PASEO REALTY AND DEVELOPMENT CORP. vs.COURT OF APPEALSG.R. No.

119286
October 13, 2004FACTS:
Paseo Realty and Development Corporation, a domestic corporation engaged in the
lease of two parcels of land at Paseo de Roxas in Makati City. On April 16, 1990,
petitioner filed its Income Tax Return for the calendaryear1989 declaring a gross
income of P1,855,000.00, deductions of P1,775,991.00, net income of P79,009.00,
an income tax due thereon in the amount of P27,653.00, prior years excess credit
of P146,026.00, and creditable taxes withheld in 1989 of P54,104.00 or a total tax
credit of P200,130.00 and credit balance of P172,477.00.In a resolution dated
October 21, 1993 Respondent Court reconsidered its decision of July 29, 1993 and
dismissed the petition for review, stating that it has
overlooked the fact that the petitioners 1989 Corporate Income Tax Return
(Exh. A) indicated that the amount of P54,104.00 subject of petitioners claim for
refund has already been included as part and parcel of the P172,477.00 which the
petitioner automatically applied as tax credit for the succeeding taxable year 1990.
Petitioner filed a Motion for Reconsideration which was denied by respondent Court
on March 10,1994.Petitioner filed a Petition for Review dated April 3, 1994 with the
Courtof Appeals. Resolving the twin issues of whether petitioner is entitled to a refu
nd of P54,104.00 representingcreditable taxes withheld in 1989 and whether
petitioner applied such creditable taxes withheld to its 1990 income tax liability, the
appellate court held that petitioner is not entitled to a refund because it had already
elected to apply the total amount of P172,447.00, which includes the P54,104.00
refund claimed, against its income tax liability for 1990. The appellate court
elucidated on the reason for its dismissal of petitioners claim for refund.
ISSUE:
Whether or not the alleged excess taxes paid by a corporation during a taxable
year should be refunded or credited against its tax liabilities for the succeeding
year?
RULING:
The petition must be denied. As a matter of principle, it is not advisable for this
Court to set aside the conclusion reached by an agency such as the CTA which is, by
the very nature of its functions, dedicated exclusively to the study and
consideration of tax problems and has necessarily developed an expertise on the
subject, unless there has been an abuse or improvident exercise of its authority.
This interdiction finds particular application in this case since the CTA, after careful
consideration of the merits of the Commissioner of Internal Revenues motion for
reconsideration, reconsidered its earlier decision which ordered the latter to refund
the amount of P54,104.00 to petitioner. Its resolution cannot be successfully
assailed based, as it is, on the pertinent laws as applied to the facts.
Petitioners 1989 tax return indicates an aggregate creditable tax of P172,477.00,
representing its 1988 excess credit of P146,026.00 and 1989 creditable tax of
P54,104.00 less tax due for 1989, which it elected to apply as tax credit for the
succeeding taxable year. According to petitioner, it successively utilized this amount
when it obtained refunds in CTA Case No. 4439 and CTA Case No. 4528 and applied
its1990 tax liability, leaving a balance of P54,104.00, the amount subject of the
instant claim for refund.
The confusion as to petitioners entitlement to a refund could altogether have
Been avoided had it presented its tax return for 1990. Such return would have
shown whether petitioner actually applied its 1989 tax credit of P172,477.00, which
includes the P54,104.00 creditable taxes withheld for 1989subject of the instant
claim for refund, against its 1990 tax liability as it had elected in its 1989 return, or
at least, whether petitioners tax credit of P172,477.00 was applied to its approved
refunds as it claims. As clearly shown from the above-quoted provisions, in case
the corporation is entitled to a refund of the excess estimated quarterly income
taxes paid, the refundable amount shown on its final adjustment return maybe
credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding year. The carrying forward of any excess or overpaid
income tax for a given taxable year is limited to the succeeding taxable year only.
Taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support
of the government. And since taxes are what we pay for civilized society, or are the
lifeblood of the nation, the law frowns against exemptions from taxation and
statutes granting tax exemptions are thus construed strictissimi juris against the
taxpayer and liberally in favor of the taxing authority. A claim of refund or
exemption from tax payments must be clearly shown and be based on language in
the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption
therefrom is the exception.

