TAXATION 1 CASES FULL TEXT

1. CIR VS PINEDA 21 S 105

G.R. No. L-22734 September 15, 1967
COMMISSIONER OF INTERNL RE!EN"E, petitioner,
vs.
MN"EL #. $INE%, &' o(e o) t*e *e+r' o) ,e-e&'e, TNSIO
$INE%, respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.

#ENG.ON, /.$., J.:
On May 23, 1945 Atanasio Pineda died, survived by his wife, Fei!isi"a #a$tas,
and 15 !hidren, the edest of who" is Manue #. Pineda, a awyer. %state pro!eedin$s
were had in the &ourt of First 'nstan!e of Mania (&ase )o. *1129+ wherein the
survivin$ widow was appointed ad"inistratri,. -he estate was divided a"on$ and
awarded to the heirs and the pro!eedin$s ter"inated on .une /, 194/. Manue #.
Pineda0s share a"ounted to about P2,511.11.
After the estate pro!eedin$s were !osed, the #ureau of 'nterna 2evenue
investi$ated the in!o"e ta, iabiity of the estate for the years 1945, 1943, 194* and
194/ and it found that the !orrespondin$ in!o"e ta, returns were not fied. -hereupon,
the representative of the &oe!tor of 'nterna 2evenue fied said returns for the estate
on the basis of infor"ation and data obtained fro" the aforesaid estate pro!eedin$s
and issued an assess"ent for the foowin$4
1. 5efi!ien!y in!o"e ta,
1945 P135./3
1943 433.95
194* 1,213.91 P1,**9.39
Add4 56 sur!har$e //.9/
16 "onthy
interest fro"
)ove"ber 31,
1953 to Apri 15,
195* *21.**
&o"pro"ise for
ate fiin$
/1.11
&o"pro"ise for
ate pay"ent 41.11
-ota a"ount due P2,*1*.44
77777777777
2.
Additiona residen!e ta,
for 1945
P14.51
77777777777
3. 2ea %state deaer0s ta,
for the fourth 8uarter of
1943 and the whoe
year of 194*
P21*.51
77777777777
Manue #. Pineda, who re!eived the assess"ent, !ontested the sa"e.
9ubse8uenty, he appeaed to the &ourt of -a, Appeas ae$in$ that he was appeain$
:ony that proportionate part or portion pertainin$ to hi" as one of the heirs.:
After hearin$ the parties, the &ourt of -a, Appeas rendered ;ud$"ent reversin$
the de!ision of the &o""issioner on the $round that his ri$ht to assess and !oe!t the
ta, has pres!ribed. -he &o""issioner appeaed and this &ourt affir"ed the findin$s of
the -a, &ourt in respe!t to the assess"ent for in!o"e ta, for the year 194* but hed
that the ri$ht to assess and !oe!t the ta,es for 1945 and 1943 has not pres!ribed. For
1945 and 1943 the returns were fied on Au$ust 24, 1953< assess"ents for both ta,abe
years were "ade within five years therefro" or on O!tober 19, 1953< and the a!tion to
!oe!t the ta, was fied within five years fro" the atter date, on Au$ust *, 195*. For
ta,abe year 194*, however, the return was fied on Mar!h 1, 194/< the assess"ent was
"ade on O!tober 19, 1953, "ore than five years fro" the date the return was fied<
hen!e, the ri$ht to assess in!o"e ta, for 194* had pres!ribed. A!!ordin$y, =e
re"anded the !ase to the -a, &ourt for further appropriate pro!eedin$s.
1
'n the -a, &ourt, the parties sub"itted the !ase for de!ision without additiona
eviden!e.
On )ove"ber 29, 1933 the &ourt of -a, Appeas rendered ;ud$"ent hodin$
Manue #. Pineda iabe for the pay"ent !orrespondin$ to his share of the foowin$
ta,es4
5efi!ien!y in!o"e ta,
1945 P135./3
1943 433.95
2ea estate
deaer0s fi,ed ta,
4th 8uarter of
1943 and whoe
year of 194* P1/*.51
-he &o""issioner of 'nterna 2evenue has appeaed to >s and has proposed to
hod Manue #. Pineda iabe for the pay"ent of a the ta,es found by the -a, &ourt to
be due fro" the estate in the tota a"ount of P*31.2/ instead of ony for the a"ount of
ta,es !orrespondin$ to his share in the estate.1awphl.nt
Manue #. Pineda opposes the proposition on the $round that as an heir he is
iabe for unpaid in!o"e ta, due the estate ony up to the e,tent of and in proportion to
any share he re!eived. ?e reies on Government of the Philippine Islands v.
Pamintuan
2
where =e hed that :after the partition of an estate, heirs and distributees
are iabe individuay for the pay"ent of a awfu outstandin$ !ai"s a$ainst the estate
in proportion to the a"ount or vaue of the property they have respe!tivey re!eived
fro" the estate.:
=e hod that the @overn"ent !an re8uire Manue #. Pineda to pay the fu
a"ount of the ta,es assessed.
Pineda is iabe for the assess"ent as an heir and as a hoderAtransferee of
property beon$in$ to the estateBta,payer. As an heir he is individuay answerabe for
the part of the ta, proportionate to the share he re!eived fro" the inheritan!e.
3
?is
iabiity, however, !annot e,!eed the a"ount of his share.
4
As a hoder of property beon$in$ to the estate, Pineda is iabe for he ta, up to
the a"ount of the property in his possession. -he reason is that the @overn"ent has a
ien on the P2,511.11 re!eived by hi" fro" the estate as his share in the inheritan!e, for
unpaid in!o"e ta,es
4a
for whi!h said estate is iabe, pursuant to the ast para$raph of
9e!tion 315 of the -a, &ode, whi!h we 8uote hereunder4
'f any person, !orporation, partnership, ;ointAa!!ount (cuenta en
participacion+, asso!iation, or insuran!e !o"pany iabe to pay the in!o"e ta,,
ne$e!ts or refuses to pay the sa"e after de"and, the a"ount sha be a ien in
favor of the @overn"ent of the Phiippines fro" the ti"e when the assess"ent
was "ade by the &o""issioner of 'nterna 2evenue unti paid with interest,
penaties, and !osts that "ay a!!rue in addition thereto upon a property and
ri$hts to property beon$in$ to the ta,payer4 . . .
#y virtue of su!h ien, the @overn"ent has the ri$ht to sub;e!t the property in
Pineda0s possession, i.e., the P2,511.11, to satisfy the in!o"e ta, assess"ent in the
su" of P*31.2/. After su!h pay"ent, Pineda wi have a ri$ht of !ontribution fro" his
!oAheirs,
5
to a!hieve an ad;ust"ent of the proper share of ea!h heir in the distributabe
estate.
A tod, the @overn"ent has two ways of !oe!tin$ the ta, in 8uestion. One, by
$oin$ after a the heirs and !oe!tin$ fro" ea!h one of the" the a"ount of the ta,
proportionate to the inheritan!e re!eived. -his re"edy was adopted in Government of
the Philippine Islands v. Pamintuan, supra. 'n said !ase, the @overn"ent fied an a!tion
a$ainst a the heirs for the !oe!tion of the ta,. -his a!tion rests on the !on!ept that
hereditary property !onsists ony of that part whi!h re"ains after the sette"ent of a
awfu !ai"s a$ainst the estate, for the sette"ent of whi!h the entire estate is first
iabe.
3
-he reason why in !ase suit is fied a$ainst a the heirs the ta, due fro" the
estate is evied proportionatey a$ainst the" is to a!hieve thereby two resuts4 first,
pay"ent of the ta,< and se!ond, ad;ust"ent of the shares of ea!h heir in the distributed
estate as lessened b the ta!.
Another re"edy, pursuant to the ien !reated by 9e!tion 315 of the -a, &ode
upon a property and ri$hts to property beon$in$ to the ta,payer for unpaid in!o"e ta,,
is by sub;e!tin$ said property of the estate whi!h is in the hands of an heir or transferee
to the pay"ent of the ta, due, the estate. -his se!ond re"edy is the very avenue the
@overn"ent tooC in this !ase to !oe!t the ta,. -he #ureau of 'nterna 2evenue shoud
be $iven, in instan!es iCe the !ase at bar, the ne!essary dis!retion to avai itsef of the
"ost e,peditious way to !oe!t the ta, as "ay be envisioned in the parti!uar provision
of the -a, &ode above 8uoted, be!ause ta,es are the ifebood of $overn"ent and their
pro"pt and !ertain avaiabiity is an i"perious need.
*
And as aforeAstated in this !ase
the suit seeCs to a!hieve ony one ob;e!tive4 pay"ent of the ta,. -he ad;ust"ent of the
respe!tive shares due to the heirs fro" the inheritan!e, as essened by the ta,, is eft to
await the suit for !ontribution by the heir fro" who" the @overn"ent re!overed said
ta,.
=?%2%FO2%, the de!ision appeaed fro" is "odified. Manue #. Pineda is
hereby ordered to pay to the &o""issioner of 'nterna 2evenue the su" of P*31.2/ as
defi!ien!y in!o"e ta, for 1945 and 1943, and rea estate deaer0s fi,ed ta, for the fourth
8uarter of 1943 and for the whoe year 194*, without pre;udi!e to his ri$ht of !ontribution
for his !oAheirs. )o !osts. 9o ordered.
2. VERA VS FERNANDEZ 89 S 199
G.R. No. L-31364 M&r-* 30, 1979
MISEL $. !ER, &' Comm+''+o(er o) I(ter(&1 Re2e(3e, &(, /IME RNET, &'
Re4+o(&1 %+re-tor, Re2e(3e Re4+o( No. 14, #3re&3 o) I(ter(&1
Re2e(3e, petitioners,
vs.
5ON. /OSE F. FERNN%E., /3,4e o) t*e Co3rt o) F+r't I('t&(-e o) Ne4ro'
O--+,e(t&1, #r&(-* !, &(, FRNCIS . TONGO6, ,m+(+'tr&tor o) t*e E't&te o)
t*e 1&te L"IS %. TONGO6 respondents.

%E CSTRO, J.:
Appea fro" two orders of the &ourt of First 'nstan!e of )e$ros O!!identa, #ran!h D in
9pe!ia Pro!eedin$s )o. **94, entited4 :'ntestate %state of Euis 5. -on$oy,: the first
dated .uy 29, 1939 dis"issin$ the Motion for Aowan!e of &ai" and for an Order of
Pay"ent of -a,es by the @overn"ent of the 2epubi! of the Phiippines a$ainst the
%state of the ate Euis 5. -on$oy, for defi!ien!y in!o"e ta,es for the years 1933 and
1934 of the de!edent in the tota a"ount of P3,254./1, in!usive 56 sur!har$e, 16
"onthy interest and !o"pro"ise penaties, and the se!ond, dated O!tober *, 1939,
denyin$ the Motion for re!onsideration of the Order of dis"issa.
-he Motion for aowan!e of !ai" and for pay"ent of ta,es dated May 2/, 1939 was
fied on .une 3, 1939 in the above"entioned spe!ia pro!eedin$s, (par. 3, Anne, A,
Petition, pp. 1921, 2oo+. -he !ai" represents the indebtedness to the @overn"ent of
the ate Euis 5. -on$oy for defi!ien!y in!o"e ta,es in the tota su" of P3,254./1 as
above stated, !overed by Assess"ent )oti!es )os. 11A51A29A1A11131A21A33 and 11A51A
291A1 11/*5A34, to whi!h "otion was atta!hed Proof of &ai" (Anne, #, Petition, pp.
21A22, 2oo+. -he Ad"inistrator opposed the "otion soey on the $round that the !ai"
was barred under 9e!tion 5, 2ue /3 of the 2ues of &ourt (par. 4, Opposition to Motion
for Aowan!e of &ai", pp. 23A24, 2oo+. Findin$ the opposition weAfounded, the
respondent .ud$e, .ose F. FernandeF, dis"issed the "otion for aowan!e of !ai" fied
by herein petitioner, 2e$iona 5ire!tor of the #ureau of 'nterna 2evenue, in an order
dated .uy 29, 1939 (Anne, 5, Petition, p. 23, 2oo+. On 9epte"ber 1/, 1939, a "otion
for re!onsideration was fied, of the order of .uy 29, 1939, but was denied in an Order
dated O!tober *, 1939.
?en!e, this appea on !ertiorari, petitioner assi$nin$ the foowin$ errors4
1. -he ower !ourt erred in hodin$ that the !ai" for ta,es by the
$overn"ent a$ainst the estate of Euis 5. -on$oy was fied beyond the
period provided in 9e!tion 2, 2ue /3 of the 2ues of &ourt.
2. -he ower !ourt erred in hodin$ that the !ai" for ta,es of the
$overn"ent was aready barred under 9e!tion 5, 2ue /3 of the 2ues of
&ourt.
whi!h raise the soe issue of whether or not the statute of nonA!ai"s 9e!tion 5, 2ue /3
of the )ew 2ue of &ourt, bars !ai" of the $overn"ent for unpaid ta,es, sti within the
period of i"itation pres!ribed in 9e!tion 331 and 332 of the )ationa 'nterna 2evenue
&ode.
9e!tion 5, 2ue /3, as invoCed by the respondent Ad"inistrator in hid Oppositions to the
Motion for Aowan!e of &ai", et!. of the petitioners reads as foows4
A !ai"s for "oney a$ainst the de!edent, arisin$ fro" !ontra!ts, e,press
or i"pied, whether the sa"e be due, not due, or !ontin$ent, a !ai"s for
funera e,penses and e,penses for the ast si!Cness of the de!edent, and
;ud$"ent for "oney a$ainst the de!edent, "ust be fied within the ti"e
i"ited in they noti!e< otherwise they are barred forever, e,!ept that they
"ay be set forth as !ounter !ai"s in any a!tion that the e,e!utor or
ad"inistrator "ay brin$ a$ainst the !ai"ants. =here the e,e!utor or
ad"inistrator !o""en!e an a!tion, or prose!utes an a!tion aready
!o""en!ed by the de!eased in his ifeti"e, the debtor "ay set forth "ay
answer the !ai"s he has a$ainst the de!edents, instead of presentin$
the" independenty to the !ourt has herein provided, and "utua !ai"s
"ay be set off a$ainst ea!h other in su!h a!tion< and in fina ;ud$"ent is
rendered in favored of the de!edent, the a"ount to deter"ined sha be
!onsidered the true baan!e a$ainst the estate, as thou$h the !ai" has
been presented dire!ty before the !ourt in the ad"inistration pro!eedin$s.
&ai"s not yet due, or !ontin$ent "ay be approved at their present vaue.
A perusa of the afore8uoted provisions shows that it "aCes no "ention of !ai"s for
"onetary obi$ation of the de!edent !reated by aw, su!h as ta,es whi!h is entirey of
different !hara!ter fro" the !ai"s e,pressy enu"erated therein, su!h as4 :a !ai"s
for "oney a$ainst the de!edent arisin$ fro" !ontra!t, e,press or i"pied, whether the
sa"e be due, not due or !ontin$ent, a !ai" for funera e,penses and e,penses for the
ast si!Cness of the de!edent and ;ud$"ent for "oney a$ainst the de!edent.: >nder the
fa"iiar rue of statutory !onstru!tion ofe!pressio unius est e!clusio alterius" the "ention
of one thin$ i"pies the e,!usion of another thin$ not "entioned. -hus, if a statute
enu"erates the thin$s upon whi!h it is to operate, everythin$ ese "ust ne!essariy, and
by i"pi!ation be e,!uded fro" its operation and effe!t (&rawford, 9tatutory
&onstru!tion, pp. 334A335+.
'n the !ase of #ommissioner of Internal $evenue vs. Ila%an &lectric ' Ice Plant" et al.,
@.2. )o. EA231/1, 5e!e"ber 31, 1939, it was hed that the assess"ent, !oe!tion and
re!overy of ta,es, as we as the "atter of pres!ription thereof are $overned by the
provisions of the )ationa 'nterna revenue &ode, parti!uary 9e!tions 331 and 332
thereof, and not by other provisions of aw. (9ee aso Ei" -io, 5y ?en$ and 5ee .ue vs.
&ourt of -a, Appeas G &oe!tor of 'nterna 2evenue, @.2. )o. EA113/1, Mar!h 29,
195/+. %ven without bein$ spe!ifi!ay "entioned, the provisions of 9e!tion 2 of 2ue /3
of the 2ues of &ourt "ay reasonaby be presu"ed to have been aso in the "ind of the
&ourt as not affe!tin$ the afore!ited 9e!tion of the )ationa 'nterna 2evenue &ode.
'n the !ase of Pineda vs. #(I of )aabas" 52 Phi. /13, it was even "ore pointedy hed
that :ta,es assessed a$ainst the estate of a de!eased person ... need not be sub"itted
to the !o""ittee on !ai"s in the ordinary !ourse of ad"inistration. 'n the e,er!ise of its
!ontro over the ad"inistrator, the !ourt "ay dire!t the pay"ent of su!h ta,es upon
"otion showin$ that the ta,es have been assessed a$ainst the estate.: -he aboition of
the &o""ittee on &ai"s does not ater the basi! ruin$ aid down $ivin$ e,!eption to
the !ai" for ta,es fro" bein$ fied as the other !ai"s "entioned in the 2ue shoud be
fied before the &ourt. &ai"s for ta,es "ay be !oe!ted even after the distribution of
the de!edent0s estate a"on$ his heirs who sha be iabe therefor in proportion of their
share in the inheritan!e. (@overn"ent of the Phiippines vs. Pa"intuan, 55 Phi. 13+.
-he reason for the "ore ibera treat"ent of !ai"s for ta,es a$ainst a de!edent0s estate
in the for" of e,!eption fro" the appi!ation of the statute of nonA!ai"s, is not hard to
find. -a,es are the ifebood of the @overn"ent and their pro"pt and !ertain avaiabiity
are i"perious need. (&o""issioner of 'nterna 2evenue vs. Pineda, @. 2. )o. EA22*34,
9epte"ber 15, 193*, 21 9&2A 115+. >pon ta,ation depends the @overn"ent abiity to
serve the peope for whose benefit ta,es are !oe!ted. -o safe$uard su!h interest,
ne$e!t or o"ission of $overn"ent offi!ias entrusted with the !oe!tion of ta,es shoud
not be aowed to brin$ har" or detri"ent to the peope, in the sa"e "anner as private
persons "ay be "ade to suffer individuay on a!!ount of his own ne$i$en!e, the
presu"ption bein$ that they taCe $ood !are of their persona affairs. -his shoud not
hod true to $overn"ent offi!ias with respe!t to "atters not of their own persona
!on!ern. -his is the phiosophy behind the $overn"ent0s e,!eption, as a $enera rue,
fro" the operation of the prin!ipe of estoppe. (2epubi! vs. &abaero, EA2*43*,
9epte"ber 31, 19**, *9 9&2A 1**< Mania Eod$e )o. *31, #enevoent and Prote!tive
Order of the %Cs 'n!. vs. &ourt of Appeas, EA41111, 9epte"ber 31, 19*3, *3 9&2A
132< 9y vs. &entra #anC of the Phiippines, EA414/1, Apri 31,19*3, *1 9&2A 5*1<
#a"a!eda vs. &oro"inas G &o., 'n!., 33 9&2A 553< Auyon$ ?ian vs. &ourt of -a,
Appeas, 59 9&2A 111< 2epubi! vs. Phiippine 2abbit #us Eines, 'n!., 33 9&2A 553<
2epubi! vs. Phiippine Eon$ 5istan!e -eephone &o"pany, EA1//41, .anuary 2*, 1939,
23 9&2A 321< Ha"ora vs. &ourt of -a, Appeas, EA232*2, )ove"ber 23, 19*1, 33
9&2A **< %. 2odri$ueF, 'n!. vs. &oe!tor of 'nterna 2evenue, EA 23141, .uy 31, 1939,
2/ 9&2A 119.+ As aready shown, ta,es "ay be !oe!ted even after the distribution of
the estate of the de!edent a"on$ his heirs (@overn"ent of the Phiippines vs.
Pa"intuan, supra< Pineda vs. &F' of -ayabas, supra &ara 5iuan$!o Paan!a vs.
&o""issioner of 'nterna 2evenue, @. 2. )o. EA13331, .anuary 31, 1932+.
Further"ore, as hed in &o""issioner of 'nterna 2evenue vs. Pineda, supra, !itin$ the
ast para$raph of 9e!tion 315 of the -a, &ode pay"ent of in!o"e ta, sha be a ien in
favor of the @overn"ent of the Phiippines fro" the ti"e the assess"ent was "ade by
the &o""issioner of 'nterna 2evenue unti paid with interests, penaties, et!. #y virtue
of su!h ien, this !ourt hed that the property of the estate aready in the hands of an heir
or transferee "ay be sub;e!t to the pay"ent of the ta, due the estate. * fortiori before
the inheritan!e has passed to the heirs, the unpaid ta,es due the de!edent "ay be
!oe!ted, even without its havin$ been presented under 9e!tion 2 of 2ue /3 of the
2ues of &ourt. 't "ay truy be said that unti the property of the estate of the de!edent
has vested in the heirs, the de!edent, represented by his estate, !ontinues as if he were
sti aive, sub;e!t to the pay"ent of su!h ta,es as woud be !oe!tibe fro" the estate
even after his death. -hus in the !ase above !ited, the in!o"e ta,es sou$ht to be
!oe!ted were due fro" the estate, for the three years 1943, 194* and 194/ foowin$
his death in May, 1945.
%ven assu"in$ ar%uendo that !ai"s for ta,es have to be fied within the ti"e
pres!ribed in 9e!tion 2, 2ue /3 of the 2ues of &ourt, the !ai" in 8uestion "ay be fied
even after the e,piration of the ti"e ori$inay fi,ed therein, as "ay be $eaned fro" the
itai!iFed portion of the 2ue herein !ited whi!h reads4
9e!tion 2. -i"e within whi!h !ai"s sha be fied. A 'n the noti!e provided
in the pre!edin$ se!tion, the !ourt sha state the ti"e for the fiin$ of
!ai"s a$ainst the estate, whi!h sha not be "ore than tweve (12+ nor
ess than si, (3+ "onths after the date of the first pubi!ation of the
noti!e. +owever" at an time before an order of distribution is entered" on
application of a creditor who has failed to file his claim within the time
previousl limited the court ma" for cause shown and on such terms as
are e,uitable" allow such claim to be flied within a time not e!ceedin% one
-1. month. (%"phasis suppied+
'n the instant !ase, petitioners fied an appi!ation (Motion for Aowan!e of &ai" and
for an Order of Pay"ent of -a,es+ whi!h, thou$h fied after the e,piration of the ti"e
previousy i"ited but before an order of the distribution is entered, shoud have been
$ranted by the respondent !ourt, in the absen!e of any vaid $round, as none was
shown, ;ustifyin$ denia of the "otion, spe!iay !onsiderin$ that it was for aowan!e Of
!ai" for ta,es due fro" the estate, whi!h in effe!t represents a !ai" of the peope at
ar$e, the ony reason $iven for the denia that the !ai" was fied out of the previousy
i"ited period, sustainin$ thereby private respondents0 !ontention, erroneousy as has
been de"onstrated.
=?%2%FO2%, the order appeaed fro" is reverse. 9in!e the -a, &o""issioner0s
assess"ent in the tota a"ount of P3,254./1 with 5 6 sur!har$e and 1 6 "onthy
interest as provided in the -a, &ode is a fina one and the respondent estate0s soe
defense of pres!ription has been herein overrued, the Motion for Aowan!e of &ai" is
herein $ranted and respondent estate is ordered to pay and dis!har$e the sa"e,
sub;e!t ony to the i"itation of the interest !oe!tibe thereon as provided by the -a,
&ode. )o pronoun!e"ent as to !osts.
9O O25%2%5.
3. &'2 D9 &-A 234 9&2A 34/
@.2. )o. 113311. .uy 21, 1994.
&OMM'99'O)%2 OF ')-%2)AE 2%D%)>%, Petitioner vs. &O>2- OF APP%AE9,
&'-I-2>9- #A)J')@ &O2PO2A-'O) and &O>2- OF -AK APP%AE9,
2espondents.
5 % & ' 9 ' O )
2%@AEA5O, ..4
-he ;udi!ia pro!eedin$s over the present !ontroversy !o""en!ed with &-A &ase )o.
4199, wherein the &ourt of -a, Appeas ordered herein petitioner &o""issioner of
'nterna
2evenue to $rant a refund to herein private respondent &itytrust #anCin$ &orporation
(&itytrust+
in the a"ount of P13,314,513.14, representin$ its overpaid in!o"e ta,es for 19/4 and
19/5, but
denied its !ai" for the ae$ed refundabe a"ount refe!ted in its 19/3 in!o"e ta,
return on the
$round of pres!ription.(L1+ -hat ;ud$"ent of the ta, !ourt was affir"ed by respondent
&ourt of
Appeas in its ;ud$"ent in &AA@.2. 9P )o. 23/39.(L2+ -he !ase was then eevated to us
in the
present petition for review on !ertiorari wherein the atter ;ud$"ent is i"pu$ned and
sou$ht to
be nuified andBor set aside.
't appears that in a etter dated Au$ust 23, 19/3, herein private respondent !orporation
fied a !ai" for refund with the #ureau of 'nterna 2evenue (#'2+ in the a"ount of
P19,9*1,*45.11 representin$ the ae$ed a$$re$ate of the e,!ess of its !arriedAover
tota
8uartery pay"ents over the a!tua in!o"e ta, due, pus !arriedAover withhodin$ ta,
pay"ents
on $overn"ent se!urities and renta in!o"e, as !o"puted in its fina in!o"e ta, return
for the
!aendar year endin$ 5e!e"ber 31, 19/5.(L3+
-wo days ater, or on Au$ust 2/, 19/3, in order to interrupt the runnin$ of the
pres!riptive
period, &itytrust fied a petition with the &ourt of -a, Appeas, do!Ceted therein as &-A
&ase
)o. 4199, !ai"in$ the refund of its in!o"e ta, overpay"ents for the years 19/3, 19/4
and
19/5 in the tota a"ount of P19,9*1,*45.11.(L4+
'n the answer fied by the Offi!e of the 9oi!itor @enera, for and in behaf of therein
respondent !o""issioner, it was asserted that the "ere aver"ent that &itytrust
in!urred a net
oss in 19/5 does not ipso fa!to "erit a refund< that the a"ounts of P3,311,223.11,
P1,959,514.11 and P2/,23/.11 !ai"ed by &itytrust as 19/3 in!o"e ta, overpay"ent,
ta,es
withhed on pro!eeds of $overn"ent se!urities invest"ents, as we as on renta
in!o"e,
respe!tivey, are not propery do!u"ented< that assu"in$ ar$uendo that petitioner is
entited to
refund, the ri$ht to !ai" the sa"e has pres!ribed with respe!t to in!o"e ta, pay"ents
prior to
Au$ust 2/, 19/4, pursuant to 9e!tions 292 and 295 of the )ationa 'nterna 2evenue
&ode of
19**, as a"ended, sin!e the petition was fied ony on Au$ust 2/, 19/3.(L5+
On February 21, 1991, the !ase was sub"itted for de!ision based soey on the
peadin$s
and eviden!e sub"itted by herein private respondent &itytrust. ?erein petitioner !oud
not
present any eviden!e by reason of the repeated faiure of the -a, &reditB2efund
5ivision of the
#'2 to trans"it the re!ords of the !ase, as we as the investi$ation report thereon, to
the
9oi!itor @enera.(L3+
?owever, on .une 24, 1991, herein petitioner fied with the ta, !ourt a "anifestation and
"otion prayin$ for the suspension of the pro!eedin$s in the said !ase on the $round
that the !ai" of &itytrust for ta, refund in the a"ount of P19,9*1,*45.11 was aready
bein$ pro!essed
by the -a, &reditB2efund 5ivision of the #'2, and that said bureau was ony awaitin$ the
sub"ission by &itytrust of the re8uired !onfir"ation re!eipts whi!h woud show whether
or not
the aforestated a"ount was a!tuay paid and re"itted to the #'2.(L*+
&itytrust fied an opposition thereto, !ontendin$ that sin!e the &ourt of -a, Appeas
aready a!8uired ;urisdi!tion over the !ase, it !oud no on$er be divested of the sa"e<
and,
further, that the pro!eedin$s therein !oud not be suspended by the "ere fa!t that the
!ai" for
refund was bein$ ad"inistrativey pro!essed, espe!iay where the !ase had aready
been
sub"itted for de!ision. 't aso ar$ued that the #'2 had aready !ondu!ted an audit,
!itin$
therefor %,hibits I, IA1, IA2 and IA3 addu!ed in the !ase, whi!h !eary showed that
there was
an overpay"ent of in!o"e ta,es and for whi!h a ta, !redit or refund was due to
&itytrust. -he
fore$oin$ e,hibits are ae$edy !on!usive proof of and an ad"ission by herein
petitioner that
there had been an overpay"ent of in!o"e ta,es. (L/+
-he ta, !ourt denied the "otion to suspend pro!eedin$s on the $round that the !ase
had
aready been sub"itted for de!ision sin!e February 21, 1991. (L9+
-hereafter, said !ourt rendered its de!ision in the !ase, the de!reta portion of whi!h
de!ares4
:=?%2%FO2%, in view of the fore$oin$, petitioner is entited to a refund but
ony for the overpaid ta,es in!urred in 19/4 and 19/5. -he refundabe a"ount as
shown in its 19/3 in!o"e ta, return is hereby denied on the $round of pres!ription.
2espondent is hereby ordered to $rant a refund to petitioner &itytrust #anCin$ &orp.
in the a"ount of P13,314,513.14 representin$ the overpaid in!o"e ta,es for 19/4
and 19/5, re!o"puted as foows4
19/4 'n!o"e ta, due P 4,*15,533.11
Eess4 19/4 Muartery
pay"ents P13,214,599.11L
9/4 -a, &redits A
=B- on int. on
$ov0t. se!. 1,921,245.3*L
=B- on renta
in!. 23,314.31L 1/,132,44/.3*
-a, Overpay"ent (13,443,915.3*+
Eess4 F&5> payabe 151,252.11
A"ount refundabe for 19/4 P(13,293,333.3*+
19/5 'n!o"e ta, due (oss+ P A 1 A
Eess4 =B- on rentas 33,*13.4*L
-a, Overpay"ent (33,*13.4*+L
Eess4 F&5> payabe 1/,/*4.11
A"ount 2efundabe for 19/5 P (1*,/42.4*+
L)ote4
-hese !redits are s"aer than the !ai"ed a"ount be!ause ony the above fi$ures are
we supported by the various
e,hibits presented durin$ the hearin$.
)o pronoun!e"ent as to !osts.
9O O25%2%5.: (L11+
-he order for refund was based on the foowin$ findin$s of the &ourt of -a, Appeas4 (1+
the fa!t of withhodin$ has been estabished by the state"ents and !ertifi!ates of
withhodin$
ta,es a!!o"pished by herein private respondent0s withhodin$ a$ents, the authenti!ity
of whi!h
were neither disputed nor !ontroverted by herein petitioner< (2+ no eviden!e was
presented
whi!h !oud effe!tivey dispute the !orre!tness of the in!o"e ta, return fied by herein
respondent !orporation and other "ateria fa!ts stated therein< (3+ no defi!ien!y
assess"ent
was issued by herein petitioner< and (4+ there was an audit report sub"itted by the #'2
Assess"ent #ran!h, re!o""endin$ the refund of overpaid ta,es for the years
!on!erned
(%,hibits I to IA3+, whi!h en;oys the presu"ption of re$uarity in the perfor"an!e of
offi!ia
duty.(L11+
A "otion for the re!onsideration of said de!ision was initiay fied by the 9oi!itor
@enera
on the soe $round that the state"ents and !ertifi!ates of ta,es ae$edy withhed are
not
!on!usive eviden!e of a!tua pay"ent and re"ittan!e of the ta,es withhed to the #'2.
(L12+ A
suppe"enta "otion for re!onsideration was thereafter fied, wherein it was !ontended
for the
first ti"e that herein private respondent had outstandin$ unpaid defi!ien!y in!o"e
ta,es.
Petitioner ae$ed that throu$h an interAoffi!e "e"orandu" of the -a, &reditB2efund
5ivision,
dated Au$ust /, 1991, he !a"e to Cnow ony atey that &itytrust had outstandin$ ta,
iabiities
for 19/4 in the a"ount of P53,5//,*41.91 representin$ defi!ien!y in!o"e and business
ta,es
!overed by 5e"andAssess"ent )oti!e )o. FA9A1A/4A113291A113293. (L13+
Oppositions to both the basi! and suppe"enta "otions for re!onsideration were fied
by
private respondent &itytrust. (L14+ -hereafter, the &ourt of -a, Appeas issued a
resoution
denyin$ both "otions for the reason that 9e!tion 52 (b+ of the -a, &ode, as
i"pe"ented by
2evenue 2e$uation 3A/5, ony re8uires that the !ai" for ta, !redit or refund "ust show
that
the in!o"e re!eived was de!ared as part of the $ross in!o"e, and that the fa!t of
withhodin$
was duy estabished. Moreover, with re$ard to the ar$u"ent raised in the suppe"enta
"otion
for re!onsideration anent the defi!ien!y ta, assess"ent a$ainst herein petitioner, the
ta, !ourt
rued that sin!e that "atter was not raised in the peadin$s, the sa"e !annot be
!onsidered,
invoCin$ therefor the sautary purpose of the o"nibus "otion rue whi!h is to obviate
"utipi!ity
of "otions and to dis!oura$e diatory peadin$s. (L15+
As indi!ated at the outset, a petition for review was fied by herein petitioner with
respondent &ourt of Appeas whi!h in due !ourse pro"u$ated its de!ision affir"in$ the
;ud$"ent of the &ourt of -a, Appeas. Petitioner eventuay eevated the !ase to this
&ourt,
"aintainin$ that said respondent !ourt erred in affir"in$ the $rant of the !ai" for refund
of
&itytrust, !onsiderin$ that, firsty, said private respondent faied to prove and
substantiate its
!ai" for su!h refund< and, se!ondy, the bureau0s findin$s of defi!ien!y in!o"e and
business
ta, iabiities a$ainst private respondent for the year 19/4 bars su!h pay"ent. (L13+
After a !arefu review of the re!ords, we find that under the pe!uiar !ir!u"stan!es of
this
!ase, the ends of substantia ;usti!e and pubi! interest woud be better subserved by
the
re"and of this !ase to the &ourt of -a, Appeas for further pro!eedin$s. 't is the sense
of this &ourt that the #'2, represented herein by petitioner &o""issioner of
'nterna 2evenue, was denied its day in !ourt by reason of the "istaCes andBor
ne$i$en!e of its
offi!ias and e"poyees. 't !an readiy be $eaned fro" the re!ords that when it was
herein
petitioner0s turn to present eviden!e, severa postpone"ents were sou$ht by its
!ounse, the
9oi!itor @enera, due to the unavaiabiity of the ne!essary re!ords whi!h were not
trans"itted
by the 2efund Audit 5ivision of the #'2 to said !ounse, as we as the investi$ation
report "ade
by the #anCsBFinan!in$ and 'nsuran!e 5ivision of the said bureau, despite repeated
re8uests.
