Chapter 2 (Digest)

7/29/2019 Chapter 2 (Digest)

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BAGATSING vs. RAMIREZG.R. No. L-41631 December 17, 1976

Facts: The Municipal Board of Manila enacted Ordinance No. 7522 regulating the operation of publicmarkets and prescribing fees for the rentals of stalls. respondent Federation of Manila Market Vendors, Inc.commenced an action to nullify said ordinance for the reason, among others, that the publication

requirement under the Revised Charter of the City of Manila has not been complied with; Judge renderedits decision declaring the nullity of the Ordinance No on the primary ground of non-compliance with therequirement of publication under the Revised City Charter providing that ordinances should be published intwo daily newspapers of general circulation in the City of Manila before its enactment and in the samemanner after approval.Petitioners moved for reconsideration of the adverse decision, stressing that only apost-publication is required by the Local Tax Code.

Issue: W/N said Ordinance is invalid having been published in accordance with the Local Tax Code and notwith the Revised Charter of the City of Manila.

Held: while the Revised Charter of the City of Manila requires publication before the enactment of theordinance and afterthe approval thereof in two daily newspapers of general circulation in the city, theLocal Tax Code only prescribes for publication after the approval of "ordinances levying or imposing taxes,

fees or other charges" either in a newspaper or publication widely circulated within the jurisdiction of thelocal government or by posting the ordinance in the local legislative hall or premises and in two otherconspicuous places within the territorial jurisdiction of the local government.

There is no question that the Revised Charter of the City of Manila is a special actsince it relates only tothe City of Manila, whereas the Local Tax Code is a general law because it applies universally to all localgovernments.

general law universal rule affecting the entire communityspecial law one relating to particular persons or things of a class (Blackstone).

prior special law is not ordinarily repealed by a subsequent general law fact that one is special and the

other general creates a presumption that the special is to be considered as remaining an exception of thegeneral, one as a general law of the land, the other as the law of a particular case.EXCEPTION : where the special statute refers to a subject in general, which the general statute

treats inparticular.

Such is the case at bar, Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" ingeneral, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Coderelates to "ordinances levying or imposing taxes, fees or other charges" in particular. therefore, theRevised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuitywhen it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" inparticular. There, the Local Tax Code controls. a general provision must give way to a particular provision--Special provision governs. This is especially true where the law containing the particular provision wasenacted later than the one containing the general provision. The City Charter of Manila was promulgated

on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973.

In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by ageneral or broad one. A charter provision may be impliedly modified or superseded by a later statute, andwhere a statute is controlling, it must be read into the charter notwithstanding any particular charterprovision. A subsequent general law similarly applicable to all cities prevails over any conflicting charterprovision, for the reason that a charter must not be inconsistent with the general laws and public policy ofthe state. A chartered city is not an independent sovereignty. The state remains supreme in all mattersnot purely local. Otherwise stated, a charter must yield to the constitution and general laws of the state, itis to have read into it that general law which governs the municipal corporation and which the corporationcannot set aside but to which it must yield. When a city adopts a charter, it in effect adopts as part of itscharter general law of such character.

EASTERN THEATRICAL v. ALFONSOG.R. No. L-1104 May 31, 1949

Facts: Twelve corporation engaged in motion picture business impugn the validity of Ordinance No. 2958imposing an additional fee on the place of amusement on the price of every admission ticket sold bycinematographs, theaters vaudeville companies, theatrical shows, and boxing. Plaintiffs, operator oftheaters in Manila And distributor of local or imported films allege that said ordinance violates theConstitutional provision regarding the uniformity and equality of taxation and the equal protection of thelaws; contravenes and is inconsistent with, existing national legislation more particularly revenue and tax


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laws; and that section 2444(m) of the Revised Administrative Code confers upon the City of Manila thepower to impose a tax on business but not on amusement

Defendants allege as affirmative defenses the following: (a) That the ordinance was passed by theMunicipal Board by virtue of its express legislative power to tax fix the license fee and regulate thebusiness of theaters, cinematographs and further to fix the location of and to tax, fix the license fee for

and regulate the business of theatrical performances public exhibition circus and other performances andplaces of amusement; (b) that the graduated tax required by said ordinance being applied to allcinematographs, theaters, vaudeville companies theatrical show and boxing exhibitions similarly situatedand as a class without distinction or exception the same does not violate the prohibition against uniformityand equality of taxation; (c) that the graduated tax on admission tickets to theaters and other places ofamusement imposed by the National Internal Revenue Code (Commonwealth Act No. 466) is collected byand for the purposes of the National Government, whereas, Ordinance No.2958 imposes and requires thecollection of a similar tax by and for the purposes of the Government of the City of Manila, and there is nocase of double taxation, (d) that said ordinance having been enacted under the express power of theMunicipal Board to tax for revenue as distinguished from its power to license for purely police purposes,the fact that the amount collected thereunder are higher than what are needed for police regulation andsupervision does not render said ordinance unfair unjust capricious unreasonable and oppressive; (e) thatconsideration the nature of the business of the plaintiffs and the enormous volume of business they handle

the graduated tax fixed by the ordinance is not unreasonable.

Issue: W/N Sec. 2444(m) of the Revised Administrative Code confers upon the City of Manila the power toimpose a tax on business but not on amusement hence Ordinance No. 2958 is null and void.

Held: The tax therein authorized cannot be defined as tax on business and cannot be restricted within asmaller scope than what is authorized by the words used, to the extent of excluding tax on amusement.

The very fact that section 2444 (m) of the Revised Administrative Code includes theaters, cinematographs,public billiard tables, public pool tables, bowling alleys, dance halls, public dancing halls, cabarets, circusesand other similar places, race tracks, horse races, theatrical performances, public exhibition, circus andother performances and places of amusements, will show conclusively that the power to tax amusement isexpressly included within the power granted by section 2444(m) of the Revised Administrative Code.

Moreover, both provisions of law may stand together and be enforced at the same time without anyincompatibility among themselves.

On the issue of violation of the principle of equality and uniformity of taxation, The fact that some placesof amusement (race tracks, cockpits, cabarets, concert halls, circuses, and others) are not taxed whileothers, such as cinematographs, theaters, vaudeville companies, theatrical shows, and boxing exhibitionsand other kinds of amusements or places of amusement are taxed, is no argument at all against theequality and uniformity of the tax imposition. Equality and uniformity in taxation means that all taxablearticles or kinds of property of the same class shall be taxed at the same rate. The taxing power has theauthority to make reasonable and natural classifications for purposes of taxation; and the appellantscannot point out what places of amusement taxed by the ordinance do not constitute a class bythemselves and which can be confused with those not included in the ordinance.

BRITISH AMERICAN TOBACCO v. CamachoG.R. No. 163583 April 15, 2009

Facts: In 2008, the Court rendered Sec 145 of the NIRC constitutional while certain Revenue Regulationsas invalid insofar as they grant the BIR the power to reclassify or update the classification of new brandsevery two years or earlier. In its Motion for Reconsideration, petitioner insists that the assailed provisions(1) violate the equal protection and uniformity of taxation clauses of the Constitution, (2) contraveneSection 19, Art XII of the Constitution on unfair competition, and (3) infringe the constitutional provisionson regressive and inequitable taxation. Petitioner further argues that assuming the assailed provisions areconstitutional, petitioner is entitled to a downward reclassification of Lucky Strike from the premium-pricedto the high-priced tax bracket.Petitioner argues that the classification freeze provision violates the equal protection and uniformity oftaxation clauses because Annex D brands are taxed based on their 1996 net retail prices while newbrands are taxed based on their present day net retail prices, thus according a special or privileged statusto Annex D brands while at the same time discriminate against other brands.

