Taxation I Case Digest CompilationCollege of Law, Silliman UniversityJD Class 2016Table of ContentsGENERAL PRINCIPLES & LIMITATIONS6Republic vs Cocofed6Osmena vs Orbos7Tan vs Del Rosario8Shell Co. vs Vano9Tolentino vs Sec. of Finance11ABAKADA vs Ermita12Coconut Oil vs Torres14John Hay Alternative vs Lim15CIR vs Lincoln16Philex Mining vs CIR17Southern Cross vs CMAP18CIR vs Marubeni20Republic vs CA & Precision21CIR vs Santos22Pepsi vs Municipality of Tanauan24Kilosbayan, Inc. et al vs Guingona25MCIAA vs MarcosARCIDE26Republic vs ICC27CIR vs Benguet Corp.29CIR vs Benguet Corp.30Planters Products vs Fertiphil31Gerochi vs DOE32CIR vs Central Luzon Drug33Carlos Superdrug vs DSWD34Diaz vs Sec. of Finance36TAX REMEDIES CASES37CIR vs CTA & Citytrust37South African Airways vs CIR38Procter & Gamble vs Municipality of Medina40CIR vs Solidbank41CIR vs Wyeth42CIR vs Pascor Realty43Ungab vs Cusi44CIR vs CA46Vda. de San Agustin vs CIR48Calamba Steel vs CIR50Phil Journalists vs CIR52CIR vs Tulio54CIR vs PNB56CIR vs BPI57CIR vs Reyes59Barcelon vs CIR60CIR vs BPI61CIR vs Phil Global62Silkair PTE, Ltd. vs CIR65CIR vs Fortune Tobacco Corp.66CIR vs Acosta69Filinvest Dev. Corp. vs CIR & CTA70ME Holding Corp vs CA & CIR71CIR vs FMF Dev. Corp.72CIR vs PERF Realty Corp75Pilipinas Shell vs CIR77State Land Inv. Corp vs CIR78Allied Bank vs CIR79CIR vs Kudos Metal81CIR vs Far East Bank/BPI84Lascona Land vs CIR85CTA CASES86Meralco vs Savellano86Yamane vs BA Lepanto87P vs Sandiganbayan 467 SCRA 137LENTORIO88PPA vs Fuentes89TFS Inc. vs CIR91CIR vs Fort Bonifacio Dev. Corp93INCOME TAX CASES94Conwi vs CTA94CIR vs British Airways96CIR vs CA & Soriano97CIR vs Solidbank98Mobil vs City Treasurer100CIR vs CA & Castaneda101Abello vs CIR102CIR vs BPI 492 SCRA 551104Cyanamid vs CA105Republic vs Meralco106Esso vs CIR109Aguinaldo vs. CIR110PRC vs. CA112China Bank vs CA113CIR vs General Foods115Gancayco vs CIR116CIR vs CA & YMCA118CIR vs CTA120FEBTC vs CIR 488 SCRA 473121CIR vs Trustworthy Pawnshop Inc.122Lhuillier Pawnshop vs CIR123Systra vs CIR124Philam Asset Mgt vs CIR126Delpher Trades vs IAC128Campagnie vs CIR130B. Van Zuiden Bros vs GTVL132CIR vs Tulio133CIRvs Citytrust134CIR vs Baier-Nickel135PDIC vs BIR137Pansacola vs CIR138Intercontinental vs Amarillo140Security Bank 499 SCRA 453 (DST)--ARCIDE142Manila Banking Corp vs CIR143Bicolandia Drug Corp vs CIR144Reyes vs. NLRC145Phil. Health Care Providers vs CIR147Dizon vs CTA & CIR148PNB vs CIR149Sunlife 473 SCRA 129 (coops)LENTORIO151Tambunting Pawnshop Inc. vs CIR152MJOPFI vs CA & CIR153CIR vs PHILAMGEN154CIR vs McGeorge GR174157 Oct20/10 (sec 76 irrevocable but unused...)DONGGAY155Belle Corp vs CIR156CIR vs Aquafesh GR170389 Oct20/10 (sec 27 (1,5) CGT, Sec 196 DST)LENTORIO157CIR vs Sony Philippines, Inc.158CIR vs CA & Commonwealth Management & Services Corp160Exxon vs CIR161V.A.T. CASES162CIR vs Seagate 451 SCRA 132KHIO162Atlas vs CIR GR 146221, 25 Sep 2007 (proof of excess input VAT)YBIO162CIR vs Cebu Toyo163CIR vs American Express 462 SCRA2197 (destination principle)ARCIDE164CIR vs Toshiba165CIR vs Manila Mining 468 SCRA 571--MALCAMPO167Phil. Geothermal vs CIR 465 SCRA 308CATACUTAN167CIR vs Philhealth 6R 168129 24 April 07 (VAT on Sale of svcs; BIR rutings not retro.)ACAS167CIR vs Burmeister GR 153205 22 J an 07CRUZ167CIR vs Global 499 S 53 [evat; franchise tx]GAMO167CIR vs PhilGlobal 499 SCRA 53LIU167Magsaysay Lines 497 SCRA 63BANQUERIGO167Sekisui 496 SCRA 206 (exports)DELOS SANTOS167Contex 433 SCRA 376 (effects re VAT exempt status)GANIR167Atlas 546 SCRA 150 (invoices, rcpts for proving input VAT)FILIPINAS167First Planters Pawnshop 560 SCRA 606 (non-bank instns; DST)GANIR167Panasonic G.R. 178090, Feb 8, 2010 (refund of VAT) MONTEJO167Toshiba G.R. 157594, March 9, 2010 (cr/ref of input VAT)BANQUERIGO167TFS Inc. , G.R. 166829, Apr 19, 2010 (CTA law; VAT on pawnshops)LIU167CIR vs Eastern Telecom, GR 163835, July 7, 2010 (sec 104 (a))GAMO167AT&T vs CIR, GR182364, Aug 3/10 (req for tx refund in 0 rated tranxs)CRUZ167JRA vs CIR GR 177127 Oct 11/10 (eff failure to print 0 rated on invoice)CULMINAS167Tambunting vs CIR GR172394 Oct13/10 (pawnshops)CATACUTAN167Hitachi vs CIR168CIR vs CA & Commonwealth Mgt170Kepco vs CIR GR181858 Nov24/10 (fail to indicate 0 rated; inv vs rcpt)PORCINA171Silicon vs CIR GR172378 Jan17/11 (req 0 rated sales, Sec112 A & B)KHIO171BEST EVIDENCE RULE172Mindanao Bus vs CIR172CIR vs Hantex Trading Co., Inc.173Sy Po vs CTA & CIR175

GENERAL PRINCIPLES & LIMITATIONSRepublic vs CocofedGR 147062-64, 14 December 2001

Elements of a tax; coco-levy as tax

FACTS: R.A 6260 was enacted creating the Coconut Investment Company (CIC) to administer the Coconut Investment Fund (CIF) which was to be sourced from a fund levied based upon every sale of copra. Charged with the collection of the fund is the PCA. One of the purposes of the law was to acquire a commercial bank in order to provide readily available credit to coconut farmers at a preferential rate. Because of this, PCA acquired a commercial bank (which we now know as UCPB) and deposited the coco-levy funds and collections in the said bank. In addition, it is also provided in the law that the funds shall not be construed as special and/or fiduciary funds, or as part of the general funds of the National Government. ISSUE: What are the elements of taxation? Is the coco-levy fund a tax?RULING: The court ruled that the coconut levy was imposed in the exercise of the State's power to tax. Coconut levy funds partake of the nature of taxes, which, in general, are enforced proportional contributions from persons and properties, exacted by the State for the support of the government and the public.A tax has three elements: a) It is an enforced proportional contributions from persons and properties; b) It is imposed by the State by virtue of its sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall squarely into the elements.The funds were imposed for a public purpose and were collected to advance the government's policy of protecting the coconut industry. The court further pointed that taxes are thus imposed only for a public purpose and cannot be used for purely private purposes.

