TAX CASES Assignment 1

8/20/2019 TAX CASES Assignment 1

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G.R. No. 106611 July 21, 1994

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

COURT OF APPEALS, CITYTRUST AN!ING CORPORATION "#$ COURT

OF TA% APPEALS, respondents.

The judicial proceedings over the present controversy commenced with CTA Case No.

4099, wherein the Court of Ta Appeals ordered herein petitioner Commissioner of

!nternal "evenue to grant a refund to herein private respondent Citytrust #an$ing

Corporation %Citytrust& in the amount of '(),)(4,*0+.(4, representing its overpaid

income taes for (94 and (9*, -ut denied its claim for the alleged refunda-le amount

reflected in its (9) income ta return on the ground of prescription. 1 That judgment of

the ta court was affirmed -y respondent Court of Appeals in its judgment in CA/.".

' No. 1+)9. 2 The case was then elevated to us in the present petition for review

on certiorari wherein the latter judgment is impugned and sought to -e nullified and2or

set aside.

!t appears that in a letter dated August 1+, (9+, herein private respondent corporation

filed a claim for refund with the #ureau of !nternal "evenue %#!"& in the amount of

'(9,93(,34*.00 representing the alleged aggregate of the ecess of its carriedover total

uarterly payments over the actual income ta due, plus carriedover withholding ta

payments on government securities and rental income, as computed in its final income

ta return for the calendar year ending 5ecem-er )(, (9*. &

Two days later, or on August 1, (9+, in order to interrupt the running of the prescriptive

period, Citytrust filed a petition with the Court of Ta Appeals, doc$eted therein as CTA

Case No. 4099, claiming the refund of its income ta overpayments for the years (9),

(94 and (9* in the total amount of '(9,93(,34*.00. 4

!n the answer filed -y the 6ffice of the olicitor /eneral, for and in -ehalf of therein

respondent commissioner, it was asserted that the mere averment that Citytrust incurred a

net loss in (9* does not ipso facto merit a refund7 that the amounts of '+,+((,11).00,

'(,9*9,*(4.00 and '1,1).00 claimed -y Citytrust as (9) income ta overpayment,

taes withheld on proceeds of government securities investments, as well as on rental

income, respectively, are not properly documented7 that assuming arguendo that

petitioner is entitled to refund, the right to claim the same has prescri-ed

with respect to income ta payments prior to August 1, (94, pursuant to ections 191

and 19* of the National !nternal "evenue Code of (933, as amended, since the petition

was filed only on August 1, (9+. '

6n 8e-ruary 10, (99(, the case was su-mitted for decision -ased solely on the pleadings

and evidence su-mitted -y herein private respondent Citytrust. erein petitioner could

not present any evidence -y reason of the repeated failure of the Ta Credit2"efund

5ivision of the #!" to transmit the records of the case, as well as the investigation report

thereon, to the olicitor /eneral. 6

owever, on :une 14, (99(, herein petitioner filed with the ta court a manifestation and

motion praying for the suspension of the proceedings in the said case on the ground that

the claim of Citytrust for ta refund in the amount of '(9,93(,34*.00 was already -eing

processed -y the Ta Credit2"efund 5ivision of the #!", and that said -ureau was only

awaiting the su-mission -y Citytrust of the reuired confirmation receipts which would

show whether or not the aforestated amount was actually paid and remitted to the #!". (

Citytrust filed an opposition thereto, contending that since the Court of Ta Appeals

already acuired jurisdiction over the case, it could no longer -e divested of the same7

and, further, that the proceedings therein could not -e suspended -y the mere fact that the

claim for refund was -eing administratively processed, especially where the case had

already -een su-mitted for decision.

!t also argued that the #!" had already conducted an audit, citing therefor ;hi-its


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>2T on int. on govt. sec. (,91(,14*.)3

>2T on rental inc. 1+,+04.)0 (,(+1,44.+3

BBBBBBB BBBBBBB

Ta 6verpayment %(),44+,9(*.+3&

?ess= 8C5D paya-le (*0,1*1.00

BBBBBBB

Amount refunda-le for (94 ' %(),19+,++).+3&

(9* !ncome ta due %loss& ' B 0 B

?ess= >2T on rentals )+,3(+.43

BBBBBBB

Ta 6verpayment %)+,3(+.43&

?ess= 8C5D paya-le (,34.00

BBBBBBB

Amount "efunda-le for (9* ' %(3,41.43&

Note=

These credits are smaller than the claimed amount -ecause only the a-ove figures are

well supported -y the various ehi-its presented during the hearing.

No pronouncement as to costs.

6 6"5;";5. 10

The order for refund was -ased on the following findings of the Court of Ta Appeals= %(&

the fact of withholding has -een esta-lished -y the statements and certificates of

withholding taes accomplished -y herein private respondents withholding agents, the

authenticity of which were neither disputed nor controverted -y herein petitioner7 %1& noevidence was presented which could effectively dispute the correctness of the income ta

return filed -y herein respondent corporation and other material facts stated therein7 %)&

no deficiency assessment was issued -y herein petitioner7 and %4& there was an audit

report su-mitted -y the #!" Assessment #ranch, recommending the refund of overpaid

taes for the years concerned %;hi-its < to


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herein petitioners counsel was constrained to su-mit the case for decision on 8e-ruary

10, (99( without presenting any evidence.

8or that matter, the #!" officials and2or employees concerned also failed to heed the

order of the Court of Ta Appeals to remand the records to it pursuant to ection 1, "ule

3 of the "ules of the Court of Ta Appeals which provides that the Commissioner of

!nternal "evenue and the Commissioner of Customs shall certify and forward to the

Court of Ta Appeals, within ten days after filing his answer, all the records of the case in

his possession, with the pages duly num-ered, and if the records are in separate folders,

then the folders shall also -e num-ered.

The aforestated impassF came a-out due to the fact that, despite the filing of the

aforementioned initiatory petition in CTA Case No. 4099 with the Court of Ta Appeals,

the Ta "efund 5ivision of the #!" still continued to act administratively on the claim

for refund previously filed therein, instead of forwarding the records of the case to the

Court of Ta Appeals as ordered. 1)

!t is a long and firmly settled rule of law that the /overnment is not -ound -y the errors

committed -y its agents.19 !n the performance of its governmental functions, the tate

cannot -e estopped -y the neglect of its agent and officers. Although the /overnment

may generally -e estopped through the affirmative acts of pu-lic officers acting within

their authority, their neglect or omission of pu-lic duties as eemplified in this case will

not and should not produce that effect.

Nowhere is the aforestated rule more true than in the field of taation. 20 !t is aiomatic

that the /overnment cannot and must not -e estopped particularly in matters involving

taes. Taes are the life-lood of the nation through which the government agencies

continue to operate and with which the tate effects its functions for the welfare of its

constituents. 21The errors of certain administrative officers should never -e allowed to

jeopardiGe the /overnments financial position, 22especially in the case at -ar where the

amount involves millions of pesos the collection whereof, if justified, stands to -e

prejudiced just -ecause of -ureaucratic lethargy.

8urther, it is also worth nothing that the Court of Ta Appeals erred in denying

petitioners supplemental motion for reconsideration alleging -ringing to said courts

attention the eistence of the deficiency income and -usiness ta assessment against

Citytrust. The fact of such deficiency assessment is intimately related to and inetrica-ly

intertwined with the right of respondent -an$ to claim for a ta refund for the same year.

To award such refund despite the eistence of that deficiency assessment is an a-surdity

and a polarity in conceptual effects. erein private respondent cannot -e entitled torefund and at the same time -e lia-le for a ta deficiency assessment for the same year.

The grant of a refund is founded on the assumption that the ta return is valid, that is, the

facts stated therein are true and correct. The deficiency assessment, although not yet final,

created a dou-t as to and constitutes a challenge against the truth and accuracy of the

facts stated in said return which, -y itself and without unuestiona-le evidence, cannot -e

the -asis for the grant of the refund.

ection 1, Chapter !H of the National !nternal "evenue Code of (933, which was the

applica-le law when the claim of Citytrust was filed, provides that I%w&hen an assessment

is made in case of any list, statement, or return, which in the opinion of the

Commissioner of !nternal "evenue was false or fraudulent or contained any

understatement or undervaluation, no ta collected under such assessment shall -e

recovered -y any suits unless it is proved that the said list, statement, or return was not

false nor fraudulent and did not contain any understatement or undervaluation7 -ut this

provision shall not apply to statements or returns made or to -e made in good faith

regarding annual depreciation of oil or gas wells and mines.I

Eoreover, to grant the refund without determination of the proper assessment and the ta

due would inevita-ly result in multiplicity of proceedings or suits. !f the deficiency

assessment should su-seuently -e upheld, the /overnment will -e forced to institute

anew a proceeding for the recovery of erroneously refunded taes which recourse must

-e filed within the prescriptive period of ten years after discovery of the falsity, fraud or

omission in the false or fraudulent return involved. 2& This would necessarily reuire and

entail additional efforts and epenses on the part of the /overnment, impose a -urden on

and a drain of government funds, and impede or delay the collection of muchneeded

revenue for governmental operations.