CREBA VS ROMULO

FACTS:
CREBA assails the imposition of the minimum corporate income tax (MCIT) as being
violative of the due process clause as it levies income tax even if there is no
realized gain. They also question the creditable withholding tax (CWT) on sales of
real properties classified as ordinary assets stating that (1) they ignore the different
treatment of ordinary assets and capital assets; (2) the use of gross selling price or
fair market value as basis for the CWT and the collection of tax on a per transaction
basis (and not on the net income at the end of the year) are inconsistent with the
tax on ordinary real properties; (3) the government collects income tax even when
the net income has not yet been determined; and (4) the CWT is being levied upon
real estate enterprises but not on other enterprises, more particularly those in the
manufacturing sector.
ISSUE:
Are the impositions of the MCIT on domestic corporations and CWT on income
from sales of real properties classified as ordinary assets unconstitutional?

HELD:
NO. MCIT does not tax capital but only taxes income as shown by the fact that the
MCIT is arrived at by deducting the capital spent by a corporation in the sale of its
goods, i.e., the cost of goods and other direct expenses from gross sales. Besides,
there are sufficient safeguards that exist for the MCIT: (1) it is only imposed on the
4th year of operations; (2) the law allows the carry forward of any excess MCIT paid
over the normal income tax; and (3) the Secretary of Finance can suspend the
imposition of MCIT in justifiable instances.

The regulations on CWT did not shift the tax base of a real estate business income
tax from net income to GSP or FMV of the property sold since the taxes withheld are
in the nature of advance tax payments and they are thus just installments on the
annual tax which may be due at the end of the taxable year. As such the tax base
for the sale of real property classified as ordinary assets remains to be the net
taxable income and the use of the GSP or FMV is because these are the only factors
reasonably known to the buyer in connection with the performance of the duties as
a withholding agent.
Neither is there violation of equal protection even if the CWT is levied only on the
real industry as the real estate industry is, by itself, a class on its own and can be
validly treated different from other businesses.

PHIL. GUARANTY CO. VS. CIRFACTS:

The Philippine Guaranty Co., Inc., a domestic insurance company, entered into reinsurance
contracts, on various dates, with foreign insurance companies not doing business in the
Philippines. Petitioner thereby agreed to cede to the foreign reinsurers a portion of the premiums
on insurance it has originally underwritten in the Philippines, in consideration for the assumption
by the latter of liability on an equivalent portion of the risks insured.
Said reinsurrance contracts were signed by Philippine Guaranty Co., Inc. in manila and by the
foreign reinsurers outside the Philippines.
Said premiums were excluded by Philippine Guaranty Co., Inc. from its ross income when it file
its income tax returns. It did not withhold or pay tax on them. Consequently, the CIR assessed
against PETITIONER withholding tax on the ceded reinsurance premiums. Petitioner protested
the assessment on the round that reinsurance premiums ceded to foreign reinsurers not doing
business in the Philippines are not subject to withholding tax.
CTA:: IN FAVOR OF RESPONDENTR
ISSUE:
whether reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines
are subject to tax
HELD:
Yes.
The reinsurance premiums are subject to tax. The reinsurance contracts show that the
transactions or activities that constituted the undertaking to reinsure Philippine
Guaranty Co., Inc. against loses arising from the original insurances in the Philippines were
performed in the Philippines.
Section /4 of the Tax Code subjects foreign corporations to tax on their income from sources
within the Philippine.Sources means the activity, property, or service giving rise to the
income. The original insurance undertakings too" place in the Philippines. It is not required that
the foreign corporation be engaged in business in the Philippines. what is controlling is not the
place of business, but the place of activity that created the income. Thus, the income is
subject to income tax.

National Power Corporation vs City of Cabanatuan

FACTS:
NAPOCOR, the petitioner, is a government-owed and controlled corporation created
under Commonwealth Act 120. It is tasked to undertake the development of
hydroelectric generations of power and the production of electricity from nuclear,
geothermal, and other sources, as well as, the transmission of electric power on a
nationwide basis.

For many years now, NAPOCOR sells electric power to the resident Cabanatuan City,
posting a gross income of P107,814,187.96 in 1992. Pursuant to Sec. 37 of
Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax
amounting to P808,606.41, representing 75% of 1% of the formers gross receipts
for the preceding year.

Petitioner, whose capital stock was subscribed and wholly paid by the Philippine
Government, refused to pay the tax assessment. It argued that the respondent has
no authority to impose tax on government entities. Petitioner also contend that as a
non-profit organization, it is exempted from the payment of all forms of taxes,
charges, duties or fees in accordance with Sec. 13 of RA 6395, as amended.