(L1*+ 't was under su!h a predi!a"ent and in deferen!e to the ta, !ourt that uti"atey,
said
re!ords bein$ sti unavaiabe, herein petitioner0s !ounse was !onstrained to sub"it the
!ase
for de!ision on February 21, 1991 without presentin$ any eviden!e.
For that "atter, the #'2 offi!ias andBor e"poyees !on!erned aso faied to heed the
order
of the &ourt of -a, Appeas to re"and the re!ords to it pursuant to 9e!tion 2, 2ue * of
the
2ues of the &ourt of -a, Appeas whi!h provides that the &o""issioner of 'nterna
2evenue
and the &o""issioner of &usto"s sha !ertify and forward to the &ourt of -a, Appeas,
within
ten days after fiin$ his answer, a the re!ords of the !ase in his possession, with the
pa$es duy
nu"bered, and if the re!ords are in separate foders, then the foders sha aso be
nu"bered.
-he aforestated i"passe !a"e about due to the fa!t that, despite the fiin$ of the
afore"entioned initiatory petition in &-A &ase )o. 4199 with the &ourt of -a, Appeas,
the
2efund 5ivision of the #'2 sti !ontinued to a!t ad"inistrativey on the !ai" for refund
previousy fied therein, instead of forwardin$ the re!ords of the !ase to the &ourt of -a,
Appeas as ordered. (L1/+
't is a on$ and fir"y setted rue of aw that the @overn"ent is not bound by the errors
!o""itted by its a$ents. (L19+ 'n the perfor"an!e of its $overn"enta fun!tions, the
9tate
!annot be estopped by the ne$e!t of its a$ent and offi!ers. Athou$h the @overn"ent
"ay
$eneray be estopped throu$h the affir"ative a!ts of pubi! offi!ers a!tin$ within their
authority,
their ne$e!t or o"ission of pubi! duties as e,e"pified in this !ase wi not and shoud
not
produ!e that effe!t.
)owhere is the aforestated rue "ore true than in the fied of ta,ation. (L21+ 't is
a,io"ati!
that the @overn"ent !annot and "ust not be estopped parti!uary in "atters invovin$
ta,es.
-a,es are the ifebood of the nation throu$h whi!h the $overn"ent a$en!ies !ontinue to
operate and with whi!h the 9tate effe!ts its fun!tions for the wefare of its !onstituents.
(L21+
-he errors of !ertain ad"inistrative offi!ers shoud never be aowed to ;eopardiFe the
@overn"ent0s finan!ia position, (L22+ espe!iay in the !ase at bar where the a"ount
invoves
"iions of pesos the !oe!tion whereof, if ;ustified, stands to be pre;udi!ed ;ust be!ause
of
bureau!rati! ethar$y.
Further, it is aso worth notin$ that the &ourt of -a, Appeas erred in denyin$ petitioner0s
suppe"enta "otion for re!onsideration ae$in$ and brin$in$ to said !ourt0s attention
the
e,isten!e of the defi!ien!y in!o"e and business ta, assess"ent a$ainst &itytrust. -he
fa!t of
su!h defi!ien!y assess"ent is inti"atey reated to and ine,tri!aby intertwined with the
ri$ht of
respondent banC to !ai" for a ta, refund for the sa"e year. -o award su!h refund
despite the
e,isten!e of that defi!ien!y assess"ent is an absurdity and a poarity in !on!eptua
effe!ts.
?erein private respondent !annot be entited to refund and at the sa"e ti"e be iabe for
a ta,
defi!ien!y assess"ent for the sa"e year.
-he $rant of a refund is founded on the assu"ption that the ta, return is vaid, that is,
the
fa!ts stated therein are true and !orre!t. -he defi!ien!y assess"ent, athou$h not yet
fina, !reated a doubt as to and !onstitutes a !haen$e a$ainst the truth and a!!ura!y of
the fa!ts
stated in said return whi!h, by itsef and without un8uestionabe eviden!e, !annot be the
basis
for the $rant of the refund.
9e!tion /2, &hapter 'K of the )ationa 'nterna 2evenue &ode of 19**, whi!h was the
appi!abe aw when the !ai" of &itytrust was fied, provides that :(w+hen an
assess"ent is
"ade in !ase of any ist, state"ent, or return, whi!h in the opinion of the &o""issioner
of
'nterna 2evenue was fase or frauduent or !ontained any understate"ent or
undervauation, no
ta, !oe!ted under su!h assess"ent sha be re!overed by any suits uness it is proved
that the
said ist, state"ent, or return was not fase nor frauduent and did not !ontain any
understate"ent or undervauation< but this provision sha not appy to state"ents or
returns
"ade or to be "ade in $ood faith re$ardin$ annua depre!iation of oi or $as wes and
"ines.:
Moreover, to $rant the refund without deter"ination of the proper assess"ent and the
ta,
due woud inevitaby resut in "utipi!ity of pro!eedin$s or suits. 'f the defi!ien!y
assess"ent
shoud subse8uenty be uphed, the @overn"ent wi be for!ed to institute anew a
pro!eedin$
for the re!overy of erroneousy refunded ta,es whi!h re!ourse "ust be fied within the
pres!riptive period of ten years after dis!overy of the fasity, fraud or o"ission in the
fase or
frauduent return invoved. (L23+ -his woud ne!essariy re8uire and entai additiona
efforts and
e,penses on the part of the @overn"ent, i"pose a burden on and a drain of
$overn"ent funds<
and i"pede or deay the !oe!tion of "u!hAneeded revenue for $overn"enta
operations.
-hus, to avoid "utipi!ity of suits and unne!essary diffi!uties or e,penses, it is both
o$i!ay ne!essary and e$ay appropriate that the issue of the defi!ien!y ta,
assess"ent
a$ainst &itytrust be resoved ;ointy with its !ai" for ta, refund, to deter"ine on!e and
for a in
a sin$e pro!eedin$ the true and !orre!t a"ount of ta, due or refundabe.
'n fa!t, as the &ourt of -a, Appeas itsef has heretofore !on!eded,(L24+ it woud be ony
;ust and fair that the ta,payer and the @overn"ent aiCe be $iven e8ua opportunities to
avai of
re"edies under the aw to defeat ea!h other0s !ai" and to deter"ine a "atters of
dispute
between the" in one sin$e !ase. 't is i"portant to note that in deter"inin$ whether or
not
petitioner is entited to the refund of the a"ount paid, it woud be ne!essary to
deter"ine how
"u!h the @overn"ent is entited to !oe!t as ta,es. -his woud ne!essariy in!ude the
deter"ination of the !orre!t iabiity of the ta,payer and, !ertainy, a deter"ination of this
!ase
woud !onstitute res ;udi!ata on both parties as to a the "atters sub;e!t thereof or
ne!essariy
invoved therein.
-he !ourt !annot end this ad;udi!ation without observin$ that what !aused the
@overn"ent to ose its !ase in the ta, !ourt "ay hopefuy be as!ribed "erey to the
ennui or
ineptitude of offi!iado", and not to syndi!ated intent or !orruption. -he evidentia !uA
deAsa! in
whi!h the 9oi!itor @enera found hi"sef on!e a$ain $ives substan!e to the pubi!
per!eption
and suspi!ion that it is another proverbia tip in the i!eber$ of venaity in a $overn"ent
bureau
whi!h is pe;orativey rated over the years. =hat is so distressin$, aside fro" the
finan!ia
osses to the @overn"ent, is the erosion of trust in a vita institution wherein the
reputations of
so "any honest and dedi!ated worCers are bes"ir!hed by the a!ts or o"issions of a
few.
?en!e, the ibera view we have here taCen pro ha! vi!e, whi!h "ay $ive so"e de$ree
of
assuran!e that this &ourt wi unhesitatin$y rea!t to any bane in the $overn"ent
servi!e, with a
repi!ation of su!h responsive bein$ iCewise e,pe!ted by the peope fro" the e,e!utive
authorities.
=?%2%FO2%, the ;ud$"ent of respondent &ourt of Appeas in &AA@.2. 9P )o. 23/39
is hereby 9%- A9'5% and the !ase at bar is 2%MA)5%5 to the &ourt of -a, Appeas
for further
pro!eedin$s and appropriate a!tion, "ore parti!uary, the re!eption of eviden!e for
petitioner
and the !orrespondin$ disposition of &-A &ase )o. 4199 not otherwise in!onsistent
with our
ad;ud$"ent herein.
9O O25%2%5.
4. &OMM'99'O)%2 D9 AE@>% 15/ 9&2A 9
G.R. No. L-27796 Febr3&r8 17, 1977
COMMISSIONER OF INTERNL RE!EN"E, petitioner,
vs.
LG"E, INC., &(, T5E CO"RT OF T9 $$ELS, respondents.
CR"., J.:
-a,es are the ifebood of the $overn"ent and so shoud be !oe!ted without
unne!essary hindran!e On the other hand, su!h !oe!tion shoud be "ade in
a!!ordan!e with aw as any arbitrariness wi ne$ate the very reason for $overn"ent
itsef. 't is therefore ne!essary to re!on!ie the apparenty !onfi!tin$ interests of the
authorities and the ta,payers so that the rea purpose of ta,ation, whi!h is the
pro"otion of the !o""on $ood, "ay be a!hieved.
-he "ain issue in this !ase is whether or not the &oe!tor of 'nterna 2evenue !orre!ty
disaowed the P*5,111.11 dedu!tion !ai"ed by private respondent A$ue as e$iti"ate
business e,penses in its in!o"e ta, returns. -he !oroary issue is whether or not the
appea of the private respondent fro" the de!ision of the &oe!tor of 'nterna 2evenue
was "ade on ti"e and in a!!ordan!e with aw.
=e dea first with the pro!edura 8uestion.
-he re!ord shows that on .anuary 14, 1935, the private respondent, a do"esti!
!orporation en$a$ed in en$ineerin$, !onstru!tion and other aied a!tivities, re!eived a
etter fro" the petitioner assessin$ it in the tota a"ount of P/3,1/3./5 as dein8uen!y
in!o"e ta,es for the years 195/ and 1959.
1
On .anuary 1/, 1935, A$ue fied a etter of
protest or re8uest for re!onsideration, whi!h etter was sta"p re!eived on the sa"e day
in the offi!e of the petitioner.
2
On Mar!h 12, 1935, a warrant of distraint and evy was
presented to the private respondent, throu$h its !ounse, Atty. Aberto @uevara, .r., who
refused to re!eive it on the $round of the pendin$ protest.
3
A sear!h of the protest in
the do!Cets of the !ase proved fruitess. Atty. @uevara produ!ed his fie !opy and $ave
a photostat to #'2 a$ent 2a"on 2eyes, who deferred servi!e of the warrant.
4
On Apri
*, 1935, Atty. @uevara was finay infor"ed that the #'2 was not taCin$ any a!tion on
the protest and it was ony then that he a!!epted the warrant of distraint and evy earier
sou$ht to be served.
5
9i,teen days ater, on Apri 23, 1935, A$ue fied a petition for
review of the de!ision of the &o""issioner of 'nterna 2evenue with the &ourt of -a,
Appeas.
6
-he above !hronoo$y shows that the petition was fied seasonaby. A!!ordin$ to 2ep.
A!t )o. 1125, the appea "ay be "ade within thirty days after re!eipt of the de!ision or
ruin$ !haen$ed.
7
't is true that as a rue the warrant of distraint and evy is :proof of
the finaity of the assess"ent:
7
and renders hopeess a re8uest for
re!onsideration,:
9
bein$ :tanta"ount to an outri$ht denia thereof and "aCes the said
re8uest dee"ed re;e!ted.:
10
#ut there is a spe!ia !ir!u"stan!e in the !ase at bar that
prevents appi!ation of this a!!epted do!trine.
-he proven fa!t is that four days after the private respondent re!eived the petitioner0s
noti!e of assess"ent, it fied its etter of protest. -his was apparenty not taCen into
a!!ount before the warrant of distraint and evy was issued< indeed, su!h protest !oud
not be o!ated in the offi!e of the petitioner. 't was ony after Atty. @uevara $ave the #'2
a !opy of the protest that it was, if at a, !onsidered by the ta, authorities. 5urin$ the
intervenin$ period, the warrant was pre"ature and !oud therefore not be served.
As the &ourt of -a, Appeas !orre!ty noted,:
11
the protest fied by private respondent
was not pro forma and was based on stron$ e$a !onsiderations. 't thus had the effe!t
of suspendin$ on .anuary 1/, 1935, when it was fied, the re$e"entary period whi!h
started on the date the assess"ent was re!eived, viF., .anuary 14, 1935. -he period
started runnin$ a$ain ony on Apri *, 1935, when the private respondent was definitey
infor"ed of the i"pied re;e!tion of the said protest and the warrant was finay served
on it. ?en!e, when the appea was fied on Apri 23, 1935, ony 21 days of the
re$e"entary period had been !onsu"ed.
)ow for the substantive 8uestion.
-he petitioner !ontends that the !ai"ed dedu!tion of P*5,111.11 was propery
disaowed be!ause it was not an ordinary reasonabe or ne!essary business e,pense.
-he &ourt of -a, Appeas had seen it differenty. A$reein$ with A$ue, it hed that the
said a"ount had been e$iti"atey paid by the private respondent for a!tua servi!es
rendered. -he pay"ent was in the for" of pro"otiona fees. -hese were !oe!ted by
the Payees for their worC in the !reation of the De$etabe Oi 'nvest"ent &orporation of
the Phiippines and its subse8uent pur!hase of the properties of the Phiippine 9u$ar
%state 5eveop"ent &o"pany.
Parentheti!ay, it "ay be observed that the petitioner had Ori$inay !ai"ed these
pro"otiona fees to be persona hodin$ !o"pany in!o"e
12
but ater !onfor"ed to the
de!ision of the respondent !ourt re;e!tin$ this assertion.
13
'n fa!t, as the said !ourt
found, the a"ount was earned throu$h the ;oint efforts of the persons a"on$ who" it
was distributed 't has been estabished that the Phiippine 9u$ar %state 5eveop"ent
&o"pany had earier appointed A$ue as its a$ent, authoriFin$ it to se its and,
fa!tories and oi "anufa!turin$ pro!ess. Pursuant to su!h authority, Aberto @uevara,
.r., %duardo @uevara, 'sabe @uevara, %dith, O0Fare, and Pabo 9an!heF, worCed for
the for"ation of the De$etabe Oi 'nvest"ent &orporation, indu!in$ other persons to
invest in it.
14
>ti"atey, after its in!orporation ar$ey throu$h the pro"otion of the said
persons, this new !orporation pur!hased the P9%5& properties.
15
For this sae, A$ue
re!eived as a$ent a !o""ission of P123,111.11, and it was fro" this !o""ission that
the P*5,111.11 pro"otiona fees were paid to the aforena"ed individuas.
16
-here is no dispute that the payees duy reported their respe!tive shares of the fees in
their in!o"e ta, returns and paid the !orrespondin$ ta,es thereon.
17
-he &ourt of -a,
Appeas aso found, after e,a"inin$ the eviden!e, that no distribution of dividends was
invoved.
17
-he petitioner !ai"s that these pay"ents are fi!titious be!ause "ost of the payees are
"e"bers of the sa"e fa"iy in !ontro of A$ue. 't is ar$ued that no indi!ation was "ade
as to how su!h pay"ents were "ade, whether by !he!C or in !ash, and there is not
enou$h substantiation of su!h pay"ents. 'n short, the petitioner su$$ests a ta, dod$e,
an atte"pt to evade a e$iti"ate assess"ent by invovin$ an i"a$inary dedu!tion.
=e find that these suspi!ions were ade8uatey "et by the private respondent when its
President, Aberto @uevara, and the a!!ountant, &e!iia D. de .esus, testified that the
pay"ents were not "ade in one u"p su" but periodi!ay and in different a"ounts as
ea!h payee0s need arose.
19
't shoud be re"e"bered that this was a fa"iy !orporation
where stri!t business pro!edures were not appied and i""ediate issuan!e of re!eipts
was not re8uired. %ven so, at the end of the year, when the booCs were to be !osed,
ea!h payee "ade an a!!ountin$ of a of the fees re!eived by hi" or her, to "aCe up
the tota of P*5,111.11.
20
Ad"ittedy, everythin$ see"ed to be infor"a. -his
arran$e"ent was understandabe, however, in view of the !ose reationship a"on$ the
persons in the fa"iy !orporation.
=e a$ree with the respondent !ourt that the a"ount of the pro"otiona fees was not
e,!essive. -he tota !o""ission paid by the Phiippine 9u$ar %state 5eveop"ent &o.
to the private respondent was P125,111.11.
21
After dedu!tin$ the said fees, A$ue sti
had a baan!e of P51,111.11 as !ear profit fro" the transa!tion. -he a"ount of
P*5,111.11 was 316 of the tota !o""ission. -his was a reasonabe proportion,
!onsiderin$ that it was the payees who did pra!ti!ay everythin$, fro" the for"ation of
the De$etabe Oi 'nvest"ent &orporation to the a!tua pur!hase by it of the 9u$ar
%state properties. -his findin$ of the respondent !ourt is in a!!ord with the foowin$
provision of the -a, &ode4
9%&. 31. /eductions from %ross income.AA'n !o"putin$ net in!o"e there
sha be aowed as dedu!tions N
(a+ %,penses4
(1+ In %eneral.AAA the ordinary and ne!essary e,penses paid or in!urred
durin$ the ta,abe year in !arryin$ on any trade or business, in!udin$ a
reasonabe aowan!e for saaries or other !o"pensation for persona
servi!es a!tuay rendered< ...
22
and 2evenue 2e$uations )o. 2, 9e!tion *1 (1+, readin$ as foows4
9%&. *1. #ompensation for personal services.AAA"on$ the ordinary and
ne!essary e,penses paid or in!urred in !arryin$ on any trade or business
"ay be in!uded a reasonabe aowan!e for saaries or other
!o"pensation for persona servi!es a!tuay rendered. -he test of
dedu!tibiity in the !ase of !o"pensation pay"ents is whether they are
reasonabe and are, in fa!t, pay"ents purey for servi!e. -his test and
dedu!tibiity in the !ase of !o"pensation pay"ents is whether they are
reasonabe and are, in fa!t, pay"ents purey for servi!e. -his test and its
pra!ti!a appi!ation "ay be further stated and iustrated as foows4
Any a"ount paid in the for" of !o"pensation, but not in fa!t as the
pur!hase pri!e of servi!es, is not dedu!tibe. (a+ An ostensibe saary paid
by a !orporation "ay be a distribution of a dividend on sto!C. -his is iCey
to o!!ur in the !ase of a !orporation havin$ few sto!Choders, Pra!ti!ay
a of who" draw saaries. 'f in su!h a !ase the saaries are in e,!ess of
those ordinariy paid for si"iar servi!es, and the e,!essive pay"ent
!orrespond or bear a !ose reationship to the sto!Chodin$s of the offi!ers
of e"poyees, it woud see" iCey that the saaries are not paid whoy for
servi!es rendered, but the e,!essive pay"ents are a distribution of
earnin$s upon the sto!C. . . . (Pro"u$ated Feb. 11, 1931, 31 O.@. )o. 1/,
325.+
't is worth notin$ at this point that "ost of the payees were not in the re$uar e"poy of
A$ue nor were they its !ontroin$ sto!Choders.
23
-he 9oi!itor @enera is !orre!t when he says that the burden is on the ta,payer to
prove the vaidity of the !ai"ed dedu!tion. 'n the present !ase, however, we find that
the onus has been dis!har$ed satisfa!toriy. -he private respondent has proved that the
pay"ent of the fees was ne!essary and reasonabe in the i$ht of the efforts e,erted by
the payees in indu!in$ investors and pro"inent business"en to venture in an
e,peri"enta enterprise and invove the"seves in a new business re8uirin$ "iions of
pesos. -his was no "ean feat and shoud be, as it was, suffi!ienty re!o"pensed.
't is said that ta,es are what we pay for !iviiFation so!iety. =ithout ta,es, the
$overn"ent woud be parayFed for a!C of the "otive power to a!tivate and operate it.
?en!e, despite the natura reu!tan!e to surrender part of one0s hard earned in!o"e to
the ta,in$ authorities, every person who is abe to "ust !ontribute his share in the
runnin$ of the $overn"ent. -he $overn"ent for its part, is e,pe!ted to respond in the
for" of tan$ibe and intan$ibe benefits intended to i"prove the ives of the peope and
enhan!e their "ora and "ateria vaues. -his sy"bioti! reationship is the rationae of
ta,ation and shoud dispe the erroneous notion that it is an arbitrary "ethod of e,a!tion
by those in the seat of power.
#ut even as we !on!ede the inevitabiity and indispensabiity of ta,ation, it is a
re8uire"ent in a de"o!rati! re$i"es that it be e,er!ised reasonaby and in a!!ordan!e
with the pres!ribed pro!edure. 'f it is not, then the ta,payer has a ri$ht to !o"pain and
the !ourts wi then !o"e to his su!!or. For a the aweso"e power of the ta, !oe!tor,
he "ay sti be stopped in his tra!Cs if the ta,payer !an de"onstrate, as it has here, that
the aw has not been observed.
=e hod that the appea of the private respondent fro" the de!ision of the petitioner
was fied on ti"e with the respondent !ourt in a!!ordan!e with 2ep. A!t )o. 1125. And
we aso find that the !ai"ed dedu!tion by the private respondent was per"itted under
the 'nterna 2evenue &ode and shoud therefore not have been disaowed by the
petitioner.
A&&O25')@EI, the appeaed de!ision of the &ourt of -a, Appeas is AFF'2M%5 in
toto" without !osts.
9O O25%2%5.
5. YMCA VS CIR 298 SCRA 83
[G.R. No. 124043. October 14, 1998]
COMMISSIONER OF INTERNAL REEN!E, petitioner, vs. CO!RT OF A""EALS,
CO!RT OF TA# A""EALS $%& 'O!NG MEN(S C)RISTIAN ASSOCIATION
OF T)E ")ILI""INES, INC., respondents.
* E C I S I O N
"ANGANI+AN, J.,
Is the income derived from rentals of real property owned by the Young Mens Christian
Association of the Philippines, Inc. YMCA! " established as #a welfare, educational and
charitable non$profit corporation% $$ sub&ect to income ta' under the (ational Internal )evenue
Code (I)C! and the Constitution*
T-e C$.e
+his is the main ,uestion raised before us in this petition for review
on certiorari challenging two )esolutions issued by the Court of Appeals
-./
on 0eptember 12,
.334
-1/
and 5ebruary 13, .336
-7/
in CA$8) 0P (o. 7199:. ;oth )esolutions affirmed the
<ecision of the Court of +a' Appeals C+A! allowing the YMCA to claim ta' e'emption on the
latters income from the lease of its real property.
T-e F$ct.
+he 5acts are undisputed.
-=/
Private )espondent YMCA is a non$stoc>, non$profit institution,
which conducts various programs and activities that are beneficial to the public, especially the
young people, pursuant to its religious, educational and charitable ob&ectives.
In .329, private respondent earned, among others, an income of P6:6,213.29 from leasing
out a portion of its premises to small shop owners, li>e restaurants and canteen operators,
and P==,143.99 from par>ing fees collected from non$members. ?n @uly 1, .32=, the
commissioner of internal revenue CI)! issued an assessment to private respondent, in the total
amount of P=.4,6.4.9. including surcharge and interest, for deficiency income ta', deficiency
e'panded withholding ta'es on rentals and professional fees and deficiency withholding ta' on
wages. Private respondent formally protested the assessment and, as a supplement to its basic
protest, filed a letter dated ?ctober 2, .324. In reply, the CI) denied the claims of YMCA.
Contesting the denial of its protest, the YMCA filed a petition for review at the Court if +a'
Appeals C+A! on March .=, .323. In due course, the C+A issued this ruling in favor of the
YMCAA
#''' -+/he leasing of private respondents facilities to small shop owners, to restaurant and
canteen operators and the operation of the par>ing lot are reasonably incidental to and reasonably
necessary for the accomplishment of the ob&ectives of the -private respondents/. It appears from
the testimonies of the witnesses for the -private respondent/ particularly Mr. @ames C. <elote,
former accountant of YMCA, that these facilities were leased to members and that they have to
service the needs of its members and their guests. +he )entals were minimal as for e'ample, the
barbershop was only charged P799 per month. Be also testified that there was actually no lot
devoted for par>ing space but the par>ing was done at the sides of the building. +he par>ing was
primarily for members with stic>ers on the windshields of their cars and they charged P.49 for
non$members. +he rentals and par>ing fees were &ust enough to cover the costs of operation and
maintenance only. +he earning-s/ from these rentals and par>ing charges including those from
lodging and other charges for the use of the recreational facilities constitute -the/ bul> of its
income which -is/ channeled to support its many activities and attainment of its ob&ectives. As
pointed out earlier, the membership dues are very insufficient to support its program. Ce find it
reasonably necessary therefore for -private respondent/ to ma>e -the/ most out -of/ its e'isting
facilities to earn some income. It would have been different if under the circumstances, -private
respondent/ will purchase a lot and convert it to a par>ing lot to cater to the needs of the general
public for a fee, or construct a building and lease it out to the highest bidder or at the mar>et rate
for commercial purposes, or should it invest its funds in the buy and sell of properties, real or
personal. Dnder these circumstances, we could conclude that the activities are already profit
oriented, not incidental and reasonably necessary to the pursuit of the ob&ectives of the
association and therefore, will fall under the last paragraph of section 1: of the +a' Code and any
income derived therefrom shall be ta'able.
#Considering our findings that -private respondent/ was not engaged in the business of operating
or contracting -a/ par>ing lot, we find no legal basis also for the imposition of -a/ deficiency
fi'ed ta' and -a/ contractors ta' in the amount-s/ of P747..4 and P7,.13.:7, respectively.
' ' ' ' ' ' ' ' '
#CBE)E5?)E, in view of all the foregoing, the following assessments are hereby dismissed for
lac> of meritA
.329 <eficiency 5i'ed +a' " P747,.4F
.329 <eficiency Contractors +a' " P7,.13.17F
.329 <eficiency Income +a' " P7:1,4:2.19.
Chile the following assessments are hereby sustainedA
.329 <eficiency E'panded Cithholding +a' " P.,:32.37F
.329 <eficiency Cithholding +a' on Cages " P77,942.21
plus .9G surcharge and 19G interest per annum from @uly 1, .32= until fully paid but not to
e'ceed three 7! years pursuant to 0ection 4. e!1! H 7! of the (ational Internal )evenue Code
effective as of .32=.%
-4/
<issatisfied with the C+A ruling, the CI) elevated the case to the Court of Appeals CA!. In
its <ecision of 5ebruary .6, .33=, the CA
-6/
initially decided in favor of the CI) and disposed of
the appeal in the following mannerA
#5ollowing the ruling in the afore$cited cases of Province of Abra vs. Bernando and Abra Ialley
College Inc. vs. A,uino, the ruling of the respondent Court of +a' Appeals that Jthe leasing of
petitioners herein respondent! facilities to small shop owners, to restaurant and canteen
operators and the operation of the par>ing lot are reasonably incidental to and reasonably
necessary for the accomplishment of the ob&ectives of the petitioners,K and the income derived
therefrom are ta' e'empt, must be reversed.
#CBE)E5?)E, the appealed decision is hereby )EIE)0E< in so far as it dismissed the
assessment forA
.329 <eficiency Income +a' P 747..4
.329 <eficiency Contractors +a' P 7,.13.17, H
.329 <eficiency Income +a' P7:1,4:2.19,
but the same is A55I)ME< in all other respect.%
-:/
Aggrieved, the YMCA as>ed for reconsideration based on the following groundsA
I
#+he findings of facts of the Public )espondent Court of +a' Appeals being supported by
substantial evidence -are/ final and conclusive.
II
#+he conclusions of law of -p/ublic -r/espondent e'empting -p/rivate -r/espondent from the
income on rentals of small shops and par>ing fees -are/ in accord with the applicable law
and &urisprudence.%
-2/
5inding merit in the Motion for )econsideration filed by the YMCA, the CA reversed itself
and promulgated on 0eptember 12, .334 its first assailed )esolution which, in part, readsA
#+he Court cannot depart from the C+As findings of fact, as they are supported by evidence
beyond what is considered as substantial.
' ' ' ' ' ' ' ' '
#+he second ground raised is that the respondent C+A did not err in saying that the rental from
small shops and par>ing fees do not result in the loss of the e'emption. (ot even the petitioner
would haLard the suggestion that YMCA is designed for profit. Conse,uently, the little income
from small shops and par>ing fees help-s/ to >eep its head above the water, so to spea>, and
allow it to continue with its laudable wor>.
#+he Court, therefore, finds the second ground of the motion to be meritorious and in accord
with law and &urisprudence.
#CBE)E5?)E, the motion for reconsideration is 8)A(+E<F the respondent C+As decision is
A55I)ME< in toto.%
-3/
+he internal revenue commissioners own Motion for )econsideration was denied by
)espondent Court in its second assailed )esolution of 5ebruary 13, .336. Bence, this petition
for review under )ule =4 of the )ules of Court.
-.9/
T-e I../e.
;efore us, petitioner imputes to the Court of Appeals the following errorsA
I
#In holding that it had departed from the findings of fact of )espondent Court of +a'
Appeals when it rendered its <ecision dated 5ebruary .6, .33=F and
II
#In affirming the conclusion of )espondent Court of +a' Appeals that the income of private
respondent from rentals of small shops and par>ing fees -is/ e'empt from ta'ation.%
-../
T-0. Co/rt(. R/10%2
+he Petition is meritorious.
F0r.t I../e,
Factual Findings of the CTA
Private respondent contends that the 5ebruary .6, .33= CA <ecision reversed the factual
findings of the C+A. ?n the other hand, petitioner argues that the CA merely reversed the
#ruling of the C+A that the leasing of private respondents facilities to small shop owners, to
restaurant and canteen operators and the operation of par>ing lots are reasonably incidental to
and reasonably necessary for the accomplishment of the ob&ectives of the private respondent and
that the income derived therefrom are ta' e'empt.%
-.1/
Petitioner insists that what the appellate
court reversed was the legal conclusion, not the factual finding, of the C+A.
-.7/
+he commissioner
has a point.
Indeed, it is a basic rule in ta'ation that the factual findings of the C+A, when supported by
substantial evidence, will not be disturbed on appeal unless it is shown that the said court
committed gross error in the appreciation of facts.
-.=/
In the present case, this Court finds that the
5ebruary .6, .33= <ecision of the CA did not deviate from this rule. +he latter merely applied
the law to the facts as found by the C+A and ruled on the issue raised by the CI)A #Chether or
not the collection or earnings of rental income from the lease of certain premises and income
earned from par>ing fees shall fall under the last paragraph of 0ection 1: of the (ational Internal
)evenue Code of .3::, as amended.%
-.4/
Clearly, the CA did not alter any fact or evidence. It merely resolved the aforementioned
issue, as indeed it was e'pected to. +hat it did so in a manner different from that of the C+A did
not necessarily imply a reversal of factual findings.
+he distinction between a ,uestion of law and a ,uestion of fact is clear$cut. It has been
held that #-t/here is a ,uestion of law in a given case when the doubt or difference arises as to
what the law is on a certain state of factsF there is a ,uestion of fact when the doubt or difference
arises as to the truth or falsehood of alleged facts.%
-.6/
In the present case, the CA did not doubt,
much less change, the facts narrated by the C+A. It merely applied the law to the facts. +hat its
interpretation or conclusion is different from that of the C+A is not irregular or abnormal.
Seco%& I../e,
Is the Rental Income of the YMCA Taxale!
Ce now come to the crucial issueA Is the rental income of the YMCA from its real estate
sub&ect to ta'* At the outset, we set forth the relevant provision of the (I)CA
#0EC. 1:. Exemptions from tax on corporations. $$ +he following organiLations shall not be
ta'ed under this +itle in respect to income received by them as such $$
' ' ' ' ' ' ' ' '
g! Civic league or organiLation not organiLed for profit but operated e'clusively for the
promotion of social welfareF
h! Club organiLed and operated e'clusively for pleasure, recreation, and other non$profitable
purposes, no part of the net income of which inures to the benefit of any private stoc>holder or
memberF
' ' ' ' ' ' ' ' '
(otwithstanding the provision in the preceding paragraphs, the income of whatever >ind and
character of the foregoing organiLation from any of their properties, real or personal, or from any
of their activities conducted for profit, regardless of the disposition made of such income, shall
be sub&ect to the ta' imposed under this Code. as amended by Pres. <ecree (o. .=4:!%
Petitioners argues that while the income received by the organiLations enumerated in 0ection
1: now 0ection 16! of the (I)C is, as a rule, e'empted from the payment of ta' #in respect to
income received by them as such,% the e'emption does not apply to income derived #''' from
any if their properties, real or personal, or from any of their activities conducted for profit,
regardless, of the disposition made of such income '''.%
Petitioner adds that #rented income derived by a ta'$e'empt organiLation from the lease of
its properties, real or personal, -is/ not, therefore, e'empt from income ta'ation, even if such
income -is/ e'clusively used for the accomplishment of its ob&ectives.%
-.:/
Ce agree with the
commissioner.
;ecause ta'es are the lifeblood of the nation, the Court has always applied the doctrine of
strict interpretation in construing ta' e'emptions.
-.2/
5urthermore, a claim of statutory e'emption
from ta'ation should be manifest and unmista>able from the language of the law on which it is
based. +hus, the claimed e'emption #must e'pressly be granted in a statute stated in a language
too clear to be mista>en.%
-.3/
In the instant case, the e'emption claimed by the YMCA is e'pressly disallowed by the very
wording of the last paragraph of then 0ection 1: of the (I)C which mandates that the income of
e'empt organiLations such as the YMCA! from any of their properties, real or personal, be
sub&ect to the imposed by the same Code. ;ecause the last paragraph of said section
une,uivocally sub&ects to ta' the rent income f the YMCA from its rental property,
-19/
the Court is
duty$bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted
attempt at construction.
It is a'iomatic that where the language of the law is clear and unambiguous, its e'press
terms must be applied.