Osmena vs Orbos GR 99886, 31 March 1993Tax if primary purpose is revenue generation; requisites of valid delegation of legislative powerFACTS: Petitioner Osmena challenges the constitutionality of the PD 1956, which created a special account in the general fund for the Oil Price Stabilization Fund (OSPF) as buffer mechanism to protect the domestic oil industry from frequent fluctuations of crude oil prices in the world market. PD 1529 created a trust account in the books of the Ministry of Energy. He alleges that the law is unconstitutional because:1. The monies collected are supposed to treated as a special fund, not a trust fund considering that it is a special tax collected for a specific purpose2. PD 1529 unduly delegates legislative power by conferring the Energy Regulatory Board the authority to impose additional amounts on petroleum products without a sufficient standard by which such authority may be exercised. ISSUES: 1) Was the Oil Price Stabilization Fund (OSPF) a tax?2) What are the requisites for a valid delegation of the taxation power? Was there undue delegation of such power?RULING: 1) No. Petitioner assumed that PD 1956 was enacted to collect taxes for a fund for a special purpose. The purpose for the fund, however, is not to generate revenue. The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil.[footnoteRef:1] As such, establishment and maintenance of the OPSF is well within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic survival and well-being of the community, that comprehensive sovereign authority we designate as the police power of the State, because its purpose is to regulate the oil industry pursuant to public policy. [1: The OPSF acts as a buffer mechanism into which a portion of the purchase price of oil and petroleum products paid by consumers as well as some tax revenues are inputted and from which amounts are drawn from time to time to reimburse oil companies, when appropriate situations arise, for increases in, as well as underrecovery of, costs of crude importation.]

That a portion of the fund is taken from collections of ad valorem taxes and the increases thereon does not change its primary purpose. Hence, if the primary purpose of the law is to regulate but has incidental taxing effects, then it is legislated by virtue of the police power. If the primary purpose of the law is to generate revenue but has incident regulatory effects, then it is legislated by virtue of the power to tax. The OSPF law falls under the first type.2) The power to tax is reposed in the legislative, but the latter may delegate it to the executive provided that the law delegating the power:i. is complete in itself, that is, it must set forth the policy to be executed by the delegateii. fixes a standard, the limits of which are sufficiently determinate or determinable to which the delegate must conform.There was no undue delegation in this case because a standard was fixed, albeit impliedly, as when the law intended to permit the additional impositions as long as there exists a need to protect the general public and the petroleum industry from price fluctuations.

Tan vs Del RosarioGR 109290, 3 October 1994Uniformity rule

FACTS: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxationn Scheme (SNIT), amending certain provisions of the National Internal Revenue Regulations No. 293, promulgated by public respondents pursuant to said law.Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation shall be uniform and equitable in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships. Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation.ISSUE: Does Republic Act No. 7496 violate the Constitution for imposing taxes that are not uniform and equitable.

RULING: The Petition is dismissed. Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as: (1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both present and future conditions, and (4) the classification applies equally well to all those belonging to the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 771).What may instead be perceived to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable corporations. We certainly do not view this classification to be arbitrary and inappropriate.Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being violative of due process must perforce fail. The due process clause may correctly be invoked only when there is a clear contravention of inherent or constitutional limitations in the exercise of the tax power.

Shell Co. vs Vano GR L-6093, 24 February 1954Occupational tax via local ordinance; non-discrimination rule; uniformity rule; specific tax; percentage tax

FACTS: The municipality of Cordova in Cebu adopted the following ordinances:1. No. 10, series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege of installation manager; 2. No. 9, series of 1947, which imposes an annual tax of P40 for local deposits in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories; and 3. No. 11, series of 1948, which imposes an annual tax of P150 on tin can factories having a maximum output capacity of 30,000 tin cans.Shell Co. of P.I. Ltd., a foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the ordinances imposing such taxes are ultra vires. Defendant, as Municipal Treasurer, denies such allegation.ISSUES:1. WON Ordinance No. 10 is ultra vires considering that installation manager is merely a designation created by plaintiff and the same is a salaried employee which may not be taxed by the municipality under CA No. 472?2. WON Ordinance No. 10 is discriminatory and hostile because there is no other person in the locality who is an installation manager?3. WON Ordinance No. 9 is ultra vires considering that the same is in violation of Sec. 2244 of the Revised Administrative Code limiting the amount of the permit to P10 per annum?4. WON Ordinance No. 11 is ultra vires?RULING: 1. The ordinance is not ultra vires. The municipal ordinance was enacted in pursuance of CA 472 which authorizes municipal councils and municipal district councils "to impose license taxes upon persons engaged in any occupation or business, or exercising privileges in the municipality or municipal district, by requiring them to secure licenses at rates fixed by the municipal council or municipal district council, xxx." Even if the installation manager is a salaried employee, it does not take away the fact that it is an occupation. Further, the fact that the occupation is exercised in relation to another occupation which pays an occupation tax does not exempt an individual exercising the occupation to pay a separate occupation tax.2. No, it is not discriminatory and hostile. The fact that there is no other person in the locality who exercises such a "designation" or calling does not make the ordinance discriminatory and hostile for the ordinance is and will be applicable to any person or firm who exercises such calling or occupation named or designated as "installation manager."3. The ordinance is not ultra vires. It was enacted by the municipality in the exercise of its regulative authority as supported by the aforementioned provision of CA 472 and as long as they are just and uniform and not percentage taxes and taxes on specified articles.4. The ordinance is not ultra vires. It is neither a percentage tax nor a tax on specified articles. Specific tax under the NIRC are those imposed on things manufactured or produced in the Philippines for domestic sale or consumption" and upon "things imported from the United States and foreign countries," such as distilled spirits, domestic denatured alcohol, fermented liquors, products of tobacco, cigars and cigarettes, matches, mechanical lighters, firecrackers, skimmed milk, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine. Tin can factories do not fall under any of these as enumerated. It is also not a percentage tax as it is tax on business and the maximum annual output capacity is not a percentage, because it is not a share or a tax based on the amount of the proceeds realized out of the sale of the tin cans manufactured [Not x% of the total gross sales of the business] but on the business of manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.

Tolentino vs Sec. of FinanceGR 115455, 30 October 1995VAT vs license tax; tax exemption is a privilege; equality and uniformity

FACTS: The Value Added Tax (VAT) is levied on the sale, barter, or exchange of goods as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code. Among the petitioners was the Philippine Press which claims RA 7716 violates their press freedom and liberty having removed them from the exemption to pay Value Added Tax. They maintain that by withdrawing the exemption granted to print media transactions involving printing, publication, importation or sale of newspapers, R.A. No. 7716 is a license tax which singled out the press for discriminatory treatment and that within the class of mass media the law discriminates against print media by giving broadcast media favoured treatment.

ISSUE: Whether or not the purpose of the VAT is similar to a license tax.

RULING: No. A license tax, unlike any ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the Jehovah' s Witnesses, in connection with the latter' s sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a preacher. I t is quite another thing to ex act a tax on him for delivering a sermon." In withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been subject.The VAT is, however, different. It is not a license tax, it is not a tax on the exercise of a privilege, much less than a constitutional right. It is imposed on the sale, barter, lease, or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its pay its income tax or subject it to general regulation is not to violate its freedom under the Constitution.The exemption of the press was a privilege granted by the State, which has the right to revoke it by including the Press under the VAT system without offending press freedom under the Constitution.Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar situation. The VAT is regressive, because it is indirectin other words, its imposition may be transferred to a person other than it is directed to. In comparison, income tax is progressive, because it is directit is imposed directly on a person and his ability to pay, which accordingly puts him in the proper bracket on a previously-fixed scale.

