Tax 1 iv-e digests (partial)

july 3 session
IV2.A. DUE PROCESS CLAUSE
Commissioner of Customs v. CTA & Campos Rueda Co.
ACTS! Campos Rueda Co. imported "tungsol flashers" and sealed beams,
for which it had paid in protest 18,000 pesos, 52,000 pesos, and 6,000 pesos
as import duties. Campos Rueda argued that it had o!erpaid the duties,
claiming that the Commissioner of Customs !iolated "ec. 201 of the #CC.
ISSUES! $o% the appraisal made b& the Commissioner was in accordance
with "ec. 201 of the #CC.
RULI"#! %o. 'ccording to "ec. 201 of the #CC, the dutiable !alue of an
imported article is based on the home consumption !alue or price as declared
in the consular, trade or sales in!oice. (ut where there is a reasonable doubt,
the correct dutiable !alue shall be ascertained from the reports of the
Re!enue 'ttache or Commercial 'ttache and from such other information that
ma& be a!ailable to the (ureau of Customs. 'lso re)uired b& the statute is the
publication from time to time of the lists of the home consumption !alues.
*n the corresponding *mport +ntries, Campos Rueda Co. )uoted the prices of
the imported merchandise as declared in the consular in!oices and as
re)uired b& "ec. 201. Reasonable doubt regarding the declarations was not
shown to ha!e e,isted such that recourse to reports from commercial attaches
or other information became necessar&. %either was there compliance with
the re)uirement in "ec. 201 regarding the publication of the lists of dutiable
!alues of imported articles from time to time. #he re-appraisal made b& the
(ureau of Customs was based on "'lert %otices" recei!ed from .inance
'ttaches abroad, which, howe!er, were not disclosed, neither to Campos
Rueda not to the C#'.
$hile it is true that appraisers of the (ureau of Customs are gi!en ample
leewa& in determining the correct customs duties under "ec. 1/05 of the #CC,
"ec. 201 of the same Code, which prescribes the criteria for the determination
of the dutiable !alues of imported articles, has not been complied with.
$hat is more, administrati!e proceedings are not e,empt from the operation
of due process re)uirements one of which is that a finding b& an
administrati!e tribunal should be supported b& substantial e!idence presented
at the hearing or at least contained in the records or disclosed to the parties
affected.
*n this case the "'lert %otices" on which the Commissioner based its re-
appraisal were not disclosed during the proceedings before the (ureau of
Customs nor presented in e!idence before the C#'. #he re-appraisal made
b& the Commissioner, therefore, can be faulted with arbitrariness in disregard
of the standard of due process to which all go!ernmental action should
conform to impress upon it the stamp of !alidit&.
IV2.$. E%UAL PROTECTIO" CLAUSE
Ormo& Su'ar vs. Treasurer of Ormo& Cit(
ACTS! *n 106/, the 1unicipal (oard of 2rmoc Cit& passed 2rdinance /,
imposing on an& and all productions of centrifuga sugar milled at the 2rmoc
"ugar Co. *nc. in 2rmoc Cit& a municpal ta, e)ui!alent to 13 per e,port sale
to the 4nited "tates and other foreign countries. #he compan& paid the said
ta, under protest. *t subse)uentl& filed a case see5ing to in!alidate the
ordinance for being unconstitutional.
ISSUES! $hether the ordinance !iolates the e)ual protection clause.
RULI"#! #he 2rdinance ta,es onl& centrifugal sugar produced and e,ported
b& the 2rmoc "ugar Co. *nc. and none other. 't the time of the ta,ing
ordinance6s enacted, the compan& was the onl& sugar central in 2rmoc Cit&.
#he classification, to be reasonable, should be in terms applicable to future
conditions as well. #he ta,ing ordinance should not be singular and e,clusi!e
as to e,clude an& subse)uentl& established sugar central, of the same class
as the present compan&, from the co!erage of the ta,. 's it is now, e!en if
later a similar compan& is set up, it cannot be sub7ect to the ta, because the
ordinance e,pressl& points onl& to the compan& as the entit& to be le!ied
upon.
S)e** Compan( vs. Va+o
ACTS! #he 1unicipal Council of Cordo!a, 8ro!ince of Cebu, adopted
se!eral ordinances imposing !arious ta,es. #he "hell Co. of 8.*. 9td., a foreign
corporation, filed suit for the refund of the ta,es paid b& it, on the ground that
the ordinances imposing such ta,es are ultra !ires. 2rdinance %o. 10, series
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of 10/6, which imposes an annual ta, of 8150 on "installation manager"
comes under the pro!isions of Commonwealth 'ct %o. /2. (ut it is claimed
that "installation manager" is a designation made b& the plaintiff and such
designation cannot be deemed to be a "calling" as defined in section 18 of
the %ational *nternal Re!enue Code :Com. 'ct %o. /66;, and that the
installation manager emplo&ed b& the plaintiff is a salaried emplo&ee which
ma& not be ta,ed b& the municipal council under the pro!isions of
Commonwealth 'ct %o. /2.
ISSUES! $o% the designation in the ordinance is discriminator& and hostile
because there is no other person in the localit& who e,ercises such
"designation"
RULI"#! %o. #he fact that there is no other person in the localit& who
e,ercises such a "designation" or calling does not ma5e the ordinance
discriminator& and hostile, inasmuch as it is and will be applicable to an&
person or firm who e,ercises such calling or occupation named or designated
as "installation manager."
IV2.C. RULE O TA,ATIO" S-ALL $E U"IOR. A"D
E%UITA$LE
.ani*a Ra&e -orse v. De*a uente
RULI"#! *n ta,ing onl& boarding stables for race horses, we do not belie!e
that the ordinance, ma5es arbitrar& classification. *n the case of +astern
#heatrical Co. *nc., !s. 'lfonso, it was said there is e)ualit& and uniformit& in
ta,ation if all articles or 5inds of propert& of the same class are ta,ed at the
same rate. #hus, it was held in that case, that "the fact that some places of
amusement are not ta,ed while others, such as cinematographs, theaters,
!aude!ille companies, theatrical shows, and bo,ing e,hibitions and other
5inds of amusements or places of amusement are ta,ed, is not argument at
all against the e)ualit& and uniformit& of ta, imposition." 'ppl&ing this criterion
to the present case, there would be discrimination if some boarding stables of
the same class used for the same number of horses were not ta,ed or were
made to pa& less or more than others.