The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that
petitioner pay the assessed tax, plus surcharge equivalent to 25% of the amount of
tax and 2% monthly interest. Respondent alleged that petitioners exemption from
local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code).
The trial court issued an order dismissing the case. On appeal, the Court of Appeals
reversed the decision of the RTC and ordered the petitioner to pay the city
government the tax assessment.

ISSUES:
(1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because
its stocks are wholly owned by the National Government and its charter
characterized is as a non-profit organization?

(2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions
of the Local Government Code (LGC)?

HELD:
(1) NO. To stress, a franchise tax is imposed based not on the ownership but on the
exercise by the corporation of a privilege to do business. The taxable entity is the
corporation which exercises the franchise, and not the individual stockholders. By
virtue of its charter, petitioner was created as a separate and distinct entity from
the National Government. It can sue and be sued under its own name, and can
exercise all the powers of a corporation under the Corporation Code.

To be sure, the ownership by the National Government of its entire capital stock
does not necessarily imply that petitioner is no engage din business.

(2) YES. One of the most significant provisions of the LGC is the removal of the
blanket exclusion of instrumentalities and agencies of the National Government
from the coverage of local taxation. Although as a general rule, LGUs cannot impose
taxes, fees, or charges of any kind on the National Government, its agencies and
instrumentalities, this rule now admits an exception, i.e. when specific provisions of
the LGC authorize the LGUs to impose taxes, fees, or charges on the
aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed
under existing laws or charter is clearly manifested by the language used on Sec.
 137 and 193 categorically withdrawing such exemption subject only to the
exceptions enumerated. Since it would be tedious and impractical to attempt to
enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have been used.

Sison vs. Ancheta,

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its
provision (Section 1) unduly discriminated against him by the imposition of higher
rates upon his income as a professional, that it amounts to class legislation, and
that it transgresses against the equal protection and due process clauses of the
Constitution as well as the rule requiring uniformity in taxation.

Issue: Whether BP 135 violates the due process and equal protection clauses, and
the rule on uniformity in taxation.

Held: There is a need for proof of such persuasive character as would lead to a
conclusion that there was a violation of the due process and equal protection
clauses. Absent such showing, the presumption of validity must prevail. Equality
and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation. Where the
differentitation conforms to the practical dictates of justice and equity, similar to the
standards of equal protection, it is not discriminatory within the meaning of the
clause and is therefore uniform. Taxpayers may be classified into different
categories, such as recipients of compensation income as against professionals.
Recipients of compensation income are not entitled to make deductions for income
tax purposes as there is no practically no overhead expense, while professionals
and businessmen have no uniform costs or expenses necessary to produce their
income. There is ample justification to adopt the gross system of income taxation to
compensation income, while continuing the system of net income taxation as
regards professional and business income.

Tio vs. Videogram Regulatory Board

Facts:

1. Petitioner on his own behalf and purportedly on behalf of other videogram operators
adversely affected assailed the constitutionality of PD 1987 entitled "An Act
Creating the Videogram Regulatory Board" with broad powers to regulate and
supervise the videogram industry. The Decree promulgated on October 5, 1985,
took effect on April 10, 1986, fifteen (15) days after completion of its publication in
the Official Gazette.
2. PD 1994 issued a month thereafter reinforced PD 1987 and in effect amended the
National Internal Revenue Code (NIRC). Petitioner contended among others that the
tax provision of the decree is a rider.

ISSUE: Whether or not the PD 1987 is unconstitutional due to the tax

provision included

RULING: PD 1987 is constitutional.

1. The title of the decree, which calls for the creation of the VRB is comprehensive
enough to include the purposes expressed in its Preamble and reasonably covered
in all its provisions. It is unnecessary to express all those objectives in the title or
that the latter be an index to the body of the decree.

2. The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of the general object of the decree, which is the regulation of the
video industry through the VRB as expressed in its title. The tax provision is not
inconsistent with nor foreign to the general subject and title. As a tool for
regulation it is simply one of the regulatory and control mechanisms scattered
throughout the decree.

3. The express purpose of PD 1987 to include taxation of the video industry in order to
regulate and rationalize the heretofore uncontrolled distribution of videos is evident
from Preambles 2 and 5. Those preambles explain the motives of the lawmaker in
presenting the measure.