ABAKADA vs ErmitaGR 168056, 1 September 2005Delegation of taxation power; input and output tax; uniform and equitability of EVAT

FACTS: Before R.A. No. 9337 took effect (July 1, 2005, petitionersABAKADA GUROParty List, et al., filed a petition for prohibition. Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. They further contend that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the President thestand-by authorityto raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax. It states. . . 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 been satisfied:(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year 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 %).

ISSUE: Do Sections 4, 5 and 6 of R.A. No. 9337, giving the President thestand-by authorityto raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax?RULING: There is no undue delegation of legislative power but only of the discretion as to the execution of a law. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. A (permissible delegation) is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate;and (b) fixes a standard the limits of which are sufficiently determinate and determinable to which the delegate must conform in the performance of his functions. In this case, the legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No discretion would be exercised by the President. Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress.Notes: There was no delegation of legislative power at all, because the legislature merely specified factual conditions that must concur before the executive may apply the provision of the law. Fact-finding processes may be delegated by the Congress to the Executive. The phrase upon the recommendation of the Sec. of Finance makes the latter an agent of the Legislature, so his functions as an alter-ego of the Executive are not necessarily affected by the provision. FISCAL ADEQUACYthe sources of tax should coincide with the needs of government expenditures. This is a question of wisdom, which the judiciary cannot take cognizance of.

Output vs Input TaxOUTPUT VATtax paid when selling a productINPUT VATtax paid when buying the materials of the thing sold; it is not a property, it is a statutory privilege which the legislative may remove at any timeVAT Payable = Output VAT - Input VAT Is the EVAT uniform and equitable?Yes. A uniform rate of 0%, 12%, or exemption, are respectively imposed on the same class of goods.

Coconut Oil vs TorresGR 132527, 29 July 2005Delegation of taxation power to the executive

FACTS: On March 13, 1992, RA No. 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. The law contains provisions on tax exemptions for importations of raw materials, capital and equipment. After which the President issued several Executive Orders as mandated by the law for the implementation of RA 7227. Herein petitioners contend the validity of the tax exemption provided for in the law. ISSUE: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions constitutes executive legislation. RULING: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the free flow of goods or capital within, into, and out of the zones is insured. The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of RA No. 7227, particularly the use of the phrase such as, that the enumeration only meant to illustrate incentives that the SSEZ is authorized to grant, in line with its being a free port zone. The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that . . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments. However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.It is public policy that the zones have a different tax policy with the rest of the country. This classification is valid, as long as it is:1. Germane to the purpose of the law, RA 72272. Not limited to the existing conditions3. Apply equally to all retailers found within the secured area, i.e the SEZ

John Hay Alternative vs LimGR 119775, 19 March 2002Strict application of tax exemption; power to exempt comes from power to tax

FACTS: Then President Ramos issued Proclamation No. 420 which created the John Hay Special Economic Zone pursuant to Republic Act No. 7227 entitled Bases and Development Act of 1992. Said Republic Act created the Subic Special Economic Zone and also granting it exemptions from local and national taxes. Proclamation No. 420 also grants tax exemptions similar to that which is granted to the Subic SEZ by RA 7227.ISSUE: Is this constitutional?RULING: No. Under RA 7227 it is only the Subic SEZ[footnoteRef:2] which was granted by Congress with tax exemptions, investment incentives and the like. The grant of economic incentives to John Hay SEZ cannot be sustained. The incentives under RA 7227 are exclusive only to Subic SEZ, hence the extension of the same to the John Hay SEZ finds no support. More importantly, the nature of most of the assailed privileges is one of tax exemption. It is the legislatureunless limited by the provision of the state Constitutionthat has full power to exempt any person or corporation or class of property from taxation, its power to exempt[footnoteRef:3] being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinance on exemption only from local taxes. The challenged grant of tax exemption would circumvent the Constitutions imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. [2: Special Economic Zones are made to encourage investment. They are considered separate tax customs territory and follow different rules. Buying in SEZs has a similar effect of importing into the Philippines. ] [3: In the same way that the imposition of a tax must be explicit, the provisions for a tax exemption must also be explicit. No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of Congress. Art VI, Sec. 28, 1987 Charter]

Tax exempt character of an SEZ proceeds from statutory provision; hence, an SEZ may not necessarily be tax exempt

CIR vs LincolnGR 119176, 19 March 2002Documentary stamp tax

FACTS: Private respondent Lincoln Philippine Life Insurance Co., Inc. is a domestic corporation engaged in life insurance business. In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only on the initial sum assured.Sec173 of the National Internal Revenue Code provides that for any documents, instruments, and papers, there there shall be levied, collected and paid for the corresponding documentary stamp taxes. Section183 of the same code also imposes tax on life insurance policies.

ISSUE 1: Whether or not the automatic increase clause is distinct and separate from that of the original agreement, and thus the payment of documentary stamp taxes should also be imposed.

RULING: No, the SC affirmed the ruling of the Court of Tax Appeals which stated that there was only one transaction involved, and that the automatic increase clause is an integral part of the policy.It is clear from Section 49 and 50, Title VI of the Insurance Code that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance.Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance.The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age.

ISSUE 2: How should the documentary stamp tax be computed?RULING: Section 183 states that it is to be computed in the amount fixed in the policy. However, there was no fixed amount computed on the additional increase based on the automatic increase clause since it is a suspensive condition. The SC ruled that Although the automatic increase in the amount of life insurance coverage was to take effect later on, the date of its effectivity, as well as the amount of the increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy.

Philex Mining vs CIRGR 125704, 28 August 1998No off-setting in tax collection

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of Tax Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax credit/refund should be applied against thetax liabilities.

ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the petitioner?

RULING: No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt.Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. There can be no off-setting of taxes against the claims that the taxpayer may have against the government.

A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.

Southern Cross vs CMAPGR 158540, 3 August 2005Jurisdiction of Court on Tax Appeals; Delegability of tariff power to President

FACTS: Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with the Department of Trade and Industry (DTI) a petition seeking the imposition of safeguard measures on gray Portland cement, in accordance with the Safeguard Measures Act (SMA). After the (DTI) issued a provisional safeguard measure, the application was referred to the Tariff Commission for a formal investigation pursuant to Section 9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement. The Tariff Commission held public hearing and conducted its own investigation and issued its Formal Investigation Report that no definitive general safeguard measure be imposed on the importation of gray Portland cement. The DTI Secretary then promulgated a decision expressing its disagreement with the conclusions of the Tariff Commission but at the same time denying Philcemcors application for safeguard measures in light of the Tariff Commissions negative findings. Philcemcor challenged this decision of the DTI Secretary by filing with the Court of Appeals a petition for certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision as sell as the Tariff Commissions Report. The appellate court partially granted the petition and ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion and also held that DTI Secretary was not bound by the factual findings of the Tariff Commission. The Southern Cross then filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcors petition. Despite the fact the Court of Appeals Decision had not yet became final, its binding force was cited by the DTI Secretary when he issued a new Decision, wherein he imposed a definitive safeguard measure on the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray Portland Cement.Southern Cross filed a Temporary Restraining Order and/or A Writ of Preliminary Injunction with the Court, seeking to enjoin the DTI Secretary from enforcing his new issued Decision. Philcemcor then filed its opposition stating that it is not the CA but the Court of Tax Appeals (CTA) that has jurisdiction over the application under the law. Southern Cross then filed with the CTA a Petition for Review against the Decision which imposed the definite safeguard measure but did not promptly inform CA about the filing. Philcemcor argued with the CTA that Southern Cross resorted to forum shopping. The Court in its decision granted Southern Crosss Petition which nullified the Decision of the DTI secretary and declared the Decision of the Court of Appeals null and void, and also concluded that the same had not committed forum shopping for there was no malicious intent to subvert procedural rules. Philcemcor and the DTI Secretary then promptly filed their respective motions for reconsideration. The Court En Banc then resolve the two central issues pertaining to the jurisdictional aspect and to the substantive aspect of whether the DTI Secretary may impose a general safeguard measure despite a negative determination by the Tariff Commission and whether the Tariff Commission could validly exercise quasi-judicial powers in the exercise of its mandate under the SMA. In its resolution, the Court directed the parties to maintain the status quo and until further orders from this Court.ISSUES: I. Jurisdiction to Review the Secretarys DecisionsII. Reviewability of the Tariff Commissions Report

