Mitsubishi Corporation-Manila Branch v. CIR, G.R. No. 175772, June 5, 2017

 

Mitsubishi Corporation-Manila Branch v. CIR

G.R. No. 175772, June 5, 2017

 

 Subject: Taxation Law

Principle: Assumption of taxes differs from Exemption of taxes. The constitutional prohibition on the grant of tax exemptions without the concurrence of the senate applies only to tax treaty, but not applicable in cases of tax assumption which is a form of executive agreement.

 

Facts: On June 11, 1987, the governments of Japan and the Philippines executed an exchange of notes where Japan agreed to extend a loan of Forty Billion Four Hundred Million Japanese Yen to the Philippines through the Overseas Economic Cooperation Fund. This was for the implementation of the Calaca II Coal-fired thermal power plant project. Under the agreement between Japan and the PH, it was stated that the PH government would assume all taxes imposed by the Philippines on Japanese contractors engaged in the project.

 

In 1991, the National Power Corporation entered into a contract with Mitsubishi for engineering, supply, construction, installation, and testing in relation to the

Project. The NPC undertook to shoulder all forms of taxes which are directly imposable under the contract. In 1998, Mitsubishi filed its Income Tax Return, including the income tax from the CALACA II Project and withhold the related Branch Profit Tax Remittance.

 

In 2000, Mitsubishi claims that the tax paid in relation to CALACA project was erroneously paid, and thereby claiming for refund, banking on the argument that it was tax exempt in relation to the Japan-Philippine Agreement.

 

Issue: Whether or not the petitioner is entitled to the refund.

 

Ruling: YES. The Supreme Court ruled that Mitsubishi is indeed entitled to a refund.

 

On the issue of the lack of concurrence by the senate as required by the constitution, the Supreme Court pointed out that the exchange of notes between the Philippine Government and Japan was an executive agreement which is binding on the state even without the concurrence of the senate. Furthermore, what is provided for in the exchange of notes is a tax assumption and not a tax exemption.

 

The Court ruled that the petitioner is indeed entitled to a refund of the taxes paid due to the fact that it was explicitly worded in the agreement between Japan and the Philippines that all fiscal levies or taxes imposed in the Philippines on Japanese firms and nationals operating as suppliers, contractors, or consultants and/or in connection with any income that may accrue from the supply of products of Japan and services of Japanese National to be provided under the OECF loan.

 

The taxes paid by the petitioner clearly fall within the ambit of the tax assumption provision under the Exchange of Notes as well as the Contract between the petitioner and the NPC. Hence, the Philippine Government through the NPC should shoulder the payment of the same.

 

It is the CIR who has to refund the taxes however, they can properly collect the subject taxes from the NPC since the NPC properly assumed the tax liability of Mitsubishi.

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PHILIPPINE HEART CENTER vs. LGU OF QUEZON CITY, G.R. No. 225409, March 11, 2020

 

PHILIPPINE HEART CENTER vs. LGU OF QUEZON CITY

G.R. No. 225409, March 11, 2020

 

Subject: Taxation Law

Principle: Real properties owned by the Republic, whether titled in the name of the Republic itself or in the name of agencies or instrumentalities of the national government, are exempt from real property tax

 

Facts: In 1975, the PHC established under PD 173 as a specialty hospital mandated to provide exert comprehensive cardiovascular care to the general public, especially the poor and less fortunate in life.

 

Respondent Quezon City Government issued 3 final Notices of Delinquency for unpaid real property taxes pertaining to the 11 properties of the PHC. The Quezon City Treasurer issued a Warrant of Levy for the PHC's failure to pay real property taxes despite due notice. On July 7, 2011, after due publication, all the properties were sold to the Quezon City Government, the lone bidder during the public auction.

 

PHC asserted that it was exempt from taxes, fees and charges imposed by a local government unit.

 

 

Issue: WON the PHC exempt from paying real property taxes on its eleven (11) properties in Quezon City.

