REQUISITES OF THE EXERCISE OF POLICE POWERLawful Subject activity sought to be regulated affects public welfareLawful Means means employed are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive on individiuals

REQUISITES OF THE EXERCISE OF EMINENT DOMAINNecessity must be public in characterPrivate property- Taking- taking of tittle and possession of property, also imposing a burden on the owner

REQUISITES FOR VALID CLASSIFICATIONClassification rests upon substantial distinctionsApplies equally to all members of the same classIt is germane to the purpose of the lawIt is not confined to existing conditions only

ARTICLE VI LEGISLATIVE DEPTSECTION 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

SECTION 26. (1) Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.

(2) No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.

SECTION 27. (1) Every bill passed by the Congress shall, before it becomes a law, be presented to the President. If he approves the same, he shall sign it; otherwise, he shall veto it and return the same with his objections to the House where it originated, which shall enter the objections at large in its Journal and proceed to reconsider it. If, after such reconsideration, two-thirds of all the Members of such House shall agree to pass the bill, it shall be sent, together with the objections, to the other House by which it shall likewise be reconsidered, and if approved by two-thirds of all the Members of that House, it shall become a law. In all such cases, the votes of each House shall be determined by yeas or nays, and the names of the Members voting for or against shall be entered in its Journal. The President shall communicate his veto of any bill to the House where it originated within thirty days after the date of receipt thereof; otherwise, it shall become a law as if he had signed it.

(2) The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object.

SECTION 28. (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.

(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.

(4) No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress.

SECTION 29. (1) No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.

(2) No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, or other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium.

(3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government.

DELEGATION TO LGUARTICLE X Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.

DELEGATION TO THE PRESIDENTARTICLE VISEC 28 (2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.OR AS AN INCIDENT OF EMERGENCY POWERSARTICLE VISECTION 23. (1) The Congress, by a vote of two-thirds of both Houses in joint session assembled, voting separately, shall have the sole power to declare the existence of a state of war.(2) In times of war or other national emergency, the Congress may, by law, authorize the President, for a limited period and subject to such restrictions as it may prescribe, to exercise powers necessary and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the Congress, such powers shall cease upon the next adjournment thereof.

COMPLETENESS TEST - A law is complete when it sets forth therein the policy to be executed, carried out or implemented by the delegate. the law must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate the only thing he will have to do is enforce it.SUFFICIENT STANDARD TEST - It lays down a sufficient standard when it provides adequate guidelines or limitations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. To be sufficient, the standard must specify the limits of the delegate's authority, announce the legislative policy and identify the conditions under which it is to be implemented.

EXAMPLE: public interest, justice & equity, public convenience & welfare, simplicity, economy and efficiencyMANOSCA V CAThe term public use, not having been otherwise defined by the constitution, must be considered in its general concept of meeting a public need or apublic exigency.Black summarizes the characterization given by various courts to the term; thus:Public Use.Eminent domain.The constitutional and statutory basis for taking property by eminent domain. For condemnation purposes, public use is one which confers some benefit or advantage to the public; it is not confined to actual use by public.It is measured in terms of right of public to use proposed facilities for which condemnation is sought and, as long as public has right of use, whether exercised by one or many members of public, a public advantage or public benefit accrues sufficient to constitute a public use. Montana Power Co.vs.Bokma,Mont.457 P. 2d 769, 772, 773.Public use, in constitutional provisions restricting the exercise of the right to take private property in virtue of eminent domain, means a use concerning the whole community as distinguished from particular individuals.But each and every member of society need not be equally interested in such use, or be personally and directly affected by it; if the object is to satisfy a great public want or exigency, that is sufficient. Rindge Co.vs.Los AngelesCounty, 262U.S.700, 43 S.Ct. 689, 692, 67 L.Ed. 1186.The term may be said to mean public usefulness, utility, or advantage, or what is productive of general benefit. It may be limited to the inhabitants of a small or restricted locality, but must be in common, and not for a particular individual. The use must be a needful one for the public, which cannot be surrendered without obvious general loss and inconvenience.A public use for which land may be taken defies absolute definition for it changes with varying conditions of society, new appliances in the sciences, changing conceptions of scope and functions of government, and other differing circumstances brought about by an increase in population and new modes of communication and transportation.PUBLIC USETRADITIONAL CONCEPTIt refers to any use directly available to the general public as a matter of right and not merely of forbearance or accommodation

Ex: construction of roads, bridges, ports, waterworks, schools, electric and telecom systems, markets, parks, hospitals, govt office buildings.

Note: The idea that public use is strictly limited to clear cases of use by the public has been discarded

EXPANSIVE CONCEPTPublic use has now acquired an expansive meaning to include any use that is of usefulness, utility, or advantage, or what is productive of general benefit to the publicAs long as public has a right of use, whether exercised by one or many members of public, a public advantage or public benefit accrues sufficient to constitute public useEx: Exprop of land for tourism purposes

CIR V ALGUE & CTA (1988) January 14, 1965 ALGUE received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.

January 18, 1965 - Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the office of the petitioner

March 12, 1965 - a warrant of distraint (PROOF OF FINALITY OF THE LEVY) and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest

A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant.

