TOLENTINO VS. SEC OF FINANCE & CIR | G.R. No.

115455, August 25, 1994| RULING

MENDOZA, J.:
 No, EVAT is non-violative of the Constitution on the rule that Taxes evolve a
General Principles of Taxation; Scope and Limitations of Taxation; Constitutional progressive system of Taxation.
Limitation; Adoption of a progressive system of taxation
 The Constitution does not really prohibit imposition of Indirect Taxes. It has been
FACTS interpreted to mean simply that Direct Taxes are to be preferred as much as
 The Case is about challenging the Constitutionality of RA 7716 otherwise known possible whereas Indirect Taxes should be minimized. Sales Taxes are the oldest
as Expanded Value Added Tax (EVAT). form of Indirect Taxes.

 The value-added tax (VAT) is levied on the sale, barter or exchange of goods and  The issue of VAT was already provided long before RA 7716. It merely expands
properties as well as on the sale or exchange of services. RA 7716 seeks to widen the base of the Tax. Resort to indirect taxes should be minimized but not avoid
the tax base of the existing VAT system and enhance its administration by entirely because it is difficult, if not IMPOSSIBLE, to avoid them by imposing such
amending the National Internal Revenue Code. There are various suits taxes according to the Taxpayers ability to pay.
challenging the constitutionality of RA 7716 on various grounds.
 Where VAT imposes regressive taxation, the Law on VAT minimizes the regressive
 A lot of issues were thrown: (1) it did not originate exclusively in the House of
Representatives; (2) The Growing Budget deficit is not an Emergency, especially effects of this imposition by providing for ZERO Rating of certain transactions like
Philippines where budget deficit is a chronic condition. Goods in its Original State (Palay, Corn), Educational Services, Work of Art, Export
sales by person not VAT registered.
 These are motions directly filed to the Supreme Court seeking reconsideration to
dismiss the case. The enactment of RA 7716 otherwise known as EVAT was  Transactions which involves VAT are goods and services used or availed mainly by
brought about by the enormous budget deficit of the Philippines. higher income group. Real Property for Sale, Patent, copyright, films, radio, 1V,
Hotels, Restaurants, Common Carriers &Lending Investments.
 Arturo Tolentino together with other petitioners like the Chamber of Real Estate
and Builders Association (CREBA) and other Civil Society riding on the popularity
of the issue on EVAT to gain political grounds, assents that EVAT violates the rules
that taxes should be uniform and equitable and that Congress shall evolve a
progressive system of Taxation.

 CREBA claims that VAT is regressive because the law imposes a flat rate of 10%
and thus places the Tax Burden on all taxpayers without regard to their ability to
pay.

 The mandate of Congress is to evolve a progressive tax system.