.rom the !iewpoint of economics and public polic& the ta,ing of boarding
stables for race horses to the e,clusion of boarding stables for horses
dedicated to other purposes is not indefensible. #he owners of boarding
stables for race horses and, for that matter, the race horse owners
themsel!es, who in the scheme of shifting ma& carr& the ta,ation burden, are
a class b& themsel!es and appropriatel& ta,ed where owners of other 5inds of
horses are ta,ed less or not at all, considering that e)uit& in ta,ation is
generall& concei!ed in terms of abilit& to pa& in relation to the benefits
recei!ed b& the ta,pa&er and b& the public from the business or propert&
ta,ed. Race horses are de!oted to gambling if legali<ed, their owners deri!e
fat income and the public hardl& an& profit from horse racing, and this
business demands relati!el& hea!& police super!ision. #a5ing e!er&thing into
account, the differentiation against which the plaintiffs complain conforms to
the practical dictates of 7ustice and e)uit& and is not discrimator& within the
meaning of the Constitution.
IV2.D. "O"/I.PAIR.E"T O CO"TRACTS
.isamis Orienta* v. CEPALCO
ACTS! #he 8ro!ince of 1isamis 2riental assessed and collected from
C+8'9C2 a 0.53 pro!incial franchise ta, on its gross earnings, under 8=
2>1, the 9ocal #a, Code. C+8'9C2 paid under protest, and argued that its
legislati!e franchise, R's >2/, >50 and 6020, uniforml& pro!ide that it shall
onl& pa& a >3 franchise ta, on its gross earnings, in lieu of all ta,es and
assessments of whate!er authorit&.
ISSUES! $o% C+8'9C2 is e,empted from the pro!incial franchise ta,.
RULI"#! ?es. #here is no pro!ision in 8= 2>1 e,pressl& or impliedl&
amending or repealing C+8'9C2@s franchise. #he rule is that a special and
local statute applicable to a particular case is not repealed b& a later statute
which is general in its terms, pro!isions and application e!en if the terms of
the general act are broad enough to include the cases in the special law,
unless there is manifest intent to repeal or alter the special law. R's >2/,
>50 and 6020 are special laws applicable onl& to C+8'9C2, while 8= 2>1 is
a general ta, law. #he presumption is that the special statutes are e,ceptions
to the general law :8= 2>1; because the& pertain to a special charter granted
to meet a particular set of conditions and circumstances. #he franchise of
respondent C+8'9C2 e,pressl& e,empts it from pa&ment of "all ta,es of
whate!er authorit&" e,cept the three per centum :>3; ta, on its gross
earnings.
"o was the e,emption upheld in fa!or of the Carcar +lectric and *ce 8lant
Compan& when it was re)uired to pa& the corporate franchise ta, under "ec.
250 of the *nternal Re!enue Code, as amended b& R' >0. #his Court pointed
out that such e,emption is part of the inducement for the acceptance of the
franchise and the rendition of public ser!ice b& the grantee. 's a charter is in
the nature of a pri!ate contract, the imposition of another franchise ta, on the
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corporation b& the local authorit& would constitute an impairment of the
contract between the go!ernment and the corporation.
IV2.. PRO-I$ITIO" A#AI"ST TA,ATIO" O RELI#IOUS
A"D C-ARITA$LE I"STITUTIO"S
L*ado& vs. Commissioner
ACTS! *n 105, the 1( +state *nc. of (acolod Cit& donated 810,000 in cash
to the parish priest of Aictorias, %egros 2ccidentalB the amount spent for the
construction of a new Catholic Church in the localit&,m as intended. *n1058,
1( +state filed the donor6s gift ta, return. *n 1060, the Commissioner issued
an assessment for donee6s gift ta, against the parish. #he priest lodged a
protest to the assessment and re)uested the withdrawal thereof.
ISSUES! $hether the Catholic 8arish is ta, e,empt.
RULI"#! #he phrase Ce,empt from ta,ationD should not be interpreted to
mean e,emption from all 5inds of ta,es. #he e,emption is onl& from the
pa&ment of ta,es assessed on such properties as propert& ta,es as
contradistinguished from e,cise ta,es. ' donee6s gift ta, is not a propert& ta,
but an e,cise ta, imposed on the transfer of propert& b& wa& of gift inter !i!os.
*t does not rest upon general ownership, but an e,cise upon the use made of
the properties, upon the e,ercise of the pri!ilege of recei!ing the properties.
#he imposition of such e,cise ta, on propert& used for religious purpose do
not constitute an impairment of the Constitution.
#he ta, e,emption of the parish, thus, does not e,tend to e,cise ta,es.
A0ra Va**e( Co**e'e vs. -on. 1uan A2uino
ACTS! 8etitioner, an educational corporation and institution of higher
learning dul& incorporated with the "ecurities and +,change Commission in
10/8, filed a complaint in the court a )uo to annul and declare !oid the "%otice
of "ei<ure@ and the "%otice of "ale" issued b& the 1unicipal #reasurer and
8ro!incial #reasurer of its lot and building located at (angued, 'bra, for non-
pa&ment of real estate ta,es and penalties.
ISSUES! $o% the petitioner is e,empt from pa&ing ta,es
RULI"#! %o. #he use of the school building or lot for commercial purposes is
neither contemplated b& law, nor b& 7urisprudence. #hus, while the use of the
second floor of the main building in the case at bar for residential purposes of
the =irector and his famil&, ma& find 7ustification under the concept of
incidental use, which is complimentar& to the main or primar& purposeE
educational, the lease of the first floor thereof to the %orthern 1ar5eting
Corporation cannot b& an& stretch of the imagination be considered incidental
to the purpose of education.
