A.

Taxpayer’s suit

Case: 1. Anti-graft League of the Phil. V. San Juan, G.R. No. 97787 August 1, 1996

Facts:

Petitioner Anti-Graft League of the Philippines, a self-confessed "non-governmental, non-stock

and non-profit organization, which was constituted to protect the interest of the Republic and its
instrumentalities and political subdivisions and its constituents against abuses of its public
officials and employees," claims the instant petition for certiorari is a taxpayer's suit which it filed
because the Provincial Board of Rizal (the Board) allegedly illegally disbursed public funds in
transactions involving four parcels of land in Ugong Norte, Pasig. The allegation is denied by
respondents who challenge the propriety of this action, as well as the capacity of petitioner to file
the same. Public respondents, officers of the Province of Rizal (the Province), even intimate that
the filing of this petition is politically-motivated.

On March 20, 1975, the President Ferdinand E. Marcos issued Presidential Decree No. 674,
establishing the Technological Colleges of Rizal. Among other things, it directed the Board to
provide funds for the purchase of a site and the construction of the necessary structures thereon.
Acting upon an authority granted by the office of the President, the Province was able to
negotiate with respondent Ortigas & Co., Ltd. (Ortigas) for the acquisition of four parcels of land
located in Ugong Norte, Pasig. Three deeds of absolute sale were executed on April 22 and May
9, 1975, whereby Ortigas transferred its ownership over a total of 192,177 square meters of land
to the Province at P110.00 per square meter. The projected construction, however, never
materialized because of the decimation of the Province's resources brought about by the creation
of the Metro Manila Commission (MMC) in 1976.

Twelve years later, with the property lying idle and the Province needing funds to propel its 5-
years Comprehensive Development Program, the then incumbent Board passed Resolution No.
87-205 dated October 15, 1987 authorizing the Governor to sell the same. The said property was
eventually sold to Valley View Realty Development Corporation (Valley View) for P700.00 per
square meter or a total of P134,523,900.00, of which 30 million was given as downpayment. On
May 10, 1988, after learning about the sale, Ortigas filed before Branch 151 of the Regional Trial
Court of Pasig an action for recission of contract plus damages with preliminary injunction against
the Province. Docketed as Civil Case No. 55904, the complaint alleged that the Province violated
one of the terms of its contracts with Ortigas by selling the subject lots which were intended to be
utilized solely as a site for the construction of the Rizal Technological Colleges and the Rizal
Provincial Hospital.

Meanwhile, the new provincial officials, including herein public respondents, assumed office. On
April 21, 1988, the Board adopted Resolution No. 88-65 which provided for the rescission of the
deed of sale between the Province and Valley View on the ground that the sale price was
exceedingly low and, thus, prejudicial to the Province. Because of this, Valley View then filed a
complaint docketed as a Civil Case No. 55913 against the Province for specific performance and
damages. The case was, however, dismissed after the parties executed on August 12, 1988 a
compromise agreement whereby the Province returned the 30-million peso downpayment earlier
given by Valley View.

Civil Case No. 55904 was also resolved through a compromise agreement executed by and
between the Province and Ortigas on March 20, 1989. Under the said compromise agreement,
which was approved by respondent Judge Eutropio Migriño in his decision dated March 21, 1989,
the Province agreed to reconvey the four parcels of land to Ortigas at a price of P2,250.00 per
square meter, or a total of P432,398,250.00, payable within two years at an annual interest rate
of fourteen percent. This amount is higher than the market values separately determined by
respondents Asian Appraisal, Inc. and the Provincial Appraisal Committee, which respectively
 pegged the price of the subject properties at P1,800.00 and P2,200.00 per square meter. Ortigas
made its final payment on March 30, 1991.