ISSUE
Whether or not EVAT violates the rule that Taxes evolve a progressive system of
Taxation?
 |PEPSI-COLA BOTTLING CO. VS. CITY OF BUTUAN|GR L-22814, 28 August 1968|En City. Besides, the tax would not be applicable to such agent and/or consignee, if
less than 1,000 cases of soft drinks are consigned or shipped to him every
Banc, Concepcion (J):
month. Considering, also, that the tax "shall be based and computed from the
cargo manifest or bill of lading x x showing the number of cases" - not sold - but
General Principles of Taxation; Scope and Limitations of Taxation; "received" by the taxpayer, the intention to limit the application of the ordinance
to soft drinks and carbonated drinks brought into the City from outside thereof
Constitutional Limitation; Valid Classification of taxpayers/subject
becomes apparent.
or items to be taxed
 Viewed from this angle, the tax partakes of the nature of an import duty, which
FACTS
is beyond City of Butuan's authority to impose by express provision of law.
 Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with
offices and principal place of business in Quezon City. Pepsi-Cola seeks to
 Even, however, if the burden in question were regarded as a tax on the sale of
recover the sums paid by it to the City of Butuan and collected by the latter,
said beverages, it would still be invalid, as discriminatory, and hence, violative of
pursuant to its Municipal Ordinance No. 110, as amended by Municipal
the uniformity required by the Constitution and the law therefor, since only sales
Ordinance No. 122, both series of 1960, which Pepsi-Cola assails as null and void,
by "agents or consignees" of outside dealers would be subject to the tax. Sales
and to prevent the enforcement thereof.
by local dealers, not acting for or on behalf of other merchants, regardless of the
volume of their sales, and even if the same exceeded those made by said agents
 Ordinance 110 was enacted by the City of Butuan imposing a tax of P0.10 per
or consignees of producers or merchants established outside the City of Butuan,
case of 24 bottles of softdrinks or carbonated drinks. The tax was imposed upon
would be exempt from the disputed tax.
dealers engaged in selling softdrinks or carbonated drinks. When Ordinance 110,
the tax was imposed upon an agent or consignee of any person, association,
 It is true that the uniformity essential to the valid exercise of the power of
partnership, company or corporation engaged in selling softdrinks or carbonated
taxation does not require identity or equality under all circumstances, or negate
drinks, with “agent or consignee” being particularly defined on the inserted
the authority to classify the objects of taxation.
provision Section 3-A.
 The classification made in the exercise of this authority, to be valid, must,
 In effect, merchants engaged in the sale of softdrinks, etc. are not subject to the
however, be reasonable[6] and this requirement is not deemed satisfied unless:
tax unless they are agents or consignees of another dealer who must be one
(1) it is based upon substantial distinctions which make real differences;
engaged in business outside the City. Pepsi-Cola filed suit to recover sums paid
(2) these are germane to the purpose of the legislation or ordinance;
by it to the city pursuant to the Ordinance, which it claims to be null and void.
(3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and
ISSUE
(4) the classification applies equally all those who belong to the same class.
Whether or not Municipal Ordinance No. 110 satisfied the requirement of
 These conditions are not fully met by the ordinance in question. Indeed, if its
reasonableness of its classification?
purpose were merely to levy a burden upon the sale of soft drinks or carbonated
beverages, there is no reason why sales thereof by dealers other than agents or
RULING
consignees of producers or merchants established outside the City of Butuan
should be exempt from the tax.
 No, Municipal Ordinance No. 110 is discriminatory.
 Merchants engaged in the sale of soft drinks or carbonated drinks, are not
subject to the tax, unless they are agents and/or consignees of another dealer,
who, in the very nature of things, must be one engaged in business outside the
|MANILA RACE HORSE TRAINERS ASSOCIATION, INC., VS. DE LA FUENTE, |G. R. No. RULING
L-2947, January 10, 1951|TUASON, J.:
No, Ordinance No. 3065 is not discriminatory.
General Principles of Taxation; Scope and Limitations of Taxation;
Constitutional Limitation; Valid Classification of taxpayers/subject  In taxing only boarding stables for race horses, the Court do not believe that the
or items to be taxed ordinance makes an arbitrary classification. In the case of Eastern Theatrical Co.
Inc., vs. Alfonso, 46 Off. Gaz. Supp. to No. 11, p. 303,[*] it was said that there is
FACTS equality and uniformity in taxation if all articles or kinds of property of the same
 Manila Race Horses Trainers Association, Inc., a nonstock corporation, and class are taxed at the same rate.
owners of boarding stables for race horses. Whereby, their rights as such were
affected by Ordinance No. 3065 of the City of Manila and prayed that said  Thus, it was held in that case, that "the fact that some places of amusement are
ordinance be declared invalid as violative of the Philippine Constitution. not taxed while others, such as cinematographs, theaters, vaudeville companies,
theatrical shows, and boxing exhibitions and other kinds of amusements or
 On appeal, the Association made assignments of error: places of amusement are taxed, is not argument at all against the equality and
uniformity of the tax imposition." Applying this criterion to the present case,
 The ordinance under consideration is a tax on race horses as distinct from there would be discrimination if some boarding stables of the same class used
boarding stables. It is argued that by section 2 the basis of the license fees "is the for the same number of horses were not taxed or were made to pay less or more
number of race horses kept or maintained in the boarding stables to be paid by than others.
the maintainers at the rate of P10.00 a year for each race horse;" that "the fee is
increased correspondingly P10 for each additional race horse maintained or fed  From the viewpoint of economics and public policy the taxing of boarding stables
in the stable;" and that "by the same token, an empty stable for race horse pays for race horses to the exclusion of boarding stables for horses dedicated to other
no license fee at all." purposes is not indefensible. The owners of boarding stables for race horses and,
for that matter, the race horse owners themselves, who in the scheme of shifting
 The spirit, rather than the letter, of an ordinance determines the construction may carry the taxation burden, are a class by themselves and appropriately taxed
thereof, and the court looks less to its words and more to the context, subject where owners of other Kinds of horses are taxed less or not at all, considering
matter, consequence and effect. Accordingly, what is within the spirit is within that equity in taxation is generally conceived in terms of ability to pay in relation
the ordinance although it is not within the letter thereof, while that which is in to the benefits received by the taxpayer and by the public from the business or
the letter, although not within the spirit, is not within the ordinance. (62 C. J. S., property taxed.
845.)
 Race horses are devoted to gambling if legalized, their owners derive fat income
 From the context of Ordinance No. 3065, the intent to tax or license stables and and the public hardly any profit from horse racing, and this business demands
not horses is clearly manifest. The tax is assessed not on the owners of the relatively heavy police supervision. Taking everything into account, the
horses but on the owners of the stables, although there is nothing, of course, to differentiation against which the Association complain conforms to the practical
stop stable owners from shifting the tax to the horse owners in the form of dictates of justice and equity and is not discriminatory within the meaning of the
increased rents or .fees, which is generally the case. Constitution.

ISSUE

Whether or not Ordinance No. 3065 is discriminative and constitutes arbitrary

classification?
 EASTERN THEATRICAL CO., INC., ET AL vs. VICTOR, ALFONSO ISSUE
G.R. No. L1104 May 31, 1949
1. WON ordinance was enacted beyond the charter powers of the City of Manila?
FACTS
 Twelve corporation engaged in motion picture business have initiated these NO. The tax imposed by Sec 2444(m) cannot be defined as and be restricted to
proceeding through a complaint, to impugn the validity of Ordinance No. 2958 of tax on business. The fact that said section includes theaters and similar
the City of Manila which was enacted by the municipalBoard of said city on April
amusement establishments shows that the power to tax amusement is expressly
25 1946 approved by the Mayor on April 27, 1946 and took effect on May 1,
1946. included within the power granted by Sec 2444(m).

 “AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET Petitioners: Sec 2444(m) of the Revised Administrative Code, which grants to the
SOLD BY CINEMATOGRAPHS, THEATERS VAUDEVILLE COMPANIES THEATRICAL City the power to regulate theaters, confers only the power to tax on business
SHOWS AND BOXINGEXHIBITION AND PROVIDING FOR OTHER PURPOSES.” but not on amusement.