#he school building as well as the lot where it is built, should be ta,ed, not
because the second floor of the same is being used b& the =irector and his
famil& for residential purposes, but because the first floor thereof is being used
for commercial purposes. Fowe!er, since onl& a portion is used for purposes
of commerce, it is onl& fair that half of the assessed ta, be returned to the
school in!ol!ed.
IV2.-. REEDO. O RELI#IOUS 3ORS-IP
Ameri&an $i0*e So&iet( v. .ani*a
ACTS! #he 'merican (ible "ociet&, a non-stoc5, non-profit religious
corporation, sold bibles during 10/5-105>. #he Cit& of 1anila assessed the
"ociet& for initial business permit fees and )uarterl& license fees based on
gross sales, under 2rdinances %os. >000 and 2520, >028 and >>6/,
respecti!el&. #he "ociet& argued that the ta, ordinances efffecti!el& impaired
its right to free e,ercise of religion b& imposing a burden on the right or
pri!ilege of distributing religious boo5s or pamphlets.
ISSUES! $o% the ta, ordinances are unconsitutional.
?es and %o. 2rdinance %os. 2520, >028 and >>6/ insofar as the& impose a
flat or percentage license ta, on the "ociet&@s gross sales of bibles are
unconstitutional. (ut 2rdinance %o. >000, re)uiring the obtention of a 1a&or@s
permit before an& person can engage in an& business, is !alid. Fowe!er, the
latter is inapplicable to the "ociet&, it not being engaged in a business or
trade.
'rticle ***, section 1, clause :; of the :10>5; Constitution of the 8hilippines
guarantees the freedom of religious profession and worship. "Religion has
been spo5en of as a profession of faith to an acti!e power that binds and
ele!ates man to its Creator." *t has reference to one@s !iews of his relations to
Fis Creator and to the obligations the& impose of re!erence to Fis being and
character, and obedience to Fis $ill. #he constitutional guarant& of the free
e,ercise and en7o&ment of religious profession and worship carries with it the
right to disseminate religious information. 'n& restraints of such right can onl&
be 7ustified li5e other restraints of freedom of e,pression on the grounds that
there is a clear and present danger of an& substanti!e e!il which the "tate has
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the right to pre!ent.
"ection 2:e; of Commonwealth 'ct %o. /66, otherwise 5nown as the
%ational *nternal Re!enue Code, further pro!ides that corporations or
associations organi<ed and operated e,clusi!el& for religious, charitable or
educational purposes shall not be ta,ed. 8ro!ided, howe!er, that the income
of whate!er 5ind and character from an& of its properties, real or personal, or
from an& acti!it& conducted for profit, regardless of the disposition made of
such income, shall be liable to the ta, imposed under this Code.
V.A. #E"ERAL RULES O CO"STRUCTIO" O TA, LA3S
Lu4on Stevedorin' v. Trinidad
RULI"#! #he case of (rown !s. German-'merican, etc. Co. ga!e a definition
for a contractor, which was adopted with appro!al in the case of *n re 4nger
"as one who contracts or co!enants either with . . . a public bod& or pri!ate
parties . . . to . . . contract wor5s or erect buildings . . . at a certain price or
rate." "aid definition was adopted from the Centur& =ictionar&. #he definition
of le,icographers, howe!er, cannot alwa&s be adopted as a correct meaning
for statutor& words and phrases. #he intention of the 9egislature and the
ob7ect which it intended to attain must be ta5en into consideration for the
purpose of determining the meaning of words and phrases used, rather than
the set definition of le,icographers. 1oreo!er, re!enue laws imposing ta,es
on business must be strictl& construed in fa!or of the citi<en. *n construing a
word or e,pression in the statute susceptible of two or more meanings, the
court will adopt that interpretation most in accord with the manifest purpose of
the statute as gathered from the conte,t. $here a particular word is obscure
or of doubtful meaning, ta5en b& itself, its obscurit& or doubt ma& be remo!ed
b& reference to associate words.
*f the )uestion presented in the interpretation of a tariff law is one of doubt, the
doubt would be resol!ed in fa!or of the importer, as duties are ne!er imposed
upon citi<ens upon !ague and doubtful interpretation.
.rom all of the foregoing it seems clear to us that the plaintiff is not a
contractor in the sense that that word is used in said section 1/62 of 'ct %o.
211, and therefore the ta, paid b& the plaintiff under protest was illegall&
collected and should be repaid.
V.$. .A"DATOR5 VS. DIRECTOR5 PROVISIO"S
Ro6as vs. Raffert(
ACTS! #he cit& assessor and collector of 1anila, under the date of
=ecember 1, 101/, sent plaintiffs notice, recei!ed b& them on =ecember 25,
101/, re)uiring them to declare the new impro!ements for assessments for
the &ear 1015. 8rior to this, in %o!ember, the cit& assessor and collector had
the building inspected and had assessed the new impro!ements for ta,ation
for 1015 at 8>00,000. 2n Hanuar& 15, 1015, plaintiffs were notified of this
assessment. 8laintiffs paid the amount of the ta,es, which amounted to
8>,000, under protest.
ISSUES! $o% the notification was made at the proper time
RULI"#! %o. *t is a general rule that those pro!isions of a statute relating to
the assessment of ta,es, which are intended for the securit& of the citi<en, or
to insure the e)ualit& of ta,ation, or certaint& as to the nature and amount of
each person@s ta,, are mandator&B but those designed merel& for the
information or direction of officers or to secure methodical and s&stematic
modes of proceedings are merel& director&. *n the language of the 4nited
"tates "upreme Court, "$hen the regulations prescribed are intended for the
protection of the citi<en and to pre!ent a sacrifice of his propert&, and b& a
disregard of which his right might be, and generall& would be, in7uriousl&
affected, the& are not director& but mandator&." "ometimes statutes re)uiring
the assessor to notif& the ta,pa&er ha!e been held merel& director&. (ut in the
ma7orit& of 7urisdictions this re)uirement is held to be mandator&, so that the
assessor cannot ma5e a !alid assessment unless he has gi!en proper notice.