RULING: I. On the Issue of jurisdiction, the DTI secretarys decisions - whether imposing safeguard measures or not are subject to review by the Court of Tax Appeals pursuant to Section 29 of RA 8800. Under section 29, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein (1) there must be a ruling by the DTI Secretary (2) the petition must be filed by an interested party adversely affected by the ruling and (3) such ruling must be in in connection with the imposition of a safeguard measure. Obviously, there are differences between a ruling for the imposition of a safeguard measure, and one issued in connection with imposition of a safeguard measure. The first adverts to a singular type of ruling, namely one that imposes a safeguard measure. The second does not contemplate only one kind of ruling, but a myriad of rulings issued in connection with the imposition of a safeguard measure. II. The DTI Secretary is not bound by the Tariff Commissions recommendations. The Power to impose Tariffs is essentially legislative; it is delegable only to the president. The application of safeguard measures, while primarily intended to protect domestic industries, is essentially in the nature of a tariff imposition. Pursuant to the Constitution, the imposition of tariffs and taxes is a highly prized legislative prerogative. Pursuant also to the Constitution, such power to fix tariffs may as an exception, be delegated by Congress to the President. Section 28 of Article VI of the Constitution provides for that exception. *The motivation behind many taxation measures is the implementation of police power goals. Progressive income taxes alleviate the margin between the rich and the poor. Taxation is distinguishable from police power as to the means employed to implement these public good goals. Those doctrines that are unique to taxation arose from peculiar considerations such as those especially punitive effects of taxation, and the belief that taxes are the lifeblood of the state. These considerations necessitated the evolution of taxation as a distinct legal concept from police power. Yet at the same time, it has been recognized that taxation may be made the implement of the states police power.*

CIR vs MarubeniGR 137377, 18 December 2001Situs rule/taxing jurisdiction

FACTS:On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that the income respondent derived were income from Philippine sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency income, branch profit remittance and contractors tax assessments and second questioned the deficiency commercial brokers assessment.

ISSUE:W/N Marubeni should be exempted from tax.

RULING: Yes. CIR argues that since the two agreements are turn-key, they call for the supply of both materials and services to the client, they are contracts for a piece of work and are indivisible. The situs of the two projects is in the Philippines, and the materials provided and services rendered were all done and completed within the territorial jurisdiction of the Philippines. Accordingly, respondents entire receipts from the contracts, including its receipts from the Offshore Portion, constitute income from Philippine sources. The total gross receipts covering both labor and materials should be subjected to contractors tax (a tax on the exercise of a privilege of selling services or labor rather than a sale on products). Marubeni, however, was able to sufficiently prove in trial that not all its work was performed in the Philippines because some of them were completed in Japan (and in fact subcontracted) in accordance with the provisions of the contracts. All services for the design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan. These services were rendered outside Philippines taxing jurisdiction and are therefore not subject to contractors tax. Petition denied.

Republic vs CA & PrecisionGR 109193, 1 February 2000Tax amnesty

FACTS: On June 10, 1985, the BIR issued an assessment notice and letter against Precision Printing, Inc., demanding payment of the sum of P248, 406.11. Despite repeated demands, however, the latter failed to pay within the period prescribed by law and as a result the tax assessment became final and demandable. But pursuant to Executive Order No. 41, on October 31, 1986, Precision Printing, Inc. filed a Tax Amnesty Return together with the Statements of Net Worth, covering the period for which taxes were demanded. The same was certified.As a result, BIR filed a case for collection in the RTC which was ruled in favor of the Precision Printing, Inc. On appeal in the CA, the lower courts decision was affirmed. Hence, this present petition for review on the ground that the respondent corporation was already assessed of its tax deficiency on June 10, 1985 prior to the promulgation of Revenue Memorandum 4-87 which implemented E.O. 41 that only covers tax assessments after August 21, 1986. ISSUE: Whether or not the respondent court erred in affirming the trial court's finding that private respondent's tax liability was extinguished when it availed of tax amnesty under Executive Order no. 41?RULING: No. The decision of the respondent court is correct. Executive Order No. 41 declaring a tax amnesty on unpaid income taxes which was promulgated on August 22, 1986 covers estate and donor's taxes and taxes on business, for the taxable years 1981-1985. This was later amended by Revenue Memorandum 4-87 stating:1.02. A certification by the Tax Amnesty Implementation Officer of the fact of availment of the said tax amnesty shall be a sufficient basis for:x x x x x x x x x1.02.3. In appropriate cases, the cancellation/withdrawal of assessment notice and letters of demand, issued after August 21, 1986 for the collection of income, business, estate or donor's taxes during the taxable years.It is therefore decisively clear that R.O. 4-87 reckoned the applicability of the tax amnesty from August 22, 1986 the date when E.O. 41 took effect. However, Executive Order No. 41 contained no limitation whatsoever delimiting its applicability to assessments made prior to its effectivity. Rather, the said E.O. 41 merely provided for a general statement covering all tax liabilities incurred from 1981-1985. If Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to cases specifically excepted by it. Indeed, administrative issuances seeking to carry into effect an act of Congress must be in harmony with the provisions of the law, it cannot modify nor supplant the same.

CIR vs SantosGR 119252, 18 August 1997Wisdom of tax policy not a justiciable issue

FACTS: On August 5, 1988, the then Regional Director of Region 4-A, acting for and in behalf of the Commissioner of Internal Revenue, issued Regional Mission Order directing BIR officers to conduct surveillance, monitoring, and inventory of all imported articles of Hans Brumann, Inc., a member of the Guild of Philippine Jewelers, Inc., and place the same under preventive embargo. This was to see if the proper taxes have been paid. The duration of the mission was from August 8-20, 1988. The BIR officers inventoried the articles, requested for proof of necessary payments for excise and VAT taxes on said articles, and requested not to sell the articles until it can be proven that the necessary taxes thereon have been paid. The owner, Brumann, signed a receipt acknowledging that the articles inventoried have been seized and left in his possession, and promising not to dispose of the same without authority of the CIR pending investigation. The BIR requested that certain documents be presented for stocktaking investigation for excise tax purposes but Brumann did not produce them. Other members of the Guild (Miladay Jewels, Mercelles, Solid Gold, Diagem Traders) were also subjected to the same request. On Nov. 29, 1988, private respondents prayed that Sec. 126, 127(a)(b), 150(a) of the National Internal Revenue Code and Hdg. No 71.01, 71.02, 71.03, 71.04, Chapter 71 of the Tariff and Customs Code be declared unconstitutional and void, and that the CIR and Customs be prevented or enjoined from issuing mission orders and other orders of similar nature. The RTC declared Sec 104 of the Tariff and Custom Code of the Philippines, Hdg, 71.01, 71.02,71.03,71.04, Chapter 71 as amended by EO 470, imposing 3%-10% tariff and customs duty on natural and cultured pearls and precious or semi-precious stones, and Sec. 150(1) of the National Internal Revenue Code of 1977, as amended, renumbered and rearranged by EO 273, imposing 20% excise tax on jewelry, pearls, and other precious stones, as inoperative and without force and effect insofar as petitioners are concerned.

