PLDT vs City of Davao, G.R. No. 143867.

August 22, (2001)

FACTS:

Petitioner Philippine Long Distance Telephone Co., Inc. (PLDT) applied for a
Mayors Permit to operate its Davao Metro Exchange. Respondent City of Davao
withheld action on the application pending payment by petitioner of the local
franchise tax in the amount of P3,681,985.72 for the first to the fourth quarter of
1999. Petitioner protested. Petitioner justifies its claim of tax exemption under
R.A. No. 7925, otherwise known as the Public Telecommunications Policy Act of
the Philippines, 23 of which reads:

SEC. 23. Equality of Treatment in the Telecommunications Industry. Any

advantage, favor, privilege, exemption, or immunity granted under existing
franchises, or may hereafter be granted, shall ipso facto become part of
previously granted telecommunications franchises and shall be accorded
immediately and unconditionally to the grantees of such franchises: Provided,
however, That the foregoing shall neither apply to nor affect provisions of
telecommunications franchises concerning territory covered by the franchise, the
life span of the franchise, or the type of service authorized by the franchise.

ISSUE:

Whether or not PLDT is exempted from franchise tax imposed by City of Davao.

HELD:

No. PLDT is not exempt from franchise tax imposed by City of Davao.

R.A. No. 7925 is a legislative enactment designed to set the national

policy on telecommunications and provide the structures to implement it to keep
up with the technological advances in the industry and the needs of the public.
The thrust of the law is to promote gradually the deregulation of the entry, pricing,
and operations of all public telecommunications entities and thus promote a level
playing field in the telecommunications industry. There is nothing in the language
of 23 nor in the proceedings of both the House of Representatives and the
Senate in enacting R.A. No. 7925 which shows that it contemplates the grant of
tax exemptions to all telecommunications entities, including those whose
exemptions had been withdrawn by the LGC.

The tax exemption must be expressed in the statute in clear language that leaves
no doubt of the intention of the legislature to grant such exemption. And, even if it
is granted, the exemption must be interpreted in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority.

In this case, the word exemption in 23 of R.A. No. 7925 could contemplate
exemption from certain regulatory or reporting requirements, bearing in mind the
policy of the law.
PLDT v. City of Davao, G.R. 143867, March 25, (2003)

Facts:

PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The
franchise tax was paid “in lieu of all taxes on this franchise or earnings thereof”
pursuant to RA 7082. The exemption from “all taxes on this franchise or earnings
thereof” was subsequently withdrawn by RA 7160 (LGC), which at the same time
gave local government units the power to tax businesses enjoying a franchise on
the basis of income received or earned by them within their territorial jurisdiction.
The LGC took effect on January 1, 1992.

The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent
part provides: Notwithstanding any exemption granted by law or other special
laws, there is hereby imposed a tax on businesses enjoying a franchise, a rate of
seventy-five percent (75%) of one percent (1%) of the gross annual receipts for
the preceding calendar year based on the income receipts realized within the
territorial jurisdiction of Davao City.

Subsequently, Congress granted in favor of Globe Mackay Cable and Radio

Corporation (Globe) and Smart Information Technologies, Inc. (Smart) franchises
which contained “in lieu of all taxes” provisos.

In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the

Philippines, Sec. 23 of which provides that any advantage, favor, privilege,
exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications
franchises and shall be accorded immediately and unconditionally to the
grantees of such franchises. The law took effect on March 16, 1995.

In January 1999, when PLDT applied for a mayor’s permit to operate its Davao
Metro exchange, it was required to pay the local franchise tax which then had
amounted to P3,681,985.72. PLDT challenged the power of the city
government to collect the local franchise tax and demanded a refund of what had
been paid as a local franchise tax for the year 1997 and for the first to the third
quarters of 1998.

Issue:

Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the
exemption from payment of the local franchise tax in view of the grant of tax
exemption to Globe and Smart.

