Case Digest - Local Taxation

Mactan Cebu (MCIAA) vs. Marcos

GR 120082 September 11, 1996 261 SCRA 667

Davide Jr., .: (CJ)


Mactan Cebu International Airport Authority (MCIAA) was created to “principally undertake to economical, efficient and effective control, management and supervision of the Mactan International Airport… and such other airports as may be established in the province of Cebu…” Section 14 of its charter excempts the Authority from payment of realty taxes but in 1994, the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the other. MCIAA filed a petition in RTC contending that, by nature of its powers and functions, it has the same footing of an agency or instrumentality of the national government. The RTC dismissed the petition based on Section 193 & 234 of the local Government Code or R.A. 7160. Thus this petition.


Whether or not the MCIAA is excempted from realty taxes?


With the repealing clause of RA 7160 the tax exemption provided. “All general and special in the charter of the MCIAA has been expressly repeated. It state laws, acts, City Charters, decrees, executive orders, proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repeated or modified accordingly.” Therefore the SC affirmed the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1, 1992 up to the present.

Jesus Estanislao vs. Amado Costales

GRN 96516 May 8, 1991 / 196 SCRA 853

Gancayco, J.:


The Sanggunian Panglungsod passed ordinance No 44 of Zamboanga City. The same was sent to the Minister of Finance where it was found out to contravenes Section 19 of the local Tax Code. The authority of the city is limited to the imposition of a percentage tax on the gross sales or receipts of said production. The tax being imposed in the ordinance is based on the output or production and not on the gross sales or receipts as authorized under the local tax code. The city Mayor of Zamboanga questioned such decision of the Finance Minister and the lower court ruled in favor of the former by reason of prescription. The ordinance imposed P0.01 per liter of softdrinks produced, manufactured and or bottled within the territorial jurisdiction of the City of Zamboanga.


Whether or not Ordinance No. 44 contravenes the Local Tax Code of 1974.


The court ruled that the tax ordinances issued by the local autonomy is governed by the Local Tax Code of 1974 as it was stated in Section 64 (a) thereof all existing tax ordinances of provinces, cities, municipalities and barrios shall be deemed ipso facto nullified on June 30, 1974. The court also clarified that the 120 days that lapsed before the Minister of Finance acted on the ordinance did not render the action inoperative due to prescription. Even if the Secretary of Finance failed to review or act on the ordinance within 120 days, it does not follow as a legal consequence thereof that an otherwise invalid ordinance is thereby validated. It does not also mean that the Secretary can no longer act by suspending and/or revoking an invalid ordinance even after the lapse of 120 day period.

Phil Petroleum Corporation vs. Mun of Pililia, Rizal

GR 90776 June 3, 1991 / 198 SCRA 82

Paras, J.:


Petitioner, Philippine Petroleum Corporation (PPC) owns and maintains an oil refinery conducting business within the municipality of Pililia, Rizal. P.D. 231 or the local tax code of 1973 provide for the Municipality of impose taxes on business any article of commerce. Thereafter, Provincial Circular 26-73 was issued directing all provincial, City and municipal treasurers to refrain from collecting any local imposed in petroleum products. In 1974, P.D. 426 amended certain provisions of P.D. 231. The municipality of Pililia, through Municipal Tax ordinance 1, S-1974, imposed tax on business. In the RTC, respondent received a favorable decision, directing herein petitioner to pay the tax and fees impose unto it. Petitioner contended that Provincial Arcular 26-73 suspended the effectively of local tax ordinances of the local tax code.


Whether or not Provincial Circular No. 26-73 supersedes the provisions of P.D. 231 as amended by P.D. 426?


The court ruled in the negative, stating that “in case of discrepancy between the basic law and on implementing rule or regulation, the former prevails.” P.D. 426, amending the local tax code repealed P.C. No. 26-73 and 26-A73 where section 19 of which stated “the municipality may impose taxes on business… manufacturers importers or producers of any article of commerce of whatever kind or nature…”

Thus, the order of the lower court was affirmed by SC with certain modification. In the case at bar, the provisions of the local tax code of 1974 supersedes P.C. 26-73, likewise upholding the constitutional right granted to local autonomy to imposed taxes.

