(22) IX. Sea-land Service v.
CA, April 30, 2001, GR No: nature of a license in respect of any service or work
122605
Facts:
Sea-Land Service Incorporated (SEA-LAND), an
American international shipping company licensed by
the SEC to do business in the Philippines, entered into
a contract with the US Government to transport
military household goods and effects of US military
personnel assigned to the Subic Naval Base.
From the said contract, SEA-LAND derived an income
for the taxable year 1984 amounting to
P58,006,207.54 wherein SEA-LAND filed the
corresponding Income Tax Return and paid the
income tax due amounting to 870, 093.12, which is
1.5% as required in Section 25(a)(2) of the Natl
Internal Revenue Code (NIRC), in relation to Article 9
of the RP-US Tax Treaty. However, they filed a written
claim for refund on April 15, 1987 claiming that it paid
by mistake. But before the said claim could be acted
upon by the Commissioner on Internal Revenue (CIR),
Sea-land already filed a pet for review with the CTA to
pursue its claim for refund and to stop the running of
the 2-yr prescriptive period under the NIRC.
February 21, 1995- CTA denied claim for refund. Sea-
land then appealed the case to the CA on March 30,
95.
October 26, 1995- CA dismissed the appeal and
affirmed in toto the decision of the CTA.
Issue
whether or not the income that petitioner derived
from services in transporting the household goods
and effects of U. S. military personnel falls within the
tax exemption provided in Article XII, paragraph 4 of
the RP-US Military Bases Agreement.
Ruling: NO
The RP-US Military Bases Agreement
provides:
No national of the United States, or corporation
organized under the laws of the United States,
resident in the United States, shall be liable to pay
income tax in the Philippines in respect of any profits
derived under a contract made in the United States
with the government of the United States in
connection with the construction, maintenance,
operation and defense of the bases, or any tax in the
for the United States in connection with the
construction, maintenance, operation and defense of
the bases.
Laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in
favor of the taxing power. Taxation is the rule and
exemption is the exception. The law does not look
with favor on tax exemptions and that he who would
seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be
misinterpreted.[8]
Under Article XII (4) of the RPUS Military Bases
Agreement, the Philippine Government agreed to
exempt from payment of Philippine income tax
nationals of the United States, or corporations
organized under the laws of the United States,
residents in the United States in respect of any profit
derived under a contract made in the United States
with the Government of the United States in
connection with the construction, maintenance,
operation and defense of the bases.
It is obvious that the transport or shipment of
household goods and effects of U. S. military
personnel is not included in the term construction,
maintenance, operation and defense of the bases.
Neither could the performance of this service to the
U. S. government be interpreted as directly related to
the defense and security of the Philippine territories.
When the law speaks in clear and categorical
language, there is no reason for interpretation or
construction, but only for application.[9] Any
interpretation that would give it an expansive
construction to encompass petitioners exemption
from taxation would be unwarranted.
(29) XVI. ABAKADA Guro v. Ermita, September 1,
2005, GR No: 168056
Facts:
Before R.A. No. 9337(An Act amending certain
sections of the NIRC of 1997) took effect, petitioners
ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005, questioning the
constitutionality of Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108,
respectively, of the NIRC.
Section 4 imposes a 10% VAT on sale of goods and
properties,
Section 5 imposes a 10% VAT on importation of
goods, and
Section 6 imposes a 10% VAT on sale of services and
use or lease of properties.
These questioned provisions contain a uniform
proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise
the VAT rate to 12%, effective January 1, 2006, after
any of the following conditions have been satisfied:
(i) Value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 %).
Petitioners argue that the law is unconstitutional, as
it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under
Article VI, Section 28(2) of the 1987 Philippine
Constitution.
They argue that VAT is a tax levied on the sale or
exchange of goods and services which cant be
included within the purview of tariffs under the
exemption delegation since this refers to customs
duties, tolls or tribute payable upon merchandise to
the government and usually imposed on
imported/exported goods. They also said that the
President has powers to cause, influence or create
the conditions provided by law to bring about the
conditions precedent. Moreover, they allege that no
guiding standards are made by law as to how the
Secretary of Finance will make the recommendation.
Issue: Whether or not the RA 9337's stand-by
authority to the Executive to increase the VAT rate,
especially on account of the recommendatory power
granted to the Secretary of Finance, constitutes
undue delegation of legislative power? NO
Held: The powers which Congress is prohibited from
delegating are those which are strictly, or inherently
and exclusively, legislative. Purely legislative power
which can never be delegated is the authority to
make a complete law- complete as to the time when
it shall take effect and as to whom it shall be
applicable, and to determine the expediency of its
enactment. It is the nature of the power and not the
liability of its use or the manner of its exercise which
determines the validity of its delegation.
The exceptions are:
(a) delegation of tariff powers to President under
Constitution
(b) delegation of emergency powers to President
under Constitution
(c) delegation to the people at large
(d) delegation to local governments
(e) delegation to administrative bodies
For the delegation to be valid, it must be complete
and it must fix a standard. A sufficient standard is one
which defines legislative policy, marks its limits, maps
out its boundaries and specifies the public agency to
apply it.
In this case, it is not a delegation of legislative power
BUT a delegation of ascertainment of facts upon
which enforcement and administration of the
increased rate under the law is contingent. The
legislature has made the operation of the 12% rate
effective January 1, 2006, contingent upon a specified
fact or condition. It leaves the entire operation or
non-operation of the 12% rate upon factual matters
outside of the control of the executive. No discretion
would be exercised by the President. Highlighting the
absence of discretion is the fact that the word SHALL
is used in the common proviso. The use of the word
SHALL connotes a mandatory order. Its use in a
statute denotes an imperative obligation and is
inconsistent with the idea of discretion.
Thus, it is the ministerial duty of the President to
immediately impose the 12% rate upon the existence
of any of the conditions specified by Congress. This is
a duty, which cannot be evaded by the President. It is
a clear directive to impose the 12% VAT rate when the
specified conditions are present.