-1./
Parenthetically, a consideration of the ,uestion of construction must not
even begin, particularly when such ,uestion is on whether to apply a strict construction or a
literal one on statutes that grant ta' e'emptions to #religious, charitable and educational
propert-ies/ or institutions.%
-11/
+he last paragraph of 0ection 1:, the YMCA argues, should be #sub&ect to the ,ualification
that the income from the properties must arise from activities Jconducted for profit before it may
be considered ta'able.%
-17/
+his argument is erroneous. As previously stated, a reading of said
paragraph ineludibly shows that the income from any property of e'empt organiLations, as well
as that arising from any activity it conducts for profit, is ta'able. +he phrase #any of their
activities conducted for profit% does not ,ualify the word #properties.% +his ma>es income from
the property of the organiLation ta'able, regardless of how that income is used $$ whether for
profit or for lofty non$profit purposes.
Verba legis non est recedendum. Bence, )espondent Court of Appeals committed reversible
error when it allowed, on reconsideration, the ta' e'emption claimed by YMCA on income it
derived from renting out its real property, on the solitary but unconvincing ground that the said
income is not collected for profit but is merely incidental to its operation. +he law does not
ma>e a distinction. +he rental income is ta'able regardless of whence such income is derived
and how it used or disposed of. Chere the law does not distinguish, neither should we.
Constitutional "rovisions
on Taxation
Invo>ing not only the (I)C but also the fundamental law, private respondent submits that
Article II, 0ection 12 of par. 7 of the .32: Constitution,
-1=/
e'empts #charitable institutions%
from the payment not only of property ta'es but also of income ta' from any source.
-14/
In
support of its novel theory, it compares the use of the words #charitable institutions,% #actually%
and #directly% in the .3:7 and the .32: Constitutions, on the handF and in Article II 0ection 11,
par. 7 of the .374 Constitution, on the other hand.
-16/
Private respondent enunciates three points. First, the present provision is divisible into two
categoriesA .! #-c/haritable institutions, churches and parsonages or convents appurtenant
thereto, mos,ues and non$profit cemeteries,% the incomes of which are, from whatever source,
all ta'$e'emptF
-1:/
and 1! #-a/ll lands, buildings and improvements actually and directly used for
religious, charitable or educational purposes,% which are e'empt only from property ta'es.
-12/
Second, Lladoc v. Commissioner of Internal Revenue,
-13/
which limited the e'emption only to
the payment of property ta'es, referred to the provision of the .374 Constitution and not to its
counterparts in the .3:7 and the .32: Constitutions.
-79/
Third, the phrase #actually, directly and
e'clusively used for religious, charitable or educational purposes% refers not only to #all lands,
buildings and improvements,% but also to the above$,uoted first category which includes
charitable institutions li>e the private respondent.
-7./
+he Court is not persuaded. +he debates, interpellations and e'pressions of opinion of the
framers of the Constitution reveal their intent which, in turn, may have guided the people in
ratifying the Charter.
-71/
0uch intent must be effectuated.
Accordingly, @ustice Bilario 8. <avide, @r., a former constitutional commissioner, who is
now a member of this Court, stressed during the Concom debates that #''' what is e'empted is
not the institution itself '''F those e'empted from real estate ta'es are lands, buildings and
improvements actually, directly and e'clusively used for religious, charitable or educational
purposes.%
-77/
5ather @oa,uin 8. ;ernas, an eminent authority on the Constitution and also a
member of the Concom, adhered to the same view that the e'emption created by said provision
pertained only to property ta'es.
-7=/
In his treatise on ta'ation, Mr. @ustice @ose C. Iitug concurs, stating that #-t/he ta'
e'emption covers propert ta'es only.M
-74/
Indeed, the income ta' e'emption claimed by private
respondent finds no basis in Article II, 0ection 12, par. 7 of the Constitution.
Private respondent also invo>es Article NII, 0ection =, par. 7 of the Charter,
-76/
claiming that
the YMCA #is a non$stoc>, non$profit educational institution whose revenues and assets are used
actually, directly and e'clusively for educational purposes so it is e'empt from ta'es on its
properties and income.%
-7:/
Ce reiterate that private respondent is e'empt from the payment of
property ta', but not income ta' on the rentals from its property. +he bare allegation alone that it
is a non$stoc>, non$profit educational institution is insufficient to &ustify its e'emption from the
payment of income ta'.
As previously discussed, laws allowing ta' e'emption are construed strictissimi
!uris. Bence, for the YMCA to be granted the e'emption it claims under the aforecited
provision, it must prove with substantial evidence that .! it falls under the classification non"
stoc#$ non"profit educational institutionF and 1! the income it see>s to be e'empted from
ta'ation is used actuall$ directl$ and exclusivel for educational purposes. Bowever, the Court
notes that not a scintilla of evidence was submitted by private respondent to prove that it met the
said re,uisites.
Is the YMCA an educational institution within the purview of Article NII, 0ection =, par.7
of the Constitution* Ce rule that it is not. +he term #educational institution% or #institution of
learning% has ac,uired a well$>nown technical meaning, of which the members of the
Constitutional Commission are deemed cogniLant.
-72/
Dnder the Education Act of .321, such
term refers to schools.
-73/
+he school system is synonymous with formal education,
-=9/
which
#refers to the hierarchically structured and chronological graded learnings organiLed and
provided by the formal school system and for which certification is re,uired in order for the
learner to progress through the grades or move to the higher levels.%
-=./
+he Court has e'amined
the #Amended Articles of Incorporation%
-=1/
and #;y$Oaws%
-=7/
of the YMCA, but found nothing
in them that even hints that it is a school or an educational institution.
-==/
5urthermore, under the Education Act of .321, even non$formal education is understood to
be school$based and #private auspices such as foundations and civic$spirited organiLations% are
ruled out.
-=4/
It is settled that the term #educational institution,% when used in laws granting ta'
e'emptions, refers to a # ''' school seminary, college or educational establishment
'''.%
-=6/
+herefore, the private respondent cannot be deemed one of the educational institutions
covered by the constitutional provision under consideration.
#''' Cords used in the Constitution are to be ta>en in their ordinary acceptation. Chile in its
broadest and best sense education embraces all forms and phrases of instruction, improvement
and development of mind and body, and as well of religious and moral sentiments, yet in the
common understanding and application it means a place where systematic instruction in any or
all of the useful branches of learning is given by methods common to schools and institutions of
learning. +hat we conceive to be the true intent and scope of the term -educational institutions,/
as used in the Constitution.%
-=:/
Moreover, without conceding that Private )espondent YMCA is an educational institution,
the Court also notes that the former did not submit proof of the proportionate amount of the
sub&ect income that was actually, directly and e'clusively used for educational purposes. Article
NIII, 0ection 4 of the YMCA by$laws, which formed part of the evidence submitted, is patently
insufficient, since the same merely signified that #-t/he net income derived from the rentals of
the commercial buildings shall be apportioned to the 5ederation and Member Associations as the
(ational ;oard may decide.%
-=2/
In sum, we find no basis for granting the YMCA e'emption from
income ta' under the constitutional provision invo>ed
Cases Cited # "rivate
Respondent Inapplicale
+he cases
-=3/
relied on by private respondent do not support its cause. %&C' of &anila v.
Collector of Internal Revenue
-49/
and 'bra Valle College$ Inc. v. '(uino
-4./
are not applicable,
because the controversy in both cases involved e'emption from the payment of property ta', not
income ta'. )ospital de San *uan de +ios$ Inc. v. ,asa Cit
-41/
is not in point either, because it
involves a claim for e'emption from the payment of regulatory fees, specifically electrical
inspection fees, imposed by an ordinance of Pasay City $$ an issue not at all related to that
involved in a claimed e'emption from the payment if income ta'es imposed on property
leases. In *esus Sacred )eart College v. Com. -f Internal Revenue,
-47/
the party therein, which
claimed an e'emption from the payment of income ta', was an educational institution which
submitted substantial evidence that the income sub&ect of the controversy had been devoted or
used solely for educational purposes. ?n the other hand, the private respondent in the present
case had not given any proof that it is an educational institution, or that of its rent income is
actually, directly and e'clusively used for educational purposes.
$pilogue
In deliberating on this petition, the Court e'presses its sympathy with private respondent. It
appreciates the nobility its cause. Bowever, the Courts power and function are limited merely to
applying the law fairly and ob&ectively. It cannot change the law or bend it to suit its sympathies
and appreciations. ?therwise, it would be overspilling its role and invading the realm of
legislation.
Ce concede that private respondent deserves the help and the encouragement of the
government. It needs laws that can facilitate, and not frustrate, its humanitarian tas>s. ;ut the
Court regrets that, given its limited constitutional authority, it cannot rule on the wisdom or
propriety of legislation. +hat prerogative belongs to the political departments of
government. Indeed, some of the member of the Court may even believe in the wisdom and
prudence of granting more ta' e'emptions to private respondent. ;ut such belief, however well$
meaning and sincere, cannot bestow upon the Court the power to change or amend the law.
3)EREFORE, the petition is %RA&T$'. +he )esolutions of the Court of Appeals dated
0eptember 12, .334 and 5ebruary 13, .336 are hereby dated 5ebruary .6, .334
is R$($R)$' and )$T A)I'$. +he <ecision of the Court of Appeals dated 5ebruary .6, .334
is R$I&)TAT$'$ insofar as it ruled that the income ta'. (o pronouncement as to costs.
SO OR*ERE*.
6. DAVAO GULF LUMBER CORP VS CIR 293 SCRA 77
:G.R. No. 117359. /318 23, 1997;
%!O G"LF L"M#ER COR$ORTION, petitioner, vs. COMMISSIONER OF
INTERNL RE!EN"E &(, CO"RT OF $$ELS, respondents.
% E C I S I O N
$NGNI#N, J.:
#e!ause ta,es are the ifebood of the nation, statutes that aow e,e"ptions are
!onstrued stri!ty a$ainst the $rantee and iberay in favor of the $overn"ent. Otherwise
stated, any e,e"ption fro" the pay"ent of a ta, "ust be !eary stated in the an$ua$e
of the aw< it !annot be "erey i"pied therefro".
St&teme(t o) t*e C&'e
-his principium is appied by the &ourt in resovin$ this petition for review under
2ue 45 of the 2ues of &ourt, assaiin$ the 5e!ision
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of 2espondent &ourt of
Appeas
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in &AA@2 9P )o. 345/1 dated 9epte"ber 23, 1994, whi!h affir"ed the .une
21, 1994 5e!ision
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of the &ourt of -a, Appeas
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in &-A &ase )o. 35*4. -he
dispositive portion of the &-A 5e!ision affir"ed by 2espondent &ourt reads4
Q=?%2%FO2%, ;ud$"ent is hereby rendered orderin$ the respondent to refund to the
petitioner the a"ount of P2,923.15 representin$ the partia refund of spe!ifi! ta,es paid
on "anufa!tured ois and fues.R
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T*e (te-e,e(t F&-t'
-he fa!ts are undisputed.
O3P
Petitioner is a i!ensed forest !on!essionaire
possessin$ a -i"ber Ei!ense A$ree"ent $ranted by the Ministry of )atura 2esour!es
(now 5epart"ent of %nviron"ent and )atura 2esour!es+. Fro" .uy 1, 19/1 to
.anuary 31, 19/2 petitioner pur!hased, fro" various oi !o"panies, refined and
"anufa!tured "inera ois as we as "otor and diese fues, whi!h it used e,!usivey
for the e,poitation and operation of its forest !on!ession. 9aid oi !o"panies paid the
spe!ifi! ta,es i"posed, under 9e!tions 153 and 153
O*P
of the 19** )ationa 'nterna
2evenue &ode ()'2&+, on the sae of said produ!ts. #ein$ in!uded in the pur!hase
pri!e of the oi produ!ts, the spe!ifi! ta,es paid by the oi !o"panies were eventuay
passed on to the user, the petitioner in this !ase.
On 5e!e"ber 13, 19/2, petitioner fied before 2espondent &o""issioner of
'nterna 2evenue (&'2+ a !ai" for refund in the a"ount
of P121,/25.11, representin$ 256 of the spe!ifi! ta,es a!tuay paid on the aboveA
"entioned fues and ois that were used by petitioner in its operations as forest
!on!essionaire. -he !ai" was based on Insular 0umber #o. vs. #ourt of )a!
*ppeals
O/P
and 9e!tion 5 of 2A 1435 whi!h reads4
Q9e!tion 5. -he pro!eeds of the additiona ta, on "anufa!tured ois sha a!!rue to the
road and brid$e funds of the poiti!a subdivision for whose benefit the ta, is
!oe!ted4 Provided" however, -hat whenever any ois "entioned above are used by
"iners or forest !on!essionaires in their operations, twentyAfive per !entu" of the
spe!ifi! ta, paid thereon sha be refunded by the &oe!tor of 'nterna 2evenue upon
sub"ission of proof of a!tua use of ois and under si"iar !onditions enu"erated in
subpara$raphs one and two of se!tion one hereof, a"endin$ se!tion one hundred fortyA
two of the 'nterna 2evenue &ode4 Provided" further, -hat no new road sha be
!onstru!ted uness the routes or o!ation thereof sha have been approved by the
&o""issioner of Pubi! ?i$hways after a deter"ination that su!h road !an be "ade
part of an inte$ra and arti!uated route in the Phiippine ?i$hway 9yste", as re8uired in
se!tion twentyAsi, of the Phiippine ?i$hway A!t of 1953.R
't is an un8uestioned fa!t that petitioner !o"pied with the pro!edure for refund,
in!udin$ the sub"ission of proof of the a!tua use of the afore"entioned ois in its
forest !on!ession as re8uired by the aboveA8uoted aw. Petitioner, in support of its
!ai" for refund, sub"itted to the &'2 the affidavits of its $enera "ana$er, the president
of the Phiippine =ood Produ!ts Asso!iation, and three disinterested persons, a
attestin$ that the said "anufa!tured diese and fue ois were a!tuay used in the
e,poitation and operation of its forest !on!ession.
On .anuary 21, 19/3, petitioner fied at the &-A a petition for review do!Ceted as
&-A &ase )o. 35*4. On .une 21, 1994, the &-A rendered its de!ision findin$ petitioner
entited to a partia refund of spe!ifi! ta,es the atter had paid in the redu!ed a"ount
of P2,923.15. -he &-A rued that the !ai" on pur!hases of ubri!atin$ oi (fro" .uy 1,
19/1 to .anuary 19, 19/1+, and on "anufa!tured ois other than ubri!atin$ ois (fro"
.uy 1, 19/1 to .anuary 4, 19/1+ had pres!ribed. 5isaowed on the $round that they
were not in!uded in the ori$ina !ai" fied before the &'2 were the !ai"s for refund on
pur!hases of "anufa!tured ois fro" .anuary 1, 19/1 to .une 31, 19/1 and fro"
February 1, 19/2 to .une 31, 19/2. 'n re$ard to the other pur!hases, the &-A $ranted
the !ai", but it !o"puted the refund based on rates dee"ed paid under 2A 1435, and
not on the hi$her rates a!tuay paid by petitioner under the )'2&.
'nsistin$ that the basis for !o"putin$ the refund shoud be the in!reased rates
pres!ribed by 9e!tions 153 and 153 of the )'2&, petitioner eevated the "atter to the
&ourt of Appeas. As noted earier, the &ourt of Appeas affir"ed the &-A
5e!ision. ?en!e, this petition for review.
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$3b1+- Re'po(,e(t<' R31+(4
'n its petition before the &ourt of Appeas, petitioner raised the foowin$ ar$u"ents4
Q'. -he respondent &ourt of -a, Appeas faied to appy the 9upre"e &ourtSs
5e!ision in Insular 0umber #o. v. #ourt of )a! *ppeals whi!h $ranted the !ai" for
partia refund of spe!ifi! ta,es paid by the !ai"ant, without 8uaifi!ation or i"itation.
Q''. -he respondent &ourt of -a, Appeas i$nored the in!rease in rates i"posed by
su!!eedin$ a"endatory aws, under whi!h the petitioner paid the spe!ifi! ta,es on
"anufa!tured and diese fues.
Q'''. 'n its de!ision, the respondent &ourt of -a, Appeas rued !ontrary to estabished
tenets of aw when it ent itsef to interpretin$ 9e!tion 5 of 2.A. 1435, when the
!onstru!tion of said aw is not ne!essary.
Q'D. 9e!tions 1 and 2 of 2.A. 1435 are not the operative provisions to be appied but
rather, 9e!tions 153 and 153 of the )ationa 'nterna 2evenue &ode, as a"ended.
QD. -o rue that the basis for !o"putation of the refunded ta,es shoud be 9e!tions 1
and 2 of 2.A. 1435 rather than 9e!tion 153 and 153 of the )ationa 'nterna 2evenue
&ode is unfair, erroneous, arbitrary, ine8uitabe and oppressive.R
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-he &ourt of Appeas hed that the !ai" for refund shoud indeed be !o"puted on
the basis of the a"ounts dee"ed paid under 9e!tions 1 and 2 of 2A 1435. 'n so ruin$,
it !ited our pronoun!e"ent in #ommissioner of Internal $evenue v. $io )uba 1ic2el
Minin% #orporation
O11P
and our subse8uent 2esoution dated .une 15, 1992 !arifyin$ the
said 5e!ision. 2espondent &ourt further rued that the !ai"s for refund whi!h
pres!ribed and those whi!h were not fied at the ad"inistrative eve "ust be e,!uded.
T*e I''3e
'n its Me"orandu", petitioner raises one !riti!a issue4
Q=hether or not petitioner is entited under 2epubi! A!t )o. 1435 to the refund of 256
of the a"ount of spe!ifi! ta,es it a!tuay paid on various refined and "anufa!tured
"inera ois and other oi produ!ts ta,ed under 9e!. 153 and 9e!. 153 of the 19** (9e!.
142 and 9e!. 145 of the 1939+ )ationa 'nterna 2evenue &ode.R
O12P
'n the "ain, the 8uestion before us pertains ony to the !o"putation of the ta,
refund. Petitioner ar$ues that the refund shoud be based on the in!reased rates of
spe!ifi! ta,es whi!h it a!tuay paid, as pres!ribed in 9e!tions 153 and 153 of the
)'2&. Pubi! respondent, on the other hand, !ontends that it shoud be based on
spe!ifi! ta,es dee"ed paid under 9e!tions 1 and 2 of 2A 1435.
T*e Co3rt<' R31+(4
-he petition is not "eritorious.
Petitioner Entitled to Refund
Under Sec. 5 of RA 1435
At the outset, it "ust be stressed that petitioner is entited to a partia refund under
9e!tion 5 of 2A 1435, whi!h was ena!ted to provide "eans for in!reasin$ the ?i$hway
9pe!ia Fund.
-he rationae for this $rant of partia refund of spe!ifi! ta,es paid on pur!hases of
"anufa!tured diese and fue ois rests on the !hara!ter of the ?i$hway 9pe!ia
Fund. -he spe!ifi! ta,es !oe!ted on $asoine and fue a!!rue to the Fund, whi!h is to
be used for the !onstru!tion and "aintenan!e of the hi$hway syste". #ut be!ause the
$asoine and fue pur!hased by "inin$ and u"ber !on!essionaires are used within
their own !o"pounds and roads, and their vehi!es sedo" use the nationa hi$hways,
they do not dire!ty benefit fro" the Fund and its use. ?en!e, the ta, refund $ives the
"inin$ and the o$$in$ !o"panies a "easure of reief in i$ht of their pe!uiar situation.
O13P
=hen the ?i$hway 9pe!ia Fund was aboished in 19/5, the reason for the refund
iCewise !eased to e,ist.
O14P
9in!e petitioner pur!hased the sub;e!t "anufa!tured diese
and fue ois fro" .uy 1, 19/1 to .anuary 31, 19/2 and sub"itted the re8uired proof
that these were a!tuay used in operatin$ its forest !on!ession, it is entited to !ai"
the refund under 9e!tion 5 of 2A 1435.
Ta Refund Strictl! "onstrued
A#ainst t$e %rantee
Petitioner sub"its that it is entited to the refund of 25 per!ent of the spe!ifi! ta,es it
had a!tuay paid for the petroeu" produ!ts used in its operations. 'n other words, it
!ai"s a refund based on the in!reased rates under 9e!tions 153 and 153 of the )'2&.
O15P
Petitioner ar$ues that the statutory $rant of the refund privie$e, spe!ifi!ay the
phrase QtwentyAfive per !entu" of the spe!ifi! ta, paid thereon sha be refunded by
the &oe!tor of 'nterna 2evenue,R is Q!ear and una"bi$uousR enou$h to re8uire
!onstru!tion or 8uaifi!ation thereof.
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'n addition, it !ites our pronoun!e"ent in Insular
0umber vs. #ourt of )a! *ppeals3
O1*P
Q, , , 9e!tion 5 Oof 2A 1435P "aCes referen!e to subpara$raphs 1 and 2 of 9e!tion 1
ony for the purpose of pres!ribin$ the pro!edure for refund. -his e,press referen!e
!annot be e,panded in s!ope to in!ude the i"itation of the period of refund. 'f the
i"itation of the period of refund of spe!ifi! ta,es paid on ois used in aviation and
a$ri!uture is intended to !over si"iar ta,es paid on oi used by "iners and forest
!on!essionaires, there woud have been no need of deain$ with oi used by "iners and
forest !on!essions separatey and 9e!tion 5 woud very we have been in!uded in
9e!tion 1 of 2epubi! A!t )o. 1435, notwithstandin$ the different rate of e,e"ption.R
Petitioner then reasons that Qthe e,press "ention of 9e!tion 1 of 2A 1435 in
9e!tion 5 !annot be e,panded to in!ude a i"itation on the ta, rates to be appied , , ,
Ootherwise,P 9e!tion 5 shoud very we have been in!uded in 9e!tion 1 , , ,.R
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-he &ourt is not persuaded. -he reevant statutory provisions do not !eary
support petitionerSs !ai" for refund. 2A 1435 provides4
Q9%&-'O) 1. 9e!tion one hundred and fortyAtwo of the )ationa 'nterna
2evenue &ode, as a"ended, is further a"ended to read as foows4
Q9%&. 142. Specific ta! on manufactured oils and other fuels. 44 On refined and
"anufa!tured "inera ois and "otor fues, there sha be !oe!ted the foowin$ ta,es4
Q(a+ Jerosene or petroeu", per iter of vou"e !apa!ity, two and oneAhaf !entavos<
Q(b+ Eubri!atin$ ois, per iter of vou"e !apa!ity, seven !entavos<
Q(!+ )aptha, $asoine, and a other si"iar produ!ts of distiation, per iter of vou"e
!apa!ity, ei$ht !entavos< and
Q(d+ On denatured a!oho to be used for "otive power, per iter of vou"e !apa!ity, one
!entavo4 Provided" -hat if the denatured a!oho is "i,ed with $asoine, the spe!ifi! ta,
on whi!h has aready been paid, ony the a!oho !ontent sha be sub;e!t to the ta,
herein pres!ribed. For the purpose of this subse!tion, the re"ova of denatured a!oho
of not ess than one hundred ei$hty de$rees proof (ninety per centum absoute a!oho+
sha be dee"ed to have been re"oved for "otive power, uness shown to the !ontrary.
Q=henever any of the ois "entioned above are, durin$ the five years fro" .une
ei$hteen, nineteen hundred and fifty two, used in a$ri!uture and aviation, fifty per
centum of the spe!ifi! ta, paid thereon sha be refunded by the &oe!tor of 'nterna
2evenue upon the sub"ission of the foowin$4
Q(1+ A sworn affidavit of the produ!er and two disinterested persons provin$ that
the said ois were a!tuay used in a$ri!uture, or in ieu thereof
Q(2+ 9houd the produ!er beon$ to any produ!ersS asso!iation or federation, duy
re$istered with the 9e!urities and %,!han$e &o""ission, the affidavit of the president
of the asso!iation or federation, attestin$ to the fa!t that the ois were a!tuay used in
a$ri!uture.
Q(3+ 'n the !ase of aviation ois, a sworn !ertifi!ate satisfa!tory to the &oe!tor
provin$ that the said ois were a!tuay used in aviation4 Provided" -hat no su!h refunds
sha be $ranted in respe!t to the ois used in aviation by !itiFens and !orporations of
forei$n !ountries whi!h do not $rant e8uivaent refunds or e,e"ptions in respe!t to
si"iar ois used in aviation by !itiFens and !orporations of the Phiippines.R
9%&. 2. 9e!tion one hundred and fortyAfive of the )ationa 'nterna 2evenue &ode, as
a"ended, is further a"ended to read as foows4
Q9%&. 145. Specific )a! on /iesel fuel oil. 44 On fue oi, !o""er!iay Cnown as diese
fue oi, and on a si"iar fue ois, havin$ "ore or ess the sa"e $eneratin$ power,
there sha be !oe!ted, per "etri! ton, one peso.R
, , , , , , , , ,
9e!tion 5. -he pro!eeds of the additiona ta, on "anufa!tured ois sha a!!rue to the
road and brid$e funds of the poiti!a subdivision for whose benefit the ta, is
!oe!ted4 Provided" however, -hat whenever any ois "entioned above are used by
"iners or forest !on!essionaires in their operations, twentyAfive per !entu" of the
spe!ifi! ta, paid thereon sha be refunded by the &oe!tor of 'nterna 2evenue upon
sub"ission of proof of a!tua use of ois and under si"iar !onditions enu"erated in
subpara$raphs one and two of se!tion one hereof, a"endin$ se!tion one hundred fortyA
two of the 'nterna 2evenue &ode4 Provided" further, -hat no new road sha be
!onstru!ted uness the route or o!ation thereof sha have been approved by the
&o""issioner of Pubi! ?i$hways after a deter"ination that su!h road !an be "ade
part of an inte$ra and arti!uated route in the Phiippine ?i$hway 9yste", as re8uired in
se!tion twentyAsi, of the Phiippine ?i$hway A!t of 1953.R
9ubse8uenty, the 19** )'2&, P5 13*2 and %O 3*2 a"ended the first two
provisions, renu"berin$ the" and pres!ribin$ hi$her rates. A!!ordin$y, petitioner paid
spe!ifi! ta,es on petroeu" produ!ts pur!hased fro" .uy 1, 19/1 to .anuary 31, 19/2
under the foowin$ statutory provisions.
Fro" February /, 19/1 to Mar!h 21, 19/1, 9e!tions 153 and 153 provided as
foows4
Q9%&. 153. Specific ta! on manufactured oils and other fuels. 44 On refined and
"anufa!tured "inera ois and "otor fues, there sha be !oe!ted the foowin$ ta,es
whi!h sha atta!h to the arti!es hereunder enu"erated as soon as they are in
e,isten!e as su!h4
Q(a+ Jerosene, per iter of vou"e !apa!ity, seven !entavos<
Q(b+ Eubri!atin$ ois, per iter of vou"e !apa!ity, ei$hty !entavos<
Q(!+ )aphtha, $asoine and a other si"iar produ!ts of distiation, per iter of
vou"e !apa!ity, ninetyAone !entavos4 Provided" )hat" on pre"iu" and aviation
$asoine, the ta, sha be one peso per iter of vou"e !apa!ity<
Q(d+ On denatured a!oho to be used for "otive power, per iter of vou"e !apa!ity,
one !entavo4 Provided" )hat" uness otherwise provided for by spe!ia aws, if the
denatured a!oho is "i,ed with $asoine, the spe!ifi! ta, on whi!h has aready been
paid, ony the a!oho !ontent sha be sub;e!t to the ta, herein pres!ribed. For the
purposes of this subse!tion, the re"ova of denatured a!oho of not ess than one
hundred ei$hty de$rees proof (ninety per !entu" absoute a!oho+ sha be dee"ed to
have been re"oved for "otive power, uness shown to the !ontrary<
Q(e+ Pro!essed $as, per iter of vou"e !apa!ity, three !entavos<
Q(f+ -hinners and sovents, per iter of vou"e !apa!ity, fiftyAseven !entavos<
Q($+ Ei8uefied petroeu" $as, per Cio$ra", fourteen !entavos4 Provided"
)hat" i8uefied petroeu" $as used for "otive power sha be ta,ed at the e8uivaent
rate as the spe!ifi! ta, on diese fue oi<
Q(h+ Asphats, per Cio$ra", ei$ht !entavos<
Q(i+ @reases, wa,es and petroatu", per Cio$ra", fifty !entavos<
Q(;+ Aviation turbo ;et fue, per iter of vou"e !apa!ity, fiftyAfive !entavos.R (As
a"ended by 9e!. 1, P.5. )o. 13*2.+
, , , , , , , , ,
Q9%&. 153. Specific ta! on diesel fuel oil. 44 On fue oi, !o""er!iay Cnown as diese
fue oi, and on a si"iar fue ois, havin$ "ore or ess the sa"e $eneratin$ power, per
iter of vou"e !apa!ity, seventeen and oneAhaf !entavos, whi!h ta, sha atta!h to this
fue oi as soon as it is in e,isten!e as su!h.:
-hen on Mar!h 21, 19/1, these provisions were a"ended by %O 3*2 to read4
Q9%&. 153. Specific ta! on manufactured oils and other fuels. 44 On refined and
"anufa!tured "inera ois and "otor fues, there sha be !oe!ted the foowin$ ta,es
whi!h sha atta!h to the arti!es hereunder enu"erated as soon as they are in
e,isten!e as su!h4
Q(a+ Jerosene, per iter of vou"e !apa!ity, nine !entavos<
Q(b+ Eubri!atin$ ois, per iter of vou"e !apa!ity, ei$hty !entavos<
Q(!+ )aphtha, $asoine and a other si"iar produ!ts of distiation, per iter of
vou"e !apa!ity, one peso and si, !entavos4 Provided" -hat on pre"iu" and aviation
$asoine, the ta, sha be one peso and ten !entavos and one peso, respe!tivey, per
iter of vou"e !apa!ity<
Q(d+ On denatured a!oho to be used for "otive power, per iter of vou"e !apa!ity,
one !entavo< Provided" -hat uness otherwise provided for by spe!ia aws, if the
denatured a!oho is "i,ed with $asoine, the spe!ifi! ta, on whi!h has aready been
paid, ony the a!oho !ontent sha be sub;e!t to the ta, herein pres!ribed. For the
purpose of this subse!tion, the re"ova of denatured a!oho of not ess than one
hundred ei$hty de$rees proof (ninety per centum absoute a!oho+ sha be dee"ed to
have been re"oved for "otive power, uness shown to the !ontrary<
Q(e+ Pro!essed $as, per iter of vou"e !apa!ity, three !entavos<
Q(f+ -hinners and sovents, per iter of vou"e !apa!ity, si,tyAone !entavos<
Q($+ Ei8uefied petroeu" $as, per Cio$ra", twentyAone
!entavos4 Provided" -hat, i8uified petroeu" $as used for "otive power sha be ta,ed
at the e8uivaent rate as the spe!ifi! ta, on diese fue oi<
Q(h+ Asphats, per Cio$ra", tweve !entavos<
Q(i+ @reases, wa,es and petroatu", per Cio$ra", fifty !entavos<
Q(;+ Aviation turboA;et fue, per iter of vou"e !apa!ity, si,tyAfour !entavos.R
, , , , , , , , ,
Q9%&. 153. Specific ta! on diesel fuel oil. 44 On fue oi, !o""er!iay Cnown as diese
fue oi, and a si"iar fue ois, havin$ "ore or ess the sa"e $eneratin$ power, per iter
of vou"e !apa!ity, twentyAfive and oneAhaf !entavos, whi!h ta, sha atta!h to this fue
oi as soon as it is in e,isten!e as su!h.R
A ta, !annot be i"posed uness it is supported by the !ear and e,press an$ua$e
of a statute<
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on the other hand, on!e the ta, is un8uestionaby i"posed, QOaP !ai" of
e,e"ption fro" ta, pay"ents "ust be !eary shown and based on an$ua$e in the aw
too pain to be "istaCen.R
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9in!e the partia refund authoriFed under 9e!tion 5, 2A
1435, is in the nature of a ta, e,e"ption,
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it "ust be
!onstrued strictissimi 5uris a$ainst the $rantee. ?en!e, petitionerSs !ai" of refund on
the basis of the spe!ifi! ta,es it a!tuay paid "ust e,pressy be $ranted in a statute
stated in a an$ua$e too !ear to be "istaCen.
=e have !arefuy s!rutiniFed 2A 1435 and the subse8uent pertinent statutes and
found no e,pression of a e$isative wi authoriFin$ a refund based on the hi$her rates
!ai"ed by petitioner. -he "ere fa!t that the privie$e of refund was in!uded in 9e!tion
5, and not in 9e!tion 1, is insuffi!ient to support petitionerSs !ai". =hen the aw itsef
does not e,pi!ity provide that a refund under 2A 1435 "ay be based on hi$her rates
whi!h were none,istent at the ti"e of its ena!t"ent, this &ourt !annot presu"e
otherwise. A e$isative a!una !annot be fied by ;udi!ia fiat.
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-he issue is not reay nove. 'n #ommissioner of Internal $evenue vs. #ourt of
*ppeals and *tlas #onsolidated Minin% and /evelopment #orporation
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(the se!ond
Atas !ase+, the &'2 !ontended that the refund shoud be based on 9e!tions 1 and 2 of
2A 1435, not 9e!tions 153 and 153 of the )'2& of 19**. 'n !ate$ori!ay ruin$ that
Private 2espondent Atas &onsoidated Minin$ and 5eveop"ent &orporation was
entited to a refund based on 9e!tions 1 and 2 of 2A 1435, the &ourt, throu$h Mr.
.usti!e ?iario @. 5avide, .r., reiterated our pronoun!e"ent in#ommissioner of Internal
$evenue vs. $io )uba 1ic2el and Minin% #orporation4
QOur 2esoution of 25 Mar!h 1992 "odifyin$ our 31 9epte"ber 1991 5e!ision in
the $io )uba !ase sets forth the !ontroin$ do!trine. 'n that 2esoution, we stated4
T9in!e the private respondentSs !ai" for refund !overs spe!ifi! ta,es paid fro" 19/1 to
.uy 19/3 then we find that the private respondent is entited to a refund. 't shoud be
"ade !ear, however, that 2io -uba is not entited to the whoe a"ount it !ai"s as
refund.
-he spe!ifi! ta,es on ois whi!h 2io -uba paid for the aforesaid period were no on$er
based on the rates spe!ified by 9e!tions 1 and 2 of 2.A. )o. 1435 but on the in!reased
rates "andated under 9e!tions 153 and 153 of the )ationa 'nterna 2evenue &ode of
19**. =e note however, that the atter aw does not spe!ifi!ay provide for a refund to
these "inin$ and u"ber !o"panies of spe!ifi! ta,es paid on "anufa!tured and diese
fue ois.