'pplied to our facts, the assessor should ha!e notified the plaintiffs during
%o!ember, 1015. Fis attempted notification on =ecember 25, 101/, was not
gi!en during the time fi,ed b& statute and was no more than a reminder to
plaintiffs to present a sworn declaration of the !alue of the new impro!ements
on their propert&. #he cit& assessor and collector perforce could not in 101/
le!& a ta, on incomplete impro!ements made during the current &ear, when
the statute onl& authori<ed him to ma5e such le!& upon completed
impro!ements made during the &ear. *n this instance there was no such
substantial compliance with the law as amounts to due process of law.
V.C. APPLICATIO" O TA, LA3S
CIR v. L)ui**ier
RULI"#! 'dding to the in!alidit& of the R1C %o. />-01 and R12 %o. 15-01 is
the absence of publication. $hile the rule-ma5ing authorit& of the C*R is not
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doubted, li5e an& other go!ernment agenc&, the C*R ma& not disregard legal
re)uirements or applicable principles in the e,ercise of )uasi-legislati!e
powers.
9et us first distinguish between two 5inds of administrati!e issuancesI the
legislati!e rule and the interpretati!e rule. ' legislati!e rule is in the nature of
subordinate legislation, designed to implement a primar& legislation b&
pro!iding the details thereof. 'n interpretati!e rule, on the other hand, is
designed to pro!ide guidelines to the law which the administrati!e agenc& is in
charge of enforcing.
*n the same wa& that laws must ha!e the benefit of public hearing, it is
generall& re)uired that before a legislati!e rule is adopted there must be
hearing. *n this connection, the 'dministrati!e Code of 108 pro!idesI
8ublic 8articipation. - *f not otherwise re)uired b& law, an agenc& shall, as far
as practicable, publish or circulate notices of proposed rules and afford
interested parties the opportunit& to submit their !iews prior to the adoption of
an& rule. :2; *n the fi,ing of rates, no rule or final order shall be !alid unless
the proposed rates shall ha!e been published in a newspaper of general
circulation at least two wee5s before the first hearing thereon :>; *n case of
opposition, the rules on contested cases shall be obser!ed.
*n addition, such rule must be published.
$hen an administrati!e rule is merel& interpretati!e in nature, its applicabilit&
needs nothing further than its bare issuance, for it gi!es no real conse)uence
more than what the law itself has alread& prescribed. $hen, on the other
hand, the administrati!e rule goes be&ond merel& pro!iding for the means that
can facilitate or render least cumbersome the implementation of the law but
substantiall& increases the burden of those go!erned, it behoo!es the agenc&
to accord at least to those directl& affected a chance to be heard, and
thereafter to be dul& informed, before that new issuance is gi!en the force and
effect of law
VI.A. E,E.PTIO"S RO. TA,ATIO" I" #E"ERAL
#reenfie*d v. .eer
ACTS! 1ilton Greenfield was engaged in the embroider& business, and did
some stoc5s trading in his spare time. Fe was assessed for income ta, during
the &ear 10>0. #he C*R deducted his 8ersonal and 'dditional +,emptions
from the ta, on the total net income based on the new %*RC. Greenfield
claimed a refund of /5 pesos, arguing that the 8ersonal and 'dditional
+,emptions should be deducted from the net income instead, as in the old ta,
laws.
ISSUES! $o% the e,emptions should be deducted from net income.
RULI"#! ?es. #he mere fact that the phrase "in the nature of a deduction"
found in section of the old law was omitted in section 2> of the new or
%ational *nternal Re!enue Code did not and could not effect an& change in
the law. *t is e!ident that said phrase was added or inserted in said section
onl& out of e,treme caution, because, e!en without it, the e,emption would
ha!e to be deducted from the gross income in order to determine the net
income sub7ect to ta,.
Fad the pro!ision in the old law been drafted in e,actl& the same term as that
of said section 2>, the same construction should ha!e been adopted. (ecause
"+,ception is an immunit& or pri!ilegeB it is freedom from a charge or burden
to which others are sub7ected." *f the amounts of personal and additional
e,emptions fi,ed in section 2> are e,empt from ta,ation, the& should not be
included as part of the net income, which is ta,able. #here is nothing in said
section 2> to 7ustif& the contention that the ta, on personal e,emptions :which
are e,empt from ta,ation; should first be fi,ed, and then deducted from the
ta, on the net income.
CIR vs. CA7 CTA and #CL Retirement P*an
ACTS! 8ri!ate respondent, GC9 Retirement 8lan :GC9, for bre!it&; is an
emplo&ees@ trust maintained b& the emplo&er, GC9 *nc., to pro!ide retirement,
pension, disabilit& and death benefits to its emplo&ees. #he 8lan as submitted
was appro!ed and )ualified as e,empt from income ta, b& 8etitioner
Commissioner of *nternal Re!enue in accordance with Rep. 'ct %o. /01.
*n 108/, Respondent GC9 made in!estsments and earned therefrom interest
income from which was witheld the fifteen per centum :153; final witholding
ta, imposed b& 8res. =ecree %o. 1050. GC9 filed a claim for refund but this
was denied.
ISSUES! $2% the GC9 Retirement is e,empt from this ta,
RULI"#! ?+". #he GC9 8lan was )ualified as e,empt from income ta, b& the
Commissioner of *nternal Re!enue in accordance with Rep. 'ct %o. /01.
#his law specificall& pro!ided that the retirement benefits recei!ed b& officials
and emplo&ees of pri!ate firms, whether indi!idual or corporate, in accordance
with a reasonable pri!ate benefit plan maintained b& the emplo&er shall
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be e,empt from all ta,es.
*n so far as emplo&ees@ trusts are concerned, the foregoing law should be
ta5en in relation to then "ection 56:b; :now 5>JbK; of the #a, Code, as
amended b& Rep. 'ct %o. 108>. #his pro!ision specificall& e,empted
emplo&ee@s trusts from income ta,.