ISSUE: Whether or not the RTC has authority to pass judgment upon taxation policy of the government.

RULING: Passing judgment on the wisdom of the laws is a matter on which the RTC is not competent to rule. It is a matter for the legislature to decide. The Judiciary does not pass upon question of wisdom, justice or expediency of legislation (Angara vs. Electoral Commission). Judicial power only allows to settle actual controversies involving rights which are legally demandable and enforceable and may not annul an act of the political departments simply because the judiciary feel it unwise or impractical. Respondent RTC judge encroached upon matters properly falling within the province of legislative functions. In citing as basis for his decision unproven comparative data pertaining to differences between tax rates of various Asian countries, and concluding that the jewelry industry in the Philippines suffers as a result, the respondent judge took it upon himself to supplant legislative policy regarding jewelry taxation. In advocating the abolition of local tax and duty on jewelry simply because other countries have adopted such policies, the respondent judge overlooked the fact that such matters are not for him to decide. There are reasons why jewelry, a non-essential item, is taxed as it is and these reasons are deliberated by our legislature, are beyond the reach of judicial questioning. As held in Macasiano vs. National Housing Authority:The policy of our courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain, this presumption is based on the doctrine of separation of powersThe theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted.BUT, this is not to say that the RTCs have no power to declare a law unconstitutional. The Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review of final judgments of inferior courts in cases where such constitutionality happens to be in issue. But this authority does not extend to deciding questions which pertain to legislative policy. The RTC can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence. Judges can only interpret and apply the law, they cannot repeal or amend it.

Pepsi vs Municipality of TanauanGR L-31156, 27 February 1976Double taxation; delegation of tax powers

FACTS: In 1963 Pepsi-Cola Bottling Company of the Philippines, Inc., (herein petitioner) commenced a complaint with preliminary injunction before the CFI Leyte to declare Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. Municipal Ordinance No. 23 levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one centavo P0.01) on each gallon of volume capacity while Municipal Ordinance No. 27 levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one centavo P0.01) on each gallon of volume capacity. The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.It was also alleged by petitioner that the aforementioned municipal ordinances constitute double taxation in two instances: a) double taxation because Ordinance No. 27 covers the same subject matter and impose practically the same tax rate as with Ordinance No. 23, b) double taxation because the two ordinances impose percentage or specific taxes.The CFI of Leyte dismissed the complaint and upheld the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional. From this judgment, Pepsi-Cola Bottling Company appealed to the CA which, in turn elevated the case to the SC. ISSUES: a. Whether or not there is undue delegation of taxing powersb. Whether or not there is double taxation.RULING:A. No. The Constitution even allows such delegation. Legislative powers may be delegated to local governments in respect of matters of local concern.By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax. Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides: Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law. Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation.B. No. The argument of the Municipality is well taken. Further, Pepsi Colas assertion that the delegation of taxing power in itself constitutes double taxation cannot be merited. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised.The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law unlike in other jurisdictions. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose,but not in a case where one tax is imposed by the State and the other by the city or municipality.Kilosbayan, Inc. et al vs GuingonaGR 113375, 5 May 1994

FACTS: Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold and conduct charity sweepstakes races, lotteries and other similar activities, the PCSO decided to establish an on-line lottery system for the purpose of increasing its revenue base and diversifying its sources of funds. The Philippine Gaming Management Corporation (PGMC) which is organized by Berhad group, a multinational company and one of the ten largest public companies in Malaysia, was granted to provide the technical and management services for the needed for project in the form of a lease contract approved by the President. KILOSBAYAN sent an open letter to President Fidel V. Ramos strongly opposing the setting up of the on-line lottery system on the basis of serious moral and ethical considerations.The protest was denied by the Office of the President, contemplating that only a court injunction can stop Malacaang . Hence, this petition. ISSUES: 1. Whether or not the petitioners have locus standi.2. Whether or not the Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign. is legal and valid.RULING:1. The Court ruled that petitioners have legal standing considering that the ramifications of such issues immeasurably affecting the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition, setting aside its procedural technicality.2. Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, prohibits the PCSO from holding and conducting lotteries in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign. There is undoubtedly a collaboration between PCSO and PGMC and not merely a contract of lease. The relations between PCSO and PGMC cannot be defined simply by the designation they used, i.e., a contract of lease. The contracts nature can be understood to form the intent of the parties as evident in the provisions of the contract. Article 1371 of the CC provides that the intent of contracting parties are determined in part through their acts. The only contribution PCSO will be giving is the authority to operate. PCSO bears no risk and all it does is to provide its franchise. Pursuant to the wordings of their agreement, PGMC at its own expense shall build, operate, and manage the network system including its facilities needed to operate a nationwide online lottery system. Indeed, PCSO cannot share the franchise in any way. Clearly, the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid for being contrary to law.

MCIAA vs MarcosARCIDE

Republic vs ICCGR 141667, 17 July 2006Regulatory nature of permit fees

FACTS: On April 4, 1995, respondent ICC,holderof a legislative franchiseunder Republic Act (RA) No. 7633to operate domestic telecommunications, filed with the NTC an application for a Certificate of Public Convenience and Necessityto install, operate, and maintain an internationaltelecommunicationsleased circuit service between the Philippines and other countries, and to charge rates therefor, with provisional authority for the purpose.Respondent ICC filed a motion for partial reconsideration of theOrder insofar as the same requiredthe payment of apermit fee. In a subsequent Order datedJune 25, 1997,theNTC denied the motion.Therefrom, ICC went to the CA on a petition forcertiorariwith prayer for a temporary restraining order and/or writ of preliminary injunction,questioning the NTC's imposition against it of a permit fee ofP1,190,750.50as a condition for the grant of the provisional authority applied for.Inits originaldecision, datedJanuary 29, 1999, the CA ruled in favor oftheNTC whose challenged orders were sustained,and accordingly denied ICC'scertioraripetition. In time, ICC moved fora reconsideration. This time, the CA, in itsAmended DecisiondatedSeptember 30, 1999, reversed itself, granting ICC its motion for reconsideration. Petitioner NTC filed a motion for reconsideration, but its motion was denied by the CA.

ISSUES: 1. Whether the feein questionis in the nature of a tax, or is merely a regulatory measure.2. Whether or not there is a repeal of Section 40 of the Public Service Act.RULING: 1. Section 40(g)of the Public Service Act is not a tax measure but a simple regulatory provision for the collection of fees imposed pursuant to the exercise ofthe Statespolice power. A tax is imposed under the taxing power of government principally for the purpose of raising revenues. The law in question, however, merely authorizes and requires the collection of fees for the reimbursement of the Commission's expenses in the authorization, supervision and/or regulation of public services. There can be no doubt then that petitioner NTC is authorized to collect such fees. However, the amountthereof must be reasonably related to the cost of such supervision and/or regulation.

2. The CA ratiocinated thatwhile Section 40(g)of the Public Service Act (CA 146, as amended),supra,allowed NTC to impose fees asreimbursement of its expenses related to,among otherthings, the authorization of public services, Section 5(g), above,of R.A.No. 7921no longer speaks of authorization but only of regulation and supervision. To the CA,the omissionby Section 5(g) of R.A.No. 7921of the word authorizationfound in Section 40(g) of the Public Service Act, as amended,meant thatthefeeswhich NTC may impose are onlyfor reimbursement ofits expenses forregulation and supervision but no longer for authorization purposes.