 Plaintiffs, operator of theaters in Manila And distributor of local or imported

The whole argument of plaintiffs hinges, therefore, on the assumption that the
films allege that they are interested in the provision of section 1,2 and 4 of said
ordinance which they impugn as null and void upon the following grounds: power granted to the City of Manila by section 2444(m) of the Revised
Administrative Code is limited to the authority to impose a tax on business, with
(a) For violation the Constitution more particular the provision regarding the exclusion of the power to impose a tax amusement; but, the assumption is based
uniformity and equality of taxation and thee equal protection of the laws; on an arbitrary labeling of the kind of tax authorized by said section 2444(m).
(b) because the Municipal Board of Manila exceeded and overstepped the power
granted it the Charter of the City of Manila;
The distinction made by plaintiffs as to the power to tax on business and the
(c) because it contravenes violates and is inconsistent with, existing
power to tax on amusement has no ground under the provisions of section
nationallegislation more particularly revenue and tax laws and
(d) because it is unfair, unjust, arbitrary capricious unreasonable oppressive and 2444(m) of the Revised Administrative Code. The tax therein authorized cannot
is contrary to and violation our basic and recognizes principles of taxation and be defined as tax on business and cannot be restricted within a smaller scope
licensing laws. than what is authorized by the words used, to the extent of excluding what
plaintiffs describe as tax on amusement.
 Defendants allege an affirmative defenses and also allege that since May 1, 1946,
when the ordinance in question took effect plaintiffs have been charging the
The very fact that section 2444 (m) of the Revised Administrative Code includes
theatergoing public increased prices for admission to the cinematographs owned
theaters, cinematographs, public billiard tables, public pool tables, bowling
and operated to the graduated tax imposed by said ordinance and as a result
while refusing to pay said tax but at the same time collecting an amount equal to alleys, dance halls, public dancing halls, cabarets, circuses and other similar
said tax plaintiffs have taken undue advantage of said ordinance to realized more places, race tracks, horse races, theatrical performances, public exhibition, circus
profits. and other performances and places of amusements, will show conclusively that
the power to tax amusement is expressly included within the power granted by
 TRIAL COURT: rendered a decision upholding the validity of Ordinance No. 2958. section 2444(m) of the Revised Administrative Code.
 Appellants contend that the lower court erred in holding that under section 2444
(m) of the Revised administrative Code the Municipal Board of the City ofManila
2. WON Sec 2444(m) of the RAC has been impliedly repealed by the NIRC?
had the power to enact Ordinance No. 2958.
 no argument at all against the equality and uniformity of the tax imposition.
NO. Both provisions of law may stand together and enforced at the same time. Equality and uniformity of the tax imposition.
Petitioners: Since the NIRC was passed later the RAC and since both taxing
powers cover the same field of legislation, Sec 2444(m) of the RAC must have Equality and uniformity in taxation means that all taxable articles or kinds of
been repealed by the NIRC and consequently, the power to regulate theaters property of the same class shall be taxed at the same rate. The taxing power has
granted to the City was withdrawn. the authority to make reasonable and natural classifications for purposes of
taxation; and the appellants cannot point out what places of amusement taxed
Plaintiffs aver that the Charter of the City of Manila, containing section 2444(m) by the ordinance do not constitute a class by themselves and which can be
of the Revised Administrative Code, was enacted on December 8, 1929. On April confused with those not included in the ordinance.
25, 1940, the National Assembly enacted Commonwealth Act No. 466, including
provisions on amusement tax, covering the whole field on taxation and provided Petitioners cannot point out what places of amusement do not constitute a class
for more than what the ordinance in question has provided. by themselves and which can be confused with those not included in the
ordinance.
As a result, there are two taxing powers seeking to occupy exactly the same field
of legislation, and so the apparent conflict must be resolved with the conclusion
that, with the enactment of Commonwealth Act No. 466, as later amended by
Republic Act No. 39, section 2444(m) of the Revised Administrative Code has
been impliedly repealed and the power therein delegated to the City of Manila
withdrawn.

The conflict pointed out by them is imaginary. Both provisions of law may stand
together and be enforced at the same time without any incompatibility among
themselves.

3. WON the ordinance violates the principle of equality and uniformity of

taxation enjoined by the Constitution?

NO. Appellantts point out to the fact that the ordinance in question does not tax
"many more kinds of amusements" than those therein specified, such as "race
tracks, cockpits, cabarets, concert halls, circuses, and other places of
amusement." The argument has absolutely no merit.

The fact that some places of amusement are not taxed while others, such as
cinematographs, theaters, vaudeville companies, theatrical shows, and boxing
exhibitions and other kinds of amusements or places of amusement are taxed, is
 THE SHELL CO. OF P.I VS. E. E. VAÑO, AS MUNICIPAL TREASURER OF THE  Even if the installation manager is a salaried employee of the plaintiff, still it is an
MUNICIPALITY OF CORDOVA occupation "and one occupation or line of business does not become exempt by
G.R. NO. L6093 FEBRUARY 24, 1954 being conducted with some other occupation or business for which such tax has
been paid'1 and the occupation tax must be paid "by each individual engaged in
FACTS
a calling subject thereto." And pursuant to section 179 of the National Internal
 The Municipal Council of Cordova, Province of Cebu, adopted the following Revenue Code, "The payment of . . . occupation tax shall not exempt any person
ordinances: from any tax, . . . provided by law or ordinance in places where such . . .
A. No. 10, series of 1946, which imposes an annual tax of P150 on occupation occupation in . . . regulated by municipal law, nor shall the payment of any such
or the exercise of the privilege of installation manager; tax be held to prohibit any municipality from placing a tax upon the same . . .
B. No. 9, series of 1947, which imposes an annual tax of P40 for local deposits occupation, for local purposes, where the imposition of such tax is authorized by
in drums of combustible and inflammable materials and an annual tax of
law."
P200 for tin can factories; and
C. No. 11, series of 1948, which imposes an annual tax of P150 on tin can
factories having a maximum output capacity of 30,000 tin cans.  The contention that the ordinance is discriminatory and hostile because there is
no other person in the locality who exercises such "designation" or occupation is
 The Shell Co. of P.I. Ltd., a foreign corporation, filed suit for the refund of the also without merit, because the fact that there is no other person in the locality
taxes paid by it, on the ground that the ordinances imposing such taxes are ultra who exercises such a "designation" or calling does not make the ordinance
vires. The defendant denies that they are so. discriminatory and hostile, inasmuch as it is and will be applicable to any person
or firm who exercises such calling or occupation named or designated as
 The parties reserved the right to introduce parole evidence but no such evidence
was submitted by either party. From the judgment holding the ordinances valid "installation manager."
and dismissing the complaint the plaintiff has appealed.

ISSUE

WON the ordinances are valid?

RULING

The ordinances are valid.

