Case Digest - Taxation

LUTZ VS. ARANETA

GR L-7859 December 22, 1955
Reyes, J.:
FACTS:
Walter Lutz, Judicial Administrator of the intestate estate of Ledesma, sought to recover the sum of Php14, 666.40 paid by the estate as taxes, alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively which is in his opinion not a public purpose.
ISSUE:
Whether or not tax is valid in supporting the sugar industry?
RULING:
The court ruled that the tax is valid as it served public purpose. The tax provided for in CA 567 is primarily an exercise of police power since sugar is a great source of income for the country and employs thousands of laborers. Hence, it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain.

COMMISSIONER OF IR VS CENTRAL LUZON DRUG CORP
GR 148512 June 26, 2006
Azcuna, J.:
FACTS:
This is a petition for review under Rule 45 of Rules of Court seeking the nullification of CA decision granting respondent’s claim for tax equal to the amount of the 20% that it extended to senior citizens on the latter’s purchases pursuant to Senior Citizens Act. Respondent deducted the total amount of Php219,778 from its gross income for the taxable year 1995 whereby respondent did not pay tax for that year reporting a net loss of Php20,963 in its corporate income tax. In 1996, claiming that the Php219,778 should be applied as a tax credit, respondent claimed for refund in the amount of Php150, 193.
ISSUE:
Whether or not the 20% discount granted by the respondent to qualified senior citizens may be claimed as tax credit or as deduction from gross sales?
RULING:
“Tax credit” is explicitly provided for in Sec4 of RA 7432. The discount given to Senior citizens is a tax credit, not a deduction from the gross sales of the establishment concerned. The tax credit that is contemplated under this Act is a form of just compensation, not a remedy for taxes that were erroneously or illegally assessed and collected. In the same vein, prior payment of any tax liability is a pre-condition before a taxable entity can benefit from tax credit. The credit may be availed of upon payment, if any. Where there is no tax liability or where a private establishment reports a net loss for the period, the tax credit can be availed of and carried over to the next taxable year.

APOSTOLIC PREFECT VS CITY TREASURER OF BAGUIO CITY
GR 4752 April 18, 1941
Imperial, J.:
FACTS:
The Apostolic Prefect is a corporation , of religious character, organized under the Philippine laws, and with residence in Baguio. The City imposed a special assessment against properties within its territorial jurisdiction, including those of the Apostolic Prefect, which benefits from its drainage and sewerage system. The Apostolic Prefect contends that its properties should be free of tax being of religious in character.
ISSUE:
Whether or not Apostolic Prefect, as a religious entity is exempt from the payment of the special assessment.
RULING:
A special assessment is not a tax; and neither the decree nor the Constitution exempt petitioner from payment of said special assessment. Although it its broad meaning, tax includes both general taxes and special assessment, yet there is a recognized distinction: Assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with special benefits to the property assessed. Petitioner likewise, has proven that the property in question is used exclusively for religious purposes; but that it appears the same is being used to other non-religious purposes. Thus, petitioner is required to pay the special assessment.

PAL VS EDU
HR L-41383 August 15, 1988
Gutierrez, J.:
FACTS:
PAL is engaged in air transportation business under a legislative franchise wherein it is exempt from tax payment. PAL has not been paying motor vehicle registration since 1956. The Land Registration Commissioner required all tax exempt entities including PAL to pay motor vehicle registration fees.
ISSUE:
Whether or not registration fees as to motor vehicles are taxes to which PAL is exempted.
RULING:
Taxes 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 Motor Vehicle Law is not intended for the expenditures of the MV Office but accrues to the funds for the construction and maintenance of public roads, streets and bridges.
As 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 everyone’s 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 exemption in the franchise was repealed.

CALTEX PHILIPPINES VS CA
G.R. 925585 MAY 8, 1992
Davide, J.:
FACTS:
In 1989, COA sent a letter to Caltex directing it to remit to OPSF its collection of the additional tax on petroleum authorized under PD 1956 and pending such remittance, all of its claims from the OPSF shall be held in abeyance. Petitioner requested COA for the early release of its reimbursement certificates from the OPSF covering claims with the Office of Energy Affairs. COA denied the same.
ISSUE:
Whether of not petitioner can avail of the right to offset any amount that it may be required under the law to remit to the OPSF against any amount that it may receive by way of reimbursement.
RULING:
It is a settled rule that a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutually debtors and creditors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.
The oil companies merely acted as agents for the government in the latter’s collection since taxes are passed unto the end-users, the consuming public.

DOMINGO VS GARLITOS
G.R. NO. 18993 June 29, 1963
Labrador, J.:
FACTS:
In Domingo vs. Moscoso, the Supreme Court declared as final and executor the order of the lower court for the payment of estate and inheritance taxes, charges and penalties amounting to Php 40,058.55 by the estate of the of the late Walter Price. The petitioner for execution filed by the fiscal was denied by the lower court. The court held that the execution is unjustified as the Government is indebted to the estate for Php262,200 and ordered the amount of inheritance taxes can be deducted from the Government’s indebtedness to the estate.
ISSUE:
Whether of not a tax and a debt may be compensated.
RULING:
The court having jurisdiction of the Estate had found that the claim of the Estate against the government has been recognized and the amount has already been appropriated by a corresponding law. Both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation takes place by operation of law and both debts are extinguished to the concurrent amount. Therefore the petitioner has no clear right to execute the judgment for taxes against the estate of the deceased Walter Price.

GARCIA VS. EXECUTIVE SECRETARY
211 SCRA 219 July 3, 1992
Feliciano, J.:

FACTS:
The President issued an EO which imposed, across the board, including crude oil and other oil products, additional duty ad valorem. The Tariff Commission held public hearings on said EO and submitted a report to the President for consideration and appropriate action. The President, on the other hand issued an EO which levied a special duty of P0.95 per liter of imported crude oil and P1.00 per liter of imported oil products.
ISSUE:
Whether of not the President may issue an EO which is tantamount to enacting a bill in the nature of revenue-generating measures.
RULING:
The Court said that although the enactment of appropriation, revenue and tariff bills is within the province of the Legislative, it does not follow that EO in question, assuming they may be characterized as revenue measure are prohibited to the President, that they must be enacted instead by Congress. Section 28 of Article VI of the 1987 Constitution provides:
“The Congress may, by law authorize the President to fix… tariff rates and other duties or imposts…”
The relevant Congressional statute is the Tariff and Customs Code of the Philippines and Sections 104 and 401, the pertinent provisions thereof.