Thus, to avoid multiplicity of suits and unnecessary difficulties or epenses, it is -oth

logically necessary and legally appropriate that the issue of the deficiency ta assessment

against Citytrust -e resolved jointly with its claim for ta refund, to determine once and

for all in a single proceeding the true and correct amount of ta due or refunda-le.

!n fact, as the Court of Ta Appeals itself has heretofore conceded, 24 it would -e only just

and fair that the tapayer and the /overnment ali$e -e given eual opportunities to avail

of remedies under the law to defeat each others claim and to determine all matters of

dispute -etween them in one single case. !t is important to note that in determining

whether or not petitioner is entitled to the refund of the amount paid, it would necessary

to determine how much the /overnment is entitled to collect as taes. This would

necessarily include the determination of the correct lia-ility of the tapayer and, certainly,

a determination of this case would constitute res judicata on -oth parties as to all the

matters su-ject thereof or necessarily involved therein.


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The Court cannot end this adjudication without o-serving that what caused the

/overnment to lose its case in the ta court may hopefully -e ascri-ed merely to the

ennui or ineptitude of officialdom, and not to syndicated intent or corruption. The

evidential cul-de-sac in which the olicitor /eneral found himself once again gives

su-stance to the pu-lic perception and suspicion that it is another prover-ial tip in the

ice-erg of venality in a government -ureau which is pejoratively rated over the years.

>hat is so distressing, aside from the financial losses to the /overnment, is the erosion

of trust in a vital institution wherein the reputations of so many honest and dedicated

wor$ers are -esmirched -y the acts or omissions of a few. ence, the li-eral view we

have here ta$en pro hac vice, which may give some degree of assurance that this Court

will unhesitatingly react to any -ane in the government service, with a replication of such

response -eing li$ewise epected -y the people from the eecutive authorities.

>;";86";, the judgment of respondent Court of Appeals in CA/.". ' No. 1+)9

is here-y ;T A!5; and the case at -ar is ";EAN5;5 to the Court of Ta Appeals for

further proceedings and appropriate action, more particularly, the reception of evidence

for petitioner and the corresponding disposition of CTA Case No. 4099 not otherwise

inconsistent with our adjudgment herein.

6 6"5;";5.

Narvasa, C.J., Padilla, Puno and Mendoza, JJ., concur.


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*G.R. No. 112024. J"#u"+y 2), 1999

P-ILIPPINE AN! OF COMMUNICATIONS, petitioner, vs. COMMISSIONER

OF INTERNAL REVENUE, COURT OF TA% APPEALS "#$ COURT OF

APPEALS, respondents.

E C I S I O N

/UISUMING, J .

This petition for review assails the "esolution J(K of the Court of Appeals datedeptem-er 11, (99), affirming the 5ecisionJ1K and "esolutionJ)K of the Court of TaAppeals which denied the claims of the petitioner for ta refund and ta credits,and disposing as follows=

!N L!;> 68 A?? T; 86";/6!N/, the instant petition for review is 5;N!;5 duecourse. The 5ecision of the Court of Ta Appeals dated Eay 10, (99) and its resolution

dated :uly 10, (99), are here-y A88!"E;5 in toto.

6 6"5;";5.J4K

The Court of Ta Appeals earlier ruled as follows=

>;";86";, petitioners claim for refund2ta credit of overpaid income ta for (9* inthe amount of '*,199,349.9* is here-y denied for having -een filed -eyond thereglementary period. The (9+ claim for refund amounting to '1)4,033.+9 is li$ewisedenied since petitioner has opted and in all li$elihood automatically credited the same tothe succeeding year. The petition for review is dismissed for lac$ of merit.

6 6"5;";5.J*K

The facts on record show the antecedent circumstances pertinent to this case.

'etitioner, 'hilippine #an$ of Communications %'#Com&, a commercial -an$ingcorporation duly organiGed under 'hilippine laws, filed its uarterly income ta returnsfor the first and second uarters of (9*, reported profits, and paid the total income taof '*,0(+,9*4.00. The taes due were settled -y applying '#Coms ta credit memos andaccordingly, the #ureau of !nternal "evenue %#!"& issued Ta 5e-it Eemo Nos. 034+*and 0343* for '),40(,30(.00 and '(, +(*,1*).00, respectively.

u-seuently, however, '#Com suffered losses so that when it filed its Annual!ncome Ta "eturns for the yearended 5ecem-er )(, (9*, it declared a net lossof '1*,)(3,11.00, there-y showing no income ta lia-ility. 8or the succeeding year,

ending 5ecem-er )(, (9+, the petitioner li$ewise reported a net loss of '(4,(19,+01.00,and thus declared no ta paya-le for the year.

#ut during these two years, '#Com earned rental income from leased properties. The lessees withheld and remitted to the #!" withholding credita-le taes

of '11,39*.*0 in (9* and '1)4,033.+9 in (9+.

6n August 3, (93, petitioner reuested the Commissioner of !nternal "evenue,among others, for a ta credit of '*,0(+,9*4.00 representing the overpayment of taes inthe first and second uarters of (9*.

Thereafter, on :uly 1*, (9, petitioner filed a claim for refund of credita-le taeswithheld -y their lessees from property rentals in (9* for '11,39*.*0 and in (9+for '1)4,033.+9.

'ending the investigation of the respondent Commissioner of !nternal "evenue, petitioner instituted a 'etition for "eview on Novem-er (, (9 -efore the Court of TaAppeals %CTA&. The petition was doc$eted as CTA Case No. 4)09 entitled= 'hilippine#an$ of Communications vs. Commissioner of !nternal "evenue.

The losses petitioner incurred as per the summary of petitioners claims for refundand ta credit for (9* and (9+, filed -efore the Court of Ta Appeals, are as follows=

(9* (9+

Net !ncome%?oss&

%'1*,)(3,11.00& %'(4,(19,+01.00&

Ta 5ue N!? N!?

@uarterly ta'ayments Eade *,0(+,9*4.00

Ta >ithheld atource

11,39*.*0 1)4,033.+9

;cess Ta '*,199,349.*0MMMMMMMMMMMMMM '1)4,033.+9MMMMMMMMMM

http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn3http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn4http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/1999/jan99/112024.htm#_edn1


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'ayments

CTAs decision reflects '#Coms (9* ta claim as '*,199,349.9*. A fortyfivecentavo difference was noted.

6n Eay 10, (99), the CTA rendered a decision which, as stated on the outset,denied the reuest of petitioner for a ta refund or credit in the sum amountof '*,199,349.9*, on the ground that it was filed -eyond the twoyear reglementary

period provided for -y law. The petitioners claim for refund in (9+ amountingto '1)4,033.+9 was li$ewise denied on the assumption that it was automatically credited

-y '#Com against its ta payment in the succeeding year.

6n :une 11, (99), petitioner filed a Eotion for "econsideration of the CTAsdecision -ut the same was denied due course for lac$ of merit. J+K

Thereafter, '#Com filed a petition for review of said decision and resolution of theCTA with the Court of Appeals. owever on eptem-er 11, (99), the Court of Appealsaffirmed in toto the CTAs resolution dated :uly 10, (99). ence this petition now -efore

us.

The issues raised -y the petitioner are=

!. >hether tapayer '#Com which relied in good faith on the formalassurances of #!" in "EC No. 3* and did not immediately file with theCTA a petition for review as$ing for the refund2ta credit of its (9*+ecess uarterly income ta payments can -e prejudiced -y thesu-seuent #!" rejection, applied retroactively, of its assurances in "EC

No. 3* that the prescriptive period for the refund2ta credit of ecessuarterly income ta payments is not two years -ut ten %(0&. J3K

!!. >hether the Court of Appeals seriously erred in affirming the CTAdecision which denied '#Coms claim for the refund of '1)4,033.+9income ta overpaid in (9+ on the mere speculation, without proof, thatthere were taes due in (93 and that '#Com availed of tacrediting thatyear .JK

imply stated, the main uestion is= >hether or not the Court of Appeals erred indenying the plea for ta refund or ta credits on the ground of prescription, despite

petitioners reliance on "EC No. 3*, changing the prescriptive period of two years toten years

'etitioner argues that its claims for refund and ta credits are not yet -arred -y prescription relying on the applica-ility of "evenue Eemorandum Circular No. 3*issued on April (, (9*. The circular states that overpaid income taes are not covered -ythe twoyear prescriptive period under the ta Code and that tapayers may claim refund

or ta credits for the ecess uarterly income ta with the #!" within ten %(0& years under Article ((44 of the Civil Code. The pertinent portions of the circular reads=

";L;ND; E;E6"AN5DE C!"CD?A" N6. 3*

D#:;CT= '"6C;!N/ 68 ";8DN5 6" TAH C";5!T 68 ;HC;C6"'6"AT; !NC6E; TAH ";D?T!N/ 8"6E T;8!?!N/ 68 T; 8!NA? A5:DTE;NT ";TD"N

T6= All !nternal "evenue 6fficers and 6thers Concerned

ections * and + of the National !nternal "evenue Code provide=

The foregoing provisions are implemented -y ection 3 of "evenue "egulations Nos. (033 which provide=

!t has -een o-served, however, that -ecause of the ecess ta payments, corporations fileclaims for recovery of overpaid income ta with the Court of Ta Appeals within the twoyear period from the date of payment, in accordance with ections 191 and 19* of the

National !nternal "evenue Code. !t is o-vious that the filing of the case in court is to preserve the judicial right of the corporation to claim the refund or ta credit.