Held:

Petitioner contends that because their existing franchises contain “in lieu of all
taxes” clauses, the same grant of tax exemption must be deemed to have
become ipso facto part of its previously granted telecommunications franchise.
But the rule is that tax exemptions should be granted only by a clear and
unequivocal provision of law “expressed in a language too plain to be mistaken”
and assuming for the nonce that the charters of Globe and of Smart grant
tax exemptions, then this runabout way of granting tax exemption to PLDT is not
a direct, “clear and unequivocal” way of communicating the legislative intent.
Nor does the term “exemption” in Sec. 23 of RA 7925 mean tax exemption. The
term refers to exemption from regulations and requirements imposed by the
National Telecommunications Commission (NTC). For instance, RA 7925, Sec.
17 provides: The Commission shall exempt any specific telecommunications
service from its rate or tariff regulations if the service has sufficient competition to
ensure fair and reasonable rates of tariffs. Another exemption granted by the law
in line with its policy of deregulation is the exemption from the requirement of
securing permits from the NTC every time a telecommunications company
imports equipment.

Tax exemptions should be granted only by clear and unequivocal provision of law

on the basis of language too plain to be mistaken.
JUAN LUNA SUBDIVISION, INC., Petitioner, -versus- M. SARMIENTO, ET
AL, Respondents

G.R. No. L-3538, EN BANC, May 28, 1952, TUASON, J.

We do not see that literal interpretation of Commonwealth Act No. 703 runs
counter and does violenceto its spirit and intention , nor do we think that such
interpretation would be "constitutionally bad" in that "it would unduly discriminate
against taxpayers who had paid in favor of delinquent taxpayers."

The remission of taxes due and payable to the exclusion of taxes already
collected does not constitute unfair discrimination. Each set of taxes is a class by
itself, and the law would be open to attack as class legislation only if all
taxpayers belonging to one class were not treated alike. They are not.

FACTS:

The plaintiff was a corporation duly organized and existing under the laws of the
Philippines with principal office in Manila. On December 29, 1941 it issued to the
City Treasurer of Manila, and the City Treasurer accepted checks No. 628334 for
P2,210.52 drawn upon the Philippine Trust Company with which it had a credit
balance of P4,940.17 on its account. This check was to be applied to plaintiff 's
land tax for the second semester of 1941 the exact amount of which was yet
undetermined and so it was entered in the ledger, Exhibit "F", as deposit by the
taxpayer. On February 20, 1942, presumably after the exact amount had been
verified, which was P341.60, the balance of P1,868.92, covered by voucher No.
1487 of the City Treasure's office, was noted in the ledger as a credit to the Juan
Luna Subdivision, Inc. Further than this, the records of the City Treasurer's office
do not show what was done with the check. But the books of the Philippine Trust
Company do reveal that it was deposited with the Philippine National Bank, the
City Treasurer's sole depository, on December 29, 1941, and that it was
presented by that Bank to the Philippine Trust Company on May 1, 1944 and was
cashed by the drawee. Manuel F. Garcia, Assistant Treasurer of the Philippine
Trust Company, testified that soon after his bank was authorized in March, 1942,
to reopen for business (it had been closed by order of the Japanese military
authorities,) it received from the Philippine National Bank a bundle of checks,
including appellees check No. 628334, drawn upon the Philippine Trust
Company before the Japanese occupation and held in abeyance by the
Philippine National Bank pending resumption of operation by the Philippine Trust
Company; that these checks, including the appellee's check, were accepted and
the amounts thereof debited against the respective drawer's accounts; that with
respect to check No. 628334, the operation was effected on May 1, 1944.

The City refused after liberation to refund the plaintiff's deposit or apply it to such
future taxes as might be found due, while the Philippine Trust Company was
unwilling to reverse its debit entry against the Juan Luna Subdivision, Inc. It was
upon this predicament that the Juan Luna Subdivision, Inc. brought this suit
against the City Treasurer and the Philippine Trust Company as defendants in
the alternative. The purpose of the action is determined which of the two
defendants is liable for plaintiff’s check. There is a separate cause of action
which concerns the plaintiff and the City Treasurer alone.
The amount to be refunded to the plaintiff is the subject of another disagreement
between the Juan Luna Subdivision, Inc. and the City Treasurer. This is the
ground of other cause of action heretofore referred to.

The plaintiff claims the whole amount of the check contending that taxes for the
last semester of 1941 have been remitted by Commonwealth Act No. 703.