We find, however, thatNTCis correct in saying that there is no showing of legislative intent to repeal, even impliedly, Section 40(g),supra,of the Public Service Act, as amended. An implied repeal is predicated on a substantial conflict between the new and prior laws. In the absence of an express repeal, a subsequent law cannot be construed as repealing a prioroneunless an irreconcilable inconsistency and repugnancy existin the terms of the new and old laws. The two laws must be absolutely incompatible such that they cannot be made to stand together.

CIR vs Benguet Corp.GR 134587-77, 8 July 2006Prospective application of VAT

FACTS: Benguet Corp. (Benguet) is a domestic corporation engaged in mining. It is a VAT-registered enterprise. Benguet filed an application for zero-rating of its sales of mine products. The application was approved.The CIR issued the 1st VAT Ruling which declared that the sale of gold to the Central Bank (CB) is considered an export sale and therefor subject to 0% VAT. In reliance to the CIRs position, Benguet sold gold to the CB and treated these sales as 0% VAT rated. In this same period, Benguet incurred input taxes attributable to its sale of gold to the CB. Consequently, Benguet filed with the CIR applications for the issuance of Tax Credit Certificates for input VAT Credits attributable to its export sales.The CIR issued the second VAT Ruling declaring that the sales of gold to the CB are considered domestic sales subject to 10% VAT (instead of 0% in the 1ST VAT RULING). Subsequently, the CIR issued another VAT Ruling. It stated the retroactive application of the 2ND VAT RULING to all such prior sales. Hence, Benguet prayed for the issuance of Tax Credit Certificates with the CTA. ISSUES: Whether or not the 2nd VAT RULING (subjecting sales of gold to the CB to 10% VAT) would be prejudicial to Benguet since it retroacts to prior sales.RULING: Benguets claim of the tax credit of input tax amounting to P50M represents the costs or expenses incurred by Benguet in connection with its gold production. Relying on the 1ST VAT RULING (sales of gold to the CB are considered export sales subject to 0%), Benguet sold gold to the CB without passing on CB its input VAT costs, obviously intending to obtain a refund or credit thereof from the BIR at the end of the taxable period. However, by the time Benguet applied for credit of its input VAT costs, the 2ND VAT RULING treated sales of gold to the CB as domestic sales subject to 10% VAT. And the 3RD VAT RULING retroactively applied the 2ND VAT RULING to such prior sales made. By reason of the denial of its claim for credit, Benguet has been precluded from recovering its input VAT costs. (1) Benguet has clearly shown that it has no other transactions subject to 10% VAT and CIR has failed to prove the existence of such other transactions against which to set off Benguets input VAT. (2) Treating the input VAT as an income tax deduction will yield only to a partial benefit. The use of input VAT as a tax deductions results in a loss of 65% of the input VAT which could have otherwise fully utilized as a tax credit. There is substantial difference between a tax credit and a tax deduction. A tax credit reduces tax liability, while a tax deduction only reduces taxable income Prejudice is all the more highlighted by the fact that it has been issued assessments for deficiency output VAT. Benguet relied on the formal assurances of the BIRs 1st VAT RULING. To retroact a later ruling revoking the grant of 0% rating status and applying a new and contrary position that such sales are now subject to 10% is inconsistent with justice and fair play.

CIR vs Benguet Corp.GR 145559, 14 July 2006Non-retroactive application of taxes; Passing on of indirect taxes like VAT

FACTS: Since the inception of the VAT in 1988, sale of gold to Central Bank has been considered by the BIR to be zero-rated. (VAT Ruling 378-88 and RMC No. 5988). On January 23, 1992, Commissioner Ong issued VAT Ruling No. 008-92 declaring and holding that the sale of gold to the CB are considered domestic sales subject to the 10% VAT. Subsequently, VAT Ruling No. 59-92 dated April 28, 1992 was issued reiterating the treatment of sales of gold to CB and expressly countenancing the retroactive application of VAT Ruling No. 008-92 to all such sales made starting January 1, 1988.ISSUES: (1) Can a ruling, changing the tax treatment of a transaction from one subject to 0% to one subject to 10%, be given a retroactive application? (2) Is there really an actual and imminent injury to the taxpayer if the ruling is given a retroactive application?RULING:(1) The SC ruled in the negative. Well-entrenched is the rule that rulings and circulars, rules and regulations, promulgated by the Commissioner of Internal Revenue, would have no retroactive application if to so apply them would be prejudicial to the taxpayers. There is no question, therefore, as to the prohibition against the retroactive application of the revocation, modification or reversal, as the case maybe, of previously established Bureau on Internal Revenue (BIR) Rulings when the taxpayer's interest would be prejudiced thereby.The CIR is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom, or when there has been a misrepresentation to the taxpayer. (citing ABS-CBN Broadcasting Corp. vs. CTA and CIR, 108 SCRA 142)(2) While the CTA said there is none, the CA had taken a contrary view which was affirmed by the SC. The VAT system of taxation allows a VAT-registered taxpayer to recover its input VAT either by (1) passing on the 10% output VAT on the gross selling price or gross receipts, as the case may be, to its buyer, or (2) if the input tax is attributable to the purchase of capital goods or to zero-rated sales, by filing a claim for refund or tax credit with the BIR. Simply stated, a taxpayer subject to 10% output VAT on its sales of goods and services may recover its input VAT costs by passing on said costs as output VAT to its buyers of goods and services but it cannot claim the same as a refund or tax credit, while a taxpayer subject to 0% on its sales of goods and services may only recover its input costs by filing a refund or tax credit with the BIR.The SC is correct in holding that a retroactive imposition of the VAT on the sale of gold to Central Bank will definitely result to substantial economic prejudice to respondent. First, the respondent could no longer pass-on to CB the 10% output VAT which would be retroactively imposed on said transactions, and second, it will also be prevented from claiming the refund because the sale is no longer zero rated. If this happens the entire cost of the input VAT will be borne by respondent Benguet without any avenue for recovery. Indeed, respondent stands to suffer substantial economic prejudice by the retroactive application of the VAT Ruling in question.

Planters Products vs FertiphilGR 166006, 14 March 2008Police power and power to tax distinguished; tests to determine which power is used

FACTS: On June 3, 1985, for the purpose of rehabilitating Philippine Planters, Inc., the then President Ferdinand E. Marcos issued Letter of Instruction (LOI) No. 1465 which imposed a charge of P10.00 per bag of fertilizer on all domestic sales of fertilizer in the Philippines. Respondent Fertiphil Corporation, a domestic entity engaged in the fertilizer business, questioned the constitutionality of LOI NO. 1465 and brought an action to recover its accumulated payment thereunder in the amount of P6,698,144.00, the case docketed as Civil Case No. 17835 before Branch 147 of the Regional Trial Court of Makati. ISSUE: Whether or not, LOI 1465 constitutes valid legislation pursuant to the exercise of the power of taxation and police power of the state RULING: No. Court said, "It is clear from the Letter of Understanding that the levy was imposed precisely to pay the corporate debts of PPI. We cannot agree with PPI that the levy was imposed to ensure the stability of the fertilizer industry in the country. The letter of understanding and the plain text of the LOI clearly indicate that the levy was exacted for the benefit of a private corporation, therefore not for public purpose. Also, even if We consider LOI No. 1465 enacted under the police power of the State, it would still be invalid for failing to comply with the test of lawful subjects and lawful means. Jurisprudence states the test as follows: (1) the interest of the public generally, as distinguished from those of particular class, requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. For the same reasons as discussed, LOI No. 1465 is invalid because it did not promote public interest. The law was enacted to give undue advantage to a private corporation."