 

Ruling: Yes. 11 properties were not anymore exempt since its beneficial use were transfer to private taxable persons. The beneficial owner is the person liable to pay the RPT to the LGU of Quezon, not the PHC since it is government instrumentality.

 

SC ruled that PHC is exempted from the real property taxes of the Quezon City Government and the public auction was considered void. The PHC is a government instrumentality with corporate powers exempt from local taxes. An agency will be classified as a government instrumentality vested with corporate powers when the following elements concur: a) it performs governmental functions, and b) it enjoys operational autonomy which PHC passes these twin criteria. The high court said the properties of the PHC are considered public dominion devoted to public use and welfare, thus exempt from real property taxes and levies.

 

The properties of the PHC are properties of public dominion devoted to public use and welfare provided in Article 420 of the Civil Code and, therefore, exempt from real property taxes and levy, without prejudice to the liability of taxable persons to whom the beneficial use of any of these properties has been granted.

 

 However, Supreme Court agreed with the position of the Quezon City government that the 11 properties of the PHC in the city are subject to real property tax since the PHC granted the beneficial use of these properties to commercial establishments such as Globe Telecom Inc., Jollibee Corporation and several others. PHC's properties which are leased to private individuals are no longer covered by the tax exemption, the private individuals are liable to pay the RPT tax.

 

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Manila Memorial Park Inc. et al v. Secretary of DSWD and DOF, G.R. No. 175356, December 3, 2013

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Manila Memorial Park Inc. et al v. Secretary of DSWD and DOF

 G.R. No. 175356, December 3, 2013

Subject: Taxation Law

Principle: The power to tax is "a principal attribute of sovereignty." Such inherent power of the State anchors on its "social contract with its citizens which obliges it to promote public interest and common good."

 

Facts: This case involves the constitutionality of Section 4 of Republic Act No. 7432 as amended by Republic Act No. 92571 as well as the implementing rules and regulations issued by respondents DSWD and DOF.

 

The provisions allow the 20% discount given by business establishments to senior citizens only as a tax deduction from their gross income. The provisions amend an earlier law that allows the senior citizen discount as a tax credit from their total tax liability. Thus, the petitioners assailed he constitutionality of the tax deduction scheme prescribed under RA 9257 and the IRR issued by the DSWD and the DOF.

 

The petitioners posit that the tax deduction scheme contravenes Article III, Section

9 of the Constitution, which provides that: "private property shall not be taken for public use without just compensation."

On the other hand, the respondents maintain that the tax deduction scheme is a legitimate exercise of the State’s police power.

 

Issue: Whether or not Section 4 of Republic Act No. 7432 as amended by Republic Act No. 9257, as well as its IRR is invalid and unconstitutional.

Ruling: No. The enactment of the provision as well as its implementing rules is a proper exercise of the inherent power to tax and police power. The determination that it will be a tax deduction, not a tax credit, is an exercise of the power to tax. The scope of the legislative power to tax necessarily includes not only the power to determine the rate of tax but the method of its collection as well.

 

Thus, this means that the power to tax also allows Congress to determine matters as whether tax rates will be applied to gross income or net income and whether costs such as discounts may be allowed as a deduction from gross income or a tax credit from net income after tax.

 

In the present case, there is no showing that the tax deduction scheme is confiscatory. The portion of the 20% discount petitioners are made to bear under the tax deduction scheme will not result in a complete loss of business for private establishments.

 

As illustrated earlier, these establishments are free to adjust factors as prices and costs to recoup the 20% discount given to senior citizens. Neither is the scheme arbitrary. In fact, this Court has consistently upheld the doctrine that "taxing power may be used as an implement of police power" in order to promote the general welfare of the people.

 

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Pelizloy Realty Corporation v. Province of Benguet, G.R. No. 183137, April 10, 2013

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Pelizloy Realty Corporation v. Province of Benguet

G.R. No. 183137, April 10, 2013

 

Subject: Taxation Law

Principle: Municipal corporations, unlike a sovereign state, have no inherent power of taxation.