Petitioner argues that the classification freeze provision gives the brands under Annex D a decisive edgebecause it constitutes a substantial barrier to the entry of prospective players that some of the newbrands, which were introduced into the market after the effectivity of the assailed law on January 1, 1997,were killed by Annex D brands because the former brands were reclassified by the BIR to higher taxbrackets; will encourage predatory pricing in contravention of the constitutional prohibition on unfair


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competition; and that the cumulative effect of the operation of the classification freeze provision is toperpetuate the oligopoly of intervenors Philip Morris and Fortune Tobacco in contravention of theconstitutional edict for the State to regulate or prohibit monopolies, and to disallow combinations inrestraint of trade and unfair competition.Petitioner argues that the classification freeze provision is a form of regressive and inequitable tax systemwhich is proscribed under Article VI, Section 28(1) of the Constitution; that people in equal positions should

be treated alike; that the use of different tax bases for brands under Annex D vis--vis new brands isdiscriminatory, and thus, iniquitous.

Petitioner alleges that the conduct of the market survey after two years from product launch constitutesgross neglect on the part of the BIR. Consequently, for failure of the BIR to conduct a timely marketsurvey, Lucky Strikes classification based on its suggested gross retail price should be deemed its officialtax classification. Finally, petitioner asserts that had the market survey been timely conducted sometimein 2001, the current net retail price of Lucky Strike would have been found to be under the high-priced taxbracket, hence it should be reclassified from premium-priced to high-priced bracket.

Issue: W/N Sec 145 of the NIRC violate the equal protection and uniformity of taxation clauses.the constitutional prohibition on unfair competition

transgress the constitutional provisions on regressive and inequitable taxationW/N petitioner is entitled to a downward reclassification of Lucky Strike.

Held: (equal protection and uniformity of taxation clauses) NO. rational basis test properlyapplied; it is sufficient that the legislative classification is rationally related to achieving some legitimateState interest.

valid and reasonable Classification [equal protection]: (1) it rests on substantial distinctions; (2) it isgermane to the purpose of the law; (3) it applies to both present and future conditions; and (4) it appliesequally to all those belonging to the same class.

classification freeze provision inserted in the law for reasons of practicality and expediency. since

a new brand was not yet in existence at the time of the passage of RA 8240, then Congress neededa uniform mechanism to fix the tax bracket of a new brand. The current net retail price, similar towhat was used to classify the brands under Annex D as of October 1, 1996, was thus the logicaland practical choice. Further, with the amendments introduced by RA 9334, the freezing of the taxclassifications now expressly applies not just to Annex D brands but to newer brands introducedafter the effectivity of RA 8240 on January 1, 1997 and any new brand that will be introduced in thefuture.

Congressunwilling to delegate the power to periodically adjust the excise tax rate and taxbrackets, to periodically resurvey and reclassify the cigarette brands; because of the belief thatperiodic adjustment and reclassification (1) would foster an anti-competitive atmosphere in themarket; (2)will open the tax system to potential areas for abuse and corruption; (3)would tempt thecigarette manufacturers to manipulate their price levels or bribe the tax implementers in order to

allow their brands to be classified at a lower tax bracket; (4) as a tool to unduly oppress thetaxpayer in order for the government to achieve its revenue targets for a given year.

Legitimate interest (Congress administrative concerns): - simplification of tax administration of sinproducts- elimination of potential areas for abuse and corruption in tax collection,- buoyant and stable revenue generation, and

- ease of projection of revenues.

[uniformity of taxation] tax is uniform when it operates with the same force and effect in every placewhere the subject of it is found.It does not signify an intrinsic but simply a geographical uniformity;merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike.

In the instant case, classification freeze provision meets the geographical uniformity requirement becausethe assailed law applies to all cigarette brands in the Philippines.

(constitutional prohibition on unfair competition) NO. petitioner did not invoke said constitutionalprovision as it relied solely on the alleged violation of the equal protection and uniformity of taxationclauses. Rule points of law, theories, issues and arguments not adequately brought to the attention ofthe lower court will not be ordinarily considered by a reviewing court as they cannot be raised for the firsttime on appeal. Petitioner should be reminded that it appealed this case from the adverse ruling of thetrial court directly to this Court on pure questions of law instead of resorting to the Court of Appeals.


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Even if we were to relax this rule, the evidence presented, petitioner failed to convincinglyprove that there is a substantial barrier to the entry of new brands in the cigarette market dueto the classification freeze provision.

(constitutional provisions on regressive and inequitable taxation )NO. does not mean that theassailed law may be declared unconstitutional for being regressive in character because the Constitution

does not prohibit the imposition of indirect taxes but merely provides that Congress shall evolve aprogressive system of taxation. These provisions (like to give priority to enactment of laws forenhancement of human dignity, or for promotion of right to quality education) are directives; are moralincentives to legislation, not as judicially enforceable rights.

(entitled to a downward reclassification of Lucky Strike) NO. First, BIR Ruling No. 018-2001was requested by petitioner for the purpose of fixing Lucky Strikes initial tax classification based onits suggested gross retail price relative to its planned introduction of Lucky Strike in the marketsometime in 2001 and not for the conduct of the market survey within three months from productlaunch. Moroever, petitioner acknowledged that the initial tax classification of Lucky Strike may bemodified depending on the outcome of the survey which will determine the actual current net retailprice of Lucky Strike in the market.

Second, there was no upward reclassification of Lucky Strike because it was taxed based on its suggestedgross retail price from the time of its introduction in the market in 2001 until the BIR market survey in2003. We reiterate that Lucky Strikes actualcurrent net retail price was surveyed for the first time in 2003and was found to be from P10.34 to P11.53 per pack, which is within the premium-priced taxbracket. There was, thus, no prohibited upward reclassification of Lucky Strike by the BIR based on itscurrent net retail price.

VILLEGAS vs. HIU CHIONG TSAI PAO HOG.R. No. L-29646 November 10, 1978

Facts: Ordinance No. 6537 was passed by the Municipal Board of Manila, which prohibits aliens from being

employed or to engage or participate in any position or occupation or business enumerated therein,whether permanent, temporary or casual, without first securing an employment permit from the Mayor ofManila and paying the permit fee of P50.00, and imposing punishments for violations thereof.

Private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed a petition to nullify saidOrdinance on the ff grounds:

1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No. 6537 isdiscriminatory 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 registrationand 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 oftheir rights to life, liberty and property and therefore, violates the due process and equal protectionclauses of the Constitution.

Petitioner Mayor Villegas argues that the rule on uniformity of taxation applies only to purely tax orrevenue measures and that Ordinance No. 6537 is not a tax or revenue measure but is an exercise of thepolice power of the state, it being principally a regulatory measure in nature.

Issue: W/N said Ordinance No. 6537 is not a purely tax or revenue measure because its principal purposeis regulatory in nature

W/N said ordinance 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

W/N ordinance in question violates the due process of law and equal protection rule of theConstitution.

Held: While the first part (requires that the alien shall secure an employment permit from the Mayorinvolves the exercise of discretion and judgment in the processing and approval or disapproval ofapplications for employment permits) regulatory in character,


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second part (requires the payment of P50.00 as employee's fee)not regulatory but a revenue measure.There is no logic or justification in exacting P50.00 from aliens who have been cleared for employment. Itis obvious that the purpose of the ordinance is to raise money under the guise of regulation.

P50.00 fee is unreasonable: excessive + fails to consider valid substantial differences in situation amongindividual aliens who are required to pay it. Although the equal protection clause of the Constitution does

not forbid classification, it is imperative that the classification should be based on real and substantialdifferences having a reasonable relation to the subject of the particular legislation. The same amount ofP50.00 is being collected from every employed alien whether he is casual or permanent, part time or fulltime or whether he is a lowly employee or a highly paid executive

Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the exercise of hisdiscretion where an ordinance of a municipality fails to state any policy or to set up any standard toguide or limit the mayor's action, expresses no purpose to be attained by requiring a permit, enumeratesno conditions for its grant or refusal, and entirely lacks standard, thus conferring upon the Mayor arbitraryand unrestricted power to grant or deny the issuance of building permits, such ordinance is invalid, beingan undefined and unlimited delegation of power to allow or prevent an activityper se lawful. OrdinanceNo. 6537 is void because it does not contain or suggest any standard or criterion to guide the mayor in theexercise of the power which has been granted to him by the ordinance.

