Wave 2 Tax

7/23/2019 Wave 2 Tax

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1

Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 137377 December 18, 2001

COMMISSIONER OF INTERNAL REENUE, petitioner,vs.

MARU!ENI CORPORATION, responent.

PUNO, J ."

In this petition for revie!, the "o##issioner of InternalRevenue assails the ecision ate $anuar% 1&, 1''' of the "ourt

of (ppeals in "()*.R. SP No. +&1- !hich affir#e theecision ate $ul% ', 1'' of the "ourt of Ta/ (ppeals in "T(

"ase No. +10'. The ta/ court orere the "o##issioner of

Internal Revenue to esist fro# collectin the 1'-& eficienc%inco#e, branch profit re#ittance an contractor2s ta/es fro#

Marubeni "orporation after finin the latter to have properl%

availe of the ta/ a#nest% uner 3/ecutive Orers Nos. +1 an+, as a#ene.

Responent Marubeni "orporation is a forein corporation

orani4e an e/istin uner the la!s of $apan. It is enae ineneral i#port an e/port train, financin an the

construction business. It is ul% reistere to enae in such

business in the Philippines an #aintains a branch office inManila.

So#eti#e in Nove#ber 1'-&, petitioner "o##issioner of

Internal Revenue issue a letter of authorit% to e/a#ine the

boo5s of accounts of the Manila branch office of responent

corporation for the fiscal %ear enin March 1'-&. In the courseof the e/a#ination, petitioner foun responent to have

uneclare inco#e fro# t!o 67 contracts in the Philippines, both of !hich !ere co#plete in 1'-+. One of the contracts !as!ith the National Develop#ent "o#pan% 6ND"7 in connection

!ith the construction an installation of a !harf8port co#ple/ at

the 9e%te Inustrial Develop#ent 3state in the #unicipalit% of Isabel, province of 9e%te. The other contract !as !ith the

Philippine Phosphate Fertili4er "orporation 6Philphos7 for the

construction of an a##onia storae co#ple/ also at the 9e%te

Inustrial Develop#ent 3state.

On March 1, 1'-, petitioner2s revenue e/a#iners reco##enean assess#ent for eficienc% inco#e, branch profit re#ittance,

contractor2s an co##ercial bro5er2s ta/es. Responent:uestione this assess#ent in a letter ate $une &, 1'-.

On (uust ;, 1'-, responent corporation receive a letter

ate (uust 1&, 1'- fro# petitioner assessin responentseveral eficienc% ta/es. The assesse eficienc% internal

revenue ta/es, inclusive of surchare an interest, !ere as

follo!s<

I. D3FI"I3N"= IN"OM3 T(>

FY ended March 31, 1985

?neclare ross inco#e 6Philphos an ND" construction pro@ects7 P';,',-11.1+

9ess< "ost an e/penses 6&0A7 +-B,B+,'0&.&;

Net uneclare inco#e +-B,B+,'0&.&;

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Inco#e ta/ ue thereon 1',;,1;.00

(< &0A surchare -+,B,10-.&0

0A int. p.a.fr. ;)1&)-& to -)1&)

- B,;&,+.'0

TOT(9 (MO?NT D?3 P'0,&-B,';.+0

II. D3FI"I3N"= CR(N" PROFIT R3MITT(N"3T(>


?neclare ross inco#e fro# Philphosan ND" construction pro@ects P+-B,B+,'0&.&;

9ess< Inco#e ta/ thereon 1',;,1;.00

(#ount sub@ect to Ta/ B1+,B,--.&;Ta/ ue thereon +;,1&+,+0B.00

(< &0A surchare B,&;;,01.&0

0A int. p.a.fr. +))-& to -)1&)

- 1,B0&,B0.

TOT(9 (MO?NT D?3 P-B,0B,'&.1

III. D3FI"I3N"= "ONTR("TOR2S T(>


?neclare ross receipts8ross inco#efro# Philphos an ND" construction pro@ects P';,',-11.1+

"ontractor2s ta/ ue thereon 6+A7 B-,'0,;'.00

(<&0A surchare for non)eclaration 1',B+&,B'.00

0A surchare for late pa%#ent ',;,'-.00

Sub)total ;,;0-,--.00

(<

0A int. p.a.fr. +)1)-& to -)1&)

- 1;,-&+,;B'.+

TOT(9 (MO?NT D?3 P-&,&B,&.+IV. D3FI"I3N"= "OMM3R"I(9 CROE3R2S T(>


?neclare share fro# co##ission

inco#e6eno#inate as subsi% fro# o#e

Office7 P+,-B,11+.&0

Ta/ ue thereon 1,-,&'.00

(<

&0A surchare for non)

eclaration -1+,-+.&0

0A surchare for late pa%#ent +0;,1+.&

Sub)total ,-+',''&.;&

(<0A int. p.a.fr. +)1)-& to -)1&)- ;&1,&B'.'-

TOT(9 (MO?NT D?3

PB,00,&B&.

-

The &0A surchare !as i#pose for %our client2s failure toreport for ta/ purposes the aforesai ta/able revenues !hile the&A surchare !as i#pose because of %our client2s failure to

pa% on ti#e the above eficienc% percentae ta/es.

/// /// ///1

Petitioner foun that the ND" an Philphos contracts !ere #ae

on a turn)5e% basis an that the ross inco#e fro# the t!o

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B

pro@ects a#ounte to P';,',-11.1+. 3ach contract !as for a

piece of !or5 an since the pro@ects calle for the construction

an installation of facilities in the Philippines, the entire inco#etherefro# constitute inco#e fro# Philippine sources, hence,

sub@ect to internal revenue ta/es. The assess#ent letter further state that the sa#e !as petitioner2s final ecision an that if responent isaree !ith it, responent #a% file an appeal !ith

the "ourt of Ta/ (ppeals !ithin thirt% 6B07 a%s fro# receipt of

the assess#ent.

On Septe#ber , 1'-, responent file t!o 67 petitions for

revie! !ith the "ourt of Ta/ (ppeals. The first petition, "T(

"ase No. +10', :uestione the eficienc% inco#e, branch profitre#ittance an contractor2s ta/ assess#ents in petitioner2s

assess#ent letter. The secon, "T( "ase No. +110, :uestionethe eficienc% co##ercial bro5er2s assess#ent in the sa#e letter.

3arlier, on (uust , 1'-, 3/ecutive Orer 63.O.7 No. +1

eclarin a one)ti#e a#nest% coverin unpai inco#e ta/es for

the %ears 1'-1 to 1'-& !as issue. ?ner this 3.O., a ta/pa%er

!ho !ishe to avail of the inco#e ta/ a#nest% shoul, on or before October B1, 1'-< 6a7 file a s!orn state#ent eclarin his

net !orth as of Dece#ber B1, 1'-&G 6b7 file a certifie true cop%

of his state#ent eclarin his net !orth as of Dece#ber B1, 1'-0

on recor !ith the Cureau of Internal Revenue 6CIR7, or if nosuch recor e/ists, file a state#ent of sai net !orth sub@ect to

verification b% the CIRG an 6c7 file a return an pa% a ta/e:uivalent to ten per cent 610A7 of the increase in net !orth

fro# Dece#ber B1, 1'-0 to Dece#ber B1, 1'-&.

In accorance !ith the ter#s of 3.O. No. +1, responent file itsta/ a#nest% return ate October B0, 1'- an attache thereto

its s!orn state#ent of assets an liabilities an net !orth as of

Fiscal =ear 6F=7 1'-1 an F= 1'-. The return !as receive b%

the CIR on Nove#ber B, 1'- an responent pai the a#ount

of P,-'1,;B.00 e:uivalent to ten percent 610A7 of its net!orth increase bet!een 1'-1 an 1'-.

The perio of the a#nest% in 3.O. No. +1 !as later e/tene

fro# October B1, 1'- to Dece#ber &, 1'- b% 3.O. No. &+ate Nove#ber +, 1'-.

On Nove#ber 1;, 1'-, the scope an coverae of 3.O. No. +1

!as e/pane b% 3/ecutive Orer 63.O.7 No. +. In aition tothe inco#e ta/ a#nest% rante b% 3.O. No. +1 for the %ears

1'-1 to 1'-&, 3.O. No. + B inclue estate an onor2s ta/es

uner Title III an the ta/ on business uner "hapter II, Title V

of the National Internal Revenue "oe, also coverin the %ears1'-1 to 1'-&. 3.O. No. + further provie that the i##unities

an privilees uner 3.O. No. +1 !ere e/tene to the foreointa/ liabilities, an the perio !ithin !hich the ta/pa%er coul

avail of the a#nest% !as e/tene to Dece#ber 1&, 1'-. Those

ta/pa%ers !ho alrea% file their a#nest% return uner 3.O. No.

+1, as a#ene, coul avail the#selves of the benefits,i##unities an privilees uner the ne! 3.O. b% filin an

a#ene return an pa%in an aitional &A on the increase in

net !orth to cover business, estate an onor2s ta/ liabilities.

The perio of a#nest% uner 3.O. No. + !as e/tene to

$anuar% B1, 1'-; b% 3.O No. '& ate Dece#ber 1;, 1'-.

On Dece#ber 1&, 1'-, responent file a supple#ental ta/a#nest% return uner the benefit of 3.O. No. + an pai a

further a#ount of P1,++&,B;.00 to the CIR e:uivalent to five

percent 6&A7 of the increase of its net !orth bet!een 1'-1 an1'-.

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+

On $ul% ', 1'', al#ost ten 6107 %ears after filin of the case,

the "ourt of Ta/ (ppeals renere a ecision in "T( "ase No.

+10'. The ta/ court foun that responent ha properl% availeof the ta/ a#nest% uner 3.O. Nos. +1 an + an eclare the

eficienc% ta/es sub@ect of sai case as ee#e cancelle an!ithra!n. The "ourt of Ta/ (ppeals ispose of as follo!s<

H3R3FOR3, the responent "o##issioner of Internal

Revenue is hereb% ORD3R3D to D3SIST fro# collectin the

1'-& eficienc% ta/es it ha assesse aainst petitioner an thesa#e are ee#e consiere sicJ "(N"3993D an

HITDR(HN b% reason of the proper avail#ent b% petitioner

of the a#nest% uner 3/ecutive Orer No. +1, as a#ene.+

Petitioner challene the ecision of the ta/ court b% filin "()*.R. SP No. +&1- !ith the "ourt of (ppeals.

On $anuar% 1&, 1''', the "ourt of (ppeals is#isse the petition an affir#e the ecision of the "ourt of Ta/ (ppeals.

ence, this recourse.

Cefore us, petitioner raises the follo!in issues<

617 Hhether or not the "ourt of (ppeals erre in affir#in the

Decision of the "ourt of Ta/ (ppeals !hich rule that hereinresponent2s eficienc% ta/ liabilities !ere e/tinuishe uponresponent2s avail#ent of ta/ a#nest% uner 3/ecutive Orers

Nos. +1 an +.

67 Hhether or not responent is liable to pa% the inco#e, branch profit re#ittance, an contractor2s ta/es assesse b%

petitioner.&

The #ain controvers% in this case lies in the interpretation of the

e/ception to the a#nest% coverae of 3.O. Nos. +1 an +.

There are three 6B7 t%pes of ta/es involve herein K inco#e ta/, branch profit re#ittance ta/ an contractor2s ta/. These ta/es are

covere b% the a#nesties rante b% 3.O. Nos. +1 an +.Petitioner clai#s, ho!ever, that responent is is:ualifie fro#availin of the sai a#nesties because the latter falls uner the

e/ception in Section + 6b7 of 3.O. No. +1.

Section + of 3.O. No. +1 enu#erates !hich ta/pa%ers cannotavail of the a#nest% rante thereuner, viz <

Sec. +. Exceptions. K The follo!in ta/pa%ers #a% not avail

the#selves of the a#nest% herein rante<

a7 Those fallin uner the provisions of 3/ecutive Orer Nos. 1,

an 1+G

b7 Those with income tax cases already iled in !o"rt as o theeectivity hereo G

c7 Those !ith cri#inal cases involvin violations of the inco#e

ta/ la! alrea% file in court as of the effectivit% hereofG

7 Those that have !ithholin ta/ liabilities uner the NationalInternal Revenue "oe, as a#ene, insofar as the sai

liabilities are concerneG

e7 Those !ith ta/ cases penin investiation b% the Cureau of

Internal Revenue as of the effectivit% hereof as a result of

infor#ation furnishe uner Section B1 of the National InternalRevenue "oe, as a#eneG

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f7 Those !ith penin cases involvin une/plaine or

unla!full% ac:uire !ealth before the Sanianba%anG

7 Those liable uner Title Seven, "hapter Three 6Fraus, Illeal

3/actions an Transactions7 an "hapter Four 6Malversation of Public Funs an Propert%7 of the Revise Penal "oe, as

a#ene.

Petitioner arues that at the ti#e responent file for inco#e ta/

a#nest% on October B0, 1'-, "T( "ase No. +10' ha alrea%

been file an !as peninG before the "ourt of Ta/ (ppeals.Responent therefore fell uner the e/ception in Section + 6b7 of

3.O. No. +1.

Petitioner2s clai# cannot be sustaine. Section + 6b7 of 3.O. No.+1 is ver% clear an una#biuous. It e/cepts fro# inco#e ta/

a#nest% those ta/pa%ers !ith inco#e ta/ cases alrea% file in

court as of the effectivit% hereof. The point of reference is theate of effectivit% of 3.O. No. +1. The filin of inco#e ta/ cases

in court #ust have been #ae before an as of the ate of

eectivity of 3.O. No. +1. Thus, for a ta/pa%er not to beis:ualifie uner Section + 6b7 there #ust have been no inco#e

ta/ cases file in court aainst hi# !hen 3.O. No. +1 too5

effect. This is rearless of !hen the ta/pa%er file for inco#e

ta/ a#nest%, provie of course he files it on or before theealine for filin.

3.O. No. +1 too5 effect on (uust , 1'-. "T( "ase No. +10'

:uestionin the 1'-& eficienc% inco#e, branch profitre#ittance an contractor2s ta/ assess#ents !as file b%

responent !ith the "ourt of Ta/ (ppeals on Septe#ber ,

1'-. Hhen 3.O. No. +1 beca#e effective on (uust , 1'-,"T( "ase No. +10' ha not %et been file in court. Responent

corporation i not fall uner the sai e/ception in Section + 6b7,

hence, responent !as not is:ualifie fro# availin of the

a#nest% for inco#e ta/ uner 3.O. No. +1.

The sa#e rulin also applies to the eficienc% branch profitre#ittance ta/ assess#ent. ( branch profit re#ittance ta/ is

efine an i#pose in Section + 6b7 67 6ii7, Title II, "hapter III of the National Internal Revenue "oe. In the ta/ coe, this

ta/ falls uner Title II on Inco#e Ta/. It is a ta/ on inco#e.

Responent therefore i not fall uner the e/ception in Section+ 6b7 !hen it file for a#nest% of its eficienc% branch profit

re#ittance ta/ assess#ent.

The ifficult% herein is !ith respect to the contractor2s ta/

assess#ent an responent2s avail#ent of the a#nest% uner 3.O. No. +. 3.O. No. + e/pane the coverae of 3.O. No. +1

b% incluin estate an onor2s ta/es an ta/ on business. 3statean onor2s ta/es fall uner Title III of the Ta/ "oe !hile

business ta/es fall uner "hapter II, Title V of the sa#e. The

contractor2s ta/ is provie in Section 0&, "hapter II, Title V of

the Ta/ "oeG it is efine an i#pose uner the title on business ta/es, an is therefore a ta/ on business.;

Hhen 3.O. No. + too5 effect on Nove#ber 1;, 1'-, it i not

provie for e/ceptions to the coverae of the a#nest% for business, estate an onor2s ta/es. Instea, Section - of 3.O. No.

+ provie that<

#ection 8. The provisions of 3/ecutive Orers Nos. +1 an &+!hich are not contrar% to or inconsistent !ith this a#enator%

3/ecutive Orer shall re#ain in full force an effect.

C% virtue of Section - as afore):uote, the provisions of 3.O.

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No. +1 not contrar% to or inconsistent !ith the a#enator% act

!ere reenacte in 3.O. No. +. Thus, Section + of 3.O. No. +1

on the e/ceptions to a#nest% coverae also applie to 3.O. No.+. Hith respect to Section + 6b7 in particular, this provision

e/cepts fro# ta/ a#nest% coverae a ta/pa%er !ho has inco#eta/ cases alrea% file in court as of the effectivit% hereof. (s to!hat 3/ecutive Orer the e/ception refers to, responent arues

that because of the !ors inco#e an hereof, the% refer to

3/ecutive Orer No. +1.-

In vie! of the a#en#ent introuce b% 3.O. No. +, Section +

6b7 cannot be construe to refer to 3.O. No. +1 an its ate of

effectivit%. The eneral rule is that an a#enator% act operates prospectivel%.' Hhile an a#en#ent is enerall% construe as

beco#in a part of the oriinal act as if it ha al!a%s beencontaine therein,10 it #a% not be iven a retroactive effect

unless it is so provie e/pressl% or b% necessar% i#plicationan no veste riht or obliations of contract are thereb%

i#paire.11

There is nothin in 3.O. No. + that provies that it shoulretroact to the ate of effectivit% of 3.O. No. +1, the oriinal

issuance. Neither is it necessaril% i#plie fro# 3.O. No. + that

it or an% of its provisions shoul appl% retroactivel%. 3/ecutive

Orer No. + is a substantive a#en#ent of 3.O. No. +1. It oesnot #erel% chane provisions in 3.O. No. +1. It supple#ents the

oriinal act b% ain other ta/es not covere in the first.1 It has been hel that !here a statute a#enin a ta/ la! is silent as to

!hether it operates retroactivel%, the a#en#ent !ill not be

iven a retroactive effect so as to sub@ect to ta/ past transactionsnot sub@ect to ta/ uner the oriinal act. 1B In an a#enator% act,

ever% case of oubt #ust be resolve aainst its retroactive

effect.1+

Moreover, 3.O. Nos. +1 an + are ta/ a#nest% issuances. ( ta/

a#nest% is a eneral paron or intentional overloo5in b% the

State of its authorit% to i#pose penalties on persons other!iseuilt% of evasion or violation of a revenue or ta/ la!.1& It

parta5es of an absolute foriveness or !aiver b% the overn#entof its riht to collect !hat is ue it an to ive ta/ evaers !ho!ish to relent a chance to start !ith a clean slate.1 ( ta/

a#nest%, #uch li5e a ta/ e/e#ption, is never favore nor

presu#e in la!.1; If rante, the ter#s of the a#nest%, li5e thatof a ta/ e/e#ption, #ust be construe strictl% aainst the

ta/pa%er an liberall% in favor of the ta/in authorit%.1-For the

riht of ta/ation is inherent in overn#ent. The State cannot

strip itself of the #ost essential po!er of ta/ation b% oubtful!ors. e !ho clai#s an e/e#ption 6or an a#nest%7 fro# the

co##on buren #ust @ustif% his clai# b% the clearest rant of

oranic or state la!. It cannot be allo!e to e/ist upon a vauei#plication. If a oubt arises as to the intent of the leislature,

that oubt #ust be resolve in favor of the state.1'

In the instant case, the vaueness in Section + 6b7 brouht about b% 3.O. No. + shoul therefore be construe strictl% aainst the

ta/pa%er. The ter# inco#e ta/ cases shoul be rea as to refer

to estate an onor2s ta/es an ta/es on business !hile the !orhereof, to 3.O. No. +. Since 3/ecutive Orer No. + too5

effect on Nove#ber 1;, 1'-, conse:uentl%, insofar as the ta/esin 3.O. No. + are concerne, the ate of effectivit% referre toin Section + 6b7 of 3.O. No. +1 shoul be Nove#ber 1;, 1'-.

Responent file "T( "ase No. +10' on Septe#ber , 1'-.

Hhen 3.O. No. + too5 effect on Nove#ber 1;, 1'-, "T( "ase No. +10' !as alrea% file an penin in court. C% the ti#e

responent file its supple#entar% ta/ a#nest% return on

Dece#ber 1&, 1'-, responent alrea% fell uner the e/ception

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;

in Section + 6b7 of 3.O. Nos. +1 an + an !as is:ualifie

fro# availin of the business ta/ a#nest% rante therein.

It is responent2s other aru#ent that assu#in it i not valil%

avail of the a#nest% uner the t!o 3/ecutive Orers, it is stillnot liable for the eficienc% contractor2s ta/ because the inco#e

fro# the pro@ects ca#e fro# the Offshore Portion of thecontracts. The t!o contracts !ere ivie into t!o parts, i.e., the

Onshore Portion an the Offshore Portion. (ll #aterials an

e:uip#ent in the contract uner the Offshore Portion !ere#anufacture an co#plete in $apan, not in the Philippines,

an are therefore not sub@ect to Philippine ta/es.

Cefore oin into responent2s aru#ents, it is necessar% to

iscuss the bac5roun of the t!o contracts, e/a#ine their pertinent provisions an i#ple#entation.

The ND" an Philphos are t!o overn#ent corporations. In1'-0, the ND", as the corporate invest#ent ar# of the

Philippine *overn#ent, establishe the Philphos to enae in

the lare)scale #anufacture of phosphatic fertili4er for the localan forein #ar5ets.0 The Philphos plant co#ple/ !hich !as

envisione to be the larest phosphatic fertili4er operation in

(sia, an a#on the larest in the !orl, covere an area of 1-0

hectares !ithin the +B&)hectare 9e%te Inustrial Develop#ent3state in the #unicipalit% of Isabel, province of 9e%te.

In 1'-, the ND" opene for public biin a pro@ect to

construct an install a #oern, reliable, efficient an interate!harf8port co#ple/ at the 9e%te Inustrial Develop#ent 3state.