Issue: Whether or not the action is a taxpayer's suit

Ruling:

Petitioner and respondents agree that to constitute a taxpayer's suit, two requisites must be met,
namely, that public funds are disbursed by a political subdivision or instrumentality and in doing
so, a law is violated or some irregularity is committed, and that the petitioner is directly affected
by the alleged ultra vires act.1 The same pronouncement was made in Kilosbayan, Inc. v.
Guingona, Jr.,2 where the Court also reiterated its liberal stance in entertaining so-called
taxpayer's suits, especially when important issues are involved. A closer examination of the facts
of this case would readily demonstrate that petitioner's standing should not even be made an
issue here, "since standing is a concept in constitutional law and here no constitutional question
is actually involved."3

In the case at bar, disbursement of public funds was only made in 1975 when the Province
bought the lands from Ortigas at P110.00 per square meter in line with the objectives of P.D. 674.
Petitioner never referred to such purchase as an illegal disbursement of public funds but focused
on the alleged fraudulent reconveyance of said property to Ortigas because the price paid was
lower than the prevailing market value of neighboring lots. The first requirement, therefore, which
would make this petition a taxpayer's suit is absent. The only remaining justification for petitioner
to be allowed to pursue this action is whether it is, or would be, directly affected by the act
complained of. As we stated in Kilosbayan, Inc. v. Morato,4

Standing is a special concern in constitutional law because in some cases suits are brought not
by parties who have been personally injured by the operation of a law or by official action taken,
but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence the
question in standing is whether such parties have "alleged such a personal stake in the outcome
of the controversy as to assure that concrete adverseness which sharpens the presentation of
issues upon which the court so largely depends for illumination of difficult constitutional
questions." (Citing Baker v. Carr, 369 U.S. 186, 7 L. Ed. 2d 633 [1962])

Undeniably, as a taxpayer, petitioner would somehow be adversely affected by an illegal use of

public money. When, however, no such unlawful spending has been shown, as in the case at bar,
petitioner, even as a taxpayer, cannot question the transaction validly executed by and between
the Province and Ortigas for the simple reason that it is not privy to said contract. In other words,
petitioner has absolutely no cause of action, and consequently no locus standi, in the instant
case.

Accordingly, after concluding that, not only does petitioner lack the legal personality to file this so-
called taxpayer's suit, but that it filed the same beyond the reglementary period, this Court no longer finds
any reason to delve into the merits, or the lack of it, of the instant petition.

WHEREFORE, premises considered, the instant petition for certiorari is hereby DISMISSED.
Cost against petitioner.
2. Abaya v. Ebdane, G.R. No. 167919 February 14, 2007

Facts:

The assailed resolution recommended the award to private respondent China Road & Bridge
Corporation of the contract for the implementation of civil works for Contract Package No. I (CP I),
which consists of the improvement/rehabilitation of the San Andres (Codon)-Virac-Jct. Bago-Viga
road, with the length of 79.818 kilometers, in the island province of Catanduanes.

The CP I project is one of the four packages comprising the project for the
improvement/rehabilitation of the Catanduanes Circumferential Road, covering a total length of
about 204.515 kilometers, which is the main highway in Catanduanes Province. The road section
(Catanduanes Circumferential Road) is part of the Arterial Road Links Development Project
(Phase IV) funded under Loan Agreement No. PH-P204 dated December 28, 1999 between the
Japan Bank for International Cooperation (JBIC) and the Government of the Republic of the
Philippines.

Background

Based on the Exchange of Notes dated December 27, 1999,1 the Government of Japan and the
Government of the Philippines, through their respective representatives, namely, Mr. Yoshihisa
Ara, Ambassador Extraordinary and Plenipotentiary of Japan to the Republic of the Philippines,
and then Secretary of Foreign Affairs Domingo L. Siazon, have reached an understanding
concerning Japanese loans to be extended to the Philippines. These loans were aimed at
promoting our country’s economic stabilization and development efforts.

The Exchange of Notes consisted of two documents: (1) a Letter from the Government of Japan,
signed by Ambassador Ara, addressed to then Secretary of Foreign Affairs Siazon, confirming the
understanding reached between the two governments concerning the loans to be extended by
the Government of Japan to the Philippines; and (2) a document denominated as Records of
Discussion where the salient terms of the loans as set forth by the Government of Japan, through
the Japanese delegation, were reiterated and the said terms were accepted by the Philippine
delegation. Both Ambassador Ara and then Secretary Siazon signed the Records of Discussion
as representatives of the Government of Japan and Philippine Government, respectively.