 Ordinance No. 10 which imposes an annual tax of P150 on "installation
manager" comes under the provisions of Commonwealth Act No. 472. The claim
that "installation manager" is a designation made by the plaintiff and such
designation cannot be deemed to be a "calling" as defined in section 178 of the
National Internal Revenue Code (Com. Act No. 466), and that the installation
manager employed by the plaintiff is a salaried employee which may not be
taxed by the municipal council under the provisions of Commonwealth Act No.
472 is without merit.
 ABRA VALLEY COLLEGE, INC (PEDRO V. BORGONIA) vs. HON. JUAN P. AQUINO, (c) that the elementary pupils are housed in a twostorey building across the
ARMIN M. CARIAGA, GASPAR V. BOSQUE, HEIRS OF PATERNO MILLARE street;
G.R. No. L39086 June 15, 1988 (d) that the high school and college students are housed in the main building;
(e) that the Director with his family is in the second floor of the main building;
FACTS and
 Petitioner, an educational corporation and institution of higher learning duly (f) that the annual gross income of the school reaches more than one hundred
incorporated with the Securities and Exchange Commission in 1948, filed a thousand pesos.
complaint on July 10, 1972 in the court a quo to annul and declare void the
"Notice of Seizure' and the "Notice of Sale" of its lot and building located at TRIAL COURT: not exempted since the second floor is used by the Director of the
Bangued, Abra, for nonpayment of real estate taxes and penalties amounting to school for residential purposes
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by
Original Certificate of Title No. Q83 duly registered in the name of petitioner, ISSUE
plaintiff below, on July 6, 1972, by respondents Municipal Treasurer and
Provincial Treasurer, defendants below, was issued for the satisfaction of the said Whether or not the lot and building in question are used exclusively for educational
taxes thereon. purposes?
 The "Notice of Sale" was caused to be served upon the petitioner by the
respondent treasurers on July 8, 1972 for the sale at public auction of said RULING
college lot and building, which sale was held on the same date.
 Dr. Paterno Millare, then Municipal Mayor of Bangued, Abra, offered the highest NO.
bid of P6,000.00 which was duly accepted. The certificate of sale was  The constitutional provision which finds application in the case at bar is Section
correspondingly issued to him. 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, which
 On August 10, 1972, the respondent Paterno Millare (now deceased) filed expressly grants exemption from realty taxes for "Cemeteries, churches and
through counstel a motion to dismiss the complaint. parsonages or convents appurtenant thereto, and all lands, buildings, and
 On August 23, 1972, the respondent Provincial Treasurer and Municipal improvements used exclusively for religious, charitable or educational purposes.
Treasurer, through then Provincial Fiscal Loreto C. Roldan, filed their answer to
the complaint on August 31, 1972.  Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as
 On September 1, 1972 the respondent Paterno Millare filed his answer amended by Republic Act No. 409, otherwise known as the Assessment Law
 On October 12, 1972, with the aforesaid sale of the school premises at public which states that (c) churches and parsonages or convents appurtenant thereto,
auction, the respondent Judge, Hon. Juan P. Aquino the respondents provincial and all lands, buildings, and improvements used exclusively for religious,
and municipal treasurers to deliver to the Clerk of Court the proceeds of the charitable, scientific or educational purposes.
auction sale.
 Hence, on December 14, 1972, petitioner, through Director Borgonia, deposited  In this regard petitioner argues that the primary use of the school lot and
with the trial court the sum of P6,000.00 evidenced by PNB Check No. 904369. building is the basic and controlling guide, norm and standard to determine tax
 Aside from the Stipulation of Facts, the trial court among others, found the exemption, and not the mere incidental use thereof.
following:
(a) that the school is recognized by the government and is offering Primary, High  The test of exemption from taxation is the use of the property for purposes
School and College Courses, and has a school population of more than one mentioned in the Constitution. It must be stressed however, that while this Court
thousand students all in all; allows a more liberal and nonrestrictive interpretation of the phrase "exclusively
(b) that it is located right in the heart of the town of Bangued, a few meters from used for educational purposes" as provided for in Article VI, Section 22,
the plaza and about 120 meters from the Court of First Instance building; paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and
 reasonably necessary for the accomplishment of the main purposes. Otherwise RUFINO R. TAN vs. RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE
stated, the use of the school building or lot for commercial purposes is neither U. ONG, as COMMISSIONER OF INTERNAL REVENUE
contemplated by law, nor by jurisprudence. Thus, while the use of the second G.R. No. 109446 October 3, 1994
floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use,
which is complimentary to the main or primary purpose—educational, the lease FACTS
of the first floor thereof to the Northern Marketing Corporation cannot by any
stretch of the imagination be considered incidental to the purpose of education.  Two consolidated cases assail the validity of RA 7496 or the Simplified Net
Income Taxation Scheme ("SNIT"), which amended certain provisions of the
 It will be noted however that the aforementioned lease appears to have been NIRC, as well as the Rules and Regulations promulgated by public respondents
raised for the first time in this Court. That the matter was not taken up in the to pursuant to said law.
court is really apparent in the decision of respondent Judge. No mention thereof
 Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the
was made in the stipulation of facts, not even in the description of the school
following provisions of the Constitution:
building by the trial judge, both embodied in the decision nor as one of the
issues to resolve in order to determine whether or not said properly may be -Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only one
exempted from payment of real estate taxes subject which shall be expressed in the title thereof.