The !harf8port co#ple/ !as intene to be one of the #a@or

facilities for the inustrial plants at the 9e%te InustrialDevelop#ent 3state. It !as to be specificall% aapte to the site

for the hanlin of phosphate roc5, bae or bul5 fertili4er

proucts, li:ui #aterials an other proucts of Philphos, the

Philippine (ssociate S#eltin an Refinin "orporation6Pasar7,1an other inustrial plants !ithin the 3state. The

biin !as participate in b% Marubeni ea Office in $apan.

Marubeni, $apan pre):ualifie an on March , 1'-, the ND"an responent entere into an aree#ent entitle Turn)Ee%

"ontract for 9e%te Inustrial 3state Port Develop#ent Pro@ect

Cet!een National Develop#ent "o#pan% an Marubeni"orporation. The Port Develop#ent Pro@ect !oul consist of a

!harf, berths, cause!a%s, #echanical an li:uis unloain an

loain s%ste#s, fuel oil epot, utilities s%ste#s, storae anservice builins, offsite facilities, harbor service vessels,

naviational ai s%ste#, fire)fihtin s%ste#, area lihtin,#obile e:uip#ent, spare parts an other relate facilities. B The

scope of the !or5s uner the contract covere turn)5e% suppl%,!hich inclue rants of licenses an the transfer of technolo%

an 5no!)ho!,+ an<

. . . the esin an enineerin, suppl% an eliver%,construction, erection an installation, supervision, irection an

control of testin an co##issionin of the Hharf)Port

"o#ple/ as set forth in (nne/ I of this "ontract, as !ell as the

coorination of tie)ins at bounaries an scheule of the use of a part or the !hole of the Hharf8Port "o#ple/ throuh the O!ner,

!ith the esin an construction of other facilities aroun thesite. The scope of !or5s shall also inclue an% activit%, !or5 an

suppl% necessar% for, inciental to or appropriate uner present

international inustrial port practice, for the ti#el% ansuccessful i#ple#entation of the ob@ect of this "ontract,

!hether or not e/pressl% referre to in the above#entione

(nne/ I.&

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The contract price for the !harf8port co#ple/ !as

L1,;'0,B-',000.00 an P++,B;,'+0.00. In the contract, the

price in $apanese currenc% !as bro5en o!n into t!o portions<617 the $apanese =en Portion IG 67 the $apanese =en Portion II,

!hile the price in Philippine currenc% !as referre to as the

Philippine Pesos Portion. The $apanese =en Portions I an II!ere finance in t!o 67 !a%s< 6a7 b% %en creit loan provie

b% the Overseas 3cono#ic "ooperation Fun 6O3"F7G an 6b7

b% supplier2s creit in favor of Marubeni fro# the 3/port)I#portCan5 of $apan. The O3"F is a Fun uner the Ministr% of

Finance of $apan e/tene b% the $apanese overn#ent as

assistance to forein overn#ents to pro#ote econo#ic

evelop#ent. The O3"F e/tene to the Philippine*overn#ent a loan of L;,&0,000,000.00 for the 9e%te Inustrial

3state Port Develop#ent Pro@ect an authori4e the ND" to

i#ple#ent the sa#e.; The other t%pe of financin is an inirectt%pe !here the supplier, i.e., Marubeni, obtaine a loan fro# the

3/port)I#port Can5 of $apan to avance pa%#ent to its sub)

contractors.-

?ner the financin sche#es, the $apanese =en Portions I an II

an the Philippine Pesos Portion !ere further bro5en o!n an

subivie accorin to the #aterials, e:uip#ent an servicesrenere on the pro@ect. The price brea5o!n an the

corresponin #aterials, e:uip#ent an services !ere containe

in a list attache as (nne/ III to the contract. '

( fe! #onths after e/ecution of the ND" contract, Philphos

opene for public biin a pro@ect to construct an install t!o

a##onia storae tan5s in Isabel. 9i5e the ND" contract, it !asMarubeni ea Office in $apan that participate in an !on the

biin. Thus, on Ma% , 1'-, Philphos an responent

corporation entere into an aree#ent entitle Turn)Ee%

"ontract for (##onia Storae "o#ple/ Cet!een Philippine

Phosphate Fertili4er "orporation an Marubeni "orporation.B0

The ob@ect of the contract !as to establish an place in operatinconition a #oern, reliable, efficient an interate a##onia

storae co#ple/ aapte to the site for the receipt an storae of

li:ui anh%rous a##oniaB1 an for the eliver% of a##onia toan interate fertili4er plant a@acent to the storae co#ple/ an

to vessels at the oc5.B The storae co#ple/ !as to consist of

a##onia storae tan5s, refrieration s%ste#, ship unloains%ste#, transfer pu#ps, a##onia heatin s%ste#, fire)fihtin

s%ste#, area lihtin, spare parts, an other relate facilities.BB

The scope of the !or5s re:uire for the co#pletion of the

a##onia storae co#ple/ covere the suppl%, incluin rantsof licenses an transfer of technolo% an 5no!)ho!,B+ an<

. . . the esin an enineerin, suppl% an eliver%,

construction, erection an installation, supervision, irection ancontrol of testin an co##issionin of the (##onia Storae

"o#ple/ as set forth in (nne/ I of this "ontract, as !ell as the

coorination of tie)ins at bounaries an scheule of the use of a part or the !hole of the (##onia Storae "o#ple/ throuh the

O!ner !ith the esin an construction of other facilities at an

aroun the Site. The scope of !or5s shall also inclue an%activit%, !or5 an suppl% necessar% for, inciental to or

appropriate uner present international inustrial practice, for

the ti#el% an successful i#ple#entation of the ob@ect of this"ontract, !hether or not e/pressl% referre to in the

above#entione (nne/ I.B&

The contract price for the pro@ect !as LB,&&,;&1,000.00 anP1;,+0,000.00. 9i5e the ND" contract, the price !as ivie

into three portions. The price in $apanese currenc% !as bro5en

o!n into the $apanese =en Portion I an $apanese =en Portion

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II !hile the price in Philippine currenc% !as classifie as the

Philippine Pesos Portion. Coth $apanese =en Portions I an II

!ere finance b% supplier2s creit fro# the 3/port)I#port Can5 of $apan. The price state in the three portions !ere further

bro5en o!n into the corresponin #aterials, e:uip#ent an

services re:uire for the pro@ect an their iniviual prices. 9i5ethe ND" contract, the brea5o!n in the Philphos contract is

containe in a list attache to the latter as (nne/ III.B

The ivision of the price into $apanese =en Portions I an II anthe Philippine Pesos Portion uner the t!o contracts correspons

to the t!o parts into !hich the contracts !ere classifie K the

Forein Offshore Portion an the Philippine Onshore Portion. In both contracts, the $apanese =en Portion I correspons to the

Forein Offshore Portion.

B;

$apanese =en Portion II an thePhilippine Pesos Portion correspon to the Philippine Onshore

Portion.B-

?ner the Philippine Onshore Portion, responent oes not en%

its liabilit% for the contractor2s ta/ on the inco#e fro# the t!o

pro@ects. In fact responent clai#s, !hich petitioner has notenie, that the inco#e it erive fro# the Onshore Portion of

the t!o pro@ects ha been eclare for ta/ purposes an the ta/es

thereon alrea% pai to the Philippine overn#ent.B' It is !ith

rear to the ross receipts fro# the Forein Offshore Portion of the t!o contracts that the liabilities involve in the assess#ents

sub@ect of this case arose. Petitioner arues that since the t!oaree#ents are turn)5e%,+0 the% call for the suppl% of both

#aterials an services to the client, the% are contracts for a piece

of !or5 an are inivisible. The situs of the t!o pro@ects is in thePhilippines, an the #aterials provie an services renere

!ere all one an co#plete !ithin the territorial @urisiction of

the Philippines.+1 (ccorinl%, responent2s entire receipts fro#

the contracts, incluin its receipts fro# the Offshore Portion,

constitute inco#e fro# Philippine sources. The total ross

receipts coverin both labor an #aterials shoul be sub@ecte tocontractor2s ta/ in accorance !ith the rulin in !ommissioner

o $nternal %even"e v& En'ineerin' E("ipment ) #"pply !o&+

( contractor2s ta/ is i#pose in the National Internal Revenue"oe 6NIR"7 as follo!s<

Sec. 0&. !ontractors, proprietors or operators o doc*yards,

and others. K( contractor2s ta/ of four percent of the rossreceipts is hereb% i#pose on proprietors or operators of the

follo!in business establish#ents an8or persons enae in the

business of sellin or renerin the follo!in services for a fee

or co#pensation<

6a7 *eneral enineerin, eneral builin an specialt%

contractors, as efine in Republic (ct No. +&G

/// /// ///

6:7 Other inepenent contractors. The ter# inepenent

contractors inclues persons 6@uriical or natural7 notenu#erate above 6but not incluin iniviuals sub@ect to the

occupation ta/ uner the 9ocal Ta/ "oe7 !hose activit%consists essentiall% of the sale of all 5ins of services for a feerearless of !hether or not the perfor#ance of the service calls

for the e/ercise or use of the ph%sical or #ental faculties of such

contractors or their e#plo%ees. It oes not inclue reional or area hea:uarters establishe in the Philippines b% #ultinational

corporations, incluin their alien e/ecutives, an !hich

hea:uarters o not earn or erive inco#e fro# the Philippinesan !hich act as supervisor%, co##unications an coorinatin

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centers for their affiliates, subsiiaries or branches in the (sia)

Pacific Reion.

/// /// ///+B

?ner the afore):uote provision, an inepenent contractor is a

person !hose activit% consists essentiall% of the sale of all 5ins

of services for a fee, rearless of !hether or not the perfor#ance of the service calls for the e/ercise or use of the

ph%sical or #ental faculties of such contractors or their

e#plo%ees. The !or contractor refers to a person !ho, in the pursuit of inepenent business, unerta5es to o a specific @ob

or piece of !or5 for other persons, usin his o!n #eans an

#ethos !ithout sub#ittin hi#self to control as to the pett%

etails.++

( contractor2s ta/ is a ta/ i#pose upon the privilee of

enain in business.+& It is enerall% in the nature of an e/ciseta/ on the e/ercise of a privilee of sellin services or labor

rather than a sale on prouctsG+ an is irectl% collectible fro#

the person e/ercisin the privilee.+; Cein an e/cise ta/, it can be levie b% the ta/in authorit% onl% !hen the acts, privilees

or business are one or perfor#e !ithin the @urisiction of sai

authorit%.+- 9i5e propert% ta/es, it cannot be i#pose on an

occupation or privilee outsie the ta/in istrict.+'

In the case at bar, it is unispute that responent !as an

inepenent contractor uner the ter#s of the t!o sub@ect

contracts. Responent, ho!ever, arues that the !or5 therein!ere not all perfor#e in the Philippines because so#e of the#

!ere co#plete in $apan in accorance !ith the provisions of

the contracts.

(n e/a#ination of (nne/ III to the t!o contracts reveals that the

#aterials an e:uip#ent to be #ae an the !or5s an services

to be perfor#e b% responent are inee classifie into t!o.The first part, entitle Crea5o!n of $apanese =en Portion I

provies<

$apanese =en Portion I of the "ontract Price has been s"+divided accordin' to discrete portions o materials and

e("ipment which will +e shipped to eyte as "nits and lots . This

subivision of price is to be use b% o!ner to verif% invoice for Proress Pa%#ents uner (rticle 1'..1 of the "ontract. The

aree subivision of $apanese =en Portion I is as follo!s<

/// /// ///&0

The subivision of $apanese =en Portion I covers #aterials an

e:uip#ent !hile $apanese =en Portion II an the Philippine

Pesos Portion enu#erate other #aterials an e:uip#ent an theconstruction an installation !or5 on the pro@ect. In other !ors,

the supplies for the pro@ect are liste uner Portion I !hile labor

an other supplies are liste uner Portion II an the PhilippinePesos Portion. Mr. Ta5eshi o@o, then *eneral Manaer of the

Inustrial Plant Section II of the Inustrial Plant Depart#ent of

Marubeni "orporation in $apan !ho supervise the

i#ple#entation of the t!o pro@ects, testifie that all the#achines an e:uip#ent liste uner $apanese =en Portion I in

(nne/ III !ere #anufacture in $apan.&1 The #achines an

e:uip#ent !ere esine, enineere an fabricate b%$apanese fir#s sub)contracte b% Marubeni fro# the list of sub)

contractors in the technical appenices to each contract.&

Marubeni sub)contracte a #a@orit% of the e:uip#ent ansupplies to Ea!asa5i Steel "orporation !hich i the esin,

fabrication, enineerin an #anufacture thereofG&B =ashi#a

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"o. 9t. !hich #anufacture the #obile e:uip#entG

Criestone !hich provie the rubber feners of the #obile

e:uip#entG&+ an C.S. $apan for the suppl% of raio e:uip#ent.&&

The enineerin an esin !or5s #ae b% Ea!asa5i Steel

"orporation inclue the la%)out of the plant facilit% an

calculation of the esin in accorance !ith the specificationsiven b% responent.& (ll sub)contractors an #anufacturers are

$apanese corporations an are base in $apan an all enineerin

an esin !or5s !ere perfor#e in that countr%.&;

The #aterials an e:uip#ent uner Portion I of the ND" Port

Pro@ect is pri#aril% co#pose of t!o 67 sets of ship unloaer

an loaerG several boats an #obile e:uip#ent.&- The shipunloaer unloas bas or bul5 proucts fro# the ship to the port

!hile the ship loaer loas proucts fro# the port to the ship.

The unloaer an loaer are bi steel structures on top of each is

a lare crane an a co#part#ent for operation of the crane. T!osets of these e:uip#ent !ere co#pletel% #anufacture in $apan

accorin to the specifications of the pro@ect. (fter #anufacture,

the% !ere rolle on to a bare an transporte to Isabel, 9e%te.&'

?pon reachin Isabel, the unloaer an loaer !ere rolle off

the bare an pulle to the pier to the spot !here the% !ere

installe.0 Their installation si#pl% consiste of boltin the#onto the pier.1

9i5e the ship unloaer an loaer, the three tuboats an a line

boat !ere co#pletel% #anufacture in $apan. The boats saile toIsabel on their o!n po!er. The #obile e:uip#ent, consistin of

three to four sets of tractors, cranes an o4ers, trailers an

for5lifts, !ere also #anufacture an co#plete in $apan. The%!ere loae on to a shippin vessel an unloae at the Isabel

Port. These pieces of e:uip#ent !ere all on !heels an self)

propelle. Once unloae at the port, the% !ere rea% to be

riven an perfor# !hat the% !ere esine to o.

In aition to the foreoin, there are other ite#s liste in

$apanese =en Portion I in (nne/ III to the ND" contract. These

other ite#s consist of supplies an #aterials for five 6&7 berths,t!o 67 roas, a cause!a%, a !arehouse, a transit she, an

a#inistration builin an a securit% builin. Most of the#aterials consist of steel sheets, steel pipes, channels an bea#s

an other steel structures, naviational an co##unication as

!ell as electrical e:uip#ent.B

In connection !ith the Philphos contract, the #a@or pieces of

e:uip#ent supplie b% responent !ere the a##onia storae

tan5s an refrieration units.+ The steel plates for the tan5 !ere

#anufacture an cut in $apan accorin to ra!ins anspecifications an then shippe to Isabel. Once there,

responent2s e#plo%ees put the steel plates toether to for# thestorae tan5. (s to the refrieration units, the% !ere co#plete

an asse#ble in $apan an thereafter shippe to Isabel. The

units !ere si#pl% installe there. & (nne/ III to the Philphos

contract lists o!n uner the $apanese =en Portion I the#aterials for the a##onia storae tan5, inciental e:uip#ent,

pipin facilities, electrical an instru#ental apparatus,

founation #aterial an spare parts.

(ll the #aterials an e:uip#ent transporte to the Philippines

!ere inspecte an teste in $apan prior to ship#ent in

accorance !ith the ter#s of the contracts. The inspection !as#ae b% representatives of responent corporation, of ND" an

Philphos. ND", in fact, contracte the services of a private

consultanc% fir# to verif% the correctness of the tests on the#achines an e:uip#ent; !hile Philphos sent a representative

to $apan to inspect the storae e:uip#ent.-

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The sub)contractors of the #aterials an e:uip#ent uner

$apanese =en Portion I !ere all pai b% responent in $apan. In

his eposition upon oral e/a#ination, Een@iro =a#a5a!a,for#erl% the (ssistant *eneral Manaer an Manaer of the

Steel Plant Mar5etin Depart#ent, 3nineerin "onstruction

Division, Ea!asa5i Steel "orporation, testifie that thee:uip#ent an supplies for the t!o pro@ects provie b%

Ea!asa5i uner $apanese =en Portion I !ere pai b% Marubeni

in $apan. Receipts for such pa%#ents !ere ul% issue b%Ea!asa5i in $apanese an 3nlish.' =ashi#a "o. 9t. an

C.S. $apan !ere li5e!ise pai b% Marubeni in $apan.;0

Cet!een Marubeni an the t!o Philippine corporations, pa%#ents for all #aterials an e:uip#ent uner $apanese =en

Portion I !ere #ae to Marubeni b% ND" an Philphos also in

$apan. The ND", throuh the Philippine National Can5,

establishe letters of creit in favor of responent throuh theCan5 of To5%o. The letters of creit !ere finance b% letters of

co##it#ent issue b% the O3"F !ith the Can5 of To5%o. The

Can5 of To5%o, upon responent2s sub#ission of pertinentocu#ents, release the a#ount in the letters of creit in favor

of responent an creite the a#ount therein to responent2s

account !ithin the sa#e ban5.;1

"learl%, the service of esin an enineerin, suppl% aneliver%, construction, erection an installation, supervision,

irection an control of testin an co##issionin,coorination. . . ; of the t!o pro@ects involve t!o ta/in

@urisictions. These acts occurre in t!o countries K $apan an

the Philippines. Hhile the construction an installation !or5 !ere co#plete !ithin the Philippines, the evience is clear that

so#e pieces of e:uip#ent an supplies !ere co#pletel%

esine an enineere in $apan. The t!o sets of ship unloaer

an loaer, the boats an #obile e:uip#ent for the ND" pro@ect

an the a##onia storae tan5s an refrieration units !ere

#ae an co#plete in $apan. The% !ere alrea% finishe proucts !hen shippe to the Philippines. The other construction

supplies liste uner the Offshore Portion such as the steel

sheets, pipes an structures, electrical an instru#entalapparatus, these !ere not finishe proucts !hen shippe to the

Philippines. The%, ho!ever, !ere li5e!ise fabricate an

#anufacture b% the sub)contractors in $apan. (ll services for the esin, fabrication, enineerin an #anufacture of the

#aterials an e:uip#ent uner $apanese =en Portion I !ere

#ae an co#plete in $apan. These services !ere renere

outsie the ta/in @urisiction of the Philippines an aretherefore not sub@ect to contractor2s ta/.

"ontrar% to petitioner2s clai#, the case of !ommissioner o

$nternal %even"e v& En'ineerin' E("ipment ) #"pply !o;B is notin point. In that case, the "ourt foun that 3nineerin

3:uip#ent, althouh an inepenent contractor, !as not

enae in the #anufacture of air conitionin units in thePhilippines. 3nineerin 3:uip#ent esine, supplie an

installe centrali4e air)conitionin s%ste#s for clients !ho

contracte its services. 3nineerin, ho!ever, i not#anufacture all the #aterials for the air)conitionin s%ste#. It

i#porte so#e ite#s for the s%ste# it esine an installe. ;+

The issues in that case ealt !ith services perfor#e !ithin thelocal ta/in @urisiction. There !as no forein ele#ent involve

in the suppl% of #aterials an services.

Hith the foreoin iscussion, it is unnecessar% to iscuss theother issues raise b% the parties.

IN VI3H H3R3OF, the petition is enie. The ecision in

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"()*.R. SP No. +&1- is affir#e.

SO ORD3R3D.

-avide, .r&, ! &. &, /ap"nan, 0ardo, and Ynares#antia'o, .. &,concur.

CIR #$. MARU!ENI

T(>(TION

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https://lazylegalboneswilldigest.wordpress.com/2012/02/11/cir-vs-marubeni/

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*R No. 1B;B;; $. Puno

F%c&$"

"IR assails the "( ecision !hich affir#e "T(, orerin "IR to esist fro# collectin the 1'-& eficienc% inco#e, branch profit re#ittance an contractors ta/es fro# Marubeni "orp

after finin the latter to have properl% availe of the ta/

a#nest% uner 3O +1 +, as a#ene.

Marubeni, a $apanese corporation, enae in eneral i#port

an e/port train, financin an construction, is ul% reistere

in the Philippines !ith Manila branch office. "IR e/a#ine theManila branchs boo5s of accounts for fiscal %ear enin March

1'-&, an foun that responent ha uneclare inco#e fro#contracts !ith ND" an Philphos for construction of a!harf8port co#ple/ an a##onia storae co#ple/ respectivel%.

On (uust ;, 1'-, Marubeni receive a letter fro# "IR

assessin it for several eficienc% ta/es. "IR clai#s that theinco#e responent erive !ere inco#e fro# Philippine

sources, hence sub@ect to internal revenue ta/es. On Sept 1'-,

responent file petitions for revie! !ith "T(< the first,:uestione the eficienc% inco#e, branch profit re#ittance an

contractors ta/ assess#ents an secon :uestione theeficienc% co##ercial bro5ers assess#ent.

On (u , 1'-, EO '1 eclare a ta/ a#nest% for unpai

inco#e ta/es for 1'-1)-&, an that ta/pa%ers !ho !ishe to

avail this shoul on or before Oct B1, 1'-. Marubeni file its

ta/ a#nest% return on Oct B0, 1'-.

On Nov 1;, 1'-, EO (' e/pane 3O +1s scope to inclue

estate an onors ta/es uner Title B an business ta/ uner "hap , Title & of NIR", e/tene the perio of avail#ent to

Dec 1&, 1'- an state those !ho alrea% availe a#nest%

uner 3O +1 shoul file an a#ene return to avail of the ne! benefits. Marubeni file a supple#ental ta/ a#nest% return on

Dec 1&, 1'-.