Philippine Airlines, Inc. vs. Edu

FACTS:
PAL is engaged in the air transportation business under a legislative franchise (Act
4271), wherein it is exempt from the
payment of taxes. On the strength of an opinion of the Secretary of Justice, PAL was
determined to have not been paying motor vehicle registration fees since 1956. The
Land Transportation Commissioner required all tax-exempt entities, including PAL, to
pay motor vehicle registration fees. PAL protested. The trial court dismissed PALs
complaint. Hence, this petition.

ISSUE:
Are motor vehicle registration fees taxes or regulatory taxes?

RULING:
They are taxes. Tax are for revenue, whereas fees are exactions for purposes of
regulation and inspection, and are for that reason limited in amount to what is
necessary to cover the cost of the services rendered in that connection.
It is the object of the charge, and not the name, that determines whether a charge
is a tax or a fee. The money collected under the Motor Vehicle Law is not intended
for the expenditures of the Motor Vehicle Law is not intended for the expenditures of
the Motor Vehicles Office but accrues to the funds for the construction and
maintenance of public roads, streets and bridges.
As the fees are not collected for regulatory purposes as an incident to the
enforcement of regulations governing the operation of motor vehicles on public
highways, but to provide revenue with which the Government is to construct and
maintain public highways for everyones use, they are veritable taxes, not merely
fees.
PAL is, thus, exempt from paying such fees, except for the period between June 27,
1968 to April 9, 1979, where its tax exception in the franchise was repealed.

Lutz vs. Araneta,

FACTS: Plaintiff Walter Lutz, in his capacity as judicial administrator of the intestate
estate of Antionio Ledesma, sought to recover from the CIR the sum of P14,666.40
paid by the estate as taxes, under section 3 of the CA 567 or the Sugar Adjustment
Act thereby assailing its constitutionality, for it provided for an increase of the
existing tax on the manufacture of sugar, alleging that such enactment is not being
levied for a public purpose but solely and exclusively for the aid and support of the
sugar industry thus making it void and unconstitutional. The sugar industry situation
at the time of the enactment was in an imminent threat of loss and needed to be
stabilized by imposition of emergency measures.

ISSUE: Is CA 567 constitutional, despite its being allegedly violative of the equal
protection clause, the purpose of which is not for the benefit of the general public
but for the rehabilitation only of the sugar industry?

HELD: Yes. The protection and promotion of the sugar industry is a matter of public
concern, it follows that the Legislature may determine within reasonable bounds
what is necessary for its protection and expedient for its promotion. Here, the
legislative discretion must be allowed to fully play, subject only to the test of
reasonableness; and it is not contended that the means provided in the law bear no
relation to the objective pursued or are oppressive in character. If objective and
methods are alike constitutionally valid, no reason is seen why the state may not
levy taxes to raise funds for their prosecution and attainment. Taxation may be
made the implement of the state's police power.

Osmea vs. Orbos

FACTS: Senator John Osmea assails the constitutionality of paragraph 1c of PD
1956, as amended by EO 137, empowering the Energy Regulatory Board (ERB) to
approve the increase of fuel prices or impose additional amounts on petroleum
products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF)
established for the reimbursement to ailing oil companies in the event of sudden
price increases. The petitioner avers that the collection on oil products
establishments is an undue and invalid delegation of legislative power to tax.
Further, the petitioner points out that since a 'special fund' consists of monies
collected through the taxing power of a State, such amounts belong to the State,
although the use thereof is limited to the special purpose/objective for which it was
created. It thus appears that the challenge posed by the petitioner is premised
primarily on the view that the powers granted to the ERB under P.D. 1956, as
amended, partake of the nature of the taxation power of the State.

ISSUE: Is there an undue delegation of the legislative power of taxation?

HELD: None. It seems clear that while the funds collected may be referred to as
taxes, they are exacted in the exercise of the police power of the State. Moreover,
that the OPSF as a special fund is plain from the special treatment given it by E.O.
137. It is segregated from the general fund; and while it is placed in what the law
refers to as a "trust liability account," the fund nonetheless remains subject to the
scrutiny and review of the COA. The Court is satisfied that these measures comply
with the constitutional description of a "special fund." With regard to the alleged
undue delegation of legislative power, the Court finds that the provision conferring
the authority upon the ERB to impose additional amounts on petroleum products
provides a sufficient standard by which the authority must be exercised. In addition
to the general policy of the law to protect the local consumer by stabilizing and
subsidizing domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose
additional amounts to augment the resources of the Fund.