 On the other hand, it is noteworthy that such fact was not disputed even after it - Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The
was raised in this Court. Indeed, it is axiomatic that facts not raised in the lower Congress shall evolve a progressive system of taxation.
court cannot be taken up for the first time on appeal.
- Article III, Section 1 — No person shall be deprived of . . . property without due
 Nonetheless, as an exception to the rule, this Court has held that although a process of law, nor shall any person be denied the equal protection of the laws.
factual issue is not squarely raised below, still in the interest of substantial
justice, this Court is not prevented from considering a pivotal factual matter.  Petitioners contended that public respondents exceeded their rule-making
authority in applying SNIT to general professional partnerships. Petitioner
 "The Supreme Court is clothed with ample authority to review palpable errors contends that the title of HB 34314, progenitor of RA 7496, is deficient for being
not assigned as such if it finds that their consideration is necessary in arriving at merely entitled, "Simplified Net Income Taxation Scheme for the Self-Employed
a just decision." and Professionals Engaged in the Practice of their Profession" (Petition in G.R.
No. 109289) when the full text of the title actually reads,
 Under the 1935 Constitution, the trial court correctly arrived at the conclusion
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed
that the school building as well as the lot where it is built, should be taxed, not
and Professionals Engaged In The Practice of Their Profession, Amending Sections 21
because the second floor of the same is being used by the Director and his family
and 29 of the National Internal Revenue Code,' as amended. Petitioners also contend
for residential purposes, but because the first floor thereof is being used for
it violated due process.
commercial purposes.
 The Solicitor General espouses the position taken by public respondents.
 However, since only a portion is used for purposes of commerce, it is only fair
that half of the assessed tax be returned to the school involved.  The Court has given due course to both petitions.

ISSUE

Whether or not the tax law is unconstitutional for violating due process?
RULING RUFINO R. TAN vs. RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE
U. ONG, as COMMISSIONER OF INTERNAL REVENUE
NO. The due process clause may correctly be invoked only when there is a clear G.R. No. 109446 October 3, 1994
contravention of inherent or constitutional limitations in the exercise of the tax
power. No such transgression is so evident in herein case. FACTS
1. Uniformity of taxation, like the concept of equal protection, merely requires that
Republic Act No 17946 limited the allowable deductions from gross income of single
all subjects or objects of taxation, similarly situated, are to be treated alike both in
privileges and liabilities. Uniformity does not violate classification as long as: (1) the proprietorship and professionals in the computation of their taxable income. It was
standards that are used therefor are substantial and not arbitrary, (2) the argued that this violated the requirement of uniformity in taxation and due process
categorization is germane to achieve the legislative purpose, (3) the law applies, all because single proprietorships and professionals were taxed differently from
things being equal, to both present and future conditions, and (4) the classification corporations and partnerships.
applies equally well to all those belonging to the same class.
ISSUE
2. What is apparent from the amendatory law is the legislative intent to increasingly Whether or not deductions should be uniform for all?
shift the income tax system towards the scheduler approach in the income taxation
of individual taxpayers and to maintain, by and large, the present global treatment on
taxable corporations. The Court does not view this classification to be arbitrary and RULING
inappropriate. Petition dismissed. Uniformity does not prohibit classification so long as the
requirements for a valid classification under the equal protection clause are complied
ISSUE 2 with. Shifting the taxation of individuals to the scheduled system which makes the
Whether or not public respondents exceeded their authority in promulgating the RR? income tax depend on the kind of taxable income and maintaining for corporations
the global treatment which treats in common all kinds if taxable income of the
RULING taxpayer is not arbitrary.

No. There is no evident intention of the law, either before or after the amendatory
legislation, to place in an unequal footing or in significant variance the income tax
treatment of professionals who practice their respective professions individually and
of those who do it through a general professional partnership.
 ANTERO M. SISON, JR vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of  On the matter that the rule of taxation shall be uniform and equitable - this
Internal Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal requirement is met when the tax operates with the same force and effect in
Revenue; TOMAS TOLEDO Deputy Commissioner, Bureau of Internal Revenue; every place where the subject may be found." Also, :the rule of uniformity does
MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, not call for perfect uniformity or perfect equality, because this is hardly
Commissioner on Audit, and CESAR E. A. VIRATA, Minister of Finance unattainable."
G.R. No. L-59431 July 25, 1984
 When the problem of classification became of issue, the Court said: "Equality
FACTS and uniformity in taxation means that all taxable articles or kinds of property of
the same class shall be taxed the same rate.
 Section 1 of BP Blg . 135 amended the Tax Code and petitioner Antero M. Sison,
as taxpayer, alleges that "he would be unduly discriminated against by the  The taxing power has the authority to make reasonable and natural
imposition of higher rates of tax upon his income arising from the exercise of his classifications for purposes of taxation..." As provided by this Court, where "the
profession vis-a-vis those which are imposed upon fixed income or salaried differentation" complained of "conforms to the practical dictates of justice and
individual taxpayers. He characterizes said provision as arbitrary amounting to equity" it "is not discriminatory within the meaning of this clause and is
class legislation, oppressive and capricious in character. It therefore violates both therefore uniform."
the equal protection and due process clauses of the Constitution as well as of
the rule requiring uniformity in taxation.

ISSUE

Whether or not the assailed provision violates the equal protection and due process
clauses of the Constitution while also violating the rule that taxes must be uniform
and equitable?

RULING

The petition is without merit.

On due process - it is undoubted that it may be invoked where a taxing statute is so

arbitrary that it finds no support in the Constitution. An obvious example is where it
can be shown to amount to the confiscation of property from abuse of power.
Petitioner alleges arbitrariness but his mere allegation does not suffice and there
must be a factual foundation of such unconstitutional taint.

On equal protection - it suffices that the laws operate equally and uniformly on all
persons under similar circumstances, both in the privileges conferred and the
liabilities imposed.
MAYOR ANTONIO J. VILLEGAS vs. HIU CHIONG TSAI PAO HO and JUDGE FRANCISCO RULING
ARCA
G.R. No. L-29646 November 10, 1978 No, The ordinance’s purpose is clearly to raise money under the guise of regulation
by exacting P50 from aliens who have been cleared for employment. The amount is
unreasonable and excessive because it fails to consider difference in situation among
FACTS aliens required to pay it, i.e. being casual, permanent, part-time, rank-and-file or
executive.
 Private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a
petition with the Court of First Instance of Manila, Branch I, denominated as Civil [ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable,
Case No. 72797, praying for the issuance of the writ of preliminary injunction being applied only to aliens who are thus deprived of their rights to life, liberty and
property and therefore violates the due process and equal protection clauses of the
and restraining order to stop the enforcement of Ordinance No. 6537 as well as
Constitution. Further, the ordinance does not lay down any criterion or standard to
for a judgment declaring said Ordinance No. 6537 null and void. guide the Mayor in the exercise of his discretion, thus conferring upon the mayor
arbitrary and unrestricted powers. ]
1) As a revenue measure imposed on aliens employed in the City of Manila,
Ordinance No. 6537 is discriminatory and violative of the rule of the uniformity
in taxation;