April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served April 23, 1965 (16 DAYS LATER) Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals CTA ruled in favor of ALGUEPROCEDURAL:RULE - the warrant of distraint and levy is "proof of the finality of the assessment"8and renders hopeless a request for reconsideration,"9being "tantamount to an outright denial thereof and makes the said request deemed rejected."EXCEPTION (IN THIS CASE) During the intervening period, the warrant was premature and could therefore not be served.EXPLANATION:The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged.7It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment"8and renders hopeless a request for reconsideration,"9being "tantamount to an outright denial thereof and makes the said request deemed rejected."10But there is a special circumstance in the case at bar that prevents application of this accepted doctrine.The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served.As the Court of Tax Appeals correctly noted,"11the protest filed by private respondent was notpro formaand was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965.(4 DAYS) The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, (16 DAYS) only 20 (TOTAL) days of the reglementary period had been consumed.SUBSTANTIVECIRS 1ST CONTENTION: it was not an ordinary reasonable or necessary business expenseCTAS RULING: the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company.There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon.17The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved.

CIRS 2ND CONTENTION: payments are fictitious because most of the payees are members of the same family in control of Algue.CTAS RULING: the amount of the promotional fees was not excessive.( reasonable proportion to services)SEC. 30.Deductions from gross income.--In computing net income there shall be allowed as deductions (TAX CODE)(a) Expenses:(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ...SEC. 70.Compensation for personal services ( REVENUE REGULATIONS NO. 2).--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service.

DOCTRINE:Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to 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 it is an arbitrary method of exaction by those in the seat of power.But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

PAL V EDU (1988)

FACTS:

PAL is engaged in the air transportation business under a legislative franchise. (Act No. 42739) Under such franchise, PAL is exempt from the payment of taxes since PAL is bound to pay to the National Government during the life of its franchise a tax of 2% of the gross revenue or gross earning derived under the franchise. Also, on the strength of an opinion of the Secretary of Justice PAL has, since 1956, not been paying motor vehicle registration fees.

In 1971, Commissioner Elevate issued a regulation pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees. Despite PAL's protestations, Comm. Elevate refused to register the PALs motor vehicles unless the amounts imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles.Thereafter, PAL wrote Comm. Edu and demanded a refund but the latter denied the request. Hence, PAL filed a complaint against Comm. Edu and National Treasurer Carbonell. The trial court dismissed the complaint and based its decision from the ruling in Republic v. Philippine Rabbit Bus Lines, Inc to the effect that motor vehicle registration fees are regulatory exceptional and not revenue measures and, therefore, do not come within the exemption granted to PAL. PAL appealed to the Court of Appeals and the latter certified the case to the SC

ISSUE:Whether or not motor vehicle registration fees are considered as taxes.

SC RULING:

The Court ruled in the affirmative. It is clear from the provisions of RA 4136 (Sec 61 see notes below) that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the administering agency. Fees may be properly regarded as taxes even though they also serve as an instrument of regulation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax.In the case of motor vehicle registration fees, the conclusions become inescapable in view of Section 70(b) of Rep. Act 587. The same provision appears as Section 59 (b) of the Land Transportation code.(see notes below) It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Sec 59 (b). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more apparent.

Pertinent provisions :Sec. 61 of the Land Transportation and Traffic Code (RA 4136):Disposal of Monies CollectedMonies collected under the provisions of this Act shall be deposited in a special trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in accordance with the provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip the Land Transportation Commission but not to exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As amended by RA 64-67, approved August 6, 1971).

Sec 59 (b)No taxes or fees other than those prescribed in this Act shall be imposed for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or municipal council or board or other competent authority may enact and collect such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the President of the Philippines upon recommendation of the Secretary of Public Works and Communications, but in none of these cases shall any toll fees be charged or collected until and unless the approved schedule of tolls has been posted legibly in a conspicuous place at such toll station.

ESSO STANDARD EASTERN INC V CIR (1989)POLICE MEASURE V REVENUE MEASUREPOLICE MEASURE = not deductible from gross incomeREVENUE MEASURE = deductible from gross incomeMARGIN FEES = (NOT TAXES) police measure because it is a form of exchange control or restriction designed to discourage imports and encourage exports, and ultimately, 'curtail any excessive demand upon the international reserve' in order to stabilize the currency.DEFINITION OF ORDINARY & NECESSARY EXPENSE no hard and fast rule, but guidelines were laidFACTS:In CTA Case No. 1251, petitioner ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for drilling and exploration of its petroleum concessions. This claim was disallowed by the respondent Commissioner of Internal Revenue. ESSO then filed an amended return where it asked for the refund of P323,279.00 by reason of its abandonment as dry holes of several of its oil wells. Also claimed as ordinary and necessary expenses in the same return was the amount of P340,822.04, representing margin fees it had paid to the Central Bank on its profit remittances to its New York head office.On August 5, 1964, the CIR granted a tax credit of P221,033.00 only, disallowing the claimed deduction for the margin fees paid on the ground that the margin fees paid to the Central Bank could not be considered taxes or allowed asdeductiblebusiness expenses.

