Case Digest: Manila Electric Company vs. Tabios

MANILA ELECTRIC COMPANY vs. BENJAMIN TABIOS

G.R. No. L-9987; L-23847 22 October 1975

FACTS:

In 1962, MERALCO imported and received from abroad copper wires, transformers, and insulators for use in the operation of its business, for which it paid the Collector of Customs, Php62,335.00 as compensating tax.  A claim for refund of said amount was presented by Meralco and was later appealed to the CTA by filing a petition for review.  The same situation happened in 1963 where it paid a compensating tax of Php6,587.00.  On both instances, the Court of Tax Appeals decided against Meralco.

The CIR relied upon Section 190 of the NIRC (CA No. 466 as amended) in deciding against the petitioner, and that just like Panay Electric Co., and Manila Gas Corp., it is not exempt from paying compensating tax under said law. CIR even pointed out that the purpose of the compensating tax is to “place casual importers, who are not merchants on equal footing with established merchants who pay sale tax on articles imported by them.”

On the other hand, Meralco bases its claim for exemption on paragraph 9 of its franchise, which states that although it is liable to pay taxes on its real estate, poles, wires, transformers and insulators are not part of said taxable property. Meralco further states that while paragraph 9 does not specifically mention the compensating tax, it is broad and sweeping enough to include compensating tax.

ISSUE: 

Is Meralco exempt from payment of a compensating tax on poles, wires, transformers, and insulators imported by it for use in the operation of its electric light, heat and power system?

RULING:

NO. Tax exemptions are strictly construed against the taxpayer, the same being highly disfavoured and may almost be said to be “odious to the law.” The right of taxation will not beheld to have been surrendered unless the intention to surrender is manifested by words too plain to be mistaken.

Moreover, the SC stated that it cannot overlook the finding of the tax court that Meralco’s franchise is a municipal one, not a legal franchise. Paragraph 9 of said franchise is also not “plain and unambiguous” as the petitioner claims it to be. What the provision exempts is the payment of property tax, which is reaffirmed on the last clause of the same.  A compensating tax is not a property tax but is an excise tax (one imposed on the performance of an act). In this case, it is not the act of importation that is taxed under Section 190 of NIRC, rather it is the use of imported goods not subjected to sales tax, because the compensating tax was expressly designed as a substitute to make up or compensate for the avenue lost to the government through the avoidance of sales taxes by means of direct purchases abroad.

Case Digest: Procter and Gamble PMC vs. Municipality of Jagna

PROCTER & GAMBLE PHL. MANUFACTURING CORPORATION vs. THE MUNICIPALITY OF JAGNA, PROVINCE OF BOHOL

G.R. No. L-24265 28 December 1979

FACTS:

The CFI of Manila upheld the validity of Ordinance No. 4, Series of 1957, which imposed “storage fees on all exportable copra deposited in the bodega of the Municipality of Jagna.” Plaintiff-appellant is engaged in the manufacture of soap, edible oil, margarine and other similar products, and for this purpose, maintains a bodega in Jagna where it stores copra purchased in the Municipality. It further claims that Ordinance No. 4 is ultra-vires and void for being beyond the power of the Municipality to enact and that it be allowed to refund to it the amount of Php42,265.13 it paid in protest.  Moreover, it claims that subject Ordinance is inapplicable to it as it is not engaged in the business or trade of storing copra for others for compensation or profit.

ISSUE: Whether the Municipality of Jagna was authorised to impose and collect the storage fee provided for in the challenged Ordinance.

RULING:

YES. The validity of the ordinance must be upheld pursuant to the broad authority conferred upon municipalities by CA No. 472, Section 1. Under the foregoing provision, a municipality is authorised to impose (1) a license for regulation of useful occupation; (2) a license for restriction or regulation of non-useful occupation or enterprises; and (3) license for revenue.

The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on persons, firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within the Municipality's territorial jurisdiction. For it has been held that a warehouse used for keeping or storing copra is an establishment likely to endanger the public safety or likely to give rise to conflagration because the oil content of the copra when ignited is difficult to put under control by water and the use of chemicals is necessary to put out the fire, the same is under Section 2238 of the Administrative Code.

Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not engaged in the business or occupation of buying or selling of copra but is only storing copra in connection with its main business of manufacturing soap and other similar products, and that to be compelled to pay the storage fees would amount to double taxation, does not inspire assent. The question of whether appellant is engaged in that business or not is irrelevant because the storage fee, as previously mentioned, is an imposition on the privilege of storing copra in a bodega within defendant municipality by persons, firms or corporations. Section 1 of the Ordinance in question does not state that said persons, firms or corporations should be engaged in the business or occupation of buying or selling copra. Moreover, by plaintiff's own admission that it is a consolidated corporation with its trading company, it will be hard to segregate the copra it uses for trading from that it utilizes for manufacturing.

Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does not amount to double taxation. For double taxation to exist, the same property must be taxed twice, when it should be taxed but once. Double taxation has also been defined as taxing the same person twice by the same jurisdiction for the same thing. Surely, a tax on plaintiff's products is different from a tax on the privilege of storing copra in a bodega situated within the territorial boundary of defendant municipality.

Case Digest: Nitafan vs. Commissioner of Internal Revenue

DAVID G. NITAFAN, et al. vs. COMMISSIONER OF INTERNAL REVENUE, and THE FINANCIAL OFFICER OF THE SUPREME COURT OF THE PHILIPPINES

G.R. No. 78780 23 July 1987

FACTS:

Petitioners Nitafan, Polo and Savellano are judges presiding over branches in the RTC of the NCJR Manila who seek to prohibit and/or perpetually enjoin respondents from making any deduction of withholding taxes from their salaries. According to them, said tax deductions constitute a diminution of their salaries, contrary to the provision of Section 10, Article VIII of the Constitution.

ISSUE: Whether or not salaries of the members of the Judiciary are subject to income tax.

RULING:

YES. The salaries of the members of the Judiciary is subject to general income tax applicable to all taxpayers. The clear intent of the ConComm was to delete the proposed express grant of exemption from payment of income tax, so as to give substance to equality among the three branches of Government. Though this intent was not clearly set forth in the final text of the Constitution, the Court since then has authorised the deduction of the withholding tax from the salaries of said members.

Case Digest: Lung Center of the Philippines vs. Quezon City and Constantino Rosas

G.R. No. 144104             June 29, 2004

FACTS:

The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City.  Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines.  The ground floor is being leased to a canteen, medical professionals whom use the same as their private clinics, as well as to other private parties.  The right portion of the lot is being leased for commercial purposes to the Elliptical Orchids and Garden Center.  The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from the government.

Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating its claim as a charitable institution. The city assessor denied the Claim.  When appealed to the QC-Local Board of Assessment, the same was dismissed.  The decision of the QC-LBAA was affirmed by the Central Board of Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are used exclusively for charity.

ISSUE:

Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it admits paying clients and leases out a portion of its property for commercial purposes.

HELD:

The Court held that the petitioner is indeed a charitable institution based on its charter and articles of incorporation.  As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons managing or operating the institution.

Despite this, the Court held that the portions of real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes.  (strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:

•         income and gift taxes for all donations, contributions, endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines for the actual use and benefit of the Lung Center; and
•          taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof with respect to equipment purchases (expression unius est exclusion alterius/expressium facit cessare tacitum).

Case Digest: Caltex (Philippines), Inc. vs. Central Board of Assessment Appeals and City Assessor of Pasay

G.R. No. L-50466               May 31, 1982

FACTS:

Various machines and equipments are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt.  These are underground tanks, gasoline pumps, water pumps, car washer and air compressors, among others. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition as when received. The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.  The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty.  However, the city board of tax appeals ruled that they are personalty.

The City Board of Tax Appeals decided that the definitions of realty and personalty under the Civil Code do not apply in this case.  Instead, the definition under the Real Property Tax Code should be followed.  Thus, the property in controversy are real in nature and subject to realty tax.

ISSUE:

Whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax.

HELD:

The Court held that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.  Under the Real Property Tax Code, “improvements” are defined as “valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes.”  On the other hand, “machinery” is embraces “machines, mechanical contrivances, instruments, appliances and apparatus attached to the real estate.”  Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty.