"T( foun that Marubeni properl% availe of the ta/ a#nest%an ee#e cancelle the eficienc% ta/es. "( affir#e on

appeal.

I$$)e"

H8N Marubeni is e/e#pte fro# pa%in ta/

*e+"

-e$.

1. On date of effectivity

"IR clai#s Marubeni is is:ualifie fro# the ta/ a#nest% because it falls uner the e/ception in Sec +b of 3O +1<

2#ec& & Exceptions&4The ollowin' taxpayers may not avail

themselves o the amnesty herein 'ranted xxx +6 Those with

income tax cases already iled in !o"rt as o the eectivity

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http://sc.judiciary.gov.ph/jurisprudence/2001/dec2001/137377.htm

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hereo7

Petitioner arues that at the ti#e responent file for inco#e ta/

a#nest% on Oct B0, 1'-, a case ha alrea% been file an !as penin before the "T( an Marubeni therefore fell uner the

e/ception. o!ever, the point of reference is the ate of

effectivit% of 3O +1 an that the filin of inco#e ta/ cases #usthave been #ae before an as of its effectivit%.

3O +1 too5 effect on (u , 1'-. The case :uestionin the

1'-& eficienc% !as file !ith "T( on Sept , 1'-. Hhen 3O+1 beca#e effective, the case ha not %et been file. Marubeni

oes not fall in the e/ception an is thus, not is:ualifie fro#

availin of the a#nest% uner 3O +1 for ta/es on inco#e an

branch profit re#ittance.

The ifficult% herein is !ith respect to the contractors ta/

assess#ent 6business ta/7 an responents avail#ent of thea#nest% uner 3O +, !hich e/pane 3O +1s coverae. Hhen

3O + too5 effect on Nov 1;, 1'-, it i not provie for

e/ceptions to the coverae of the a#nest% for business, estatean onors ta/es. Instea, Section - sai 3O provie that<

2#ection 8& The provisions o Exec"tive rders :os& 1 and 5

which are not contrary to or inconsistent with this amendatory Exec"tive rder shall remain in "ll orce and eect&

Due to the 3O + a#en#ent, Sec +b cannot be construe to

refer to 3O +1 an its ate of effectivit%. The eneral rule is thatan a#enator% act operates prospectivel%. It #a% not be iven a

retroactive effect unless it is so provie e/pressl% or b%

necessar% i#plication an no veste riht or obliations of

contract are thereb% i#paire.

2. On situs of taxation

Marubeni contens that assu#in it i not valil% avail of the

a#nest%, it is still not liable for the eficienc% ta/ because the

inco#e fro# the pro@ects ca#e fro# the Offshore PortionQ asoppose to Onshore PortionQ. I& c+%m$ %++ m%&er%+$ %/e)me/& / &e co/&r%c& )/er &e O44$ore Por&o/56ere m%/)4%c&)re %/ com+e&e / %%/, /o& / &eP+/e$, %/ %re &ere4ore /o& $)bec& &o P+/e &%9e$.

6C*< Marubeni !on in the public biin for pro@ects !ith

overn#ent corporations ND" an Philphos. In the contracts,the prices !ere bro5en o!n into a $apanese =en Portion 6I an

II7 an Philippine Pesos Portion an finance either b% O3"F or

b% suppliers creit. The $apanese =en Portion I correspons tothe Forein Offshore Portion, !hile $apanese =en Portion II an

the Philippine Pesos Portion correspon to the Philippine

Onshore Portion. Marubeni has alrea% pai the OnshorePortion, a fact that "IR oes not en%.7

"IR arues that since the t!o aree#ents are turn)5e%, the% call

for the suppl% of both #aterials an services to the client, the%are contracts for a piece of !or5 an are inivisible. The situs of

the t!o pro@ects is in the Philippines, an the #aterials provie

an services renere !ere all one an co#plete !ithin the

territorial @urisiction of the Philippines. (ccorinl%,responents entire receipts fro# the contracts, incluin its

receipts fro# the Offshore Portion, constitute inco#e fro#

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Philippine sources. The total ross receipts coverin both labor

an #aterials shoul be sub@ecte to contractors ta/ 6a ta/ on

the e/ercise of a privilee of sellin services or labor rather thana sale on proucts7.

Marubeni, ho!ever, !as able to sufficientl% prove in trial that

not all its !or5 !as perfor#e in the Philippines because so#eof the# !ere co#plete in $apan 6an in fact subcontracte7 in

accorance !ith the provisions of the contracts. (ll services for

the esin, fabrication, enineerin an #anufacture of the#aterials an e:uip#ent uner $apanese =en Portion I !ere

#ae an co#plete in $apan. Te$e $er#ce$ 6ere re/ereo)&$e P+/e$: &%9/; )r$c&o/ %/ %re &ere4ore /o&$)bec& &o co/&r%c&or:$ &%9. Petition enie.

Republic of the PhilippinesSUPREME COURT

Manila

3N C(N"

G.R. No. L<2'7=( Oc&ober 31, 1>(8

CIT- OF !AGUIO, plaintiff)appellee,

vs.FORTUNATO DE LEON, efenant)appellant.

The !ity ;ttorney or plaintiappellee&

Fort"nato de eon or and in his own +ehal as deendantappellant&

FERNANDO, J.:

In this appeal, a lo!er court ecision upholin the valiit% of an orinance1 of the "it% of Cauio i#posin a license fee on

an% person, fir#, entit% or corporation oin business in the "it%

of Cauio is assaile b% efenant)appellant Fortunato e 9eon.e !as hel liable as a real estate ealer !ith a propert% therein

!orth #ore than P10,000, but not in e/cess of P&0,000, an

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therefore obliate to pa% uner such orinance the P&0 annual

fee. That is the principal :uestion. In aition, there has been a

fir# an un%ielin insistence b% efenant)appellant of the lac5 of @urisiction of the "it% "ourt of Cauio, !here the suit

oriinate, a co#plaint havin been file aainst hi# b% the "it%

(ttorne% of Cauio for his failure to pa% the a#ount of PB00 aslicense fee coverin the perio fro# the first :uarter of 1'&- to

the fourth :uarter of 1', alleel%, inspite of repeate

e#ans. Nor !as efenant)appellant areeable to such a suit bein institute b% the "it% Treasurer !ithout the consent of the

Ma%or, !hich for hi# !as inispensable. The lo!er court !as of

a ifferent #in.

In its ecision of Dece#ber 1', 1'+, it eclare the above

orinance as a#ene, vali an subsistin, an hel efenant)

appellant liable for the fees therein prescribe as a real estate

ealer. ence, this appeal. (ssu#e the valiit% of suchorinance, an there !oul be no :uestion about the liabilit% of

efenant)appellant for the above license fee, it bein sho!n in

the partial stipulation of facts, that he !as enae in the rentalof his propert% in Cauio erivin inco#e therefro# urin the

perio covere b% the first :uarter of 1'&- to the fourth :uarter

of 1'.

The source of authorit% for the challene orinance is supplie

b% Republic (ct No. B', a#enin the cit% charter of Cauio

e#po!erin it to fi/ the license fee an reulate businesses,traes an occupations as #a% be establishe or practice in the

"it%.

?nless it can be sho!n then that such a rant of authorit% is not broa enouh to @ustif% the enact#ent of the orinance no!

assaile, the ecision appeale fro# #ust be affir#e. The tas5

confrontin efenant)appellant, therefore, !as far fro# eas%.

Hh% he faile is unerstanable, consierin that even a cursor%

reain of the above a#en#ent reail% iscloses that theenact#ent of the orinance in :uestion fins support in the

po!er thus conferre.

Nor is the :uestion raise b% hi# as to the valiit% thereof novelin character. In Medina v& !ity o <a'"io,B the effect of the

a#enator% section insofar as it !oul e/pan the previous

po!er veste b% the cit% charter !as clarifie in these ter#s<(ppellants apparentl% have in #in section &&B, pararaph 6c7

of the Revise (#inistrative "oe, !hich e#po!ers the "it%

of Cauio #erel% to i#pose a license fee for the purpose of ratin the business that #a% be establishe in the cit%. The po!er

as thus conferre is inee li#ite, as it oes not inclue the

po!er to lev% a ta/. Cut on $ul% 1&, 1'+-, Republic (ct No. B'

!as enacte a#enin the charter of sai cit% an ain to its po!er to license the po!er to ta/ an to reulate. (n it is

precisel% havin in vie! this a#en#ent that Orinance No. ''

!as approve in orer to increase the revenues of the cit%. In our opinion, the a#en#ent above averte to e#po!ers the cit%

council not onl% to i#pose a license fee but also to lev% a ta/ for

purposes of revenue, #ore so !hen in a#enin section &&B6b7, the phrase 2as provie b% la!2 has been re#ove b% section

of Republic (ct No. B'. The cit% council of Cauio,

therefore, has no! the po!er to ta/, to license an to reulate provie that the sub@ects affecte be one of those inclue in

the charter. In this sense, the orinance uner consieration

cannot be consiere "ltra vires !hether its purpose be to lev% ata/ or i#pose a license fee. The ter#inolo% use is of no

conse:uence.

It !oul be an unue an un!arrante e#asculation of the

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above po!er thus rante if efenant)appellant !ere to be

sustaine in his contention that no such statutor% authorit% for

the enact#ent of the challene orinance coul be iscernefro# the lanuae use in the a#enator% act. That is about all

that nees to be sai in upholin the lo!er court, consierin

that the "it% of Cauio !as not evoi of authorit% in enactinthis particular orinance. (s #entione at the outset, ho!ever,

efenant)appellant li5e!ise allee proceural #issteps an

asserte that the challene orinance suffere fro# certainconstitutional infir#ities. To such points raise b% hi#, !e shall

no! turn.

1. Defenant)appellant #a5es #uch of the allee lac5 of @urisiction of the "it% "ourt of Cauio in the suit for the

collection of the real estate ealer2s fee fro# hi# in the a#ount

of PB00. e contene before the lo!er court, an it is his

contention no!, that !hile the a#ount of PB00 souht !as!ithin the @urisiction of the "it% "ourt of Cauio !here this

action oriinate, since the principal issue !as the lealit% an

constitutionalit% of the challene orinance, it is not such "it%"ourt but the "ourt of First Instance that has oriinal

@urisiction.

There is here a #isapprehension of the $uiciar% (ct. The "it%"ourt has @urisiction. Onl% recentl%, on Septe#ber ;, 1'- to

be e/act, !e re@ecte a contention si#ilar in character in

:emenzo v& #a+illano.+ The plaintiff in that case file a clai# for the pa%#ent of his salar% before the $ustice of the Peace "ourt of

Paaian, a#boana el Sur. The :uestion of @urisiction !as

raiseG the efenant Ma%or asserte that !hat !as in issue !asthe enforce#ent of the ecision of the "o##ission of "ivil

ServiceG the $ustice of the Peace "ourt !as thus !ithout

@urisiction to tr% the case. The above plea !as curtl% is#isse

b% ?s, as !hat !as involve !as an orinar% #one% clai# an

therefore !ithin the oriinal @urisiction of the $ustice of the

Peace "ourt !here it !as file, consierin the a#ountinvolve. Such is li5e!ise the situation here.

Moreover, in !ity o Manila v& <"'s"* "m+er !o& ,& a suit to

collect fro# a efenant this license fee corresponin to the%ears 1'&1 an 1'& !as file !ith the Municipal "ourt of

Manila, in vie! of the a#ount involve. The thouht that the

#unicipal court lac5e @urisiction apparentl% !as not even inthe #ins of the parties an i not receive an% consieration b%

this "ourt.

3vientl%, the fear is entertaine b% efenant)appellant that!henever a constitutional :uestion is raise, it is the "ourt of

First Instance that shoul have oriinal @urisiction on the

#atter. It oes not a#it of oubt, ho!ever, that !hat confers @urisiction is the a#ount set forth in the co#plaint. ere, the

su# souht to be recovere !as clearl% !ithin the @urisiction of

the "it% "ourt of Cauio.

Nor coul it be plausibl% #aintaine that the valiit% of such

orinance bein open to :uestion as a efense aainst its

enforce#ent fro# one aversel% affecte, the #atter shoul be

elevate to the "ourt of First Instance. For the "it% "ourt coulrel% on the presu#ption of the valiit% of such orinance, an

the #ere fact, ho!ever, that in the ans!er to such a co#plaint a

constitutional :uestion !as raise i not suffice to oust the "it%"ourt of its @urisiction. The suit re#ains one for collection, the

lac5 of valiit% bein onl% a efense to such an atte#pt at

recover%. Since the "it% "ourt is possesse of @uicial po!er anit is li5e!ise a/io#atic that the @uicial po!er e#braces the

ascertain#ent of facts an the application of the la!, the

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"onstitution as the hihest la! supersein an% statute or

orinance in conflict there!ith, it cannot be sai that a "it%

"ourt is bereft of co#petence to procee on the #atter. In thee/ercise of such elicate po!er, ho!ever, the a#onition of

"oole% on inferior tribunals is !ell !orth re#e#berin. Thus<

It #ust be evient to an% one that the po!er to eclare aleislative enact#ent voi is one !hich the @ue, conscious of

the fallibilit% of the hu#an @u#ent, !ill shrin5 fro#

e/ercisin in an% case !here he can conscientiousl% an !ithue rear to ut% an official oath ecline the responsibilit%.;

Hhile it re#ains unoubte that such a po!er to pass on the

valiit% of an orinance allee to infrine certain constitutional

rihts of a litiant e/ists, still it shoul be e/ercise !ith uecare an circu#spection, consierin not onl% the presu#ption

of valiit% but also the relativel% #oest ran5 of a cit% court in

the @uicial hierarch%.

. To repeat the challene orinance cannot be consiere "ltra

vires as there is #ore than a#ple statutor% authorit% for the

enact#ent thereof. Nonetheless, its valiit% on constitutionalrouns is challene because of the alleation that it i#pose

ouble ta/ation, !hich is repunant to the ue process clause,

an that it violate the re:uire#ent of unifor#it%. He o notvie! the #atter thus.

(s to !h% ouble ta/ation is not violative of ue process, $ustice

ol#es #ae clear in this lanuae< The ob@ection to theta/ation as ouble #a% be lai o!n on one sie. ... The 1+th

(#en#ent the ue process clauseJ no #ore forbis ouble

ta/ation than it oes oublin the a#ount of a ta/, short of confiscation or proceeins unconstitutional on other

rouns.-Hith that ecision renere at a ti#e !hen (#erican

sovereint% in the Philippines !as reconi4e, it possesses #ore

than @ust a persuasive effect. To so#e, it elivere the co"p de

'race to the boe% of ouble ta/ation as a constitutional bar to

the e/ercise of the ta/in po!er. It !oul see# thouh that inthe ?nite States, as !ith us, its host as note b% an e#inent

critic, still stal5s the @uriical state. In a 1'+; ecision, ho!ever,'

!e :uote !ith approval this e/cerpt fro# a leain (#ericanecision<10 Hhere, as here, "onress has clearl% e/presse its

intention, the statute #ust be sustaine even thouh ouble

ta/ation results.

(t an% rate, it has been e/pressl% affir#e b% us that such an

aru#ent aainst ouble ta/ation #a% not be invo5e !here

one ta/ is i#pose b% the state an the other is i#pose b% thecit% ..., it bein !iel% reconi4e that there is nothin

inherentl% obno/ious in the re:uire#ent that license fees or

ta/es be e/acte !ith respect to the sa#e occupation, callin or activit% b% both the state an the political subivisions thereof.11

The above !oul clearl% inicate ho! lac5in in #erit is this

aru#ent base on ouble ta/ation.

No!, as to the clai# that there !as a violation of the rule of

unifor#it% establishe b% the constitution. (ccorin to the

challene orinance, a real estate ealer !ho leases propert%

!orth P&0,000 or above #ust pa% an annual fee of P100. If the propert% is !orth P10,000 but not over P&0,000, then he pa%s

P&0 an P+ if the value is less than P10,000. On its face,

therefore, the above orinance cannot be assaile as violative of the constitutional re:uire#ent of unifor#it%. In 0hilippine Tr"st

!ompany v& Yatco,1 $ustice 9aurel, spea5in for the "ourt,

state< ( ta/ is consiere unifor# !hen it operates !ith thesa#e force an effect in ever% place !here the sub@ect #a% be

foun.

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0

There !as no occasion in that case to consier the possible effect

on such a constitutional re:uire#ent !here there is a

classification. The opportunit% ca#e in Eastern Theatrical !o& v& ;lonso.1B Thus< 3:ualit% an unifor#it% in ta/ation #eans that

all ta/able articles or 5ins of propert% of the sa#e class shall be

ta/e at the sa#e rate. The ta/in po!er has the authorit% to#a5e reasonable an natural classifications for purposes of

ta/ationG ... (bout t!o %ears later, $ustice Tuason, spea5in for

this "ourt in Manila %ace =orses Trainers ;ssn& v& -e la

F"ente1+ incorporate the above e/cerpt in his opinion an

continue< Ta5in ever%thin into account, the ifferentiation

aainst !hich the plaintiffs co#plain confor#s to the practical

ictates of @ustice an e:uit% an is not iscri#inator% !ithin the#eanin of the "onstitution.

To satisf% this re:uire#ent then, all that is neee as hel inanother case ecie t!o %ears later, 1& is that the statute or orinance in :uestion applies e:uall% to all persons, fir#s an

corporations place in si#ilar situation. This "ourt is on recor

as acceptin the vie! in a leain (#erican case1 thatine:ualities !hich result fro# a sinlin out of one particular

class for ta/ation or e/e#ption infrine no constitutional

li#itation.1;

It is thus apparent fro# the above that in #uch the sa#e !a%

that the plea of ouble ta/ation is unavailin, the alleation that

there !as a violation of the principle of unifor#it% is inherentl%lac5in in persuasiveness. There is no nee to pass upon the

other alleations to assail the valiit% of the above orinance, it

bein #aintaine that the license fees therein i#pose ise/cessive, unreasonable an oppressive an that there is a

failure to observe the #anate of e:ual protection. ( reain of

the orinance !ill reail% isclose their inherent lac5 of

plausibilit%.

B. That !oul ispose of all the errors assine, e/cept the last

t!o, !hich !oul preicate a rievance on the co#plaint havin been starte b% the "it% Treasurer rather than the "it% Ma%or of

Cauio. These allee errors, as !as the case !ith the others

assine, lac5 #erit.

In #uch the sa#e !a% that an act of a epart#ent hea of the

national overn#ent, perfor#e !ithin the li#its of his

authorit%, is presu#ptivel% the act of the Presient unlessreprobate or isapprove,1- si#ilarl% the act of the "it%

Treasurer, !hose position is rouhl% analoous, #a% be assu#e

to carr% the seal of approval of the "it% Ma%or unless repuiateor set asie. This shoul be the case consierin that such cit%

official is calle upon to see to it that revenues ue the "it% are

collecte. Hhen a#inistrative steps are futile an unavailin,iven the stubbornness an oburac% of a ta/pa%er, convince in

oo faith that no ta/ !as ue, @uicial re#e% #a% be resorte

to b% hi#. It !oul be a reflection on the state of the la! if such

fielit% to ut% !oul be #et b% cone#nation rather thanco##enation.

So, #uch for the anal%tical approach. The conclusion thus

reache has a reinforce#ent that co#es to it fro# the functionalan pra#atic test. If a cit% treasurer has to a!ait the no fro#

the cit% #a%or before a #unicipal orinance is enforce, then

opportunit% e/ists for favoritis# an unue iscri#ination toco#e into pla%. Hhatever vali reason #a% e/ist as to !h% one

ta/pa%er is to be accore a treat#ent enie another, the

suspicion is unavoiable that such a #anifestation of officialfavor coul have been inuce b% unna#e but not un5no!n

consieration. It !oul not be oin too far to assert that even

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1

efenant)appellant !oul fin no satisfaction in such a sa

state of affairs. The #ore esirable leal octrine therefore, on

the assu#ption that a choice e/ists, is one that !oul o a!a%!ith such te#ptation on the part of both ta/pa%er an public

official ali5e.

H3R3FOR3, the lo!er court ecision of Dece#ber 1', 1'+,is hereb% affir#e. "osts aainst efenant)appellant.

!oncepcion, !.&, %eyes, .&<&&, -izon, Ma*alintal, #anchez,

!astro, ;n'eles and !apistrano, ..&, concur. >aldivar, .&, is on leave.

CIT- OF !AGUIO #$. DE LEON2= SCRA >38GR No. L<2'7=(, Oc&ober 31, 1>(8

There is no ouble ta/ation !here one ta/ is i#pose b% thestate an the other is i#pose b% the cit%.

F("TS<

The "it% of Cauio passe an orinance i#posin a license feeon an% person, entit% or corporation oin business in the "it%.

The orinance source its authorit% fro# R( No. B', thereb%a#enin the cit% charter e#po!erin it to fi/ the license fee

an reulate businesses, traes an occupations as #a% be

establishe or practice in the "it%. De 9eon !as assesse for P&0 annual fee it bein sho!n that he !as enae in propert%

rental an erivin inco#e therefro#. The latter assaile the

valiit% of the orinance aruin that it is ultra vires for there is

no statur% authorit% !hich e/pressl% rants the "it% of Cauio to

lev% such ta/, an that there it i#pose ouble ta/ation, an

violates the re:uire#ent of unifor#it%.

ISS?3<

(re the contentions of the efenant)appellant tenable

39D<

No. First, R( B' !as enacte a#enin Section &&B of theRevise (#inistrative "oe e#po!erin the "it% "ouncil not

onl% to i#pose a license fee but to lev% a ta/ for purposes of

revenue, thus the orinance cannot be consiere ultra vires for there is #ore than a#ple statur% authorit% for the enact#ent

thereof.