The ordinance in question violates the due process of law and equal protection rule of theConstitutionRequiring a person before he can be employed to get a permit from the City Mayor of Manilawho may withhold or refuse it at will is tantamount to denying him the basic right of the people in thePhilippines to engage in a means of livelihood. While it is true that the Philippines as a State is not obligedto admit aliens within its territory, once an alien is admitted, he cannot be deprived of life without dueprocess of law. This guarantee includes the means of livelihood. The shelter of protection under the dueprocess and equal protection clause is given to all persons, both aliens and citizens.

VERA v. CUEVAS

G.R. No. L-33693-94 May 31, 1979

Facts: Petitioner Commissioner of Internal Revenue ( as well as Fair Trade Board) required privaterespondents milk companies to withdraw from the market all of their filled milk products which do not bearthe inscription required by Section 169 of the Tax Code:

Section 169. Inscription to be placed on skimmed milk. All condensed skimmed milk andall milk in whatever form, from which the fatty part has been removed totally or in partshall be clearly and legibly marked "This milk is not suitable for nourishment for infantsless than one year of age," or with other equivalent words.

Issue: W/N Section 169 of the Tax Code requiring inscription on skimmed milk applies to filled milk.

Held: NO. The use of the specific and qualifying terms "skimmed milk" in the headnote and "condensedskimmed milk" in the text of the cited section, would restrict the scope of the general clause "all milk, inwhatever form, from which the fatty pat has been removed totally or in part." In other words, the generalclause is restricted by the specific term "skimmed milk" under the familiar rule of ejusdem generis thatgeneral and unlimited terms are restrained and limited by the particular terms they follow in the statute.

Skimmed milk different from filled milk; milk in whatever form from which the fatty part has beenremoved.Filled milk the fatty part is likewise removed but is substituted with refined coconut oil or corn oil or both.

There is no dispute that filled milk is suitable for feeding infants of all ages. Being so, the declarationrequired by Section 169 of the Tax Code that filled milk is not suitable for nourishment for infants less than

one year of age would, in effect, constitute a deprivation of property without due process of law.

Section 169 is being enforced only against respondent manufacturers of filled milk product and not asagainst manufacturers, distributors or sellers of condensed skimmed milk such as SIMILAC, SMA, BREMIL,ENFAMIL, OLAC, in which, as admitted by the petitioner, the fatty part has been removed and substitutedwith vegetable or corn oil. The enforcement of Section 169 against the private respondents only, but notagainst other persons similarly situated as the private respondents, amounts to an unconstitutional denialof the equal protection of the laws.

THE PROVINCE OF ABRA v. HERNANDOG.R. No. L-49336 August 31, 1981


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Facts: respondent Judge Hernando granted private respondent Roman Catholic Bishop of Banguedexemption from a real estate tax through a summary judgment without even hearing the side of petitioner.Petitioner contends that respondent judge virtually ignored the pertinent provisions of the Rules of Court;wantonly violated the rights of petitioner to due process, by giving due course to the petition of private

respondent without allowing petitioner to answer and without any hearing, adjudged the case; all in totaldisregard of basic laws of procedure and basic provisions of due process in the constitution.

Issue: W/N Petitioner province of Abra was denied due process provided by the constitution whenrespondent judge, without hearing, granted private respondent exemption from a real estate tax.

Held: YES. Comparing the provisions of the present Constitution with that appearing in the 1935 Charteron the tax exemption of "lands, buildings, and improvements."

1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands,buildings, and improvements used exclusively for religious, charitable, or educational purposes shall beexempt from taxation."

The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and requiredthat for the exemption of lands, buildings, and improvements, they should not only be "exclusively" butalso "actually and "directly" used for religious or charitable purposes. There must be proof ofthe actual and directuse of the lands, buildings, and improvements for religious or charitable purposes tobe exempt from taxation.

exemption from taxation is not favored and is never presumed, so that if granted it must be strictlyconstrued against the taxpayer. The law frowns on exemption from taxation, hence, an exemptingprovision should be construed strictissimi juris.

Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due process.Proof is necessary to demonstrate that there is compliance with the constitutional provision that allows an

exemption. However, respondent Judge accepted at its face the allegation of private respondent; thatcertain parcels of land owned by it are used "actually, directly and exclusively" as sources of support of theparish priest and his helpers and also of private respondent Bishop.

In the motion to dismiss filed on behalf of petitioner Province of Abra, the objection was based primarilyon the lack of jurisdiction, as the validity of a tax assessment may be questioned before the Local Board ofAssessment Appeals and not with a court. There was also mention of a lack of a cause of action, but onlybecause, in its view, declaratory relief is not proper, as there had been breach or violation of the right ofgovernment to assess and collect taxes on such property. Therefore, in failing to accord a hearing topetitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent

Judge failed to abide by the constitutional command of procedural due process.

CAGAYAN ELECTRIC POWER v. COMMISSIONER OF INTERNAL REVENUEG.R. No. L-60126 September 25, 1985

Facts: petitioner Cagayan Electric Power & Light Co. is a holder of a legislative franchise, RA 3247, underwhich its payment of 3% tax on its gross earnings from the sale of electric current is "in lieu of all taxesand assessments of whatever authority upon privileges, earnings, income, franchise, and poles, wires,transformers, and insulators of the grantee, from which taxes and assessments the grantee is herebyexpressly exempted"

RA 5431 amended section 24 of the Tax Code by making liable for income tax franchise companies inaddition to franchise tax. However, in petitioner's case, its franchise was amended by RA 6020, and theamendment reenactedthe tax exemption in its original charter or neutralized the modification made byRepublic Act No. 5431.

By reason of the amendment to section 24 of the Tax Code, the Commissioner of Internal Revenuerequired the petitioner to pay deficiency income taxes for 1968 and 1969.The petitioner filed a petition forreview with the Tax Court, which held the petitioner liable only for the income tax for the period from

January 1 to August 3, 1969 or before the passage of Republic Act No. 6020 which reiterated its taxexemption.

Petitioner appealed contending that franchise tax is a commutative tax which already includes the incometax and that the same is a contract which cannot be impaired by an implied repeal.


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days before Congress convened on 27 July 1987, was within the President's constitutional power andauthority to legislate.

(2) The petitioners assertions are not supported by facts and circumstances to warrant their conclusions.They have failed to adequately show that the VAT is oppressive, discriminatory or unjust merely relyingupon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification

of a law. there must be a clear and unequivocal breach of the Constitution, not a doubtful andargumentative implication. 4

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform"A tax is considereduniform when it operates with the same force and effect in every place where the subject may befound."The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,which are not exempt, at the constant rate of 0% or 10%.

EquitableIt is imposed only on sales of goods or services by persons engage in business with anaggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequentlyexempt from its application. Likewise exempt from the tax are sales of farm and marine products, sparedas they are from the incidence of the VAT, are expected to be relatively lower and within the reach of thegeneral public.

(3) No. Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax:xxx xxx xxx(r) Service performed in the exercise of profession or calling (except customs brokers)subject to the occupation tax under the Local Tax Code, and professional services performedby registered general professional partnerships;

The phrase "except customs brokers" is not meant to discriminate against customs brokers. It was insertedin to complement the provisions of Sec. 102 of the Code, which makes the services of customs brokerssubject to the payment of the VAT and to distinguish customs brokers from other professionals who aresubject to the payment of an occupation tax under the Local Tax Code.