Section 1 of this Act, which was approved on November 1, 1945, provides:

All land taxes and penalties due and payable for the years nineteen hundred and
forty-two nineteen hundred and forty-three nineteen hundred and forty-four and
fifty per cent of the tax due for nineteen hundred and forty-five, are hereby
remitted. The land taxes and penalties due and payable for the second semester
of the year nineteen hundred and forty-one shall also be remitted the if the
remaining fifty per cent corresponding to the year nineteen hundred and forty-five
shall been paid on or before December thirty-first, nineteen hundred and forty-
five.

ISSUE:

Whether the provision cover taxes paid before its enactment as the plaintiff
maintains and the court below held, or does it refer, (YES)

RULING:

There is no ambiguity in the language of the law. It says "taxes and penalties due
and payable," the literal meaning of which taxes owned or owing. (See Webster's
New International Dictionary) Note that the provision speaks of penalties, and
note that penalties accrue only when taxes are not paid on time. The word "remit"
underlined by the appellant does not help its theory, for to remit to desist or
refrain from exacting, inflicting, or enforcing something as well as to restore what
has already been taken.

We do not see that literal interpretation of Commonwealth Act No. 703 runs
counter and does violence to its spirit and intention, nor do we think that such
interpretation would be "constitutionally bad" in that "it would unduly discriminate
against taxpayers who had paid in favor of delinquent taxpayers."

The remission of taxes due and payable to the exclusion of taxes already
collected does not constitute unfair discrimination. Each set of taxes is a class by
itself, and the law would be open to attack as class legislation only if all taxpayers
belonging to one class were not treated alike. They are not.

As to the justice of the measure, the confinement of the condonation to

delinquent taxes was not without good reason. The property owners who had
paid their taxes before liberation and those who had not were not on the same
footing on the need of material relief. It is true that the ravages and devastations
wrought by were operations had rendered the bulk of the people destitute or
impoverished and that it was this situation which prompted the passage of
Commonwealth Act No. 703. But it is also true that the taxpayers who had been
in arrears in their obligation would have to satisfy their liability with genuine
currency, while the taxes paid during the occupation had been satisfied in
Japanese military notes, many of them at a time when those notes were well-
nigh worthless. To refund those taxes with the restored currency, even if the
Government could afford to do so, would be unduly to enrich many of the payers
at a greater expense to the people at large.

What is more, the process of refunding would entail a tremendous amount of

work and difficulties, what with the destruction of tax records and the great
number of claimants who would take advantage of such grace.

It is said that the plaintiff's check was in the nature of deposit, held trust by the
City Treasurer, and that for this reason, plaintiff's taxes are to be regarded as still
due and payable. This argument is well taken but only to the extent of P1,868.92.
The amount of P341.60 as early as February 20, 1942, had been applied to the
second half of plaintiff's 1941 tax and become part of the general funds of the city
treasury. From that date that tax was legally and actually paid and settled.
Surigao Cons. Minining v. Collector 9 SCRA 728

FACTS

Before the outbreak of the War, the Surigao Consolidated Mining Co. was
operating its mining concessions in Mainit, Surigao. Due to the interruption of
communications at the outbreak of the war, the company lost contact with its
mines and never received the production reports for the 4th quarter of 1941. To
avoid incurring any tax liability or penalty, it deposited of check payable to and
indorsed in favor of the City Treasurer, in payment of ad valorem taxes for the
said period. After the war, the company filed its ad valorem tax for the said period
pursuant to Commonwealth Act 772. Its return was revised, until eventually the
company claimed are fund of P17,158.01. The collector of Internal Revenue
denied the request for refund

ISSUE

Whether Surigao Consolidated may recover its tax payment in light of the
condonation made under a subsequent law.

