 31, 1995 stating stating that sales of petroleum petroleum fuels are not subject to local taxation. - Petron’s Petron’s protest-letter protest-letter was denied. denied. Final Demand to Pay letter was sent to Petron Petron threatening threatening closure closure of  operations should there be no payment within 5 days from receipt of such letter. - Petron Petron filed with Malabo Malabon n RTC a complai complaint nt for cancellati cancellation on of assessment assessment of deficiency deficiency taxes. RTC dismissed Petron’s complaint and ordered payment of  the assessed amount. Petron received a Closure Order from the Mayor 11 days later. A TRO sought by Petron was denied so was a MFR. - Petron brought the case before the SC, which issued a TRO. - Petron argued that the “business taxes” on its sale of  diesel diesel fuel partakes partakes of an excise excise tax on an articl article e enumerated enumerated under the NIRC, thus prohibited prohibited under Sec. 133(h) of the NIRC. Respondent argues that the provision provision merely prohibits prohibits the imposition imposition of excise excise taxes on petroleum petroleum products, but not imposition imposition of  business taxes on the same.

HELD 1. NO. - The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all “taxes, fees and charges.” The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of  taxation: all articles already covered by excise taxation under the NIRC, such as alcohol alcohol products, tobacco tobacco products, products, mineral mineral products, products, automobiles automobiles,, and such nonnon-es esse sent ntia iall good goods s as jewe jewelr lry, y, good goods s made made of  precio precious us metals metals,, perfum perfumes, es, and yachts yachts and other other vessels intended for pleasure or sports. In contrast, the later reference to "taxes, fees and charges" pertains only to one class of articles of the many subjects of  excise taxes, specifically, "petroleum products". While local government government units are authorized authorized to burden burden all such such other other class class of goods goods with with "taxes "taxes,, fees fees and charges," excepting excise taxes, a specific prohibition is imposed barring the levying levying of any other type of  taxes with respect to petroleum p roducts. - We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase "taxes, fees fees or charge charges s on petrol petroleum eum produc products" ts" does not qualify the kind of taxes, fees or charges that could withstand withstand the absolute absolute prohibition prohibition imposed imposed by the provision. It would have been a different matter had Congress, Congress, in crafting crafting Section Section 133(h), 133(h), barred barred "excise "excise taxes" or "direct taxes," or any category of taxes only, for for then then it woul would d be unde unders rsto tood od that that only only such such specified specified taxes on petroleum petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of  taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. Disposition Petition GRANTED. Malabon RTC decision REVERSED REVERSED and SET ASIDE. Deficiency taxes ordered cancelled.

- The Sangguniang Panglungsod of Zamboanga City passed Ordinance No. 44, dated Jan 13, 1982, imposing a P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within the territorial  jurisdiction of the City of Zamboanga.. - On Feb 16, 1982, the Sanggunian sent a copy of the Ordinance to the then Minister of Finance by registered mail for his review pursuant to the Local Tax Code. - On Dec 3, 1982, the Minister of Finance sent a letter addressed to the Sanggunian, suspending the effectivity of Ordinance No. 44 on the ground that it contravenes Section 19(a) of the Local Tax Code. The City of Zamboanga, represented by its City Mayor, appealed the decision of the Minister of Finance to the RTC. - On Dec 5, 1990, the RTC ruled that the tax levied under said Ordinance is not among those that the Sanggunian may impose under the Local Tax Code, but nonetheless, it upheld its validity on the ground that the Minister of Finance did not take appropriate action on the matter within the prescribed period of 120 days after receipt of a copy thereof.

ISSUE: WON the trial court erred when it held that the failure of the Minister of Finance to suspend the effectivity of  Ordinance No. 44 within 120 days from receipt of a copy thereof rendered said Ordinance valid.

HELD:  YES - A city, like Zamboanga City may impose, in lieu of the graduated fixed tax prescribed under Section 19 of the Local Tax Code, a percentage tax on the gross sales for the preceding calendar year of non-essential commodities at the rate of not exceeding two per cent and on the gross sales of essential commodities at the rate of not exceeding one per cent. The applicable provisions are Sec 19 in relation to Sec 23 of the Local  Tax Code. Code .2 2

Sec. 19.