Secon, an aru#ent aainst ouble ta/ation #a% not be

invo5e !here one ta/ is i#pose b% the state an the other is

i#pose b% the cit%, so that !here, as here, "onress has clearl%e/presse its intention, the statute #ust be sustaine even thouh

ouble ta/ation results.

(n thir, violation of unifor#it% is out of place it bein !iel%

reconi4e that there is nothin inherentl% obno/ious in the

re:uire#ent that license fees or ta/es be e/acte !ith respect to

the sa#e occupation, callin or activit% b% both the state an the political subivisions thereof.

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SUPREME COURTManila

3N C(N"

G.R. No. L<23771 A);)$& ', 1>88

T*E COMMISSIONER OF INTERNAL REENUE, petitioner,

vs.LINGA-EN GULF ELECTRIC PO?ER CO., INC. %/

T*E COURT OF TA@ APPEALS, responents.

;n'el #anchez or in'ayen Electric 0ower !o&, $nc&

SARMIENTO, J.:

This is an appeal fro# the ecision of the "ourt of Ta/

(ppeals 6".T.(., for brevit%7 ate Septe#ber 1&, 1'+ in".T.(. "ases Nos. &-1 an 1B0, !hich !ere @ointl% hear upon

aree#ent of the parties, absolvin the responent ta/pa%er fro#

liabilit% for the eficienc% percentae, franchise, an fi/e ta/esan surchare assesse aainst it in the su#s of P1','B.+1 an

PB,1.- for the %ears 1'+ to 1'&+ an 1'&' to 1'1,

respectivel%.

The responent ta/pa%er, 9ina%en *ulf 3lectric Po!er "o.,

Inc., operates an electric po!er plant servin the a@oinin

#unicipalities of 9ina%en an Cin#ale%, both in the province

of Panasinan, pursuant to the #unicipal franchise rante it b%

their respective #unicipal councils, uner Resolution Nos. 1+

an & of $une ' an $ul% , 1'+, respectivel%. Section 10 of these franchises provie that<

...The sai rantee in consieration of the franchise hereb%rante, shall pa% :uarterl% into the Provincial Treasur% of Panasinan, one per centu# of the ross earnins obtaine thru

this privilee urin the first t!ent% %ears an t!o per centu#

urin the re#ainin fifteen %ears of the life of sai franchise.

On Februar% +, 1'+-, the Presient of the Philippines approve

the franchises rante to the private responent.

On Nove#ber 1, 1'&&, the Cureau of Internal Revenue 6CIR7assesse aainst an e#ane fro# the private responent the

total a#ount of P1','B.+1 representin eficienc% franchise

ta/es an surchares for the %ears 1'+ to 1'&+ appl%in thefranchise ta/ rate of &A on ross receipts fro# March 1, 1'+- to

Dece#ber B1, 1'&+ as prescribe in Section &' of the National

Internal Revenue "oe, instea of the lo!er rates as provie inthe #unicipal franchises. On Septe#ber ', 1'&, the private

responent re:ueste for a reinvestiation of the case on the

roun that instea of incurrin a eficienc% liabilit%, it #ae an

overpa%#ent of the franchise ta/. On (pril B0, 1'&;, the CIR throuh its reional irector, enie the private responent2s

re:uest for reinvestiation an reiterate the e#an for

pa%#ent of the sa#e. In its letters ate $ul% , an (uust ',1'&- to the petitioner "o##issioner, the private responent

proteste the sai assess#ent an re:ueste for a conference

!ith a vie! to settlin the liabilit% a#icabl%. In his letters ate$ul% & an (uust -, 1'&-, the "o##issioner enie the

re:uest of the private responent. Thus, the appeal to the

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responent "ourt of Ta/ (ppeals on Septe#ber 1', 1'&-,

oc5ete as ".T.(. "ase No. &-1.

In a letter ate (uust 1, 1', the "o##issioner e#anefro# the private responent the pa%#ent of PB,1.-

representin eficienc% franchise ta/ an surchares for the%ears 1'&' to 1'1 aain appl%in the franchise ta/ rate of &Aon ross receipts as prescribe in Section &' of the National

Internal Revenue "oe. In a letter ate October &, 1', the

private responent proteste the assess#ent an re:uestereconsieration thereof The sa#e !as enie on Nove#ber ',

1'. Thus, the appeal to the responent "ourt of (ppeals on

Nove#ber ', 1', oc5ete as ".T.(. No. 1B0.

Penin the hearin of the sai cases, Republic (ct 6R.(.7 No.

B-+B !as passe on $une , 1 'B, rantin to the private

responent a leislative franchise for the operation of the electricliht, heat, an po!er s%ste# in the sa#e #unicipalities of

Panasinan. Section + thereof provies that<

In consieration of the franchise an rihts hereb% rante, therantee shall pa% into the Internal Revenue office of each

Municipalit% in !hich it is suppl%in electric current to the

public uner this franchise, a ta/ e:ual to t!o per centu# of the

ross receipts fro# electric current sol or supplie uner thisfranchise. Sai ta/ shall be ue an pa%able :uarterl% an shall

be in lieu of an% an all ta/es an8or licenses of an% 5in, nature

or escription levie, establishe, or collecte b% an% authorit%!hatsoever, #unicipal, provincial or national, no! or in the

future, on its poles, !ires, insulator ... an on its franchise,

rihts, privilees, receipts, revenues an profits, fro# !hichta/es an8or licenses, the rantee is hereb% e/pressl% e/e#pte

an effective further upon the ate the oriinal franchise !as

rante, no other ta/ an8or licenses other than the franchise ta/

of t!o per centu# on the ross receipts as provie for in the

oriinal franchise shall be collecte, an% provision of la! to thecontrar% not!ithstanin.

On Septe#ber 1&, 1'+, the responent court rule that the provisions of R.(. No. B-+B shoul appl% an accorinl%is#isse the clai# of the "o##issioner of Internal Revenue.

The sai rulin is no! the sub@ect of the petition at bar.

The issues raise for resolution are<

1. Hhether or not the &A franchise ta/ prescribe in Section &'

of the National Internal Revenue "oe assesse aainst the

private responent on its ross receipts reali4e before theeffectivit% of R.() No. B-+B is collectible.

. Hhether or not Section + of R.(. No. B-+B is unconstitutional

for bein violative of the unifor#it% an e:ualit% of ta/ationclause of the "onstitution.

B. If the above#entione Section + of R.(. No. B-+B is vali,

!hether or not it coul be iven retroactive effect so as to rener uncollectible the ta/es in :uestion !hich !ere assesse before

its enact#ent.

+. Hhether or not the responent ta/pa%er is liable for the fi/ean eficienc% percentae ta/es in the a#ount of PB,0&.' for

the perio fro# $anuar% 1, 1'+ to Februar% ', 1'+-, the perio

before the approval of its #unicipal franchises.

The first issue raise b% the petitioner before us is !hether or not

the five percent 6&A7 franchise ta/ prescribe in Section &' of

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+

the National Internal Revenue "oe 6"o##on!ealth (ct No.

+ as a#ene b% R.(. No. B'7 assesse aainst the private

responent on its ross receipts reali4e before the effectivit% of R.() No. B-+B is collectible. It is the contention of the petitioner

"o##issioner of Internal Revenue that the private responent

shoul have been hel liable for the &A franchise ta/ on rossreceipts prescribe in Section &' of the Ta/ "oe, instea of

the lo!er franchise ta/ rates provie in the #unicipal

franchises 61A of ross earnins for the first t!ent% %ears anA for the re#ainin fifteen %ears of the life of the franchises7

because Section &' of the Ta/ "oe, as a#ene b% R( No. B'

of October 1, 1'+, applie to e/istin an future franchises.

The franchises of the private responent !ere alrea% ine/istence at the ti#e of the aoption of the sai a#en#ent,

since the franchises !ere accepte on March 1, 1'+- after

approval b% the Presient of the Philippines on Februar% +,1'+-. The private responent2s oriinal franchises i not

contain the proviso that the ta/ provie therein shall be in lieu

of all ta/esG #oreover, the franchises containe a reservationclause that the% sha be sub@ect to a#en#ent, alteration, or

repeal, but even in the absence of such cause, the po!er of the

9eislature to alter, a#en, or repeal an% franchise is al!a%see#e reserve. The franchise of the private responent have

been #oifie or a#ene b% Section &' of the Ta/ "oe, the

petitioner sub#its.

He fin no #erit in petitioner2s contention. R.(. No. B-+B

rante the private responent a leislative franchise in $une,

1'B, a#enin, alterin, or even repealin the oriinal#unicipal franchises, an proviin that the private responent

shoul pa% onl% a A franchise ta/ on its ross receipts, in lieu

of an% an all ta/es an8or licenses of an% 5in, nature or escription levie, establishe, or collecte b% an% authorit%

!hatsoever, #unicipal, provincial, or national, no! or in the

future ... an eective "rther "pon the date the ori'inal

ranchise was 'ranted, no other ta/ an8or licenses other thanthe franchise ta/ of t!o per centu# on the ross receipts ... shall

be collecte, an% provision of la! to the contrar%

not!ithstanin. Thus, b% virtue of R.() No. B-+B, the privateresponent !as liable to pa% onl% the A franchise ta/, effective

fro# the ate the oriinal #unicipal franchise !as rante.

On the :uestion as to !hether or not Section + of R.(. No. B-+Bis unconstitutional for bein violative of the unifor#it% an

e:ualit% of ta/ation clause of the "onstitution, an, if a@ue

vali, !hether or not it shoul be iven retroactive effect, the petitioner sub#its that the sai la! is unconstitutional insofar as

it provies for the pa%#ent b% the private responent of a

franchise ta/ of A of its ross receipts, !hile other ta/pa%erssi#ilarl% situate !ere sub@ect to the &A franchise ta/ i#posein Section &' of the Ta/ "oe, thereb% iscri#inator% an

violative of the rule on unifor#it% an e:ualit% of ta/ation.

( ta/ is unifor# !hen it operates !ith the sa#e force an effectin ever% place !here the sub@ect of it is foun. ?nifor#it% #eans

that all propert% belonin to the sa#e class shall be ta/e ali5e

The 9eislature has the inherent po!er not onl% to select thesub@ects of ta/ation but to rant e/e#ptions. Ta/ e/e#ptions

have never been ee#e violative of the e:ual protection clause.1 It is true that the private responents #unicipal franchises !ereobtaine uner (ct No. ; 2 of the Philippine "o##ission, but

these oriinal franchises have been replace b% a ne! leislative

franchise, i.e. R.(. No. B-+B. (s correctl% hel b% theresponent court, the latter !as rante sub@ect to the ter#s an

conitions establishe in (ct No. BB, 3 as a#ene b% ".(.

No. 1B. These conitions Ientif% the private responent2s

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&

po!er plant as fallin !ithin that class of po!er plants create

b% (ct No. BB, as a#ene. The benefits of the ta/ reuction

provie b% la! 6(ct No. BB as a#ene b% ".(. No. 1B anR.(. No. B-+B7 appl% to the responent2s po!er plant an others

circu#scribe !ithin this class. R.()No. B-+B #erel%

transferre the petitioner2s po!er plant fro# that class proviefor in (ct No. ;, as a#ene, to !hich it belone until the

approval of R.() No. B-+B, an place it !ithin the class fallin

uner (ct No. BB, as a#ene. Thus, it onl% effecte thetransfer of a ta/able propert% fro# one class to another.

He o not have the authorit% to in:uire into the !iso# of such

act. Further#ore, the &A franchise ta/ rate provie in Section&' of the Ta/ "oe !as never intene to have a universal

application. ' He note that the sai Section &' of the Ta/ "oe

e/pressl% allo!s the pa%#ent of ta/es at rates lo!er than &A!hen the charter rantin the franchise of a rantee, li5e the onerante to the private responent uner Section + of R.(. No.

B-+B, preclues the i#position of a hiher ta/. R.(. No. B-+B

i not onl% fi/ an specif% a franchise ta/ of A on its rossreceipts, but #ae it in lieu of an% an all ta/es, all la!s to the

contrar% not!ithstanin, thus, leavin no roo# for oubt

rearin the leislative intent. "harters or special la!s rantean enacte b% the 9eislature are in the nature of private

contracts. The% o not constitute a part of the #achiner% of the

eneral overn#ent. The% are usuall% aopte after carefulconsieration of the private rihts in relation !ith resultant

benefits to the State ... in passin a special charter the attention

of the 9eislature is irecte to the facts an circu#stances!hich the act or charter is intene to #eet. The 9eislature

consier 6sic7 an #a5e 6sic7 provision for all the circu#stances

of a particular case. = In vie! of the foreoin, !e fin noreason to isturb the responent court2s rulin upholin the

constitutionalit% of the la! in :uestion.

*iven its valiit%, shoul the sai la! be applie retroactivel% so

as to rener uncollectible the ta/es in :uestion !hich !ereassesse before its enact#ent The :uestion of !hether a statute

operates retrospectivel% or onl% prospectivel% epens on theleislative intent. In the instant case, (ct No. B-+B provies thateffective ... upon the ate the oriinal franchise !as rante, no

other ta/ an8or licenses other than the franchise ta/ of t!o per

centu# on the ross receipts ... shall be collecte, an% provisionto the contrar% not!ithstanin. Republic (ct No. B-+B

therefore specificall% provie for the retroactive effect of the

la!.

The last issue to be resolve is !hether or not the private

responent is liable for the fi/e an eficienc% percentae ta/esin the a#ount of PB,0&.' 6i.e. for the perio fro# $anuar% 1,1'+ to Februar% ', 1'+-7 before the approval of its #unicipal

franchises. (s aforestate, the franchises !ere approve b% the

Presient onl% on Februar% +, 1'+-. Therefore, before the sai

ate, the private responent !as liable for the pa%#ent of percentae an fi/e ta/es as seller of liht, heat, an po!er K

!hich as the petitioner clai#s, a#ounte to PB,0&.'. The

leislative franchise 6R.(. No. B-+B7 e/e#pte the rantee fro#all 5ins of ta/es other than the A ta/ fro# the date the

ori'inal ranchise was 'ranted . The e/e#ption, therefore, inot cover the perio before the franchise !as rante, i.e. beforeFebruar% +, 1'+-. o!ever, as pointe out b% the responent

court in its finins, urin the perio covere b% the instant

case, that is fro# $anuar% 1, 1'+ to Dece#ber B1, 1'1, the private responent pai the a#ount of PB+,1-+.B, !hich !as

ver% #uch #ore than the a#ount rihtfull% ue fro# it. ence,

the private responent shoul no loner be #ae to pa% for the

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eficienc% ta/ in the a#ount of PB,0&.'- for the perio fro#

$anuar% 1, 1'+ to Februar% ', 1'+-.

H3R3FOR3, the appeale ecision of the responent "ourt of Ta/ (ppeals is hereb% (FFIRM3D. No pronounce#ent as to

costs. SO ORD3R3D.

Fernan, !&.&, :arvasa, Melencio=errera, ?"tierrez, .r&, !r"z, 0aras, Feliciano, ?ancayco, 0adilla, <idin, !ortes, ?ri@o

;("ino and Medialdea, ..&, conc"r&

Comm$$o/er # L/;%Be/ G)+4 E+ec&rc GR No L<23771,A);)$& ', 1>88

F("TS<

9ina%en *ulf 3lectric Po!er operates an electric po!er plant

servin the #unicipalities of 9ina%en an Cin#ale%,Panasinan, pursuant to #unicipal franchise rante it b% the

respective #unicipal councils. The franchises provie that the

rantee shall pa% :uarterl% to the provincial treasur% of Panasinan 1A of the ross earnins obtaine throuh the

privilee for the first 0 %ears 6fro# 1'+7 an A urin the

re#ainin 1& %ears of the life of the franchise. In 1'&&, the CIR assesse an e#ane aainst the co#pan% eficienc%

franchise ta/es an surchares fro# the %ears 1'+ to 1'&+

appl%in the franchise ta/ rate of &A on ross receipts fro#

1'+- to 1'&+. The co#pan% as5e for a reinvestiation, !hich!as enie. "T(, ho!ever, rule for 9ina%en. ence, this

petition.

ISS?3S<

1. Hhether the "ourt can in:uire into the !iso# of the

franchise

. Hhether a rate belo! &A is violative of the unifor#it% clausein the "onstitution

R?9IN*<

1. No, the "ourt oes not have the authorit% to in:uire into the

!iso# of the (ct. "harters or special la!s rante an enacte

b% the leislature are in the nature of private contracts. The% onot constitute a part of the #achiner% of the eneral overn#ent.

(lso, the "ourt ouht not to isturb the rulin of the "ourt of

Ta/ (ppeals on the constitutionalit% of the la! in :uestion.

. No. The leislature has the inherent po!er not onl% toselect the sub@ects of ta/ation but to rant e/e#ptions. Ta/e/e#ptions have never been ee#e violative of the e:ual

protection clause. erein, the &A franchise ta/ rate provie

in Section &' of the Ta/ "oe !as never intene to have

universal application. Section &' e/pressl% allo!s the pa%#ent of ta/es at rates lo!er than &A !hen the charter

rantin the franchise preclues the i#position of a hiher

ta/. R( B-+B, the la! rantin the franchise, i not onl% fi/an specif% a franchise ta/ of A on its ross receipts but

#ae it in lieu of an% an all ta/es, all la!s to the contrar%not!ithstanin. The co#pan%, hence, is not liable for eficienc% ta/es.

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;


SUPREME COURTManila

3N C(N"

G.R. No. L<'37( M%B 22, 1>=3

ASSOCIATION OF CUSTOMS !ROERS, INC. %/ G.MANLAPIT, INC., petitioners)appellants,

vs.

T*E MUNICIPALIT- !OARD, T*E CIT- TREASURER,T*E CIT- ASSESSOR %/ T*E CIT- MA-OR, %++ o4 &eC&B o4 M%/+%, responents)appellees.

Teotimo ;& %oAa or appellants&!ity Fiscal E"'enio ;n'eles and ;ssistant Fiscal E"lo'io #&#errano or appellees&

S-LLA!US

1. T(>(TIONG T(>3S ON MOTOR V3I"93SG NO F33S

OT3R T(N PROP3RT= T(> (ND TOS3 PROVID3DIN ("T No. B'' M(= C3 3>("T3D ON MOTOR

V3I"93S. K ?ner section ;0)b of (ct No. B'' asa#ene, no fees #a% be e/acte or e#ane for the operationof an% #otor vehicle other than those therein provie, the onl%

e/ception bein that !hich refers to propert% ta/ !hich #a% be

i#pose b% a #unicipal corporation. This provision is all)

inclusive in the sense that it applies to all #otor vehicles. In thissense, this provision shoul be construe as li#itin the broa

rant of po!er conferre upon the "it% of Manila b% its "harter

to i#pose ta/es. Hhen Section 1- of sai "harter provies thatthe "it% of Manila can i#pose a ta/ on #otor vehicles operatin

!ithin its li#its, it can onl% refer to propert% ta/, as a ifferentinterpretation !oul #a5e it repunant to the Motor Vehicle9a!.

. ID.G "ONSTIT?TION(9 9(HG ORDIN(N"3 No. BB;' OFM(NI9(, INV(9IDG PROP3RT= T(>, DISTIN*?IS3D

FROM 3>"IS3 T(> OR 9I"3NS3 F33. K Hhile Orinance

No. BB;' of the "it% of Manila refers to propert% ta/ an it is

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-

fi/e a volore# %et !e can not re@ect the iea that it is #erel%

levie on #otor vehicles operatin !ithin the sai cit% !ith the

#ain purpose of raisin funs to be e/pene e/clusivel% for therepair, #aintenance an i#prove#ent of the streets an bries

in sai cit%. This is precisel% !hat the Motor Vehicle 9a! 6(ct

No. B''7 intens to prevent, for the reason that, uner sai (ct,#unicipal corporations alrea% participate in the istribution of

the procees that are raise for the sa#e purpose of repairin,

#aintainin an i#provin bries an public hih!a%s 6Motor Vehicle 9a!, sec. ;B7. This prohibition is intene to prevent

uplication in the i#position of fees for the sa#e purpose. It is

for this reason that it is believe that the orinance in :uestion

#erel% i#poses a license fee althouh uner the cloa5 of an avalore# ta/ to circu#vent the prohibition averte to.

B. ID.G ID.G ID.G ?NIFORMIT= OF T(>(TION. K The saiorinance infrines also the rule of unifor#it% of ta/ation

oraine b% our "onstitution. It e/acts the ta/ upon all #otor

vehicles operatin !ithin the "it% of Manila. It oes notistinuish bet!een a #otor vehicle for hire an one !hich is

purel% for private use. Neither oes it istinuish bet!een a

#otor vehicle reistere in the "it% of Manila an one reisterein another place but occasionall% co#es to Manila an uses its

streets an public hih!a%s. There is no pretense that the

orinance e:uall% applies to #otor vehicles !hich co#e to

Manila for a te#porar% sta% or for short errans, an it cannot beenie that the% contribute in no s#all eree to the

eterioration of the streets an public hih!a%s. (s the% are benefite b% their use the% shoul also be #ae to share the

corresponin buren. This is an ine:ualit% !hich is foun in the

orinance in :uestion en !hich reners it offensive to the

"onstitution.

!AUTISTA ANGELO, J."

This is a petition for eclarator% relief to test the valiit% of

Orinance No. BB;' passe b% the Municipal Coar of the "it%of Manila on March +, 1'&0.

The (ssociation of "usto#s Cro5ers, Inc., !hich is co#pose of

all bro5ers an public service operators of #otor vehicles in the"it% of Manila, an *. Manlapit, Inc., a #e#ber of sai

association, also a public service operator of the truc5s in sai

"it%, challene the valiit% of sai orinance on the roun that617 !hile it levies a so)calle propert% ta/ it is in realit% a license

ta/ !hich is be%on the po!er of the Municipal Coar of the

"it% of ManilaG 67 sai orinance offens aainst the rule of unifor#it% of ta/ationG an 6B7 it constitutes ouble ta/ation.