 

Facts: Pelizloy, an owner of a resort, questioned the legality of the ordinance and contended that it is not within the local taxing power of Benguet. Pelizloy posits that said amusement tax is an ultra vires act. However, the province claimed that the amusement tax imposed is already provided under the LGC falling under ‘other places of amusement.’

 

Issue: Whether or not provinces are authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath houses, hot springs, and tourist spots for being "amusement places" under the LGC.

 

Ruling: No.

Resorts, swimming pools, bath houses, hot springs, and tourist spots are not among those places expressly mentioned in Sec. 140 of the LGC. Thus, the determination of whether it is a valid imposition hinges on whether the phrase ‘other places of amusement’ encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots.

 

Section 131 (c) of the LGC already provides a clear definition: "Amusement Places" include theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances. It is clear that resorts, swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily "where one seeks admission to entertain oneself by seeing or viewing the show or performances".

 

While it is true that they may be venues where people are visually engaged, they are not primarily venues for their proprietors or operators to actively display, stage or present shows and/or performances.

 

Thus, subject amusement tax imposed was declared null and void.

Luzon Drug Corp. v DSWD [GR 199669 April 25, 2017]

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Luzon Drug Corp. v DSWD

[GR 199669 April 25, 2017]

Subject: Taxation Law

Facts:

Southern Luzon Drug Corp’s petition sought to prohibit the implementation of Section 4(a) of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" and Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons," particularly the granting of 20% discount on the purchase of medicines by senior citizens and persons with disability (PWD), respectively, and treating them as tax deduction, instead of tax credit under the previous law. The claim the is unconstitutional and it impairs their right to earn profit

 

The petitioner is a domestic corporation engaged in the business of drugstore operation in the Philippines while the respondents are government agencies, office and bureau tasked to monitor compliance with R.A. Nos. 9257 and 9442.

 

Issue: Whether or not the questioned law by the petitioner is unconstitutional. (No)

 

Ruling:

Petitioner’s argument the law is confiscatory in the sense that the State takes away a portion of its supposed profits does not hold ground because the subject provisions only affect the petitioner's right to profit, and not earned profits.

 

Unfortunately for the petitioner, the right to profit is not a vested right or an entitlement that has accrued on the person or entity such that its invasion or deprivation warrants compensation. Vested rights are "fixed, unalterable, or irrevocable."

 

In the exercise of police power, "property rights of private individuals are subjected to restraints and burdens in order to secure the general comfort, health, and prosperity of the State." Even then, the State's claim of police power cannot be arbitrary or unreasonable. The proper exercise of the police power requires the concurrence of a lawful subject and a lawful method.

 

More importantly, it is in the exercise of its police power that the Congress enacted R.A. Nos. 9257 and 9442, the laws mandating a 20% discount on purchases of medicines made by senior citizens and PWDs. It is also in further exercise of this power that the legislature opted that the said discount be claimed as tax deduction, rather than tax credit, by covered establishments.

 

The subjects of R.A. Nos. 9257 and 9442, i.e., senior citizens and PWDs, are individuals whose well-being is a recognized public duty. As a public duty, the responsibility for their care devolves upon the concerted efforts of the State, the family and the community.

 

The 20% Sales Discount for Senior Citizens and PWDs is a valid exercise of police power.

After all, the overriding purpose of the exercise of the power is to promote general welfare, public health and safety, among others. It is a measure, which by sheer necessity, the State exercises, even to the point of interfering with personal liberties or property rights in order to advance common good.

 

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Tiu vs. Arriesgado G.R. No. 138060, September 1, 2004

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Tiu vs. Arriesgado 

G.R. No. 138060

September 1, 2004

Subject: Insurance Law

Principle: Where the insurance contract provides for indemnity against liability to third person, such persons can directly sue the insurer, as an exception to the rule on mutuality of contract.