Petitioner Plaridel M. Abaya claims that he filed the instant petition as a taxpayer, former
lawmaker, and a Filipino citizen. Petitioner Plaridel C. Garcia likewise claims that he filed the suit
as a taxpayer, former military officer, and a Filipino citizen. Petitioner PMA ’59 Foundation, Inc.,
on the other hand, is a non-stock, non-profit corporation organized under the existing Philippine
laws. It claims that its members are all taxpayers and alumni of the Philippine Military Academy. It
is represented by its President, Carlos L. Agustin.

Named as public respondents are the DPWH, as the government agency tasked with the
implementation of government infrastructure projects; the Department of Budget and
Management (DBM) as the government agency that authorizes the release and disbursement of
public funds for the implementation of government infrastructure projects; and the Department of
Finance (DOF) as the government agency that acts as the custodian and manager of all financial
resources of the government. Also named as individual public respondents are Hermogenes E.
Ebdane, Jr., Emilia T. Boncodin and Cesar V. Purisima in their capacities as former Secretaries
of the DPWH, DBM and DOF, respectively. On the other hand, public respondent Norma L.
Lasala was impleaded in her capacity as Treasurer of the Bureau of Treasury.

Private respondent China Road & Bridge Corporation is a duly organized corporation engaged in
the business of construction.
Issue:

Whether or not the action is a taxpayer's suit

Ruling:

Petitioners, as taxpayers, possess locus standi to file the present suit

Briefly stated, locus standi is "a right of appearance in a court of justice on a given question."38 More
particularly, it is a party’s personal and substantial interest in a case such that he has sustained or will
sustain direct injury as a result of the governmental act being challenged. It calls for more than just a
generalized grievance. The term "interest" means a material interest, an interest in issue affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental interest.39
Standing or locus standi is a peculiar concept in constitutional law40 and the rationale for requiring a party
who challenges the constitutionality of a statute to allege such a personal stake in the outcome of the
controversy is "to assure that concrete adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of difficult constitutional questions."41

Locus standi, however, is merely a matter of procedure42 and it has been recognized that in some cases,
suits are not brought by parties who have been personally injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or voters who actually sue in the public interest.43
Consequently, the Court, in a catena of cases,44 has invariably adopted a liberal stance on locus standi,
including those cases involving taxpayers.

The prevailing doctrine in taxpayer’s suits is to allow taxpayers to question contracts entered into by the
national government or government- owned or controlled corporations allegedly in contravention of law.45
A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or that public
money is being deflected to any improper purpose, or that there is a wastage of public funds through the
enforcement of an invalid or unconstitutional law.46 Significantly, a taxpayer need not be a party to the
contract to challenge its validity.47

In the present case, the petitioners are suing as taxpayers. They have sufficiently demonstrated that,
notwithstanding the fact that the CP I project is primarily financed from loans obtained by the government
from the JBIC, nonetheless, taxpayers’ money would be or is being spent on the project considering that
the Philippine Government is required to allocate a peso-counterpart therefor. The public respondents
themselves admit that appropriations for these foreign-assisted projects in the GAA are composed of the
loan proceeds and the peso-counterpart. The counterpart funds, the Solicitor General explains, refer to
the component of the project cost to be financed from government-appropriated funds, as part of the
government’s commitment in the implementation of the project.48 Hence, the petitioners correctly
asserted their standing since a part of the funds being utilized in the implementation of the CP I project
partakes of taxpayers’ money.

Further, the serious legal questions raised by the petitioners, e.g., whether RA 9184 applies to the CP I
project, in particular, and to foreign-funded government projects, in general, and the fact that public
interest is indubitably involved considering the public expenditure of millions of pesos, warrant the Court
to adopt in the present case its liberal policy on locus standi.
 B. Tax Amnesty:

Case: Republic v IAC; G.R. No. L-69344, April 26, 1991

Facts:

On April 15, 1980, the Republic of the Philippines, through the Bureau of Internal Revenue, commenced
an action in the Court of First Instance (now Regional Trial Court) of Manila, Branch XVI, to collect from
the spouses Antonio Pastor and Clara Reyes-Pastor deficiency income taxes for the years 1955 to 1959
in the amount of P17,117.08 with a 5% surcharge and 1% monthly interest, and costs.