#he ta,-e,emption pri!ilege of emplo&ees@ trusts, as distinguished from an&
other 5ind of propert& held in trust, springs from the foregoing. *t is
unambiguous. 1anifest therefrom is that the ta, law has singled out
emplo&ees@ trusts for ta, e,emption.
'nd rightl& so, b& !irtue of the raison de@etre behind the creation of
emplo&ees@ trusts. +mplo&ees@ trusts or benefit plans normall& pro!ide
economic assistance to emplo&ees upon the occurrence of certain
contingencies, particularl&, old age retirement, death, sic5ness, or disabilit&. *t
pro!ides securit& against certain ha<ards to which members of the 8lan ma&
be e,posed. *t is an independent and additional source of protection for the
wor5ing group. $hat is more, it is established for their e,clusi!e benefit and
for no other purpose. 2therwise, ta,ation of those earnings would result in a
diminution accumulated income and reduce whate!er the trust beneficiaries
would recei!e out of the trust fund. #his would run afoul of the !er&
intendment of the law.
P)i*ippine A&et(*ene v. CIR
ACTS! #he %8C en7o&s ta, e,emption b& !irtue of R' 08. *t is contended
that the immunit& thus gi!en to the %8C would be impaired b& the imposition
of a ta, on sales made to it because while the ta, is paid b& the manufacturer
or producer, the ta, is ultimatel& shifted b& the latter to the former. #he
petitioner in!o5es in support of its position a 105/ opinion of the "ecretar& of
Hustice which ruled that the %8C is e,empt from the pa&ment of all ta,es
"whether direct or indirect."
RULI"#! *n the earl& case of 8anhandle 2il Co. !. 1ississippi the doctrine of
intergo!ernmental ta, immunit& was held as prohibiting the imposition of a ta,
on sales of gasoline made to the .ederal Go!ernment. "aid the "upreme
court of the 4nited "tates.
Hustice Folmes did not agree. *n a powerful dissent 7oined b& Hustices
(randeis and "tone, he saidI
"*f the plaintiff in error had paid the ta, and added it to the price the
go!ernment would ha!e nothing to sa&. *t could ta5e the gasoline or lea!e it
but it could not re)uire the seller to abate his charge e!en if it had been
arbitraril& increased in the hope of getting more from the go!ernment than
could be got from the public at large. *t does not appear that the go!ernment
would ha!e refused to pa& a price that included the ta, if demanded, but if the
go!ernment had refused it would not ha!e e,onerated the seller."
*n 10/1, 'labama !. Ling M (oo<er held that the constitutional immunit& of the
4nited "tates from state ta,ation was not infringed b& the imposition of a state
sales ta, with which the seller was chargeable but which he was re)uired to
collect from the bu&er, in respect of materials purchased b& a contractor with
the 4nited "tates on a cost-plus basis for use in carr&ing out its contract,
despite the fact that the economic burden of the ta, was borne b& the 4nited
"tates.
#he asserted right of the one to be free of ta,ation b& the other does not spell
immunit& from pa&ing the added costs, attributable to the ta,ation of those
who furnish supplies to the Go!ernment and who ha!e been granted no ta,
immunit&.
.urther inroads into the doctrine of 8anhandle were made in 10/> when the
4.". "upreme Court held that immunit& from state regulation in the
performance of go!ernmental functions b& .ederal officers and agencies did
not e,tend to those who merel& contracted to furnish supplies or render
ser!ices to the go!ernment e!en though as a result of an increase in the price
of such supplies or ser!ices attributable to the state regulation, its ultimate
effect ma& be to impose an additional economic burden on the Go!ernment.
(ut if a complete turnabout from the rule announced in 8anhandle was &et to
be made, it was so made in 1052 in +sso "tandard 2il !. +!ans which held
that a contractor is not e,empt from the pa&ment of a state pri!ilege ta, on the
business of storing gasoline simpl& because the .ederal Go!ernment with
which it has a contract for the storage of gasoline is immune from state
ta,ation.
$e ha!e determined the current status of the doctrine of intergo!ernmental
ta, immunit& in the 4nited "tates, b& showing the drift of the decisions
following announcement of the original rule, to point up the that fact that e!en
in those cases where e,emption from ta, was sought on the ground of state
immunit&, the attempt has not met with success. *f a claim of e,emption from
sales ta, based on state immunit& cannot command assent, much less can a
claim resting on statutor& grant.
$e therefore hold that the ta, imposed b& section 186 of the %ational *nternal
Re!enue Code is a ta, on the manufacturer or producer and not a ta, on the
purchaser e,cept probabl& in a !er& remote and inconse)uential sense.
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'ccordingl& its le!& on the sales made to ta,-e,empt entities li5e the %8C is
permissible.
.a&eda v. .a&arai'
RULI"#! #he %8C is a non-profit public corporation created for the general
good and welfare wholl& owned b& the go!ernment of the Republic of the
8hilippines. .rom the !er& beginning of its corporate e,istence, the %8C
en7o&ed preferential ta, treatment 25 to enable the Corporation to pa& the
indebtedness and obligation and in furtherance and effecti!e implementation
of the polic& enunciated in "ection one of "Republic 'ct %o. 6>05"
.rom the changes made in the %8C charter, the intention to strengthen its
preferential ta, treatment is ob!ious.
*t is noted that in the earlier law, R.'. %o. >58 the e,emption was worded in
general terms, as to co!er "all ta,es, duties, fees, imposts, charges, etc. . . ."
Fowe!er, the amendment under Republic 'ct %o. 6>05 enumerated the
details co!ered b& the e,emption. "ubse)uentl&, 8.=. %o. >80, made e!en
more specific the details of the e,emption of %8C to co!er, among others,
both direct and indirect ta,es on all petroleum products used in its operation.
8residential =ecree %o. 0>8 amended the ta, e,emption b& simplif&ing the
same law in general terms. *t succinctl& e,empts %8C from "all forms of ta,es,
duties, fees, imposts, as well as costs and ser!ice fees including filing fees,
appeal bonds, supersedeas bonds, in an& court or administrati!e
proceedings."