The responents, represente b% the cit% fiscal, conten on their

part that the challene orinance i#poses a propert% ta/ !hichis !ithin the po!er of the "it% of Manila to i#pose uner its

Revise "harter Section 1- 6p7 of Republic (ct No. +0'J, an

that the ta/ in :uestion oes not violate the rule of unifor#it% of ta/ation, nor oes it constitute ouble ta/ation.

The issues havin been @oine, the "ourt of First Instance of

Manila sustaine the valiit% of the orinance an is#isse the petition. ence this appeal.

The ispute orinance !as passe b% the Municipal Coar of

the "it% of Manila uner the authorit% conferre b% section 1-6p7 of Republic (ct No. +0'. Sai section confers upon the

#unicipal boar the po!er to ta/ #otor an other vehicles

operatin !ithin the "it% of Manila the provisions of an%e/istin la! to the contrar% not!ithstanin. It is contene

T(>(TION

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'

that this po!er is broa enouh to confer upon the "it% of

Manila the po!er to enact an orinance i#posin the propert%

ta/ on #otor vehicles operatin !ithin the cit% li#its.

In the eciin the issue before us it is necessar% to bear in #in

the pertinent provisions of the Motor Vehicles 9a!, as a#ene,6(ct No. B''7 !hich has a bearin on the po!er of the#unicipal corporation to i#pose ta/ on #otor vehicles operatin

in an% hih!a% in the Philippines. The pertinent provisions are

containe in section ;0 6b7 !hich provie in part<

No further fees than those fi/e in this (ct shall be e/acte or

e#ane b% an% public hih!a%, brie or ferr%, or for the

e/ercise of the profession of chauffeur, or for the operation of an% #otor vehicle b% the o!ner thereof< 0rovided, however ,

That nothin in this (ct shall be construe to e/e#pt an% #otor vehicle fro# the pa%#ent of an% la!ful an e:uitable insular,local or #unicipal propert% ta/ i#pose thereupon. . . .

Note that uner the above section no fees #a% be e/acte or

e#ane for the operation of an% #otor vehicle other thanthose therein provie, the onl% e/ception bein that !hich

refers to the propert% ta/ !hich #a% be i#pose b% a #unicipal

corporation. This provision is all)inclusive in that sense that it

applies to all #otor vehicles. In this sense, this provision shoul

be construe as li#itin the broa rant of po!er conferre uponthe "it% of Manila b% its "harter to i#pose ta/es. Hhen section

1- of sai "harter provies that the "it% of Manila can i#pose ata/ on #otor vehicles operatin !ithin its li#it, it can onl% refers

to propert% ta/ as a ifferent interpretation !oul #a5e it

repunant to the Motor Vehicle 9a!.

"o#in no! to the orinance in :uestion, !e fin that its title

refers to it as (n Orinance 9ev%in a Propert% Ta/ on (ll

Motor Vehicles Operatin Hithin the "it% of Manila, an that

in its section 1 it provies that the ta/ shoul be 1 per cent ad valorem per annu#. It also provies that the procees of the ta/

shall accrue to the Streets an Cries Funs of the "it% an

shall be e/pene e/clusivel% for the repair, #aintenance ani#prove#ent of its streets an bries. "onsierin the

!orin use in the orinance in the liht in the purpose for

!hich the ta/ is create, can !e consier the ta/ thus i#pose as propert% ta/, as clai#e b% responents

Hhile as a rule an ad valorem ta/ is a propert% ta/, an this rule

is supporte b% so#e authorities, the rule shoul not be ta5en inits absolute sense if the nature an purpose of the ta/ as athere

fro# the conte/t sho! that it is in effect an e/cise or a license

ta/. Thus, it has been hel that If a ta/ is in its nature an e/cise,it oes not beco#e a propert% ta/ because it is proportione ina#ount to the value of the propert% use in connection !ith the

occupation, privilee or act !hich is ta/e. 3ver% e/cise

necessaril% #ust finall% fall upon an be pai b% propert% an so#a% be inirectl% a ta/ upon propert%G but if it is reall% i#pose

upon the perfor#ance of an act, en@o%#ent of a privilee, or the

enain in an occupation, it !ill be consiere an e/cise. 6R. ". 9., B&)B.7 It has also been hel that

The character of the ta/ as a propert% ta/ or a license or occupation ta/ #ust be eter#ine b% its incients, an fro# thenatural an leal effect of the lanuae e#plo%e in the act or

orinance, an not b% the na#e b% !hich it is escribe, or b%

the #oe aopte in fi/in its a#ount. If it is clearl% a propert%ta/, it !ill be so reare, even thouh no#inall% an in for# it

is a license or occupation ta/G an, on the other han, if the ta/ is

levie upon persons on account of their business, it !ill be

T(>(TION

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B0

construe as a license or occupation ta/, even thouh it is

rauate accorin to the propert% use in such business, or on

the ross receipts of the business. 6B; ".$., 1;7

The orinance in :uestion falls uner the foreoin rules. Hhile

it refers to propert% ta/ an it is fi/e ad valorem%et !e cannotre@ect the iea that it is #erel% levie on #otor vehiclesoperatin !ithin the "it% of Manila !ith the #ain purpose of

raisin funs to be e/pene e/clusivel% for the repair,

#aintenance an i#prove#ent of the streets an bries in saicit%. This is precisel% !hat the Motor Vehicle 9a! 6(ct No.

B''7 intens to prevent, for the reason that, uner sai (ct,

#unicipal corporation alrea% participate in the istribution of the procees that are raise for the sa#e purpose of repairin,

#aintainin an i#provin bries an public hih!a% 6section

;B of the Motor Vehicle 9a!7. This prohibition is intene to prevent uplication in the i#position of fees for the sa#e purpose. It is for this reason that !e believe that the orinance in

:uestion #erel% i#poses a license fee althouh uner the cloa5

of an ad valorem ta/ to circu#vent the prohibition aboveaverte to.

It is also our opinion that the orinance infrines the rule of the

unifor#it% of ta/ation oraine b% our "onstitution. Note thatthe orinance e/acts the ta/ upon all #otor vehicles operatin

!ithin the "it% of Manila. It oes not istinuish bet!een a#otor vehicle for hire an one !hich is purel% for private use. Neither oes it istinuish bet!een a #otor vehicle reistere in

the "it% of Manila an one reistere in another place but

occasionall% co#es to Manila an uses its streets an publichih!a%s. The istinction is i#portant if !e note that the

orinance intens to buren !ith the ta/ onl% those reistere in

the "it% of Manila as #a% be inferre fro# the !or operatin

use therein. The !or operatin enotes a connotation !hich

is a5in to a reistration, for uner the Motor Vehicle 9a! no

#otor vehicle can be operate !ithout previous pa%#ent of thereistration fees. There is no pretense that the orinance e:uall%

applies to #otor vehicles !ho co#e to Manila for a te#porar%

sta% or for short errans, an it cannot be enie that the%contribute in no s#all eree to the eterioration of the streets

an public hih!a%. The fact that the% are benefite b% their use

the% shoul also be #ae to share the corresponin buren.(n %et such is not the case. This is an ine:ualit% !hich !e fin

in the orinance, an !hich reners it offensive to the

"onstitution.

Hherefore, reversin the ecision appeale fro#, !e hereb%

eclare the orinance null an voi.

0aras, !&.&, <en'zon and T"ason, ..&, concur.

Montemayor, %eyes, ."'o and a+rador, ..&, concur in the

result.

Se%r%&e O/o/$

FERIA, J., concurrin<

I concur on the roun that it is a license ta/.

Associaiton of Customs Brokers vs Manila

GRN L-4376 May 22 !"#3

FACTS:

The Municipal Board of Manila passed ordinance No. 3379 which

T(>(TION

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B1

imposes a propert ta! that is within the power of the Cit under itsre"ised charter. The ordinance was passed # the Municipal Boardunder the authorit conferred # section $% of &A '(9

)SS*+:

,hether or not the ordinance infrin-es on the uniformit of ta!es asordained # the Constitution.

&*)N/:

The 0rdinance e!acts the ta! upon all motor "ehicles operatin- withinManila and does not distin-uish #etween a motor "ehicle re-istered inthe Cit and one re-istered in another place nor does it distin-uishpri"ate of "ehicle for hire. The distinction is important if we note thatthe ordinance intends to #urden with the ta! onl those re-istered inManila. There is no pretense that the 0rdinance e1uall applies to"ehicles who come to Manila for a temporar purpose.


Manila

3N C(N"

G.R. No. L<(0>3 Febr)%rB 2', 1>='

T*E S*ELL CO. OF P.I., LTD., plaintiff)appellant,

vs.

E. E. AO, %$ M)/c%+ Tre%$)rer o4 &e M)/c%+&B o4Coro#%, Pro#/ce o4 Ceb), efenant)appellee.

!&.& .ohnston and ;&0& -een or appellant&

0rovincial Fiscal .ose !& <orromeo and ;ssistant 0rovincial Fiscal ;nanias B& Mari+ao or appellee&

PADILLA, J."

The Municipal "ouncil of "orova, Province of "ebu, aopte

the follo!in orinances< No. 10, series of 1'+, !hich i#posesan annual ta/ of P1&0 on occupation or the e/ercise of the

privilee of installation #anaerG No. ', series of 1'+;, !hich

i#poses an annual ta/ of P+0 for local eposits in ru#s of

co#bustible an infla##able #aterials an an annual ta/ of P00 for tin can factoriesG an No. 11, series of 1'+-, !hich

i#poses an annual ta/ of P1&0 on tin can factories havin a#a/i#u# output capacit% of B0,000 tin cans. The Shell "o. of

P.I. 9t., a forein corporation, file suit for the refun of the

ta/es pai b% it, on the roun that the orinances i#posin suchta/es are "ltra vires& The efenant enies that the% are so. The

controvers% !as sub#itte for @u#ent upon stipulation of

facts !hich reas as follo!s<

"o#e no! the parties in the above)entitle case b% their

unersine attorne%s an hereb% aree to the follo!in

stipulation of facts<

1. That the parties a#it the alleations containe in Pararaph 1

of the (#ene "o#plaint referrin to resience, personalit%,

an capacit% of the parties e/cept the fact that 3.3. Vao is no!replace b% F.(. "orbo as Municipal Treasurer of "orova,

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B

"ebuG

. That the parties a#it the alleations containe in pararaph

of the (#ene "o#plaint. Official Receipts Nos. ()1-00,()B;0;+, ()B;'-& an ()10B0B-- are herein #ar5e as

3/hibits (, C, ", an D, respectivel% for the plaintiffG

B. That the parties a#it that pa%#ents #ae uner 3/hibits C,", an D !ere all "nder protest an plaintiff a#its that 3/hibit

( !as not pai uner protestG

+. That the parties a#it that Official Receipt No. ()1-00 for P+0 an Official Receipt No. ()B;0;+ for P00 !ere

collecte b% the efenant b% virtue of Orinance No. ', 6Secs.

3)+ an 3), respectivel%7 uner Resolution No. B1, series of

1'+;, enacte Dece#ber 1&, 1'+;, approve b% the ProvincialCoar of "ebu in its Resolution No. ++, series of 1'+-. "op% of

sai Orinance No. ', series of 1'+;, is herein #ar5e as 3/hibit3 for the plaintiff, an as 3/hibit I for the efenantG

&. That the parties a#it that Official Receipt No. ()B;0-& for

P1&0 !as pai for ta/es i#pose on Installation Manaers,collecte b% the efenant b% virtue of Orinance No. 10

6section B, 3)17 uner Resolution No. B-, series of 1'+,

approve b% the Provincial Coar of "ebu in its Resolution No.

10;0, series of 1'+. "op% of .sai Orinance No. 10, series of 1'+ is #ar5e as 3/hibit F for the plaintiff an as 3/hibit

for the efenantG

. That the parties a#it that Official Receipt No. ()10B0B--

for P&,+&0 !as pai b% plaintiff an that sai a#ount !as

collecte b% efenant b% virtue of Orinance No. 11, series of 1'+- 6uner Resolution No. +7 enacte (uust B1, 1'+- an

approve b% the Provincial Coar of "ebu in its Resolution No.

11&, series of 1'+', an sa#e !as approve b% the onorable

Secretar% of Finance uner the provisions of section + of "o##on!ealth (ct No. +;. "op% of sai Orinance No. 11,

series of 1'+- is herein #ar5e as 3/hibit * for the plaintiff,

an 3/hibit B for the efenant. "op% of the approval of theonorable Secretar% of Finance of the sa#e Orinance is herein

#ar5e as 3/hibit + for the efenant.

Hherefore, asie fro# oral evience !hich #a% be offere b%the parties an other points not covere b% this stipulation, this

case is hereb% sub#itte upon the foreoin aree facts an

recor of evience.

"ebu "it%, Philippines, $anuar% 0, 1'&0.

T3 S399 "O. OF P.I. 9TD.

6S.7 9. D3 C93"=ND3N

0lainti

".D. $ONSTON (.P.

D33N

6S.7 (.P. D33N ;ttys& or the plainti

T3 M?NI"IP(9IT= OF

"ORDOV( 6S.7 F.(. "ORCO

Defenant

6S.7 $OS3 ".

CORROM3O 0rovincial Fiscal

;ttorney or the deendant

6Recor on (ppeal, pp. 1&)1-.7

The parties reserve the riht to introuce parole evience but

no such evience !as sub#itte b% either part%. Fro# the @u#ent holin the orinances vali an is#issin the

co#plaint the plaintiff has appeale.

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BB

It is contene that as the #unicipal orinance i#posin an

annual ta/ of P+0 for #inor local eposit in ru#s of

co#bustible an infla##able #aterials, an of P00 for tinfactor% !as aopte uner an pursuant to section ++ of the

Revise (#inistrative "oe, !hich provies that the #unicipal

council in the e/ercise of the reulative authorit% #a% re:uirean% person enae in an% business or occupation, such as

storin co#bustible or e/plosive #aterials or the conuctin

of an% other business of an un!holeso#e, obno/ious, offensive,or anerous character, to obtain a per#it for !hich a

reasonable fee, in no case to e/cee P10 per annu#, #a% be

chare, the annual ta/ of P+0 an P00 are unauthori4e an

illeal. The per#it an the fee referre to #a% be re:uire anchare b% the Municipal "ouncil of "orova in the e/ercise of

its reulative authorit%, !hereas the orinance !hich i#poses

the ta/es in :uestion !as aopte uner an pursuant to the provisions of "o##on!ealth (ct No. +;, !hich authori4es

#unicipal councils an #unicipal istrict councils to i#pose

license ta/es upon persons enae in an% occupation or business, or e/ercisin privilees in the #unicipalit% or

#unicipal istrict, b% re:uirin the# to secure licenses at rates

fi/e b% the #unicipal council or #unicipal istrict council,!hich shall be @ust an unifor# but not percentae ta/es an

ta/es on specifie articles. 9i5e!ise, Orinance No. 10, series

of 1'+, !hich i#poses an annual ta/ of P1&0 on installation

#anaer co#es uner the provisions of "o##on!ealth (ct No. +;. Cut it is clai#e that installation #anaer is a

esination #ae b% the plaintiff an such esination cannot beee#e to be a callin as efine in section 1;- of the

National Internal Revenue "oe 6"o#. (ct No. +7, an that

the installation #anaer e#plo%e b% the plaintiff is a salarie

e#plo%ee !hich #a% not be ta/e b% the #unicipal counciluner the provisions of "o##on!ealth (ct No. +;. This

contention is !ithout #erit, because even if the installation

#anaer is a salarie e#plo%ee of the plaintiff, still it is an

occupation an one occupation or line of business oes not beco#e e/e#pt b% bein conucte !ith so#e other occupation

or business for !hich such ta/ has been pai21 an the

occupation ta/ #ust be pai b% each iniviual enae in acallin sub@ect thereto. (n pursuant to section 1;' of the

National Internal Revenue "oe, The pa%#ent of . . .

occupation ta/ shall not e/e#pt an% person fro# an% ta/, . . . provie b% la! or orinance in places !here such . . .

occupation in . . . reulate b% #unicipal la!, nor shall the

pa%#ent of an% such ta/ be hel to prohibit an% #unicipalit%

fro# placin a ta/ upon the sa#e . . . occupation, for local purposes, !here the i#position of such ta/ is authori4e b% la!.

It is true that, accorin to the stipulation of facts, Orinance

No. 10, series of 1'+, !as approve b% the Provincial Coar of "ebu in its Resolution No. 10;0, series of 1'+, an that it oes

not appear that it !as approve b% the Depart#ent of Finance, as

provie for an re:uire in section +, pararaph , of "o##on!ealth (ct No. +;, the rate of #unicipal ta/ bein in

e/cess of P&0 per annu#. Cut at this point on the approval of the

Depart#ent of Finance !as not raise in the court belo!, itcannot be raise for the first ti#e on appeal. The issue @oine b%

the parties in their pleains an the point raise b% the plaintiff

is that the #unicipal council !as not e#po!ere to aopt the

orinance an not that it !as not approve b% the Depart#ent of Finance. The fact that it !as not state in the stipulation of facts

@ustifies the presu#ption that the orinance !as approve inaccorance !ith la!.

The contention that the orinance is iscri#inator% an hostile

because there is no other person in the localit% !ho e/ercisessuch esination or occupation is also !ithout #erit, because

T(>(TION

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B+

the fact that there is no other person in the localit% !ho e/ercises

such a esination or callin oes not #a5e the orinance

iscri#inator% an hostile, inas#uch as it is an !ill beapplicable to an% person or fir# !ho e/ercises such callin or

occupation na#e or esinate as installation #anaer.

9astl%, Orinance No. 11, series of 1'+-, !hich i#poses a#unicipal ta/ of P1&0 on tin can factories havin a #a/i#u#

annual output capacit% of B0,000 tin cans !hich, accorin to

the stipulation of facts, !as approve b% the Provincial Coar of "ebu an the Depart#ent of Finance, is vali an la!ful,

because it is neither a percentae ta/ nor one on specifie

articles !hich are the onl% e/ceptions provie in section 1,"o##on!ealth (ct No. +;. Neither oes it fall uner an% of

the prohibitions provie for in section B of the sa#e (ct.

Specific ta/es enu#erate in the National Internal Revenue"oe are those that are i#pose upon thins #anufacture or prouce in the Philippines for o#estic sale or consu#ption

an upon thins i#porte fro# the ?nite States an forein

countries, such as istille spirits, o#estic enature alcohol,fer#ente li:uors, proucts of tobacco, ciars an ciarettes,

#atches, #echanical lihters, firecrac5ers, s5i##e #il5,

#anufacture oils an other fuels, coal, bun5er fuel oil, ieselfuel oil, cine#atoraphic fil#s, pla%in cars, sacharine.B (n it

is not a percentae ta/ because it is ta/ on business an the

#a/i#u# annual output capacit% is not a percentae, because itis not a share or a ta/ base on the a#ount of the procees

reali4e out of the sale of the tin cans #anufacture therein but

on the business of #anufacturin tin cans havin a #a/i#u#annual output capacit% of B0,000 tin cans.

In an action for refun of #unicipal ta/es clai#e to have been

pai an collecte uner an illeal orinance, the real part% in

interest is not the #unicipal treasurer but the #unicipalit%

concerne that is e#po!ere to sue an be sue. +

The @u#ent appeale fro# is hereb% affir#e, !ith costsaainst the appellant.

0aras, !&.&, 0a+lo, <en'zon, Montemayor, %eyes, ."'o, <a"tista

;n'elo, a+rador, !oncepcion and -io*no, ..&,concur.

Se++ Com%/B #$ E.E. %o

9 0hil& 38C D Taxation D #cope and imitation o Taxation D

E("al 0rotection !la"se

In 1'+, the #unicipal council of "orova, "ebu issue an

orinance !hich i#pose, a#on others, an annual ta/ of P1&0.00 upon the occupation or the e/ercise of the privilee of

an installation #anaerQ.

Shell "o#pan% assaile the valiit% of the sai orinance on theroun that it violates the e:ual protection clause. It appears that

onl% Shell ha, at that ti#e, an installation #anaer. In short,

there is onl% one installation #anaer in "orova, "ebu. SoShell felt li5e the ta/ orinance !as #erel% taretin Shell. Shell

no! !ants the Treasurer of "orova, 3.3. Vao to be en@oine

fro# i#ple#entin the la!.

ISSUE" Hhether or not the ta/ orinance is not vali for bein

violative of the e:ual protection clause.

*ELD" No. The fact that there is no other person or co#pan%!ith a position for an installation #anaer oes not #a5e the

orinance iscri#inator%. The la! is an !ill be applicable to

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B&

an% person or fir# !ho e/ercises such callin or occupation

na#e or esinate as installation #anaerQ. In short, the la!

is applicable to present an future conitions.

Note aain the re:uisites for a vali classification 6not

#entione in this particular case but #entione in other relevantcases7<

1. #ust rest on substantial istinctionsG

. #ust be er#ane to the purposes of the la!G

B. m)$& /o& be +m&e &o e9$&/; co/&o/$ o/+BG an+. #ust appl% e:uall% to all #e#bers of the sa#e class.


Manila

3N C(N"

G.R. No. L<1=270 Se&ember 30, 1>(1

OSE . *ERRERA %/ ESTER OC*ANGCO *ERRERA, petitioners,vs.

T*E UEON CIT- !OARD OF ASSESSMENTAPPEALS, responent.

;n'el ;& #ison or petitioners&

.aime ;'loro or respondent&

CONCEPCION, J.:

(ppeal, b% petitioners $ose V. errera an 3ster Ochancoerrera, fro# a ecision of the "ourt of Ta/ (ppeals affir#in

that of the Coar of (ssess#ent (ppeals of Uue4on "it%, !hichhel that certain properties of sai petitioners are sub@ect to

assess#ent for purposes of real estate ta/.