2) As a police power measure, it makes no distinction between useful and non-

useful occupations, imposing a fixed P50.00 employment permit, which is out of
proportion to the cost of registration and that it fails to prescribe any standard to
guide and/or limit the action of the Mayor, thus, violating the fundamental
principle on illegal delegation of legislative powers:

3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who

are thus, deprived of their rights to life, liberty and property and therefore,
violates the due process and equal protection clauses of the Constitution. 7

 Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared
null and void on the ground that it violated the rule on uniformity of taxation
because the rule on uniformity of taxation applies only to purely tax or revenue
measures and that Ordinance No. 6537 is not a tax or revenue measure but is an
exercise of the police power of the state, it being principally a regulatory
measure in nature.

ISSUE

Whether the ordinance imposes a regulatory fee?

 VILLANUEVA VS CITY OF ILOILO but as a license tax on persons engaged in the business of operating tenements,
as the title of the ordinance designates it.
FACTS:
 The spirit, rather than the letter, or an ordinance determines the construction
 On September 30, 1946 the municipal board of Iloilo City enacted Ordinance 86, thereof, and the court looks less to its words and more to the context, subject
imposing license tax fees as follows: (1) tenement house (casa de vecindad), matter, consequence and effect. It is within neither the letter nor the spirit of the
P25.00 annually; (2) tenement house, partly or wholly engaged in or dedicated ordinance that an additional real estate tax is being imposed, otherwise the
to business in the streets of J.M. Basa, Iznart and Aldeguer, P24.00 per subject matter would have been not merely tenement houses.
apartment; (3) tenement house, partly or wholly engaged in business in any
other streets, P12.00 per apartment. The validity and constitutionality of this  On the contrary, it is plain from the context of the ordinance that the intention is
ordinance were challenged by the spouses Eusebio Villanueva and Remedios to impose a license tax on the operation of tenement houses, which is a form of
Sian Villanueva, owners of four tenement houses containing 34 apartments. business or calling. The ordinance, in both its title and body, particularly sections
1 and 3 thereof, designates the tax imposed as a "municipal license tax" which,
 By virtue of the ordinance in question, the appellant City collected from spouses by itself, means an "imposition or exaction on the right to use or dispose of
Eusebio Villanueva and Remedios S. Villanueva, for the years 19601964, the sum property, to pursue a business, occupation, or calling, or to exercise a privilege”
of P5,824.30, and from the appellees Pio Sian Melliza, Teresita S. Topacio, and
Remedios S. Villanueva, for the years 1960-1964, the sum of P1,317.00. Eusebio  In fact, the imposition by the ordinance of a license tax on persons engaged in
Villanueva has likewise been paying real estate taxes on his property. On July 11, the business of operating tenement houses finds authority in section 2 of the
1962 and April 24, 1964, the plaintiffs appellees filed a complaint, and an Local Autonomy Act which provides that chartered cities have the authority to
amended complaint, respectively, against the City of Iloilo, in the impose municipal license taxes or fees upon persons engaged in any occupation
aforementioned court, praying that Ordinance 11, series of 1960, be declared or business, or exercising privileges within their respective territories, and
"invalid for being beyond the powers of the Municipal Council of the City of Iloilo "otherwise to levy for public purposes, just and uniform taxes, licenses, or fees.
to enact, and unconstitutional for being violative of the rule as to uniformity of
taxation and for depriving said plaintiffs of the equal protection clause of the
Constitution," and that the City be ordered to refund the amounts collected from
them under the said ordinance.

 On March 30, 1966,1 the lower court rendered judgment declaring the
ordinance illegal on the grounds that (a) "Republic Act 2264 does not empower
cities to impose apartment taxes," (b) the same is "oppressive and
unreasonable," for the reason that it penalizes owners of tenement houses who
fail to pay the tax, (c) it constitutes not only double taxation, but treble at that
and (d) it violates the rule of uniformity of taxation.

ISSUE:
Whether or not the tax imposed of the City of Iloilo falls within the exceptions of
section 2 of the Local Autonomy Act?

RULING:
 No. The tax imposed by the City does not fall within the exceptions of section 2
as tax in residence as it is not characterized as a real estate tax or property tax CIR vs CA (March 10, 1995)
 Whether or not petitioner is liable for payment of the manufacturer’s tax and
FACTS: contractor's tax and surcharge on the alleged lease of personal property during the
taxable years 1975 and 1976 plus interest?
 Atlas Consolidated Mining and Development Corporation (herein also referred to
as ACMDC) is a domestic corporation which owns and operates a mining RULING
concession at Toledo City, Cebu, the products of which are exported to Japan and
other foreign countries. On April 9, 1980, the Commissioner of Internal Revenue  ACMDC is not liable for the payment of manufacturer’s tax but is liable to the
(also Commissioner, for brevity), acting on the basis of the report of the payment of contractor’s tax.
examiners of the Bureau of Internal Revenue (BIR), caused the service of an
assessment notice and demand for payment of the amount of P12,391,070.51  To be held liable for the payment of a privilege tax, the person or entity must be
representing deficiency ad valorem percentage and fixed taxes, including engaged in business, as shown by the fact that the drafters of the tax code had
increments, for the taxable year 1975 against ACMDC. purposely grouped said provisions under the general heading adverted to above.