Esso appealed to the Court of Tax Appeals (CTA) for the refund of the margin fees it had earlier paid contending that the margin fees weredeductiblefromgross incomeeither as a tax or as an ordinary and necessarybusiness expense. However, Essos appeal was denied.

ESSOS CONTENTION:1. margin fees are taxes and cites the background and legislative history of the Margin Fee Law - STATCON2. margin levy is a tax on the purchase of foreign exchange and hence should not form part of the exchange rate NO, IT IS A POLICE MEASURE3. if margin fees are not taxes, they should nevertheless be considered necessary and ordinary business expenses and therefore still deductible from its gross income.- NOT NECESSARY & ORDINARYESSOS 1ST CONTENTION :margin fees are taxes and cites the background and legislative history of the Margin Fee Law showing that R.A. 2609 was nothing less than a revival of the 17% excise tax on foreign exchange imposed by R.A. 601. This was a revenue measure formally proposed by President Carlos P. Garcia to Congress as part of, and in order to balance, the budget for 1959-1960.CTAS CONTENTION:( STAT CON) opinions expressed in debates, actual proceedings of the legislature, steps taken in the enactment of a law, or the history of the passage of the law through the legislature, may be resorted to as an aid in the interpretation of a statute which is ambiguous or of doubtful meaning. As a matter of fact, there may be no resort to the legislative history of the enactment of a statute, the language of which is plain and unambiguous, since such legislative history may only be resorted to for the purpose of solving doubt, not for the purpose of creating it.SCS ANSWER:In 2 cases, the SC have held that a margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve. (REGULATION POLICE MEASURE)1. Caltex (Phil.) Inc. v. Acting Commissioner of CustomsA margin levy on foreign exchange is a form of exchange control or restriction designed to discourage imports and encourage exports, and ultimately, 'curtail any excessive demand upon the international reserve' in order to stabilize the currency.

ESSOS 2ND CONTENTION:margin levy is a tax on the purchase of foreign exchange and hence should not form part of the exchange rateSCS ANSWER:NO - a tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country's international reserves.1. Chamber of Agriculture and Natural Resources of the Philippines v. Central BankNeither do we find merit in the argument that the 20% retention of exporter's foreign exchange constitutes an export tax. A tax is a levy for the purpose of providing revenue for government operations, while the proceeds of the 20% retention, as we have seen, are applied to strengthen the Central Bank's international reserve.We conclude then that the margin fee was imposed by the State in the exercise of its police power and not the power of taxation.ESSOSS 3RD CONTENTION:if margin fees are not taxes, they should nevertheless be considered necessary and ordinary business expenses and therefore still deductible from its gross income.SCS ANSWER:The applicable provision is Section 30(a) of the National Internal Revenue Code reading as follows:SEC. 30. Deductions from gross income in computing net income there shall be allowed as deductions(a) Expenses:(1)In general. All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling expenses while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition to the continued use or possession, for the purpose of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.(2)Expenses allowable to non-resident alien individuals and foreign corporations. In the case of a non-resident alien individual or a foreign corporation, the expenses deductible are the necessary expenses paid or incurred in carrying on any business or trade conducted within the Philippines exclusively.IN Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, the Court laid down the rules on the deductibility of business expenses:(1) the expense must be ordinary and necessary, (2) it must be paid or incurred within the taxable year, and (3) it must be paid or incurred in carrying on a trade or business.ALSO, he must substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will be disallowed. The mere allegation of the taxpayer that an item of expense is ordinary and necessary does not justify its deduction.NO HARD AND FAST RULE ON THE DEFINITION OF ORDINARY & NECESSARY EXPENSES BUT THE FOLLOWING ARE THE GUIDELINES ESTABLISHED BY THE COURT:1. 'necessary' - where the expenditure is appropriate and helpful in the development of the taxpayer's business2. 'ordinary'- when it connotes a payment which is normal in relation to the business of the taxpayer and the surrounding circumstances.3. 'ordinary' does not require that the payments be habitual or normal in the sense that the same taxpayer will have to make them often; the payment may be unique or non-recurring to the particular taxpayer affectedAssuming that the expenditure is ordinary and necessary in the operation of the taxpayer's business, the answer to the question as to whether the expenditure is an allowable deduction as a business expense must be determined from the nature of the expenditure itself, which in turn depends on the extent and permanency of the work accomplished by the expenditure.IN THE PRESENT CASE:1. Were the margin fees paid by petitioner on its profit remittance to its Head Office in New York appropriate and helpful in the taxpayer's business in the Philippines? NO2. Were the margin fees incurred for purposes proper to the conduct of the affairs of petitioner's branch in the Philippines? NO3. were the margin fees incurred for the purpose of realizing a profit or of minimizing a loss in the Philippines?- NOTHEREFORE - They were expenses incurred in the disposition of said incomes; expenses for the remittance of funds after they have already been earned by petitioner's branch in the Philippines for the disposal of its Head Office in New York which is already another distinct and separate income taxpayer.DOCTRINE:Claims for deductions are a matter of legislative grace and do not turn on mere equitable considerations .The taxpayer in every instance has the burden of justifying the allowance of any deduction claimed.