With the insertion of the clarificatory phrase "except customs brokers" in Sec. 103(r), a potential conflictbetween the two sections, (Secs. 102 and 103), insofar as customs brokers are concerned, is averted.

the distinction of the customs brokers from the other professionals who are subject to occupation taxunder the Local Tax Code is based upon material differences, in that the activities of customs brokers (likethose of stock, real estate and immigration brokers) partake more of a business, rather than a profession .

JBL REYES vs. ALMANZORG.R. Nos. L-49839-46 April 26, 1991

Facts: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated inTondo and Sta. Cruz Districts, City of Manila, which are leased as dwelling sites by tenants. Said tenantswere paying monthly rentals not exceeding P300 in July, 1971. On July 14, 1971, the National Legislatureenacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentalsof dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed threehundred pesos P300.00 a month, which was later amended by PD 20 making absolute the prohibition toincrease monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision ofthe Civil Code, excepting leases with a definite period.

Consequently, the Reyeseswere precluded from raising the rentals and from ejecting the tenants. In 1973,respondent City Assessor of Manila re-classified and reassessed the value of the subject properties basedon the schedule of market values duly reviewed by the Secretary of Finance. The revision entailed anincrease in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement withthe Board of Tax Assessment Appeals. They averred that the reassessments made were "excessive,unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed uponthem greatly exceeded the annual income derived from their properties. They argued that the "IncomeApproach" method should have been used and the effect of the restrictions imposed by P.D. 20 on themarket value of the properties affected must be regarded instead of the comparable sales approach whichthe City Assessor adopted.

Issue: W/N the "Comparable Sales Approach" was correctly applied such that the value estimate of theproperties predicated upon prices paid in actual, market transactions would be a uniform and a morecredible standards to use especially in case of mass appraisal of properties


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Held: No. not even the factors determinant of the assessed value of subject properties under the"comparable sales approach" were presented by the public respondents, namely: (1) that the sale mustrepresent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) theproperty must be comparable property

Verily, taxes are the lifeblood of the government and so should be collected without unnecessary

hindrance. However, such collection should be made in accordance with law as any arbitrariness willnegate the very reason for government itself It is therefore necessary to reconcile the apparentlyconflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is thepromotion of the common good, may be achieved. Consequently, it stands to reason that petitioners whoare burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under theprinciple of social justice should not now be penalized by the same government by the imposition ofexcessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.

Uniformity that principle by which all taxable articles or kinds of property of the same class shall betaxed at the same rate.equitable when its burden falls on those better able to pay.Progressive when its rate goes up depending on the resources of the person affected.

COMMISSIONER OF INTERNAL REVENUE v. CAG.R. No. 106611 July 21, 1994

Facts: Private respondent Citytrust corporation filed a claim for refund with BIR representing the allegedaggregate of the excess of its carried-over total quarterly payments over the actual income tax due, pluscarried-over withholding tax payments on government securities and rental income, as computed in itsfinal income tax return.Two days later, in order to interrupt the running of the prescriptive period, Citytrustfiled a petition with the Court of Tax Appeals claiming the refund of its income tax overpayments for theyears 1983, 1984 and 1985.

the Office of the Solicitor General asserted that the mere averment that Citytrust incurred a net loss in1985 does not ipso facto merit a refund; that the amounts claimed by Citytrust are not properlydocumented; that assuming arguendo that petitioner is entitled to refund, the right to claim the same hasprescribed with respect to income tax payments prior to August 28, 1984, pursuant to Sections 292 and295 of the National Internal Revenue Code of 1977.

When the case was submitted for decision based solely on the pleadings and evidence submitted byprivate respondent Citytrust, herein petitioner could not present any evidence by reason of the repeatedfailure of the Tax Credit/Refund Division of the BIR to transmit the records of the case, as well as theinvestigation report thereon, to the Solicitor General.Thereafter, petitioner filed with the tax court amanifestation and motion praying for the suspension of the proceedings in the said case on the groundthat the claim of Citytrust for tax refund was already being processed by the Tax Credit/Refund Division ofthe BIR, and that said bureau was only awaiting the submission by Citytrust of the required confirmationreceipts which would show whether or not the aforestated amount was actually paid and remitted to theBIR.

Citytrust filed an opposition contending that since the Court of Tax Appeals already acquired jurisdictionover the case, it could no longer be divested of the same; and that the BIR had already conducted an auditshowing that there was an overpayment of income taxes and for which a tax credit or refund was due toCitytrust and that the same are conclusive proof of and an admission by herein petitioner that there hadbeen an overpayment of income taxes.

the Court of Tax Appeals held that Section 52 (b) of the Tax Code only requires that the claim for taxcredit or refund must show that the income received was declared as part of the gross income, and thatthe fact of withholding was duly established. Petitioner maintains that private respondent failed to proveand substantiate its claim for such refund; and, the bureau's findings of deficiency income and business

tax liabilities against private respondent for the year 1984 bars such payment.

Issue: W/N statements and certificates of taxes allegedly withheld are conclusive evidence of actualpayment and remittance of the taxes withheld to the BIR

Held: No, under the peculiar circumstances of this case, the ends of substantial justice and public interestwould be better subserved by the remand of this case to the Court of Tax Appeals for further proceedings.

the BIR, represented by petitioner Commissioner of Internal Revenue, was denied its day in court byreason of the mistakes and/or negligence of its officials and employees. several postponements weresought by the Solicitor General, due to the unavailability of the necessary records which were not


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transmitted by the Refund Audit Division of the BIR to said counsel, as well as the investigation reportdespite repeated requests.the BIR officials and/or employees also failed to heed the order of the Court of

Tax Appeals to remand the records to it. The aforestated impass came about due to the fact that, despitethe filing of the initiatory petition with the Court of Tax Appeals, the Tax Refund Division of the BIR stillcontinued to act administratively on the claim for refund previously filed therein, instead of forwarding therecords of the case to the Court of Tax Appeals as ordered.

It is axiomatic that the Government cannot and must not be estopped particularly in matters involvingtaxes. The errors of certain administrative officers should never be allowed to jeopardize the Government'sfinancial position,especially in the case at bar where the amount involves millions of pesos the collectionwhereof, if justified, stands to be prejudiced just because of bureaucratic lethargy.

Further, it is also worth nothing that the Court of Tax Appeals erred in denying petitioner's supplementalmotion for reconsideration alleging bringing to said court's attention the existence of the deficiencyincome and business tax assessment against Citytrust. The fact of such deficiency assessment isintimately related to and inextricably intertwined with the right of respondent bank to claim for a taxrefund for the same year. To award such refund despite the existence of that deficiency assessment is anabsurdity and a polarity in conceptual effects. Herein private respondent cannot be entitled to refund andat the same time be liable for a tax deficiency assessment for the same year.

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts statedtherein are true and correct. The deficiency assessment, although not yet final, created a doubt as to andconstitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself andwithout unquestionable evidence, cannot be the basis for the grant of the refund. to grant the refundwithout determination of the proper assessment and the tax due would inevitably result in multiplicity ofproceedings or suits. If the deficiency assessment should subsequently be upheld, the Government will beforced to institute anew a proceeding for the recovery of erroneously refunded taxes which recourse mustbe filed within the prescriptive period of ten years after discovery of the falsity, fraud or omission in thefalse or fraudulent return involved.This would necessarily require and entail additional efforts andexpenses on the part of the Government, impose a burden on and a drain of government funds, andimpede or delay the collection of much-needed revenue for governmental operations.

Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessaryand legally appropriate that the issue of the deficiency tax assessment against Citytrust be resolved jointlywith its claim for tax refund, to determine once and for all in a single proceeding the true and correctamount of tax due or refundable.