'n Insular 0umber #o. v. #ourt of )a! *ppeals" (114 9&2A *11 O19/1P+, the &ourt hed
that the authoriFed partia refund under 9e!tion 5 of 2.A. )o. 1435 partaCes of the
nature of a ta, e,e"ption and therefore !annot be aowed uness $ranted in the "ost
e,pi!it and !ate$ori!a an$ua$e. 9in!e the $rant of refund privie$es "ust be stri!ty
!onstrued a$ainst the ta,payer, the basis for the refund sha be the a"ounts dee"ed
paid under 9e!tions 1 and 2 of 2.A. )o. 1435.
A&&O25')@EI, the de!ision in @.2. )os. /35/3A/4 is hereby MO5'F'%5. -he private
respondentSs &EA'M for 2%F>)5 is @2A)-%5, !o"puted on the basis of the a"ounts
dee"ed paid under 9e!tions 1 and 2 of 2.A. )O. 1435, without interest.S
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=e rue, therefore, that sin!e AtasSs !ai"s for refund !over spe!ifi! ta,es paid before
19/5, it shoud be $ranted the refund based on the rates spe!ified by 9e!tions 1 and 2
of 2.A. )o. 1435 and not on the in!reased rates under 9e!tions 153 and 153 of the -a,
&ode of 19**, provided the !ai"s are not yet barred by pres!ription.R (>nders!orin$
suppied.+
I('31&r L3mber Co. and &irst Atlas "ase 'ot
(nconsistent )it$ R+o T3b&
&(, Second Atlas "ase
Petitioner ar$ues that the appi!abe ;urispruden!e in this !ase shoud
be #ommissioner of Internal $evenue vs. *tlas #onsolidated and Minin% #orp. (the first
Atas !ase+, an unsi$ned resoution, and Insular 0umber #o. vs. #ourt of )a!
*ppeals" an en banc de!ision.
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Petitioner aso asCs the &ourt to taCe a Qse!ond ooCR
at $io )uba and the se!ond Atas !ase, both de!ided by 5ivisions, in view
of Insular whi!h was de!ided en banc. Petitioner posits that QO'Pn view of the si"iarity of
the situation of herein petitioner with 'nsuar Eu"ber &o"pany (!ai"ant in Insular
0umber+ and 2io -uba )i!Ce Minin$ &orporation (!ai"ant in $io )uba+, a dilemma has
been !reated as to whether or not Insular 0umber, whi!h has been de!ided by the
?onorabe &ourt en banc, or $io )uba, whi!h was de!ided ony ObyP the -hird 5ivision of
the ?onorabe &ourt, shoud appy.R
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=e find no !onfi!t between these two pairs of !ases. )either Insular 0umber
#o. nor the first Atas !ase rued on the issue of whether the
refund privie$e under 9e!tion 5 shoud be !o"puted based on the spe!ifi! ta,
dee"ed paid under 9e!tions 1 and 2 of 2A 1435, re$ardess of what was a!tuay paid
under the in!reased rates. $io )uba and the se!ond Atas !ase did.
Insular 0umber #o. de!ided a !ai" for refund on spe!ifi! ta, paid on petroeu"
produ!ts pur!hased in the year 1933, when the in!reased rates under the )'2& of 19**
were not yet in effe!t. -hus, the issue now before us did not e,ist at the ti"e, sin!e the
appi!abe rates were sti those pres!ribed under 9e!tions 1 and 2 of 2A 1435.
On the other hand, the issue raised in the first Atas !ase was whether the !ai"ant
was entited to the refund under 9e!tion 5, notwithstandin$ its faiure to pay any
additiona ta, under a "uni!ipa or !ity ordinan!e. Athou$h Atas pur!hased petroeu"
produ!ts in the years 19*3 to 19*/ when the rates had aready been !han$ed, the
&ourt did not de!ide or "aCe any pronoun!e"ent on the issue in that !ase.
&eary, it is i"possibe for these two de!isions to !ash with our pronoun!e"ent
in $io )uba and se!ond Atas !ase, in whi!h we rued that the refund $ranted be
!o"puted on the basis of the a"ounts dee"ed paid under 9e!tions 1 and 2 of 2A
1435. 'n this i$ht, we find no basis for petitionerSs invo!ation of the !onstitutiona
pros!ription that Qno do!trine or prin!ipe of aw aid down by the &ourt in a de!ision
rendered en banc or in division "ay be "odified or reversed e,!ept by the &ourt
sittin$ en banc.R
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Finay, petitioner asserts that Qe8uity and ;usti!e de"and that the !o"putation of
the ta, refunds be based on a!tua a"ounts paid under 9e!tions 153 and 153 of the
)'2&.R
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=e disa$ree. A!!ordin$ to an e"inent authority on ta,ation, Qthere is no ta,
e,e"ption soey on the $round of e8uity.R
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=5EREFORE, the petition is hereby 5%)'%5 and the assaied 5e!ision of the
&ourt of Appeas is AFF'2M%5.
SO OR%ERE%.
7. MARCOS II VS CA 273 SCRA 47
:G.R. No. 120770. /3(e 5, 1997;
FER%INN% R. MRCOS II, petitioner, vs. CO"RT OF $$ELS, T5E
COMMISSIONER OF T5E #"RE" OF INTERNL RE!EN"E &(, 5ERMINI
%. %E G".MN, respondents.
% E C I S I O N
TORRES, /R., J.>
'n this Petition for 2eview on #ertiorari" @overn"ent a!tion is on!e a$ain assaied
as pre!ipitate and unfair, sufferin$ the basi! and ofty i"pored re8uisites of due pro!ess
of aw. 9pe!ifi!ay, the petition assais the 5e!ision
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of the &ourt of Appeas dated
)ove"ber 29, 1994 in &AA@.2. 9P )o. 31333, where the said !ourt hed4
MIn view of all the foregoing, we rule that the deficiency income ta' assessments and estate ta'
assessment, are already final and u!nappealable $and$ the subse,uent levy of real properties is a
ta' remedy resorted to by the government, sanctioned by 0ection 1.7 and 1.2 of the (ational
Internal )evenue Code. +his summary ta' remedy is distinct and separate from the other ta'
remedies such as @udicial Civil actions and Criminal actions!, and is not affected or precluded
by the pendency of any other ta' remedies instituted by the government.
CBE)E5?)E, premises considered, &udgment is hereby rendered <I0MI00I(8 the petition for
certiorari with prayer for )estraining ?rder and In&unction.
(o pronouncements as to costs.
0? ?)<E)E<.M
More than seven years sin!e the de"ise of the ate Ferdinand %. Mar!os, the
for"er President of the 2epubi! of the Phiippines, the "atter of the sette"ent of his
estate, and its dues to the $overn"ent in estate ta,es, are sti unresoved, the atter
issue bein$ now before this &ourt for resoution. 9pe!ifi!ay, petitioner Ferdinand 2.
Mar!os '', the edest son of the de!edent, 8uestions the a!tuations of the respondent
&o""issioner of 'nterna 2evenue in assessin$, and !oe!tin$ throu$h the su""ary
re"edy of Eevy on 2ea Properties, estate and in!o"e ta, dein8uen!ies upon the
estate and properties of his father, despite the penden!y of the pro!eedin$s on probate
of the wi of the ate president, whi!h is do!Ceted as 9p. Pro!. )o. 112*9 in the
2e$iona -ria &ourt of Pasi$, #ran!h 153.
Petitioner had fied with the respondent &ourt of Appeas a Petition for #ertiorari and
Prohibition with an appi!ation for writ of prei"inary in;un!tion andBor te"porary
restrainin$ order on .une 2/, 1993, seeCin$ to A
I. Annul and set aside the (otices of Oevy on real property dated 5ebruary 11, .337 and May
19, .337, issued by respondent Commissioner of Internal )evenueF
II. Annul and set aside the (otices of 0ale dated May 16, .337F
III. En&oin the Bead )evenue E'ecutive Assistant <irector II Collection 0ervice!, from
proceeding with the Auction of the real properties covered by (otices of 0ale.
After the parties had peaded their !ase, the &ourt of Appeas rendered its
5e!ision
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on )ove"ber 29, 1994, ruin$ that the defi!ien!y assess"ents for estate and
in!o"e ta, "ade upon the petitioner and the estate of the de!eased President Mar!os
have aready be!o"e fina and unappeaabe, and "ay thus be enfor!ed by the
su""ary re"edy of evyin$ upon the properties of the ate President, as was done by
the respondent &o""issioner of 'nterna 2evenue.
MCBE)E5?)E, premises considered &udgment is hereby rendered <I0MI00I(8 the petition for
Certiorari with prayer for )estraining ?rder and In&unction.
(o pronouncements as to cost.
0? ?)<E)E<.M
>nperturbed, petitioner is now before us assaiin$ the vaidity of the appeate
!ourt0s de!ision, assi$nin$ the foowin$ as errors4
A. 2%9PO)5%)- &O>2- MA)'F%9-EI %22%5 ') 2>E')@ -?A- -?%
9>MMA2I -AK 2%M%5'%9 2%9O2-%5 -O #I -?% @OD%2)M%)- A2% )O-
AFF%&-%5 A)5 P2%&E>5%5 #I -?% P%)5%)&I OF -?% 9P%&'AE
P2O&%%5')@ FO2 -?% AEEO=A)&% OF -?% EA-% P2%9'5%)-09 AEE%@%5
='EE. -O -?% &O)-2A2I, -?'9 P2O#A-% P2O&%%5')@ P2%&'9%EI PEA&%5
AEE P2OP%2-'%9 =?'&? FO2M PA2- OF -?% EA-% P2%9'5%)-09 %9-A-% ')
&>9-O5'A E%@'9 OF -?% P2O#A-% &O>2- -O -?% %K&E>9'O) OF AEE O-?%2
&O>2-9 A)5 A5M')'9-2A-'D% A@%)&'%9.
#. 2%9PO)5%)- &O>2- A2#'-2A2'EI %22%5 ') 9=%%P')@EI 5%&'5')@
-?A- 9')&% -?% -AK A99%99M%)-9 OF P%-'-'O)%2 A)5 ?'9 PA2%)-9 ?A5
AE2%A5I #%&OM% F')AE A)5 >)APP%AEA#E%, -?%2% =A9 )O )%%5 -O @O
')-O -?% M%2'-9 OF -?% @2O>)59 &'-%5 ') -?% P%-'-'O). ')5%P%)5%)-
OF =?%-?%2 -?% -AK A99%99M%)-9 ?A5 AE2%A5I #%&OM% F')AE,
?O=%D%2, P%-'-'O)%2 ?A9 -?% 2'@?- -O M>%9-'O) -?% >)EA=F>E
MA))%2 A)5 M%-?O5 ') =?'&? -AK &OEE%&-'O) '9 9O>@?- -O #%
%)FO2&%5 #I 2%9PO)5%)-9 &OMM'99'O)%2 A)5 5% @>HMA). -?>9,
2%9PO)5%)- &O>2- 9?O>E5 ?AD% FADO2A#EI &O)9'5%2%5 -?% M%2'-9
OF -?% FOEEO=')@ @2O>)59 ') -?% P%-'-'O)4
.! +he (otices of Oevy on )eal Property were issued beyond the period provided in the
)evenue Memorandum Circular (o. 72$62.
1! -a/ +he numerous pending court cases ,uestioning the late PresidentKs ownership or
interests in several properties both personal and real! ma>e the total value of his estate, and
the conse,uent estate ta' due, incapable of e'act pecuniary determination at this time. +hus,
respondents assessment of the estate ta' and their issuance of the (otices of Oevy and 0ale
are premature, confiscatory and oppressive.
-b/ Petitioner, as one of the late PresidentKs compulsory heirs, was never notified, much less
served with copies of the (otices of Oevy, contrary to the mandate of 0ection 1.7 of the
(I)C. As such, petitioner was never given an opportunity to contest the (otices in
violation of his right to due process of law.
&. O) A&&O>)- OF -?% &E%A2 M%2'- OF -?% P%-'-'O), 2%9PO)5%)-
&O>2- MA)'F%9-EI %22%5 ') 2>E')@ -?A- '- ?A5 )O PO=%2 -O @2A)-
').>)&-'D% 2%E'%F -O P%-'-'O)%2. 9%&-'O) 219 OF -?% )'2&
)O-='-?9-A)5')@, &O>2-9 PO99%99 -?% PO=%2 -O '99>% A =2'- OF
P2%E'M')A2I ').>)&-'O) -O 2%9-2A') 2%9PO)5%)-9 &OMM'99'O)%209
A)5 5% @>HMA)09 A2#'-2A2I M%-?O5 OF &OEE%&-')@ -?% AEE%@%5
5%F'&'%)&I %9-A-% A)5 ')&OM% -AK%9 #I M%A)9 OF E%DI.
-he fa!ts as found by the appeate !ourt are undisputed, and are hereby adopted4
M?n 0eptember 13, .323, former President 5erdinand Marcos died in Bonolulu, Bawaii, D0A.
?n @une 1:, .339, a 0pecial +a' Audit +eam was created to conduct investigations and
e'aminations of the ta' liabilities and obligations of the late president, as well as that of his
family, associates and McroniesM. 0aid audit team concluded its investigation with a
Memorandum dated @uly 16, .33.. +he investigation disclosed that the Marcoses failed to file a
written notice of the death of the decedent, an estate ta' returns -sic/, as well as several income
ta' returns covering the years .321 to .326, $all in violation of the (ational Internal )evenue
Code (I)C!.
0ubse,uently, criminal charges were filed against Mrs. Imelda ). Marcos before the )egional
+rial of PueLon City for violations of 0ections 21, 27 and 2= has penaliLed under 0ections 147
and 14= in relation to 0ection 141$ a H b! of the (ational Internal )evenue Code (I)C!.
+he Commissioner of Internal )evenue thereby caused the preparation and filing of the Estate
+a' )eturn for the estate of the late president, the Income +a' )eturns of the 0pouses Marcos for
the years .324 to .326, and the Income +a' )eturns of petitioner 5erdinand K;ongbongK Marcos
II for the years .321 to .324.
?n @uly 16, .33., the ;I) issued the followingA .! <eficiency estate ta' assessment no. 5AC$1$
23$3.$991=6= against the estate of the late president 5erdinand Marcos in the amount of
P17,137,69:,672.99 Pesos!F 1! <eficiency income ta' assessment no. 5AC$.$24$3.$991=41 and
<eficiency income ta' assessment no. 5AC$.$26$3.$991=4. against the 0pouses 5erdinand and
Imelda Marcos in the amounts of P.=3,44..:9 and P.2=,993,:7:.=9 representing deficiency
income ta' for the years .324 and .326!F 7! <eficiency income ta' assessment nos. 5AC$.$21$
3.$991=69 to 5AC$.$24$3.$991=67 against petitioner 5erdinand K;ongbongK Marcos II in the
amounts of P142.:9 pesosF P3,726.=9 PesosF P=,722.79 PesosF and P6,7:6.69 Pesos representing
his deficiency income ta'es for the years .321 to .324!.
+he Commissioner of Internal )evenue avers that copies of the deficiency estate and income ta'
assessments were all personally and constructively served on August 16, .33. and 0eptember .1,
.33. upon Mrs. Imelda Marcos through her careta>er Mr. MartineL! at her last >nown address at
(o. 19= ?rtega 0t., 0an @uan, M.M. Anne'es K<K and KEK of the Petition!. Oi>ewise, copies of
the deficiency ta' assessments issued against petitioner 5erdinand K;ongbongK Marcos II were
also personally and constructively served upon him through his careta>er! on 0eptember .1,
.33., at his last >nown address at <on Mariano Marcos 0t. corner P. 8uevarra 0t., 0an @uan,
M.M. Anne'es K@K and K@$.K of the Petition!. +hereafter, 5ormal Assessment notices were served
on ?ctober 19, .331, upon Mrs. Marcos cQo petitioner, at his office, Bouse of )epresentatives,
;atasan Pambansa, PueLon City. Moreover, a notice to +a'payer inviting Mrs. Marcos or her
duly authoriLed representative or counsel!, to a conference, was furnished the counsel of Mrs.
Marcos, <ean Antonio Coronel $ but to no avail.
+he deficiency ta' assessments were not protested administratively, by Mrs. Marcos and the
other heirs of the late president, within 79 days from service of said assessments.
?n 5ebruary 11, .337, the ;I) Commissioner issued twenty$two notices of levy on real property
against certain parcels of land owned by the Marcoses $ to satisfy the alleged estate ta' and
deficiency income ta'es of 0pouses Marcos.
?n May 19, .337, four more (otices of Oevy on real property were issued for the purpose of
satisfying the deficiency income ta'es.
?n May 16, .337, additional four =! notices of Oevy on real property were again issued. +he
foregoing ta' remedies were resorted to pursuant to 0ections 194 and 1.7 of the (ational
Internal )evenue Code (I)C!.
In response to a letter dated March .1, .337 sent by Atty. Ooreto Ata counsel of herein
petitioner! calling the attention of the ;I) and re,uesting that they be duly notified of any action
ta>en by the ;I) affecting the interest of their client 5erdinand K;ongbong Marcos II, as well as
the interest of the late president $ copies of the aforesaid notices were served on April :, .337
and on @une .9, .337, upon Mrs. Imelda Marcos, the petitioner, and their counsel of record, K<e
;or&a, Medialdea, Ata, ;ello, 8uevarra and 0erapio Oaw ?fficeK.
(otices of sale at public auction were posted on May 16, .337, at the lobby of the City Ball of
+acloban City. +he public auction for the sale of the eleven ..! parcels of land too> place on
@uly 4, .337. +here being no bidder, the lots were declared forfeited in favor of the government.
?n @une 14, .337, petitioner 5erdinand K;ongbongK Marcos II filed the instant petition for
certiorari and prohibition under )ule 64 of the )ules of Court, with prayer for temporary
restraining order andQor writ of preliminary in&unction.M
't has been repeatedy observed, and not without "erit, that the enfor!e"ent of ta,
aws and the !oe!tion of ta,es, is of para"ount i"portan!e for the sustenan!e of
$overn"ent. -a,es are the ifebood of the $overn"ent and shoud be !oe!ted without
unne!essary hindran!e. ?owever, su!h !oe!tion shoud be "ade in a!!ordan!e with
aw as any arbitrariness wi ne$ate the very reason for $overn"ent itsef. 't is therefore
ne!essary to re!on!ie the apparenty !onfi!tin$ interests of the authorities and the
ta,payers so that the rea purpose of ta,ation, whi!h is the pro"otion of the !o""on
$ood, "ay be a!hieved.:
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=hether or not the proper avenues of assess"ent and !oe!tion of the said ta,
obi$ations were taCen by the respondent #ureau is now the sub;e!t of the &ourt0s
in8uiry.
Petitioner posits that noti!es of evy, noti!es of sae, and subse8uent sae of
properties of the ate President Mar!os effe!ted by the #'2 are nu and void for
disre$ardin$ the estabished pro!edure for the enfor!e"ent of ta,es due upon the
estate of the de!eased. -he !ase of 5o"in$o vs. @aritos
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is spe!ifi!ay !ited to
boster the ar$u"ent that :the ordinary pro!edure by whi!h to sette !ai"s of
indebtedness a$ainst the estate of a de!eased, person, as in an inheritan!e (estate+
ta,, is for the !ai"ant to present a !ai" before the probate !ourt so that said !ourt "ay
order the ad"inistrator to pay the a"ount therefor.: -his re"edy is ae$edy, e,!usive,
and !annot be effe!ted throu$h any other "eans.
Petitioner $oes further, sub"ittin$ that the probate !ourt is not pre!uded fro"
denyin$ a re8uest by the $overn"ent for the i""ediate pay"ent of ta,es, and shoud
order the pay"ent of the sa"e ony within the period fi,ed by the probate !ourt for the
pay"ent of a the debts of the de!edent. 'n this re$ard, petitioner !ites the !ase of
&oe!tor of 'nterna 2evenue vs. -he Ad"inistratri, of the %state of %!harri (3* Phi
512+, where it was hed that4
M+he case of Pineda vs. Court of 5irst Instance of +ayabas and Collector of Internal )evenue 41
Phil 297!, relied upon by the petitioner$appellant is good authority on the proposition that the
court having control over the administration proceedings has &urisdiction to entertain the claim
presented by the government for ta'es due and to order the administrator to pay the ta' should it
find that the assessment was proper, and that the ta' was legal, due and collectible. And the rule
laid down in that case must be understood in relation to the case of Collector of Customs vs.
Baygood, supra., as to the procedure to be followed in a given case by the government to
effectuate the collection of the ta'. Categorically stated, where during the pendency of &udicial
administration over the estate of a deceased person a claim for ta'es is presented by the
government, the court has the authority to order payment by the administratorF but, in the same
way that it has authority to order payment or satisfaction, it also has the negative authority to
deny the same. Chile there are cases where courts are re,uired to perform certain duties
mandatory and ministerial in character, the function of the court in a case of the present character
is not one of themF and here, the court cannot be an organism endowed with latitude of &udgment
in one direction, and converted into a mere mechanical contrivance in another direction.M
On the other hand, it is ar$ued by the #'2, that the state0s authority to !oe!t
interna revenue ta,es is para"ount. -hus, the penden!y of probate pro!eedin$s over
the estate of the de!eased does not pre!ude the assess"ent and !oe!tion, throu$h
su""ary re"edies, of estate ta,es over the sa"e. A!!ordin$ to the respondent, !ai"s
for pay"ent of estate and in!o"e ta,es due and assessed after the death of the
de!edent need not be presented in the for" of a !ai" a$ainst the estate. -hese !an
and shoud be paid i""ediatey. -he probate !ourt is not the $overn"ent a$en!y to
de!ide whether an estate is iabe for pay"ent of estate of in!o"e ta,es. =eAsetted is
the rue that the probate !ourt is a !ourt with spe!ia and i"ited ;urisdi!tion.
&on!ededy, the authority of the 2e$iona -ria &ourt, sittin$, albeit with i"ited
;urisdi!tion, as a probate !ourt over estate of de!eased individua, is not a trifin$
thin$. -he !ourt0s ;urisdi!tion, on!e invoCed, and "ade effe!tive, !annot be treated with
indifferen!e nor shoud it be i$nored with i"punity by the very parties invoCin$ its
authority.
'n testa"ent to this, it has been hed that it is within the ;urisdi!tion of the probate
!ourt to approve the sae of properties of a de!eased person by his prospe!tive heirs
before fina ad;udi!ation<
O5P
to deter"ine who are the heirs of the de!edent<
O3P
the
re!o$nition of a natura !hid<
O*P
the status of a wo"an !ai"in$ to be the e$a wife of the
de!edent<
O/P
the e$aity of disinheritan!e of an heir by the testator<
O9P
and to pass upon
the vaidity of a waiver of hereditary ri$hts.
O11P
-he pivota 8uestion the !ourt is tasCed to resove refers to the authority of the
#ureau of 'nterna 2evenue to !oe!t by the su""ary re"edy of evyin$ upon, and sae
of rea properties of the de!edent, estate ta, defi!ien!ies, without the !o$nition and
authority of the !ourt sittin$ in probate over the supposed wi of the de!eased.
-he nature of the pro!ess of estate ta, !oe!tion has been des!ribed as foows4
M0trictly spea>ing, the assessment of an inheritance ta' does not directly involve the
administration of a decedentKs estate, although it may be viewed as an incident to the complete
settlement of an estate, and, under some statutes, it is made the duty of the probate court to ma>e
the amount of the inheritance ta' a part of the final decree of distribution of the estate. It is not
against the property of decedent, nor is it a claim against the estate as such, but it is against the
interest or property right which the heir, legatee, devisee, etc., has in the property formerly held
by decedent. 5urther, under some statutes, it has been held that it is not a suit or controversy
between the parties, nor is it an adversary proceeding between the state and the person who owes
the ta' on the inheritance. Bowever, under other statutes it has been held that the hearing and
determination of the cash value of the assets and the determination of the ta' are adversary
proceedings. +he proceeding has been held to be necessarily a proceeding in rem.
-../
'n the Phiippine e,perien!e, the enfor!e"ent and !oe!tion of estate ta,, is
e,e!utive in !hara!ter, as the e$isature has seen it fit to as!ribe this tasC to the #ureau
of 'nterna 2evenue. 9e!tion 3 of the )ationa 'nterna 2evenue &ode attests to this4
M0ec. 7. Powers and duties of the ;ureau.$+he powers and duties of the ;ureau of Internal
)evenue shall comprehend the assessment and collection of all national internal revenue ta'es,
fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected
therewith, including the e'ecution of &udgments in all cases decided in its favor by the Court of
+a' Appeals and the ordinary courts. 0aid ;ureau shall also give effect to and administer the
supervisory and police power conferred to it by this Code or other laws.M
-hus, it was in Dera vs. FernandeF
O12P
that the !ourt re!o$niFed the ibera treat"ent
of !ai"s for ta,es !har$ed a$ainst the estate of the de!edent. 9u!h ta,es, we said,
were e,e"pted fro" the appi!ation of the statute of nonA!ai"s, and this is ;ustified by
the ne!essity of $overn"ent fundin$, i""ortaiFed in the "a,i" that ta,es are the
ifebood of the $overn"ent. 6ecti%alia nervisunt rei publicae A ta,es are the sinews of
the state.
M+a'es assessed against the estate of a deceased person, after administration is opened, need not
be submitted to the committee on claims in the ordinary course of administration. In the e'ercise
of its control over the administrator, the court may direct the payment of such ta'es upon motion
showing that the ta'es have been assessed against the estate.M
9u!h ibera treat"ent of interna revenue ta,es in the probate pro!eedin$s e,tends
so far, even to aowin$ the enfor!e"ent of ta, obi$ations a$ainst the heirs of the
de!edent, even after distribution of the estate0s properties.
MClaims for ta'es, whether assessed before or after the death of the deceased, can be collected
from the heirs even after the distribution of the properties of the decedent. +hey are e'empted
from the application of the statute of non$claims. +he heirs shall be liable therefor, in proportion
to their share in the inheritance.M
-.7/
M+hus, the 8overnment has two ways of collecting the ta'es in ,uestion. ?ne, by going after all
the heirs and collecting from each one of them the amount of the ta' proportionate to the
inheritance received. Another remedy, pursuant to the lien created by 0ection 7.4 of the +a'
Code upon all property and rights to property belong to the ta'payer for unpaid income ta', is by
sub&ecting said property of the estate which is in the hands of an heir or transferee to the
payment of the ta' due the estate. Commissioner of Internal )evenue vs. Pineda, 1. 0C)A .94,
0eptember .4, .36:.!
Fro" the fore$oin$, it is dis!ernibe that the approva of the !ourt, sittin$ in probate,
or as a sette"ent tribuna over the de!eased is not a "andatory re8uire"ent in the
!oe!tion of estate ta,es. 't !annot therefore be ar$ued that the -a, #ureau erred in
pro!eedin$ with the evyin$ and sae of the properties ae$edy owned by the ate
President, on the $round that it was re8uired to seeC first the probate !ourt0s
san!tion. -here is nothin$ in the -a, &ode, and in the pertinent re"edia aws that
i"pies the ne!essity of the probate or estate sette"ent !ourt0s approva of the state0s
!ai" for estate ta,es, before the sa"e !an be enfor!ed and !oe!ted.
On the !ontrary, under 9e!tion /* of the )'2&, it is the probate or sette"ent !ourt
whi!h is bidden not to authoriFe the e,e!utor or ;udi!ia ad"inistrator of the de!edent0s
estate to deiver any distributive share to any party interested in the estate, uness it is
shown a &ertifi!ation by the &o""issioner of 'nterna 2evenue that the estate ta,es
have been paid. -his provision disproves the petitioner0s !ontention that it is the
probate !ourt whi!h approves the assess"ent and !oe!tion of the estate ta,.
'f there is any issue as to the vaidity of the #'20s de!ision to assess the estate
ta,es, this shoud have been pursued throu$h the proper ad"inistrative and ;udi!ia
avenues provided for by aw.
9e!tion 229 of the )'2& tes us how4
M0ec. 113. Protesting of assessment.$Chen the Commissioner of Internal )evenue or his duly
authoriLed representative finds that proper ta'es should be assessed, he shall first notify the
ta'payer of his findings. Cithin a period to be prescribed by implementing regulations, the
ta'payer shall be re,uired to respond to said notice. If the ta'payer fails to respond, the
Commissioner shall issue an assessment based on his findings.
0uch assessment may be protested administratively by filing a re,uest for reconsideration or
reinvestigation in such form and manner as may be prescribed by implementing regulations
within 79! days from receipt of the assessmentF otherwise, the assessment shall become final
and unappealable.
If the protest is denied in whole or in part, the individual, association or corporation adversely
affected by the decision on the protest may appeal to the Court of +a' Appeals within thirty 79!
days from receipt of said decisionF otherwise, the decision shall become final, e'ecutory and
demandable. As inserted by P.<. .::7!M
Apart fro" faiin$ to fie the re8uired estate ta, return within the ti"e re8uired for the
fiin$ of the sa"e, petitioner, and the other heirs never 8uestioned the assess"ents
served upon the", aowin$ the sa"e to apse into finaity, and pro"ptin$ the #'2 to
!oe!t the said ta,es by evyin$ upon the properties eft by President Mar!os.
Petitioner sub"its, however, that :whie the assess"ent of ta,es "ay have been
vaidy undertaCen by the @overn"ent, !oe!tion thereof "ay have been done in
vioation of the aw. -hus, the "anner and "ethod in whi!h the atter is enfor!ed "ay
be 8uestioned separatey, and irrespe!tive of the finaity of the for"er, be!ause the
@overn"ent does not have the unbrided dis!retion to enfor!e !oe!tion without re$ard
to the !ear provision of aw.:
O14P
Petitioner spe!ifi!ay points out that appyin$ Me"orandu" &ir!uar )o. 3/A3/,
i"pe"entin$ 9e!tions 31/ and 324 of the od ta, !ode (2epubi! A!t 5213+, the #'20s
)oti!es of Eevy on the Mar!os properties, were issued beyond the aowed period, and
are therefore nu and void4
M...the (otices of Oevy on )eal Property Anne'es 9 to (( of Anne' C of this Petition! in
satisfaction of said assessments were still issued by respondents well beyond the period
mandated in )evenue Memorandum Circular (o. 72$62. +hese (otices of Oevy were issued
only on 11 5ebruary .337 and 19 May .337 when at least seventeen .:! months had already
lapsed from the last service of ta' assessment on .1 0eptember .33.. As no notices of distraint
of personal property were first issued by respondents, the latter should have complied with
)evenue Memorandum Circular (o. 72$62 and issued these (otices of Oevy not earlier than
three 7! months nor later than si' 6! months from .1 0eptember .33.. In accordance with the
Circular, respondents only had until .1 March .331 the last day of the si'th month! within
which to issue these (otices of Oevy. +he (otices of Oevy, having been issued beyond the
period allowed by law, are thus void and of no effect.M
-.4/
=e hod otherwise. -he )oti!es of Eevy upon rea property were issued within the
pres!riptive period and in a!!ordan!e with the provisions of the present -a, &ode. -he
defi!ien!y ta, assess"ent, havin$ aready be!o"e fina, e,e!utory, and de"andabe,
the sa"e !an now be !oe!ted throu$h the su""ary re"edy of distraint or evy
pursuant to 9e!tion 215 of the )'2&.
-he appi!abe provision in re$ard to the pres!riptive period for the assess"ent and
!oe!tion of ta, defi!ien!y in this instan!e is Arti!e 223 of the )'2&, whi!h pertinenty
provides4
M0ec. 117. E'ceptions as to a period of limitation of assessment and collection of ta'es.$ a! In
the case of a false or fraudulent return with intent to evade ta' or of a failure to file a return, the
ta' may be assessed, or a proceeding in court for the collection of such ta' may be begun without
assessment, at any time within ten .9! years after the discovery of the falsity, fraud, or
omissionA ,rovided, +hat, in a fraud assessment which has become final and e'ecutory, the fact
of fraud shall be &udicially ta>en cogniLance of in the civil or criminal action for the collection
thereof.
,,,
c! Any internal revenue ta' which has been assessed within the period of limitation above
prescribed, may be collected by distraint or levy or by a proceeding in court within three years
following the assessment of the ta'.
,,,
-he o"ission to fie an estate ta, return, and the subse8uent faiure to !ontest or
appea the assess"ent "ade by the #'2 is fata to the petitioner0s !ause, as under the
aboveA!ited provision, in !ase of faiure to fie a return, the ta, "ay be assessed at any
ti"e within ten years after the o"ission, and any ta, so assessed "ay be !oe!ted by
evy upon rea property within three years foowin$ the assess"ent of the ta,. 9in!e
the estate ta, assess"ent had be!o"e fina and unappeaabe by the petitioner0s
defaut as re$ards protestin$ the vaidity of the said assess"ent, there is now no reason
why the #'2 !annot !ontinue with the !oe!tion of the said ta,. Any ob;e!tion a$ainst
the assess"ent shoud have been pursued foowin$ the avenue paved in 9e!tion 229
of the )'2& on protests on assess"ents of interna revenue ta,es.
Petitioner further ar$ues that :the nu"erous pendin$ !ourt !ases 8uestionin$ the
ate president0s ownership or interests in severa properties (both rea and persona+
"aCe the tota vaue of his estate, and the !onse8uent estate ta, due, in!apabe of
e,a!t pe!uniary deter"ination at this ti"e. -hus, respondents0 assess"ent of the
estate ta, and their issuan!e of the )oti!es of Eevy and sae are pre"ature and
oppressive.: ?e points out the penden!y of 9andi$anbayan &ivi &ase )os. 1111A1134
and 1141, whi!h were fied by the $overn"ent to 8uestion the ownership and interests
of the ate President in rea and persona properties o!ated within and outside the
Phiippines. Petitioner, however, o"its to ae$e whether the properties evied upon by
the #'2 in the !oe!tion of estate ta,es upon the de!edent0s estate were a"on$ those
invoved in the said !ases pendin$ in the 9andi$anbayan. 'ndeed, the !ourt is at a oss
as to how these !ases are reevant to the "atter at issue. -he "ere fa!t that the
de!edent has pendin$ !ases invovin$ iA$otten weath does not affe!t the enfor!e"ent
of ta, assess"ents over the properties indubitaby in!uded in his estate.
Petitioner aso e,presses his reservation as to the propriety of the #'20s tota
assess"ent of P23,292,31*,33/.11, statin$ that this a"ount deviates fro" the findin$s
of the 5epart"ent of .usti!e0s Pane of Prose!utors as per its resoution of 21
9epte"ber 1991. Ae$edy, this is !ear eviden!e of the un!ertainty on the part of the
@overn"ent as to the tota vaue of the estate of the ate President.