 Likewise, on the basis. of the BIR examiner's report in another investigation  "Engaged in business" means occupied or employed in business; carrying on
separately conducted, the Commissioner had another assessment notice, with a business" does not mean the performance of a single disconnected act, but
demand for payment of the amount of P13,531,466.80 representing the 1976 means conducting, prosecuting, and continuing business by performing
deficiency ad valorem and business taxes with P5,000.00 compromise penalty, progressively all the acts normally incident thereto; while "doing business"
served on ACMDC on September 23, 1980. conveys the idea of business being done, not from time to time, but all the time.
Since the term "business" is being used without any qualification in our aforesaid
 ACMDC protested both assessments but the. same were denied, hence it filed tax code, it should therefore be therefore be construed in its plain and ordinary
two petitions for review in the Court of Tax Appeals (also, tax court) where they meaning, restricted to activities for profit or livelihood.
were docketed as C.T.A. Cases Nos. 3467 and 3825. These two cases, being
substantially identical in most respects except for the taxable periods and the  A manufacturer, in order to be subjected to the necessity of paying the
amounts involved, were eventually consolidated. percentage tax imposed by Section 186 of the tax code, must be 'engaged' in the
sale, barter or exchange of; personal property. Under a statute which imposes a
 On May 31, 1991, the Court of Tax Appeals rendered a consolidated decision tax on persons engaged in the sale, barter or exchange of merchandise, a person
holding, inter alia, that ACMDC was not liable for deficiency ad valorem taxes on must be occupied or employed in the sale, barter or exchange of personal
copper and silver for 1975 and 1976 in the respective amounts of property. A person can hardly be considered as occupied or employed in the
P11,276,540.79 and P12,882,760.80 thereby effectively sustaining the theory of sale, barter or exchange of personal property when he has made one purchase
ACMDC that in computing the ad valorem tax on copper mineral, the refining and sale only.
and smelting charges should be deducted, in addition to freight and insurance
charges, from the London Metal Exchange (LME) price of manufactured copper.  Well settled is the rule that anything done as a mere incident to, or as a
necessary consequence of, the principal business is not ordinarily taxed as an
 However, the tax court held ACMDC liable for the amount of P1,572,637.48, independent business in itself. 36 Where a person or corporation is engaged in a
exclusive of interest, consisting of 25% surcharge for late payment of the ad distinct business and, as a feature thereof, in an activity merely incidental which
valorem tax and late filing of notice of removal of silver, gold and pyrite extracted serves no other person or business, the incidental and restricted activity is not
during certain periods, and for alleged deficiency of manufacturer's sales tax for considered as intended to be separately taxed.
manufacturing and selling grinding steel balls and contractor's tax for the lease
of its properties deduced from the fact that for the tax years 1975 and 1976  The same conclusion; however, cannot be made with respect to the contractor's
there were rental income received. tax being imposed on ACMDC. It cannot validly claim that the leasing out of its
ISSUE personal properties was merely an isolated transaction. Its book of accounts
 shows that several distinct payments were made for the use of its personal
properties such as its plane, motor boat and dump truck. FACTS:

 Considering that there was a series of transactions involved, plus the fact that
 The Association of Customs Brokers, Inc., which is composed of all brokers and
there was apparent and protracted intention to profit from such activities, it can
public service operators of motor vehicles in the City of Manila, and G. Manlapit,
be safely concluded that ACMDC was habitually engaged in the leasing out of its
plane, motor boat and dump truck, and is perforce subject to the contractor's Inc., a member of said association, also a public service operator of the trucks in
tax. said City, challenge the validity of Ordinance No. 3379 passed by the Municipal
Board of the City of Manila on March 24, 1950 on the ground that (1) while it
levies a so called property tax it is in reality a license tax which is beyond the
power of the Municipal Board of the City of Manila; (2) said ordinance offends
against the rule of uniformity of taxation; and (3) it constitutes double taxation.

 The disputed ordinance was passed by the Municipal Board of the City of Manila
under the authority conferred by section 18 (p) of Republic Act No. 409. Said
section confers upon the municipal board the power "to tax motor and other
vehicles operating within the City of Manila the provisions of any existing law to
the contrary notwithstanding." It is contended that this power is broad enough
to confer upon the City of Manila the power to enact an ordinance imposing the
property tax on motor vehicles operating within the city limits.

ISSUE
Whether or not the Ordinance is valid being within the power of the City of Manila?

RULING:
 No, as it violates the Motor Vehicles law as the tax imposed is a license tax.
 According to the Motor Vehicles Law “No further fees than those fixed in this
Act shall be exacted or demanded by any public highway, bridge or ferry, or for
the exercise of the profession of chauffeur, or for the operation of any motor
vehicle by the owner thereof: Provided, however, That nothing in this Act shall
be construed to exempt any motor vehicle from the payment of any lawful and
equitable insular, local or municipal property tax imposed thereupon.”

 Therefore no fees may be exacted or demanded for the operation of any motor
vehicle other than those therein provided, the only exception being that which
refers to the property tax which may be imposed by a municipal corporation.
ASSOCIATION OF CUSTOMS BROKER VS THE MUNICIPALITY BOARD
 The character of the tax imposed as a property tax or a license or occupation
tax must be determined by its incidents, and from the natural and legal effect of  Plainĕff is the owner and manager of a gasoline staĕon located in the City of Lipa
the language employed in the act or ordinance, and not by the name by which where gasoline, kerosene, oil and the like are sold. He paid under protest to the
city treasurer during the period from October 24, 1952 to September 30, 1953
it is described, or by the mode adopted in fixing its amount. If it is clearly a
the aggregate sum P733.84 as taxes levied under Ordinance No. 457-A, as
property tax, it will be so regarded, even though nominally and in form it is a amended by Ordinance No. 462, imposing one-tenth (1/10) centavo per liter on
license or occupation tax; and, on the other hand, if the tax is levied upon the sale of gasoline and one-half (1/2) centavo per liter on the sale of alcohol,
persons on account of their business, it will be construed as a license or gas, or petroleum that may be made in any store or establishment within the
occupation tax, even though it is graduated according to the property used in city.
such business, or on the gross receipts of the business.
 To recover the amount paid on the ground that the two ordinances are ultra
vires, he brought the present action in the Court of First Instance of Batangas.
 While it refers to property tax and it is fixed ad valorem yet we cannot reject
The City of Lipa put up the defense that the ordinances are valid because they
the idea that it is merely levied on motor vehicles operating within the City of were enacted pursuant to the power granted to it by its Charter, Republic Act No.
Manila with the main purpose of raising funds to be expended exclusively for 162.
the repair, maintenance and improvement of the streets and bridges in said
city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to  The parties submitted a joint motion for judgment on the pleadings, and on May
prevent, for the reason that, under said Act, municipal corporation already 27, 1954, the court rendered judgment declaring the ordinances ultra vires and
participate in the distribution of the proceeds that are raised for the same ordering Defendant to reimburse to Plaintiff the amount of P733.84 and such
other fees as Plaintiff may have paid after the filing of the complaint.
purpose of repairing, maintaining and improving bridges and public highway
(section 73 of the Motor Vehicle Law).  Defendant took the case directly to this Court.