RULING

The provision refers to the condonation of unpaid taxes only. The condonation of
a tax liability is equivalent and is in the nature of tax exemption. Being so, it
should be sustained only when expressed in explicit terms, and it cannot be
extended beyond the plain meaning of those terms. He who claims an exemption
from his share of the common burden of taxation must justify his claim by
showing that the Legislature intended to exempt him. The company failed to
show any portion of the law that explicitly provided for a refund of those
taxpayers who had paid their taxes on the items. It is a settled doctrine that in a
suit for the recovery of the payment of taxes or any portion thereof as having
been illegally or erroneously collected, the burden is upon the taxpayer to
establish the facts which show the illegality of the tax or that the determination
thereof is erroneous. In this case, petitioner failed to show that the amount of
taxes sought to be refunded have been erroneously collected.
Commissioner v. CA

G.R. No. 108358 | January 20, 1995

FACTS

On 1986, Executive Order No. 41 was promulgated declaring a one-time tax

amnesty on unpaid income taxes, later to include estate and donor's taxes and
taxes on business, for the taxable years 1981 to 1985.Availing of the amnesty,
respondent R.O.H. Auto Products Philippines, Inc., filed its Tax Amnesty Return
No. 34-F-00146-41 and Supplemental Tax Amnesty Return No. 34-F-00146-64-
B, respectively, and paid the corresponding amnesty taxes due. Prior to this
ailment, petitioner Commissioner of Internal Revenue assessed the latter
deficiency taxes in an aggregate amount of P1,410,157.71. The taxpayer wrote
back to state that since it had been able to avail itself of the tax amnesty, the
deficiency tax notice should forthwith be cancelled and withdrawn. The request
was denied by the Commissioner on the ground that Revenue Memorandum
Order No. 4-87, dated 09 February 1987, implementing Executive Order No. 41,
had construed the amnesty coverage to include only assessments issued by the
Bureau of Internal Revenue after the promulgation of the executive order on
August 1986 and not to assessments theretofore made. The invoked provisions
of the memorandum order read:xxx xxx xxx1.02.3. In appropriate cases, the
cancellation/withdrawal of assessment notices and letters of demand issued after
August 21, 1986 for the collection of income, business, estate or donor's taxes
due during the same taxable years

(Emphasis supplied)

ISSUE/S

1. Is Memorandum No. 4-87 promulgated to implement E.O. No. 41 is valid?

2. Whether said deficiency assessments in question were extinguished by reason

or private respondent’s availment of the E.O?

RULING

1. YES. The authority of the Minister of Finance (now the Secretary of Finance),
in conjunction with the Commissioner of Internal Revenue, to promulgate all
needful rules and regulations for the effective enforcement of internal revenue
laws cannot be controverted. Neither can it be disputed that such rules and
regulations, as well as administrative opinions and rulings, ordinarily should
deserve weight and respect by the courts. Much more fundamental than either of
the above, however, is that all such issuances must not override, but must
remain consistent and in harmony with, the law they seek to apply and
implement. Administrative rules and regulations are intended to carry out, neither
to supplant nor to modify, the law.

2. YES. We agree with both the court of Appeals and court of Tax Appeals that
Executive Order No. 41 is quite explicit and requires hardly anything beyond a
simple application of its provisions. It reads:Sec. 1. Scope of Amnesty.

—
 A one-time tax amnesty covering unpaid income taxes for the years 1981 to
1985 is hereby declared. Sec. 2. Conditions of the Amnesty.

 A taxpayer who wishes to avail himself of the tax amnesty shall, on or before
October 31, 1986;a) file a sworn statement declaring his net worth as of
December 31, 1985;b) file a certified true copy of his statement declaring his net
worth as of December 31,1980 on record with the Bureau of Internal Revenue, or
if no such record exists, file a statement of said net worth therewith, subject to
verification by the Bureau of InternalRevenue;c) file a return and pay a tax
equivalent to ten per cent (10%) of the increase in net worth from December 31,
1980 to December 31, 1985:

Provided, That in no case shall the tax be less than P5,000.00 for individuals and
P10,000.00 for judicial persons. If, as the Commissioner argues, Executive Order
No. 41 had not been intended to include 1981-1985 tax liabilities already
assessed (administratively) prior to 22 August 1986, the law could have simply
so provided in its exclusionary clauses. It did not. The conclusion is unavoidable,
and it is that the executive order has been designed to be in the nature of a
general grant of tax amnesty subject only to the cases specifically excepted by
it.Moreover, we need only quote from Executive Order No. 41 itself; thus:Sec. 6.
Immunities and Privileges.