!t should -e noted, however, that this is not a case of erroneously or illegally paid taunder the provisions of ections 191 and 19* of the Ta Code.

!n the a-ove provision of the "egulations the corporation may reuest for the refund ofthe overpaid income ta or claim for automatic ta credit. To insure prompt action oncorporate annual income ta returns showing refunda-le amounts arising from overpaiduarterly income taes, this 6ffice has promulgated "evenue Eemorandum 6rder No.)13+ dated :une ((, (93+, containing the procedure in processing said returns. Dnderthese procedures, the returns are merely preaudited which consist mainly of chec$ingmathematical accuracy of the figures of the return. After which, the refund or ta credit isgranted, and, this procedure was adopted to facilitate immediate action on cases li$e this.

I# 3 +5"+$, 5+57o+5, 5+5 3 #o #55$ o 73l5 8533o# 7o+ +535: 3# 5 Cou+ o7

T"; A885"l 3# o+$5+ o 8+55+5 5 +3 o


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Broadcasting Corporation vs. Court of Ta AppealsJ(0K petitioner claims that rulings or circulars promulgated -y the Commissioner of !nternal "evenue have no retroactiveeffect if it would -e prejudicial to tapayers. !n A#C#N case, the Court held that thegovernment is precluded from adopting a position inconsistent with one previously ta$enwhere injustice would result therefrom or where there has -een a misrepresentation to thetapayer.

'etitioner contends that ec. 14+ of the National !nternal "evenue Code eplicitly

provides for this rule as follows=

ec. 14+. Non-retroactivit! of rulings-- Any revocation, modification or reversal of anyof the rules and regulations promulgated in accordance with the preceding section or anyof the rulings or circulars promulgated -y the Commissioner shall not -e givenretroactive application if the revocation, modification, or reversal will -e prejudicial tothe tapayers ecept in the following cases=

a& where the tapayer deli-erately misstates or omits material facts from his return or inany document reuired of him -y the #ureau of !nternal "evenue7

-& where the facts su-seuently gathered -y the #ureau of !nternal "evenue are

materially different from the facts on which the ruling is -ased7

c& where the tapayer acted in -ad faith.

"espondent Commissioner of !nternal "evenue, through the olicitor /eneral,argues that the twoyear prescriptive period for filing ta cases in court concerningincome ta payments of Corporations is rec$oned from the date of filing the 8inalAdjusted !ncome Ta "eturn, which is generally done on April (* following the close of the calendar year. As precedents, respondent Commissioner cited cases which adhered tothis principle, to "it = ACC#A $nvest%ents Corp. vs. Court of Appeals, et al.,J((K and Co%%issioner of $nternal #evenue vs. TM& Sales, $nc., et al..J(1K "espondentCommissioner also states that since the 8inal Adjusted !ncome Ta "eturn of the

petitioner for the taa-le year (9* was supposed to -e filed on April (*, (9+, the latter had only until April (*, (9 to see$ relief from the court.8urther, respondentCommissioner stresses that when the petitioner filed the case -efore the CTA on

Novem-er (, (9, the same was filed -eyond the time fied -y law, and such failure isfatal to petitioners cause of action.

After a careful study of the records and applica-le jurisprudence on the matter, wefind that, contrary to the petitioners contention, the relaation of revenue regulations -y"EC 3* is not warranted as it disregards the twoyear prescriptive period set -y law.

#asic is the principle that taes are the life-lood of the nation. The primary purposeis to generate funds for the tate to finance the needs of the citiGenry and to advance thecommon weal.J()K 5ue process of law under the Constitution does not reuire judicial

proceedings in ta cases. This must necessarily -e so -ecause it is upon taation that thegovernment chiefly relies to o-tain the means to carry on its operations and it is of utmost

importance that the modes adopted to enforce the collection of taes levied should -esummary and interfered with as little as possi-le. J(4K

8rom the same perspective, claims for refund or ta credit should -e eercisedwithin the time fied -y law -ecause the #!" -eing an administrative -ody enforced tocollect taes, its functions should not -e unduly delayed or hampered -y incidentalmatters.

ection 1)0 of the National !nternal "evenue Code %N!"C& of (933 %now ec. 119, N!"C of (993& provides for the prescriptive period for filing a court proceeding for therecovery of ta erroneously or illegally collected, viz .=

ec. 1)0. #ecover! of ta erroneousl! or illegall! collected. -- No suit or proceeding shall -e maintained in any court for the recovery of any national internal revenue ta hereafteralleged to have -een erroneously or illegally assessed or collected, or of any penaltyclaimed to have -een collected without authority, or of any sum alleged to have -eenecessive or in any manner wrongfully collected, until a claim for refund or credit has

-een duly filed with the Commissioner7 -ut such suit or proceeding may -e maintained,whether or not such ta, penalty, or sum has -een paid under protest or duress.

!n any case, no such suit or proceeding shall 'e 'egun after the epiration of t"o !ears fro% the date of pa!%ent of the ta or penalt! regardless of an! supervening cause that%a! arise after pa!%ent 7 'rovided however, That the Commissioner may, even without awritten claim therefor, refund or credit any ta, where on the face of the return uponwhich payment was made, such payment appears clearly to have -een erroneously paid.%!talics supplied&

The rule states that the tapayer may file a claim for refund or credit with theCommissioner of !nternal "evenue, within two %1& years after payment of ta, -efore anysuit in CTA is commenced. The twoyear prescriptive period provided, should -ecomputed from the time of filing the Adjustment "eturn and final payment of the ta for the year.

!n Co%%issioner of $nternal #evenue vs. Philippine A%erican (ife $nsurance Co. ,J(*K this Court eplained the application of ec. 1)0 of (933 N!"C, as follows=

Clearly, the prescriptive period of two years should commence to run only from the timethat the refund is ascertained, which can only -e determined after a final adjustmentreturn is accomplished. !n the present case, this date is April (+, (94, and two yearsfrom this date would -e April (+, (9+. As we have earlier said in the TEH alescase, ections +,J(+K +9,J(3K and 30J(K on @uarterly Corporate !ncome Ta 'ayment andection )1( should -e considered in conjunction with it. J(9K

>hen the Acting Commissioner of !nternal "evenue issued "EC 3*, changingthe prescriptive period of two years to ten years on claims of ecess uarterly income ta

payments, such circular created a clear inconsistency with the provision of ec. 1)0 of

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(933 N!"C. !n so doing, the #!" did not simply interpret the law7 rather it legislatedguidelines contrary to the statute passed -y Congress.

!t -ears repeating that "evenue memorandumcirculars are consideredadministrative rulings %in the sense of more specific and less general interpretations of talaws& which are issued from time to time -y the Commissioner of !nternal "evenue. !t iswidely accepted that the interpretation placed upon a statute -y the eecutive officers,whose duty is to enforce it, is entitled to great respect -y the courts.Nevertheless, such

interpretation is not conclusive and will -e ignored if judicially found to -e erroneous.J10K Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they see$ to apply and implement. J1(K

!n the case of People vs. (i%,J11K it was held that rules and regulations issued -yadministrative officials to implement a law cannot go -eyond the terms and provisions of the latter.

Appellant contends that ection 1 of 8A6 No. )3( is void -ecause it is not onlyinconsistent with -ut is contrary to the provisions and spirit of Act. No. 400) as amended,

-ecause whereas the prohi-ition prescri-ed in said 8isheries Act was for any single period of time not eceeding five years duration, 8A6 No. )3( fied no period, that is tosay, it esta-lishes an a-solute -an for all time. This discrepancy -etween Act No. 400)

and 8A6 No. )3( was pro-a-ly due to an oversight on the part of ecretary ofAgriculture and Natural "esources. 6f course, in case of discrepancy, the -asic Act

prevails, for the reason that the regulation or rule issued to implement a law


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longer as$ for refund, as to JsicK the two remedies of refund and ta credit are alternative.J)0K

That the petitioner opted for an automatic ta credit in accordance with ec. +9 of the (933 N!"C, as specified in its (9+ 8inal Adjusted !ncome Ta "eturn, is a finding of fact which we must respect.Eoreover, the (93 annual corporate ta return of the

petitioner was not offered as evidence to controvert said fact. Thus, we are -ound -y thefindings of fact -y respondent courts, there -eing no showing of gross error or a-use ontheir part to distur- our reliance thereon. J)(K

@-EREFORE, the petition is here-y 5;N!;5. The decision of the Court of Appeals appealed from is A88!"E;5, with C6T against the petitioner.

SO ORERE.

Bellosillo, *Chair%an+, Puno, Mendoza, and Buena, JJ., concur .