-his is, to our "ind, the petitioner0s ast dit!h effort to assai the assess"ent of
estate ta, whi!h had aready be!o"e fina and unappeaabe.
't is not the 5epart"ent of .usti!e whi!h is the $overn"ent a$en!y tasCed to
deter"ine the a"ount of ta,es due upon the sub;e!t estate, but the #ureau of 'nterna
2evenue
O13P
whose deter"inations and assess"ents are presu"ed !orre!t and "ade in
$ood faith.
O1*P
-he ta,payer has the duty of provin$ otherwise. 'n the absen!e of proof of
any irre$uarities in the perfor"an!e of offi!ia duties, an assess"ent wi not be
disturbed. %ven an assess"ent based on esti"ates is prima facie vaid and awfu
where it does not appear to have been arrived at arbitrariy or !apri!iousy. -he burden
of proof is upon the !o"painin$ party to show !eary that the assess"ent is
erroneous. Faiure to present proof of error in the assess"ent wi ;ustify the ;udi!ia
affir"an!e of said assess"ent.
O1/P
'n this instan!e, petitioner has not pointed out one
sin$e provision in the Me"orandu" of the 9pe!ia Audit -ea" whi!h $ave rise to the
8uestioned assess"ent, whi!h bears a tra!e of fasity. 'ndeed, the petitioner0s atta!C on
the assess"ent bears "ainy on the ae$ed i"probabe and un!ons!ionabe a"ount of
the ta,es !har$ed. #ut "ere rhetori! !annot suppy the basis for the !har$e of
i"propriety of the assess"ents "ade.
Moreover, these ob;e!tions to the assess"ents shoud have been raised,
!onsiderin$ the a"pe re"edies afforded the ta,payer by the -a, &ode, with the
#ureau of 'nterna 2evenue and the &ourt of -a, Appeas, as des!ribed earier, and
!annot be raised now via Petition for #ertiorari, under the prete,t of $rave abuse of
dis!retion. -he !ourse of a!tion taCen by the petitioner refe!ts his disre$ard or even
repu$nan!e of the estabished institutions for $overnan!e in the s!he"e of a weA
ordered so!iety. -he sub;e!t ta, assess"ents havin$ be!o"e fina, e,e!utory and
enfor!eabe, the sa"e !an no on$er be !ontested by "eans of a dis$uised protest. 'n
the "ain, #ertiorari "ay not be used as a substitute for a ost appea or re"edy.
O19P
-his
;udi!ia poi!y be!o"es "ore pronoun!ed in view of the absen!e of suffi!ient atta!C
a$ainst the a!tuations of $overn"ent.
On the "atter of suffi!ien!y of servi!e of )oti!es of Assess"ent to the petitioner, we
find the respondent appeate !ourt0s pronoun!e"ents sound and resiient to petitioner0s
atta!Cs.
MAnent grounds 7b! and ;! $ both allegingQclaiming lac> of notice $ Ce find, after considering
the facts and circumstances, as well as evidences, that there was sufficient, constructive andQor
actual notice of assessments, levy and sale, sent to herein petitioner 5erdinand
M;ongbongM Marcos as well as to his mother Mrs. Imelda Marcos.
Even if we are to rule out the notices of assessments personally given to the careta>er of Mrs.
Marcos at the latterKs last >nown address, on August 16, .33. and 0eptember .1, .33., as well as
the notices of assessment personally given to the careta>er of petitioner also at his last >nown
address on 0eptember .1, .33. $ the subse,uent notices given thereafter could no longer be
ignored as they were sent at a time when petitioner was already here in the Philippines, and at a
place where said notices would surely be called to petitionerKs attention, and received by
responsible persons of sufficient age and discretion.
+hus, on ?ctober 19, .331, formal assessment notices were served upon Mrs. Marcos cQo the
petitioner, at his office, Bouse of )epresentatives, ;atasan Pambansa, P.C. Anne'es MAM, MA$
.M, MA$1M, MA$7MF pp. 19:$1.9, CommentQMemorandum of ?08!. Moreover, a notice to
ta'payer dated ?ctober 2, .331 inviting Mrs. Marcos to a conference relative to her ta'
liabilities, was furnished the counsel of Mrs. Marcos $ <ean Antonio Coronel Anne' M;M, p.
1.., ibid!. +hereafter, copies of (otices were also served upon Mrs. Imelda Marcos, the
petitioner and their counsel M<e ;or&a, Medialdea, Ata, ;ello, 8uevarra and 0erapio Oaw
?fficeM, on April :, .337 and @une .9, .337. <espite all of these (otices, petitioner never lifted
a finger to protest the assessments, upon which the Oevy and sale of properties were based!, nor
appealed the same to the Court of +a' Appeals.
+here being sufficient service of (otices to herein petitioner and his mother! and it appearing
that petitioner continuously ignored said (otices despite several opportunities given him to file a
protest and to thereafter appeal to the Court of +a' Appeals, $ the ta' assessments sub&ect of this
case, upon which the levy and sale of properties were based, could no longer be contested
directly or indirectly! via this instant petition for certiorari.M
-19/
Petitioner ar$ues that a the 8uestioned )oti!es of Eevy, however, "ust be nuified
for havin$ been issued without vaidy servin$ !opies thereof to the petitioner. As a
"andatory heir of the de!edent, petitioner avers that he has an interest in the sub;e!t
estate, and noti!es of evy upon its properties shoud have been served upon hi".
=e do not a$ree. 'n the !ase of noti!es of evy issued to satisfy the dein8uent
estate ta,, the dein8uent ta,payer is the %state of the de!edent, and not ne!essariy,
and e,!usivey, the petitioner as heir of the de!eased. 'n the sa"e vein, in the "atter
of in!o"e ta, dein8uen!y of the ate president and his spouse, petitioner is not the
ta,payer iabe. -hus, it foows that servi!e of noti!es of evy in satisfa!tion of these ta,
dein8uen!ies upon the petitioner is not re8uired by aw, as under 9e!tion 213 of the
)'2&, whi!h pertinenty states4
:,,,
...Oevy shall be effected by writing upon said certificate a description of the property upon which
levy is made. At the same time, written notice of the levy shall be mailed to or served upon the
)egister of <eeds of the province or city where the property is located and upon the delin,uent
ta'payer, or if he be absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose, or if there be none, to the occupant of the property in
,uestion.
,,,:
-he fore$oin$ notwithstandin$, the re!ord shows that noti!es of warrants of distraint
and evy of sae were furnished the !ounse of petitioner on Apri *, 1993, and .une 11,
1993, and the petitioner hi"sef on Apri 12, 1993 at his offi!e at the #atasan$
Pa"bansa.
O21P
=e !annot therefore, !ountenan!e petitioner0s insisten!e that he was
denied due pro!ess. =here there was an opportunity to raise ob;e!tions to $overn"ent
a!tion, and su!h opportunity was disre$arded, for no ;ustifiabe reason, the party
!ai"in$ oppression then be!o"es the oppressor of the ordery fun!tions of
$overn"ent. ?e who !o"es to !ourt "ust !o"e with !ean hands. Otherwise, he not
ony taints his na"e, but ridi!ues the very stru!ture of estabished authority.
IN !IE= =5EREOF, the &ourt 2%9OED%5 to 5%)I the present petition. -he
5e!ision of the &ourt of Appeas dated )ove"ber 29, 1994 is hereby AFF'2M%5 in a
respe!ts.
SO OR%ERE%.
8. REYES VS ALMANZOR 196 SCRA 322
G.R. No'. L-49739-46 pr+1 26, 1991
/OSE #. L. RE6ES &(, E%M"N%O . RE6ES, petitioners,
vs.
$E%RO LMN.OR, !ICENTE #% SNTOS, /OSE RO?O, +( t*e+r -&p&-+t+e' &'
&ppo+(te, &(, -t+(4 Member' o) t*e CENTRL #OR% OF SSESSMENT
$$ELS@ TERESIT 5. NO#LE/S, ROM"LO M. %EL ROSRIO, R"L C.
FLORES, +( t*e+r -&p&-+t+e' &' &ppo+(te, &(, -t+(4 Member' o) t*e #OR% OF
SSESSMENT $$ELS o) M&(+1&@ &(, NICOLS CTIIL +( *+' -&p&-+t8 &' C+t8
''e''or o) M&(+1&,respondents.
Barcelona" Perlas" 7oven ' *cademia 0aw Offices for petitioners.

$RS, J.:p
-his is a petition for review on certiorari to reverse the .une 11, 19** de!ision of the
&entra #oard of Assess"ent Appeas
1
in &#AA &ases )os. *2A*9 entited :..#.E.
2eyes, %d"undo 2eyes, et a. v. #oard of Assess"ent Appeas of Mania and &ity
Assessor of Mania: whi!h affir"ed the Mar!h 29, 19*3 de!ision of the #oard of -a,
Assess"ent Appeas
2
in #-AA &ases )os. 314, 314AAA., 315, 315AA, #, %, :.ose
2eyes, et a. v. &ity Assessor of Mania: and :%d"undo 2eyes and Mia$ros 2eyes v.
&ity Assessor of Mania: uphodin$ the !assifi!ation and assess"ents "ade by the &ity
Assessor of Mania.
-he fa!ts of the !ase are as foows4
Petitioners ..#.E. 2eyes, %d"undo and Mia$ros 2eyes are owners of par!es of and
situated in -ondo and 9ta. &ruF 5istri!ts, &ity of Mania, whi!h are eased and entirey
o!!upied as dwein$ sites by tenants. 9aid tenants were payin$ "onthy rentas not
e,!eedin$ three hundred pesos (P311.11+ in .uy, 19*1. On .uy 14, 19*1, the )ationa
Ee$isature ena!ted 2epubi! A!t )o. 3359 prohibitin$ for one year fro" its effe!tivity, an
in!rease in "onthy rentas of dwein$ units or of ands on whi!h another0s dwein$ is
o!ated, where su!h rentas do not e,!eed three hundred pesos (P311.11+ a "onth but
aowin$ an in!rease in rent by not "ore than 116 thereafter. -he said A!t aso
suspended para$raph (1+ of Arti!e 13*3 of the &ivi &ode for two years fro" its
effe!tivity thereby disaowin$ the e;e!t"ent of essees upon the e,piration of the usua
e$a period of ease. On O!tober 12, 19*2, Presidentia 5e!ree )o. 21 a"ended 2.A.
)o. 3359 by "aCin$ absoute the prohibition to in!rease "onthy rentas beow P311.11
and by indefinitey suspendin$ the afore"entioned provision of the &ivi &ode,
e,!eptin$ eases with a definite period. &onse8uenty, the 2eyeses, petitioners herein,
were pre!uded fro" raisin$ the rentas and fro" e;e!tin$ the tenants. 'n 19*3,
respondent &ity Assessor of Mania reA!assified and reassessed the vaue of the
sub;e!t properties based on the s!hedue of "arCet vaues duy reviewed by the
9e!retary of Finan!e. -he revision, as e,pe!ted, entaied an in!rease in the
!orrespondin$ ta, rates pro"ptin$ petitioners to fie a Me"orandu" of 5isa$ree"ent
with the #oard of -a, Assess"ent Appeas. -hey averred that the reassess"ents "ade
were :e,!essive, unwarranted, ine8uitabe, !onfis!atory and un!onstitutiona:
!onsiderin$ that the ta,es i"posed upon the" $reaty e,!eeded the annua in!o"e
derived fro" their properties. -hey ar$ued that the in!o"e approa!h shoud have been
used in deter"inin$ the and vaues instead of the !o"parabe saes approa!h whi!h
the &ity Assessor adopted ($ollo, pp. 9A11AA+. -he #oard of -a, Assess"ent Appeas,
however, !onsidered the assess"ents vaid, hodin$ thus4
=?%2%FO2%, and !onsiderin$ that the appeants have faied to sub"it
!on!rete eviden!e whi!h !oud over!o"e the presu"ptive re$uarity of the
!assifi!ation and assess"ents appear to be in a!!ordan!e with the base
s!hedue of "arCet vaues and of the base s!hedue of buidin$ unit
vaues, as approved by the 9e!retary of Finan!e, the !ases shoud be, as
they are hereby, uphed.
9O O25%2%5. (5e!ision of the #oard of -a, Assess"ent Appeas, $ollo,
p. 22+.
-he 2eyeses appeaed to the &entra #oard of Assess"ent Appeas. -hey sub"itted,
a"on$ others, the su""ary of the yeary rentas to show the in!o"e derived fro" the
properties. 2espondent &ity Assessor, on the other hand, sub"itted three (3+ deeds of
sae showin$ the different "arCet vaues of the rea property situated in the sa"e
vi!inity where the sub;e!t properties of petitioners are o!ated. -o better appre!iate the
o!ationa and physi!a features of the and, the #oard of ?earin$ &o""issioners
!ondu!ted an o!uar inspe!tion with the presen!e of two representatives of the &ity
Assessor prior to the heain$ of the !ase. )either the owners nor their authoriFed
representatives were present durin$ the said o!uar inspe!tion despite proper noti!es
served the". 't was found that !ertain par!es of and were beow street eve and were
affe!ted by the tides ($ollo, pp. 24A25+.
On .une 11, 19**, the &entra #oard of Assess"ent Appeas rendered its de!ision, the
dispositive portion of whi!h reads4
=?%2%FO2%, the appeaed de!ision insofar as the vauation and
assess"ent of the ots !overed by -a, 5e!aration )os. (5/35+ P5A5/4*,
(5/39+, (5/31+ P5A5/44 and P5A3/24 is affir"ed.
For the ots !overed by -a, 5e!aration )os. (1431+ P5A1432, P5A1519,
143 and (1+ P5A233, the appeaed 5e!ision is "odified by aowin$ a 216
redu!tion in their respe!tive "arCet vaues and appyin$ therein the
assess"ent eve of 316 to arrive at the !orrespondin$ assessed vaue.
9O O25%2%5. (5e!ision of the &entra #oard of Assess"ent
Appeas, $ollo, p. 2*+
Petitioner0s subse8uent "otion for re!onsideration was denied, hen!e, this petition.
-he 2eyeses assi$ned the foowin$ error4
-?% ?O)O2A#E% #OA25 %22%5 ') A5OP-')@ -?% :&OMPA2A#E%
9AE%9 APP2OA&?: M%-?O5 ') F'K')@ -?% A99%99%5 DAE>% OF
APP%EEA)-90 P2OP%2-'%9.
-he petition is i"pressed with "erit.
-he !ru, of the !ontroversy is in the "ethod used in ta, assess"ent of the properties in
8uestion. Petitioners "aintain that the :'n!o"e Approa!h: "ethod woud have been
"ore reaisti! for in disre$ardin$ the effe!t of the restri!tions i"posed by P.5. 21 on the
"arCet vaue of the properties affe!ted, respondent Assessor of the &ity of Mania
unawfuy and un;ustifiaby set in!reased new assessed vaues at eves so hi$h and
su!!essive that the resutin$ annua rea estate ta,es woud ad"ittedy e,!eed the su"
tota of the yeary rentas paid or payabe by the dweer tenants under P.5. 21. ?en!e,
petitioners protested a$ainst the eves of the vaues assi$ned to their properties as
revised and in!reased on the $round that they were arbitrariy e,!essive, unwarranted,
ine8uitabe, !onfis!atory and un!onstitutiona ($ollo, p. 11AA+.
On the other hand, whie respondent #oard of -a, Assess"ent Appeas ad"its in its
de!ision that the in!o"e approa!h is used in deter"inin$ and vaues in so"e vi!inities,
it "aintains that when in!o"e is affe!ted by so"e sort of pri!e !ontro, the sa"e is
re;e!ted in the !onsideration and study of and vaues as in the !ase of properties
affe!ted by the 2ent &ontro Eaw for they do not pro;e!t the true "arCet vaue in the
open "arCet ($ollo, p. 21+. -hus, respondents opted instead for the :&o"parabe 9aes
Approa!h: on the $round that the vaue esti"ate of the properties predi!ated upon
pri!es paid in a!tua, "arCet transa!tions woud be a unifor" and a "ore !redibe
standards to use espe!iay in !ase of "ass appraisa of properties (Ibid.+. Otherwise
stated, pubi! respondents woud have this &ourt !o"petey i$nore the effe!ts of the
restri!tions of P.5. )o. 21 on the "arCet vaue of properties within its !overa$e. 'n any
event, it is un8uestionabe that both the :&o"parabe 9aes Approa!h: and the :'n!o"e
Approa!h: are $eneray a!!eptabe "ethods of appraisa for ta,ation purposes (-he
Eaw on -ransfer and #usiness -a,ation by ?e!tor 9. 5e Eeon, 19// %dition+. ?owever,
it is !on!eded that the propriety of one as a$ainst the other woud of !ourse depend on
severa fa!tors. ?en!e, as eary as 1923 in the !ase of Ar"y G )avy &ub, Mania v.
=en!esao -rinidad, @.2. )o. 1929* (44 Phi. 3/3+, it has been stressed that the
assessors, in findin$ the vaue of the property, have to !onsider a the !ir!u"stan!es
and ee"ents of vaue and "ust e,er!ise a prudent dis!retion in rea!hin$ !on!usions.
>nder Art. D''', 9e!. 1* (1+ of the 19*3 &onstitution, then enfor!ed, the rue of ta,ation
"ust not ony be unifor", but "ust aso be e8uitabe and pro$ressive.
>nifor"ity has been defined as that prin!ipe by whi!h a ta,abe arti!es or Cinds of
property of the sa"e !ass sha be ta,ed at the sa"e rate (&hur!hi v. &on!ep!ion, 34
Phi. 939 O1913P+.
)otaby in the 1935 &onstitution, there was no "ention of the e8uitabe or pro$ressive
aspe!ts of ta,ation re8uired in the 19*3 &harter (Fernando :-he &onstitution of the
Phiippines:, p. 221, 9e!ond %dition+. -hus, the need to e,a"ine !osey and deter"ine
the spe!ifi! "andate of the &onstitution.
-a,ation is said to be e8uitabe when its burden fas on those better abe to pay.
-a,ation is pro$ressive when its rate $oes up dependin$ on the resour!es of the person
affe!ted (Ibid.+.
-he power to ta, :is an attribute of soverei$nty:. 'n fa!t, it is the stron$est of a the
powers of $overn"ent. #ut for a its penitude the power to ta, is not un!onfined as
there are restri!tions. Adversey effe!tin$ as it does property ri$hts, both the due
pro!ess and e8ua prote!tion !auses of the &onstitution "ay propery be invoCed to
invaidate in appropriate !ases a revenue "easure. 'f it were otherwise, there woud be
truth to the 1913 di!tu" of &hief .usti!e Marsha that :the power to ta, invoves the
power to destroy.: -he web or unreaity spun fro" Marsha0s fa"ous di!tu" was
brushed away by one stroCe of Mr. .usti!e ?o"es pen, thus4 :-he power to ta, is not
the power to destroy whie this &ourt sits. 9o it is in the Phiippines : (9ison, .r. v.
An!heta, 131 9&2A 355 O19/4P< Obios, .r. v. &o""issioner of 'nterna 2evenue, 139
9&2A 439 O19/5P+.
'n the sa"e vein, the due pro!ess !ause "ay be invoCed where a ta,in$ statute is so
arbitrary that it finds no support in the &onstitution. An obvious e,a"pe is where it !an
be shown to a"ount to !onfis!ation of property. -hat woud be a !ear abuse of power
(9ison v. An!heta, supra+.
-he ta,in$ power has the authority to "aCe a reasonabe and natura !assifi!ation for
purposes of ta,ation but the $overn"ent0s a!t "ust not be pro"pted by a spirit of
hostiity, or at the very east dis!ri"ination that finds no support in reason. 't suffi!es
then that the aws operate e8uay and unifor"y on a persons under si"iar
!ir!u"stan!es or that a persons "ust be treated in the sa"e "anner, the !onditions
not bein$ different both in the privie$es !onferred and the iabiities i"posed (Ibid., p.
332+.
Finay under the 2ea Property -a, &ode (P.5. 434 as a"ended+, it is de!ared that the
first Funda"enta Prin!ipe to $uide the appraisa and assess"ent of rea property for
ta,ation purposes is that the property "ust be :appraised at its !urrent and fair "arCet
vaue.:
#y no stren$th of the i"a$ination !an the "arCet vaue of properties !overed by P.5.
)o. 21 be e8uated with the "arCet vaue of properties not so !overed. -he for"er has
naturay a "u!h esser "arCet vaue in view of the renta restri!tions.
'roni!ay, in the !ase at bar, not even the fa!tors deter"inant of the assessed vaue of
sub;e!t properties under the :!o"parabe saes approa!h: were presented by the pubi!
respondents, na"ey4 (1+ that the sae "ust represent a bonafide ar"0s en$th
transa!tion between a wiin$ seer and a wiin$ buyer and (2+ the property "ust be
!o"parabe property ($ollo, p. 2*+. )othin$ !an ;ustify or support their view as it is of
;udi!ia noti!e that for properties !overed by P.5. 21 espe!iay durin$ the ti"e in
8uestion, there were hardy any wiin$ buyers. As a $enera rue, there were no taCers
so that there !an be no reasonabe basis for the !on!usion that these properties were
!o"parabe with other residentia properties not burdened by P.5. 21. )either !an the
$iven !ir!u"stan!es be non!haanty dis"issed by pubi! respondents as i"posed
under distressed !onditions !eary i"pyin$ that the sa"e were "erey te"porary in
!hara!ter. At this point in ti"e, the fasity of su!h pre"ises !annot be "ore !onvin!in$y
de"onstrated by the fa!t that the aw has e,isted for around twenty (21+ years with no
end to it in si$ht.
Deriy, ta,es are the ifebood of the $overn"ent and so shoud be !oe!ted without
unne!essary hindran!e. ?owever, su!h !oe!tion shoud be "ade in a!!ordan!e with
aw as any arbitrariness wi ne$ate the very reason for $overn"ent itsef 't is therefore
ne!essary to re!on!ie the apparenty !onfi!tin$ interests of the authorities and the
ta,payers so that the rea purpose of ta,ations, whi!h is the pro"otion of the !o""on
$ood, "ay be a!hieved (&o""issioner of 'nterna 2evenue v. A$ue 'n!., et a., 15/
9&2A 9 O19//P+. &onse8uenty, it stands to reason that petitioners who are burdened by
the $overn"ent by its 2enta FreeFin$ Eaws (then 2.A. )o. 3359 and P.5. 21+ under the
prin!ipe of so!ia ;usti!e shoud not now be penaiFed by the sa"e $overn"ent by the
i"position of e,!essive ta,es petitioners !an i afford and eventuay resut in the
forfeiture of their properties.
#y the pubi! respondents0 own !o"putation the assess"ent by in!o"e approa!h woud
a"ount to ony P11.11 per s8. "eter at the ti"e in 8uestion.
P2%M'9%9 &O)9'5%2%5, (a+ the petition is @2A)-%5< (b+ the assaied de!isions of
pubi! respondents are 2%D%29%5 and 9%- A9'5%< and (e+ the respondent #oard of
Assess"ent Appeas of Mania and the &ity Assessor of Mania are ordered to "aCe a
new assess"ent by the in!o"e approa!h "ethod to $uarantee a fairer and "ore
reaisti! basis of !o"putation ($ollo, p. *1+.
9O O25%2%5.
9. PB COM VS CIR 302 SCRA 250
10. P!". B#$% &' C&(()$!*#+!&$, -,. CIR
11. P.IL. BAN/ OF COMMUNICA0IONS -. CIR
GR N&. 1120241 2#$)#34 281 1999
302 SCRA 250
FAC0S5 P6+!+!&$63 PBC&( 7"68 !+, 73,+ #$8 ,6*&$8 9)#3+63 !$*&(6 +#:
36+)3$,1 36;&3+68 ;3&7+,1 #$8 ;#!8 !$*&(6
+#:6, #(&)$+!$< +& P5.2M !$ 1985. .&=6-631 #+ +6 6$8 &' +6 46#3
PBC&( ,)>6368 "&,,6, ,& +#+ =6$ !+ 7"68
!+, A$$)#" I$*&(6 0#: R6+)3$, '&3 +6 46#3?6$868 D6*6(@63 311 19861
+6 ;6+!+!&$63 "!%6=!,6 36;&3+68 # $6+
"&,, &' P14.1 M1 #$8 +), 86*"#368 $& +#: ;#4#@"6 '&3 +6 46#3. I$ 19881
+6 @#$% 369)6,+68 '3&( CIR '&3 # +#:
*368!+ #$8 +#: 36')$8, 36;36,6$+!$< &-63;#4(6$+ &' +#:6,. P6$8!$<
!$-6,+!<#+!&$ &' +6 36,;&$86$+ CIR1
;6+!+!&$63 !$,+!+)+68 # P6+!+!&$ '&3 R6-!6= @6'&36 +6 C&)3+ &' 0#:
A;;6#", AC0AB. C0A 86$!68 !+, ;6+!+!&$ '&3 +#:
*368!+ #$8 36')$8 '&3 '#!"!$< +& 7"6 =!+!$ +6 ;36,*3!;+!-6 ;63!&8 +&
=!* +6 ;6+!+!&$63 @6"!6, #3<)!$< +6
R6-6$)6 C!3*)"#3 N&.7?85 !,,)68 @4 +6 CIR !+,6"' ,+#+6, +#+ *"#!( '&3
&-63;#!8 +#:6, #36 $&+ *&-6368 @4 +6
+=&?46#3 ;36,*3!;+!-6 ;63!&8 (#$8#+68 )$863 +6 0#: C&86.
ISSUE5 I, +6 *&$+6$+!&$ &' +6 ;6+!+!&$63 *&336*+C I, +6 36-6$)6
*!3*)"#3 # -#"!8 6:6(;+!&$ +& +6 NIRCC
.ELD5 N&. 06 36"#:#+!&$ &' 36-6$)6 36<)"#+!&$, @4 RMC 7?85 !, $&+
=#33#$+68 #, !+ 8!,36<#38, +6 +=&?46#3
;36,*3!;+!-6 ;63!&8 ,6+ @4 "#=.
B#,!* !, +6 ;3!$*!;"6 +#+ D+#:6, #36 +6 "!'6@"&&8 &' +6 $#+!&$.D 06
;3!(#34 ;)3;&,6 !, +& <6$63#+6 ')$8, '&3
+6 S+#+6 +& 7$#$*6 +6 $668, &' +6 *!+!E6$34 #$8 +& #8-#$*6 +6
*&((&$ =6#". D)6 ;3&*6,, &' "#= )$863 +6
C&$,+!+)+!&$ 8&6, $&+ 369)!36 F)8!*!#" ;3&*668!$<, !$ +#: *#,6,. 0!,
(),+ $6*6,,#3!"4 @6 ,& @6*#),6 !+ !, );&$
+#:#+!&$ +#+ +6 <&-63$(6$+ *!6G4 36"!6, +& &@+#!$ +6 (6#$, +&
*#334 &$ !+, &;63#+!&$, #$8 !+ !, &' )+(&,+
!(;&3+#$*6 +#+ +6 (&86, #8&;+68 +& 6$'&3*6 +6 *&""6*+!&$ &' +#:6,
"6-!68 ,&)"8 @6 ,)((#34 #$8 !$+63'6368
=!+ #, "!++"6 #, ;&,,!@"6.
F3&( +6 ,#(6 ;63,;6*+!-61 *"#!(, '&3 36')$8 &3 +#: *368!+ ,&)"8 @6
6:63*!,68 =!+!$ +6 +!(6 7:68 @4 "#=
@6*#),6 +6 BIR @6!$< #$ #8(!$!,+3#+!-6 @&84 6$'&3*68 +& *&""6*+
+#:6,1 !+, ')$*+!&$, ,&)"8 $&+ @6 )$8)"4
86"#468 &3 #(;6368 @4 !$*!86$+#" (#++63,.
10. P.IL GUARAN0Y VS CIR 13 SCRA 775H
G.R. No. L-22074 pr+1 30, 1965
T5E $5ILI$$INE G"RNT6 CO., INC., petitioner,
vs.
T5E COMMISSIONER OF INTERNL RE!EN"E &(, T5E CO"RT OF T9
$$ELS, respondents.
7osue +. Gustilo and $amire8 and Orti%as for petitioner.
Office of the Solicitor General and *ttorne 6.G. Salda5ena for respondents.
#ENG.ON, /.$., J.:
-he Phiippine @uaranty &o., 'n!., a do"esti! insuran!e !o"pany, entered into
reinsuran!e !ontra!ts, on various dates, with forei$n insuran!e !o"panies not doin$
business in the Phiippines na"ey4 '"perio &o"paUia de 9e$uros, Ea >nion y % Feni,
%spaUo, Overseas Assuran!e &orp., Etd., 9o!ieded Anoni"a de 2ease$uros AianFa,
-oCio Marino G Fire 'nsuran!e &o., Etd., >nion Assuran!e 9o!iety Etd., 9wiss
2einsuran!e &o"pany and -ariff 2einsuran!e Ei"ited. Phiippine @uaranty &o., 'n!.,
thereby a$reed to !ede to the forei$n reinsurers a portion of the pre"iu"s on insuran!e
it has ori$inay underwritten in the Phiippines, in !onsideration for the assu"ption by
the atter of iabiity on an e8uivaent portion of the risCs insured. 9aid reinsurran!e
!ontra!ts were si$ned by Phiippine @uaranty &o., 'n!. in Mania and by the forei$n
reinsurers outside the Phiippines, e,!ept the !ontra!t with 9wiss 2einsuran!e
&o"pany, whi!h was si$ned by both parties in 9witFerand.
-he reinsuran!e !ontra!ts "ade the !o""en!e"ent of the reinsurers0 iabiity
si"utaneous with that of Phiippine @uaranty &o., 'n!. under the ori$ina insuran!e.
Phiippine @uaranty &o., 'n!. was re8uired to Ceep a re$ister in Mania where the risCs
!eded to the forei$n reinsurers where entered, and entry therein was bindin$ upon the
reinsurers. A proportionate a"ount of ta,es on insuran!e pre"iu"s not re!overed fro"
the ori$ina assured were to be paid for by the forei$n reinsurers. -he forei$n reinsurers
further a$reed, in !onsideration for "ana$in$ or ad"inisterin$ their affairs in the
Phiippines, to !o"pensate the Phiippine @uaranty &o., 'n!., in an a"ount e8ua to 56
of the reinsuran!e pre"iu"s. &onfi!ts andBor differen!es between the parties under the
reinsuran!e !ontra!ts were to be arbitrated in Mania. Phiippine @uaranty &o., 'n!. and
9wiss 2einsuran!e &o"pany stipuated that their !ontra!t sha be !onstrued by the
aws of the Phiippines.
Pursuant to the aforesaid reinsuran!e !ontra!ts, Phiippine @uaranty &o., 'n!. !eded to
the forei$n reinsurers the foowin$ pre"iu"s4
1953 . . . . . . . . . . . . . . . . . . . . . P/42,433.*1
1954 . . . . . . . . . . . . . . . . . . . . . *21,4*1./5
9aid pre"iu"s were e,!uded by Phiippine @uaranty &o., 'n!. fro" its $ross in!o"e
when it fie its in!o"e ta, returns for 1953 and 1954. Further"ore, it did not withhod or
pay ta, on the". &onse8uenty, per etter dated Apri 13, 1959, the &o""issioner of
'nterna 2evenue assessed a$ainst Phiippine @uaranty &o., 'n!. withhodin$ ta, on the
!eded reinsuran!e pre"iu"s, thus4
1953
@ross pre"iu" per investi$ation . . . . . . . . . . P*3/,5/1.11
=ithhodin$ ta, due thereon at 246 . . . . . . . . P1/4,459.11
256 sur!har$e . . . . . . . . . . . . . . . . . . . . . . . . . . 43,114.11
&o"pro"ise for nonAfiin$ of withhodin$
in!o"e ta, return . . . . . . . . . . . . . . . . . . . . . . . . .
111.11
-O-AE AMO>)- 5>% G &OEE%&-'#E% . . . . P231,3*3.11
7777777777
1954
@ross pre"iu" per investi$ation . . . . . . . . . . P*/1.//1.3/
=ithhodin$ ta, due thereon at 246 . . . . . . . . P1/4,411.11
256 sur!har$e . . . . . . . . . . . . . . . . . . . . . . . . . . P1/4,411.11
&o"pro"ise for nonAfiin$ of withhodin$
in!o"e ta, return . . . . . . . . . . . . . . . . . . . . . . . . .
111.11
-O-AE AMO>)- 5>% G &OEE%&-'#E% . . . . P234,334.11
7777777777
Phiippine @uaranty &o., 'n!., protested the assess"ent on the $round that reinsuran!e
pre"iu"s !eded to forei$n reinsurers not doin$ business in the Phiippines are not
sub;e!t to withhodin$ ta,. 'ts protest was denied and it appeaed to the &ourt of -a,
Appeas.
On .uy 3, 1933, the &ourt of -a, Appeas rendered ;ud$"ent with this dispositive
portion4
') D'%= OF -?% FO2%@O')@ &O)9'5%2A-'O)9, petitioner Phiippine
@uaranty &o., 'n!. is hereby ordered to pay to the &o""issioner of 'nterna
2evenue the respe!tive su"s of P212,192.11 and P1*3,153.11 or the tota su"
of P3*5,345.11 as withhodin$ in!o"e ta,es for the years 1953 and 1954, pus
the statutory dein8uen!y penaties thereon. =ith !osts a$ainst petitioner.
Phiippine @uaranty &o, 'n!. has appeaed, 8uestionin$ the e$aity of the &o""issioner
of 'nterna 2evenue0s assess"ent for withhodin$ ta, on the reinsuran!e pre"iu"s
!eded in 1953 and 1954 to the forei$n reinsurers.
Petitioner "aintain that the reinsuran!e pre"iu"s in 8uestion did not !onstitute in!o"e
fro" sour!es within the Phiippines be!ause the forei$n reinsurers did not en$a$e in
business in the Phiippines, nor did they have offi!e here.
-he reinsuran!e !ontra!ts, however, show that the transa!tions or a!tivities that
!onstituted the undertaCin$ to reinsure Phiippine @uaranty &o., 'n!. a$ainst oses
arisin$ fro" the ori$ina insuran!es in the Phiippines were perfor"ed in the Phiippines.