 Upon full compliance with the conditions of the tax amnesty and the rules and
regulations issued pursuant to this Executive order, the taxpayer shall enjoy the
following immunities and privileges:a)

The taxpayer shall be relieved of any income tax liability on any untaxed income
from January 1, 1981 to December31, 1985, including increments thereto and
penalties on account of the non-payment of the said tax. Civil, criminal or
administrative liability arising from the non-payment of the said tax, which are
actionable under the National Internal Revenue Code, as amended, are likewise
deemed extinguished
People v. Castaneda, 165 SCRA 327 (1988)

Nature of the Case:

In this Petition for certiorari and mandamus, the People seek the annulment of
the Orders of respondent Judge quashing criminal information against the
accused upon the grounds that:

(a) accused Francisco Valencia was entitled to tax amnesty under

Presidential Decree No. 370; and

(b) that the dismissal of the criminal cases against accused Valencia inured to
the benefit of his co-accused Vicente Lee Teng and Priscilla Castillo de Cura,
and denying the People's Motion for Reconsideration of said Orders.

Facts:

Sometime in 1971, two (2) informants submitted sworn information under

Republic Act No. 2338 (entitled "An Act to Provide for Reward to Informers of
Violations of the Internal Revenue and Customs Laws," effective June 19, 1959)
to the Bureau of Internal Revenue ("BIR"), concerning alleged violations of
provisions of the Internal Revenue Code committed by the private respondents.

The record of this case includes an affidavit executed on 27 December 1971 by

Mr. William Chan, one of the said informers, describing the details of alleged
violations of the tax code.

In July 1973, State Prosecutor Estanislao L. Granados Department of Justice,

filed with the Court of First Instance of Pampanga an information docketed as
Criminal Case No. 439 for violation of Sec. 170 (2) of the National Internal
Revenue Code, as amended, against Francisco Valencia, Apolonio G. Erespe y
Comia and Priscilla Castillo de Cura for “conspiring and confederating with one
another, did then and there willfully, unlawfully, and feloniously have in their
possession, custody and control, false and counterfeit or fake internal revenue
labels consisting of five (5) sheets containing ten (10) labels each purporting to
be regular labels of the Tanduay Distillery, Inc. bearing Serial Nos. 2571891 to
2571901 to 2571910, 2571911 to 2571920, 05381 to 05390 and 05391 to
05400.”

On 22 April 1974, after arraignment, accused Valencia filed a Motion to Quash

Criminal Cases Nos. 538-543 inclusive, upon the grounds that the six (6)
informations had been filed without conducting the necessary preliminary
investigation and that he was entitled to the benefits of the tax amnesty provided
by P.D. No. 370.

The respondent Judge granted the Motion to Quash and issued an Order, dated
15 July 1974, dismissing not only Criminal Cases Nos. 538-543 but also Criminal
Cases Nos. 439 and 440 insofar as accused Francisco Valencia was concerned.
A Motion for Reconsideration by the People was similarly denied by respondent
Judge.

On 14 December 1975, the remaining accused Vicente Lee Teng and Priscilla
Castillo de Cura, having been arraigned, filed Motions to Quash Criminal Cases
Nos. 538-543 and 439 and 440, upon the common ground that the dismissal of
said cases insofar as accused Francisco Valencia was concerned, inured to their
benefit.

The respondent Judge granted the Motions to Quash by Vicente Lee Teng and
Priscilla Castillo de Cura, and denied the People's Motion for Reconsideration.

Preliminary Issues:

1. Whether or not the People of the Philippines are guilty of laches-was raised
by private respondents in their Answer.

2. Whether or not the defense of double jeopardy became available to them

with the dismissal by respondent Judge of the eight (8) criminal cases.

Substantive Issues:

1. Whether or not the accused Valencia, Lee Teng and de Cura are entitled
to the benefits available under P.D. No. 370.

2. Whether or not the dismissal by the respondent court of the criminal

informations against accused Valencia, inured to the benefit of Valencia's
co-accused.