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G.R. No. L>2&64' O


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1. irst-class and third-class %ail per%its. B Eails to -e posted without

postage affied under permits issued -y this #ureau shall each -e charged the

usual postage, in addition to the fivecentavo etra charge intended for said

society. The total etra charge thus received shall -e entered in the same official

receipt to -e issued for the postage collected, as in su-paragraph (.

). Metered %ail . B 8or each piece of mail matter impressed -y postage meter

under metered mail permit issued -y this #ureau, the etra charge of five

centavos for said society shall -e collected in cash and an official receipt issued

for the total sum thus received, in the manner indicated in su-paragraph (.

4. Business repl! cards and envelopes. B Dpon delivery of -usiness reply cards

and envelopes to holders of -usiness reply permits, the fivecentavo charge

intended for said society shall -e collected in cash on each reply card or

envelope delivered, in addition to the reuired postage which may also -e paid

in cash. An official receipt shall -e issued for the total postage and total etra

charge received, in the manner shown in su-paragraph (.

*. Mails entitled to franing privilege. B /overnment agencies, officials, and

other persons entitled to the fran$ing privilege under eisting laws may pay in

cash such etra charge intended for said society, instead of affiing the semi

postal stamps to their mails, provided that such mails are presented at the post

office window, where the fivecentavo etra charge for said society shall -e

collected on each piece of such mail matter. !n such case, an official receipt

shall -e issued for the total sum thus collected, in the manner stated in

su-paragraph (.

Eail under permits, metered mails and fran$ed mails not presented at the post

office window shall -e affied with the necessary semipostal stamps. !f found

in mail -oes without such stamps, they shall -e treated in the same way as

herein provided for other mails.

Adm. 6rder 9, amending Adm. 6rder ), as amended, eempts I/overnment and its

Agencies and !nstrumentalities 'erforming /overnmental 8unctions.I Adm. 6rder (0,

amending Adm. 6rder ), as amended, eempts Icopies of periodical pu-lications

received for mailing under any class of mail matter, including newspapers and magaGines

admitted as secondclass mail.I

The FACTS . 6n eptem-er l*, (9+) the petitioner #enjamin '. /omeG mailed a letter at

the post office in an 8ernando, 'ampanga. #ecause this letter, addressed to a certain

Agustin Auino of (0(4 5agohoy treet, ingalong, Eanila did not -ear the special anti

T# stamp reuired -y the statute, it was returned to the petitioner.

!n view of this development, the petitioner -rough suit for declaratory relief in the Court

of 8irst !nstance of 'ampanga, to test the constitutionality of the statute, as well as the

implementing administrative orders issued, contending that it violates the eual

protection clause of the Constitution as well as the rule of uniformity and euality of

taation. The lower court declared the statute and the orders unconstitutional7 hence this

appeal -y the respondent postal authorities.

8or the reasons set out in this opinion, the judgment appealed from must -e reversed.

I.

#efore reaching the merits, we deem it necessary to dispose of the respondents

contention that declaratory relief is unavailing -ecause this suit was filed after the

petitioner had committed a -reach of the statute. >hile conceding that the mailing -y the

petitioner of a letter without the additional antiT# stamp was a violation of "epu-lic Act

(+)*, as amended, the trial court nevertheless refused to dismiss the action on the ground

that under section + of "ule +4 of the "ules of Court, I!f -efore the final termination of

the case a -reach or violation of ... a statute ... should ta$e place, the action may

thereupon -e converted into an ordinary action.I

The prime specification of an action for declaratory relief is that it must -e -rought

I-efore -reach or violationI of the statute has -een committed. "ule +4, section ( so

provides. ection + of the same rule, which allows the court to treat an action for

declaratory relief as an ordinary action, applies only if the -reach or violation occurs after

the filing of the action -ut -efore the termination thereof. )

ence, if, as the trial court itself admitted, there had -een a -reach of the statute -efore

the firing of this action, then indeed the remedy of declaratory relief cannot -e availed of,

much less can the suit -e converted into an ordinary action.

Nor is there merit in the petitioners argument that the mailing of the letter in uestion did

not constitute a -reach of the statute -ecause the statute appears to -e addressed only to

postal authorities. The statute, it is true, in terms provides that Ino mail matter shall -e

accepted in the mails unless it -ears such semipostal stamps.I !t does not follow,

however, that only postal authorities can -e guilty of violating it -y accepting mails

without the payment of the antiT# stamp. !t is o-vious that they can -e guilty of

violating the statute only if there are people who use the mails without paying for theadditional antiT# stamp. :ust as in -ri-ery the mere offer constitutes a -reach of the law,

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so in the matter of the antiT# stamp the mere attempt to use the mails without the stamp

constitutes a violation of the statute. !t is not reuired that the mail -e accepted -y postal

authorities. That reuirement is relevant only for the purpose of fiing the lia-ility of

postal officials.

Nevertheless, we are of the view that the petitioners choice of remedy is correct -ecause

this suit was filed not only with respect to the letter which he mailed on eptem-er (*,

(9+), -ut also with regard to any other mail that he might send in the future. Thus, in his

complaint, the petitioner prayed that due course -e given to Iother mails without the

semipostal stamps which he may deliver for mailing ... if any, during the period covered

-y "epu-lic Act (+)*, as amended, as well as other mails hereafter to -e sent -y or to

other mailers which -ear the reuired postage, without collection of additional charge of

five centavos prescri-ed -y the same "epu-lic Act.I As one whose mail was returned, the

petitioner is certainly interested in a ruling on the validity of the statute reuiring the use

of additional stamps.

II.

>e now consider the constitutional o-jections raised against the statute and the

implementing orders.

(. !t is said that the statute is violative of the eual protection clause of the Constitution.

Eore specifically the claim is made that it constitutes mail users into a class for the

purpose of the ta while leaving untaed the rest of the population and that even among

postal patrons the statute discriminatorily grants eemption to newspapers while

Administrative 6rder 9 of the respondent 'ostmaster /eneral grants a similar eemption

to offices performing governmental functions. .

The five centavo charge levied -y "epu-lic Act (+)*, as amended, is in the nature of an

ecise ta, laid upon the eercise of a privilege, namely, the privilege of using the mails.

As such the o-jections levelled against it must -e viewed in the light of applica-le

principles of taation.

To -egin with, it is settled that the legislature has the inherent power to select the su-jects

of taation and to grant eemptions.4 This power has aptly -een descri-ed as Iof wide

range and f lei-ility.I* !ndeed, it is said that in the field of taation, more than in other

areas, the legislature possesses the greatest freedom in classification. + The reason for this

is that traditionally, classification has -een a device for fitting ta programs to local needs

and usages in order to achieve an euita-le distri-ution of the ta -urden. 3

That legislative classifications must -e reasona-le is of course undenied. #ut what the

petitioner asserts is that statutory classification of mail users must -ear some reasona-le

relationship to the end sought to -e attained, and that a-sent such relationship the

selection of mail users is constitutionally impermissi-le. This is altogether a different

proposition. As eplained in Co%%on"ealth v. (ife Assurance Co.=

>hile the principle that there must -e a reasona-le relationship -etween

classification made -y the legislation and its purpose is undou-tedly true in

some contets, it has no application to a measure whose sole purpose is to raise

revenue ... o long as the classification imposed is -ased upon some standard

capa-le of reasona-le comprehension, -e that standard -ased upon a-ility to

produce revenue or some other legitimate distinction, eual protection of the

law has -een afforded. ee Allied tores of 6hio, !nc. v. #owers, supra, )*

D.. at *13, 39 . Ct. at 44(7 #rown 8orman Co. v. Commonwealth of

Pentuc$y, 1d D.. *+, *3), 0 . Ct. *3, *0 %(9(0&.

>e are not wont to invalidate legislation on eual protection grounds ecept -y the

clearest demonstration that it sanctions invidious discrimination, which is all that the

Constitution for-ids. The remedy for unwise legislation must -e sought in the legislature.

Now, the classification of mail users is not without any reason. !t is -ased on a-ility to

pay, let alone the enjoyment of a privilege, and on administrative convinience. !n the

allocation of the ta -urden, Congress must have concluded that the contri-ution to the

antiT# fund can -e assured -y those whose who can afford the use of the mails.

The classification is li$ewise -ased on considerations of administrative convenience. 8or

it is now a settled principle of law that Iconsideration of practical administrative

convenience and cost in the administration of ta laws afford adeuate ground for

imposing a ta on a well recogniGed and defined class.I 9 !n the case of the antiT#

stamps, undou-tedly, the single most important and influential consideration that led the

legislature to select mail users as su-jects of the ta is the relative ease and

convenienceof collecting the ta through the post offices. The small amount of five

centavos does not justify the great epense and inconvenience of collecting through the

regular means of collection. 6n the other hand, -y placing the duty of collection on postal

authorities the ta was made almost selfenforcing, with as little cost and as little

inconvenience as possi-le.

And then of course it is not accurate to say that the statute constituted mail users into a

class. Eail users were already a class -y themselves even -efore the enactment of the

statue and all that the legislature did was merely to select their class. ?egislation is

essentially empiric and "epu-lic Act (+)*, as amended, no more than reflects a

distinction that eists in fact. As Er. :ustice 8ran$furter said, Ito recogniGe differences

P | 13


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Page | 13

that eist in fact is living law7 to disregard JthemK and concentrate on some a-stract

identities is lifeless logic.I(0

/ranted the power to select the su-ject of taation, the tates power to grant eemption

must li$ewise -e conceded as a necessary corollary. Ta eemptions are too common in

the law7 they have never -een thought of as raising issues under the eual protection

clause.