#he use of the phrase "all forms" of ta,es demonstrate the intention of the law
to gi!e %8C all the ta, e,emptions it has been en7o&ing before. #he rationale
for this e,emption is that being non-profit the %8C "shall de!ote all its returns
from its capital in!estment as well as e,cess re!enues from its operation, for
e,pansion. #o enable the Corporation to pa& the indebtedness and obligations
and in furtherance and effecti!e implementation of the polic& enunciated in
"ection one of this 'ct, . . ."
*t is e!ident from the foregoing that the lawma5er did not intend that the said
pro!isions of 8.=. %o. 0>8 shall be construed strictl& against %8C. 2n the
contrar&, the law mandates that it should be interpreted liberall& so as to
enhance the ta, e,empt status of %8C.
Fence, petitioner cannot in!o5e the rule on strictissimi 7uris with respect to the
interpretation of statutes granting ta, e,emptions to %8C.
1oreo!er, it is a recogni<ed principle that the rule on strict interpretation does
not appl& in the case of e,emptions in fa!or of a go!ernment political
subdi!ision or instrumentalit&.
*n the case of propert& owned b& the state or a cit& or other public
corporations, the e,press e,emption should not be construed with the same
degree of strictness that applies to e,emptions contrar& to the polic& of the
state, since as to such propert& "e,emption is the rule and ta,ation the
e,ception."
Davao #u*f Lum0er Co. v. CIR
ACTS! =a!ao Gulf 9umber Co. claimed a refund on the ta,es paid from its
use of fuel oils used in its operations. *t argued that under R' 1/>5, "ec. 5, it
was entitled to a refund 253 of the specific ta,es it paid from the use of fuel
oils. #he C*R denied the claim, arguing that R' 1/>5, "ec. 5 was in
connection with the 8hilippine Fighwa& .und N that since the hea!&
e)uipment used b& the lumber concessionaires rarel& used the public
highwa&s, the& were entitled to the refund. (ut since the 8hilippine Fighwa&
.und was abolished, there was no longer an& reason for the refund.
.urthermore, subse)uent statutes increasing the ta,es for fuel oils did not
contain an& pro!ision similar to R' 1/>5, "ec. 5, hence it cannot be said that
the refund still subsists.
ISSUE! $o% =a!ao Gulf was entitled to a refundO
RULI"#! %o. ' ta, cannot be imposed unless it is supported b& the clear and
e,press language of a statuteB on the other hand, once the ta, is
un)uestionabl& imposed, a claim of e,emption from ta, pa&ments must be
clearl& shown and based on language in the law too plain to be mista5en.
"ince the partial refund authori<ed under R' 1/>5, "ec. 5 is in the nature of a
ta, e,emption, it must be construed strictissimi 7uris against the grantee.
Fence, =a!ao Gulf@s claim of refund on the basis of the specific ta,es it
actuall& paid must e,pressl& be granted in a statute stated in a language too
clear to be mista5en.
$e ha!e carefull& scrutini<ed R' 1/>5 and the subse)uent pertinent statutes
and found no e,pression of a legislati!e will authori<ing a refund based on the
higher rates claimed b& petitioner. #he mere fact that the pri!ilege of refund
was included in "ection 5, and not in "ection 1, is insufficient to support
petitioner@s claim. $hen the law itself does not e,plicitl& pro!ide that a refund
under R' 1/>5 ma& be based on higher rates which were none,istent at the
time of its enactment, this Coure cannot presume otherwise. ' legislati!e
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lacuna cannot be filled b& 7udicial fiat.
VI.$. TA, E,E.PTIO" CO.PARED 3IT- OT-ER TER.S
CIR vs. CA
ACTS! 2n 22 'ugust 1086, +,ecuti!e 2rder %o. /1 was promulgated
declaring a one-time ta, amnest& on unpaid income ta,es, later amended to
include estate and donor@s ta,es and ta,es on business, for the ta,able &ears
1081 to 1085.
'!ailing itself of the amnest&, respondent R.2.F. 'uto 8roducts 8hilippines,
*nc., filed, in 2ctober 1086 and %o!ember 1086, its #a, 'mnest& Return %o.
>/-.-001/6-/1 and "upplemental #a, 'mnest& Return %o. >/-.-001/6-6/-(,
respecti!el&, and paid the corresponding amnest& ta,es due.
8rior to this a!ailment, petitioner Commissioner of *nternal Re!enue, in a
communication recei!ed b& pri!ate respondent on 1> 'ugust 1086, assessed
the latter deficienc& income and business ta,es for its fiscal &ears ended >0
"eptember 1081 and >0 "eptember 1082 in an aggregate amount of
81,/10,15.1. Fowe!er, the re)uest to cancel the deficienc& ta,es was
denied.
ISSUES! $2% pri!ate respondent can a!ail of the ta, amnest&
RULI"#! ?+". +,ecuti!e 2rder %o. /1 is )uite e,plicit and re)uires hardl&
an&thing be&ond a simple application of its pro!isions. *f, as the Commissioner
argues, +,ecuti!e 2rder %o. /1 had not been intended to include 1081-1085
ta, liabilities alread& assessed :administrati!el&; prior to 22 'ugust 1086, the
law could ha!e simpl& so pro!ided in its e,clusionar& clauses. *t did not. #he
conclusion is una!oidable, and it is that the e,ecuti!e order has been
designed to be in the nature of a general grant of ta, amnest& sub7ect onl& to
the cases specificall& e,cepted b& it.
*t might not be amiss to recall that the ta,able periods co!ered b& the amnest&
include the &ears immediatel& preceding the 1086 re!olution during which
time there had been persistent calls, all too !i!id to be easil& forgotten, for ci!il
disobedience, most particularl& in the pa&ment of ta,es, to the martial law
regime. *t should be understandable then that those who ultimatel& too5 o!er
the reigns of go!ernment following the successful re!olution would promptl&
pro!ide for a broad, and not a confined, ta, amnest&.