 This prohibition is intended to prevent duplication in the imposition of fees for ISSUE:
the same purpose. It is for this reason that we believe that the ordinance in Whether or not the ordinance imposed a specific tax on the article therein
question merely imposes a license fee although under the cloak of an ad enumerated like the oil, gasoline, or petroleum, thus, said ordinance was ultra vires?
valorem tax to circumvent the prohibition above adverted to.
RULING:

YES

 It is clear from the above that the City of Lipa is given the power and authority
(1) to tax, (2) to fix the license fee for, (3) to regulate the business, and (4) to fix
the location of the storage and sale of oil, gasoline and the like. In other words, it
is given the power to tax, fix the license fee for, or regulate the business affecting
match factories, blacksmith shops, foundries, steam boilers, lumber yards,
WE WA YU vs CITY OF LIPA shipyards, the storage and the sale of oil, gasoline, petroleum and the like. It
GR No. L-9167 September 27, 1956 does not possess the power to impose a tax on specific articles which may take
the form of specific tax.
FACTS:
 In order that such power may be exercised, the grant must be clear. It cannot be
implied for the reason that a municipal corporation, unlike a sovereign state, FACTS:
does not possess inherent power of taxation.
 Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic
 It is settled that a municipal corporation, unlike a sovereign state, is clothed with corporation whose members, individually or collectively, are engaged in the
no statute must plainly show an intent to confer that power or the municipality buying and selling of copra in Misamis Oriental.
cannot assume it. And the power when granted is to be construed strictissimi
juris. Any doubt or ambiguity arising out of the term used in granting that power  The petitioner alleges that prior to the issuance of Revenue Memorandum
must be resolved against the municipality. Inferences, implications, deductions Circular 47-91 on June 11, 1991, which implemented VAT Ruling 19090, copra
— all these — have no place in the interpretation of the taxing power of a was classified as agricultural food product under Section 103(b) of the National
municipal cooperations. Internal Revenue Code and, therefore, exempt from VAT at all stages of
production or distribution.
 We are inclined to uphold that the tax which they seek to collect is imposed by
“some standard of weight or measurement” and not regardless of it. Thus, the  Respondents represent departments of the executive branch of government
tax imposed is 1/10 centavo per liter on the sale of gasoline and 1/2 centavo per charged with the generation of funds and the assessment, levy and collection of
liter on the sale of alcohol, gas, or petroleum. And it has been held that “A tax taxes and other imposts. Under Section 103(a), the sale of agricultural non-food
which imposes ‘a specific sum by the head or number, or some standard of products in their original state is exempt from VAT only if the sale is made by the
weight or measurement, and which requires no assessment beyond a listing and primary producer or owner of the land from which the same are produced.
classification of the objects to be taxed”, is a specific tax. It is the sense that the
tax on manufactured oils and other fuels is imposed by the National Internal  The sale made by any other person or entity, like a trader or dealer, is not
Revenue Code (section 142, Commonwealth Act No. 466, as amended by section exempt from the tax. On the other hand, under Section 103(b) the sale of
11, Republic Act No. 56). The tax is considered a specific tax if the amount is agricultural food products in their original state is exempt from VAT at all stages
imposed per liter of volume capacity.” It is therefore plain that the enactment of of production or distribution regardless of who the seller is.
the ordinances in question is ultra vires.
 On June 11, 1991, respondent Commissioner of Internal Revenue issued the
circular in question, classifying copra as an agricultural non-food product and
declaring it "exempt from VAT only if the sale is made by the primary producer
pursuant to Section 103(a) of the Tax Code, as amended."

 The reclassification had the effect of denying to the petitioner the exemption it
previously enjoyed when copra was classified as an agricultural food product
under Section 103(b) of the NIRC.

 Thereafter, petitioner challenges RMC No. 4791 on various grounds, which will
be presently discussed although not in the order raised in the petition for
prohibition.

MISAMIS ORIENTAL vs. DEPT OF FINANCE et. al.

GR No. 108524 November 10, 1994 ISSUE:
 Whether or not BFAD and not the BIR is the competent government agency
to determine the proper classification of food products?

RULING:

NO

 In interpreting Section103(a) and (b) of the NIRC, the Commissioner of Internal

Revenue gave it a strict construction consistent with the rule that tax exemptions
must be strictly construed against the taxpayer and liberally in favor of the state.
Indeed, even Dr. Kintanar said that his classification of copra as food was based
on "the broader definition of food which includes agricultural commodities and
other components used in the manufacture/processing of food."

 Moreover, as the government agency charged with the enforcement of the law,
the opinion of the Commissioner of Internal Revenue, in the absence of any
showing that it is plainly wrong, is entitled to great weight. Indeed, the ruling
was made by the Commissioner of Internal Revenue in the exercise of his power
under Section 245 of the NIRC to "make rulings or opinions in connection with
the implementation of the provisions of internal revenue laws, including rulings
on the classification of articles for sales tax and similar purposes."