The facts an the issue are set forth in the afore#entioneecision of the "ourt of Ta/ (ppeals, fro# !hich !e :uote<

On $ul% +, 1'&, the Director of the Cureau of ospitals

authori4e the petitioners to establish an operate the St."atherine2s ospital, locate at &- D. Tua4on, Sta. Mesa

eihts, Uue4on "it% 63/hibit F)1, p. ;, CIR rec.7. On or

about $anuar% B, 1'&B, the petitioners sent a letter to the Uue4on"it% (ssessor re:uestin e/e#ption fro# pa%#ent of real estate

ta/ on the lot, builin an other i#prove#ents co#prisin the

hospital statin that the sa#e !as establishe for charitable anhu#anitarian purposes an not for co##ercial ain 63/hibit F)

, pp. -)', CIR rec.7. (fter an inspection of the pre#ises in

:uestion an after a careful stu% of the case, the e/e#ption

fro# real propert% ta/es !as rante effective the %ears 1'&B,1'&+ an 1'&&.

Subse:uentl%, ho!ever, in a letter ate (uust 10, 1'&&63/hibit 3, p. &, "T( rec.7 the Uue4on "it% (ssessor notifie

the petitioners that the aforesai properties !ere re)classifie

fro# e/e#pt to ta/able an thus assesse for real propert%ta/es effective 1'&, enclosin there!ith copies of Ta/

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B

Declarations Nos. 1'B1 to 1'B coverin the sai properties.

The petitioners appeale the assess#ent to the Uue4on "it%

Coar of (ssess#ent (ppeals, !hich, in a ecision ate MarchB1, 1'& an receive b% the for#er on Ma% 1;, 1'&, affir#e

the ecision of the "it% (ssessor. ( #otion for reconsieration

thereof !as enie on March -, 1'&;. Fro# this ecision, the petitioners institute the instant appeal.1awphl&nt

The builin involve in this case is principall% use as a

hospital. It is #ainl% a surical an orthopeic hospital !ithe#phasis on obstetrical cases, the latter constitutin '0A of the

total nu#ber of cases reistere therein. The hospital has thirt%)

t!o 6B7 bes, of !hich t!ent% 607 are for charit%)patients ant!elve 617 for pa%)patients. Fro# the evience presente b%

petitioners, it is #ae to appear that there are t!o 5ins of

charit% patients K 6a7 those !ho co#e for consultation onl%6out)charit% patients7G an 6b7 those !ho re#ain in the hospitalfor treat#ent 6l%in)in)patients7. The out)charit% patients are

iven free consultation an prescription, althouh so#eti#es

the% are furnishe !ith free #eicines !hich are not costl% li5easpirin, sulfatia4ole, etc. The charit% l%in)in)patients are iven

free #eical service an #eicine althouh the foo serve to

the pa%)patients is ver% #uch better than that iven to thefor#er. (lthouh no conition is i#pose b% the hospital on the

a#ission of charit% l%in)in)patients, the% ho!ever, usuall%

ive onations to the hospital. On the other han, the pa%) patients are re:uire to pa% for hospital services ranin fro#

the #ini#u# chare of P&.00 to the #a/i#u# of P+0.00 for

each a% of sta% in the hospital. The inco#e reali4e fro# pa%) patients is spent for the i#prove#ent of the charit% !ars. The

hospital personnel is co#pose of three nurses, t!o rauate

#i!ives, a resient ph%sician receivin a salar% of P1;0.00 a#onth an the petitioner, Dr. 3ster Ochanco errera, as

irectress. (s such irectress, the latter oes not receive an%

salar%.

Petitioners also operate !ithin the pre#ises of the hospital theSt. "atherine2s School of Mi!ifer% !hich !as rante

overn#ent reconition b% the Secretar% of 3ucation onFebruar% 1, 1'&& 63/hibit F)B, p. 10, CIR rec.7 This school hasan enroll#ent of about t!o hunre stuents. The stuents are

chare a #atriculation fee of PB00.00 for 1) %ears, plus

P&0.00 a #onth for boar an loin, !hich incluestransportation to the St. Mar%2s ospital. The stuents practice in

the St. "atherine2s ospital, as !ell as in the St. Mar%2s ospital,

!hich is also o!ne b% the petitioners. ( separate set of accountin boo5s is #aintaine b% the school for #i!ifer%

istinct fro# that 5ept b% the hospital. The petitioners allee

that the accounts of the school are not inclue in 3/hibits (,()1, (), C, C)1, C), ", ")1 an ") !hichrelate to the hospital onl%. o!ever, the petitioners have refuse

to sub#it a separate state#ent of accounts of the school. ( brief

tabulation inicatin the a#ount of inco#e of the hospital for the %ears 1'&+, 1'&& an 1'&, an its operational e/penses, is

as follo!s<

1 ' & +

$ncome Expenses -eicit

"harit% Har

Pa% Har

P1+,;;'.&0

P &,-0.0+

P10,-0B.

P1,0-B.B0

P1,B0B.-0

63/hibits (, ()1 an ()7

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B;

1 ' & &


"harit% Har

Pa% Har

P1;,+BB.B0

P ,-&'.B

1+,0B-.'

P0,-'-.+

PB,++.'+

63/hibits C, C)1 an C)7

1 ' &


"harit% Har

Pa% Har

P1,+;.+0

P &,&&'.-'

1,+'.0+

P1,-0'.'B

P B+1.&B

63/hibits ", ")1 an ")7

(sie fro# the St. "atherine an St. Mar% hospitals, the

petitioners eclare that the% also o!n lans an coconut plantations in Uue4on Province, an other real estate in the "it%

of Manila consistin of apart#ents for rent. The petitioner, $ose

V. errera, is an architect, activel% enae in the practice of his profession, !ith office at Tuason Cuilin, 3scolta, Manila. e

!as for#erl% "hair#an, Coar of 3/a#iners for (rchitects an

"hair#an, Coar of (rchitects connecte !ith the ?nite Nations. e !as also connecte !ith the (llie Technoloists

!hich constructe the Veterans ospital in Uue4on "it%.

The onl% issue raise, is !hether or not the lot, builin an

other i#prove#ents occupie b% the St. "atherine ospital are

e/e#pt fro# the real propert% ta/. The resolution of this:uestion boils o!n to the corollar% issue as to !hether or not

the sai properties are use e/clusivel% for charitable or

eucational purposes. 6Petitioners2 brief, pp. +)'7.

The "ourt of Ta/ (ppeals ecie the issue in the neative, upon

the roun that the St. "atherine2s ospital has a pa% !ar

for ... pa%)patients, !ho are chare for the use of the privateroo#s, operatin roo#, laborator% roo#, eliver% roo#, etc.,

li5e other hospitals operate for profit an that petitioners an

their fa#il% occup% a portion of the builin for their resience.Hith respect to petitioners2 clai# for e/e#ption base upon the

operation of the school of #i!ifer%, the "ourt concee that

the proposition #iht be proper if the propert% use for theschool of #i!ifer% !ere separate an istinct fro# thehospital. It ae, ho!ever, that, in the instant case, the

portions of the builin use for classroo#s of the school of

#i!ifer% have not been sho!n to be e/clusivel% for school purposesG that sai portions rather ... have a ual use, i.e., for

classroo# an for hospital use, the latter not bein a purpose that

reners the propert% ta/ e/e#ptG that part of the builin anlot in :uestion is use as a hospital, part as resience of the

petitioners, part as arae, part as or#itor% an part as schoolG

an that the portion eicate to eucational an charitable purposes can not be ientifie fro# those estine to other usesG

an the builin is itself an inivisible unit of propert%.

It shoul be note, ho!ever, that, accorin to the ver%state#ent of facts #ae in the ecision appeale fro#, of the

thirt%)t!o 6B7 bes in the hospital, t!ent% 607 are for charit%)

patientsG that the inco#e reali4e fro# pa%)patients is spent for

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B-

i#prove#ent of the charit% !arsG an that petitioners, Dr.

3ster Ochanco errera, as irectress of sai hospital, oes

not receive an% salar%, althouh its resient ph%sician ets a#onthl% salar% of P1;0.00. It is !ell settle, in this connection,

that the a#ission of pa%)patients oes not etract fro# the

charitable character of a hospital, if all its funs are evotee/clusivel% to the #aintenance of the institution as a public

charit% 6-+ ".$.S., 1;G see, also, &1 (#. $ur. 0;G "oole% on

Ta/ation, Vol. , p. 1&G 1++ (.9.R., 1+-')1+'7. In other !ors, !here renerin charit% is its pri#ar% ob@ect, an the

funs erive fro# pa%#ents #ae b% patients able to pa% are

evote to the benevolent purposes of the institution, the #ere

fact that a profit has been #ae !ill not eprive the hospital of its benevolent character 6Prairie Du "hien Sanitariu# "o. vs.

"it% of Prairie Du "hien, + His. , ; NH J -B, 1++

(.9.R. 1+-07.

Thus, !e have hel that the ?.S.T. ospital !as not establishe

for profit)#a5in purposes, althouh it ha 1+0 pa%in bes

#aintaine onl% to partl% finance the e/penses of the free !ars,containin 0B bes for charit% patients 6?.S.T. ospital

3#plo%ees (ssociation vs. Sto. To#as ?niversit% ospital, 9)

'--, Ma% +, 1'&+7, that St. Paul2s ospital of Iloilo, acorporation orani4e for charitable eucational an reliious

purposes can not be consiere as enae in business #erel%

because its phar#ac% epart#ent chares pa%in patients thecost of their #eicine, plus 10A thereof, to partl% offset the cost

of #eicines supplie free of chare to charit% patients

6"ollector of Internal Revenue vs. St. Paul2s ospital of Iloilo,9)11;, Ma% &, 1'&'7, an that the a#en#ent of the oriinal

articles of incorporation of the ?niversit% of Visa%as to convert

it fro# a non)stoc5 to a stoc5 corporation an the increase of itsassets fro# P',000 to P&0,000, istribute a#on the #e#bers

of the oriinal non)stoc5 corporation in ter#s of shares of stoc5,

as !ell as the subse:uent #ove of its boar of trustees to ouble

the stoc5 iviens of the corporation, in vie! of a ain of P00,000.00 in propert%, besies oo)!ill, !hich !as not

carrie out, oes not @ustif% the inference that the corporation

has beco#e one for business an profit, none of its profitshavin inure to the benefit of an% stoc5holer or iniviual

6"ollector of Internal Revenue vs. ?niversit% of Visa%as, 9)

1B&&+, Februar% -, 1'17.

Moreover, the e/e#ption in favor of propert% use e/clusivel%

for charitable or eucational purposes is not li#ite to propert%

actuall% inispensable therefor 6"oole% on Ta/ation, Vol. , p.1+B07, but e/tens to facilities !hich are inciental to an

reasonabl% necessar% for the acco#plish#ent of sai purposes,

such as, in the case of hospitals, a school for trainin nurses, anurses2 ho#e, propert% use to provie housin facilities for interns, resient octors, superintenents, an other #e#bers of

the hospital staff, an recreational facilities for stuent nurses,

interns an resients 6-+ ".$.S., 17, such as athletic fiels,incluin a far# use for the in#ates of the institution

6"oole% on Ta/ation, Vol. , p. 1+B07.

Hithin the purvie! of the "onstitutional e/e#ption fro#ta/ation, the St. "atherine2s ospital is, therefore, a charitable

institution, an the fact that it a#its pa%)patients oes not bar itfro# clai#in that it is evote e/clusivel% to benevolent purposes, it bein a#itte that the inco#e erive fro# pa%)

patients is evote to the i#prove#ent of the charit% !ars,

!hich represent al#ost t!o)thirs 68B7 of the be capacit% of the hospital, asie fro# out)charit% patients !ho co#e onl% for

consultation.

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B'

(ain, the e/istence of St. "atherine2s School of Mi!ifer%,

!ith an enroll#ent of about 00 stuents, !ho practice partl% in

St. "atherine2s ospital an partl% in St. Mar%2s ospital, !hich,li5e!ise, belons to petitioners herein, oes not, an cannot,

affect the e/e#ption to !hich St. "atherine2s ospital is entitle

uner our funa#ental la!. On the contrar%, it furnishes another roun for e/e#ption. See#inl%, the "ourt of Ta/ (ppeals !as

i#presse b% the fact that the si4e of sai enroll#ent an the

#atriculation fee chare fro# the stuents of #i!ifer%, asiefro# the a#ount the% pai for boar an loin, incluin

transportation to St. Mar%2s ospital, !arrants the belief that

petitioners erive a substantial profit fro# the operation of the

school afore#entione. Such factor is, ho!ever, i##aterial tothe issue in the case at bar, for all lans, builin an

i#prove#ents use e/clusivel% for reliious, charitable or

eucational purposes shall be e/e#pt fro# ta/ation, pursuant tothe "onstitution, rearless of !hether or not #aterial profits are

erive fro# the operation of the institutions in :uestion. In

other !ors, "onress #a%, if it ee#s fit to o so, i#pose ta/esupon such profits, but sai lans, builins an

i#prove#ents are +eyond its ta/in po!er.

Si#ilarl%, the arae in the builin above referre to K !hich!as obviousl% essential to the operation of the school of

#i!ifer%, for the stuents therein enrolle practice, not onl% in

St. "atherine2s ospital, but, also, in St. Mar%2s ospital, an!ere entitle to transportation thereto K for Mrs. errera

receive no co#pensation as irectress of St. "atherine2s

ospital K !ere inciental to the operation of the latter an of sai school, an, accorinl%, i not affect the charitable

character of sai hospital an the eucational nature of sai

school.

H3R3FOR3, the ecision of the "ourt of Ta/ (ppeals, as !ell

as that of the (ssess#ent Coar of (ppeals of Uue4on "it%, are

hereb% reverse an set asie, an another one entere eclarinthat the lot, builin an i#prove#ents constitutin the St.

"atherine2s ospital are e/e#pt fro# ta/ation uner the

provisions of the "onstitution, !ithout special pronounce#ent asto costs. It is so orere.

<en'zon, !&.&, 0adilla, a+rador, %eyes, .&<&&, 0aredes and -e

eon, ..&, conc"r&

*errer% #$. )eHo/ C&B !o%r o4 A$$e$$me/& Ae%+$GR L<1=270, 30 Se&ember 1>(1Fr$& D#$o/, Co/ceco/ J" ( co/c)r

Facts<

In 1'&, the Director of the Cureau of ospitals authori4e $ose

V. errera an 3ster Ochanco errera to establish an operatethe St. "atherines ospital. In 1'&B, the erreras sent a letter to

the Uue4on "it% (ssessor re:uestin e/e#ption fro# pa%#ent

of real estate ta/ on the hospital, statin that the sa#e !asestablishe for charitable an hu#anitarian purposes an not for

co##ercial ain. The e/e#ption !as rante effective %ears

1'&B to 1'&&. In 1'&&, ho!ever, the (ssessor reclassifie the properties fro# e/e#ptQ to ta/ableQ effective 1'&, as it !as

ascertaine that out B bes in the hospital, 1 of !hich are for

pa%)patients. ( school of #i!ifer% is also operate !ithin the pre#ises of the hospital.

Issue<

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Hhether St. "atherines ospital is e/e#pt fro# reallt% ta/.

el<

The a#ission of pa%)patients oes not etract fro# thecharitable character of a hospital, if all its funs are evote

e/clusivel% to the #aintenance of the institution as a publiccharit%. The e/e#ption in favor of propert% use e/clusivel% for

charitable or eucational purpose is not li#ite to propert%

actuall% inispensable therefore, but e/tens to facilities !hichare inciental to an reasonabl% necessar% for the

acco#plish#ent of sai purpose, such as in the case of hospitals

K a school for trainin nursesG a nurses ho#eG propert% use to provie housin facilities for interns, resient octors,

superintenents an other #e#bers of the hospital staffG anrecreational facilities for stuent nurses, interns an resients.Hithin the purvie! of the "onstitution, St. "atherines ospital

is a charitable institution e/e#pt fro# ta/ation.


SUPREME COURTManila

S3"OND DIVISION

G.R. No. L<3>08( )/e 1=, 1>88

A!RA ALLE- COLLEGE, INC., rere$e/&e bB PEDRO. !ORGONIA, petitioner,

vs.*ON. UAN P. AUINO, );e, Co)r& o4 Fr$& I/$&%/ce,Abr%K ARMIN M. CARIAGA, Pro#/c%+ Tre%$)rer, Abr%KGASPAR . !OSUE, M)/c%+ Tre%$)rer, !%/;)e, Abr%K*EIRS OF PATERNO MILLARE,responents.

PARAS, J.:

This is a petition for revie! on certiorari of the ecision of theefunct "ourt of First Instance of (bra, Cranch I, ate $une 1+,1';+, renere in "ivil "ase No. &, entitle (bra Valle%

$unior "ollee, Inc., represente b% Pero V. Coronia, plaintiff

vs. (r#in M. "ariaa as Provincial Treasurer of (bra, *aspar V.Cos:ue as Municipal Treasurer of Canue, (bra an Paterno

Millare, efenants, the ecretal portion of !hich reas<

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IN VI3H OF (99 T3 FOR3*OIN*, the "ourt hereb%

eclares<

That the istraint sei4ure an sale b% the Municipal Treasurer of Canue, (bra, the Provincial Treasurer of sai province aainst

the lot an builin of the (bra Valle% $unior "ollee, Inc.,represente b% Director Pero Coronia locate at Canue,(bra, is valiG

That since the school is not e/e#pt fro# pa%in ta/es, it shoul

therefore pa% all bac5 ta/es in the a#ount of P&,1+0.B1 an bac5 ta/es an penalties fro# the pro#ulation of this ecisionG

That the a#ount eposite b% the plaintaff hi# the su# of

P0,000.00 before the trial, be confiscate to appl% for the

pa%#ent of the bac5 ta/es an for the ree#ption of the propert%in :uestion, if the a#ount is less than P,000.00, the re#ainer

#ust be returne to the Director of Pero Coronia, !horepresents the plaintiff hereinG

That the eposit of the Municipal Treasurer in the a#ount of

P,000.00 also before the trial #ust be returne to saiMunicipal Treasurer of Canue, (braG

(n finall% the case is hereb% orere is#isse !ith costs

aainst the plaintiff.

SO ORD3R3D. 6Rollo, pp. )B7

Petitioner, an eucational corporation an institution of hiher

learnin ul% incorporate !ith the Securities an 3/chane"o##ission in 1'+-, file a co#plaint 6(nne/ 1 of (ns!er b%

the responents eirs of Paterno MillareG Rollo, pp. '&)';7 on

$ul% 10, 1'; in the court a ("o to annul an eclare voi the

Notice of Sei4ure2 an the Notice of Sale of its lot an

builin locate at Canue, (bra, for non)pa%#ent of realestate ta/es an penalties a#ountin to P&,1+0.B1. Sai Notice

of Sei4ure of the collee lot an builin covere b% Oriinal

"ertificate of Title No. U)-B ul% reistere in the na#e of petitioner, plaintiff belo!, on $ul% , 1';, b% responents

Municipal Treasurer an Provincial Treasurer, efenants belo!,

!as issue for the satisfaction of the sai ta/es thereon. TheNotice of Sale !as cause to be serve upon the petitioner b%

the responent treasurers on $ul% -, 1'; for the sale at public

auction of sai collee lot an builin, !hich sale !as hel on

the sa#e ate. Dr. Paterno Millare, then Municipal Ma%or of Canue, (bra, offere the hihest bi of P,000.00 !hich !as

ul% accepte. The certificate of sale !as corresponinl% issue

to hi#.

On (uust 10, 1';, the responent Paterno Millare 6no!

ecease7 file throuh counstel a #otion to is#iss the

co#plaint.

On (uust B, 1';, the responent Provincial Treasurer an

Municipal Treasurer, throuh then Provincial Fiscal 9oreto ".

Rolan, file their ans!er 6(nne/ of (ns!er b% theresponents eirs of Pate#o MillareG Rollo, pp. '-)1007 to the

co#plaint. This !as follo!e b% an a#ene ans!er 6(nne/B, i+id , Rollo, pp. 101)10B7 on (uust B1, 1';.

On Septe#ber 1, 1'; the responent Paterno Millare file his

ans!er 6(nne/ &, i+id G Rollo, pp. 10)10-7.

On October 1, 1';, !ith the aforesai sale of the school pre#ises at public auction, the responent $ue, on. $uan P.

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(:uino of the "ourt of First Instance of (bra, Cranch I, orere

6(nne/ , i+id G Rollo, pp. 10')1107 the responents provincial

an #unicipal treasurers to eliver to the "ler5 of "ourt the procees of the auction sale. ence, on Dece#ber 1+, 1';,

petitioner, throuh Director Coronia, eposite !ith the trial

court the su# of P,000.00 evience b% PNC "hec5 No.'0+B'.

On (pril 1, 1';B, the parties entere into a stipulation of facts

aopte an e#boie b% the trial court in its :uestioneecision. Sai Stipulations reas<

STIP?9(TION OF F("TS

"OM3 NOH the parties, assiste b% counsels, an to this

onorable "ourt respectfull% enter into the follo!in areestipulation of facts<

1. That the personal circu#stances of the parties as state in pararaph 1 of the co#plaint is a#itteG but the particular

person of Mr. (r#in M. "ariaa is to be substitute, ho!ever,

b% an%one !ho is actuall% holin the position of ProvincialTreasurer of the Province of (braG

. That the plaintiff (bra Valle% $unior "ollee, Inc. is the o!ner

of the lot an builins thereon locate in Canue, (bra uner Oriinal "ertificate of Title No. 0)-BG

B. That the efenant *aspar V. Cos:ue, as Municipal treasurer

of Canue, (bra cause to be serve upon the (bra Valle%$unior "ollee, Inc. a Notice of Sei4ure on the propert% of sai

school uner Oriinal "ertificate of Title No. 0)-B for the

satisfaction of real propert% ta/es thereon, a#ountin to

P&,1+0.B1G the Notice of Sei4ure bein the one attache to the

co#plaint as 3/hibit (G

+. That on $une -, 1'; the above properties of the (bra Valle%$unior "ollee, Inc. !as sol at public auction for the

satisfaction of the unpai real propert% ta/es thereon an thesa#e !as sol to efenant Paterno Millare !ho offere thehihest bi of P,000.00 an a "ertificate of Sale in his favor

!as issue b% the efenant Municipal Treasurer.