Ruling:

On the preliminary issues:

1. Ordinarily, perhaps, a Petition for certiorari brought seven (7) months after
rendition of the last order sought to be set aside might be regarded as
barred by laches. In the case at bar, however, the Court believes that the
equitable principle of laches should not be applied to bar this Petition for
certiorari and Mandamus. The effect of such application would not be the
avoidance of an inequitable situation (the very raison d'etre of the laches
principle), but rather the perpetuation of the state of facts brought about by
the orders of the respondent Judge, a state of facts which, as will be seen
later, is marked by a gross disregard of the legal rights of the People. We
hold that, in the circumstances of this case, the Petition for certiorari and
mandamus is not barred by laches.

2. This defense need not detain us for long for it is clearly premature in the
present certiorari proceeding. In the certiorari petition at bar, the validity
and legal effect of the orders of dismissal issued by the respondent Judge
 of the eight (8) criminal cases are precisely in issue. Should the Court
uphold these dismissal orders as valid and effective and should a second
prosecution be brought against the accused respondents, that second
prosecution may be defended against with the plea of double jeopardy. If,
upon the other hand, the Court finds the dismissal orders to be invalid and
of no legal effect, the legal consequence would follow that the first
jeopardy commenced by the eight (8) informations against the accused
has not yet been terminated and accordingly a plea of second jeopardy
must be rejected both here and in the continuation of the criminal
proceedings against the respondents-accused.

Ruling on the Substantive Issues:

1. The first point that should be made in respect of P.D. No. 370 is that
compliance with all the requirements of availment of tax amnesty under
P.D. No. 370 would have the effect of condoning not just income tax
liabilities but also "all internal revenue taxes including the increments or
penalties on account of non-payment as well as all civil, criminal or
administrative liabilities, under the Internal Revenue Code, the Revised
Penal Code, the Anti-Graft and Corrupt Practices Act, the Revised
Administrative Code, the Civil Service Laws and Regulations, laws and
regulations on Immigration and Deportation, or any other applicable law or
proclamation." Thus, entitlement to benefits of P.D. No. 370 would have
the effect of condoning or extinguishing the liabilities consequent upon
possession of false and counterfeit internal revenue labels; the
manufacture of alcoholic products subject to specific tax without having
paid the annual privilege tax therefor, and the possession, custody and
control of locally manufactured articles subject to specific tax on which the
taxes had not been paid in accordance with law, in other words, the
criminal liabilities sought to be imposed upon the accused respondents by
the several informations quoted above.

2. It is necessary to note that the "valid information under Republic Act No.
2338" referred to in Section 1 (a) (4) of P.D. No. 370, refers not to a
criminal information filed in court by a fiscal or special prosecutor, but
rather to the sworn information or complaint filed by an informer with the
BIR under R.A. No. 2338 in the hope of earning an informer's reward. The
sworn information or complaint filed with the BIR under R.A. No. 2338 may
be considered "valid" where the following conditions are complied with:

(1) that the information was submitted by a person other

than an internal revenue or customs official or employee
or other public official, or a relative of such official or
employee within the sixth degree of consanguinity;
 (2) that the information must be definite and sworn to and
must state the facts constituting the grounds for such
information; and

(3) that such information was not yet in the possession of the
BIR or the Bureau of Customs and does not refer to "a
case already pending or previously investigated or
examined by the Commissioner of Internal Revenue or
the Commissioner of Customs, or any of their deputies,
agents or examiners, as the case may be, or the
Secretary of Finance or any of his deputies or agents.

Because of the conclusion reached above, that is, that accused Francisco
Valencia was not legally entitled to the benefits of P.D. No. 370 and that the
dismissal of the criminal information as against him was serious error on
the part of the respondent Judge, it may not be strictly necessary to deal
with this second issue. There was in fact nothing that could have inured to
the benefit of Valencia's co-accused. It seems appropriate to stress,
nonetheless, that co-accused and co-respondents Lee Teng and Priscilla
Castillo de Cura, in order to enjoy the benefits of the tax amnesty statute
here involved, must show that they have individually complied with and
come within the terms of that statute.

We conclude that the respondent Judge's error in respect of the first and second
substantive issues considered above is so gross and palpable as to amount to
arbitrary and capricious action and to grave abuse of discretion. Those orders
effectively prevented the People from prosecuting and presenting evidence
against the accused-respondents; they denied the People its day in court.