Tax on business. — The municipality may impose a tax on businesses

as follows:

ESTANISLAO v COSTALES 196 SCRA 853 May 8. 1991; GANCAYCO

ISSUES 1. WON a LGU is empowered under the LGC to impose business taxes on persons or entities engaged in the sale of petroleum products. *Interpretation of Sec. 133(h) of the LGC

Prof.Movido

FACTS:

"(a) "(a) Tax Tax on the the bus busin ines ess s of man manuf ufac actu turi ring ng,, impo import rtin ing, g, exporting, producing, wholesaling or retailing of, or dealing in, any article of  commerce of whatever kind or nature, except those for which fixed taxes are provided herein: With gross annual sales Amount of tax for the preceding calendar per   in the amount of: annum Less than P1,000.00 P10.00 P1,0 P1,000 00.0 .00 0 or more more but but less e ss than than P2,0 P2,000 00.0 .00 0 20.0 20.00 0 2,000.00 or more but less than 3,000.00 3,000.00 30.00 3,000.00 or more but less than 4,000.00 4,000.00 45.00

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Taxation II A2010 - The Ordinance is ultra vires as it is not within the authority of the City to impose said tax. The authority of the City is limited to the imposition of a percentage tax on the gross sales or receipts of said product which, being non-essential, shall be at the rate of not exceeding 2% of the gross sales or receipts of the softdrinks for the preceding calendar year. The tax being imposed under said Ordinance is based on the output or production and not on the gross sales or receipts as authorized under the Local Tax Code. - Public respondent Zamboanga City, however, invokes Pepsi-Cola Bottling Company vs. Municipality of 

4,000.00 or more but less than 5,000.00 5,000.00 65.00 5,000.00 or more but less than 6,000.00 6,000.00 80.00 6,000.00 or more but less than 7,000.00 7,000.00 100.00 7, 000. 00 or or mo more bu but less th than 8 ,0 ,000. 00 00 120. 00 00 8 ,0 ,00 0. 0. 00 00 or or mo mo re re bu bu t l es es s t ha ha n 10 ,0 ,0 00 .0 .0 0 1 60 60. 00 00 10,0 10,000 00.0 .00 0 or or more more but but less e ss than than 15,0 15,000 00.0 .00 0 P240 P240.0 .00 0 15,0 15,000 00.0 .00 0 or more more but but less less than than 20,0 20,000 00.0 .00 0 360. 360.00 00 20,0 20,000 00.0 .00 0 or more more but but less less than than 30,0 30,000 00.0 .00 0 520. 520.00 00 30,0 30,000 00.0 .00 0 or more more but but less less than than 40,0 40,000 00.0 .00 0 750. 750.00 00 40,0 40,000 00.0 .00 0 or or mor more e but less less than than 50,0 50,000 00.0 .00 0 1,00 1,000. 0.00 00 50,0 50,000 00.0 .00 0 or or mor more e but less less than than 75,0 75,000 00.0 .00 0 1,50 1,500. 0.00 00 75,0 75,000 00.0 .00 0 or mor more e but but less e ss than than 100 100,0 ,000 00.0 .00 0 2,20 2,200. 0.00 00 100, 100,00 000. 0.00 00 or more more but but less less tha than n 150 150,00 ,000.00 0.00 3,200.0 00.00 0 150, 150,00 000. 0.00 00 or more more but but less less tha than n 300 300,00 ,000.00 0.00 3,900.0 00.00 0 300, 300,00 000. 0.00 00 or more more but but less less tha than n 500 500,00 ,000.00 0.00 7,000.0 00.00 0 500, 500,00 000. 0.00 00 or more more but but less less than 750 750,00 ,000.00 0.00 11,2 11,250 50.0 .00 0 P750,000.00 to P1,000,000.00 16,000.00. For every P50,000.00 or fraction thereof  in excess of P1,000,000.00 200.00 In the case of newly started business, the tax shall be at the rate of  not exceeding one-tenth of one per cent of the capital investment but in no case shall it be less than the minimum of P10.00 fixed above. The tax on the business of manufacturing, producing or importing agricultural implements, fertilizers, medicinal drugs, and dairy products shall be onehalf of the rates above prescribed. cdlex For purposes of collection of this tax, manufacturers and producers maintaining or operating branch or sales offices elsewhere shall record the sales in the branch or sales office making the sale and the tax thereon shall accrue to the local government where the branch or sales office is located. In cases where there is no such branch or sales office in the locality where the sale is effected, the sale shall be duly recorded in the principal office and the tax shall accrue to the local government where said principal office is located." "SEC. 23. Scope of power. — Except as otherwise provided in this Code, the city may levy and collect, among others, any of the taxes, fees and other  impositions that the province or the municipality may levy and collect. The exercise of the taxing powers of the city extends to the taxes, fees and other impositions mentioned in Sections 12, 13, 14, 15 and 16 of this code which the city shall also impose and collect, to the exclusion of the national and municipal governments. The rates of the taxes, fees, or other impositions that the city shall fix may exceed the maximum rates allowed for the province or municipality by not more than fifty per cent, except the rates of the taxes and fees provided in Sections 12, 13 and 143 in Chapter II of this Code which shall be uniform for the province and the city. LLjur  In lieu of the graduated fixed tax prescribed under Section 19 of this Code as read in relation with this Section, the city may impose a percentage tax on the sales of non-essential commodities at the rate of not exceeding two per cent and on the sales of essential commodities at the rate of not exceeding one per cent. In no case, however, shall the city impose both the graduated fixed tax and the percentage tax on the same subject. For purposes of this tax, the following shall be considered essential commodities:

 Tanauan, Leyte where the SC upheld the validity of  Municipal Ordinance No. 27 enacted by the Municipality of Tanauan, Leyte imposing a tax of P0.01 for every gallon of softdrinks produced in the municipality. But said case was decided on the basis of  the provisions of the Local A utonomy Act, particularly Section 2, which gives the cities or municipalities ample taxing authority covering almost "everything, excepting those mentioned herein." However, the Local Autonomy Act has been superseded by the Local  Tax Code insofar as the taxing authority in the provinces, cities or municipalities is concerned. By express language of Section 64(a) of the Local Tax Code," all existing tax ordinances of provinces, cities, municipalities and barrios shall be deemed ipso facto nullified on June 30, 1974." The applicable law, therefore, to the present case is the Local Tax Code and not the Local Autonomy Act. - Section 5, Article X of the 1987 Constitution provides "Each local government unit shall have the power to create its own sources of revenues, and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy." Ordinance No. 44 of public respondent Zamboanga City traverses the limitations set by the Local Tax Code.

(a) (a) Rice, Rice, corn corn,, whe wheat, at, flour flour,, mea meat, t, milk, k , fish, fish, suga sugar, r, sal saltt and and other agricultural, marine and fresh-water products; (b) (b) Laun Laundr dry y soap soap,, medici dicine n e and and hou house seho hold ld rem remed edie ies; s; (c) (c) Loca Locall lly manu manufa fact ctur ured ed ord ordin inar ary y fabr fabric ics s and and canned nned foodstuffs; (d) (d) Comm Commod odit itie ies s cov cover ered ed by the the Pri Price ce Cont Contro roll Law Law;; and and (e) (e) Such Such oth other er rel related a ted and and simi simila larr prod produc ucts ts nec neces essa sary ry to to human life and well-being. The city may levy any tax, fee or other imposition not specifically enumerated or otherwise provided for in this Code, subject to the provisions of  Sections 49 and 50 of this Code."

Prof.Movido - In accordance with Sec 44 of the Local Tax Code 3, the Sanggunian Panglungsod sent a copy of Ordinance No. 44 by registered mail to the then Minister of Finance on February 16, 1982. Apparently, said official failed to act within 120 days after receipt of a copy thereof. It was only on December 6, 1982 when the Minister of  Finance, through his deputy, wrote the Sanggunian informing it of the suspension of the effectivity of  Ordinance No. 44 as it contravenes Section 19(a) of  the Local Tax Code, as amended, without prejudice to the Sanggunian filing an appeal within thirty (30) days from receipt thereof; otherwise the same shall be deemed revoked. Public respondent Zamboanga City concurs in the position of the respondent judge that since the Minister of Finance failed to act or otherwise suspend the effectivity of the tax ordinance within 120 days from receipt of a copy thereof, said Ordinance is valid and remains in force. - There is no authority under Section 44 of the Local  Tax Code for the conclusion that the Ordinance is valid when the Minister of Finance fails to act within 120 days. All that is provided therein is that if the Secretary of Finance "takes no action as authorized in the Section, the tax ordinance shall remain in force." 3