-he iabiity of the forei$n reinsurers !o""en!ed si"utaneousy with the iabiity of
Phiippine @uaranty &o., 'n!. under the ori$ina insuran!es. Phiippine @uaranty &o.,
'n!. Cept in Mania a re$ister of the risCs !eded to the forei$n reinsurers. %ntries "ade in
su!h re$ister bound the forei$n resinsurers, o!aiFin$ in the Phiippines the a!tua
!ession of the risCs and pre"iu"s and assu"ption of the reinsuran!e undertaCin$ by
the forei$n reinsurers. -a,es on pre"iu"s i"posed by 9e!tion 259 of the -a, &ode for
the privie$e of doin$ insuran!e business in the Phiippines were payabe by the forei$n
reinsurers when the sa"e were not re!overabe fro" the ori$ina assured. -he forei$n
reinsurers paid Phiippine @uaranty &o., 'n!. an a"ount e8uivaent to 56 of the !eded
pre"iu"s, in !onsideration for ad"inistration and "ana$e"ent by the atter of the
affairs of the for"er in the Phiippines in re$ard to their reinsuran!e a!tivities here.
5isputes and differen!es between the parties were sub;e!t to arbitration in the &ity of
Mania. A the reinsuran!e !ontra!ts, e,!ept that with 9wiss 2einsuran!e &o"pany,
were si$ned by Phiippine @uaranty &o., 'n!. in the Phiippines and ater si$ned by the
forei$n reinsurers abroad. Athou$h the !ontra!t between Phiippine @uaranty &o., 'n!.
and 9wiss 2einsuran!e &o"pany was si$ned by both parties in 9witFerand, the sa"e
spe!ifi!ay provided that its provision sha be !onstrued a!!ordin$ to the aws of the
Phiippines, thereby "anifestin$ a !ear intention of the parties to sub;e!t the"seves to
Phiippine aw.
9e!tion 24 of the -a, &ode sub;e!ts forei$n !orporations to ta, on their in!o"e fro"
sour!es within the Phiippines. -he word :sour!es: has been interpreted as the a!tivity,
property or servi!e $ivin$ rise to the in!o"e.
1
-he reinsuran!e pre"iu"s were in!o"e
!reated fro" the undertaCin$ of the forei$n reinsuran!e !o"panies to reinsure
Phiippine @uaranty &o., 'n!., a$ainst iabiity for oss under ori$ina insuran!es. 9u!h
undertaCin$, as e,pained above, tooC pa!e in the Phiippines. -hese insuran!e
pre"iu"s, therefore, !a"e fro" sour!es within the Phiippines and, hen!e, are sub;e!t
to !orporate in!o"e ta,.
-he forei$n insurers0 pa!e of business shoud not be !onfused with their pa!e of
a!tivity. Business shoud not be !ontinuity and pro$ression of transa!tions
2
whie a!tivity
"ay !onsist of ony a sin$e transa!tion. An a!tivity "ay o!!ur outside the pa!e of
business. 9e!tion 24 of the -a, &ode does not re8uire a forei$n !orporation to en$a$e
in business in the Phiippines in sub;e!tin$ its in!o"e to ta,. 't suffi!es that the a!tivity
!reatin$ the in!o"e is perfor"ed or done in the Phiippines. =hat is !ontroin$,
therefore, is not the pa!e of business but the pa!e ofactivit that !reated an in!o"e.
Petitioner further !ontends that the reinsuran!e pre"iu"s are not in!o"e fro" sour!es
within the Phiippines be!ause they are not spe!ifi!ay "entioned in 9e!tion 3* of the
-a, &ode. 9e!tion 3* is not an aAin!usive enu"eration, for it "erey dire!ts that the
Cinds of in!o"e "entioned therein shoud be treated as in!o"e fro" sour!es within the
Phiippines but it does not re8uire that other Cinds of in!o"e shoud not be !onsidered
iCewise.19wph:1.;<t
-he power to ta, is an attribute of soverei$nty. 't is a power e"anatin$ fro" ne!essity. 't
is a ne!essary burden to preserve the 9tate0s soverei$nty and a "eans to $ive the
!itiFenry an ar"y to resist an a$$ression, a navy to defend its shores fro" invasion, a
!orps of !ivi servants to serve, pubi! i"prove"ent desi$ned for the en;oy"ent of the
!itiFenry and those whi!h !o"e within the 9tate0s territory, and fa!iities and prote!tion
whi!h a $overn"ent is supposed to provide. &onsiderin$ that the reinsuran!e pre"iu"s
in 8uestion were afforded prote!tion by the $overn"ent and the re!ipient forei$n
reinsurers e,er!ised ri$hts and privie$es $uaranteed by our aws, su!h reinsuran!e
pre"iu"s and reinsurers shoud share the burden of "aintainin$ the state.
Petitioner woud wish to stress that its reian!e in $ood faith on the ruin$s of the
&o""issioner of 'nterna 2evenue re8uirin$ no withhodin$ of the ta, due on the
reinsuran!e pre"iu"s in 8uestion reieved it of the duty to pay the !orrespondin$
withhodin$ ta, thereon. -his defense of petitioner "ay free if fro" the pay"ent of
sur!har$es or penaties i"posed for faiure to pay the !orrespondin$ withhodin$ ta,,
but it !ertainy woud not e,!upate if fro" iabiity to pay su!h withhodin$ ta, -he
@overn"ent is not estopped fro" !oe!tin$ ta,es by the "istaCes or errors of its
a$ents.
3
'n respe!t to the 8uestion of whether or not reinsuran!e pre"iu"s !eded to forei$n
reinsurers not doin$ business in the Phiippines are sub;e!t to withhodin$ ta, under
9e!tion 53 and 54 of the -a, &ode, suffi!e it to state that this 8uestion has aready been
answered in the affir"ative in *le!ander +owden ' #o." 0td. vs. #ollector of Internal
$evenue, EA19393, Apri 14, 1935.
Finay, petitioner !ontends that the withhodin$ ta, shoud be !o"puted fro" the
a"ount a!tuay re"itted to the forei$n reinsurers instead of fro" the tota a"ount
!eded. And sin!e it did not re"it any a"ount to its forei$n insurers in 1953 and 1954, no
withhodin$ ta, was due.
-he pertinent se!tion of the -a, &ode 9tates4
9e!. 54. Pament of corporation income ta! at source. N 'n the !ase of forei$n
!orporations sub;e!t to ta,ation under this -ite not en$a$ed in trade or business
within the Phiippines and not havin$ any offi!e or pa!e of business therein,
there sha be dedu!ted and withhed at the sour!e in the sa"e "anner and upon
the sa"e ite"s as is provided in 9e!tion fiftyAthree a ta, e8ua to twentyAfour per
centum thereof, and su!h ta, sha be returned and paid in the sa"e "anner and
sub;e!t to the sa"e !onditions as provided in that se!tion.
-he appi!abe portion of 9e!tion 53 provides4
(b+ 1onresident aliens. N A persons, !orporations and $enera !opartnerships
(!o"paUias colectivas+, in what ever !apa!ity a!tin$, in!udin$ essees or
"ort$a$ors of rea or persona property, trustees a!tin$ in any trust !apa!ity,
e,e!utors, ad"inistrators, re!eivers, !onservators, fidu!iaries, e"poyers, and a
offi!ers and e"poyees of the @overn"ent of the Phiippines havin$ the !ontro,
re!eipt, !ustody, disposa, or pay"ent of interest, dividends, rents, saaries,
wa$es, pre"iu"s, annuities, !o"pensation, re"unerations, e"ou"ents, or
other fi,ed or deter"inabe annua or periodi!a $ains, profits, and in!o"e of any
nonresident aien individua, not en$a$ed in trade or business within the
Phiippines and not havin$ any offi!e or pa!e of business therein, sha (e,!ept in
the !ase provided for in subse!tion OaP of this se!tion+ dedu!t and withhod fro"
su!h annua or periodi!a $ains, profits, and in!o"e a ta, e8ua to tweve per
centum thereof4 Provided -hat no dedu!tions or withhodin$ sha be re8uired in
the !ase of dividends paid by a forei$n !orporation uness (1+ su!h !orporation is
en$a$ed in trade or business within the Phiippines or has an offi!e or pa!e of
business therein, and (2+ "ore than ei$htyAfive per centum of the $ross in!o"e
of su!h !orporation for the threeAyear period endin$ with the !ose of its ta,abe
year pre!edin$ the de!aration of su!h dividends (or for su!h part of su!h period
as the !orporation has been in e,isten!e+was derived fro" sour!es within the
Phiippines as deter"ined under the provisions of se!tion thirtyA
seven4Provided, further, -hat the &oe!tor of 'nterna 2evenue "ay authoriFe
su!h ta, to be dedu!ted and withhed fro" the interest upon any se!urities the
owners of whi!h are not Cnown to the withhodin$ a$ent.
-he aboveA8uoted provisions aow no dedu!tion fro" the in!o"e therein enu"erated in
deter"inin$ the a"ount to be withhed. A!!ordin$, in !o"putin$ the withhodin$ ta, due
on the reinsuran!e pre"iu" in 8uestion, no dedu!tion sha be re!o$niFed.
=?%2%FO2%, in affir"in$ the de!ision appeaed fro", the Phiippine @uaranty &o.,
'n!. is hereby ordered to pay to the &o""issioner of 'nterna 2evenue the su"s of
P212,192.11 and P1*3,153.11, or a tota a"ount of P3*5,345.11, as withhodin$ ta, for
the years 1953 and 1954, respe!tivey. 'f the a"ount of P3*5,345.11 is not paid within
31 days fro" the date this ;ud$e"ent be!o"es fina, there sha be !oe!ted a
sur!har$ed of 56 on the a"ount unpaid, pus interest at the rate of 16 a "onth fro"
the date of dein8uen!y to the date of pay"ent, provided that the "a,i"u" a"ount that
"ay be !oe!ted as interest sha not e,!eed the a"ount !orrespondin$ to a period of
three (3+ years. =ith !osts a$ainsts petitioner.
12. P.ILEI MINING CORP VS CIR 294 SCRA 687
:G.R. No. 120324. pr+1 21, 1999;
$5ILE9 MINING COR$ORTION, petitioner, vs. COMMISSIONER OF INTERNL
RE!EN"E, N% T5E CO"RT OF $$ELS, respondents.
% E C I S I O N
A"IS"M#ING, J.>
-his petition for certiorari pursuant to 2ue 45 of the 2ues of &ourt seeCs to set
aside the May 1/, 1995 5e!ision
O1P
of the &ourt of Appeas in &AA@2 9P )o. 349//,
whi!h affir"ed the 5e!ision of the &ourt of the -a, Appeas in &-A &ase )o. 354*. -he
&ourt of -a, Appeas disposed of the !ase as foows4
Q=?%2%FO2%, the respondent, &OMM'99'O)%2 OF ')-%2)AE 2%D%)>% is hereby
ordered to 2%F>)5 in favor of petitioner, P?'E%K M')')@ &O2P., the su"
of P13,*4*.33 without interest, e8uivaent to 256 partia refund of spe!ifi! ta,es paid on
its pur!hases of $asoine, ois and ubri!ants, diese and fue ois pursuant to the
provision of 9e!tion 5 of 2epubi! A!t )o. 1435, in reation to 9e!tion 142 (b+ and (!+ of
the )ationa 'nterna 2evenue &ode and 9e!tion 145 as pres!ribed under 9e!tions 1
and 2 of 2.A. )o. 1435.
)o pronoun!e"ent as to !osts.
9O O25%2%5.R
O2P
As set forth in the de!ision of the &ourt of Appeas, the foowin$ reevant in!idents
tooC pa!e4
Petitioner as a do"esti! "inin$ !orporation had entered into a Minin$ Ei!ense
A$ree"ent with the then Ministry of )atura 2esour!es (now the 5epart"ent of
%nviron"ent and )atura 2esour!es+. Fro" the period .uy 1, 19/1 to 5e!e"ber 31,
19/1, petitioner pur!hased fro" severa oi !o"panies, refined and "anufa!tured
"inera ois, "otor fues, and diese fue ois. -he spe!ifi! ta,es passed on to the
petitioner a"ounted to two "iion, four hundred ninetyAtwo thousand, si, hundred
seventyAseven pesos and twentyAtwo !entavos (P2,492,3**.22+.
On O!tober 22, 19/2, pursuant to 2epubi! A!t )o. 1435, petitioner fied a !ai" for
refund with the &o""issioner of 'nterna 2evenue (&'2+ for si, hundred twentyAthree
thousand, one hundred si,tyAnine pesos and thirty !entavos (P323,139.31+,
representin$ the twentyAfive (256+ per!ent of the spe!ifi! ta,es paid. -he petitioner
presented as eviden!e the affidavits of its president, pur!hasin$ "ana$er, and two
disinterested representatives of another i!ensed "inin$ !orporation. -hey averred that
for the period .uy 19/1 to 5e!e"ber 19/1, petitioner used refined and "anufa!tured
"inera ois, "otor fues and diese fue ois in their business operation and paid the
!orrespondin$ spe!ifi! ta,es.
Pendin$ &'2 a!tion, on )ove"ber 13, 19/2, the petitioner fied a !ase for ta, refund
with the &ourt of -a, Appeas (&-A+. -he petitioner sou$ht ;ud$"ent orderin$ the &'2
to pay as refund the a"ount of P323,139.31, with twenty (216+ per!ent interest per
annu", pus the !osts of suit.
On Au$ust 4, 1994, the &-A rendered its de!ision, 8uoted at the outset, $rantin$ the
petitionerSs !ai", but ony to the e,tent of si,teen thousand, seven hundred fortyAseven
pesos and thirtyAsi, !entavos (P13,*4*.33+.
-he &ourt of Appeas affir"ed the de!ision of the &-A. #efore us, the petitioner
now !ites the foowin$ ae$ed errors of the &ourt of Appeas4
:'. #A9')@ -?% 2%F>)5 O) -?% AMO>)-9 5%%M%5 PA'5
>)5%2 9%&-'O)9 1 A)5 2 OF 2.A. )O. 1435 '9 &O)-2A2I -O -?%
9>P2%M% &O>2-S9 %) #A)& 5%&'9'O) ') I1S=0*$ 0=MB&$ #O.
6. #O=$) O( )*> *PP&*0S =?'&? @2A)-%5 -?% &EA'M FO2
PA2-'AE 2%F>)5 O) -?% #A9'9 OF 9P%&'F'& -AK%9 A&->AEEI
PA'5 #I -?% &EA'MA)- ='-?O>- M>AE'F'&A-'O) O2 E'M'-A-'O).
:''. -?% 9A'5 2>E')@ OF -?% 2%9PO)5%)- &O>2- '@)O2%9 -?%
')&2%A9% ') 2A-%9 'MPO9%5 #I 9>&&%%5')@ AM%)5A-O2I
EA=9, >)5%2 =?'&? -?% P%-'-'O)%2 PA'5 -?% 9P%&'F'& -AK%9
O) MA)>FA&->2%5 A)5 5'%9%E F>%E9.
:'''. ') MAJ')@ -?% 2>E')@, -?% 2%9PO)5%)- &O>2- =%)-
A@A')9- -?% %9-A#E'9?%5 2>E%9 OF &O)9-2>&-'O) ') -?A- '-
E%)- '-9%EF -O ')-%2P2%-')@ 9%&-'O) 5 OF 2.A. )O. 1435,
=?%) -?% &O)9-2>&-'O) OF 9A'5 EA= '9 )O- )%&%99A2I.
:'D. 9%&-'O)9 1 A)5 2 OF 2.A. )O. 1435 A2% )O- -?% OP%2A-'D%
P2OD'9'O)9 -O #% APPE'%5 #>- 2A-?%2, 9%&-'O)9 142 A)5 145
(=?'&? =O>E5 #%&OM% 9%&-'O)9 153 A)5 153+ OF -?%
)A-'O)AE ')-%2)AE 2%D%)>% &O5%, A9 AM%)5%5.
:D. #A9')@ -?% &OMP>-A-'O) OF -?% PA2-'AE -AK 2%F>)5 O)
9%&-'O)9 1 A)5 2 OF 2.A. )O. 1435, 2A-?%2 -?A) O) 9%&-'O)9
153 A)5 153 OF -?% )A-'O)AE ')-%2)AE 2%D%)>% &O5%, '9
>)FA'2, %22O)%O>9, A2#'-2A2I, ')%M>'-A#E% A)5
OPP2%99'D%.R
O3P
-here are two !earA!ut issues now raised before the &ourt4
1+ =hether respondent !ourt erred in basin$ the ta, refund under 9e!tions 1
and 2 of 2.A. 1435, instead of the in!reased rates i"posed by 9e!tions 142
and 145 (whi!h be!a"e 9e!tions 153 and 153+ of the )ationa 'nterna
2evenue &ode, as a"ended.
2+ =hether the respondent !ourt erred in reyin$ on the 9upre"e &ourtSs
de!ision in #ommissioner of Internal $evenue vs. $io )uba 1ic2el Minin%
#orp.
O4P
whi!h ae$edy runs !ounter to the &ourtSs de!ision in Insular
0umber #o. vs. #ourt of )a! *ppeals.
O5P
2.A. 1435, QAn A!t to Provide Means for 'n!reasin$ the ?i$hway 9pe!ia Fund,R
states that the spe!ifi! ta,es !oe!ted on $asoine and fue whi!h a!!rue to the Fund
sha be used for the !onstru!tion and "aintenan!e of the hi$hway syste". Minin$ and
u"ber !o"panies sedo" use nationa hi$hways. 9in!e the $asoine and fue
pur!hased by "inin$ and u"ber !o"panies are used within their own !o"pounds and
roads, and they do not benefit dire!ty fro" the Fund, the $overn"ent $ranted to these
!o"panies a 256 partia refund of spe!ifi! ta,es paid on pur!hases of "anufa!tured
diese and fue ois. -his ta, reief was e"bodied in 9e!tion 5 of 2.A. )o. 1435, whi!h
states4
QSec. ? of 2.A. 1435 AA -he pro!eeds of the additiona ta, on "anufa!tured ois sha
a!!rue to the road and brid$e funds of the poiti!a subdivision for whose benefit the ta,
is !oe!ted4 Provided" however" -hat whenever any ois "entioned above are used by
"iners or forest !on!essionaires in their operations, twentyAfive per centum of the
spe!ifi! ta, paid thereon sha be refunded by the &oe!tor of 'nterna 2evenue upon
sub"ission of proof of a!tua use of ois and under si"iar !onditions enu"erated in
subApara$raphs one and two of se!tion one hereof, a"endin$ se!tion one hundred
fortyAtwo of the 'nterna 2evenue &ode4 Provided, further, -hat no new road sha be
!onstru!ted uness the routes or o!ation thereof sha have been approved by the
&o""issioner of Pubi! ?i$hways after a deter"ination that su!h road !an be "ade
part of an inte$ra and arti!uated route in the Phiippine ?i$hway 9yste", as re8uired in
se!tion twentyAsi, of the Phiippine ?i$hway A!t of 1953.R
'n 19**, P.5. 115/ !odified a e,istin$ aws. 9e!tions 142 and 145 of the -a, &ode,
as a"ended by 9e!tions 1 and 2 of 2.A. 1435 were reAnu"bered to 9e!tions 153 and
153.
O3P
Eater, these se!tions were a"ended by P.5. )o. 13*2 and subse8uenty by %.O.
3*2 in!reasin$ the ta, rates for !ertain oi and fue produ!ts.
O*P
=hen the ?i$hway
9pe!ia Fund was aboished in 19/5, the reason for the refund !eased to e,ist.
-his &ourt, in a strin$ of de!isions, repeatedy hed that the ta, refund under 2.A.
1435 is !o"puted on the basis of the spe!ifi! ta, dee"ed paid under 9e!tions 1 and 2,
and not on the in!reased rates a!tuay paid under the 19** )'2&. A"on$ these !ases,
are #I$ vs. $io )uba 1ic2el Minin% #orporation"
O/P
#I$ vs. #* and *tlas #onsolidated
Minin% and /evelopment #orp."
O9P
en banc@s ruin$ in /avao Gulf 0umber #orporation
vs. #I$ and #*"
O11P
*tlas #onsolidated Minin% and /evelopment #orp. vs. #I$" et. al.
O11P
and the re!enty de!ided !onsoidated !ases of #I$ vs. #.*. and #/#P Minin%
#orporation
O12P
and Sirawai Plwood ' 0umber #o." Inc. vs. #* and #I$..
O13P
-he funda"enta issues raised herein appear to be the very issues setted in the
!ase of /avao Gulf 0umber #orporation vs. #I$ and #*.
O14P
=e are $uided and
!onstrained by this pre!edent in now rea!hin$ a si"iar resoution of the issues, adverse
to herein petitioner.
'n /avao Gulf, the &ourt en banc hed4
Q, , , 9in!e the partia refund authoriFed under 9e!tion 5, 2.A. 1435, is in the nature of
a ta, e,e"ption, it "ust be !onstrued strictissimi 5uris a$ainst the $rantee. ?en!e,
petitionerSs !ai" of refund on the basis of the spe!ifi! ta,es it a!tuay paid "ust
e,pressy be $ranted in a statute stated in a an$ua$e too !ear to be "istaCen.
=e have !arefuy s!rutiniFed 2.A. 1435 and the subse8uent pertinent statutes and
found no e,pression of a e$isative wi authoriFin$ a refund based on the hi$her rates
!ai"ed by petitioner. , , , =hen the aw itsef does not e,pi!ity provide that a refund
under 2.A. 1435 "ay be based on hi$her rates whi!h were nonAe,istent at the ti"e of
its ena!t"ent, this &ourt !annot presu"e otherwise. A e$isative a!una !annot be
fied by ;udi!ia fiat.R (!itations o"itted+
O15P
'n /avao Gulf" the &ourt aso aid to rest the ae$ed !onfi!t between the Insular
0umber and the $io )uba de!isions, in this "anner4
Q'nsuar Eu"ber &o. de!ided a !ai" for refund on spe!ifi! ta, paid on petroeu"
produ!ts pur!hased in the year 1933, when the in!reased rates under the )'2& of 19**
were not yet in effe!t. -hus, the issue now before us did not e,ist at the ti"e, sin!e the
appi!abe rates were sti those pres!ribed under 9e!tions 1 and 2 of 2.A. 1435.
, , , , , , , , ,
&eary it is i"possibe for these two de!isions to !ash with our pronoun!e"ents in 2io
-uba and se!ond Atas !ase, in whi!h we rued that the refund $ranted be !o"puted on
the basis of the a"ounts dee"ed paid under 9e!tions 1 and 2 of 2.A. 1435. 'n the
i$ht, we find no basis for petitionerSs invo!ation of the !onstitutiona pros!ription that Tno
do!trine or prin!ipe of aw aid down by the &ourt in a de!ision rendered en ban! or in
division "ay be "odified or reversed e,!ept by the &ourt sittin$ en ban!.S
Finay, petitioner asserts that e8uity and ;usti!e de"and that the !o"putation of the ta,
refunds be based on a!tua a"ounts paid under 9e!tions 153 and 153 of the )'2&. =e
disa$ree. A!!ordin$ to an e"inent authority on ta,ation, Tthere is no ta, e,e"ption
soey on the $round of e8uity.SR (!itations o"itted+
O13P
-he subse8uent !odifi!ation of ta, aws under the 19** )'2&, 9e!tions 153 and
153, "andated the in!reased rates of spe!ifi! ta,es evied on "anufa!tured ois, other
fues and diese fue ois. Athou$h Phie, Minin$ &orporation paid the ta,es on their oi
and fue pur!hases based on the in!reased rates, the atter aw did not spe!ifi!ay
provide for a refund based on the in!reased rates. 9in!e the $rant of refund privie$es
"ust be stri!ty !onstrued a$ainst the ta,payer, the basis for the refund re"ains to be
the a"ounts dee"ed paid under 9e!tions 1 and 2 of 2.A. 1435.
O1*P
Further"ore, the
!ai"s for refund whi!h were not fied with the &'2 and those that pres!ribed "ust be
dee"ed e,!uded, for bein$ outside the a"bit of the e$isative ena!t"ent.
As to the 216 interest per annu" prayed by the petitioner, we reiterate our
pronoun!e"ent in $io )uba, where no interest was awarded athou$h the !ai" for
refund was $ranted. As apty stated by the &-A, vi8.3
Q, , , O-Phe rue is that no interest on refund of ta, !an be awarded uness authoriFed by
aw or the !oe!tion of the ta, was attended by arbitrariness. An a!tion is not arbitrary
when e,er!ised honesty and upon due !onsideration where there is roo" for two
opinions, however "u!h it "ay be beieved that an erroneous !on!usion was rea!hed.
Arbitrariness presupposes ine,!usabe or obstinate disre$ard of e$a provisions. )one
of the e,!eptions are present in the !ase at bar. 2espondentSs de!ision denyin$
petitionerSs !ai" for refund was based on an honest interpretation of aw. =e, therefore
see no reason why petitioner shoud be entited to the pay"ent of interest. (!itations
o"itted+R
O1/P
=5EREFORE, the instant petition is hereby 5%)'%5, and the assaied de!ision of
the &ourt of Appeas is hereby AFF'2M%5.
&osts a$ainst petitioner.
SO OR%ERE%.
13. NOR0. CAMARINES LUMBER CO VS CIR 109 P.IL 511
G.R. No. L-12353 September 30, 1960
NORT5 CMRINES L"M#ER CO., INC., petitioner,
vs.
COLLECTOR OF INTERNL RE!EN"E, respondent.
Mi%uel San 7ose and *.B. #hristi for petitioner.
*ssistant Solicitor General 7ose P. *le5andro and *tt. S. /. Paredes for respondent.
$RS, ".J.:
-his is an appea fro" the resoution of the &ourt of -a, Appeas dis"issin$ the
petition for review fied by the petitioner for a!C of ;urisdi!tion to try it on the "erits, the
sa"e havin$ been fied beyond the 31Aday period fi,ed in 9e!tion 11 of 2epubi! A!t
)o. 1125.
-he petitioner, )orth &a"arines Eu"ber &o., 'n!., is a do"esti! !orporation
en$a$ed in the u"ber business. On .une 19, 1951 and .uy 31, 1951, it sod a tota of
2,134,/33 board feet of o$s to the @enera Eu"ber &o., 'n!., with the a$ree"ent that
the atter woud assu"e responsibiity for the pay"ent of the saes ta, thereon in the
a"ount of P*,*3/.51. After bein$ !onsuted on the "atter, the respondent &oe!tor of
'nterna 2evenue, in his etters dated .une 1/, 1951 and Au$ust 3, 1951, advised the
petitioner that he was interposin$ no ob;e!tion to the arran$e"ent, provided the @enera
Eu"ber &o., 'n!., woud fie the !orrespondin$ bonds to !over the saes ta, iabiities.
-he @enera Eu"ber &o., 'n!., !o"pied with the !ondition. 'n view, however, of
its faiure and that of the surety to pay the ta, iabiities, the respondent &oe!tor, in his
etter dated Au$ust 31, 1955, re8uired the petitioner to pay the tota a"ount of
P9,59/.*2 as saes ta, and in!identa penaties in the sae of o$s to the @enera
Eu"ber &o., 'n!. Athou$h the date of re!eipt by petitioner of this etter does not appea
in the re!ords, it "ay be presu"ed to be 9epte"ber 9, 1955, when the petitioner
addressed a etter to the respondent &oe!tor, whi!h was re!eived on 9epte"ber 12,
1955, wherein the petitioner a!Cnowed$ed re!eipt of the etter of de"and and at the
sa"e ti"e re8uested for the re!onsideration of the assess"ent. -his was denied by the
respondent &oe!tor in his etter of 5e!e"ber /, 1955, re!eived by the petitioner on
.anuary 5, 1953. -he respondent &oe!tor havin$ denied the se!ond re8uest for
re!onsideration in his etter dated .anuary 31, 1953, whi!h the petitioner re!eived on
February 13, 1953, the atter, on Mar!h 13, 1953, fied a petition for review with the
&ourt of -a, Appeas. -he &ourt, after a prei"inary hearin$ on respondent &oe!tor0s
"otion to dis"iss, rued that, as the petition was fied beyond the 31Aday period
pres!ribed by 9e!tion 11 of 2epubi! A!t )o. 1125, it has no ;urisdi!tion to try the sa"e.
A!!ordin$y, the !ase was dis"issed.
'n !ontendin$ that the &ourt of -a, Appeas erred, the petitioner points out that
9e!tion *, and not 9e!tion 11, of 2epubi! A!t )o. 1125 !onfers and deter"ines the
;urisdi!tion of the respondent !ourt, and that 9e!tion 11 refers "erey to the pres!riptive
period for fiin$ appeas.
=hie the petitioner is !orre!t as to the attribute of 9e!tion *, it shoud be
re"e"bered that, for the respondent !ourt to have ;urisdi!tion over any !ase, the party
seeCin$ redress "ust first invoCe its e,er!ise in the "anner and within the ti"e
pres!ribed by the aw. -hus 9e!tion *, whi!h enu"erates the spe!ifi! !ases fain$
within the ;urisdi!tion of the &ourt of -a, Appeas "ust be read to$ether with 9e!tion 11,
whi!h fi,es the ti"e for invoCin$ said ;urisdi!tion.1awphl.nt
-here is no 8uestion that petitioner0s !ase is !overed by 9e!tion * and, therefore,
!o"es within the ;urisdi!tion of the respondent !ourt. #ut we said ;urisdi!tion invoCed by
the petitioner within the period pres!ribed by 9e!tion 11V
-he respondent !ourt rued that the ti"e !onsu"ed by the petitioner in perfe!tin$
its appea after dedu!tin$ the ti"e durin$ whi!h the period for appea was suspended by
a pendin$ re8uest for re!onsideration is as foows4
Fro" 9epte"ber 9, 1955, presu"ed date of
re!eipt of de!ision, to 9epte"ber 12, 1955, the
fiin$ of re8uest for
re!onsideration ......................................................
..........
3
days
Fro" .anuary 5, 1953, presu"ed date of
re!eipt of denia of re!onsideration, to .anuary 9,
1953, the fiin$ of the se!ond re8uest for
re!onsideration ......................................................
..........
4
days
Fro" February 13, 1953, re!eipt of denia of
se!ond re8uest for re!onsideration, to Mar!h 13,
1953, the fiin$ of petition for
review ................................................................
23
days
-ota ................................................................ 33
days
As the petitioner had !onsu"ed thirtyAthree days, its appea was !eary fied out
of ti"e. 't is ar$ued, however, that in !o"putin$ the 31Aday period fi,ed in 9e!tion 11 of
2epubi! A!t )o. 1125, the etter of the respondent &oe!tor dated .anuary 31, 1953,
denyin$ the se!ond re8uest for re!onsideration, shoud be !onsidered as the fina
de!ision !onte"pated in 9e!tion *, and not the etter of de"and dated Au$ust 31,
1955.
-his !ontention is untenabe. =e !annot !ountenan!e that theory that woud
"aCe the !o""en!e"ent of the statutory 31Aday period soey dependent on the wi of
the ta,payer and pa!e the atter in a position to put off indefinitey and at his
!onvenien!e the finaity of a ta, assess"ent. 9u!h an absurd pro!edure woud be
detri"enta to the interest of the @overn"ent, for :ta,es are the ifebood of the
$overn"ent, and their pro"pt and !ertain avaiabiity an i"perious need.: (#u vs. >.9.
295, >.9. 24*+.
=?%2%FO2%, the resoution appeaed fro" is affir"ed, with !osts. 3" 3 so
ordered.
14. LU0S VA ARANE0A 98 P.IL 148
G.R. No. L-7759 %e-ember 22, 1955
=LTER L"T., &' /3,+-+&1 ,m+(+'tr&tor o) t*e I(te't&te E't&te o) t*e ,e-e&'e,
(to(+o /&8me Le,e'm&, paintiffAappeant,
vs.
/. NTONIO RNET, &' t*e Co11e-tor o) I(ter(&1 Re2e(3e, defendantAappeee.
&rnesto 7. Gon8a%a for appellant.
Office of the Solicitor General *mbrosio Padilla" (irst *ssistant Solicitor General
Guillermo &. )orres and Solicitor (elicisimo $. $osete for appellee.

RE6ES, /.# L., J.:
-his !ase was initiated in the &ourt of First 'nstan!e of )e$ros O!!identa to test the
e$aity of the ta,es i"posed by &o""onweath A!t )o. 53*, otherwise Cnown as the
9u$ar Ad;ust"ent A!t.
Pro"u$ated in 1941, the aw in 8uestion opens (se!tion 1+ with a de!aration of
e"er$en!y, due to the threat to our industry by the i""inent i"position of e,port ta,es
upon su$ar as provided in the -ydin$sAM!5uffe A!t, and the :eventua oss of its
preferentia position in the >nited 9tates "arCet:< wherefore, the nationa poi!y was
e,pressed :to obtain a read;ust"ent of the benefits derived fro" the su$ar industry by
the !o"ponent ee"ents thereof: and :to stabiiFe the su$ar industry so as to prepare it
for the eventuaity of the oss of its preferentia position in the >nited 9tates "arCet and
the i"position of the e,port ta,es.:
'n se!tion 2, &o""onweath A!t 53* provides for an in!rease of the e,istin$ ta, on the
"anufa!ture of su$ar, on a $raduated basis, on ea!h pi!u of su$ar "anufa!tured< whie
se!tion 3 evies on owners or persons in !ontro of ands devoted to the !utivation of
su$ar !ane and !eded to others for a !onsideration, on ease or otherwise N
a ta, e8uivaent to the differen!e between the "oney vaue of the renta or
!onsideration !oe!ted and the a"ount representin$ 12 per !entu" of the
assessed vaue of su!h and.
A!!ordin$ to se!tion 3 of the aw N
9%&. 3. A !oe!tions "ade under this A!t sha a!!rue to a spe!ia fund in the
Phiippine -reasury, to be Cnown as the 09u$ar Ad;ust"ent and 9tabiiFation
Fund,0 and sha be paid out ony for any or a of the foowin$ purposes or to
attain any or a of the foowin$ ob;e!tives, as "ay be provided by aw.
