Commissioner vs.

Algue

158 SCRA 9

Facts:

The Philippine Sugar Estate Development Company (PSEDC). Appointed

Issue: Is the CIR correct?

Ruling:

No. taxes are the lifeblood of the government and should be collected without
unnecessary hindrance. Every person who is able to pay must contribute his share in the
running of the government. The government for its part is expected to respond in the
form of tangible and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion that is an arbitrary method of exaction by
those in the seat of power.

On the other hand, such collection should be made in accordance with law as
any arbitrariness will negate the very reason for government itself.
PEPSI-COLA BOTTLING COMPANY OF THE PHIILIPPINES, INC. vs.
MUNICIPALITY OF TANAUAN

G.R. No. L-31156 February 27, 1976

FACTS: In February 1963, plaintiff commenced a complaint seeking to declare Section 2

Municipal Ordinance No. 23 levies and collects from soft drinks producers and
manufacturers one-sixteenth (1/16) of a centavo for every bottle of soft drink corked. On
the other hand, Municipal Ordinance No. 27 levies and collects on soft drinks produced
or manufactured within the territorial jurisdiction of the municipality a tax of one centavo
(P0.01) on each gallon of volume capacity. The tax imposed in both Ordinances Nos. 23
and 27 is denominated as "municipal production tax.

ISSUES:

1. Is Section 2 of R.A. 2264 an undue delegation of the power of taxation?

2. Do Ordinance Nos. 23 and 24 constitute double taxation and impose percentage or

RULING:

1. NO. The power of taxation is purely legislative and cannot be delegated to the
executive or judicial department of the government without infringing upon the theory of
separation of powers. But as an exception, the theory does not apply to municipal
corporations. Legislative powers may be delegated to local governments in respect of
matters of local concern.

2. NO. The Municipality of Tanauan discovered that manufacturers could increase the
volume contents of each bottle and still pay the same tax rate since tax is imposed on
every bottle corked. To combat this scheme, Municipal Ordinance No. 27 was enacted.
As such, it was a repeal of Municipal Ordinance No. 23. In the stipulation of facts, the
parties admitted that the Municipal Treasurer was enforcing Municipal Ordinance No. 27
only. Hence, there was no case of double taxation.
Wells Fargo vs. Collector of Internal Revenue
GR 46720, 28 June 1940
First Division, Moran (J): 4 concur, 1 concur in result

Facts: Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the
place of her alleged last residence and domicile. Among the properties she left was her
1/2 conjugal shares of stock in the Benguet Consolidated Mining Co., an anonymous
partnership (sociedad anonima), organized under the laws of the Philippines. She left a
will duly admitted to probate in California where her estate was administered and settled.
Wells Fargo bank and Union Trust Co. was duly appointed trustee of the trust by the said
will. The Federal and California States inheritance taxes due thereon have been duly
paid. The Collector of Internal Revenue in the Philippines, however, sought to subject the
shares of stock to inheritance tax, to which Wells Fargo objected.

Issue: Whether the shares of stock are subject to Philippine inheritance tax considering
that the decedent was domiciled in California.

Held: Originally, the settled law in the United States is that intangibles have only one
situs for the purpose of inheritance tax, and such situs is in the domicile of the decedent at
the time of his or her death. But the rule has been relaxed. The maxim mobila sequuntur
personam, upon which the rule rests, has been decried as a mere fiction of law having
its origin in considerations of general convenience and public policy, and cannot be
applied to limit or control teh right of the State to tax property within its jurisdiction and
must yield to established fact of legal ownership, actual presence and control elsewhere,
and cannot be applied if to do so whould result in inescapable and patent injustice. The
relaxation of the original rule rests on either of two fundamental considerations: (1) upon
the recognition of the inherent power of each government to tax persons, properties, and
rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2) upon
the principle that as to intangibles, a single location in space is hardly possible,
considering the multiple, distinct relationships which may be entered into with respect
thereto.

Herein, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled therein. The certificates of stock remained in the Philippines up to the time
when the deceased died in California, and they were in possession of one Syrena McKee,
secretary of the corporation, to whom they have been delivered and indorsed in blank.
McKee had the legal title to the certificates of stock held in trust for the true owner
thereof. The owner residing in California has extended here her activities with respect to
her intangibles so as to avail hereself of the protection and benefit of Philippine laws.
Accordingly, the jurisdiction of the Philippine Government to tax must be upheld.
PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965
13 SCRA 775

FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company,
entered into reinsurance contracts with foreign insurance companies not doing business in
the country, thereby ceding to foreign reinsurers a portion of the premiums on insurance
it has originally underwritten in the Philippines. The premiums paid by such companies
were excluded by the petitioner from its gross income when it file its income tax returns
for 1953 and 1954. Furthermore, it did not withhold or pay tax on them. Consequently,
the CIR assessed against the petitioner withholding taxes on the ceded reinsurance
premiums to which the latter protested the assessment on the ground that the premiums
are not subject to tax for the premiums did not constitute income from sources within the
Philippines because the foreign reinsurers did not engage in business in the Philippines,
and CIR's previous rulings did not require insurance companies to withhold income tax
due from foreign companies.

ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums
ceded to foreign insurance companies, which deprives the government from collecting
the tax due from them?

HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from
necessity. It is a necessary burden to preserve the State's sovereignty and a means to give
the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a
corps of civil servants to serve, public improvement designed for the enjoyment of the
citizenry and those which come within the State's territory, and facilities and protection
which a government is supposed to provide. Considering that the reinsurance premiums
in question were afforded protection by the government and the recipient foreign
reinsurers exercised rights and privileges guaranteed by our laws, such reinsurance
premiums and reinsurers should share the burden of maintaining the state.
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no
withholding of tax due on reinsurance premiums may free the taxpayer from the payment
of surcharges or penalties imposed for failure to pay the corresponding withholding tax,
but it certainly would not exculpate it from liability to pay such withholding tax. The
Government is not estopped from collecting taxes by the mistakes or errors of its agents.
G.R. No. L-28271 July 25, 1975

SMITH, BELL AND CO. (PHIL.), INC., petitioner, vs.COMMISSIONER OF

This is a petition for review of the decision of the court of Tax Appeals in case 1733
which affirms the deficiency assessment made by the Commissioner of Internal Revenue
against the petitioner Smith, Bell & Co. in the amount of P11,713.90.

We affirm the decision of the Court of Tax Appeals.

From August 1963 to August 1965 the petitioner imported 119 cases of "Chatteau Gay"
wine which it declared as "still wine" under Section 134(b)of the Tax Code and paid
thereon the specific tax of P1.00 per liter of volume capacity. To determine the correct
amount of the specific tax due on the petitioner's importation, the Commissioner of
Internal Revenue (hereinafter referred to as the Commissioner) ordered it tested and
analyzed in the Bureau of Internal Revenue Laboratory Center. The analyst who
conducted the laboratory test reported that Chatteau Gay "is a delicate table wine, with an
alcohol content of 9.5% by volume (volume 745 cc @ 290C), characterized with
explosion upon opening and effervescence due to CO2 (residual)," and concluded that it
should be classified as "sparkling wine." The analyst's conclusion is supported by
Herstein and Jacobs who, in their book entitled "Chemistry & Technology of Wines and
Liquors," wrote:

(f) Sparkling wines are bottled before the fermentation has ceased so that they contain
carbon dioxide gas in solution at greater than atmospheric pressure. When they are
served, the carbon dioxide is liberated with effervescence. These gas and alcoholic
contents vary according to the market for which they are intended. They may be dry or
sweet, light or strong. Champagne, sparkling Burgundy, and Asti-Spumante are examples
of sparkling wines.

On the basis of the analyst's report and recommendation, the Commissioner, on October
11, 1965, assessed the petitioner a deficiency specific tax on the 119 cases of imported
Chatteau Gay in the sum of P11,713.90 under Section 134(a) of the Tax Code which
imposes a specific tax of P12.00 per liter of volume capacity on sparkling wines.

The petitioner does not dispute the mathematical correctness of the Commissioner's
assessment, but contends that the assessment is unconstitutional because Section 134(a)
of the Tax Code under which it was issued lays down an insufficient and hazy standard
by which the policy and purpose of the law may be ascertained and as well gives the
Commissioner blanket authority to decide what is or is not the meaning of "sparkling
wines." The argument is thus advanced that there is here an abdication of legislative
power violative of the established doctrine, delegata potestas non potest delegate, and the
due process clause of the Constitution. The Commissioner disagrees on the ground that
Chapter I, Title IV of the Tax Code in no uncertain terms specifies the articles subject to
specific taxes, among which are wines, and Section 134 does no more than classify wines
in several categories and prescribe the corresponding amounts of tax to be paid. The
Commissioner's position was sustained by the Court of Tax Appeals in its decision dated
October 5, 1967.

The contention that in regard to Section 134(a) of the Tax Code there is an
unconstitutional surrender of legislative powers and a failure of due process, need not
give us more than a momentary pause.

Section 134 of the Tax Code provides: 1

Specific tax on wines. On wines and imitation wines there shall be collected, per liter
of volume capacity, the following taxes:

(a) Sparkling wines, regardless of proof, twelve pesos.

(b) Still wines containing fourteen per centum of alcohol or less, except those produced
from casuy and duhat, one peso.

(c) Still wines containing more than fourteen per centum of alcohol, two pesos.

Imitation wines containing more than twenty-five per centum of alcohol shall be taxed as
distilled spirits.

There can be no uncertainty that the purpose of the abovequoted provision is to impose a
specific tax on wines and imitation wines. The first clause of Section 134 states so in
plain language. The sole object of the sub-enumeration that follows is in turn
unmistakably to prescribe the amount of the tax specifically to be paid for each type of
wine and/or imitation wine so classified and described. The section therefore clearly and
indubitably discloses the legislative will, leaving to the officers charged with
implementation and execution thereof no more than the administrative function of
determining whether a particular kind of wine or imitation wine falls in one class or
another. In the performance of this function, the internal revenue officers are
demonstrably guided by the sound established practices and technology of the wine
industry, an industry as aged and widely dispersed as one can care to know.

In the case at bar, the Commissioner had the petitioner's wine examined and analyzed.
The petitioner, on the other hand, does not appear to have made a similar effort. On the
bases of the test thus made and the authoritative and published work on the subject of
wines, the Commissioner ordered the corresponding deficiency assessment to be issued.
Having chosen to engage in the wine trading business, the petitioner is duty bound to
know the kinds of wine it deals in, particularly insofar as such knowledge may be
relevant to the proper appreciation of its tax liabilities, and cannot take comfort in its
pretended ignorance of what sparkling wine is.

ACCORDINGLY, the decision of the Court of Tax Appeals is affirmed, at petitioner's