Congress just granted the Secretary of Finance the

authority to ascertain the existence of a fact---
whether by December 31, 2005, the VAT collection as
a percentage of GDP of the previous year exceeds 2
4/5 % or the national government deficit as a
percentage of GDP of the previous year exceeds one
and 1%. If either of these two instances has
occurred, the Secretary of Finance, by legislative
mandate, must submit such information to the
President.

In making his recommendation to the President on

the existence of either of the two conditions, the
Secretary of Finance is not acting as the alter ego of
the President or even her subordinate. He is acting as
the agent of the legislative department, to determine
and declare the event upon which its expressed will is
to take effect. The Secretary of Finance becomes the
means or tool by which legislative policy is
determined and implemented, considering that he
possesses all the facilities to gather data and
information and has a much broader perspective to
properly evaluate them. His function is to gather and
collate statistical data and other pertinent
information and verify if any of the two conditions
laid out by Congress is present.

Congress does not abdicate its functions or unduly

delegate power when it describes what job must be
done, who must do it, and what is the scope of his
authority; in our complex economy that is frequently
the only way in which the legislative process can go
forward.

There is no undue delegation of legislative power but

only of the discretion as to the execution of a law. This
is constitutionally permissible. Congress did not
delegate the power to tax but the mere
implementation of the law.
(34) XXI. American Bible Society v. City of Manila,
April 30, 1957
Facts:
American Bible Society is a foreign, non-
stock, non-profit, religious, missionary corporation
duly registered and doing business in the Philippines
through its Philippine agency established in Manila in
November, 1898. American Bible Society has been
distributing and selling bibles and/or gospel portions
throughout the Philippines and translating the same
into several Philippine dialect
City Treasurer of Manila informed American
Bible Society that it was violating several Ordinances
for operating without the necessary permit and
license, thereby requiring the corporation to secure
the permit and license fees covering the period from
4Q 1945-2Q 1953. To avoid closing of its business,
American Bible Society paid the City of Manila its
permit and license fees under protest
American Bible filed a complaint,
questioning the constitutionality and legality of the
Ordinances 2529 and 3000, and prayed for a refund
of the payment made to the City of Manila. They
contended:
a. They had been in the Philippines since 1899 and
were not required to pay any license fee or sales tax
b. it never made any profit from the sale of its
bibles
Trial Court dismissed the complaint. ABS
appealed to the CA.
Issue: WON American Bible Society liable to pay sales
tax for the distribution and sale of bibles
Ruling: NO
Under Sec. 1 of Ordinance 3000, one of the
ordinance in question, person or entity engaged in
any of the business, trades or occupation enumerated
under Sec. 3 must obtain a Mayors permit and license
from the City Treasurer. American Bible Societys
business is not among those enumerated. However,
item 79 of Sec. 3 of the Ordinance provides that all
other businesses, trade or occupation not mentioned,
except those upon which the City is not empowered
to license or to tax P5.00.
Therefore, the necessity of the permit is
made to depend upon the power of the City to license
or tax said business, trade or occupation.
2 provisions of law that may have bearing on
this case:
a. Chapter 60 of the Revised Administrative Code,
the Municipal Board of the City of Manila is
empowered to tax and fix the license fees on retail
dealers engaged in the sale of books
b. Sec. 18(o) of RA 409: to tax and fix the license
fee on dealers in general merchandise, including
importers and indentors, except those dealers who
may be expressly subject to the payment of some
other municipal tax. Further, Dealers in general
merchandise shall be classified as (a) wholesale
dealers and (b) retail dealers. For purposes of the tax
on retail dealers, general merchandise shall be
classified into four main classes: namely (1) luxury
articles, (2) semi-luxury articles, (3) essential
commodities, and (4) miscellaneous articles. A
separate license shall be prescribed for each class but
where commodities of different classes are sold in the
same establishment, it shall not be compulsory for
the owner to secure more than one license if he pays
the higher or highest rate of tax prescribed by
ordinance. Wholesale dealers shall pay the license tax
as such, as may be provided by ordinance
The only difference between the 2
provisions is the limitation as to the amount of tax or
license fee that a retail dealer has to pay per annum
As held in Murdock vs. Pennsylvania, The
power to impose a license tax on the exercise of these