First, to pa!e the su$ar industry in a position to "aintain itsef, despite the
$radua oss of the preferntia position of the Phiippine su$ar in the >nited 9tates
"arCet, and uti"atey to insure its !ontinued e,isten!e notwithstandin$ the oss
of that "arCet and the !onse8uent ne!essity of "eetin$ !o"petition in the free
"arCets of the word<
9e!ond, to read;ust the benefits derived fro" the su$ar industry by a of the
!o"ponent ee"ents thereof N the "i, the andowner, the panter of the su$ar
!ane, and the aborers in the fa!tory and in the fied N so that a "i$ht !ontinue
profitaby to en$a$e therein<awphi1.net
-hird, to i"it the produ!tion of su$ar to areas "ore e!ono"i!ay suited to the
produ!tion thereof< and
Fourth, to afford abor e"poyed in the industry a ivin$ wa$e and to i"prove their
ivin$ and worCin$ !onditions4 Provided, -hat the President of the Phiippines
"ay, unti the ad;our"ent of the ne,t re$uar session of the )ationa Asse"by,
"aCe the ne!essary disburse"ents fro" the fund herein !reated (1+ for the
estabish"ent and operation of su$ar e,peri"ent station or stations and the
undertaCin$ of resear!hers (a+ to in!rease the re!overies of the !entrifu$a su$ar
fa!tories with the view of redu!in$ "anufa!turin$ !osts, (b+ to produ!e and
propa$ate hi$her yiedin$ varieties of su$ar !ane "ore adaptabe to different
distri!t !onditions in the Phiippines, (!+ to ower the !osts of raisin$ su$ar !ane,
(d+ to i"prove the buyin$ 8uaity of denatured a!oho fro" "oasses for "otor
fue, (e+ to deter"ine the possibiity of utiiFin$ the other byAprodu!ts of the
industry, (f+ to deter"ine what !rop or !rops are suitabe for rotation and for the
utiiFation of e,!ess !ane ands, and ($+ on other probe"s the soution of whi!h
woud hep rehabiitate and stabiiFe the industry, and (2+ for the i"prove"ent of
ivin$ and worCin$ !onditions in su$ar "is and su$ar pantations, authoriFin$
hi" to or$aniFe the ne!essary a$en!y or a$en!ies to taCe !har$e of the
e,penditure and ao!ation of said funds to !arry out the purpose hereinbefore
enu"erated, and, iCewise, authoriFin$ the disburse"ent fro" the fund herein
!reated of the ne!essary a"ount or a"ounts needed for saaries, wa$es,
travein$ e,penses, e8uip"ent, and other sundry e,penses of said a$en!y or
a$en!ies.
Paintiff, =ater EutF, in his !apa!ity as .udi!ia Ad"inistrator of the 'ntestate %state of
Antonio .ay"e Eedes"a, seeCs to re!over fro" the &oe!tor of 'nterna 2evenue the
su" of P14,333.41 paid by the estate as ta,es, under se!tion 3 of the A!t, for the !rop
years 194/A1949 and 1949A1951< ae$in$ that su!h ta, is un!onstitutiona and void,
bein$ evied for the aid and support of the su$ar industry e,!usivey, whi!h in paintiff0s
opinion is not a pubi! purpose for whi!h a ta, "ay be !onstitutioay evied. -he a!tion
havin$ been dis"issed by the &ourt of First 'nstan!e, the paintifs appeaed the !ase
dire!ty to this &ourt (.udi!iary A!t, se!tion 1*+.
-he basi! defe!t in the paintiff0s position is his assu"ption that the ta, provided for in
&o""onweath A!t )o. 53* is a pure e,er!ise of the ta,in$ power. Anaysis of the A!t,
and parti!uary of se!tion 3 (heretofore 8uoted in fu+, wi show that the ta, is evied
with a re$uatory purpose, to provide "eans for the rehabiitation and stabiiFation of the
threatened su$ar industry. 'n other words, the a!t is pri"ariy an e,er!ise of the poi!e
power.
-his &ourt !an taCe ;udi!ia noti!e of the fa!t that su$ar produ!tion is one of the $reat
industries of our nation, su$ar o!!upyin$ a eadin$ position a"on$ its e,port produ!ts<
that it $ives e"poy"ent to thousands of aborers in fieds and fa!tories< that it is a $reat
sour!e of the state0s weath, is one of the i"portant sour!es of forei$n e,!han$e needed
by our $overn"ent, and is thus pivota in the pans of a re$i"e !o""itted to a poi!y of
!urren!y stabiity. 'ts pro"otion, prote!tion and advan!e"ent, therefore redounds
$reaty to the $enera wefare. ?en!e it was !o"petent for the e$isature to find that the
$enera wefare de"anded that the su$ar industry shoud be stabiiFed in turn< and in
the wide fied of its poi!e power, the aw"aCin$ body !oud provide that the distribution
of benefits therefro" be read;usted a"on$ its !o"ponents to enabe it to resist the
added strain of the in!rease in ta,es that it had to sustain (9i$h vs. JirCwood, 23* >. 9.
52, 59 E. %d. /35< .ohnson vs. 9tate e, re. Marey, 99 Fa. 1311, 12/ 9o. /53< Ma,!y
'n!. vs. Mayo, 113 Fa. 552, 139 9o. 121+.
As stated in .ohnson vs. 9tate e, re. Marey, with referen!e to the !itrus industry in
Forida N
-he prote!tion of a ar$e industry !onstitutin$ one of the $reat sour!es of the
state0s weath and therefore dire!ty or indire!ty affe!tin$ the wefare of so $reat
a portion of the popuation of the 9tate is affe!ted to su!h an e,tent by pubi!
interests as to be within the poi!e power of the soverei$n. (12/ 9p. /5*+.
On!e it is !on!eded, as it "ust, that the prote!tion and pro"otion of the su$ar industry
is a "atter of pubi! !on!ern, it foows that the Ee$isature "ay deter"ine within
reasonabe bounds what is ne!essary for its prote!tion and e,pedient for its pro"otion.
?ere, the e$isative dis!retion "ust be aowed fuy pay, sub;e!t ony to the test of
reasonabeness< and it is not !ontended that the "eans provided in se!tion 3 of the aw
(above 8uoted+ bear no reation to the ob;e!tive pursued or are oppressive in !hara!ter.
'f ob;e!tive and "ethods are aiCe !onstitutionay vaid, no reason is seen why the state
"ay not evy ta,es to raise funds for their prose!ution and attain"ent. -a,ation "ay be
"ade the i"pe"ent of the state0s poi!e power (@reat At. G Pa!. -ea &o. vs. @ros;ean,
311 >. 9. 412, /1 E. %d. 1193< >. 9. vs. #uter, 29* >. 9. 1, /1 E. %d. 4**< M0&uo!h vs.
Maryand, 4 =heat. 313, 4 E. %d. 5*9+.
-hat the ta, to be evied shoud burden the su$ar produ!ers the"seves !an hardy be a
$round of !o"paint< indeed, it appears rationa that the ta, be obtained pre!isey fro"
those who are to be benefited fro" the e,penditure of the funds derived fro" it. At any
rate, it is inherent in the power to ta, that a state be free to see!t the sub;e!ts of
ta,ation, and it has been repeatedy hed that :ine8uaities whi!h resut fro" a sin$in$
out of one parti!uar !ass for ta,ation, or e,e"ption infrin$e no !onstitutiona i"itation:
(&ar"i!hae vs. 9outhern &oa G &oCe &o., 311 >. 9. 495, /1 E. %d. 1245, !itin$
nu"erous authorities, at p. 1251+.
Fro" the point of view we have taCen it appears of no "o"ent that the funds raised
under the 9u$ar 9tabiiFation A!t, now in 8uestion, shoud be e,!usivey spent in aid of
the su$ar industry, sin!e it is that very enterprise that is bein$ prote!ted. 't "ay be that
other industries are aso in need of si"iar prote!tion< that the e$isature is not re8uired
by the &onstitution to adhere to a poi!y of :a or none.: As rued in Minnesota e, re.
Pearson vs. Probate &ourt, 319 >. 9. 2*1, /4 E. %d. *44, :if the aw presu"aby hits the
evi where it is "ost fet, it is not to be overthrown be!ause there are other instan!es to
whi!h it "i$ht have been appied<: and that :the e$isative authority, e,erted within its
proper fied, need not e"bra!e a the evis within its rea!h: (). E. 2. #. vs. .ones G
Eau$hin 9tee &orp. 311 >. 9. 1, /1 E. %d. /93+.
%ven fro" the standpoint that the A!t is a pure ta, "easure, it !annot be said that the
devotion of ta, "oney to e,peri"enta stations to seeC in!rease of effi!ien!y in su$ar
produ!tion, utiiFation of byAprodu!ts and soution of aied probe"s, as we as to the
i"prove"ents of ivin$ and worCin$ !onditions in su$ar "is or pantations, without any
part of su!h "oney bein$ !hanneed dire!ty to private persons, !onstitutes e,penditure
of ta, "oney for private purposes, (!o"pare %verson vs. #oard of %du!ation, 91 E. %d.
4*2, 13/ AE2 1392, 1411+.
-he de!ision appeaed fro" is affir"ed, with !osts a$ainst appeant. 9o ordered.
15. GOMEZ VS PALOMAR 25 SCRA 827
G.R. No. L-23645 O-tober 29, 1967
#EN/MIN $. GOME., petitionerAappeee,
vs.
ENRICO $LOMR, +( *+' -&p&-+t8 &' $o'tm&'ter Ge(er&1, 5ON. #RIGI%O R.
!LENCI, +( *+' -&p&-+t8 &' Se-ret&r8 o) $3b1+- =orB' &(, Comm3(+-&t+o(',
&(, %OMINGO GO$E., +( *+' -&p&-+t8 &' -t+(4 $o'tm&'ter o) S&( Fer(&(,o,
$&mp&(4&, respondentAappeants.
0oren8o P. 1avarro and 1arvaro Belar S. 1avarro for petitioner4appellee.
Office of the Solicitor General *rturo *. *lafri8" *ssistant Solicitor General (rine #.
Aaballero and Solicitor /ominador 0. Buiro8 for respondents4appellants.
CSTRO, J.:
-his appea puts in issue the !onstitutionaity of 2epubi! A!t 1335,
1
as a"ended by
2epubi! A!t 2331,
2
whi!h provides as foows4
-o hep raise funds for the Phiippine -uber!uosis 9o!iety, the 5ire!tor of Posts
sha order for the period fro" Au$ust nineteen to 9epte"ber thirty every year the
printin$ and issue of se"iAposta sta"ps of different deno"inations with fa!e
vaue showin$ the re$uar posta$e !har$e pus the additiona a"ount of five
!entavos for the said purpose, and durin$ the said period, no "ai "atter sha be
a!!epted in the "ais uness it bears su!h se"iAposta sta"ps4 Provided, -hat no
su!h additiona !har$e of five !entavos sha be i"posed on newspapers. -he
additiona pro!eeds reaiFed fro" the sae of the se"iAposta sta"ps sha
!onstitute a spe!ia fund and be deposited with the )ationa -reasury to be
e,pended by the Phiippine -uber!uosis 9o!iety in !arryin$ out its nobe worC to
prevent and eradi!ate tuber!uosis.
-he respondent Post"aster @enera, in i"pe"entation of the aw, thereafter issued
four (4+ ad"inistrative orders nu"bered 3 (.une 21, 195/+, * (Au$ust 9, 195/+, 9
(Au$ust 2/, 195/+, and 11 (.uy 15, 1931+. A these ad"inistrative orders were issued
with the approva of the respondent 9e!retary of Pubi! =orCs and &o""uni!ations.
-he pertinent portions of Ad". Order 3 read as foows4
9u!h se"iAposta sta"ps !oud not be "ade avaiabe durin$ the period fro"
Au$ust 19 to 9epte"ber 31, 195*, for a!C of ti"e. ?owever, two deno"inations
of su!h sta"ps, one at :5 W 5: !entavos and another at :11 W 5: !entavos, wi
soon be reeased for use by the pubi! on their "ais to be posted durin$ the
sa"e period startin$ with the year 195/.
,,, ,,, ,,,
5urin$ the period fro" Au$ust 19 to 9epte"ber 31 ea!h year startin$ in 195/, no
"ai "atter of whatever !ass, and whether do"esti! or forei$n, posted at any
Phiippine Post Offi!e and addressed for deivery in this !ountry or abroad, sha
be a!!epted for "aiin$ uness it bears at east one su!h se"iAposta sta"p
showin$ the additiona vaue of five !entavos intended for the Phiippine
-uber!uosis 9o!iety.
'n the !ase of se!ondA!ass "ais and "ais prepaid by "eans of "ai per"its or
i"pressions of posta$e "eters, ea!h pie!e of su!h "ai sha bear at east one
su!h se"iAposta sta"p if posted durin$ the period above stated startin$ with the
year 195/, in addition to bein$ !har$ed the usua posta$e pres!ribed by e,istin$
re$uations. 'n the !ase of business repy enveopes and !ards "aied durin$
said period, su!h sta"p shoud be !oe!ted fro" the addressees at the ti"e of
deivery. Mais entited to franCin$ privie$e iCe those fro" the offi!e of the
President, "e"bers of &on$ress, and other offi!es to whi!h su!h privie$e has
been $ranted, sha ea!h aso bear one su!h se"iAposta sta"p if posted durin$
the said period.
Mais posted durin$ the said period startin$ in 195/, whi!h are found in street or
postAoffi!e "ai bo,es without the re8uired se"iAposta sta"p, sha be returned
to the sender, if Cnown, with a notation !ain$ for the affi,in$ of su!h sta"p. 'f the
sender is unCnown, the "ai "atter sha be treated as non"aiabe and
forwarded to the 5ead Eetter Offi!e for proper disposition.
Ad". Order *, a"endin$ the fifth para$raph of Ad". Order 3, reads as foows4
'n the !ase of the foowin$ !ate$ories of "ai "atter and "ais entited to
franCin$ privie$e whi!h are not e,e"pted fro" the pay"ent of the five !entavos
intended for the Phiippine -uber!uosis 9o!iety, su!h e,tra !har$e "ay be
!oe!ted in !ash, for whi!h offi!ia re!eipt (@enera For" )o. 13, A+ sha be
issued, instead of affi,in$ the se"iAposta sta"p in the "anner hereinafter
indi!ated4
1. Second4class mail. N Aside fro" the posta$e at the se!ondA!ass rate, the
e,tra !har$e of five !entavos for the Phiippine -uber!uosis 9o!iety sha be
!oe!ted on ea!h separateyAaddressed pie!e of se!ondA!ass "ai "atter, and
the tota su" thus !oe!ted sha be entered in the sa"e offi!ia re!eipt to be
issued for the posta$e at the se!ondA!ass rate. 'n "aCin$ su!h entry, the tota
nu"ber of pie!es of se!ondA!ass "ai posted sha be stated, thus4 :-ota !har$e
for -# Fund on 111 pie!es . .. P5.11.: -he e,tra !har$e sha be entered
separate fro" the posta$e in both of the offi!ia re!eipt and the 2e!ord of
&oe!tions.
2. (irst4class and third4class mail permits. N Mais to be posted without posta$e
affi,ed under per"its issued by this #ureau sha ea!h be !har$ed the usua
posta$e, in addition to the fiveA!entavo e,tra !har$e intended for said so!iety.
-he tota e,tra !har$e thus re!eived sha be entered in the sa"e offi!ia re!eipt
to be issued for the posta$e !oe!ted, as in subpara$raph 1.
3. Metered mail. N For ea!h pie!e of "ai "atter i"pressed by posta$e "eter
under "etered "ai per"it issued by this #ureau, the e,tra !har$e of five
!entavos for said so!iety sha be !oe!ted in !ash and an offi!ia re!eipt issued
for the tota su" thus re!eived, in the "anner indi!ated in subpara$raph 1.
4. Business repl cards and envelopes. N >pon deivery of business repy !ards
and enveopes to hoders of business repy per"its, the fiveA!entavo !har$e
intended for said so!iety sha be !oe!ted in !ash on ea!h repy !ard or
enveope deivered, in addition to the re8uired posta$e whi!h "ay aso be paid in
!ash. An offi!ia re!eipt sha be issued for the tota posta$e and tota e,tra
!har$e re!eived, in the "anner shown in subpara$raph 1.
5. Mails entitled to fran2in% privile%e. N @overn"ent a$en!ies, offi!ias, and
other persons entited to the franCin$ privie$e under e,istin$ aws "ay pay in
!ash su!h e,tra !har$e intended for said so!iety, instead of affi,in$ the se"iA
posta sta"ps to their "ais, provided that su!h "ais are presented at the postA
offi!e window, where the fiveA!entavo e,tra !har$e for said so!iety sha be
!oe!ted on ea!h pie!e of su!h "ai "atter. 'n su!h !ase, an offi!ia re!eipt sha
be issued for the tota su" thus !oe!ted, in the "anner stated in subpara$raph
1.
Mai under per"its, "etered "ais and franCed "ais not presented at the postA
offi!e window sha be affi,ed with the ne!essary se"iAposta sta"ps. 'f found in
"ai bo,es without su!h sta"ps, they sha be treated in the sa"e way as herein
provided for other "ais.
Ad". Order 9, a"endin$ Ad". Order 3, as a"ended, e,e"pts :@overn"ent and its
A$en!ies and 'nstru"entaities Perfor"in$ @overn"enta Fun!tions.: Ad". Order 11,
a"endin$ Ad". Order 3, as a"ended, e,e"pts :!opies of periodi!a pubi!ations
re!eived for "aiin$ under any !ass of "ai "atter, in!udin$ newspapers and
"a$aFines ad"itted as se!ondA!ass "ai.:
T$e &A"TS. On 9epte"ber 5, 1933 the petitioner #en;a"in P. @o"eF "aied a etter
at the post offi!e in 9an Fernando, Pa"pan$a. #e!ause this etter, addressed to a
!ertain A$ustin A8uino of 1114 5a$ohoy 9treet, 9in$aon$, Mania did not bear the
spe!ia antiA-# sta"p re8uired by the statute, it was returned to the petitioner.
'n view of this deveop"ent, the petitioner brou$h suit for de!aratory reief in the &ourt
of First 'nstan!e of Pa"pan$a, to test the !onstitutionaity of the statute, as we as the
i"pe"entin$ ad"inistrative orders issued, !ontendin$ that it vioates the e8ua
prote!tion !ause of the &onstitution as we as the rue of unifor"ity and e8uaity of
ta,ation. -he ower !ourt de!ared the statute and the orders un!onstitutiona< hen!e
this appea by the respondent posta authorities.
For the reasons set out in this opinion, the ;ud$"ent appeaed fro" "ust be reversed.
I.
#efore rea!hin$ the "erits, we dee" it ne!essary to dispose of the respondents0
!ontention that de!aratory reief is unavaiin$ be!ause this suit was fied after the
petitioner had !o""itted a brea!h of the statute. =hie !on!edin$ that the "aiin$ by
the petitioner of a etter without the additiona antiA-# sta"p was a vioation of 2epubi!
A!t 1335, as a"ended, the tria !ourt nevertheess refused to dis"iss the a!tion on the
$round that under se!tion 3 of 2ue 34 of the 2ues of &ourt, :'f before the fina
ter"ination of the !ase a brea!h or vioation of ... a statute ... shoud taCe pa!e, the
a!tion "ay thereupon be !onverted into an ordinary a!tion.:
-he pri"e spe!ifi!ation of an a!tion for de!aratory reief is that it "ust be brou$ht
:before brea!h or vioation: of the statute has been !o""itted. 2ue 34, se!tion 1 so
provides. 9e!tion 3 of the sa"e rue, whi!h aows the !ourt to treat an a!tion for
de!aratory reief as an ordinary a!tion, appies ony if the brea!h or vioation o!!urs
after the fiin$ of the a!tion but before the ter"ination thereof.
3
?en!e, if, as the tria !ourt itsef ad"itted, there had been a brea!h of the statute before
the firin$ of this a!tion, then indeed the re"edy of de!aratory reief !annot be avaied
of, "u!h ess !an the suit be !onverted into an ordinary a!tion.
)or is there "erit in the petitioner0s ar$u"ent that the "aiin$ of the etter in 8uestion
did not !onstitute a brea!h of the statute be!ause the statute appears to be addressed
ony to posta authorities. -he statute, it is true, in ter"s provides that :no "ai "atter
sha be a!!epted in the "ais uness it bears su!h se"iAposta sta"ps.: 't does not
foow, however, that ony posta authorities !an be $uity of vioatin$ it by a!!eptin$
"ais without the pay"ent of the antiA-# sta"p. 't is obvious that they !an be $uity of
vioatin$ the statute ony if there are peope who use the "ais without payin$ for the
additiona antiA-# sta"p. .ust as in bribery the "ere offer !onstitutes a brea!h of the
aw, so in the "atter of the antiA-# sta"p the "ere atte"pt to use the "ais without the
sta"p !onstitutes a vioation of the statute. 't is not re8uired that the "ai be a!!epted
by posta authorities. -hat re8uire"ent is reevant ony for the purpose of fi,in$ the
iabiity of posta offi!ias.
)evertheess, we are of the view that the petitioner0s !hoi!e of re"edy is !orre!t
be!ause this suit was fied not ony with respe!t to the etter whi!h he "aied on
9epte"ber 15, 1933, but aso with re$ard to any other "ai that he "i$ht send in the
future. -hus, in his !o"paint, the petitioner prayed that due !ourse be $iven to :other
"ais without the se"iAposta sta"ps whi!h he "ay deiver for "aiin$ ... if any, durin$
the period !overed by 2epubi! A!t 1335, as a"ended, as we as other "ais hereafter
to be sent by or to other "aiers whi!h bear the re8uired posta$e, without !oe!tion of
additiona !har$e of five !entavos pres!ribed by the sa"e 2epubi! A!t.: As one whose
"ai was returned, the petitioner is !ertainy interested in a ruin$ on the vaidity of the
statute re8uirin$ the use of additiona sta"ps.
II.
=e now !onsider the !onstitutiona ob;e!tions raised a$ainst the statute and the
i"pe"entin$ orders.
1. 't is said that the statute is vioative of the e8ua prote!tion !ause of the &onstitution.
More spe!ifi!ay the !ai" is "ade that it !onstitutes "ai users into a !ass for the
purpose of the ta, whie eavin$ unta,ed the rest of the popuation and that even a"on$
posta patrons the statute dis!ri"inatoriy $rants e,e"ption to newspapers whie
Ad"inistrative Order 9 of the respondent Post"aster @enera $rants a si"iar
e,e"ption to offi!es perfor"in$ $overn"enta fun!tions. .
-he five !entavo !har$e evied by 2epubi! A!t 1335, as a"ended, is in the nature of an
e,!ise ta,, aid upon the e,er!ise of a privie$e, na"ey, the privie$e of usin$ the "ais.
As su!h the ob;e!tions eveed a$ainst it "ust be viewed in the i$ht of appi!abe
prin!ipes of ta,ation.
-o be$in with, it is setted that the e$isature has the inherent power to see!t the
sub;e!ts of ta,ation and to $rant e,e"ptions.
4
-his power has apty been des!ribed as
:of wide ran$e and fe,ibiity.:
5
'ndeed, it is said that in the fied of ta,ation, "ore than in
other areas, the e$isature possesses the $reatest freedo" in !assifi!ation.
3
-he
reason for this is that traditionay, !assifi!ation has been a devi!e for fittin$ ta,
pro$ra"s to o!a needs and usa$es in order to a!hieve an e8uitabe distribution of the
ta, burden.
*
-hat e$isative !assifi!ations "ust be reasonabe is of !ourse undenied. #ut what the
petitioner asserts is that statutory !assifi!ation of "ai users "ust bear so"e
reasonabe reationship to the end sou$ht to be attained, and that absent su!h
reationship the see!tion of "ai users is !onstitutionay i"per"issibe. -his is
ato$ether a different proposition. As e,pained in #ommonwealth v. 0ife *ssurance
#o.4
/
=hie the prin!ipe that there "ust be a reasonabe reationship between
!assifi!ation "ade by the e$isation and its purpose is undoubtedy true in so"e
!onte,ts, it has no appi!ation to a "easure whose soe purpose is to raise
revenue ... 9o on$ as the !assifi!ation i"posed is based upon so"e standard
!apabe of reasonabe !o"prehension, be that standard based upon abiity to
produ!e revenue or so"e other e$iti"ate distin!tion, e8ua prote!tion of the aw
has been afforded. 9ee Aied 9tores of Ohio, 'n!. v. #owers, supra, 35/ >.9. at
52*, *9 9. &t. at 441< #rown For"an &o. v. &o""onweath of Jentu!Cy, 2d >.9.
53, 5*3, /1 9. &t. 5*/, 5/1 (1911+.
=e are not wont to invaidate e$isation on e8ua prote!tion $rounds e,!ept by the
!earest de"onstration that it san!tions invidious dis!ri"ination, whi!h is a that the
&onstitution forbids. -he re"edy for unwise e$isation "ust be sou$ht in the e$isature.
)ow, the !assifi!ation of "ai users is not without any reason. 't is based on abiity to
pay, et aone the en;oy"ent of a privie$e, and on ad"inistrative !onvinien!e. 'n the
ao!ation of the ta, burden, &on$ress "ust have !on!uded that the !ontribution to the
antiA-# fund !an be assured by those whose who !an afford the use of the "ais.
-he !assifi!ation is iCewise based on !onsiderations of ad"inistrative !onvenien!e.
For it is now a setted prin!ipe of aw that :!onsideration of pra!ti!a ad"inistrative
!onvenien!e and !ost in the ad"inistration of ta, aws afford ade8uate $round for
i"posin$ a ta, on a we re!o$niFed and defined !ass.:
9
'n the !ase of the antiA-#
sta"ps, undoubtedy, the sin$e "ost i"portant and infuentia !onsideration that ed the
e$isature to see!t "ai users as sub;e!ts of the ta, is the reative ease and
!onvenien!eof !oe!tin$ the ta, throu$h the post offi!es. -he s"a a"ount of five
!entavos does not ;ustify the $reat e,pense and in!onvenien!e of !oe!tin$ throu$h the
re$uar "eans of !oe!tion. On the other hand, by pa!in$ the duty of !oe!tion on
posta authorities the ta, was "ade a"ost sefAenfor!in$, with as itte !ost and as itte
in!onvenien!e as possibe.
And then of !ourse it is not a!!urate to say that the statute !onstituted "ai users into a
!ass. Mai users were aready a !ass by the"seves even before the ena!t"ent of the
statue and a that the e$isature did was "erey to see!t their !ass. Ee$isation is
essentiay e"piri! and 2epubi! A!t 1335, as a"ended, no "ore than refe!ts a
distin!tion that e,ists in fa!t. As Mr. .usti!e FranCfurter said, :to re!o$niFe differen!es
that e,ist in fa!t is ivin$ aw< to disre$ard Othe"P and !on!entrate on so"e abstra!t
identities is ifeess o$i!.:
11
@ranted the power to see!t the sub;e!t of ta,ation, the 9tate0s power to $rant
e,e"ption "ust iCewise be !on!eded as a ne!essary !oroary. -a, e,e"ptions are too
!o""on in the aw< they have never been thou$ht of as raisin$ issues under the e8ua
prote!tion !ause.
't is thus erroneous for the tria !ourt to hod that be!ause !ertain "ai users are
e,e"pted fro" the evy the aw and ad"inistrative offi!ias have san!tioned an invidious
dis!ri"ination offensive to the &onstitution. -he appi!ation of the ower !ourts theory
woud re8uire a "ai users to be ta,ed, a !on!usion that is hardy tenabe in the i$ht of
differen!es in status of "ai users. -he &onstitution does not re8uire this Cind of
e8uaity.
As the >nited 9tates 9upre"e &ourt has said, the e$isature "ay withhod the burden
of the ta, in order to foster what it !on!eives to be a benefi!ent enterprise.
11
-his is the
!ase of newspapers whi!h, under the a"end"ent introdu!ed by 2epubi! A!t 2331, are
e,e"pt fro" the pay"ent of the additiona sta"p.
As for the @overn"ent and its instru"entaities, their e,e"ption rests on the 9tate0s
soverei$n i""unity fro" ta,ation. -he 9tate !annot be ta,ed without its !onsent and
su!h !onsent, bein$ in dero$ation of its soverei$nty, is to be stri!ty
!onstrued.
12
Ad"inistrative Order 9 of the respondent Post"aster @enera, whi!h ists
the various offi!es and instru"entaities of the @overn"ent e,e"pt fro" the pay"ent of
the antiA-# sta"p, is but a restate"ent of this weACnown prin!ipe of !onstitutiona aw.
-he tria !ourt iCewise hed the aw invaid on the $round that it sin$es out tuber!uosis
to the e,!usion of other diseases whi!h, it is said, are e8uay a "ena!e to pubi!
heath. #ut it is never a re8uire"ent of e8ua prote!tion that a evis of the sa"e $enus
be eradi!ated or none at a.
13
As this &ourt has had o!!asion to say, :if the aw
presu"aby hits the evi where it is "ost fet, it is not to be overthrown be!ause there
are other instan!es to whi!h it "i$ht have been appied.:
14
2. -he petitioner further ar$ues that the ta, in 8uestion is invaid, first, be!ause it is not
evied for a pubi! purpose as no spe!ia benefits a!!rue to "ai users as ta,payers, and
se!ond, be!ause it vioates the rue of unifor"ity in ta,ation.
-he eradi!ation of a dreaded disease is a pubi! purpose, but if by pubi! purpose the
petitioner "eans benefit to a ta,payer as a return for what he pays, then it is suffi!ient
answer to say that the ony benefit to whi!h the ta,payer is !onstitutionay entited is
that derived fro" his en;oy"ent of the privie$es of ivin$ in an or$aniFed so!iety,
estabished and safe$uarded by the devotion of ta,es to pubi! purposes. Any other
view woud pre!ude the evyin$ of ta,es e,!ept as they are used to !o"pensate for the
burden on those who pay the" and woud invove the abandon"ent of the "ost
funda"enta prin!ipe of $overn"ent N that it e,ists pri"ariy to provide for the !o""on
$ood.
15
)or is the rue of unifor"ity and e8uaity of ta,ation infrin$ed by the i"position of a fat
rate rather than a $raduated ta,. A ta, need not be "easured by the wei$ht of the "ai
or the e,tent of the servi!e rendered. =e have said that !onsiderations of ad"inistrative
!onvenien!e and !ost afford an ade8uate $round for !assifi!ation. -he sa"e
!onsiderations "ay indu!e the e$isature to i"pose a fat ta, whi!h in effe!t is a !har$e
for the transa!tion, operatin$ e8uay on a persons within the !ass re$ardess of the
a"ount invoved.
13
As Mr. .usti!e ?o"es said in sustainin$ the vaidity of a sta"p a!t
whi!h i"posed a fat rate of two !ents on every X111 fa!e vaue of sto!C transferred4
One of the sto!Cs was worth X31.*5 a share of the fa!e vaue of X111, the other
X1*2. -he ine8uaity of the ta,, so far as a!tua vaues are !on!erned, is
"anifest. #ut, here a$ain e8uaity in this sense has to yied to pra!ti!a
!onsiderations and usa$e. -here "ust be a fi,ed and indisputabe "ode of
as!ertainin$ a sta"p ta,. 'n another sense, "oreover, there is e8uaity. =hen the
ta,es on two saes are e8ua, the sa"e nu"ber of shares is sod in ea!h !ase<
that is to say, the sa"e privie$e is used to the sa"e e,tent. Dauation is not the
ony thin$ to be !onsidered. As was pointed out by the !ourt of appeas, the
fa"iiar sta"p ta, of 2 !ents on !he!Cs, irrespe!tive of in!o"e or earnin$
!apa!ity, and "any others, iustrate the ne!essity and pra!ti!e of so"eti"es
substitutin$ !ount for wei$ht ...
1*
A!!ordin$ to the tria !ourt, the "oney raised fro" the saes of the antiA-# sta"ps is
spent for the benefit of the Phiippine -uber!uosis 9o!iety, a private or$aniFation,
without appropriation by aw. #ut as the 9oi!itor @enera points out, the 9o!iety is not
reay the benefi!iary but ony the a$en!y throu$h whi!h the 9tate a!ts in !arryin$ out
what is essentiay a pubi! fun!tion. -he "oney is treated as a spe!ia fund and as su!h
need not be appropriated by aw.
1/
3. Finay, the !ai" is "ade that the statute is so broady drawn that to e,e!ute it the
respondents had to issue ad"inistrative orders far beyond their powers. 'ndeed, this is
one of the $rounds on whi!h the ower !ourt invaidated 2epubi! A!t 1331, as
a"ended, na"ey, that it !onstitutes an undue dee$ation of e$isative power.
Ad"inistrative Order 3, as a"ended by Ad"inistrative Orders * and 11, provides that
for !ertain !asses of "ai "atters (su!h as "ai per"its, "etered "ais, business repy
!ards, et!.+, the fiveA!entavo !har$e "ay be paid in !ash instead of the pur!hase of the
antiA-# sta"p. 't further states that "ais deposited durin$ the period Au$ust 19 to
9epte"ber 31 of ea!h year in "ai bo,es without the sta"p shoud be returned to the
sender, if Cnown, otherwise they shoud be treated as non"aiabe.
't is true that the aw does not e,pressy authoriFe the !oe!tion of five !entavos e,!ept
throu$h the sae of antiA-# sta"ps, but su!h authority "ay be i"pied in so far as it "ay
be ne!essary to prevent a faiure of the undertaCin$. -he authority $iven to the
Post"aster @enera to raise funds throu$h the "ais "ust be iberay !onstrued,
!onsistent with the prin!ipe that where the end is re8uired the appropriate "eans are
$iven.
19
-he antiA-# sta"p is a distin!tive sta"p whi!h shows on its fa!e not ony the a"ount of
the additiona !har$e but aso that of the re$uar posta$e. 'n the !ase of business repy
!ards, for instan!e, it is obvious that to re8uire "aiers to affi, the antiA-# sta"p on their
!ards woud be to "aCe the" pay "u!h "ore be!ause the !ards iCewise bear the
a"ount of the re$uar posta$e.
't is iCewise true that the statute does not provide for the disposition of "ais whi!h do
not bear the antiA-# sta"p, but a de!aration therein that :no "ai "atter sha be
a!!epted in the "ais uness it bears su!h se"iAposta sta"p: is a de!aration that su!h
"ai "atter is non"aiabe within the "eanin$ of se!tion 1952 of the Ad"inistrative
&ode. Ad"inistrative Order * of the Post"aster @enera is but a restate"ent of the aw
for the $uidan!e of posta offi!ias and e"poyees. As for Ad"inistrative Order 9, we
have aready said that in istin$ the offi!es and entities of the @overn"ent e,e"pt fro"
the pay"ent of the sta"p, the respondent Post"aster @enera "erey observed an
estabished prin!ipe, na"ey, that the @overn"ent is e,e"pt fro" ta,ation.
A&&O25')@EI, the ;ud$"ent a ,uo is reversed, and the !o"paint is dis"issed,
without pronoun!e"ent as to !osts.
16. PUNSALAN VS MUN BOARD OF 0.E CI0Y OF MANILA 95 P.IL 46
G.R. No. L-4717 M&8 26, 1954
SIL!ESTER M. $"NSLN, ET L., paintiffsAappeants,
vs.
T5E M"NICI$L #OR% OF T5E CIT6 OF MNIL, ET L., defendantsAappeants.
#alano% and *lafri8 for plaintiffs4appellants.
#it (iscal &u%enio *n%eles and *ssistant (iscal &ulo%io S. Serreno for defendants4
appellants.