!t is thus erroneous for the trial court to hold that -ecause certain mail users are eempted

from the levy the law and administrative officials have sanctioned an invidious

discrimination offensive to the Constitution. The application of the lower courts theory

would reuire all mail users to -e taed, a conclusion that is hardly tena-le in the light of

differences in status of mail users. The Constitution does not reuire this $ind of euality.

As the Dnited tates upreme Court has said, the legislature may withhold the -urden of

the ta in order to foster what it conceives to -e a -eneficent enterprise. (( This is the case

of newspapers which, under the amendment introduced -y "epu-lic Act 1+)(, are

eempt from the payment of the additional stamp.

As for the /overnment and its instrumentalities, their eemption rests on the tates

sovereign immunity from taation. The tate cannot -e taed without its consent and

such consent, -eing in derogation of its sovereignty, is to -e strictly

construed.(1 Administrative 6rder 9 of the respondent 'ostmaster /eneral, which lists the

various offices and instrumentalities of the /overnment eempt from the payment of the

antiT# stamp, is -ut a restatement of this well$nown principle of constitutional law.

The trial court li$ewise held the law invalid on the ground that it singles out tu-erculosis

to the eclusion of other diseases which, it is said, are eually a menace to pu-lic health.

#ut it is never a reuirement of eual protection that all evils of the same genus -e

eradicated or none at all.() As this Court has had occasion to say, Iif the law presuma-ly

hits the evil where it is most felt, it is not to -e overthrown -ecause there are other

instances to which it might have -een applied.I(4

1. The petitioner further argues that the ta in uestion is invalid, first, -ecause it is not

levied for a pu-lic purpose as no special -enefits accrue to mail users as tapayers, and

second, -ecause it violates the rule of uniformity in taation.

The eradication of a dreaded disease is a pu-lic purpose, -ut if -y pu-lic purpose the

petitioner means -enefit to a tapayer as a return for what he pays, then it is sufficient

answer to say that the only -enefit to which the tapayer is constitutionally entitled is thatderived from his enjoyment of the privileges of living in an organiGed society, esta-lished

and safeguarded -y the devotion of taes to pu-lic purposes. Any other view would

preclude the levying of taes ecept as they are used to compensate for the -urden on

those who pay them and would involve the a-andonment of the most fundamental

principle of government B that it eists primarily to provide for the common good.(*

Nor is the rule of uniformity and euality of taation infringed -y the imposition of a flat

rate rather than a graduated ta. A ta need not -e measured -y the weight of the mail or

the etent of the service rendered. >e have said that considerations of administrative

convenience and cost afford an adeuate ground for classification. The same

considerations may induce the legislature to impose a flat ta which in effect is a charge

for the transaction, operating eually on all persons within the class regardless of the

amount involved.(+ As Er. :ustice olmes said in sustaining the validity of a stamp act

which imposed a flat rate of two cents on every Q(00 face value of stoc$ transferred=

6ne of the stoc$s was worth Q)0.3* a share of the face value of Q(00, the other

Q(31. The ineuality of the ta, so far as actual values are concerned, is

manifest. #ut, here again euality in this sense has to yield to practical

considerations and usage. There must -e a fied and indisputa-le mode of

ascertaining a stamp ta. !n another sense, moreover, there is euality. >hen the

taes on two sales are eual, the same num-er of shares is sold in each case7

that is to say, the same privilege is used to the same etent. Laluation is not the

only thing to -e considered. As was pointed out -y the court of appeals, the

familiar stamp ta of 1 cents on chec$s, irrespective of income or earning

capacity, and many others, illustrate the necessity and practice of sometimes

su-stituting count for weight ...(3

According to the trial court, the money raised from the sales of the antiT# stamps is

spent for the -enefit of the 'hilippine Tu-erculosis ociety, a private organiGation,

without appropriation -y law. #ut as the olicitor /eneral points out, the ociety is not

really the -eneficiary -ut only the agency through which the tate acts in carrying out

what is essentially a pu-lic function. The money is treated as a special fund and as such

need not -e appropriated -y law.(

). 8inally, the claim is made that the statute is so -roadly drawn that to eecute it the

respondents had to issue administrative orders far -eyond their powers. !ndeed, this is

one of the grounds on which the lower court invalidated "epu-lic Act (+)(, as amended,

namely, that it constitutes an undue delegation of legislative power.

Administrative 6rder ), as amended -y Administrative 6rders 3 and (0, provides that for

certain classes of mail matters %such as mail permits, metered mails, -usiness reply cards,

etc.&, the fivecentavo charge may -e paid in cash instead of the purchase of the antiT#

P | 14


14/26

Page | 14

stamp. !t further states that mails deposited during the period August (9 to eptem-er )0

of each year in mail -oes without the stamp should -e returned to the sender, if $nown,

otherwise they should -e treated as nonmaila-le.

!t is true that the law does not epressly authoriGe the collection of five centavos ecept

through the sale of antiT# stamps, -ut such authority may -e implied in so far as it may

-e necessary to prevent a failure of the underta$ing. The authority given to the

'ostmaster /eneral to raise funds through the mails must -e li-erally construed,

consistent with the principle that where the end is reuired the appropriate means are

given.(9

The antiT# stamp is a distinctive stamp which shows on its face not only the amount of

the additional charge -ut also that of the regular postage. !n the case of -usiness reply

cards, for instance, it is o-vious that to reuire mailers to affi the antiT# stamp on their

cards would -e to ma$e them pay much more -ecause the cards li$ewise -ear the amount

of the regular postage.

!t is li$ewise true that the statute does not provide for the disposition of mails which do

not -ear the antiT# stamp, -ut a declaration therein that Ino mail matter shall -e

accepted in the mails unless it -ears such semipostal stampI is a declaration that such

mail matter is nonmaila-le within the meaning of section (9*1 of the Administrative

Code. Administrative 6rder 3 of the 'ostmaster /eneral is -ut a restatement of the law

for the guidance of postal officials and employees. As for Administrative 6rder 9, we

have already said that in listing the offices and entities of the /overnment eempt from

the payment of the stamp, the respondent 'ostmaster /eneral merely o-served an

esta-lished principle, namely, that the /overnment is eempt from taation.

ACC6"5!N/?


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G.R. No. L>416&1 5e find the petition impressed with merits.

(. The neus of the present controversy is the apparent conflict -etween the "evised

Charter of the City of Eanila and the ?ocal Ta Code on the manner of pu-lishing a ta

ordinance enacted -y the Eunicipal #oard of Eanila. 8or, while ection (3 of the

"evised Charter provides=

1ach proposed ordinance shall -e pu-lished in two daily newspapers

of general circulation in the city, and shall not -e discussed or enacted

-y the #oard until after the third day following such pu-lication.

1ach approved ordinance shall -e pu-lished in two dailynewspapers of general circulation in the city, within ten days after its

approval7 and shall ta$e effect and -e in force on and after the

twentieth day following its pu-lication, if no date is fied in the

ordinance.

ection 4) of the ?ocal Ta Code directs=

>ithin ten days after their approval , certified true copies of all

provincial, city, municipal and -arrioordinances lev!ing or i%posing

taes, fees or other charges shall -e pu-lished for three consecutive

days in a newspaper or pu-lication widely circulated within the jurisdiction of the local government, or posted in the local legislative

Page | 16


16/26

Page | 16

hall or premises and in two other conspicuous places within the

territorial jurisdiction of the local government. !n either case, copies of

all provincial, city, municipal and -arrio ordinances shall -e furnished

the treasurers of the respective component and mother units of a local

government for dissemination.

!n other words, while the "evised Charter of the City of Eanila reuires

pu-lication 'efore the enactment of the ordinance and after the approval thereof in two

daily newspapers of general circulation in the city, the ?ocal Ta Code only prescri-es for

pu-lication after the approval of Iordinances lev!ing or i%posing taes, fees or other

chargesI either in a newspaper or pu-lication widely circulated within the jurisdiction of

the local government or -y posting the ordinance in the local legislative hall or premises

and in two other conspicuous places within the territorial jurisdiction of the local

government. 'etitioners compliance with the ?ocal Ta Code rather than with the

"evised Charter of the City spawned this litigation.