Gerochi vs DOEGR 159796, 17 July 2007

Regulatory exactions are not taxes

FACTS:RA 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), which sought to impose a universal charge on all end-users of electricity for the purpose of funding NAPOCORs projects, was enacted and took effect in 2001.Petitionerscontestthe constitutionality of the EPIRA, stating that the imposition of the universal charge on all end-users is oppressive and confiscatory and amounts to taxation without representation for not giving the consumers a chance to be heard and be represented.ISSUE:Whether or not the universal charge is atax.RULING:NO. The assailed universal charge is not a tax, but an exaction in the exercise of the States police power. That public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State regarding electrification. Moreover, the Special Trust Fund feature of the universal charge reasonably serves and assures the attainment and perpetuity of the purposes for which the universal charge is imposed (e.g. to ensure the viability of the countrys electric power industry), further boosting the position that the same is an exaction primarily in pursuit of the States police objectivesIf generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.The taxing power may be used asan implement of police power.The theory behind the exercise of the power to tax emanates from necessity; withouttaxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.

CIR vs Central Luzon DrugGR 148512, 26 June 2006Tax credit and tax deductions in Senior Citizens Act

FACTS: Central Luzon Drug Corporation is a retailer of medicines and other pharmaceutical products. Pursuant to the mandate of Section 4(a) of Republic Act No. 7432, otherwise known as the Senior Citizens Act, it granted a twenty percent (20%) discount on the sale of medicines to qualified senior citizens amounting to P219,778.00 (for the period January 1995 - December 1995). It then deducted the same amount from its gross income for the taxable year 1995, pursuant to Revenue Regulations No. 2-94 implementing the Senior Citizens Act, which states that the discount given to senior citizens shall be deducted by the establishment from its gross sales for value-added tax and other percentage tax purposes. For the said taxable period, Central Luzon Drug reported a net loss of P20, 963.00 in its corporate income tax return, and as a result, it did not pay income tax for 1995. Central Luzon Drug filed a claim for refund in the amount of P150,193.00, claiming that according to Sec. 4(a) of the Senior Citizens Act, the amount of P219,778.00 should be applied as a tax credit. ISSUE: Whether or not the 20% discount granted by the respondent to qualified senior citizens may be claimed as tax credit or as deduction from gross sales?

RULING: Tax credit is explicitly provided for in Sec4 of RA 7432. Nothing in the provision suggests for it to mean a deduction from gross sales. Thus, the 20% discount required by the law to be given to senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. As a corollary to this, the definition of tax credit found in Sect. 2(1) of Revenue Regulations No. 2-94 is erroneous as it refers to tax credit as the amount representing the 20% discount that shall be deducted by the said establishment from their gross sales for value added tax and other percentage tax purposes. When the law says that the cost of the discount may be claimed as a tax credit, it means that the amount, when claimed, shall be treated as a reduction from any tax liability. The law cannot be amended by a mere regulation. Sec. 229 of the Tax Code does not apply to cases that fall under Sec. 4 of the Senior Citizens Act. Under the Senior Citizens Act, tax credit is considered a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is not a precondition before a taxable entity can benefit from the tax credit. The credit may be availed of upon payment of the tax due, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year.

Carlos Superdrug vs DSWDGR 166494, 29 June 2007Tax credits vs tax deductions; superiority of general welfare over property rights

FACTS: This is a petitionfor Prohibition with Prayer for Preliminary Injunction assailing the constitutionality of Sec. 4(a) of RA 9257 (Expanded Senior Citizens Act of 2003) based on the grounds that (1) the law is confiscatory; (2) it violates the equal protection clause; and, (3) the 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that makes "essential goods, health and other social services available to all people at affordable cost." Sec. 4(a) of the Act states that the senior citizens shall be entitled to 20% discount from all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens; and, the establishment may claim the discounts astax deductionbased on the net cost of the goods sold or services rendered. ISSUES:1) What is a tax credit and what are its effects2) What is a tax deduction and what are its effects3) Whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government programRULING:1) Under RA 7432 (the old Senior Citizens Act) the 20% discount may be claimed by the private establishments concerned as tax credit. Atax creditis a peso-for-peso deduction from a taxpayers tax liability due to the government of the amount of discounts such establishment has granted to a senior citizen. The establishment recovers the full amount of discount given to a senior citizen and hence, the government shoulders 100% of the discounts granted. A tax creditscheme under the Philippine tax system, necessitates that prior payments of taxes have been made and the taxpayer is attempting to recover this tax payment from his/her income tax due. 2) Under RA No. 9257, the establishment concerned may claim the 20% discounts astax deductionfrom gross income, based on the net cost of goods sold or services rendered. Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the government loses in terms of foregone revenues an amount equivalent to the marginal tax rate the said establishment is liable to pay the government. This will be an amount equivalent to 32% of the 20% discounts so granted. The establishment shoulders the remaining portion of the granted discount3) A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation. However, the Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges to them for their improvement and well-being as the State considers them an integral part of our society, as provided for in Art. XV, Sec. 4 of the Constitution. The law is a legitimate exercise of police power which has general welfare for its object. When the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield to general welfare.

Diaz vs Sec. of Finance GR 193007, 19 July 2011

FACTS: Petitioners Renato V. Diaz and Aurora Ma. F. Timbol (petitioners) filed this petition for declaratoryrelief assailing the validity of the impending imposition of value-added tax (VAT) by the Bureau ofInternal Revenue (BIR) on the collections of tollway operators. Court treated the case as one ofprohibition. Petitioners hold the view that Congress did not, when it enacted the NIRC, intend to include toll feeswithin the meaning of "sale of services" that are subject to VAT; that a toll fee is a "user's tax," not a sale of services; that to impose VAT on toll fees would amount to a tax on public service; and that, since VAT was never factored into the formula for computing toll fees, its imposition would violate the non-impairment clause of the constitution. The government avers that the NIRC imposes VAT on all kinds of services of franchise grantees, including tollway operations; that the Court should seek the meaning and intent of the law from thewords used in the statute; and that the imposition of VAT on tollway operations has been the subject as early as 2003 of several BIR rulings and circulars. The government also argues that petitioners have no right to invoke the non-impairment of contracts clause since they clearly have no personal interest in existing toll operating agreements (TOAs)between the government and tollway operators. At any rate, the non-impairment clause cannot limit the State's sovereign taxing power which is generally read into contracts.

ISSUE: May toll fees collected by tollway operators be subjected to VAT (Are tollway operations a franchise and/or a service that is subject to VAT)?

RULING:When a tollway operator takes a toll fee from a motorist, the fee is in effect for the latter's use of the tollway facilities over which the operator enjoys private proprietary rights that its contract and the lawrecognize. In this sense, the tollway operator is no different from the service providers under Section108 who allow others to use their properties or facilities for a fee. Tollway operators are franchise grantees and they do not belong to exceptions that Section 119 spares from the payment of VAT. The word "franchise" broadly covers government grants of a special right to do an act or series of acts of public concern. Tollway operators are, owing to the nature and object of their business, "franchise grantees." The construction, operation, and maintenance of toll facilities on public improvements are activities of public consequence that necessarily require a special grant ofauthority from the state.A tax is imposed under the taxing power of the government principally for the purpose of raising revenues to fund public expenditures. Toll fees, on the other hand, are collected by private tollwayoperators as reimbursement for the costs and expenses incurred in the construction, maintenance and operation of the tollways, as well as to assure them a reasonable margin of income. Although toll fees are charged for the use of public facilities, therefore, they are not government exactions that can be properly treated as a tax. Taxes may be imposed only by the government under its sovereign authority, toll fees may be demanded by either the government or private individuals or entities, as an attribute of ownership.