DRILON vs. LIMG.R. No. 112497 August 4, 1994

Facts: Section 187 of the LGC provides for the procedure for approval of local tax ordinances and revenueme asures requiring public hearings for the purpose prior to the enactment thereof. Pursuant thereto, the

Secretary of Justice declared Ordinance No. 7794 known as the Manila Revenue Code, null and void fornon-compliance with the prescribed procedure in the enactment of tax ordinances and for containingcertain provisions contrary to law and public policy.

the Regional Trial Court of Manila revoked the Secretary's resolution and sustained the ordinance, holdingthat the procedural requirements had been observed and declared Section 187 of the LGC asunconstitutional because of its vesture in the Secretary of Justice of the power of control over localgovernments in violation of the policy of local autonomy mandated in the Constitution and of the specificprovision therein conferring on the President of the Philippines only the power of supervision over localgovernments.

Issue: (1)W/N the annulled Section 187 is unconstitutional such that it vests in the Secretary of Justice ofthe power of control over local governments in violation of the policy of local autonomy mandated in the

Constitution(2) W/N the procedural requirements for the enactment of tax ordinances as specified in the Local

Government Code had been observed in Ordinance No. 7794

Held: the lower court had jurisdiction to consider the constitutionality of Section 187, this authority beingembraced in the general definition of the judicial power to determine what are the valid and binding lawsby the criterion of their conformity to the fundamental law.

In the exercise of this jurisdiction, every court is charged with the duty of a purposeful hesitation b

eforedeclaring a law unconstitutional, on the theory that the measure was first carefully studied by theexecutive and the legislative departments and determined by them to be in accordance with the


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fundamental law before it was finally approved. To doubt is to sustain. The presumption of constitutionalitycan be overcome only by the clearest showing that there was indeed an infraction of the Constitution, andonly when such a conclusion is reached by the required majority may the Court pronounce, in thedischarge of the duty it cannot escape, that the challenged act must be struck down.

(1) NO. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of

the tax ordinance and, if warranted, to revoke it on either or both of these grounds. he is not permitted tosubstitute his own judgment for the judgment of the local government that enacted the measure.Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version ofwhat the Code should be. What he found only was that it was illegal. All he did in reviewing the saidmeasure was determine if the petitioners were performing their functions in accordance with law, that is,with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the citygovernment under the LGC. As we see it, that was an act not of control but of mere supervision.

In the case at bar, Secretary Drilon set aside the Manila Revenue Code only on two grounds, to with, theinclusion therein of certain ultra vires provisions and non-compliance with the prescribed procedure in itsenactment. These grounds affected the legality, not the wisdom or reasonableness, of the tax measure.

(2) Yes. the procedural requirements have indeed been observed. Notices of the public hearings were sent

to interested parties as evidenced by Exhibits, The minutes of the hearings, and other exhibits show thatthe proposed ordinances were published in the Balita and the Manila Standard, and the approvedordinance was published in the Manila Standard and in Balita.

The only exceptions are the posting of the ordinance as approved but this omission does not affect itsvalidity, considering that its publication in three successive issues of a newspaper of general circulationwill satisfy due process. It has also not been shown that the text of the ordinance has been translated anddisseminated, but this requirement applies to the approval of local development plans and publicinvestment programs of the local government unit and not to tax ordinances.

TAN vs. DEL ROSARIO, JR.G.R. No. 109289 October 3, 1994

Facts: Petitioners, as taxpayers, claim to be adversely affected by the continued implementation of RA7469 known as the Simplified Net Income Taxation Scheme ("SNIT"), amending certain provisions of theNational Internal Revenue Code, and the validity of Section 6, Revenue Regulations No. 2-93, promulgatedby public respondents pursuant to said law.

G.R. No. 109289

They assert that the enactment of RA 7496 violates the following provisions of the Constitution:

Article VI, Section 26(1) Every bill passed by the Congress shall embrace only one subject which shall be

expressed in the title thereof.Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall evolve aprogressive system of taxation.Article III, Section 1 No person shall be deprived of . . . property without due process of law, nor shallany person be denied the equal protection of the laws.

Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is amisnomer or, at least, deficient for being merely entitled, "Simplified Net Income Taxation Scheme for theSelf-Employed and Professionals Engaged in the Practice of their Profession" when it in fact have nowadopted a gross income, instead of as having still retained the netincome, taxation scheme

Issue:

(1) W/N RA 7496 is deficient for having more than one subject not having been expressed in thetitle.

(2) W/N RA 7496 desecrates the constitutional requirement that taxation "shall be uniform andequitable" in that the law would now attempt to tax single proprietorships and professionalsdifferently from the manner it imposes the tax on corporations and partnerships

Held: (1) No. The allowance for deductible items may have significantly been reduced by the questionedlaw in comparison with that which has prevailed prior to the amendment; limiting, however, allowabledeductions from gross income is neither discordant with, nor opposed to, the net income tax concept. Thefact of the matter is still that various deductions continue to be well provided under the new law.


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Article VI, Section 26(1) Constitution envisioned so as (a) to prevent log-rolling legislation intended tounite the members of the legislature who favor any one of unrelated subjects in support of the whole act,(b) to avoid surprises or even fraud upon the legislature, and (c) to fairly apprise the people, through suchpublications of its proceedings as are usually made, of the subjects of legislation.The above objectives ofthe fundamental law appear to us to have been sufficiently met.

(2) NO. with the legislature lies primarily lies the discretion to determine the nature, object, extent,coverage, situs of taxation. The court cannot freely delve into those matters which, by constitutional fiat,rightly rest on the legislative judgment.

Uniformity of taxation like concept of equal protection, merely requires that all subjects or objects oftaxation, similarly situated, are to be treated alike both in privileges and liabilities

Uniformity does not forfend classification as long as: (1) the standards that are used therefor aresubstantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) thelaw applies, all things being equal, to both present and future conditions, and (4) the classification appliesequally well to all those belonging to the same class.

legislative intent to increasingly shift the income tax system towards the schedular approachin the

income taxation of individual taxpayers , and to maintain, by and large, the present globaltreatment on taxable corporations.

Hence, the plea of petitioner to have the law declared unconstitutional for being violative of due processmust perforce fail. The due process clause may correctly be invoked only when there is a clearcontravention of inherent or constitutional limitations in the exercise of the tax power.

G.R. No. 109446

In addition, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that public respondentshave exceeded their rule-making authority in applying SNIT to general professsional partnerships in thatthere is a difference in the tax treatment between individuals engaged in business or in the practice of

their respective professions and partners in general professional partnerships.

The questioned regulation reads:

Sec. 6. General Professional Partnership The general professional partnership (GPP) andthe partners comprising the GPP are covered by R. A. No. 7496. Thus, in determining the netprofit of the partnership, only the direct costs mentioned in said law are to be deducted frompartnership income. Also, the expenses paid or incurred by partners in their individualcapacities in the practice of their profession which are not reimbursed or paid by thepartnership but are not considered as direct cost, are not deductible from his gross income.

Issue: W/N public respondents have exceeded their authority in promulgating Section 6, Revenue

Regulations No. 2-93, to carry out Republic Act No. 7496.

Held: No. a general professional partnership, unlike an ordinary business partnership (which is treated as acorporation for income tax purposes and so subject to the corporate income tax), is not itself an incometaxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on thepartners themselves in their individual capacity computed on their distributive shares of partnershipprofits.

There is no distinction in income tax liability between a person who practices his profession alone orindividually and one who does it through partnership (whether registered or not) with others in theexercise of a common profession. Indeed, outside of the gross compensation income tax and the final taxon passive investment income, under the present income tax system all individuals deriving income fromany source whatsoever are treated in almost invariably the same manner and under a common set of

rules.