There is no uestion that the "evised Charter of the City of Eanila is a special act since

it relates only to the City of Eanila, whereas the ?ocal Ta Code is a general law -ecause

it applies universally to all local governments. #lac$stone defines general law as a

universal rule affecting the entire community and special law as one relating to particular

persons or things of a class. 1 And the rule commonly said is that a prior special law is not

ordinarily repealed -y a su-seuent general law. The fact that one is special and the other

general creates a presumption that the special is to -e considered as remaining an

eception of the general, one as a general law of the land, the other as the law of a

particular case. 2 owever, the rule readily yields to a situation where the special statute

refers to a su-ject in general, which the general statute treats in particular . The eactly is

the circumstance o-taining in the case at -ar. ection (3 of the "evised Charter of the

City of Eanila spea$s of IordinanceI in general, i.e., irrespective of the nature and scope

thereof,"hereas, ection 4) of the ?ocal Ta Code relates to Iordinances levying or

imposing taes, fees or other chargesI in particular. !n regard, therefore, to ordinances ingeneral, the "evised Charter of the City of Eanila is dou-tless dominant, -ut, that

dominant force loses its continuity when it approaches the realm of Iordinances levying

or imposing taes, fees or other chargesI in particular. There, the ?ocal Ta Code

controls. ere, as always, a general provision must give way to a particular

provision. & pecial provision governs. 4 This is especially true where the law containing

the particular provision was enacted later than the one containing the general provision.

The City Charter of Eanila was promulgated on :une (, (949 as against the ?ocal Ta

Code which was decreed on :une (, (93). The lawma$ing power cannot -e said to have

intended the esta-lishment of conflicting and hostile systems upon the same su-ject, or to

leave in force provisions of a prior law -y which the new will of the legislating power

may -e thwarted and overthrown. uch a result would render legislation a useless and

!dle ceremony, and su-ject the law to the reproach of uncertainty and unintelligi-ility. '

The case of Cit! of Manila v. Teotico 6 is opposite. !n that case, Teotico sued the City of

Eanila for damages arising from the injuries he suffered when he fell inside an

uncovered and unlighted catch-asin or manhole on '. #urgos Avenue. The City of Eanila

denied lia-ility on the -asis of the City Charter %".A. 409& eempting the City of Eanila

from any lia-ility for damages or injury to persons or property arising from the failure of

the city officers to enforce the provisions of the charter or any other law or ordinance, or

from negligence of the City Eayor, Eunicipal #oard, or other officers while enforcing or

attempting to enforce the provisions of the charter or of any other law or ordinance. Dpon

the other hand, Article 1(9 of the Civil Code ma$es cities lia-le for damages for the

death of, or injury suffered -y any persons -y reason of the defective condition of roads,

streets, -ridges, pu-lic -uildings, and other pu-lic wor$s under their control or

supervision. 6n review, the Court held the Civil Code controlling. !t is true that, insofar

as its territorial application is concerned, the "evised City Charter is a special law and the

su-ject matter of the two laws, the "evised City Charter esta-lishes a general rule of

lia-ility arising from negligence in general, regardless of the o-ject thereof, whereas the

Civil Code constitutes a particular prescription for lia-ility due to defective streets in particular. !n the same manner, the "evised Charter of the City prescri-es a rule for the

pu-lication of IordinanceI in general , while the ?ocal Ta Code esta-lishes a rule for the

pu-lication of Iordinance levying or imposing taes fees or other charges in particular .

!n fact, there is no rule which prohi-its the repeal even -y implication of a special or

specific act -y a general or -road one. ( A charter provision may -e impliedly modified or

superseded -y a later statute, and where a statute is controlling, it must -e read into the

charter notwithstanding any particular charter provision. ) A su-seuent general law

similarly applica-le to all cities prevails over any conflicting charter provision, for the

reason that a charter must not -e inconsistent with the general laws and pu-lic policy of

the state. 9 A chartered city is not an independent sovereignty. The state remains supremein all matters not purely local. 6therwise stated, a charter must yield to the constitution

and general laws of the state, it is to have read into it that general law which governs the

municipal corporation and which the corporation cannot set aside -ut to which it must

yield. >hen a city adopts a charter, it in effect adopts as part of its charter general law of

such character. 10

1. The principle of ehaustion of administrative remedies is strongly asserted -y

petitioners as having -een violated -y private respondent in -ringing a direct suit in court.

This is -ecause ection 43 of the ?ocal Ta Code provides that any uestion or issue

raised against the legality of any ta ordinance, or portion thereof, shall -e referred for

opinion to the city fiscal in the case of ta ordinance of a city. The opinion of the city

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fiscal is appeala-le to the ecretary of :ustice, whose decision shall -e final and

eecutory unless contested -efore a competent court within thirty %)0& days. #ut, the

petition -elow plainly shows that the controversy -etween the parties is deeply rooted in

a pure uestion of law= whether it is the "evised Charter of the City of Eanila or the

?ocal Ta Code that should govern the pu-lication of the ta ordinance. !n other words,

the dispute is sharply focused on the applica-ility of the "evised City Charter or the

?ocal Ta Code on the point at issue, and not on the legality of the imposition of the ta.

;haustion of administrative remedies -efore resort to judicial -odies is not an a-soluterule. !t admits of eceptions. >here the uestion litigated upon is purely a legal one, the

rule does not apply. 11 The principle may also -e disregarded when it does not provide a

plain, speedy and adeuate remedy. !t may and should -e relaed when its application

may cause great and irrepara-le damage. 12

). !t is maintained -y private respondent that the su-ject ordinance is not a Ita

ordinance,I -ecause the imposition of rentals, permit fees, tolls and other fees is not

strictly a taing power -ut a revenueraising function, so that the procedure for

pu-lication under the ?ocal Ta Code finds no application. The pretense -ears its own

mar$s of fallacy. 'recisely, the raising of revenues is the principal o-ject of taation.

Dnder ection *, Article H! of the New Constitution, I;ach local government unit shallhave the power to create its own sources of revenue and to levy taes, su-ject to such

provisions as may -e provided -y law.I 1& And one of those sources of revenue is what

the ?ocal Ta Code points to in particular= I?ocal governments may collect fees or

rentals for the occupancy or use of pu-lic mar$ets and premises .I 14 They can

provide for and regulate mar$et stands, stalls and privileges, and, also, the sale, lease or

occupancy thereof. They can license, or permit the use of, lease, sell or otherwise dispose

of stands, stalls or mar$eting privileges. 1'

!t is a fee-le attempt to argue that the ordinance violates 'residential 5ecree No. 3, dated

eptem-er )0, (931, insofar as it affects livestoc$ and animal products, -ecause the said

decree prescri-es the collection of other fees and charges thereon Iwith the eception ofantemortem and postmortem inspection fees, as well as the delivery, stoc$yard and

slaughter fees as may -e authoriGed -y the ecretary of Agriculture and Natural

"esources.I 16Clearly, even the eception clause of the decree itself permits the collection

of the proper fees for livestoc$. And the ?ocal Ta Code %'.5. 1)(, :uly (, (93)&

authoriGes in its ection )(= I?ocal governments may collect fees for the slaughter of

animals and the use of corrals I

4. The nonparticipation of the Ear$et Committee in the enactment of 6rdinance No.

3*11 supposedly in accordance with "epu-lic Act No. +0)9, an amendment to the City

Charter of Eanila, providing that Ithe mar$et committee shall formulate, recommend and

adopt, su')ect to the ratification of the %unicipal 'oard, and approval of the %a!or ,

policies and rules or regulation repealing or maneding eisting provisions of the mar$et

codeI does not infect the ordinance with any germ of invalidity. 1( The function of the

committee is purely recommendatory as the underscored phrase suggests, its

recommendation is without -inding effect on the Eunicipal #oard and the City Eayor.

!ts prior acuiescence of an intended or proposed city ordinance is not a condition sine

ua non -efore the Eunicipal #oard could enact such ordinance. The native power of the

Eunicipal #oard to legislate remains undistur-ed even in the slightest degree. !t can

move in its own initiative and the Ear$et Committee cannot demur. At most, the Ear$etCommittee may serve as a legislative aide of the Eunicipal #oard in the enactment of

city ordinances affecting the city mar$ets or, in plain words, in the gathering of the

necessary data, studies and the collection of consensus for the proposal of ordinances

regarding city mar$ets. Euch less could it -e said that "epu-lic Act +0)9 intended to

delegate to the Ear$et Committee the adoption of regulatory measures for the operation

and administration of the city mar$ets. Potestas delegata non delegare potest .

*. 'rivate respondent -ewails that the mar$et stall fees imposed in the disputed ordinance

are diverted to the eclusive private use of the Asiatic !ntegrated Corporation since the

collection of said fees had -een let -y the City of Eanila to the said corporation in a

IEanagement and 6perating Contract.I The assumption is of course saddled onerroneous premise. The fees collected do not go direct to the private coffers of the

corporation. 6rdinance No. 3*11 was not made for the corporation -ut for the purpose of

raising revenues for the city. That is the o-ject it serves. The entrusting of the collection

of the fees does not destroy the pu-lic purpose of the ordinance. o long as the purpose is

pu-lic, it does not matter whether the agency through which the money is dispensed is

pu-lic or private. The right to ta depends upon the ultimate use, purpose and o-ject for

which the fund is raised. !t is not dependent on the nature or character of the person or

corporation whose intermediate agency is to -e used in applying it. The people may -e

taed for a pu-lic purpose, although it -e under the direction of an individual or private

corporation. 1)

Nor can the ordinance -e stric$en down as violative of ection )%e& of the Anti/raft and

Corrupt 'ractices Act -ecause the increased rates of mar$et stall fees as levied -y the

ordinance will necessarily inure to the unwarranted -enefit and advantage of the

corporation. 19 >e are concerned only with the issue whether the ordinance in uestion is

intra vires. 6nce determined in the affirmative, the measure may not -e invalidated

-ecause of conseuences that may arise from its enforcement. 20

ACC6"5!N/?