RE6ES, J.>
-his suit was !o""en!ed in the &ourt of First 'nstan!e of Mania by two awyers, a
"edi!a pra!titioner, a pubi! a!!ountant, a denta sur$eon and a phar"a!ist,
purportedy :in their own behaf and in behaf of other professionas pra!tisin$ in the &ity
of Mania who "ay desire to ;oin it.: Ob;e!t of the suit is the annu"ent of Ordinan!e )o.
339/ of the &ity of Mania to$ether with the provision of the Mania !harter authoriFin$ it
and the refund of ta,es !oe!ted under the ordinan!e but paid under protest.
-he ordinan!e in 8uestion, whi!h was approved by the "uni!ipa board of the &ity of
Mania on .uy 25, 1951, i"poses a "uni!ipa o!!upation ta, on persons e,er!isin$
various professions in the !ity and penaiFes nonApay"ent of the ta, :by a fine of not
"ore than two hundred pesos or by i"prison"ent of not "ore than si, "onths, or by
both su!h fine and i"prison"ent in the dis!retion of the !ourt.: A"on$ the professions
ta,ed were those to whi!h paintiffs beon$. -he ordinan!e was ena!ted pursuant to
para$raph (1+ of se!tion 1/ of the 2evised &harter of the &ity of Mania (as a"ended by
2epubi! A!t )o. 419+, whi!h e"powers the Muni!ipa #oard of said !ity to i"pose a
"uni!ipa o!!upation ta,, not to e,!eed P51 per annum, on persons en$a$ed in the
various professions above referred to.
?avin$ aready paid their o!!upation ta, under se!tion 211 of the )ationa 'nterna
2evenue &ode, paintiffs, upon bein$ re8uired to pay the additiona ta, pres!ribed in the
ordinan!e, paid the sa"e under protest and then brou$ht the present suit for the
purpose aready stated. -he ower !ourt uphed the vaidity of the provision of aw
authoriFin$ the ena!t"ent of the ordinan!e but de!ared the ordinan!e itsef ie$a and
void on the $round that the penaty there in provided for nonApay"ent of the ta, was not
e$ay authoriFed. Fro" this de!ision both parties appeaed to this &ourt, and the ony
8uestion they have presented for our deter"ination is whether this ruin$ is !orre!t or
not, for thou$h the de!ision is sient on the refund of ta,es paid paintiffs "aCe no
assi$n"ent of error on this point.
-o be$in with defendants0 appea, we find that the ower !ourt was in error in sayin$ that
the i"position of the penaty provided for in the ordinan!e was without the authority of
aw. -he ast para$raph (22+ of the very se!tion that authoriFes the ena!t"ent of this ta,
ordinan!e (se!tion 1/ of the Mania &harter+ in e,press ter"s aso e"powers the
Muni!ipa #oard Cto fi! penalties for the violation of ordinances which shall not e!ceed
to-sic. two hundred pesos fine or si! monthsC imprisonment" or both such fine and
imprisonment" for a sin%le offense.C ?en!e, the pronoun!e"ent beow that the
ordinan!e in 8uestion is ie$a and void be!ause it i"poses a penaty not authoriFed by
aw is !eary without basis.
As to paintiffs0 appea, the !ontention in substan!e is that this ordinan!e and the aw
authoriFin$ it !onstitute !ass e$isation, are un;ust and oppressive, and authoriFe what
a"ounts to doube ta,ation.
'n raisin$ the hue and !ry of :!ass e$isation:, the burden of paintiffs0 !o"paint is not
that the professions to whi!h they respe!tivey beon$ have been sin$ed out for the
i"position of this "uni!ipa o!!upation ta,< and in any event, the Ee$isature "ay, in its
dis!retion, see!t what o!!upations sha be ta,ed, and in the e,er!ise of that dis!retion
it "ay ta, a, or it "ay see!t for ta,ation !ertain !asses and eave the others unta,ed.
(&ooey on -a,ation, Do. 4, 4th ed., pp. 3393A3395.+ Paintiffs0 !o"paint is that whie
the aw has authoriFed the &ity of Mania to i"pose the said ta,, it has withhed that
authority fro" other !hartered !ities, not to "ention "uni!ipaities. =e do not thinC it is
for the !ourts to ;ud$e what parti!uar !ities or "uni!ipaities shoud be e"powered to
i"pose o!!upation ta,es in addition to those i"posed by the )ationa @overn"ent.
-hat "atter is pe!uiary within the do"ain of the poiti!a depart"ents and the !ourts
woud do we not to en!roa!h upon it. Moreover, as the seat of the )ationa
@overn"ent and with a popuation and vou"e of trade "any ti"es that of any other
Phiippine !ity or "uni!ipaity, Mania, no doubt, offers a "ore u!rative fied for the
pra!ti!e of the professions, so that it is but fair that the professionas in Mania be "ade
to pay a hi$her o!!upation ta, than their brethren in the provin!es.
Paintiffs brand the ordinan!e un;ust and oppressive be!ause they say that it !reates
dis!ri"ination within a !ass in that whie professionas with offi!es in Mania have to
pay the ta,, outsiders who have no offi!es in the !ity but pra!ti!e their profession
therein are not sub;e!t to the ta,. Paintiffs "aCe a distin!tion that is not found in the
ordinan!e. -he ordinan!e i"poses the ta, upon every person :e,er!isin$: or :pursuin$:
N in the &ity of Mania naturay N any one of the o!!upations na"ed, but does not say
that su!h person "ust have his offi!e in Mania. =hat !onstitutes e,er!ise or pursuit of
a profession in the !ity is a "atter of ;udi!ia deter"ination. -he ar$u"ent a$ainst
doube ta,ation "ay not be invoCed where one ta, is i"posed by the state and the other
is i"posed by the !ity (1 &ooey on -a,ation, 4th ed., p. 492+, it bein$ widey re!o$niFed
that there is nothin$ inherenty obno,ious in the re8uire"ent that i!ense fees or ta,es
be e,a!ted with respe!t to the sa"e o!!upation, !ain$ or a!tivity by both the state and
the poiti!a subdivisions thereof. (51 A". .ur., 341.+
'n view of the fore$oin$, the ;ud$"ent appeaed fro" is reversed in so far as it de!ares
Ordinan!e )o. 339/ of the &ity of Mania ie$a and void and affir"ed in so far as it
hods the vaidity of the provision of the Mania !harter authoriFin$ it. =ith !osts a$ainst
paintiffsAappeants.
17. FRANCIA VS IAC 162 SCRA 753
G.R. No. L-67649 /3(e 27, 1977
ENGRCIO FRNCI, petitioner,
vs.
INTERME%ITE $$ELLTE CO"RT &(, 5O FERNN%E., respondents.

G"TIERRE., /R., J.:
-he petitioner invoCes e$a and e8uitabe $rounds to reverse the 8uestioned de!ision of
the 'nter"ediate Appeate &ourt, to set aside the au!tion sae of his property whi!h tooC
pa!e on 5e!e"ber 5, 19**, and to aow hi" to re!over a 213 s8uare "eter ot whi!h
was, sod at pubi! au!tion to ?o FernandeF and ordered tited in the atter0s na"e.
-he ante!edent fa!ts are as foows4
%n$ra!io Fran!ia is the re$istered owner of a residentia ot and a twoAstory house buit
upon it situated at #arrio 9an 'sidro, now 5istri!t of 9ta. &ara, Pasay &ity, Metro
Mania. -he ot, with an area of about 32/ s8uare "eters, is des!ribed and !overed by
-ransfer &ertifi!ate of -ite )o. 4*39 (3**95+ of the 2e$istry of 5eeds of Pasay &ity.
On O!tober 15, 19**, a 125 s8uare "eter portion of Fran!ia0s property was
e,propriated by the 2epubi! of the Phiippines for the su" of P4,113.11 representin$
the esti"ated a"ount e8uivaent to the assessed vaue of the aforesaid portion.
9in!e 1933 up to 19** in!usive, Fran!ia faied to pay his rea estate ta,es. -hus, on
5e!e"ber 5, 19**, his property was sod at pubi! au!tion by the &ity -reasurer of
Pasay &ity pursuant to 9e!tion *3 of Presidentia 5e!ree )o. 434 Cnown as the 2ea
Property -a, &ode in order to satisfy a ta, dein8uen!y of P2,411.11. ?o FernandeF
was the hi$hest bidder for the property.
Fran!ia was not present durin$ the au!tion sae sin!e he was in 'i$an &ity at that ti"e
hepin$ his un!e ship bananas.
On Mar!h 3, 19*9, Fran!ia re!eived a noti!e of hearin$ of E2& &ase )o. 1593AP :'n re4
Petition for %ntry of )ew &ertifi!ate of -ite: fied by ?o FernandeF, seeCin$ the
!an!eation of -&- )o. 4*39 (3**95+ and the issuan!e in his na"e of a new !ertifi!ate
of tite. >pon verifi!ation throu$h his awyer, Fran!ia dis!overed that a Fina #i of 9ae
had been issued in favor of ?o FernandeF by the &ity -reasurer on 5e!e"ber 11, 19*/.
-he au!tion sae and the fina bi of sae were both annotated at the ba!C of -&- )o.
4*39 (3**95+ by the 2e$ister of 5eeds.
On Mar!h 21, 19*9, Fran!ia fied a !o"paint to annu the au!tion sae. ?e ater
a"ended his !o"paint on .anuary 24, 19/1.
On Apri 23, 19/1, the ower !ourt rendered a de!ision, the dispositive portion of whi!h
reads4
=?%2%FO2%, in view of the fore$oin$, ;ud$"ent is hereby rendered
dis"issin$ the a"ended !o"paint and orderin$4
(a+ -he 2e$ister of 5eeds of Pasay &ity to issue a new
-ransfer &ertifi!ate of -ite in favor of the defendant ?o
FernandeF over the par!e of and in!udin$ the
i"prove"ents thereon, sub;e!t to whatever en!u"bran!es
appearin$ at the ba!C of -&- )o. 4*39 (3**95+ and orderin$
the sa"e -&- )o. 4*39 (3**95+ !an!eed.
(b+ -he paintiff to pay defendant ?o FernandeF the su" of
P1,111.11 as attorney0s fees. (p. 31, 2e!ord on Appea+
-he 'nter"ediate Appeate &ourt affir"ed the de!ision of the ower !ourt in toto.
?en!e, this petition for review.
Fran!ia prefa!ed his ar$u"ents with the foowin$ assi$n"ents of $rave errors of aw4
'
2%9PO)5%)- ')-%2M%5'A-% APP%EEA-% &O>2- &OMM'--%5 A @2AD% %22O2
OF EA= ') )O- ?OE5')@ P%-'-'O)%209 O#E'@A-'O) -O PAI P2,411.11 FO2
9>PPO9%5 -AK 5%E')M>%)&I =A9 9%-AOFF #I -?% AMO>)- OF P4,113.11
=?'&? -?% @OD%2)M%)- '9 ')5%#-%5 -O -?% FO2M%2.
''
2%9PO)5%)- ')-%2M%5'A-% APP%EEA-% &O>2- &OMM'--%5 A @2AD% A)5
9%2'O>9 %22O2 ') )O- ?OE5')@ -?A- P%-'-'O)%2 =A9 )O- P2OP%2EI A)5
5>EI )O-'F'%5 -?A- A) A>&-'O) 9AE% OF ?'9 P2OP%2-I =A9 -O -AJ%
PEA&% O) 5%&%M#%2 5, 19** -O 9A-'9FI A) AEE%@%5 -AK 5%E')M>%)&I OF
P2,411.11.
'''
2%9PO)5%)- ')-%2M%5'A-% APP%EEA-% &O>2- F>2-?%2 &OMM'--%5 A
9%2'O>9 %22O2 A)5 @2AD% A#>9% OF 5'9&2%-'O) ') )O- ?OE5')@ -?A-
-?% P2'&% OF P2,411.11 PA'5 #I 2%9PO)-5%)- ?O F%2)A)5%H =A9
@2O99EI ')A5%M>A-% A9 -O 9?O&J O)%09 &O)9&'%)&% AMO>)-')@ -O
F2A>5 A)5 A 5%P2'DA-'O) OF P2OP%2-I ='-?O>- 5>% P2O&%99 OF EA=,
A)5 &O)9%M>%)-EI, -?% A>&-'O) 9AE% MA5% -?%2%OF '9 DO'5. (pp. 11, 1*,
21A21, 2oo+
=e $ave due !ourse to the petition for a "ore thorou$h in8uiry into the petitioner0s
ae$ations that his property was sod at pubi! au!tion without noti!e to hi" and that the
pri!e paid for the property was sho!Cin$y inade8uate, a"ountin$ to fraud and
deprivation without due pro!ess of aw.
A !arefu review of the !ase, however, dis!oses that Mr. Fran!ia brou$ht the probe"s
raised in his petition upon hi"sef. =hie we !o""iserate with hi" at the oss of his
property, the aw and the fa!ts "iitate a$ainst the $rant of his petition. =e are
!onstrained to dis"iss it.
Fran!ia !ontends that his ta, dein8uen!y of P2,411.11 has been e,tin$uished by e$a
!o"pensation. ?e !ai"s that the $overn"ent owed hi" P4,113.11 when a portion of
his and was e,propriated on O!tober 15, 19**. ?en!e, his ta, obi$ation had been setA
off by operation of aw as of O!tober 15, 19**.
-here is no e$a basis for the !ontention. #y e$a !o"pensation, obi$ations of
persons, who in their own ri$ht are re!ipro!ay debtors and !reditors of ea!h other, are
e,tin$uished (Art. 12*/, &ivi &ode+. -he !ir!u"stan!es of the !ase do not satisfy the
re8uire"ents provided by Arti!e 12*9, to wit4
(1+ that ea!h one of the obi$ors be bound prin!ipay and that he be at the
sa"e ti"e a prin!ipa !reditor of the other<
,,, ,,, ,,,
(3+ that the two debts be due.
,,, ,,, ,,,
-his prin!ipa !ontention of the petitioner has no "erit. =e have !onsistenty rued that
there !an be no offAsettin$ of ta,es a$ainst the !ai"s that the ta,payer "ay have
a$ainst the $overn"ent. A person !annot refuse to pay a ta, on the $round that the
$overn"ent owes hi" an a"ount e8ua to or $reater than the ta, bein$ !oe!ted. -he
!oe!tion of a ta, !annot await the resuts of a awsuit a$ainst the $overn"ent.
'n the !ase of $epublic v. Mambulao 0umber #o. (4 9&2A 322+, this &ourt rued that
'nterna 2evenue -a,es !an not be the sub;e!t of setAoff or !o"pensation. =e stated
that4
A !ai" for ta,es is not su!h a debt, de"and, !ontra!t or ;ud$"ent as is
aowed to be setAoff under the statutes of setAoff, whi!h are !onstrued
unifor"y, in the i$ht of pubi! poi!y, to e,!ude the re"edy in an a!tion or
any indebtedness of the state or "uni!ipaity to one who is iabe to the
state or "uni!ipaity for ta,es. )either are they a proper sub;e!t of
re!oup"ent sin!e they do not arise out of the !ontra!t or transa!tion sued
on. ... (/1 &...9., *3*4+. :-he $enera rue based on $rounds of pubi!
poi!y is weAsetted that no setAoff ad"issibe a$ainst de"ands for ta,es
evied for $enera or o!a $overn"enta purposes. -he reason on whi!h
the $enera rue is based, is that ta,es are not in the nature of !ontra!ts
between the party and party but $row out of duty to, and are the positive
a!ts of the $overn"ent to the "aCin$ and enfor!in$ of whi!h, the persona
!onsent of individua ta,payers is not re8uired. ...:
=e stated that a ta,payer !annot refuse to pay his ta, when !aed upon by the !oe!tor
be!ause he has a !ai" a$ainst the $overn"enta body not in!uded in the ta, evy.
-his rue was reiterated in the !ase of #orders v. Gonda (1/ 9&2A 331+ where we
stated that4 :... interna revenue ta,es !an not be the sub;e!t of !o"pensation4 2eason4
$overn"ent and ta,payer are not "utuay !reditors and debtors of ea!h other0 under
Arti!e 12*/ of the &ivi &ode and a :!ai" for ta,es is not su!h a debt, de"and,
!ontra!t or ;ud$"ent as is aowed to be setAoff.:
-here are other fa!tors whi!h !o"pe us to rue a$ainst the petitioner. -he ta, was due
to the !ity $overn"ent whie the e,propriation was effe!ted by the nationa $overn"ent.
Moreover, the a"ount of P4,113.11 paid by the nationa $overn"ent for the 125 s8uare
"eter portion of his ot was deposited with the Phiippine )ationa #anC on$ before the
sae at pubi! au!tion of his re"ainin$ property. )oti!e of the deposit dated 9epte"ber
2/, 19** was re!eived by the petitioner on 9epte"ber 31, 19**. -he petitioner ad"itted
in his testi"ony that he Cnew about the P4,113.11 deposited with the banC but he did
not withdraw it. 't woud have been an easy "atter to withdraw P2,411.11 fro" the
deposit so that he !oud pay the ta, obi$ation thus abortin$ the sae at pubi! au!tion.
Petitioner had one year within whi!h to redee" his property athou$h, as we be shown
ater, he !ai"ed that he po!Ceted the noti!e of the au!tion sae without readin$ it.
Petitioner !ontends that :the au!tion sae in 8uestion was "ade without !o"pyin$ with
the "andatory provisions of the statute $overnin$ ta, sae. )o eviden!e, ora or
otherwise, was presented that the pro!edure outined by aw on saes of property for ta,
dein8uen!y was foowed. ... Since defendant +o (ernande8 has the affirmative of this
issue" the burden of proof therefore rests upon him to show that plaintiff was dul and
properl notified ... .(Petition for 2eview, 2oo p. 1/< e"phasis suppied+
=e a$ree with the petitioner0s !ai" that ?o FernandeF, the pur!haser at the au!tion
sae, has the burden of proof to show that there was !o"pian!e with a the pres!ribed
re8uisites for a ta, sae.
-he !ase of 6alencia v. 7imene8 (11 Phi. 492+ aid down the do!trine that4
,,, ,,, ,,,
... O5Pue pro!ess of aw to be foowed in ta, pro!eedin$s "ust be
estabished by proof and the%eneral rule is that the purchaser of a ta! title
is bound to ta2e upon himself the burden of showin% the re%ularit of all
proceedin%s leadin% up to the sale. (e"phasis suppied+
-here is no presu"ption of the re$uarity of any ad"inistrative a!tion whi!h resuts in
deprivin$ a ta,payer of his property throu$h a ta, sae. (&a"o v. 2iosa #oy!o, 29 Phi.
43*+< 5eno$a v. 'nsuar @overn"ent, 19 Phi. 231+. -his is a!tuay an e,!eption to the
rue that ad"inistrative pro!eedin$s are presu"ed to be re$uar.
#ut even if the burden of proof ies with the pur!haser to show that a e$a
prere8uisites have been !o"pied with, the petitioner !an not, however, deny that he did
re!eive the noti!e for the au!tion sae. -he re!ords sustain the ower !ourt0s findin$ that4
O-Phe paintiff !ai"ed that it was ie$a and irre$uar. ?e insisted that he
was not propery notified of the au!tion sae. 9urprisin$y, however, he
ad"itted in his testi"ony that he re!eived the etter dated )ove"ber 21,
19** (%,hibit :':+ as shown by his si$nature (%,hibit :'AA:+ thereof. ?e
!ai"ed further that he was not present on 5e!e"ber 5, 19** the date of
the au!tion sae be!ause he went to 'i$an &ity. As on$ as there was
substantia !o"pian!e with the re8uire"ents of the noti!e, the vaidity of
the au!tion sae !an not be assaied ... .
=e 8uote the foowin$ testi"ony of the petitioner on !rossAe,a"ination, to wit4
M. My 8uestion to you is this etter "arCed as %,hibit ' for ?o
FernandeF notified you that the property in 8uestion sha be
sod at pubi! au!tion to the hi$hest bidder on 5e!e"ber 5,
19** pursuant to 9e!. *4 of P5 434. =i you te the &ourt
whether you re!eived the ori$ina of this etterV
A. ' ;ust si$ned it be!ause ' was not abe to read the sa"e. 't
was ;ust sent by "ai !arrier.
M. 9o you ad"it that you re!eived the ori$ina of %,hibit '
and you si$ned upon re!eipt thereof but you did not read the
!ontents of itV
A. Ies, sir, as ' was in a hurry.
M. After you re!eived that ori$ina where did you pa!e itV
A. ' pa!ed it in the usua pa!e where ' pa!e "y "ais.
Petitioner, therefore, was notified about the au!tion sae. 't was ne$i$en!e on his part
when he i$nored su!h noti!e. #y his very own ad"ission that he re!eived the noti!e, his
now !o"in$ to !ourt assaiin$ the vaidity of the au!tion sae oses its for!e.
Petitioner0s third assi$n"ent of $rave error iCewise a!Cs "erit. As a $enera rue, $ross
inade8ua!y of pri!e is not "ateria (5e Eeon v. 9avador, 33 9&2A 53*< Pon!e de Eeon
v. 2ehabiitation Finan!e &orporation, 33 9&2A 2/9< -oentino v. A$!aoii, 91 Phi. 91*
>nrep.+. 9ee aso Barro8o 6da. de Gordon v. #ourt of *ppeals (119 9&2A 3//+ we hed
that :ae$ed $ross inade8ua!y of pri!e is not "ateria when the aw $ives the owner the
ri$ht to redee" as when a sae is "ade at pubi! au!tion, upon the theory that the
esser the pri!e, the easier it is for the owner to effe!t rede"ption.: 'n 6elas,ue8 v.
#oronel (5 9&2A 9/5+, this &ourt hed4
... O2Pespondent treasurer now !ai"s that the pri!es for whi!h the ands
were sod are un!ons!ionabe !onsiderin$ the wide diver$en!e between
their assessed vaues and the a"ounts for whi!h they had been a!tuay
sod. ?owever, whie in ordinary saes for reasons of e8uity a transa!tion
"ay be invaidated on the $round of inade8ua!y of pri!e, or when su!h
inade8ua!y sho!Cs one0s !ons!ien!e as to ;ustify the !ourts to interfere,
su!h does not foow when the aw $ives to the owner the ri$ht to redee",
as when a sae is "ade at pubi! au!tion, upon the theory that the esser
the pri!e the easier it is for the owner to effe!t the rede"ption. And so it
was apty said4 :=hen there is the ri$ht to redee", inade8ua!y of pri!e
shoud not be "ateria, be!ause the ;ud$"ent debtor "ay rea!8uire the
property or aso se his ri$ht to redee" and thus re!over the oss he
!ai"s to have suffered by reason of the pri!e obtained at the au!tion
sae.:
-he reason behind the above ruin$s is we enun!iated in the !ase of +ilton et. u!. v.
/e 0on%" et al. (1// =ash. 132, 31 P. 2d, 1291+4
'f "ere inade8ua!y of pri!e is hed to be a vaid ob;e!tion to a sae for
ta,es, the !oe!tion of ta,es in this "anner woud be $reaty
e"barrassed, if not rendered ato$ether i"pra!ti!abe. 'n #a!C on -a,
-ites (2nd %d.+ 23/, the !orre!t rue is stated as foows4 :where and is
sod for ta,es, the inade8ua!y of the pri!e $iven is not a vaid ob;e!tion to
the sae.: -his rue arises fro" ne!essity, for, if a fair pri!e for the and
were essentia to the sae, it woud be useess to offer the property.
'ndeed, it is notorious that the pri!es habituay paid by pur!hasers at ta,
saes are $rossy out of proportion to the vaue of the and. (2oth!hid
#ros. v. 2oin$er, 32 =ash. 31*, *3 P. 33*, 339+.
'n this !ase now before us, we !an apty use the an$ua$e of McGuire" et al. v. Bean" et
al. (23* P. 555+4
EiCe "ost !ases of this !hara!ter there is here a !ertain ee"ent of
hardship fro" whi!h we woud be $ad to reieve, but do so woud unsette
on$Aestabished rues and ead to un!ertainty and diffi!uty in the
!oe!tion of ta,es whi!h are the ife bood of the state. =e are !onvin!ed
that the present rues are ;ust, and that they brin$ hardship ony to those
who have invited it by their own ne$e!t.
=e are in!ined to beieve the petitioner0s !ai" that the vaue of the ot has $reaty
appre!iated in vaue. Pre!isey be!ause of the widenin$ of #uendia Avenue in Pasay
&ity, whi!h ne!essitated the e,propriation of ad;oinin$ areas, rea estate vaues have
$one up in the area. ?owever, the pri!e 8uoted by the petitioner for a 213 s8uare "eter
ot appears 8uite e,a$$erated. At any rate, the fore$oin$ reasons whi!h answer the
petitioner0s !ai"s ead us to deny the petition.
And finay, even if we are in!ined to $ive reief to the petitioner on e8uitabe $rounds,
there are no stron$ !onsiderations of substantia ;usti!e in his favor. Mr. Fran!ia faied to
pay his ta,es for 14 years fro" 1933 up to the date of the au!tion sae. ?e !ai"s to
have po!Ceted the noti!e of sae without readin$ it whi!h, if true, is sti an a!t of
ine,pi!abe ne$i$en!e. ?e did not withdraw fro" the e,propriation pay"ent deposited
with the Phiippine )ationa #anC an a"ount suffi!ient to pay for the ba!C ta,es. -he
petitioner did not pay attention to another noti!e sent by the &ity -reasurer on
)ove"ber 3, 19*/, durin$ the period of rede"ption, re$ardin$ his ta, dein8uen!y.
-here is further"ore no showin$ of bad faith or !ousion in the pur!hase of the property
by Mr. FernandeF. -he petitioner has no standin$ to invoCe e8uity in his atte"pt to
re$ain the property by beatedy asCin$ for the annu"ent of the sae.
=?%2%FO2%, ') D'%= OF -?% FO2%@O')@, the petition for review is 5'9M'99%5.
-he de!ision of the respondent !ourt is affir"ed.
9O O25%2%5.
18. DOMINGO VS GARLI0OS 8 SCRA 443
G.R. No. L-17994 /3(e 29, 1963
MELECIO R. %OMINGO, &' Comm+''+o(er o) I(ter(&1 Re2e(3e, petitioner,
vs.
5ON. LOREN.O C. GRLITOS, +( *+' -&p&-+t8 &' /3,4e o) t*e Co3rt o) F+r't
I('t&(-e o) Le8te,
&(, SIMEON C. $RICE, &' ,m+(+'tr&tr+D o) t*e I(te't&te E't&te o) t*e 1&te =&1ter
S-ott $r+-e,respondents.
Office of the Solicitor General and *tt. G. +. Mantolino for petitioner.
Benedicto and Martine8 for respondents.
L#R%OR, J.:
-his is a petition for certiorari and mandamus a$ainst the .ud$e of the &ourt of First
'nstan!e of Eeyte, 2on. EorenFo &. @aritos, presidin$, seeCin$ to annu !ertain orders
of the !ourt and for an order in this &ourt dire!tin$ the respondent !ourt beow to
e,e!ute the ;ud$"ent in favor of the @overn"ent a$ainst the estate of =ater 9!ott
Pri!e for interna revenue ta,es.
't appears that in Mee!io 2. 5o"in$o vs. ?on. .ud$e 9. &. Mos!oso, @.2. )o. EA
143*4, .anuary 31, 1931, this &ourt de!ared as fina and e,e!utory the order for the
pay"ent by the estate of the estate and inheritan!e ta,es, !har$es and penaties,
a"ountin$ to P41,15/.55, issued by the &ourt of First 'nstan!e of Eeyte in, spe!ia
pro!eedin$s )o. 14 entited :'n the "atter of the 'ntestate %state of the Eate =ater
9!ott Pri!e.: 'n order to enfor!e the !ai"s a$ainst the estate the fis!a presented a
petition dated .une 21, 1931, to the !ourt beow for the e,e!ution of the ;ud$"ent. -he
petition was, however, denied by the !ourt whi!h hed that the e,e!ution is not ;ustifiabe
as the @overn"ent is indebted to the estate under ad"inistration in the a"ount of
P232,211. -he orders of the !ourt beow dated Au$ust 21, 1931 and 9epte"ber 2/,
1931, respe!tivey, are as foows4
Atty. #enedi!to sub"itted a !opy of the !ontra!t between Mrs. 9i"eona J. Pri!e,
Ad"inistratri, of the estate of her ate husband =ater 9!ott Pri!e and 5ire!tor
Hoio &astrio of the #ureau of Eands dated 9epte"ber 19, 1953 and
a!Cnowed$ed before )otary Pubi! 9avador D. %s$uerra, e$a adviser in
Maa!aUan$ to %,e!utive 9e!retary 5e Eeon dated 5e!e"ber 14, 1953, the note
of ?is %,!een!y, Pres. &aros P. @ar!ia, to 5ire!tor &astrio dated Au$ust 2,
195/, dire!tin$ the atter to pay to Mrs. Pri!e the su" ofP33/,141.11, and an
e,tra!t of pa$e *35 of 2epubi! A!t )o. 2*11 appropriatin$ the su" of
P232.211.11 for the pay"ent to the Eeyte &adastra 9urvey, 'n!., represented by
the ad"inistratri, 9i"eona J. Pri!e, as dire!ted in the above note of the
President. &onsiderin$ these fa!ts, the &ourt orders that the pay"ent of
inheritan!e ta,es in the su" of P41,15/.55 due the &oe!tor of 'nterna 2evenue
as ordered paid by this &ourt on .uy 5, 1931 in a!!ordan!e with the order of the
9upre"e &ourt pro"u$ated .uy 31, 1931 in @.2. )o. EA143*4, be dedu!ted
fro" the a"ount of P232,211.11 due and payabe to the Ad"inistratri, 9i"eona
J. Pri!e, in this estate, the baan!e to be paid by the @overn"ent to her without
further deay. (Order of Au$ust 21, 1931+
-he &ourt has nothin$ further to add to its order dated Au$ust 21, 1931 and it
orders that the pay"ent of the !ai" of the &oe!tor of 'nterna 2evenue be
deferred unti the @overn"ent sha have paid its a!!ounts to the ad"inistratri,
herein a"ountin$ to P232,211.11. 't "ay not be a"iss to repeat that it is ony fair
for the @overn"ent, as a debtor, to its a!!ounts to its !itiFensA!reditors before it
!an insist in the pro"pt pay"ent of the atter0s a!!ount to it, spe!iay taCin$ into
!onsideration that the a"ount due to the @overn"ent draws interests whie the
!redit due to the present state does not a!!rue any interest. (Order of 9epte"ber
2/, 1931+
-he petition to set aside the above orders of the !ourt beow and for the e,e!ution of the
!ai" of the @overn"ent a$ainst the estate "ust be denied for a!C of "erit. -he
ordinary pro!edure by whi!h to sette !ai"s of indebtedness a$ainst the estate of a
de!eased person, as an inheritan!e ta,, is for the !ai"ant to present a !ai" before the
probate !ourt so that said !ourt "ay order the ad"inistrator to pay the a"ount thereof.
-o su!h effe!t is the de!ision of this #ourt in *ldami8 vs. 7ud%e of the #ourt of (irst
Instance of Mindoro, @.2. )o. EA2331, 5e!. 29, 1949, thus4
. . . a writ of e,e!ution is not the proper pro!edure aowed by the 2ues of &ourt
for the pay"ent of debts and e,penses of ad"inistration. -he proper pro!edure
is for the !ourt to order the sae of persona estate or the sae or "ort$a$e of rea
property of the de!eased and a debts or e,penses of ad"inistrator and with the
written noti!e to a the heirs e$atees and devisees residin$ in the Phiippines,
a!!ordin$ to 2ue /9, se!tion 3, and 2ue 91, se!tion 2. And when sae or
"ort$a$e of rea estate is to be "ade, the re$uations !ontained in 2ue 91,
se!tion *, shoud be !o"pied with.19wph:1.;<t
%,e!ution "ay issue ony where the devisees, e$atees or heirs have entered
into possession of their respe!tive portions in the estate prior to sette"ent and
pay"ent of the debts and e,penses of ad"inistration and it is ater as!ertained
that there are su!h debts and e,penses to be paid, in whi!h !ase :the !ourt
havin$ ;urisdi!tion of the estate "ay, by order for that purpose, after hearin$,
sette the a"ount of their severa iabiities, and order how "u!h and in what
"anner ea!h person sha !ontribute, and "ayissue e!ecution if !ir!u"stan!es
re8uire: (2ue /9, se!tion 3< see also 2ue *4, 9e!tion 4< %"phasis suppied.+
And this is not the instant !ase.
-he e$a basis for su!h a pro!edure is the fa!t that in the testate or intestate
pro!eedin$s to sette the estate of a de!eased person, the properties beon$in$ to the
estate are under the ;urisdi!tion of the !ourt and su!h ;urisdi!tion !ontinues unti said
properties have been distributed a"on$ the heirs entited thereto. 5urin$ the penden!y
of the pro!eedin$s a the estate is in custodia le%is and the proper pro!edure is not to
aow the sheriff, in !ase of the !ourt ;ud$"ent, to seiFe the properties but to asC the
!ourt for an order to re8uire the ad"inistrator to pay the a"ount due fro" the estate
and re8uired to be paid.
Another $round for denyin$ the petition of the provin!ia fis!a is the fa!t that the !ourt
havin$ ;urisdi!tion of the estate had found that the !ai" of the estate a$ainst the
@overn"ent has been re!o$niFed and an a"ount of P232,211 has aready been
appropriated for the purpose by a !orrespondin$ aw (2ep. A!t )o. 2*11+. >nder the
above !ir!u"stan!es, both the !ai" of the @overn"ent for inheritan!e ta,es and the
!ai" of the intestate for servi!es rendered have aready be!o"e overdue and
de"andabe is we as fuy i8uidated. &o"pensation, therefore, taCes pa!e by
operation of aw, in a!!ordan!e with the provisions of Arti!es 12*9 and 1291 of the &ivi
&ode, and both debts are e,tin$uished to the !on!urrent a"ount, thus4
A2-. 1211. =hen a the re8uisites "entioned in arti!e 12*9 are present,
!o"pensation taCes effe!t by operation of aw, and e,tin$uished both debts to
the !on!urrent a"ount, eventhou$h the !reditors and debtors are not aware of
the !o"pensation.
't is !ear, therefore, that the petitioner has no !ear ri$ht to e,e!ute the ;ud$"ent for
ta,es a$ainst the estate of the de!eased =ater 9!ott Pri!e. Further"ore, the petition
for certiorari and mandamus is not the proper re"edy for the petitioner. Appea is the
re"edy.
-he petition is, therefore, dis"issed, without !osts.