TAX REMEDIES CASESCIR vs CTA & Citytrust GR 106611, 21 July 1994

FACTS: City Trust filed its claim of tax refunds for its income tax overpayments for years 1983, 1984 and 1985. The case was submitted for decision based solely on the pleadings and evidence submitted by City Trust. Herein petitioner could not present any evidence by reason of the repeated failure of the Tax Credit/Refund Division of the BIR to transmit the records of the case to the Solicitor General. CTA ruled that petitioner is entitled to a refund but only for the overpaid taxes incurred in 1984 and 1985. The refundable amount in its 1983 income tax return was denied on the ground of prescription. An MR was thereafter filed, wherein it was contended for the first time that City Trust had outstanding unpaid deficiency income taxes for 1984. The MR was denied. On Appeal, the CA affirmed CTAs ruling.

ISSUES:1. Is the government bound by the errors of its agents/employees?2. Is City Trust entitled tax refund when it was found out that it has unpaid tax liabilities?

RULING: 1. No. It is a settled rule of law that the Government is not bound by the errors committed by its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its agent and officers. This rule is especially true in the field of taxation.It is axiomatic that the Government cannot be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents.The errors of certain administrative officers should never be allowed to jeopardize the Government's financial position.

2. No. The fact of such deficiency assessment is intimately related to with the right of City Trust to claim for a tax refund for the same year. To award such refund despite the existence of that deficiency assessment is an absurdity. City Trust cannot be entitled to refund and at 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 stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund.

South African Airways vs CIR GR 180356, 16 February 2010

Income tax liability of international carriers; off-setting of tax deficiency and tax refund

FACTS: Petitioner is a foreign corporation duly established under the laws of South Africa, having its principal office at Johannesburg International Airport. It has no landing rights in the Philippines, being merely an internal carrier. It is not registered with the SEC and is not licensed to do business in the Philippines, but has a general sales agent in the Philippines, Aerotel Ltd. Corp, which sells passage documents for compensation or commission for petitioners off-line flights for the carriage of passengers and cargo between ports or points outside Philippine territory.In 2000, petitioner paid about Php 1.7 million in taxes as 2.5% of its GPB (Gross Philippine Billings). The definition of GPB has changed over the years. Under the 1939 NIRC, 2.5% tax on GPB was imposed on international carriers existing under foreign laws but engaged in business within the Philippines. Under the 1977 NIRC, it was imposed on international carriers selling passage documents in the Philippines provided the cargo/mail is of Philippine origin. Under the 1986 and 1993 NIRC, it was imposed on gross revenue realized from uplifts of passengers anywhere in the world and excess baggage, cargo, and mail of Philippine origin covered by passage documents sold in the Philippines. Under the 1997 NIRC, it refers to gross revenue from carriage of persons, excess baggage, cargo and mail of Philippine origin in a continuous and uninterrupted flight irrespective of where the passage document for such was sold. In 2003, petitioner filed for a tax refund with the BIR, claiming that Php 1.7 million was erroneously paid on the ground that it is not liable for tax on its GPB or for any other income tax. The claim, however, was not answered, prompting petitioner to file for a review before the CTA.The CTA denied the petition on the ground that although petitioner was not liable for 2.5% of GPB, it was liable to pay 32% income tax because it was engaged in a business in the Philippines. Hence, petitioner appeals before the SC, arguing that granting that it is liable for the 32% income tax, it is nevertheless has the right to be refunded of the taxes it wrongly paid for 2.5% of its GPB or that such amount should be offset from its 32% income tax liability as a matter of legal compensation. ISSUES: 1. What tax is petitioner liable for? 2. Can there be off-setting where taxpayer, who has not paid taxes it is liable for (tax deficiency), has paid taxes it is not liable for (tax refund)?RULING: 1. Petitioner is not liable for the 2.5% tax on GPB because it does not maintain flights to or from the Philippinesit is merely selling passage documents for the transfer of such on flights outside Philippine territory. However, it is liable for the 32% income tax because off-line air carriers having general sales agents in the Philippines are engaged in or doing business in the Philippines, and that their income from sales of passage documents here is income from within the Philippines (CIR vs British Overseas Airways).

The general rule is that under Sec. 28 (A) (1) of the 1997 NIRC, resident foreign corporations are liable for 32% tax on all income from sources within the Philippines. The exception is that under Sec. 28 (A) (3) of the 1997 NIRC, they are only liable for 2.5% on their GBP if such foreign corporation is an international carrier maintaining flights to and from the Philippines lifting persons, excess baggage, cargo, or mail, originating from the Philippines. Petitioner does not belong to the latter category; hence the general rule applies to it.2. Yes. The general rule is that taxes cannot be subject to compensation because the government and the taxpayer are not creditors and debtors of each other. Taxes are not debts to the government. Debts are due to the government in its corporate capacity, while taxes are due to the government in its sovereign capacity. There can be no off-setting of taxes against the claims that the taxpayer may have against the government in its corporate capacity. A person cannot refuse to pay taxes on the ground that the government owes him an amount equal to or greater than the tax to be collected. The collection of a tax cannot await the results of a lawsuit against the government.

However, in CIR vs CTA (GR 106611, 21 July 1994), a tax refund may be off-set with a tax deficiency to avoid multiplicity of suits and for efficiencys sake, provided that no doubt is created as the accuracy of the facts in the tax return since a refund assumes a valid tax return. In this case, there is doubt to the validity of petitioners tax return as it has been found that it is liable for one tax but not for another. Hence, the case was remanded for retrial to establish the correct amount that should have been in petitioners tax return for year 2000.

Procter & Gamble vs Municipality of Medina GR L-29125, 31 January 1972

FACTS: Procter & Gamble Trading Company and Union Import & Export Corporation, herein appellants, engaged in an occupation or business of copra in the Municipality of Medina question the decision of the lower court upholding the validity of Ordinance No. 13 of the Municipality of Medina, which was approved pursuant to Commonwealth Act No. 472. The subject provision reads: "The following taxes, charges, and fees are imposed in the Municipality upon the businesses, occupations, and privileges, specific hereunder, and shall be collected in accordance with the following schedule of rates: ... ." Both appellants seek to annul or at least to obtain a judicial declaration of their being outside the scope of Ordinance No. 13 on the contention that they are not merchants within the meaning of the ordinance and that what is imposed by the ordinance is an export tax expressly prohibited by law. ISSUE: 1. Whether or not the appellants are not merchants within the meaning of Ordinance No. 13 of the Municipality of Medina and hence the ordinance is inapplicable to them?1. Whether or not Ordinance No. 13 of the Municipality of Medina is an export tax expressly prohibited by law?RULING:1. No. Undoubtedly, the plaintiffs are engaged in an occupation or business in the municipality. This fact is evidenced by the existence in Medina of plaintiffs branch offices or buying agencies, manned by their branch managers and clerical forces; their establishments like bodegas and equipment necessary in the buying, storing and shipping of copra; actual purchase of millions of kilos of copra in Medina and its environs in terms of millions of pesos every year and round the year; and direct exportation and shipment of this commodity by the plaintiffs to foreign countries thru foreign vessels that periodically and regularly call in defendant's municipal wharf at the instance of plaintiff. Certainly, these series of activities of plaintiffs constitute business in every essence of the word for it could not deny that the same is carried for profit or gain. It is explicitly provided in the ordinance in question that defendant Municipality would collect taxes, charges and fees on businesses conducted therein. The conferment of such competence under Commonwealth Act No. 472 is in accordance with the well-settled principle that a public corporation may tax a business or profession conducted within its territorial jurisdiction. There should be greater awareness on the part of firms and entities conducting business within a municipality that the exercise of such a privilege could be subject to the appropriate exercise of the prerogative to tax. Hence, said ordinance is applicable to appellants Procter & Gamble Trading Company and Union Import & Export Corporation.1. No. The appellants were