&. That all other #atters not particularl% an speciall% covere b% this stipulation of facts !ill be the sub@ect of evience b% the

parties.

H3R3FOR3, it is respectfull% pra%e of the onorable "ourt

to consier an a#it this stipulation of facts on the point areeupon b% the parties.

Canue, (bra, (pril 1, 1';B.

S. (ripino Crillantes

T%p (*RIPINO CRI99(NT3S

(ttorne% for Plaintiff

S. 9oreto Rolan

T%p 9OR3TO RO9D(NProvincial Fiscal"ounsel for Defenants

Provincial Treasurer of

(bra an the MunicipalTreasurer of Canue, (bra

S. De#etrio V. Pre

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T%p. D3M3TRIO V. PR3

(ttorne% for Defenant

Paterno Millare 6Rollo, pp. 1;)1-7

(sie fro# the Stipulation of Facts, the trial court a#on others,

foun the follo!in< 6a7 that the school is reconi4e b% theovern#ent an is offerin Pri#ar%, ih School an "ollee"ourses, an has a school population of #ore than one thousan

stuents all in allG 6b7 that it is locate riht in the heart of the

to!n of Canue, a fe! #eters fro# the pla4a an about 10#eters fro# the "ourt of First Instance builinG 6c7 that the

ele#entar% pupils are house in a t!o)store% builin across the

streetG 67 that the hih school an collee stuents are house inthe #ain builinG 6e7 that the Director !ith his fa#il% is in the

secon floor of the #ain builinG an 6f7 that the annual ross

inco#e of the school reaches #ore than one hunre thousan pesos.

Fro# all the foreoin, the onl% issue left for the "ourt to

eter#ine an as aree b% the parties, is !hether or not the lot

an builin in :uestion are "sed excl"sively or ed"cational p"rposes. 6Rollo, p. 07

The succeein Provincial Fiscal, on. $ose (. Solo#on an his

(ssistant, on. 3usta:uio . Montero, file a Me#oranu# for

the *overn#ent on March &, 1';+, an a Supple#entalMe#oranu# on Ma% ;, 1';+, !herein the% opine that base

on the evience, the la!s applicable, court ecisions an @urispruence, the school builin an school lot use for

eucational purposes of the (bra Valle% "ollee, Inc., are

e/e#pte fro# the pa%#ent of ta/es. 6(nne/es C, C)1 of PetitionG Rollo, pp. +)+'G ++ an +'7.

Nonetheless, the trial court isaree because of the use of the

secon floor b% the Director of petitioner school for resiential

purposes. e thus rule for the overn#ent an renere theassaile ecision.

(fter havin been rante b% the trial court ten 6107 a%s fro#(uust , 1';+ !ithin !hich to perfect its appeal 6Per Orer ate (uust , 1';+G (nne/ * of PetitionG Rollo, p. &;7

petitioner instea availe of the instant petition for revie! on

certiorari !ith pra%er for preli#inar% in@unction before this"ourt, !hich petition !as file on (uust 1;, 1';+ 6Rollo, p.7.

In the resolution ate (uust 1, 1';+, this "ourt resolve to

ive D?3 "O?RS3 to the petition 6Rollo, p. &-7. Responents!ere re:uire to ans!er sai petition 6Rollo, p. ;+7.

Petitioner raise the follo!in assin#ents of error<

I

T3 "O?RT ; GH 3RR3D IN S?ST(ININ* (S V(9ID

T3 S3I?R3 (ND S(93 OF T3 "O993*3 9OT (ND

C?I9DIN* ?S3D FOR 3D?"(TION(9 P?RPOS3S OF T3P3TITION3R.

II

T3 "O?RT ; GH 3RR3D IN D3"9(RIN* T(T T3"O993*3 9OT (ND C?I9DIN* OF T3 P3TITION3R

(R3 NOT ?S3D 3>"9?SIV39= FOR 3D?"(TION(9

P?RPOS3S M3R39= C3"(?S3 T3 "O993*3PR3SID3NT R3SID3S IN ON3 ROOM OF T3 "O993*3

C?I9DIN*.

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III

T3 "O?RT ; GH 3RR3D IN D3"9(RIN* T(T T3

"O993*3 9OT (ND C?I9DIN* OF T3 P3TITION3R (R3 NOT 3>3MPT FROM PROP3RT= T(>3S (ND IN

ORD3RIN* P3TITION3R TO P(= P&,1+0.B1 (S R3(9T=T(>3S.

IV

T3 "O?RT ; GH 3RR3D IN ORD3RIN* T3

"ONFIS"(TION OF T3 P,000.00 D3POSIT M(D3 INT3 "O?RT C= P3TITION3R (S P(=M3NT OF T3

P&,1+0.B1 R3(9T= T(>3S. 6See Crief for the Petitioner, pp. 1)

7

The #ain issue in this case is the proper interpretation of the

phrase use e/clusivel% for eucational purposes.

Petitioner contens that the pri#ar% use of the lot an builinfor eucational purposes, an not the inciental use thereof,

eter#ines an e/e#ption fro# propert% ta/es uner Section

6B7, (rticle VI of the 1'B& "onstitution. ence, the sei4ure ansale of sub@ect collee lot an builin, !hich are contrar%

thereto as !ell as to the provision of "o##on!ealth (ct No.

+;0, other!ise 5no!n as the (ssess#ent 9a!, are !ithout leal basis an therefore voi.

On the other han, private responents #aintain that the collee

lot an builin in :uestion !hich !ere sub@ecte to sei4ure ansale to ans!er for the unpai ta/ are use< 617 for the eucational

purposes of the colleeG 67 as the per#anent resience of the

Presient an Director thereof, Mr. Pero V. Coronia, an his

fa#il% incluin the in)la!s an ranchilrenG an 6B7 for

co##ercial purposes because the roun floor of the collee

builin is bein use an rente b% a co##ercialestablish#ent, the Northern Mar5etin "orporation 6See

photoraph attache as (nne/ - 6"o##entG Rollo, p. '0J7.

Due to its ti#e fra#e, the constitutional provision !hich finsapplication in the case at bar is Section , pararaph B, (rticle

VI, of the then 1'B& Philippine "onstitution, !hich e/pressl%

rants e/e#ption fro# realt% ta/es for "e#eteries, churchesan parsonaes or convents appurtenant thereto, an all lans,

builins, an i#prove#ents "sed excl"sively for reliious,

charitable or eucational purposes ...

Relative thereto, Section &+, pararaph c, "o##on!ealth (ct

No. +;0 as a#ene b% Republic (ct No. +0', other!ise 5no!nas the (ssess#ent 9a!, provies<

The follo!in are e/e#pte fro# real propert% ta/ uner the

(ssess#ent 9a!<

/// /// ///

6c7 churches an parsonaes or convents appurtenant thereto,

an all lans, builins, an i#prove#ents "sed excl"sively for

reliious, charitable, scientific or eucational purposes.

/// /// ///

In this rear petitioner arues that the pri#ar% use of the school

lot an builin is the basic an controllin uie, nor# anstanar to eter#ine ta/ e/e#ption, an not the #ere inciental

use thereof.

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(s earl% as 1'1 in YM!; o Manila vs& !ollector o lnternal

%even"e, BB Phil. 1; 1'1J, this "ourt rule that !hile it #a%

be true that the =M"( 5eeps a loin an a boarin housean #aintains a restaurant for its #e#bers, still these o not

constitute business in the orinar% acceptance of the !or, but

an institution use e/clusivel% for reliious, charitable aneucational purposes, an as such, it is entitle to be e/e#pte

fro# ta/ation.

In the case of Cishop of :"eva #e'ovia v& 0rovincial <oard o $locos :orte, &1 Phil. B& 1';J, this "ourt inclue in the

e/e#ption a veetable aren in an a@acent lot an another lot

for#erl% use as a ce#eter%. It !as clarifie that the ter# usee/clusivel% consiers inciental use also. Thus, the e/e#ption

fro# pa%#ent of lan ta/ in favor of the convent inclues, not

onl% the lan actuall% occupie b% the builin but also thea@acent aren evote to the inciental use of the parish priest.The lot !hich is not use for co##ercial purposes but serves

solel% as a sort of loin place, also :ualifies for e/e#ption

because this constitutes inciental use in reliious functions.

The phrase e/clusivel% use for eucational purposes !as

further clarifie b% this "ourt in the cases of =errera vs& G"ezon

!ity <oard o assessment ;ppeals, B S"R( 1- 1'1J an!ommissioner o $nternal %even"e vs& <ishop o the Missionary

-istrict , 1+ S"R( ''1 1'&J, thus K

Moreover, the e/e#ption in favor of propert% use e/clusivel%for charitable or eucational purposes is 2not li#ite to propert%

actuall% inispensable2 therefor 6"oole% on Ta/ation, Vol. , p.

1+B07, but e/tens to facilities !hich are inciental to anreasonabl% necessar% for the acco#plish#ent of sai purposes,

such as in the case of hospitals, a school for trainin nurses, a

nurses2 ho#e, propert% use to provie housin facilities for

interns, resient octors, superintenents, an other #e#bers of

the hospital staff, an recreational facilities for stuent nurses,interns, an resients2 6-+ "$S 17, such as (thletic fiels

incluin a fir# use for the in#ates of the institution. 6"oole%

on Ta/ation, Vol. , p. 1+B07.

The test of e/e#ption fro# ta/ation is the use of the propert% for

purposes #entione in the "onstitution 6(postolic Prefect v.

"it% Treasurer of Cauio, ;1 Phil, &+; 1'+1J7.

It #ust be stresse ho!ever, that !hile this "ourt allo!s a #ore

liberal an non)restrictive interpretation of the phrase

e/clusivel% use for eucational purposes as provie for in(rticle VI, Section , pararaph B of the 1'B& Philippine

"onstitution, reasonable e#phasis has al!a%s been #ae thate/e#ption e/tens to facilities !hich are inciental to anreasonabl% necessar% for the acco#plish#ent of the #ain

purposes. Other!ise state, the use of the school builin or lot

for co##ercial purposes is neither conte#plate b% la!, nor b%

@urispruence. Thus, !hile the use of the secon floor of the#ain builin in the case at bar for resiential purposes of the

Director an his fa#il%, #a% fin @ustification uner the concept

of inciental use, !hich is co#pli#entar% to the #ain or pri#ar% purposeKeucational, the lease of the first floor thereof to the

Northern Mar5etin "orporation cannot b% an% stretch of thei#aination be consiere inciental to the purpose of eucation.

It !ill be note ho!ever that the afore#entione lease appears

to have been raise for the first ti#e in this "ourt. That the#atter !as not ta5en up in the to court is reall% apparent in the

ecision of responent $ue. No #ention thereof !as #ae in

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the stipulation of facts, not even in the escription of the school

builin b% the trial @ue, both e#boie in the ecision nor as

one of the issues to resolve in orer to eter#ine !hether or notsai properl% #a% be e/e#pte fro# pa%#ent of real estate

ta/es 6Rollo, pp. 1;)B7. On the other han, it is note!orth% that

such fact !as not ispute even after it !as raise in this "ourt.

Inee, it is a/io#atic that facts not raise in the lo!er court

cannot be ta5en up for the first ti#e on appeal. Nonetheless, as

an e/ception to the rule, this "ourt has hel that althouh afactual issue is not s:uarel% raise belo!, still in the interest of

substantial @ustice, this "ourt is not prevente fro# consierin a

pivotal factual #atter. The Supre#e "ourt is clothe !itha#ple authorit% to revie! palpable errors not assine as such if

it fins that their consieration is necessar% in arrivin at a @ust

ecision. 6Pere4 vs. "ourt of (ppeals, 1; S"R( +& 1'-+J7.

?ner the 1'B& "onstitution, the trial court correctl% arrive at

the conclusion that the school builin as !ell as the lot !here it

is built, shoul be ta/e, not because the secon floor of the

sa#e is bein use b% the Director an his fa#il% for resiential purposes, but because the first floor thereof is bein use for

co##ercial purposes. o!ever, since onl% a portion is use for

purposes of co##erce, it is onl% fair that half of the assesse ta/ be returne to the school involve.

PR3MIS3S "ONSID3R3D, the ecision of the "ourt of First

Instance of (bra, Cranch I, is hereb% (FFIRM3D sub@ect to the#oification that half of the assesse ta/ be returne to the

petitioner.

SO ORD3R3D.

Yap, !&.&, Melencio=errera, 0adilla and #armiento, ..&, conc"r&

A$ra %alley Colle&e v' A(uino

2/& 39(%45 $6 une $9%%8

Facts:

etitioner A#ra alle Colle-e is an educational corporation andinstitution of hi-her learnin- dul incorporated with the S+C in $9'%.0n 4 ul $97;5 the Municipal and ro"incial treasurers </aspar Bos1ue and Armin Caria-a5 respecti"el= and issued a Notice of Sei>ure upon the petitioner for the colle-e lot and #uildin- <0CT ?%3=for the satisfaction of said ta!es thereon. The treasurers ser"ed uponthe petitioner a Notice of Sale on % ul $97;5 the sale #ein- held onthe same da. @r. aterno Millare5 then municipal maor of Ban-ued5

A#ra5 offered the hi-hest #id of 45((( on pu#lic auction in"ol"in- the

sale of the colle-e lot and #uildin-. The certificate of sale wascorrespondin-l issued to him.

The petitioner filed a complaint on $( ul $97; in the court a 1uo toannul and declare "oid the Notice of Sei>ure and the Notice of Saleof its lot and #uildin- located at Ban-ued5 A#ra5 for nonpament of real estate ta!es and penalties amountin- to 65$'(.3$. 0n $; April$9735 the parties entered into a stipulation of facts adopted andem#odied # the trial court in its 1uestioned decision. The trial courtruled for the -o"ernment5 holdin- that the second floor of the #uildin-is #ein- used # the director for residential purposes and that the-round floor used and rented # Northern Maretin- Corporation5 a

commercial esta#lishment5 and thus the propert is not #ein- usede!clusi"el for educational purposes. )nstead of perfectin- an appeal5petitioner a"ailed of the instant petition for re"iew on certiorari withpraer for preliminar inDunction #efore the Supreme Court5 # filin-said petition on $7 Au-ust $97'.

The Supreme Court affirmed the decision of the CF) A#ra <Branch )=su#Dect to the modification that half of the assessed ta! #e returned tothe petitioner. The modification is deri"ed from the fact that the -round

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floor is #ein- used for commercial purposes <leased= and the secondfloor #ein- used as incidental to education <residence of the director=.

)ssue: Should there #e ta! e!emptionE

)nterpretation of the phrase used e!clusi"el for educational

purposes

Section ;;5 para-raph 35 Article )5 of the then $936 hilippineConstitution5 e!pressl -rants e!emption from realt ta!es for Cemeteries5 churches and parsona-es or con"ents appurtenantthereto5 and all lands5 #uildin-s5 and impro"ements used e!clusi"elfor reli-ious5 charita#le or educational purposes. This constitution isrelati"e to Section 6'5 para-raph c5 Commonwealth Act '7( asamended # &A '(9 <Assessment aw=. An institution usede!clusi"el for reli-ious5 charita#le and educational purposes5 and assuch5 it is entitled to #e e!empted from ta!ation notwithstandin- that iteeps a lod-in- and a #oardin- house and maintains a restaurant for its mem#ers <GMCA case=. A lot which is not used for commercialpurposes #ut ser"es solel as a sort of lod-in- place5 also 1ualifies for e!emption #ecause this constitutes incidental use in reli-iousfunctions <Bishop of Nue"a Se-o"ia case=.

+!emption in fa"our of propert used e!clusi"el for charita#le or educational purposes is Hnot limited to propert actuall indispensa#leItherefor #ut e!tends to facilities which are incidental to and reasona#lnecessar for the accomplishment of said purposes <Jerrera ".?ue>on Cit Board of Assessment Appeals=. ,hile the Court allows amore li#eral and nonrestricti"e interpretation of the phrase

e!clusi"el used for educational purposes5 reasona#le emphasis hasalwas #een made that e!emption e!tends to facilities which areincidental to and reasona#l necessar for the accomplishment of themain purposes. The use of the school #uildin- or lot for commercialpurposes is neither contemplated # law5 nor # Durisprudence. )n thecase at #ar5 the lease of the first floor of the #uildin- to the NorthernMaretin- Corporation cannot # an stretch of the ima-ination #econsidered incidental to the purpose of education.

Abr% %++eB Co++e;e #$ A)/o G.R. No. L<3>08(J

FACTS" Petitioner, an eucational corporation an institution of

hiher learnin ul% incorporate !ith the Securities an3/chane "o##ission in 1'+-, file a co#plaint to annul an

eclare voi the Notice of Sei4ure an the Notice of SaleQ of its lot an builin locate at Canue, (bra, for non)pa%#entof real estate ta/es an penalties a#ountin to P&,1+0.B1. Sai

Notice of Sei4ureQ b% responents Municipal Treasurer an

Provincial Treasurer, efenants belo!, !as issue for thesatisfaction of the sai ta/es thereon.

The parties entere into a stipulation of facts aopte an

e#boie b% the trial court in its :uestione ecision. The trialcourt rule for the overn#ent, holin that the secon floor of

the builin is bein use b% the irector for resiential purposesan that the roun floor use an rente b% Northern Mar5etin"orporation, a co##ercial establish#ent, an thus the propert%

is not bein use e/clusivel% for eucational purposes. Instea

of perfectin an appeal, petitioner availe of the instant petition

for revie! on certiorari !ith pra%er for preli#inar% in@unction before the Supre#e "ourt, b% filin sai petition on 1; (uust

1';+.

ISSUE" Hhether or not the lot an builin are use e/clusivel%

for eucational purposes.

*ELD" Section , pararaph B, (rticle VI, of the then 1'B&

Philippine "onstitution, e/pressl% rants e/e#ption fro# realt%ta/es for ce#eteries, churches an parsonaes or convents

appurtenant thereto, an all lans, builins, an i#prove#ents

use e/clusivel% for reliious, charitable or eucational purposes.ﾝ Reasonable e#phasis has al!a%s been #ae that the

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e/e#ption e/tens to facilities !hich are inciental to an

reasonabl% necessar% for the acco#plish#ent of the #ain

purposes. The use of the school builin or lot for co##ercial purposes is neither conte#plate b% la!, nor b% @urispruence.

In the case at bar, the lease of the first floor of the builin to the

Northern Mar5etin "orporation cannot b% an% stretch of thei#aination be consiere inciental to the purpose of

eucation. The test of e/e#ption fro# ta/ation is the use of the

propert% for purposes #entione in the "onstitution.

The ecision of the "FI (bra 6Cranch I7 is affir#e sub@ect to

the #oification that half of the assesse ta/ be returne to the

petitioner. The #oification is erive fro# the fact that theroun floor is bein use for co##ercial purposes 6lease7 an

the secon floor bein use as inciental to eucation 6resience

of the irector7.


SUPREME COURTManila

3N C(N"

G.R. No. L<771>' M%rc 1=, 1>88

IRGILIO GASTON, *ORTENCIA STARE, ROMEOGUANON, OSCAR ILLANUEA, OSE A!ELLO,REMO RAMOS, CAROLINA LOPE, ESUS ISASI,MANUEL LACSON, AIER LACSON, TITO TAGARAO,EDUARDO SUATENGCO, AUGUSTO LLAMAS,RODOLFO SIASON, PACIFICO MAG*ARI, R., OSEAMANDRE, AURELIO GAM!OA, ET AL., petitioners,vs.

REPU!LIC PLANTERS !AN, P*ILIPPINE SUGARCOMMISSION, %/ SUGAR REGULATOR-ADMINISTRATION, re$o/e/&$, ANGEL *. SEERINO,R., GLICERIO AELLANA, GLORIA P. DE LA PA,OE- P. DE LA PA, ET AL., %/ NATIONALFEDERATION OF SUGARCANE PLANTERS, intervenors.

MELENCIO<*ERRERA, J.:

Petitioners are suar proucers, suarcane planters an #illers,

!ho have co#e to this "ourt in their iniviual capacities an inrepresentation of other suar proucers, planters an #illers,

sai to be so nu#erous that it is i#practicable to brin the# all

before the "ourt althouh the sub@ect #atter of the presentcontrovers% is of co##on interest to all suar proucers,

!hether parties in this action or not.

Responent Philippine Suar "o##ission 6PI9S?"OM, for short7 !as for#erl% the overn#ent office tas5e !ith the

function of reulatin an supervisin the suar inustr% until it

!as supersee b% its co)responent Suar Reulator%(#inistration 6SR(, for brevit%7 uner 3/ecutive Orer No. 1-

on Ma% -, 1'-. (lthouh sai 3/ecutive Orer abolishe the

PI9S?"OM, its e/istence as a @uriical entit% !as #anate to

continue for three 6B7 #ore %ears for the purpose of prosecutin

an efenin suits b% or aainst it an enables it to settle anclose its affairs, to ispose of an conve% its propert% an to

istribute its assets.

Responent Republic Planters Can5 6briefl%, the Can57 is a

co##ercial ban5in corporation.

(nel . Severino, $r., et al., !ho are suarcane planters

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plantin an #illin their suarcane in ifferent #ill istricts of

Neros Occiental, !ere allo!e to intervene b% the "ourt,

since the% have co##on cause !ith petitioners an responentshavin interpose no ob@ection to their intervention.

Subse:uentl%, on $anuar% 1+,1'--, the National Feeration of

Suar Planters 6NFSP7 also #ove to intervene, !hich the "ourtallo!e on Februar% 1,1'--.