The law, in levying the tax, adopts the most comprehensive tax situs of nationality and residence of thetaxpayer (that renders citizens, regardless of residence, and resident aliens subject to income tax liabilityon their income from all sources) and of the generally accepted and internationally recognized incometaxable base (that can subject non-resident aliens and foreign corporations to income tax on their incomefrom Philippine sources).

Code classifies taxpayers into four main groups, namely: (1) Individuals, (2) Corporations, (3) Estatesunder Judicial Settlement and (4) Irrevocable Trusts (irrevocable both as to corpus and as to income).


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Partnerships are, under the Code, either "taxable partnerships" or "exempt partnerships." Ordinarily,partnerships, no matter how created or organized, are subject to income tax (and thus alluded to as"taxable partnerships") which, for purposes of the above categorization, are by law assimilated to bewithin the context of, and so legally contemplated as, corporations. Except for few variances, such as inthe application of the "constructive receipt rule" in the derivation of income, the income tax approach isalike to both juridical persons. Obviously, SNIT is not intended or envisioned, as so correctly pointed out in

the discussions in Congress during its deliberations on Republic Act 7496, aforequoted, to covercorporations and partnerships which are independently subject to the payment of income tax.

"Exempt partnerships," upon the other hand, are not similarly identified as corporations nor evenconsidered as independent taxable entities for income tax purposes. A general professional partnership issuch an example.Here, the partners themselves, not the partnership (although it is still obligated to file anincome tax return [mainly for administration and data]), are liable for the payment of income tax intheir individual capacity computed on their respective and distributive shares of profits. In thedetermination of the tax liability, a partner does so as anindividual, and there is no choice on the matter.

Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the standing rule as now somodified by Republic ActNo. 7496 the extent of allowable deductions applicable to all individual income taxpayers on their non-

compensation income. There is no evident intention of the law to place in an unequal footing or insignificant variance the income tax treatment of professionals who practice their respective professionsindividually and of those who do it through a general professional partnership.

ABAKADA GURO PARTY LIST (Formerly AASJAS) vs. EXEC. SEC. ERMITAG.R. No. 168056 September 1, 2005

R.A. No. 9337 purpose Mounting budget deficit increased emoluments for health workersrevenue generation wider coverage for full value-added tax benefitsinadequate fiscal allocation for education

Facts:R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, andSenate Bill No. 1950.

House Bill No. 3555was introduced on first reading on January 7, 2005. The House Committee on Waysand Means approved the bill. The President certified the bill on January 7, 2005 for immediate enactment.On January 27, 2005, the House of Representatives approved the bill on second and third reading.

House Bill No. 3705Its "mother bill" is House Bill No. 3555. The House Committee on Ways and Meansapproved the bill on February 2, 2005. The President also certified it as urgent on February 8, 2005. TheHouse of Representatives approved the bill on second and third reading on February 28, 2005.

Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No. 1950on March 7,

2005, taking into consideration House Bill Nos. 3555 and 3705. The President certified the bill on March 11,2005, and was approved by the Senate on second and third reading on April 13, 2005.

The Senate agreed to the request of the House of Representatives for a committee conference on thedisagreeing provisions of the proposed bills. the Conference Committee on the Disagreeing Provisions ofHouse Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950, after having met and discussed in fullfree and conference, recommended the approval of its report, which the Senate did and with the House ofRepresentatives agreeing thereto. The enrolled copy of the consolidated House and Senate version wastransmitted to the President, who signed the same into law, Thus, came R.A. No. 9337.

PROCEDURAL ISSUE

(P.1) W/N The Bicameral Conference Committee acted without jurisdiction in deleting the no passon provisions present in Senate Bill No. 1950 and House Bill No. 3705;

(P.2) W/N Insertion by the Bicameral Conference Committee of certain sections violates Article VI, Section24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall originateexclusively in the House of Representatives

(P.3) W/N inclusion of a stand-by authoritygranted to the President by the Bicameral ConferenceCommittee is a violation of the "no-amendment rule" upon last reading of a bill laid down in Article VI,Section 26(2) of the Constitution.


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SUBSTANTIVE ISSUES

(S.1) W/N Sections 4, 5, and 6 of R.A. No. 9337 , the so-called stand-by authorityof the President toincrease the VAT rate to 12%, constitute an undue delegation of legislative power, in violation of Article VI,Section 28(2) of the Constitution;

(S.2) W/N limitation on the creditable input tax in effect allows VAT-registered establishments to retain aportion of the taxes they collect, thus violating the principle that tax collection and revenue should besolely allocated for public purposes and expenditures

(S.3) W/N Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution:

a. Article VI, Section 28(1) as to the imposition of 70% limit on the amount of input tax to becredited against the output tax

b. constitutional guarantee of equal protection of the law under Article III, Section 1 of theConstitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of inputtax; or (2) invests in capital equipment; or (3) has several transactions with the government, is notbased on real and substantial differences to meet a valid classification.

Held: VATa tax on spending or consumption. It is levied on the sale, barter, exchange or lease of goodsor properties and services. Being an indirect tax on expenditure, the seller of goods or services may passon the amount of tax paid to the buyer, with the seller acting merely as a tax collector. The burden of VATis intended to fall on the immediate buyers and ultimately, the end-consumers.

In contrast, a direct tax a tax for which a taxpayer is directly liable on the transaction or business itengages in, without transferring the burden to someone else. Examples are individual and corporateincome taxes, transfer taxes, and residence taxes.

single-stage tax system- computed under the "cost deduction method" and was payable only by theoriginal sellers.

mixture of the "cost deduction method" and "tax credit method"an entity can credit against or subtractfrom the VAT charged on its sales or outputs the VATpaid on its purchases, inputs and imports.14

1987- VAT system was imposing a multi-stage tax rate of 0% or 10% on all sales using the "tax creditmethod.Expanded VAT LawImproved VAT Law

Tax Reform Act of 1997RA 9337-- VAT Reform Act.

(P.1) The Bicameral Conference Committee acted with jurisdiction in deleting the no passon

provisions present in Senate Bill No. 1950 and House Bill No. 3705;

Bicameral Conference Committee In the event that the House does not agree with the Senate on theamendment to any bill or joint resolution, the differences may be settledby the conference committees of both chambers.

The creation was apparently in response to a problem, not addressed by anyconstitutional provision, where the two houses of Congress find themselves indisagreement over changes or amendments introduced by the other house in alegislative bill.

Parliamentary rules are merely procedural, and with their observance, thecourts have no concern. They may be waived or disregarded by the legislativebody." Consequently, "mere failure to conform to parliamentary usage will notinvalidate the action (taken by a deliberative body) when the requisite numberof members have agreed to a particular measure.

one of the most basic and inherent power of the legislature is the power toformulate rules for its proceedings and the discipline of its members. Congressis the best judge of how it should conduct its own business expeditiously and inthe most orderly manner. It is also the sole

The Court observes that there was a necessity for a conference committee because a comparison of theprovisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other, revealsthat there were indeed disagreements. As pointed out in the petitions, said disagreements were as follows:

House Bill No. 3555 House Bill No.3705 Senate Bill No. 1950

With regard to "Stand-By Authority" in favor of President
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Provides for 12% VAT on everysale of goods or properties(amending Sec. 106 of NIRC);12% VAT on importation ofgoods (amending Sec. 107 ofNIRC); and 12% VAT on sale of

services and use or lease ofproperties (amending Sec. 108of NIRC)

Provides for 12% VAT in general onsales of goods or properties andreduced rates for sale of certainlocally manufactured goods andpetroleum products and rawmaterials to be used in the

manufacture thereof (amendingSec. 106 of NIRC); 12% VAT onimportation of goods and reducedrates for certain imported productsincluding petroleum products(amending Sec. 107 of NIRC); and12% VAT on sale of services anduse or lease of properties and areduced rate for certain servicesincluding power generation(amending Sec. 108 of NIRC)

Provides for a single rate of10% VAT on sale of goods orproperties (amending Sec. 106of NIRC), 10% VAT on sale ofservices including sale ofelectricity by generation

companies, transmission anddistribution companies, and useor lease of properties(amending Sec. 108 of NIRC)

With regard to the "no pass-on" provision

No similar provision Provides that the VAT imposed on

power generation and on the saleof petroleum products shall beabsorbed by generationcompanies or sellers, respectively,and shall not be passed on toconsumers

Provides that the VAT imposed

on sales of electricity bygeneration companies andservices of transmissioncompanies and distributioncompanies, as well as those offranchise grantees of electricutilities shall not apply toresidential

end-users. VAT shall beabsorbed by generation,transmission, and distributioncompanies.