Jardine Davies Insurance vs. Aliposo

GRN 118900 February 27, 2003

Callejo, Sr. J.:


Makati enacted Municipal Ordinance 92-072 which provides for the schedule of real estate, business and franchise taxes in Makati. PRCI appealed the ordinance with the DOJ assailing invalidity due to lack of public hearing, in violation of RA 7160. DOJ declared it null and void while pending appeal to SC, Makati continued to implement the ordinance. Petitioner Jardine paid its deficiency taxes without any protest. In 1995, Jardine requested for tax credit or refund which Makati denied reasoning that until nullified by final judgment of competent court, the ordinance remained in full force & effect. RTC dismissed petitioner’s case ruling that plaintiff’s cause of action has prescribed. Petition for review under Rule 45 was filed.


Whether or not a protest must first be filed before an action for refund/credit in instituted.


As a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and praying for a refund of its overpayments without first filing a protest to the payment of taxes due the ordinance. However, petitioner was prescribed from filing its complaint with RTC for the reason that petitioner failed to appeal to Sec. of the Justice within 30 days from affectivity of ordinance as provided by Sec 187, RA 7160.

Failure of taxpayer to interpose the requisite appeal to DOJ is fatal to its complaint for a refund. Any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. Moreover, petitioner even paid without any protest the amounts of taxes assessed by respondents as provided for in the ordinance. The complaint was a mere afterthought.

Lim vs CA/PP

GRN L- 48134-37 October 18, 1990

Fernan, J.:


Petitioner Spouses (Lim) were engaged in a Lendership business. A Raid was made on their promises and seized were business and accounting records which served as bases for an investigation by BIR. Findings reveal that income tax filed for 1958/1959 were false or fraudulent. BIR referred the case to Manila for investigation and prosecution. RTC found spouses guilty but Emilio Lim died and CA resolved that counsel petitioners should inform the court as to who are the heirs of Emilio.


Whether or not the civil obligation arising from the crime charged was extinguished by his death.


Indubitably, petitioners had filed false and fraudulent income tax returns for the years 1958 and 1959 by non-disclosure of sales in the aggregate amount of P 2,197,742.92 thereby depriving the government in the amount of P 1,237,190.55 representing deficiency income taxes inclusive of interest, surcharges and compromise penalty for the late payment. Considering it occurred in the 50’s the defraudation was on a massive scale. It is clear that criminal conviction for a violation of any penal provision in the tax code does not mount at the same time to a decision for a payment of the unpaid taxes in as much as there is no specific provision in the tax code prior to its amendment. The trial court did not order the payment of the unpaid taxes as a part of the sentence. The supervening death of Emilio has extinguished his liability with regard to the pecuniary penalty of fine imposed on the deceased.

The crime of filling false return can be considered discovered only after the manner of commission and the nature and extent of the fraud have been definitely ascertained. It was only Oct. 10, 1967 when the BIR rendered its decision holding that there was no ground for the reversal of the assessment and therefore required the petitioners to pay deficiency taxes that the tax infractions were discovered.

Yamane vs BA Lepanito Condominium Corp.

GRN: 154993, October 25,2005

Tinga, J.:


The Condominium is authorized to collect regular assessments from its members for operating expenses, capital, and expenditures on the common areas and other special assessment as provided for in its CBL on Dec. 15, 1998, the corporation sought for the legal basis of said assessment Yamane responded that the corporation is in engaged in the business and that the collection of dues has for its ends a better marketable prices for occupants who would in the future sell their units. RTC concluded that the activities of the corporation fall squarely under the definition of business under Sec 13 of LGC, and thus subject to local business taxation.


Whether or not a Local government unit can impel a condominium corporation to pay business taxes.


The power of Local Government units to impose taxes within its territorial jurisdiction derives from the constitution. Section 143 of LGC specifically enumerates several types of business on which municipalities and cities may impose taxes but none refers to case at bar. In fact, nowhere in is there any citation by city treasurer as to the legal authority upon which the collection of business tax from corporation was based.

To subject a corporation to a business taxes, its activities must fall within the definition of business provided in local government Code. We can Elicit from condominium act that condominium corporation is precluded by statistic from engaging in corporate activities other than the holding of common areas, the administration of the condominium project and other acts necessary, incidental or convenient to the accomplishment of such purposes. There is no contemplation of business and the assessment appears to be solely based on corporation’s collection of assessment from unit owners which was used to defray expense of the condominium.

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