SEC. 44. Review and suspension of tax ordinan ordinance. ce. - Within fifteen fifteen days days after its approval, a certified true copy of a tax ordinance shall be furnished: the Secretary of  Finance by the provincial board or city council; the provincial treasurer, by the municipal or barrio council; or the city treasurer by the barrio council in the city's  jurisdiction. If, within one hundred and twenty days after receipt of a copy thereof, the Secretary of Finance or the provincial or city treasurer, as the case may be, takes no action as authorized in this section, the tax ordinance shall remain in force. The Secretary of Finance, the provincial treasurer, or the city treasurer, as the case may be, shall review and have the authority to suspend the effectivity of any tax ordinance within one hundred and twenty days after receipt of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is unjust, excessive, oppressive, confiscatory, or not among those that the particular local government may impose in the exercise of its power in accordance with this Code; or when the tax ordinance is, in whole or in part, contrary to declared national economic policy; or when the ordinance is discriminatory in nature on the conduct of  business or calling or in restraint of trade. When the Secretary of Finance, the provincial treasurer or city treasurer, as the case may be, exercises this authority, the effectivity of such ordinance shall be suspended, either in part or, if necessary, in toto. The local legislative body, within thirty days after receipt of the notice of suspension, may either modify the tax ordinance to meet the objections thereto or file an appeal with the proper court, otherwise, the tax ordinance or the part or parts thereof declared suspended shall be considered as revoked. An appeal shall not stay the order of suspension nor does it authorize the local legislative body to reimpose the same tax or fee levied under a suspended ordinance until such time as the grounds for the suspension thereof shall have ceased to exist or the appeal has been resolved in its favor. Any tax or fee paid pursuant to the ordinance involved shall be considered as having been paid under  protest. In case the appeal is resolved in favor of the local government, the tax or fee that would have been collected if there were no order of suspension shall immediately be collected without interest and surcharge. In case the order of  suspension is upheld, the court shall forthwith order the refund of the tax or fee paid under protest to the taxpayer."

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- Even if the Secretary of Finance failed to review or act on the Ordinance within the prescribed period of  120 days it does not follow as a legal consequence thereof that an otherwise invalid ordinance is thereby validated. Much less can it be interpreted to mean that the Secretary of Finance can no longer act by suspending and/or revoking an invalid ordinance even after the lapse of the 120-day period. All that the law says is that after said period the tax ordinance shall remain in force. The prescribed period for review is only directory and the Secretary of Finance may still review the ordinance and act accordingly even after the lapse of  the said period provided he acts within a reasonable time. - Consequently even after the prescribed period has lapsed, should the Secretary of Finance, upon review, find that the tax or fee levied or imposed is unjust, excessive, oppressive, confiscatory, or not among those that the particular local government may impose in the exercise of its power in accordance with this Code; or when the tax ordinance, is in whole or in part, contrary to the declared national economic policy; or when the ordinance is discriminatory in nature on the conduct of business or calling or in restraint of trade," the Secretary of Finance may certainly suspend the effectivity of such ordinance and revoke the same, without prejudice to the right to appeal to the courts within 30 days after receipt of the notice of  suspension. The same rule should apply to the provincial and city treasurers, as the case may be, under Section 44 of the Local Tax Code. Disposition Ordinance No. 44 null and void. A ny taxes paid under protest should be refunded to the taxpayers concerned.