With regard to 70% limit on input tax creditProvides that the input taxcredit for capital goods onwhich a VAT has been paidshall be equally distributedover 5 years or thedepreciable life of such capitalgoods; the input tax credit forgoods and services other thancapital goods shall not exceed5% of the total amount of suchgoods and services; and forpersons engaged in retail

trading of goods, the allowableinput tax credit shall notexceed 11% of the totalamount of goods purchased.

No similar provision Provides that the input taxcredit for capital goods onwhich a VAT has been paidshall be equally distributedover 5 years or the depreciablelife of such capital goods; theinput tax credit for goods andservices other than capitalgoods shall not exceed 90% ofthe output VAT.

With regard to amendments to be made to NIRC provisions regarding income andexcise taxes

No similar provision No similar provision Provided for amendmentsto several NIRC provisionsregarding corporateincome, percentage,franchise and excise taxes

The disagreements between the provisions in the House bills and the Senate bill were with regard to (1)what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation,transmission and distribution companies should not be passed on to consumers, as proposed in the Senatebill, or both the VAT imposed on electricity generation, transmission and distribution companies and theVAT imposed on sale of petroleum products should not be passed on to consumers, as proposed in theHouse bill; (3) in what manner input tax credits should be limited; (4) and whether the NIRC provisions oncorporate income taxes, percentage, franchise and excise taxes should be amended.

In the present case, the changes introduced by the Bicameral Conference Committee on disagreeingprovisions were meant only to reconcile and harmonize the disagreeing provisions for it did not inject anyidea or intent that is wholly foreign to the subject embraced by the original provisions.


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so-called stand-by authoritywhereby the rate of 10% VAT wanted by the Senate is retained until suchtime that certain conditions arise when the 12% VAT wanted by theHouse shall be imposed, appears to be a compromise to try to bridgethe difference in the rate of VAT proposed by the two houses of Congress, that is

still totally within the subject of what rate of VAT should be imposed on taxpayers.

no pass-on provision was deleted altogether reason: to keep the VAT law or the VAT bill simple; that nosector should be a beneficiary of legislative grace, neither shouldany sector be discriminated on. The VAT is an indirect tax. It is apass on-tax.

Thus, all the changes or modifications made by the Bicameral Conference Committee were germane tosubjects of the provisions referred to it for reconciliation. Such being the case, the Court does not see anygrave abuse of discretion amounting to lack or excess of jurisdiction committed by the BicameralConference Committee.

it is within the power of a conference committee to include in its report an entirely new provision that isnot found either in the House bill or in the Senate bill. If the committee can propose an amendmentconsisting of one or two provisions, there is no reason why it cannot propose several provisions,

collectively considered as an "amendment in the nature of a substitute," so long as such amendment isgermane to the subject of the bills before the committee. After all, its report was not final but needed theapproval of both houses of Congress to become valid as an act of the legislative department.

(P.2) Insertion by the Bicameral Conference Committee of certain sections Does Not ViolateArticle VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills

Article VI, Section 24 of the Constitution:All appropriation, revenue or tariff bills, bills authorizing increaseof the public debt, bills of local application, and private bills shall originate exclusively in the House ofRepresentatives but the Senate may propose or concur with amendments.

it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in

the House of Representatives. a bill originating in the House may undergo such extensive changes in theSenate that the result may be a rewriting of the whole. As a result of the Senate action, a distinct bill maybe produced. To insist that a revenue statute and not only the bill which initiated the legislative processculminating in the enactment of the law must substantially be the same as the House bill would be todeny the Senates power not only to "concur with amendments" but also to "propose amendments." Itwould be to violate the coequality of legislative power of the two houses of Congress and in fact make theHouse superior to the Senate. Given, then, the power of the Senate to propose amendments, the Senatecan propose its own version even with respect to bills which are required by the Constitution to originate inthe House.

what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, billsauthorizing an increase of the public debt, private bills and bills of local application must come from theHouse of Representatives on the theory that, elected as they are from the districts, the members of the

House can be expected to be more sensitive to the local needs and problems. On the other hand, thesenators, who are elected at large, are expected to approach the same problems from the nationalperspective. Both views are thereby made to bear on the enactment of such laws.

Since there is no question that the revenue bill exclusively originated in the House of Representatives, theSenate was acting within its constitutional power to introduce amendments to the House bill when itincluded provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, excise andfranchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain any prohibition orlimitation on the extent of the amendments that may be introduced by the Senate to the House revenuebill

(P.3) inclusion of a stand-by authority

granted to the President by the Bicameral ConferenceCommittee NOT a violation of the "no-amendment rule" upon last reading of a bill laid down in

Article VI, Section 26(2) of the Constitution.

Article VI, Sec. 26 (2) of the Constitution, states:No bill passed by either House shall become a law unlessit has passed three readings on separate days, and printed copies thereof in its final form have beendistributed to its Members three days before its passage, except when the President certifies to thenecessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of abill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter,and the yeas and nays entered in the Journal.

Art. VI. 26 (2) must be construed as referring only to bills introduced for the first time ineither house of Congress, not to the conference committee report.


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the "no-amendment rule" refers only to the procedure to be followed by each house ofCongress with regard to bills initiated in each of said respective houses, before said bill istransmitted to the other house for its concurrence or amendment.

The practice where a bicameral conference committee is allowed to add or delete provisions in the Housebill and the Senate bill after these had passed three readings does not in effect circumvent the "no

amendment rule". There is no reason for requiring that the Committees Report in these cases must haveundergone three readings in each of the two houses. If that be the case, there would be no end tonegotiation since each house may seek modification of the compromise bill.

(S.1) stand-by authority of the President NOT Undue Delegation of Legislative Power

Section 28 (2), Article VI of the Constitution:The Congress may, by law, authorize the President to fix withinspecified limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage dues, andother duties or imposts within the framework of the national development program of the government.

potestas delegata non delegaripotest(what has been delegated, cannot be delegated) - as delegatedpower constitutes not only a right but a duty to be performed by the delegate through the instrumentalityof his own judgment and not through the intervening mind of another.

The powers which Congress is prohibited from delegating are those which are strictly, or inherently andexclusively, legislative. Purely legislative powercan never be delegated; the authority to make acomplete law complete as to the time when it shall take effect and as to whom it shall beapplicable and to determine the expediency of its enactment.

exceptions:(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution;(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the Constitution;(3) Delegation to the people at large;(4) Delegation to local governments;(5) Delegation to administrative bodies.

requisites of permissible delegation:law (a) is complete in itself, setting forth therein the policy to beexecuted, carried out, or implemented by the delegate; and (b) fixes a standard the limits of which aresufficiently determinate and determinable to which the delegate must conform in the performance of hisfunctions.

The legislative does not abdicate its functions when it describes what job must be done, who is to do it,and what is the scope of his authority. A distinction has rightfully been made between delegation of powerto make the laws which necessarily involves a discretion as to what it shall be, which constitutionally maynot be done, and delegation of authority or discretion as to its execution to be exercised under and inpursuance of the law, to which no valid objection can be made.