Case Digest: Ulpiano Sarmiento III and Juanito G. Arcialla vs. Salvador Mison and Guillermo Carague

No. L-79974        December 17, 1987

En Banc

FACTS:

When Salvador Mison was appointed to the Office of the Commissioner of Bureau of Customs, this petition for prohibition filed by taxpayers, lawyers, members of the IBP and professors of Constitutional was filed on the grounds that said appointment is in violation of Section 16, Article VII of the 1987 Constitution for it was not approved by the Commission on Appointments.

ISSUE:  Whether said appointment is indeed unconstitutional basing on Section 16, Article VII.

RULING:

Mison’s appointment is constitutional.  Sec. 16, Article VII states that:

“Section 16. The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads of the executive departments, ambassadors, other public ministers and consuls, or officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution. He shall also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint. The Congress may, by law, vest the appointment of other officers lower in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards. x x x”

It is clear that the first group shall need the confirmation of the CoA.  Also, it can be seen from reviewing the records of deliberation of the 1986 Constitutional Commission that it has been clearly stated that appointments to the second and third groups of officers can be made by the President without the confirmation of the CoA.  In the issue at hand, it is evident that the position of Commissioner of the Bureau of Customs (a bureau head) is not one of those within the first group of appointments where the consent of the CoA is required. 

Furthermore, the President is expressly authorized by law to appoint the Commissioner of the Bureau of Customs under Sec. 601 of R.A. 1937 which states that “Sec. 601. – x x x The Commissioner and the Deputy Commissioner of Customs shall be appointed by the President of the Philippines.”

Case Digest: Emmanuel Pelaez vs. The Auditor General

FACTS:

From September 4, 1964 to October 29, 1964 the President of the Philippines issued executive orders to create thirty-three municipalities pursuant to Section 69 of the Revised Administrative Code.  Public funds thereby stood to be disbursed in the implementation of said executive orders. 

Suing as a private citizen and taxpayer, Vice President Emmanuel Pelaez filed a petition for prohibition with preliminary injunction against the Auditor General.  It seeks to restrain from the respondent or any person acting in his behalf, from passing in audit any expenditure of public funds in implementation of the executive orders aforementioned.

ISSUE:

Whether the executive orders are null and void, upon the ground that the President does not have the authority to create municipalities as this power has been vested in the legislative department.

RULING:

Section 10(1) of Article VII of the fundamental law ordains:

“The President shall have control of all the executive departments, bureaus or offices, exercise general supervision over all local governments as may be provided by law, and take care that the laws be faithfully executed.”

The power of control under this provision implies the right of the President to interfere in the exercise of such discretion as may be vested by law in the officers of the executive departments, bureaus, or offices of the national government, as well as to act in lieu of such officers.  This power is denied by the Constitution to the Executive, insofar as local governments are concerned.  Such control does not include the authority to either abolish an executive department or bureau, or to create a new one.  Section 68 of the Revised Administrative Code does not merely fail to comply with the constitutional mandate above quoted, it also gives the President more power than what was vested in him by the Constitution. 

The Executive Orders in question are hereby declared null and void ab initio and the respondent permanently restrained from passing in audit any expenditure of public funds in implementation of said Executive Orders or any disbursement by the municipalities referred to.

Case Doctrines: Police Power, Eminent Domain and Taxation

Ichong vs. Hernandez

The treaty is always subject to qualification or amendment by a subsequent law, and the same may never curtail or restrict the scope of the police power of the State.

Lutz vs. Araneta

The tax levied by the challenged statute is for a regulatory purpose, namely, to provide ways and means for the rehabilitation and stabilization of the sugar industry. x x x The law is thus primarily an exercise of the police power of the state and taxation was merely used to implement the state’s power.

Department of Education vs. San Diego

The State has the responsibility to harness its human resources and to see to it that they are not dissipated or, no less worse, not used at all.

Republic of the Philippines vs. La Orden de  PP. Benedictinos de Filipinas

Whether or not the purpose of the taking is necessary is a question of fact dependent only upon the facts of which the trial court very liberally took judicial notice but also other facts that do not appear of record and must, therefore, be established by means of evidence.