 

FACTS: On March 15, 1987, a truck owned by Condor was travelling along Poblacion, Compostela, Cebu blew one of its rear tires.  The truck driver parked the truck on the right side of the highway, left the rear lights on, and instructed the helper to place spare tire on the road few meters away from the truck to serve as warning device. The driver went to get assistance.

 

Thereafter, D’Rough Riders passenger bus was cruising along the highway in the same direction. Its driver saw the stalled truck 25 meters away but it was too late. The bus rammed on the rear part of the truck resulting in the injury of its passengers, including Arriesgado and his wife, who eventually died from her injuries.

 

Arriesgado filed a complaint for breach of contract of carriage against D’Rough Riders and its driver. For its part, Tiu (owner of D’Rough Riders) filed a third party complaint against its insurer, PPSII, the owner of the truck and its driver. He claimed that PPSII, as insurer, should be held solidarily liable with Tiu. PPSII’s argument: There is a contract of insurance (TPL) but it had already settled the claims of those injured in the incident.

 

The trial court and the CA held in favor of Arriesgado. As to the liability of PPSII, CA held that no evidence was presented against PPSII so it cannot be held liable for Arriesgado’s claim

 

 

ISSUE: In third-party liability insurance, would it be possible for a third party to sue the insurer directly?

 

 

HELD: Yes. This is an exception to the rule on mutuality of contract. Whenever a contract contains stipulation for the benefit of a third person and the moment the third person communicates his assent thereto, the contract becomes binding upon him. The fact that a third person demands fulfillment of the insurance policy may be reasonably construed as an assent on his part to the benefit provided in the policy. This provision arms him with the requisite legal personality to bring an action on the insurance policy.

 

While it is true that where the insurance contract provides for indemnity against liability to third persons, and such persons can directly sue the insurer, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held liable in solidum with the insured and/or the other parties found at fault. For the liability of the insurer is based on contract; that of the insured carrier or vehicle owner is based on tort.

 

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Sun Insurance Office Ltd. vs. CA, G.R. No. 92383, July 17, 1992

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Sun Insurance Office Ltd. vs. CA

G.R. No. 92383

July 17, 1992

 SUBJECT: INSURANCE LAW

Principle: Contributory negligence of the accused as to his death is not suicide or willful exposure to needless peril that would excuse the insurer from the payment of claims.

 

FACTS: Felix Lim, Jr. had a life insurance policy with Sun Insurance, with his wife Nerissa Lim, as beneficiary. Two months after its issuance, Lim died of gunshot. His secretary testified that, on the eve of his mother’s birthday, Lim was playing with his handgun, he removed the magazine thereon and playfully pointed that gun at her, and the secretary pushed it aside saying the gun might be loaded. Lim assured her that the gun was empty, he pointed it to his temple, what followed was a fatal explosion. Nerissa filed a claim with Sun Insurance. The latter denied on ground that the cause of Lim’s death was not an accident, i.e. it was a death consequent upon “the insured person attempting to commit suicide or willfully exposing himself to needless peril.”

 

ISSUE: Whether or not Sun Insurance be absolved of liability on ground that Lim willfully exposed himself to needless peril.

 

RULING: No. Suicide and willful exposure to needless peril are in pari materia because they both signify a disregard for one’s life. The only difference is in degree, as suicide imports a positive act of ending such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent.

 

In this case, as the secretary testified, Lim had removed the magazine from the gun and believed it was no longer dangerous. He expressly assured her that the gun was not loaded. It is submitted that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is that he thought it was not unsafe to do so.

 

What bars the insured from recovering from the insurer on account of his own acts is a deliberate exposure to a known peril. While Lim was unquestionably negligent, this negligence does not bar his wife from recovering from proceeds of the policy from the insurer. Contributory negligence is not one of the grounds enumerated in the policy exonerating the insurer from liability.

 

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