Clearly, the legislature may delegate to executive officers or bodies the power to determine certain facts

or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms, madeto depend, but the legislature must prescribe sufficient standards, policies or limitations on theirauthority. While the power to tax cannot be delegated to executive agencies, details as to the enforcementand administration of an exercise of such power may be left to them, including the power to determine theexistence of facts on which its operation depends.50

In the case at bar, the challenged section of R.A. No. 9337 is the commonproviso in Sections 4, 5 and 6which reads as follows:

That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006,raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has beensatisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previousyear exceeds two and four-fifth percent (2 4/5%); or(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-

half percent (1 %).

The case before the Court is not a delegation of legislative power. It is simply a delegation ofascertainment of facts upon which enforcement and administration of the increase rate under the law iscontingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingentupon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate uponfactual matters outside of the control of the executive.
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No discretion would be exercised by the President. the absence of discretion is the fact that thewordshall is used in the commonproviso. Thus, it is the ministerial duty of the President to immediatelyimpose the 12% rate upon the existence of any of the conditions specified by Congress. This is a dutywhich cannot be evaded by the President.

(S.2) W/N limitation on the creditable input tax in effect allows VAT-registered establishments

to retain a portion of the taxes they collect, thus violating the principle that tax collection andrevenue should be solely allocated for public purposes and expenditures

petitioner Garcia failed to comprehend the operation of the 70% limitation on the input tax. According topetitioner, the limitation on the creditable input tax in effect allows VAT-registered establishments toretain a portion of the taxes they collect, which violates the principle that tax collection and revenueshould be for public purposes and expenditures

the value-added taxes that a person/taxpayer paid and passed on to him by a seller can only be creditedup to 70% of the value-added taxes that is due to him on a taxable transaction. There is no retention ofany tax collection because the person/taxpayer has already previously paid the input tax to a seller, andthe seller will subsequently remit such input tax to the BIR. The party directly liable for the payment of thetax is the seller. What only needs to be done is for the person/taxpayer to apply or credit these input

taxes, as evidenced by receipts, against his output taxes.

Petitioners Association ofPilipinas Shell Dealers, Inc., et al. also argue that the input tax partakesthe nature of a property that may not be confiscated, appropriated, or limited without due processof law.

input tax is not a property or a property right within the constitutional purview of the due processclause. A VAT-registered persons entitlement to the creditable input tax is a mere statutoryprivilege.

statutory privileges vs. vested rights -- persons have no vested rights in statutory privileges. Thestate may change or take away rights, which were created by the law of the state, although it may

not take away property, which was vested by virtue of such rights.

Under the previous system of single-stage taxation, taxes paid at every level of distribution are notrecoverable from the taxes payable, although it becomes part of the cost, which is deductible from thegross revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all sales, it wasthen that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was introduced.73This was adopted by the Expanded VAT Law(R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 The right to credit input tax as againstthe output tax is clearly a privilege created by law, a privilege that also the law can remove, or in thiscase, limit.

(S.3) W/N Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC;and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following

provisions of the Constitution:

a. Article VI, Section 28(1) as to the imposition of 70% limit on the amount of input tax to becredited against the output tax

Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the amount ofinput tax that may be credited against the output tax. It states, in part: "[P]rovided, that the input taxinclusive of the input VAT carried over from the previous quarter that may be credited in every quartershall not exceed seventy percent (70%) of the output VAT: "

Input Tax( 110(A) of the NIRC) the value-added tax due from orpaidby a VAT-registered person on theimportation of goods or local purchase of good and services, including lease or use of property, in the

course of trade or business, from a VAT-registered personOutput Taxthe value-added tax due on the sale or lease of taxable goods or properties or services byany person registered or required to register under the law.

Petitioners claim that the contested sections impose limitations on the amount of input tax that may beclaimed. In effect, a portion of the input tax that has already been paid cannot now be credited against theoutput tax.

Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, andtherefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax isless than 70% of the output tax, then 100% of such input tax is still creditable.
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More importantly, the excess input tax, if any, is retained in a businesss books of accounts and remainscreditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which provides that "ifthe input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter orquarters." In addition, Section 112(B) allows a VAT-registered person to apply for the issuance of a taxcredit certificate or refund for any unused input taxes, to the extent that such input taxes have not beenapplied against the output taxes. Such unused input tax may be used in payment of his other internal

revenue taxes.

The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitionersexaggeratedly contend. Their analysis of the effect of the 70% limitation is incomplete and one-sided. Itends at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It does notproceed further to the fact that such unapplied/unutilized input tax may be credited in the subsequentperiods as allowed by the carry-over provision of Section 110(B) or that it may later on be refundedthrough a tax credit certificate under Section 112(B).

Therefore, petitioners argument must be rejected.

b. constitutional guarantee of equal protection of the law under Article III, Section 1 of theConstitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of

input tax; or (2) invests in capital equipment; or (3) has several transactions with thegovernment, is not based on real and substantial differences to meet a valid classification.

The equal protection clause under the Constitution means that "no person or class of persons shall bedeprived of the same protection of laws which is enjoyed by other persons or other classes in the sameplace and in like circumstances."83

The power of the State to make reasonable and natural classifications for the purposes of taxation has longbeen established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied,or the amounts to be raised, the methods of assessment, valuation and collection, the States power isentitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clearshowing of unreasonableness, discrimination, or arbitrariness.

Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of inputtax, or invests in capital equipment, or has several transactions with the government, is not based on realand substantial differences to meet a valid classification. While the implementation of the law may yieldvarying end results depending on ones profit margin and value-added, the Court cannot go beyond whatthe legislature has laid down and interfere with the affairs of business.

The equal protection clause does not require the universal application of the laws on all persons or thingswithout distinction. What the clause requires is equality among equals as determined according to a validclassification. By classification is meant the grouping of persons or things similar to each other in certainparticulars and different from all others in these same particulars.

B. Uniformity and Equitability of Taxation

the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services.Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC,provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale ofservices and use or lease of properties. These same sections also provide for a 0% rate on certain salesand transaction.

R.A. No. 9337 is also equitable The law is equipped with a threshold margin. The VAT rate of 0% or 10%(or 12%) does not apply to sales of goods or services with gross annual sales or receipts notexceeding P1,500,000.00.88Also, basic marine and agricultural food products in their original state are stillnot subject to the tax,89 thus ensuring that prices at the grassroots level will remain accessible.

It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly favorsthose with high profit margins. Congress was not oblivious to this. Thus, to equalize the weighty burdenthe law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-exempt persons underSection 109(v), i.e., transactions with gross annual sales and/or receipts not exceeding P1.5 Million. Thisacts as a equalizer because in effect, bigger businesses that qualify for VAT coverage and VAT-exempttaxpayers stand on equal-footing.

Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax onthose previously exempt. Excise taxes on petroleum products91 and natural gas92 were reduced.Percentage tax on domestic carriers was removed.93 Power producers are now exempt from payingfranchise tax.94
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Aside from these, Congress also increased the income tax rates of corporations, in order to distribute theburden of taxation. Domestic, foreign, and non-resident corporations are now subject to a 35% income taxrate, from a previous 32%.95 Intercorporate dividends of non-resident foreign corporations are still subjectto 15% final withholding tax but the tax credit allowed on the corporations domicile was increased to20%.96 The Philippine Amusement and Gaming Corporation (PAGCOR) is not exempt from income taxesanymore.97 Even the sale by an artist of his works or services performed for the production of such works

was not spared.

All these were designed to ease, as well as spread out, the burden of taxation, which would otherwise restlargely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is equitable.

C. Progressivity of Taxation

Lastly, petitioners contend that the limitation on the creditable input tax is anything b

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Chapter 2 (Digest)