freedoms provided for in the Bill of Rights, is indeed
as potent as the power of censorship which this Court
has repeatedly struck down. It is not a nominal fee
imposed as a regulatory measure to defray the
expenses of policing the activities in question. It is in
no way apportioned. It is flat license tax levied and
collected as a condition to the pursuit of activities
whose enjoyment is guaranteed by the constitutional
liberties of press and religion and inevitably tends to
suppress their exercise. That is almost uniformly
recognized as the inherent vice and evil of this flat
license tax.
Further, the case also mentioned that the
power to tax the exercise of a privilege is the power
to control or suppress its enjoyment. Those who can
tax the exercise of this religious practice can make its
exercise so costly as to deprive it of the resources
necessary for its maintenance. Those who can tax the
privilege of engaging in this form of missionary
evangelism can close all its doors to all those who do
not have a full purse
Under Sec. 27(e) of Commonwealth Act No.
466 or the National Internal Revenue Code,
Corporations or associations organized and operated
exclusively for religious, charitable, . . . or educational
purposes, . . .: Provided, however, That the income of
whatever kind and character from any of its
properties, real or personal, or from any activity
conducted for profit, regardless of the disposition
made of such income, shall be liable to the tax
imposed under this Code shall not be taxed
The price asked for the bibles and other
religious pamphlets was in some instances a little bit
higher than the actual cost of the same but this
cannot mean that American Bible Society was
engaged in the business or occupation of selling said
"merchandise" for profit
Therefore, the Ordinance cannot be applied
for in doing so it would impair American Bible
Societys free exercise and enjoyment of its religious
profession and worship as well as its rights of
dissemination of religious beliefs.
(36) XXIII. Lung Center v. Quezon City, June 29, 2004
Facts:
The petitioner Lung Center of the
Philippines is a non-stock and non-profit entity
established by virtue of Presidential Decree No. 1823.
It owns a piece of land, in the middle of which is a
hospital stands. A big space at the ground floor is
being leased to private parties for canteen and small
stores and to medical and to professional
practitioners. A big portion of the lot is being leased
for commercial purposes to a private enterprise.
In 1993, both land and the hospital building
were assessed for real property taxes in the amount
of about Php 4.5 Million. The petitioner avers that it
is a charitable institution within the context of Section
28(3), Article VI of the 1987 Constitution. It asserts
that its character as a charitable institution is not
altered by the fact that it admits paying patients and
renders medical services to them, leases portions of
the land to private parties, and rents out portions of
the hospital to private medical practitioners from
which it derives income to be used for operational
expenses.
Respondents aver that the petitioner is not a
charitable entity. The petitioners real property is not
exempt from the payment of real estate taxes under
P.D. No. 1823 and even under the 1987 Constitution
because it failed to prove that it is a charitable
institution and that the said property is actually,
directly and exclusively used for charitable purposes.
The respondents noted that in a newspaper report, it
appears that graft charges were filed with the
Sandiganbayan against the director of the petitioner,
its administrative officer, and Zenaida Rivera, the
proprietress of the Elliptical Orchids and Garden
Center, for entering into a lease contract over
7,663.13 square meters of the property in 1990 for
only P20,000 a month, when the monthly rental
should be P357,000 a month as determined by the
Commission on Audit; and that instead of complying
with the directive of the COA for the cancellation of
the contract for being grossly prejudicial to the
government, the petitioner renewed the same on
March 13, 1995 for a monthly rental of only P24,000.
They assert that the petitioner uses the subsidies
granted by the government for charity patients and
uses the rest of its income from the property for the
benefit of paying patients, among other purposes.
They aver that the petitioner failed to adduce
substantial evidence that 100% of its out-patients and
170 beds in the hospital are reserved for indigent
patients.
Issues: (a) whether the petitioner is a charitable
institution within the context of Presidential Decree
No. 1823 and the 1973 and 1987 Constitutions and
Section 234(b) of Republic Act No. 7160; and
(b) whether the real properties of the
petitioner are exempt from real property taxes.
Ruling:
The Court hold that the petitioner is a
charitable institution within the context of the 1973
and 1987 Constitution. Under PD 1823, the petitioner
is a non-profit and non-stock corporation which,