Petition for review on certiorari of a decision of the CA

business in Salcedo Village Village in Makati. On August 1998, Mobil filed an application with the city treasurer for the retirement of its business within Makati as it moved its principal place of business to Pasig. - Mobi Mobill was was asse assess ssed ed a tota totall tax tax amou amount ntin ing g to P1,893,106.96. Mobil paid the said amount in protest. protest. Later Later it appl applie ied d for for a tax tax refu refund nd amou amount ntin ing g to P1,331,638.84. The city treasurer denied the claim for refund on the ground that Mobil was transferring, not retiring, the business. - The trial court denied denied Mobil’s Mobil’s petition petition seeking for refund refund.. In denying denying the petition petition,, the trial trial court court examined examined Makati’s Makati’s law on the imposition imposition of business taxes. - The tax shall be fixed fixed by the quarter. quarter. The initial tax for the quarter in which a business starts to operate shall be 2½% of 1% of its capital investment. - The tax shall be compute computed d based based on the gross gross sales sales or receip receipts ts of the preced preceding ing quarter. quarter. In the succeedin succeeding g calendar calendar year, year, regardless regardless of when the business business started to operate, the tax shall be based on the gross sales or receipts for the preceding calendar year. The tax shall accrue on the first first day of    January January of each year and payment payment shall be made within the first 20 days of January or of  each subsequent quarter as the case may be. - Considering therefore that the business tax accrues only on the first day of January as provided in Sec. 3A.07 and becomes payable within within the first first 20 days days thereo thereoff or of each each subsequent subsequent quarter, the payments payments made by Mobi Mobill in the the year year 1998 1998 are are ther theref efor ore e payments for the business tax for 1997 which accr accrue ued d in Janu Januar ary y of 1998 1998 and and beca became me payable within the first 20 days of January or of each subsequent quarter. - Thus, upon retirement in August 1998, the taxes for said year which should accrue in   January January 1999 immediately immediately became payable payable before the application for retirement can be approv approved ed and does does not consti constitut tute e double double taxation.

FACTS

ISSUE

- Mobil Phils is a domestic corporation engaged in the manufacturing, importing, exporting and wholesaling of petroleum products. - Mobil previously had established its principal place of 

WON the business taxes paid by Mobil in 1998 were business taxes for 1998

MOBIL PHILS. V CITY TREASURER OF MAKATI 463 SCRA 381 QUISIMBING; July 14, 2005 NATURE

HELD

Prof.Movido  YES Reasoning - Busine Business ss taxes taxes impose imposed d in the exercise exercise of police police powe powerr for for regu regula lato tory ry purp purpos oses es are are paid paid for for the the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning beginning of the year as a fee to allow the business to operate for the rest of the year. - Income tax, on the other hand, is a tax on all yearly profits profits arising arising from property, professions, professions, trades or offices, or as a tax on a person’s income, emoluments, profits and the like. It is tax on income, whether net or gross realized in one taxable year. - The trial court erred erred when it said that the payments made by petitioner in 1998 are payments for business tax incurred in 1997 which only accrued in January 1998. It also erred when it ruled that petitioner was still still liable liable for business business taxes taxes based based on its gross income/revenue for January to August 1998. - Under the Makati Revenue Code, it appears that the business tax, like income tax, is computed based on the previous year’s year’s figures. figures. This is the reason for the confusion. confusion. A newly-starte newly-started d business business is already already liable liable for business taxes (i.e. license fees) at the start of the quarter when it commences operations. In computing the the amou amount nt of tax tax due due for for the the firs firstt quart quarter er of  operations, the business’ capital investment is used as the basis. For the subsequent subsequent quarters quarters of the first year, the tax is based on the gross sales/receipts for the previous previous quarter. In the following year(s), year(s), the business business is then taxed based on the gross sales or receipts of the previous year. The business taxes paid paid in the year 1998 is for the privilege privilege of engaging engaging in busi busine ness ss for for the the same same year year,, and and not not for for havi having ng engaged in business for 1997. - On the year an establishment retires or terminates its business within the municipality, it would be required to pay the difference in the amount if the tax collected, based on the previous year’s gross sales or receipts, is less less than than the actual actual tax due based on the current current year’s gross sales or receipts. - For For the the year year 1998 1998,, peti petiti tion oner er paid paid a tota totall of  P2,262 P2,262,12 ,122.4 2.48 8 to the City City Treasu Treasurer rer of Makati Makati as business business taxes for the year 1998. The amount of tax as computed based on petitioner’s gross sales for 1998 is only P1,331,638.84. Since the amount paid is more than than the amo amount unt compute computed d based based on petiti petitione oner’s r’s actu actual al gros gross s sale sales s for for 1998 1998,, peti petiti tion oner er upon upon its its retirement is not liable for additional taxes to the City of Makati.

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Prof.Movido

Disposition Decision reversed.

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