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6 6"5;";5.

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G.R. No. L>29646 No5=?5+ 10, 19()

MAYOR ANTONIO J. VILLEGAS, petitioner,

vs.

-IU C-IONG TSAI PAO -O "#$ JUGE FRANCISCO ARCA, respondents.

This is a petition for certiorari to review tile decision dated eptem-er (3, (9+ of

respondent :udge 8rancisco Arca of the Court of 8irst !nstance of Eanila, #ranch !, in

Civil Case No. 31393, the dispositive portion of winch reads.

>herefore, judgment is here-y rendered in favor of the petitioner and against the

respondents, declaring 6rdinance No. + )3 of the City of Eanila null and void. The

preliminary injunction is made permanent. No pronouncement as to cost.

6 6"5;";5.

Eanila, 'hilippines, eptem-er (3, (9+.

%/5.& 8"ANC!C6 A"CA

:udge 1

The controverted 6rdinance No. +*)3 was passed -y the Eunicipal #oard of Eanila on

8e-ruary 11, (9+ and signed -y the herein petitioner Eayor Antonio :. Lillegas of

Eanila on Earch 13, (9+. 2

City 6rdinance No. +*)3 is entitled=

AN 6"5!NANC; EAP!N/ !T DN?A>8D? 86" AN< ';"6N N6T A C!T!R;N68 T; '!?!''!N; T6 #; ;E'?6


20/26

Page | 20

T; ";'6N5;NT :D5/; C6EE!TT;5 A ;"!6D AN5 'AT;NT ;""6" 68

?A> !N "D?!N/ TAT 6"5!NANC; N6. +*)3 L!6?AT;5 T; CA"5!NA?

"D?; 68 DN!86"E!T< 68 TAHAT!6N.

!!

";'6N5;NT :D5/; ?!P;>!; C6EE!TT;5 A /"AL; AN5 'AT;NT ;""6"

68 ?A> !N "D?!N/ TAT 6"5!NANC; N6. +*)3 L!6?AT;5 T; '"!NC!'?;

A/A!NT DN5D; 5;!/NAT!6N 68 ?;/!?AT!L; '6>;".

!!!

";'6N5;NT :D5/; 8D"T;" C6EE!TT;5 A ;"!6D AN5 'AT;NT

;""6" 68 ?A> !N "D?!N/ TAT 6"5!NANC; N6. +*)3 L!6?AT;5 T; 5D;

'"6C; AN5 ;@DA? '"6T;CT!6N C?AD; 68 T; C6NT!TDT!6N.

'etitioner Eayor Lillegas argues that 6rdinance No. +*)3 cannot -e declared null and

void on the ground that it violated the rule on uniformity of taation -ecause the rule on

uniformity of taation applies only to purely ta or revenue measures and that 6rdinance

No. +*)3 is not a ta or revenue measure -ut is an eercise of the police power of the

state, it -eing principally a regulatory measure in nature.

The contention that 6rdinance No. +*)3 is not a purely ta or revenue measure -ecause

its principal purpose is regulatory in nature has no merit. >hile it is true that the first part

which reuires that the alien shall secure an employment permit from the Eayor involves

the eercise of discretion and judgment in the processing and approval or disapproval of

applications for employment permits and therefore is regulatory in character the second

part which reuires the payment of '*0.00 as employees fee is not regulatory -ut a

revenue measure. There is no logic or justification in eacting '*0.00 from aliens who

have -een cleared for employment. !t is o-vious that the purpose of the ordinance is to

raise money under the guise of regulation.

The '*0.00 fee is unreasona-le not only -ecause it is ecessive -ut -ecause it fails to

consider valid su-stantial differences in situation among individual aliens who are

reuired to pay it. Although the eual protection clause of the Constitution does not

for-id classification, it is imperative that the classification should -e -ased on real and

su-stantial differences having a reasona-le relation to the su-ject of the particular

legislation. The same amount of '*0.00 is -eing collected from every employed alien

whether he is casual or permanent, part time or full time or whether he is a lowly

employee or a highly paid eecutive

6rdinance No. +*)3 does not lay down any criterion or standard to guide the Eayor in

the eercise of his discretion. !t has -een held that where an ordinance of a municipality

fails to state any policy or to set up any standard to guide or limit the mayors action,

epresses no purpose to -e attained -y reuiring a permit, enumerates no conditions for

its grant or refusal, and entirely lac$s standard, thus conferring upon the Eayor ar-itrary

and unrestricted power to grant or deny the issuance of -uilding permits, such ordinance

is invalid, -eing an undefined and unlimited delegation of power to allow or prevent an

activity per se lawful. 10

!n Chinese lour $%porters Association vs. Price Sta'ilization Board , 11 where a law

granted a government agency power to determine the allocation of wheat flour among

importers, the upreme Court ruled against the interpretation of uncontrolled power as it

vested in the administrative officer an ar-itrary discretion to -e eercised without a

policy, rule, or standard from which it can -e measured or controlled.

!t was also held in Pri%icias vs. ugoso 12 that the authority and discretion to grant and

refuse permits of all classes conferred upon the Eayor of Eanila -y the "evised Charter

of Eanila is not uncontrolled discretion -ut legal discretion to -e eercised within the

limits of the law.

6rdinance No. +*)3 is void -ecause it does not contain or suggest any standard or

criterion to guide the mayor in the eercise of the power which has -een granted to him

-y the ordinance.

The ordinance in uestion violates the due process of law and eual protection rule of the

Constitution.

"euiring a person -efore he can -e employed to get a permit from the City Eayor of

Eanila who may withhold or refuse it at will is tantamount to denying him the -asic right

of the people in the 'hilippines to engage in a means of livelihood. >hile it is true that

the 'hilippines as a tate is not o-liged to admit aliens within its territory, once an alien is

admitted, he cannot -e deprived of life without due process of law. This guarantee

includes the means of livelihood. The shelter of protection under the due process and

eual protection clause is given to all persons, -oth aliens and citiGens. 1&

The trial court did not commit the errors assigned.

>;";86";, the decision appealed from is here-y affirmed, without pronouncement

as to costs.

6 6"5;";5.

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Barredo, Maasiar, Mu2oz Pal%a

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22/26

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G.R. No. '1'9& No5=?5+ ', 1992

NATIONAL EVELOPMENT COMPANY, plaintiffappellee,

vs. CEU CITY "#$ AUGUSTO PACIS " T+5"u+5+ o7 C5?u C3y, defendant

appellants.

!s a pu-lic land reserved -y the 'resident for warehousing purposes in favor of a

governmentowned or controlled corporation, 1 as well as the warehouse su-seuently

erected thereon, eempt from real property ta

'etitioner National 5evelopment Company %N5C&, a governmentowned or controlled

corporation %/6CC& eisting -y virtue of C.A. (1 2 and ;.6. )99, & is authoriGed to

engage in commercial, industrial, mining, agricultural and other enterprises necessary or

contri-utory to economic development or important to pu-lic interest. !t also operates, in

furtherance of its o-jectives, su-sidiary corporations one of which is the now defucnt

National >arehousing Corporation %N>C&. 4

6n August (0, (9)9, the 'resident issued 'roclamation No. 4)0 ' reserving #loc$ no. 4,

"eclamation Area No. 4, of Ce-u City, consisting of 4,*99 suare meters, for

warehousing purposes under the administration of N>C. 6 u-seuently, in (940, a

warehouse with a floor area of (,940 suare meters more or less, was constructed

thereon. (

6n 6cto-er 4, (943, ;.6. 9) dissolved N>C ) with N5C ta$ing over its assets and

functions. 9

Commencing (94, Ce-u City %C;#D& assessed and collected from N5C real estate

taes on the land and the warehouse thereon. 10 #y the first uarter of (930, a total of

'(00,)(+.)( was paid -y N5C 11 of which only '),9*.0+ was under protest. 12

6n 10 Earch (930, N5C wrote the City Assessor demanding full refund of the real estate

taes paid to C;#D claiming that the land and the warehouse standing thereon -elonged

to the "epu-lic and therefore eempt from taation. 1& C;#D did not acuiesce in the

demand, hence, the present suit filed 1* 6cto-er (931 in the Court of 8irst !nstance of

Eanila.

6n 19 Eay (93), the Court of 8irst !nstance of Eanila, #ranch HH!!, promulgated a

decision 14 the dispositive portion of which reads B

>;";86";, judgment is here-y rendered sentencing the City ofCe-u, thru the Treasurer of said City, to refund to the plaintiff,

National 5evelopment Company, the real estate taes paid -y it for the

parcel of land covered -y 'residential 'roclamation No. 4)0 of August

(0, (9)9, and the warehouse erected thereon from and after 6cto-er

1*, (9++, with interests thereon at the legal rate from the date of the

filing of the complaint and the costs of the suit.