VI.C. CO"STRUCTIO" O TA, E,E.PTIO"S
E. Rodri'ue47 In&. v. Co**e&tor
ACTS! 8etitioner filed its income ta, return for the &ear 1050. *n the said
return, petitioner did not include the sum of 8625,>15.00 recei!ed b& it
from the go!ernment in the form of ta,-e,empt bonds in pa&ment of its
e,propriated properties, belie!ing that the said amount was e,empt from
ta,ation. #he C*R later assessed against petitioner a deficienc& income
ta,.
ISSUES! $2% the portion of the profit :paid in ta,-e,empt Go!ernment
(onds; petitioner deri!ed from the e,propriation of its propert& should be
made sub7ect to income ta,.
RULI"#! ?+". #he fact that a portion of the purchase price of the propert&
was paid b& the Go!ernment in the form of ta, e,empt bonds does not
operate to e,empt said income from income ta,. #he income from the sale of
the land in )uestion and the bond are two different and distinct ta,able items
so that the e,emption of one does not operate to e,empt the other, unless the
law e,pressl& so pro!ides. $hat are ta, e,empt are the documentar& stamp
ta, and the interest deri!ed on such bonds.
'n e,empting pro!ision in a legislati!e enactment should be construed in
strictissimi 7uris against the ta,pa&er and liberall& in fa!or of the ta,ing
authorit&. #he "tate cannot strip itself of the most essential power of ta,ation
b& doubtful words. Fe who claims an e,emption must be able to point to some
positi!e pro!ision of law creating the right. *t cannot be allowed to e,ist upon a
!ague implication. #he law in!o5ed b& petitioner :"ec 0, R' >>>; does not
ma5e an& reference whatsoe!er to e,emption of income deri!ed from sale of
e,propriated propert& thereunder.
Repu0*i& *our .i**s v. CIR
RULI"#! *t is true that in the construction of ta, statutes ta, e,emptions :and
deductions are of this nature; are not fa!ored in the law, and are construed
strictissimi 7uris against the ta,pa&er. Fowe!er, it is e)uall& a recogni<ed
principle that where the pro!ision of the law is clear and unambiguous, so that
there is no occasion for the court@s see5ing the legislati!e intent, the law must
be ta5en as it is, de!oid of 7udicial addition or subtraction. *n this case, we find
the pro!ision of "ection 186-' E "whene!er a ta, free product is utili<ed, etc."
E all encompassing to comprehend ta,-free raw materials, e!en if imported.
$here the law pro!ided no )ualification for the granting of the pri!ilege, the
court is not at libert& to suppl& an&.
8 Of 10
Lu4on Stevedorin' Corp. v. CTA & CIR
ACTS! 94"#+A+C2 imported engines for the repair of its tugboats. *t
claimed a refund from the compensating ta, it paid for the engines, based on
%*RC, "ec. 100, which pro!ides that when articles to be used b& the importer
himself as passenger andPor cargo !essel, whether coastwise or oceangoing,
including engines and spare parts of said !essel, the importer is e,empt from
compensating ta,.
#he C*R disagreed, arguing that 94"#+A+C2 is neither engaged in
coastwise or oceangoing shipping, nor can tugboats be considered as cargo
or passenger !essel.
ISSUE! $o% 94"#+A+C2 is entitled to the e,emption.
RULI"#! ?es. #his Court has laid down the rule that as the power of ta,ation
is a high prerogati!e of so!ereignt&, the relin)uishment is ne!er presumed and
an& reduction or dimunition thereof with respect to its mode or its rate, must
be strictl& construed, and the same must be coached in clear and
unmista5able terms in order that it ma& be applied. 1ore specificall& stated,
the general rule is that an& claim for e,emption from the ta, statute should be
strictl& construed against the ta,pa&er.
's correctl& anal&<ed b& the Court of #a, 'ppeals, in order that the
importations in )uestion ma& be declared e,empt from the compensating ta,,
it is indispensable that the re)uirements of the amendator& law be complied
with, namel&I :1; the engines and spare parts must be used b& the importer
himself as a passenger andPor cargo, !esselB and :2; the said passenger
andPor cargo !essel must be used in coastwise or oceangoing na!igation.
's )uoted in the decision of the Court of #a, 'ppeals, a tugboat is defined as
followsI ' tugboat is a strongl& built, powerful steam or power !essel, used for
towing and, now, also used for attendance on !essel. ' tugboat is a diesel or
steam power !essel designed primaril& for mo!ing large ships to and from
piers for towing barges and lighters in harbors, ri!ers and canals. ' tug is a
steam !essel built for towing, s&non&mous with tugboat.
4nder the foregoing definitions, petitioner@s tugboats clearl& do not fall under
the categories of passenger andPor cargo !essels. #hus, it is a cardinal
principle of statutor& construction that where a pro!ision of law spea5s
categoricall&, the need for interpretation is ob!iated, no plausible pretense
being entertained to 7ustif& non-compliance. 'll that has to be done is to appl&
it in e!er& case that falls within its terms.
'nd, e!en if construction and interpretation of the law is insisted upon,
following another fundamental rule that statutes are to be construed in the
light of purposes to be achie!ed and the e!ils sought to be remedied, it will be
noted that the legislature in amending "ec. 100 of the #a, Code b& R' >16,
as appearing in the records, intended to pro!ide incenti!es and inducements
to bolster the shipping industr& and not the business of ste!edoring, as
manifested in the sponsorship speech of "enator Gil 8u&at.
2n anal&sis of petitioner-appellant@s transactions, the Court of #a, 'ppeals
found that no e!idence was adduced b& petitioner-appellant that tugboats are
passenger andPor cargo !essels used in the shipping industr& as an
independent business. 2n the contrar&, petitioner-appellant@s own e!idence
supports the !iew that it is engaged as a ste!edore, that is, the wor5 of
unloading and loading of a !essel in portB and towing of barges containing
cargoes is a part of petitioner@s underta5ing as a ste!edore. *n fact, e!en its
trade name is indicati!e that its sole and principal business is ste!edoring and
lighterage, ta,ed under "ec. 101 of the %ational *nternal Re!enue Code as a
contractor, and not an entit& which transports passengers or freight for hire
which is ta,ed under "ec. 102 of the same Code as a common carrier b&
water.