Petitioners an Intervenors have co#e to this "ourt pra%in for a

Hrit of #ana#us co##anin responents<

TO IMP93M3NT (ND (""OMP9IS T3

PRIV(TI(TION OF R3P?C9I" P9(NT3RS C(NE C=

T3 TR(NSF3R (ND DISTRIC?TION OF T3 S(R3SOF STO"E IN T3 S(ID C(NEG NOH 39D C= (ND

STI99 "(RRI3D IN T3 N(M3 OF T3 PI9IPPIN3S?*(R "OMMISSION, TO T3 S?*(R PROD?"3RS,P9(NT3RS (ND MI993RS, HO (R3 T3 TR?3

C3N3FI"I(9 OHN3RS OF T3 ;1,+1 "OMMON

S(R3S V(9?3D (T PB,&+-.000.00, (ND &B,00&,0+&

PR3F3RR3D S(R3S 6(, C "7 HIT ( TOT(9 P(R V(9?3 OF P&+,++,+.;, OR ( TOT(9 INV3STM3NT

OF P'0,';,+.;, T3 S(ID INV3STM3NT (VIN*

C33N F?ND3D C= T3 D3D?"TION OF Pl.00 P3R PI"?9FROM S?*(R PRO"33DS OF T3 S?*(R PROD?"3RS

"OMM3N"IN* T3 =3(R 1';-);' ?NTI9 T3 PR3S3NT(S ST(CI9I(TION F?ND P?RS?(NT TO P.D. W B--.

Responent Can5 oes not ta5e issue !ith either petitioners or

its corresponents as it has no beneficial or e:uitable interest

that #a% be affecte b% the rulin in this Petition, but !elco#esthe filin of the Petition since it !ill settle finall% the issue of

leal o!nership of the :uestione shares of stoc5.

Responents PI9S?"OM an SR(, for their part, s:uarel%

traverse the petition aruin that no trust results fro# Section ;

of P.D. No. B--G that the stabili4ation fees collecte areconsiere overn#ent funs uner the *overn#ent (uitin

"oeG that the transfer of shares of stoc5 fro# PI9S?"OM to

the suar proucers !oul be irreular, if not illealG an thatthis suit is barre b% laches.

The Solicitor *eneral aptl% su##ari4es the basic issues thus< 617

!hether the stabili4ation fees collecte fro# suar planters an#illers pursuant to Section ; of P.D. No. B-- are funs in trust

for the#, or public funsG an 67 !hether shares of stoc5 in

responent Can5 pai for !ith sai stabili4ation fees belon tothe PI9S?"OM or to the ifferent suar planters an #illers

fro# !ho# the fees !ere collecte or levie.

P. D. No. B--, pro#ulate on Februar% ,1';+, !hich createthe PI9S?"OM, provie for the collection of a Stabili4ation

Fun as follo!s<

S3". ;. !apitalization, #pecial F"nd o the !ommission, -evelopment and #ta+ilization F"nd . K There is hereb%

establishe a fun for the co##ission for the purpose of

financin the ro!th an evelop#ent of the suar inustr% an

all its co#ponents, stabili4ation of the o#estic #ar5et

incluin the forein #ar5et to +e administered in tr"st b% the"o##ission an eposite in the Philippine National Can5

erive in the #anner herein belo! cite fro# the follo!insources<

a. Stabili4ation fun shall be collecte as provie for in the

various provisions of this Decree.

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b. Stabili4ation fees shall be collecte fro# planters an #illers

in the a#ount of T!o 6P.007 Pesos for ever% picul prouce

an #ille for a perio of five %ears fro# the approval of thisDecree an One 6Pl.007 Peso for ever% picul prouce an

#ille ever% %ear thereafter.

Provie< That fift% 6P0.&07 centavos per picul of the a#ountlevie on planters, #illers an traers uner Section +6c7 of this

Decree !ill be use for the pa%#ent of salaries an !aes of

personnel, frine benefits an allo!ances of officers ane#plo%ees for the purpose of acco#plishin an e#plo%ees for

the purpose of acco#plishin the efficient perfor#ance of the

uties of the "o##ission.

Provie, further< That sai a#ount shall constitute a lien on the

suar :uean an8or !arehouse receipts an shall be paii##eiatel% b% the planters an #ill co#panies, suar centralsan refineries to the "o##ission. 6pararaphin an bol

supplie7.

Section ; of P.D. No. B-- oes provie that the stabili4ation feescollecte shall be a#inistere in trust b% the "o##ission.

o!ever, !hile the ele#ent of an intent to create a trust is

present, a resultin trust in favor of the suar proucers, #illers

an planters cannot be sai to have ensue because the

presu#ptive intention of the parties is not reasonabl%ascertainable fro# the lanuae of the statute itself.

The octrine of resultin trusts is foune on the presu#eintention of the partiesG an as a eneral rule, it arises !here, an

onl% !here such #a% be reasonabl% presu#e to be the intention

of the parties, as eter#ine fro# the facts an circu#stancese/istin at the ti#e of the transaction out of !hich it is souht to

be establishe 6-' ".$.S. '+;7.

No i#plie trust in favor of the suar proucers either can be

euce fro# the i#position of the lev%. The essential Iea of an i#plie trust involves a certain antaonis# bet!een the

cestui :ue trust an the trustee even !hen the trust has not arisenout of frau nor out of an% transaction of a frauulent or i##oral character 6& "$ 7. It is not clearl% sho!n fro# the

statute itself that the PI9S?"OM i#pose on itself the

obliation of holin the stabili4ation fun for the benefit of thesuar proucers. It #ust be cateoricall% e#onstrate that the

ver% a#inistrative aenc% !hich is the source of such

reulation !oul place a buren on itself 6 <atchelder v& !entral

<an* o the 0hilippines, 9)&0;1, $ul% ',1';,+ S"R( 10,

citin People v. Uue Po 9a%, '+ Phil. +0 1'&+J7.

Neither can petitioners place reliance on the histor% of responents Can5. The% recite that at the beinnin, the Can5

!as o!ne b% the Ro#an)Ro@as *roup. Cecause it uner!ent

ifficulties earl% in the %ear 1';-, Mr. Roberto S. Ceneicto,

then "hair#an of the PI9S?"OM, sub#itte a proposal to the"entral Can5 for the rehabilitation of the Can5. The "entral

Can5 acte favorabl% on the proposal at the #eetin of the

Monetar% Coar on March B1, 1';- sub@ect to the infusion of fresh capital b% the Ceneicto *roup. Petitioners #aintain that

this infusion of fresh capital !as acco#plishe, not b% an%capital invest#ent b% Mr. Ceneicto, but b% PI9S?"OM,!hich set asie the procees of the P1.00 per picul stabili4ation

fun to pa% for its subscription in shares of stoc5 of responent

Can5. It is petitioners2 sub#ission that all shares !ere place inPI9S?"OM2s na#e onl% out of convenience an necessit% an

that the% are the true an beneficial o!ners thereof.

T(>(TION

I i t f f t t l t h li ill hi h t PI9S?"OM PD BB-

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&1

In point of fact, !e cannot see our !a% clear to upholin

petitioners2 position that the invest#ent of the procees fro# the

stabili4ation fun in subscriptions to the capital stoc5 of theCan5 !ere bein #ae for an on their behalf. That coul have

been clarifie b% the Trust (ree#ent, ate Ma% -, 1'-,

entere into bet!een PI9S?"OM, as Trustor actin throuhMr. Fre $. 3li4ale as Officer)in)"hare, an responent RPC)

Trust Depart#ent2 as Trustee, ac5no!lein that

PI9S?"OM hols sai shares for an in behalf of the suar proucers, the latter bein the true an beneficial o!ners

thereof. The (ree#ent, ho!ever, i not et off the roun

because it faile to receive the approval of the PI9S?"OM

Coar of "o##issioners as re:uire in the (ree#ent itself.

The SR(, !hich succeee PI9S?"OM, neither approve the

(ree#ent because of the averse opinion of the SR(, Resient

(uitor, ate $une &,1'-, !hich !as ai#e b% the "hair#anof the "o##ission on (uit, on $anuar% ,1'-;.

On Februar% 1', 1'-;, the SR(, resolve to revo5e the Trust

(ree#ent in the liht of the rulin of the "o##ission on(uit that the afore#entione (ree#ent is of oubtful

valiit%.

Fro# the leal stanpoint, !e fin basis for the opinion of the

"o##ission on (uit reain<

That the overn#ent, PI9S?"OM or its successor)in)interest,

Suar Reulator% (#inistration, in particular, o!ns an stoc5s.Hhile it is true that the collecte stabili4ation fees !ere set asie

b% PI9S?"OM to pa% its subscription to RPC, it i not

collect sai fees for the account of the suar proucers. Thatstabili4ation fees are chares8levies on suar prouce an

#ille !hich accrue to PI9S?"OM uner PD BB-, as

a#ene. ...

The stabili4ation fees collecte are in the nature of a ta/, !hichis !ithin the po!er of the State to i#pose for the pro#otion of

the suar inustr% 6 "tz vs& ;raneta, 98 0hil& 187. The%constitute suar liens 6Sec. ;bJ, P.D. No. B--7. The collections#ae accrue to a Special Fun, a Develop#ent an

Stabili4ation Fun, al#ost Ientical to the Suar (@ust#ent

an Stabili4ation Fun create uner Section of "o##on!ealth (ct &;. 1 The ta/ collecte is not in a pure

e/ercise of the ta/in po!er. It is levie !ith a reulator%

purpose, to provie #eans for the stabili4ation of the suar inustr%. The lev% is pri#aril% in the e/ercise of the police

po!er of the State 69ut4 vs. (raneta, supra.7.

The protection of a lare inustr% constitutin one of the reatsources of the state2s !ealth an therefore irectl% or inirectl%

affectin the !elfare of so reat a portion of the population of

the State is affecte to such an e/tent b% public interests as to be

!ithin the police po!er of the soverein. 6$ohnson vs. State e/rel. Mare%, 1- So. -&;, cite in 9ut4 vs. (raneta, s"pra7.

The stabili4ation fees in :uestion are levie b% the State upon

suar #illers, planters an proucers for a special purpose K

that of financin the ro!th an evelop#ent of the suar inustr% an all its co#ponents, stabili4ation of the o#estic

#ar5et incluin the forein #ar5et the fact that the State hasta5en possession of #one%s pursuant to la! is sufficient to

constitute the# state funs, even thouh the% are hel for a

special purpose 69a!rence vs. (#erican Suret% "o., B Mich&-, +' (9R &B&, cite in + (#. $ur. Sec. , p. ;1-7. avin

been levie for a special purpose, the revenues collecte are to

T(>(TION

b t t i l f t b i th l f th t t t T l i titi 2 f l t th l

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&

be treate as a special fun, to be, in the lanuae of the statute,

a#inistere in trust2 for the purpose intene. Once the

purpose has been fulfille or abanone, the balance, if an%, is to be transferre to the eneral funs of the *overn#ent. That is

the essence of the trust intene 6See 1'-; "onstitution, (rticle

VI, Sec. '6B7, lifte fro# the 1'B& "onstitution, (rticle VI,Sec. B6lJ7. 2

The character of the Stabili4ation Fun as a special fun is

e#phasi4e b% the fact that the funs are eposite in thePhilippine National Can5 an not in the Philippine Treasur%,

#one%s fro# !hich #a% be pai out onl% in pursuance of an

appropriation #ae b% la! 61'-;7 "onstitution, (rticle VI, Sec.'1J,1';B "onstitution, (rticle VIII, Sec. 1-lJ7.

That the fees !ere collecte fro# suar proucers, planters an#illers, an that the funs !ere channele to the purchase of shares of stoc5 in responent Can5 o not convert the funs into

a trust fire for their benefit nor #a5e the# the beneficial

o!ners of the shares so purchase. It is but rational that the fees

be collecte fro# the# since it is also the% !ho are to be benefite fro# the e/peniture of the funs erive fro# it. The

invest#ent in shares of responent Can5 is not alien to the

purpose intene because of the Can52s character as aco##oit% ban5 for suar conceive for the inustr%2s ro!th

an evelop#ent. Further#ore, of note is the fact that one)half,6187 or PO.&0 per picul, of the a#ount levie uner P.D. No.B-- is to be utili4e for the pa%#ent of salaries an !aes of

personnel, frine benefits an allo!ances of officers an

e#plo%ees of PI9S?"OM thereb% i##eiatel% neatin theclai# that the entire a#ount levie is in trust for suar,

proucers, planters an #illers.

To rule in petitioners2 favor !oul contravene the eneral

principle that revenues erive fro# ta/es cannot be use for

purel% private purposes or for the e/clusive benefit of private persons. The Stabili4ation Fun is to be utili4e for the benefit

of the entire suar inustr%, an all its co#ponents, stabili4ation

of the o#estic #ar5et, incluin the forein #ar5et theinustr% bein of vital i#portance to the countr%2s econo#% an

to national interest.

H3R3FOR3, the Hrit of #ana#us is enie an the Petitionhereb% is#isse. No costs.

This Decision is i##eiatel% e/ecutor%.

SO ORD3R3D.

Teehan*ee, !&.&, Yap, :arvasa, ?"tierrez, .r&, !r"z, 0aras,

Feliciano, ?ancayco, 0adilla, <idin, #armiento, !ortes and

?ri@o;("ino, ..&, conc"r&

Fernan, .&, too* no part&

Foo&/o&e$

1 Sec. . (ll collections #ae uner this (ct shall accrue to a

special fun in the Philippine Treasur%, to be 5no!n as the2Suar (@ust#ent an Stabili4ation Fun an shall be pai out

onl% for an% or all of the follo!in purposes or to attain an% or

T(>(TION

all of the follo!in ob@ectives as #a% be provie b% la!

7/23/2019 Wave 2 Tax


&B

all of the follo!in ob@ectives, as #a% be provie b% la!.

/// /// ///

6&7 (ll #one% collecte on an% ta/ levie for a special purpose

shall be treate as a special fun an pai out for such purposeonl%. If the purpose for !hich a special fun !as create has

been fulfille or abanone, the balance, if an%, shall betransferre to the eneral funs of the *overn#ent. 61'-;

"onstitution, (rt. VI, Sec. -BJ7.

G%$&o/ #$. Re)b+c P+%/&er$ !%/

F%c&$" Petitioners are suar proucers an planters an #illers

file a M(ND(M?S to i#ple#ent the privati4ation of RepublicPlanters Can5, an for the transfer of the shares in the

overn#ent ban5 to suar proucers an planters. 6because the%are alleel% the true beneficial o!ners of the ban5 since the%

pa% P1.00 per picul of suar fro# the procees of suar

proucers as ST(CI9I(TION F33S7The shares are currentl% hel b% Philsuco# 8 Suar Reulator%

(#in. The Solen countere that the stabili4ation fees are

consiere overn#ent funs an that the transfer of shares tofro# Philsuco# to the suar proucers !oul be irreular.

I$$)e< Hhat is the nature of the P1.00 stabili4ation fees collecte

fro# suar proucers (re the% funs hel in trust for the#, or are the% public funs (re the shares in the ban5 6pai usin

these fees7 o!ne b% the overn#ent Philsuco# or privatel% b%

the ifferent suar planters fro# !ho# such fees !erecollecte

*e+< P?C9I" F?NDS. Hhile it is true that the collecte fees

!ere use to bu% shares in RPC, it i not collect sai fees for

the account of suar proucers. The stabili4ation fees !erechare on suar prouce an #ille !hich (""R?3D TO

PI9S?"OM, uner PD BB-.

The fees collecte (R3 IN T3 N(T?R3 OF ( T(>., !hich is

!ithin the po!er of the state to i#pose FOR T3

PROMOTION OF T3 S?*(R IND?STR=. The% constitutesuar liens. The collections accrue to a SP3"I(9 F?NDS. It is

T(>(TION

levie not purel% for ta/ation but for reulation to provie

http://coffeeafficionado.blogspot.com/2012/03/gaston-vs-republic-planters-bank.html

http://coffeeafficionado.blogspot.com/2012/03/gaston-vs-republic-planters-bank.html

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&+

levie not purel% for ta/ation, but for reulation, to provie

#eans TO ST(CI9I3 T3 S?*(R IND?STR=. The lev% is

pri#aril% an e/ercise of police po!ers.

The fact that the State has ta5en #one% pursuant to la! is

sufficient to constitute the# as ST(T3 F?NDS, even thouh

hel for a special purpose. avin been levie for a special purpose, the revenues are treate as a special fun, a#inistere

in trust for the purpose intene. Once the purpose has been

fulfille or abanone, the balance !ill be transferre to theeneral funs of ovt.

It is a special fun since the funs are eposite in PNC, not in

the National Treasur%.

The suar planters are NOT C3N3FI"I(9 OHN3RS. The#one% is collecte fro# the# onl% because the% it is also the%

!ho are to be benefite fro# the e/peniture of funs erivefro# it. The investin of the funs in RPC is not alien to the

purpose since the Can5 is a co##oit% ban5 for suar,

conceive for the suar inustr% ro!th an evelop#ent.

Revenues erive fro# ta/es cannot be use purel% for private

purposes or for the e/clusive benefit of private persons. The

Stabili4ation Fun is to be utili4e for the benefit of the 3NTIR3

S?*(R IND?STR=, an all its co#ponents, stabili4ation of o#estic an forein #ar5ets, since the suar inustr% is of vital

i#portance to the countr%s econo#% an national interest.

Gaston vs' Re)u$lic *lanter BankK MelencioJerrera <$9%%=+ey,ors. /s)ecial fun su&ar )roucers0

1AC

• 0n ; Fe#ruar $97'5 * 355! ,as )romul&ate ,ic created

the hilippine Su-ar Commission <J)S*C0M= and )roviefor te collection of a ta$iliation 1un5 primaril5 from theproduction of su-ar planters and millers.

• Sometime in $97%5 as the &epu#lic lanters Ban <Ban= was

under-oin- difficulties5 Mr. &o#erto Benedicto5 then Chairman of

1 Sec. 7. Capitalization, Special Fund of the Commission, Development andStabilization Fund. – There is hereby established a fund for the commissionfor the purpose of nancing the growth and development of the sugarindustry and all its components, stabilization of the domestic marketincluding the foreign market to be administered in trust by the ommissionand deposited in the !hilippine "ational #ank derived$.

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the J)S*C0M su#mitted a proposal to the Central Ban for the presumpti"e intention of the parties is not reasona#l

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&&

p preha#ilitation of the #an.

• The Central Ban appro"ed the proposal su#Dect to the infusion of

fresh capital # the Benedicto /roup.

• The ca)ital investment ,as mae $y *89L:C;M ,ic usemoney from te sta$iliation fun to )ay for its su$scri)tionin sares of stock of te Bank'

• e )etitioners L who are su-ar producers5 su-arcane planters

and millers L $rou&t tis class suit )rayin& for te issuanceof a <rit of Manamus commanin& te res)onents5J)S*C0M and its successor Su-ar &e-ulator Administration<S&A=5 to transfer an istri$ute te sares of stock in tesai $ank5 which are held in the respondentIs name5 to te su&ar )roucers )lanters an millers ,o are te true $eneficialo,ners tereof #ecause their contri#utions to the sta#ili>ationfund were used in the purchase of said stocs.

• J)S*C0M and S&A oppose the petition ar-uin- that there was

no resultin- trust from Sec. 7 of @ 3%% and that the sta#ili>ationfees collected are considered -o"ernment funds.

9:=>8=L

Are the sta#ili>ation fees pu#lic funds or funds in trust for the su-ar planters and millersE L *:BL9C 1:N'

RA9;NAL=

• ere ,as no trust tat ,as create $y * 355.

o ,hile the element of an intent to create a trust is present5 a

resultin- trust in fa"or of the su-ar producers5 millers andplanters cannot #e said to ha"e ensued #ecause the

p p p ascertaina#le from the lan-ua-e of the statute itself.

o There is no implied trusted that can #e deduced either

#ecause it is not cate-oricall demonstrated that theJ)S*C0M imposed on itself the o#li-ation of holdin- thesta#ili>ation fund for the #enefit of the su-ar producers.

o The historical #ac-round also does not show that the

in"estment of the proceeds form the sta#ili>ation fund insu#scriptions to the capital stoc of the Ban were #ein- madefor and on #ehalf of the petitioners.

• The fact is that te sta$iliation fees collecte are in te nature

of a ta?5 which is within the power of the State to impose for thepromotion of the su-ar industr tey constitute su&ar liens.

•8o,ever te ta? collecte is not a )ure e?ercise of te ta?in&)o,er@ it is levie ,it a re&ulatory )ur)ose <to pro"ide meansfor the sta#ili>ation of the su-ar industr= an is )rimarily in tee?ercise of te )olice )o,er of te tate.

o e fact tat te tate as taken )ossession of moneys

)ursuant to la, is sufficient to constitute tem statefuns even tou& tey are el for a s)ecial )ur)ose'

o 8avin& $een levie for a s)ecial )ur)ose te revenues

collecte are to $e treate as a s)ecial fun to $e

aministere in trust for te )ur)ose intene@ once te)ur)ose as $een fulfille or a$anone te $alance if any is to $e transferre to te &eneral funs of teGovernment <Art. )5 Sec. ;9 2385 Constitution=.

• The character of the Sta#ili>ation Fund as a special fund is

emphasi>ed # the fact that the funds are deposited in the NBand not in the hilippine Treasure5 which means that there is noneed for an appropriation from Con-ress to #e used.

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• Also5 the fact that half of the amount le"ied is to #e used to pa

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&

p

the officers and emploees of J)S*C0M immediatel ne-atedthe claim that the fund is held in trust for petitioners.

• o &rant te )etition ,oul contravene te &eneral )rinci)le

tat revenues erive from ta?es cannot $e use for )urely

)rivate )ur)oses or for te e?clusive $enefit of )rivate)ersons $ecause te ta$iliation fun is to $e utilie for te$enefit of te entire su&ar inustry'

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