subject to the provisions of the decree, is to be
administered by the Office of the President with the
Ministry of Health and the Ministry of Human
Settlements. The purpose for which it was created
was to render medical services to the public in
general including those who are poor and also the
rich, and become a subject of charity. Under PD 1823,
petitioner is entitled to receive donations, even if the
gift or donation is in the form of subsidies granted by
the government.
However, even if the petitioner is a
charitable institution, the SC hold that those portions
of its real property that are leased to private entities
are not exempt from real property taxes as these are
not actually, directly and exclusively used for
charitable purposes.
The settled rule in this jurisdiction is that
laws granting exemption from tax are construed
strictissimi juris against the taxpayer and liberally in
favor of the taxing power. Taxation is the rule and
exemption is the exception. The effect of an
exemption is equivalent to an appropriation. Hence,
a claim for exemption from tax payments must be
clearly shown and based on language in the law too
plain to be mistaken.
Moreover, Section 2 of Presidential Decree
No. 1823, relied upon by the petitioner, specifically
provides that the petitioner shall enjoy the tax
exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a
non-profit, non-stock corporation organized primarily
to help combat the high incidence of lung and
pulmonary diseases in the Philippines, all donations,
contributions, endowments and equipment and
supplies to be imported by authorized entities or
persons and by the Board of Trustees of the Lung
Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from
income and gift taxes, the same further deductible in
full for the purpose of determining the maximum
deductible amount under Section 30, paragraph (h),
of the National Internal Revenue Code, as amended.
The Lung Center of the Philippines shall be
exempt from the payment of taxes, charges and fees
imposed by the Government or any political
subdivision or instrumentality thereof with respect to
equipment purchases made by, or for the Lung
Center.
It is plain as day that under the decree, the
petitioner does not enjoy any property tax exemption
privileges for its real properties as well as the building
constructed thereon. If the intentions were
otherwise, the same should have been among the
enumeration of tax exempt privileges under Section
2.
It is a settled rule of statutory construction that the
express mention of one person, thing, or
consequence implies the exclusion of all others. The
rule is expressed in the familiar maxim, expressio
unius est exclusio alterius. The exemption must not be
so enlarged by construction since the reasonable
presumption is that the State has granted in express
terms all it intended to grant at all, and that unless
the privilege is limited to the very terms of the statute
the favor would be intended beyond what was
meant.
Section 28(3), Article VI of the 1987
Philippine Constitution provides, thus:
(3) Charitable institutions, churches and
parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly and
exclusively used for religious, charitable or
educational purposes shall be exempt from taxation.
Under the 1973 and 1987 Constitutions and
Rep. Act No. 7160 in order to be entitled to the
exemption, the petitioner is burdened to prove, by
clear and unequivocal proof, that (a) it is a charitable
institution; and (b) its real properties are ACTUALLY,
DIRECTLY and EXCLUSIVELY used for charitable
purposes.
In the case at bar, the petitioner failed to
discharge its burden to prove that the entirety of its
real property is actually, directly and exclusively used
for charitable purposes. While portions of the
hospital are used for the treatment of patients and
the dispensation of medical services to them,
whether paying or non-paying, other portions thereof
are being leased to private individuals for their clinics
and a canteen. Further, a portion of the land is being
leased to a private individual for her business
enterprise under the business name Elliptical Orchids
and Garden Center. Indeed, the petitioners evidence
shows that it collected P1,136,483.45 as rentals in
1991 and P1,679,999.28 for 1992 from the said
lessees.
Accordingly, we hold that the portions of the land
leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt
from such taxes. On the other hand, the portions of
the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or non-
paying, are exempt from real property taxes.

Consequently, the constitutional provision is

implemented by Section 234(b) of Republic Act No.
7160 (otherwise known as the Local Government
Code of 1991) as follows:

SECTION 234. Exemptions from Real

Property Tax. The following are exempted from
payment of the real property tax:
(b) Charitable institutions, churches,
parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all
lands, buildings, and improvements actually, directly,
and exclusively used for religious, charitable or
educational purposes.