Resins 7 In&. vs. Auditor #enera*
ACTS! 8etitioner see5s a refund from respondent Central (an5 on the claim
that it was e,empt from the margin fee under Republic 'ct %o. 2600 for the
importation of urea and formaldeh&de, as separate units, used for the
production of s&nthetic glue of which it was a manufacturer. #he specific
language of the 'ct spea5s of "urea formaldeh&de.D
ISSUES! $2% petitioner was entitled to a refund
RULI"#! %2. @4rea formaldeh&de@ is clearl& a finished product, which is
patentl& distinct and different from @urea@ and @formaldeh&de@, as separate
articles used in the manufacture of the s&nthetic resins 5nown as @urea
formaldeh&de@. *t is well settled that the enrolled bill E which uses the term
@urea formaldeh&de@ instead of @urea and formaldeh&de@ E is conclusi!e upon
the courts as regards the tenor of the measure passed b& Congress and
appro!ed b& the 8resident.
's a refund undoubtedl& parta5es of a nature of an e,emption, it cannot be
allowed unless granted in the most e,plicit and categorical language. *t has
been the constant and uniform holding that e,emption from ta,ation is not
fa!ored and is ne!er presumed, so that if granted it must be strictl& construed
against the ta,pa&er. 'ffirmati!el& put, the law frowns on e,emption from
9 Of 10
ta,ation, hence, an e,empting pro!ision should be construed strictissimi 7uris."
.isamis Orienta* Asso&iation vs. Dept. of inan&e Se&retar(
ACTS! 8etitioner 1isamis 2riental 'ssociation of Coco #raders, *nc. is a
domestic corporation whose members, are engaged in the bu&ing and selling
of copra. #he petitioner alleges that prior to the issuance of Re!enue
1emorandum Circular /-01, which implemented A'# Ruling 100-00, copra
was classified as agricultural food product under Q 10>:b; of the %ational
*nternal Re!enue Code and, therefore, e,empt from A'# at all stages of
production or distribution. "aid circular classified copra as an agricultural non-
food product and declared it "e,empt from A'# onl& if the sale is made b& the
primar& producer pursuant to "ection 10>:a; of the #a, Code, as amended."
#he reclassification had the effect of den&ing to the petitioner the e,emption it
pre!iousl& en7o&ed when copra was classified as an agricultural food product
under Q10>:b; of the %*RC.
ISSUES! $2% the petitioner is e,empt from the ta,
RULI"#! %2. *n interpreting Q10>:a; and :b; of the %*RC, the Commissioner
of *nternal Re!enue ga!e it a strict construction consistent with the rule that
ta, e,emptions must be strictl& construed against the ta,pa&er and liberall& in
fa!or of the state. 's the go!ernment agenc& charged with the enforcement of
the law, the opinion of the Commissioner of *nternal Re!enue, in the absence
of an& showing that it is plainl& wrong, is entitled to great weight. *ndeed, the
ruling was made b& the Commissioner of *nternal Re!enue in the e,ercise of
his power under Q 2/5 of the %*RC to "ma5e rulings or opinions in connection
with the implementation of the pro!isions of internal re!enue laws, including
rulings on the classification of articles for sales ta, and similar purposes."
"est*e P)i*ippines v. CA
RULI"#! #he right to claim for refund of customs duties is specificall&
go!erned b& "ection 108 of the #ariff and Customs Code, which pro!ides
that -
""ec. 108. Claim for Refund of =uties and #a,es and 1ode of 8a&ment. - 'll
claims for refund of duties shall be made in writing and forwarded to the
Collector to whom such duties are paid, who upon receipt of such claim, shall
!erif& the same b& the records of his 2ffice, and if found to be correct and in
accordance with law, shall certif& the same to the Commissioner with his
recommendation together with all necessar& papers and documents. 4pon
receipt b& the Commissioner of such certified claim he shall cause the same
to be paid if found correct."
*t is clear from the foregoing pro!ision of the #ariff and Customs Code that in
all claims for refund of customs duties, the Collector to whom such customs
duties are paid and upon receipt of such claim is mandated to !erif& the same
b& the records of his 2ffice. *f such claim is found correct and in accordance
with law, the Collector shall certif& the same to the Commissioner with his
recommendation together with all, the necessar& papers and documents. #his
is precisel& one of the reasons wh& the Court of 'ppeals upheld the dismissal
of the case on the ground that the C#'@s 7urisdiction under the #ariff and
Customs Code is not concurrent with that of the respondent Commissioner of
Customs due to the absence of an& certification from the Collector of Customs
of 1aniKa. 'ccordingl&, petitioner@s contention that its claims for refund of
alleged o!erpa&ment of customs duties ma& be deemed established from the
findings of the ta, court in C.#.'. Case %o. /11/ on the 'd!ance "ales #a, is
not necessaril& corrupt in the light of the abo!e-cited pro!ision of the #ariff and
Customs Code.
"Customs duties" is @the name gi!en to ta,es on the importation and
e,portation of commodities, the tariff or ta, assessed upon merchandise
imported from, or e,ported to, a foreign countr&.15 'n& claim, for refund of
customs duties, therefore, ta5e the nature of ta, e,emptions that must be
construed strictissimi 7uris against the claimants and liberalK& in fa!or of the
ta,ing authorit&. #his power of ta,ation being a high prerogati!e of
so!ereignt&, its relin)uishment is ne!er presumed. 'n& reduction or diminution
thereof with respect to its mode or its rate must be strictl& construed, and the
same must be couched in clear and unmista5able terms in order that it ma&
be applied.
#hus, an& outright award for the refund of allegedl& o!erpaid customs duties
in fa!or of petitioner on its sub7ect si,teen :16; importations is not fa!ored in
this 7urisdiction unless there is a direct and clear finding thereon.
10 Of 10