The defendants appealed to the Court of Appeals which however certified the case to Ds

as one involving pure uestions of law, pursuant to ec. (3, ".A. 19+.

!n this appeal, C;#D assigns five %*& errors 1' imputed to the trial court which may -e

synopsiGed into whether N5C is eempted from payment of the real estate taes on the

land reserved -y the 'resident for warehousing purposes as well as the warehouse

constructed thereon, and in the affirmative, whether N5C may recover in refund

unprotested real estate taes it paid from (94 to (930.

6n the first uestion, C;#D insists on taa-ility of the su-ject properties, claiming that

no law grants N5C eemption from real estate taes, and that N5C, as recipient of the

land reserved -y the 'resident pursuant to ec. ) of the 'u-lic ?and Act, 16 is lia-le for

payment or ordinary %real estate& taes under ec. ((* therefore. C;#D contends that the

properties have ceased to -e ta eempt under the Assessment ?aw. 1( when the

government disposed of them in favor of N5C, and even assuming that title to the land

remains with the government %ownership -eing the -asis for real estate taa-ility under

the Assessment ?aw&, the upreme Court rulings esta-lish increasing rather than

IownershipI as -asis for real estate ta lia-ility.

6n the other hand, N5C maintains the ec. ) of the Assessment ?aw, which eempts

properties owned -y the "epu-lic from real estate ta, includes su-ject properties in the

eemption. !t invo$es the ruling in Board of Assess%ent Appeals vs. CTA 3

N4SA 1) which held that properties of N>A, a /6CC, were eempt from real estate ta

-ecause ec. ) of the Assessment ?aw applied to all government properties whether held

in governmental or proprietary capacity. N5C rejects the applica-ility of ec. ((* of the

'u-lic ?and Act to the su-ject land, claiming that provision contemplates dispositions of

pu-lic land with eventual transfer of title. !n addition, N5C -elieves that it is neither a

grantee of a pu-lic land nor an applicant within the purview of the same provision.

As already adverted to, one of the principal issues -efore Ds is the interpretation of a

provision of the Assessment ?aw, the precursor of the then "eal 'roperty Ta Code and

the ?ocal /overnment Code, where IownershipI of the property and not IuseI is the test

of ta lia-ility. 19

Page | 23


23/26

g |

ection, ) par. %a&, of the Assessment ?aw, on which N5C claims real estate ta

eemption, provides B

ection ). Propert! ee%pt fro% ta. B The eemptions shall -e as

follows= %a& 'roperty owned -y the Dnited tates of America, the

Commonwealth of the 'hilippines, any province, city, municipality at

municipal district . . .

The same opinion of N5C was passed upon in National /evelop%ent Co. v. Province of

Nueva 1ci)a 20 where >e held that its properties were not comprehended in ec. ), par

%a&, of the Assessment ?aw. !n part, >e stated=

(. Commonwealth Act No. (1 which created N5C contains no

provision eempting it from the payment of real estate ta on

properties it may acuire . . . There is justification in the contention of

plaintiffappellee that . . . J!Kt is undenia-le that to any municipality

the principal source of revenue with which it would defray its

operation will came from real property taes. !f the National

5evelopment Company would -e eempt from paying real property

taes over these properties, the town of /a-aldon will -ee deprived of

much needed revenues with which it will maintain itself and finance

the compelling needs of its inha-itants %p. +, #rief of 'laintiff

Appellee&.

1. 5efendantappellant N5C does not come under classification of

municipal or pu-lic corporation in the sense that it may sue and -e

sued in the same manner as any other private corporations, and in this

sense, it is an entity different from the government, defendant

corporation may -e sued without its consent, and is su-ject to taation.

!n the case N5C vs. :ose e find no compelling reason why the foregoing ruling, although referring to lands

which would eventually -e transferred to private individuals, should not apply eually to

this case.

N5C cites Board of Assess%ent Appeals, Province of (aguna v. Court of Ta Appeal and

National 4ater"ors and Se"erage Authorit! *N4SA+. !n that case, >e held that

properties of N>A, a /6CC, were eempt from real estate ta -ecause ec. ), par %c&,of ".A. 430 did not distinguish -etween those possessed -y the government in

sovereign2governmental2political capacity and those in private2proprietary2patrimonial

character.

The conflict -etween N/C v. Nueva 1ci)a, supra, and BAA v. CTA and N4SA, supra, is

more superficial than real. The N/C decision spea$s of properties owned -y N5C, while

the BAA ruling concerns properties -elonging to the "epu-lic. The latter case appears to

-e eceptional -ecause the parties therein stipulated B

(. That the petitioner National >aterwor$s and ewerage Authority

%NA>AA& is a pu-lic corporation created -y virtue of "epu-lic Act.

No. ()), and that it is o"ned '! the 5overn%ent of the Philippines as

"ell as all propert! co%prising "ater"ors and se"erage s!ste%s

placed under it %;mphasis supplied&.

There, the Court o-served= I!t is conceded, in the stipulation of facts, that the property

involved in this case Iis owned -y the /overnment of the 'hilippines.I ence, it -elongs

to the "epu-lic of the 'hilippines and falls suarely within letter of the a-ove provision.I

!n the case at -ar, no similar statement appears in the stipulation of facts, hence,

ownership of su-ject properties should first -e esta-lished. 8or, while it may -e stated

that the "epu-lic owns N5C, it does not necessary follow that properties owned -y N5C,

Page | 24


24/26

g |

are also owned -y "epu-lic B in the same way that stoc$holders are not ipso

facto owners of the properties of their corporation.

The "epu-lic, li$e any individual, may form a corporation with personality and eistence

distinct from its own. The separate personality allows a /6CC to hold and possess

properties in its own name and, thus, permit greater independence and flei-ility in its

operations. !t may, therefore, -e stated that ta eemption of property owned -y the

"epu-lic of the 'hilippines Irefers to properties owned -y the /overnment and -y itsagencies which do not have separate and distinct personalities %unincorporated entities&.

>e find the separate opinion of :ustice #autistaAngelo in 5onzales v. 6echanova, et

al ., 21 appropriate and enlightening B

. . . The /overnment of the "epu-lic of the 'hilippines under the

"evised Administrative Code refers to that entity through which the

functions of government are eercised, including the various arms

through which political authority is made effective whether they -e

provincial, municipal or other form of local government, whereas a

government instrumentality refers to corporations owned or controlled

-y the government to promote certain aspects of the economic life ofour people. A government agency therefore, must necessarily after

refer to the government itself to the "epu-lic, as distinguished from

any government instrumentality which has a personality distinct and

separate from it %ection 1&.

The foregoing discussion does not mean that -ecause N5C, li$e most /6CCs engages in

commercial enterprises all properties of the government and its unincorporated agencies

possessed in propriety character are taa-le. imilarly, in the case at -ar, N5C proceeded

on the premise that the BAA ruling declared all properties owed -y /6CCs as properties

in the name of the "epu-lic, hence, eempt under ec. ) of the Assessment ?aw.22

To come within the am-it of the eemption provided in Art. ), par. %a&, of the Assessment

?aw, it is important to esta-lish that the property is owned -y the government or its

unincorporated agency, and once government ownership is determined, the nature of the

use of the property, whether for proprietary or sovereign purposes, -ecomes immaterial.

>hat appears to have -een ceded to N>C %later transferred to N5C&, in the case -efore

Ds, is merely the administration of the property while the government retains ownership

of what has -een declared reserved for warehousing purposes under 'roclamation No.

4)0.

!ncidentally, the parties never raised the issued the issue of ownership from the court a

uo to this Court.

A reserved land is defined as a IJpKu-lic land that has -een withheld or $ept -ac$ from

sale or disposition.I 2& The land remains Ia-solute property of the government.I 24 The

government Idoes not part with its title -y reserving them %lands&, -ut simply gives notice

to all the world that it desires them for a certain purpose.I 2' A-solute disposition of land

is not implied from reservation7 26 it merely means Ia withdrawal of a specified portion of

the pu-lic domain from disposal under the land laws and the appropriation thereof, for

the time -eing, to some particular use or purpose of the general government.I 2( As its

title remains with the "epu-lic, the reserved land is clearly recovered -y the taeemption provision.

C;#D nevertheless contends that the reservation of the property in favor of N>C or

N5C is a form of disposition of pu-lic land which, su-jects the recipient %N5C & to real

estate taation under ec. ((* of the 'u-lic ?and Act. as amended -y ".A. 4)+, 2) which

estate=

ec ((*. All lands granted -y virtue of this Act, including homesteads

upon which final proof has not -een made or approved shall, even

though and while the title remains in the tate, -e su-ject to the

ordinary taes, which shall -e paid -y the grantee or the applicant, -eginning with the year net following the one in which the

homestead application has -een filed, or the concession has -een

approved, or the contract has -een signed, as the case may -e, on the

-asis of the value fied in such filing, approval or signing of the

application, concession or contract.

The essential uestion then is whether lands reserved pursuant to ec. ) are

comprehended in ec. ((* and, therefore, taa-le.

ection ((* of the 'u-lic ?and Act should -e treated as an eception to Art. ), par. %a&, of

the Assessment ?aw. >hile ordin

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