City of Manila vs. Chinese Community

Whether or not the municipal corporation or entity is exercising the right in a particular case under the conditions imposed by the general authority, is a question which the courts have the right to inquire into.

Republic of the Philippines vs. PLDT

Normally, the power of eminent domain results in taking or appropriation of title to, and possession of, the expropriated party; but no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of the condemned property, without loss of title and possession. x x x the state may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why a state may not require a public utility to render services in the general interest, provided just compensation is paid therefor.

National Housing Authority vs. Reyes

Although in an expropriation proceeding the court technically would still have the power to determine the just compensation for the property, following the applicable decrees, its task would be relegated to simply stating the lower value of the property as declared either by the owner or the assessor.

It is violative of due process to deny the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong.  And it is repulsive to the basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgement of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated.

Association of Small Land Owners vs. Secretary of Agrarian Reform

It cannot be denied from these cases that the traditional medium for the payment of just compensation is money and no other. x x x This is not an ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner for a specific and perhaps local purpose.  what we deal here is a revolutionary kind of expropriation. x x x Considering the vast areas of land subject to expropriation under the laws before us, we estimate that hundreds of billions of pesos will be needed, far more indeed than the amount of P50 billion initially appropriated, which is already staggering as it is by our present standards.  Such amount is in fact not even fully available in cash at this time. x x x

Republic vs. Lim

In cases where the government failed to pay the compensation within five years from the finality of the judgement in the expropriation proceedings, the owner concerned shall have the right to recover possession of their property.  This is in connection with the principle that ‘the government cannot keep the property and dishonour the judgement.’

Lladoc vs. Commissioner of Internal Revenue

The exemption in Sec. 22(3) of Article VI of the Constitution is only from the payment of taxes assessed on such properties enumerated as property taxes as distinguished from excise taxes. x x x Manifestly, a gift tax is not within the exemption provisions.

Yu Cong Eng vs. Trinidad

It would be oppressive and arbitrary to prohibit all Chinese merchants from maintaining a set of books in the Chinese language, and in the Chinese characters and thus prevent them from keeping advised of the status of their business and directing conduct.

Case Digest: Casco Philippine Chemical Co., Inc. vs. Gimenez and Mathay

G.R. No. L-17931                 28 February 1963

Ponente: Concepcion, J.

FACTS:

On July 1, 1959, pursuant to Republic Act No. 2609 (Foreign Exchange margin Fee Law), the Central Bank of the Philippines fixed a uniform margin fee of 25% foreign exchange transactions.  Petitioner Casco Philippine Chemical Co., Inc., a manufacturer of resin glues, had bought foreign exchange for the importation of urea and formaldehyde – raw materials for the said glues – and were thus paying for the margin fees required.

Relying upon Resolution No. 1529 of the Monetary Board of the said bank declaring that the separate importation of urea and formaldehyde is exempt from the said fee, the petitioner sought for a refund of the margin fees that had been paid.  This was denied by the Auditor of the said Bank stating that the claim was not in accord with the provisions of section 2, paragraph XVIII of R.A. 2609.

ISSUE: Whether “urea” and “formaldehyde” are exempt by law from the payment of the aforesaid margin fee

HELD/RULING:

“Urea” and “formaldehyde” is not exempt from law.

The pertinent portion of Section 2 of Republic Act No. 2609 reads:

The margin established by the Monetary Board pursuant to the provision of section one hereof shall not be imposed upon the sale of foreign exchange for the importation of the following:

x x x           x x x           x x x

XVIII. Urea formaldehyde for the manufacture of plywood and hardboard when imported by and for the exclusive use of end-users. (Emphasis provided.)

Urea formaldehyde is different from urea and formaldehyde, the former being a finished product.  It is well settled that the enrolled bill – which uses the term “urea formaldehyde” instead of “urea and formaldehyde” – is conclusive upon the courts as regards the tenor of the measure passed by Congress and approved by the President.  The courts cannot speculate that there had been an error in the printing of the bill as this shall violate the principle of separation of powers.  Shall there have been any error in the printing, the remedy is by amendment or curative legislation, not by judicial decree.