The Pastors filed a motion to dismiss the complaint, but the motion was denied.1âwphi1 On August 2,
1975, they filed an answer admitting there was an assessment against them of P17,117.08 for income tax
deficiency but denying liability therefor. They contended that they had availed of the tax amnesty under
P.D.'s Nos. 23, 213 and 370 and had paid the corresponding amnesty taxes amounting to P10,400 or
10% of their reported untaxed income under P.D. 23, P2,951.20 or 20% of the reported untaxed income
under P.D. 213, and a final payment on October 26, 1973 under P.D. 370 evidenced by the Government's
Official Receipt No. 1052388. Consequently, the Government is in estoppel to demand and compel
further payment of income taxes by them.

The parties agreed that there were no issues of fact to be litigated, hence, the case was submitted for
decision upon the pleadings and memoranda on the lone legal question of: whether or not the payment of
deficiency income tax under the tax amnesty, P.D. 23, and its acceptance by the Government operated to
divest the Government of the right to further recover from the taxpayer, even if there was an existing
assessment against the latter at the time he paid the amnesty tax.

It is not disputed that as a result of an investigation made by the Bureau of Internal Revenue in 1963, it
was found that the private respondents owed the Government P1,283,621.63 as income taxes for the
years 1955 to 1959, inclusive of the 50% surcharge and 1% monthly interest. The defendants protested
against the assessment. A reinvestigation was conducted resulting in the drastic reduction of the
assessment to only P17,117.08.

It appears that on April 27, 1978, the private respondents offered to pay the Bureau of Internal Revenue
the sum of P5,000 by way of compromise settlement of their income tax deficiency for the questioned
years, but Assistant Commissioner Bernardo Carpio, in a letter addressed to the Pastor spouses, rejected
the offer stating that there was no legal or factual justification for accepting it. The Government filed the
action against the spouses in 1980, ten (10) years after the assessment of the income tax deficiency was
made.

On a motion for judgment on the pleadings filed by the Government, which the spouses did not oppose,
the trial court rendered a decision on February 28, 1980, holding that the defendants spouses had settled
their income tax deficiency for the years 1955 to 1959, not under P.D. 23 or P.D. 370, but under P.D. 213,
as shown in the Amnesty Income Tax Returns' Summary Statement and the tax Payment Acceptance
Order for P2,951.20 with its corresponding official receipt, which returns also contain the very assessment
for the questioned years.

Issue:

whether or not the tax amnesty payments made by the private respondents on October 23, 1973 bar an
action for recovery of deficiency income taxes under P.D.'s Nos. 23, 213 and 370.
Ruling:

Even assuming that the deficiency tax assessment of P17,117.08 against the Pastor spouses were
correct, since the latter have already paid almost the equivalent amount to the Government by way of
amnesty taxes under P.D. No. 213, and were granted not merely an exemption, but an amnesty, for their
past tax failings, the Government is estopped from collecting the difference between the deficiency tax
assessment and the amount already paid by them as amnesty tax.

A tax amnesty, being a general pardon or intentional overlooking by the State of its authority to impose
penalties on persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an
absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it,
and in this sense, prejudicial thereto, particularly to give tax evaders, who wish to relent and are willing to
reform a chance to do so and thereby become a part of the new society with a clean slate (Commission of
Internal Revenue vs. Botelho Corp. and Shipping Co., Inc., 20 SCRA 487).

The finding of the appellate court that the deficiency income taxes were paid by the Pastors, and
accepted by the Government, under P.D. 213, granting amnesty to persons who are required by law to
file income tax returns but who failed to do so, is entitled to the highest respect and may not be disturbed
except under exceptional circumstances which have already become familiar (Rule 45, Sec. 4, Rules of
Court; e.g., where: (1) the conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on misapprehension of facts; (5) the Court of Appeals went beyond the issues of the
case and its findings are contrary to the admissions of both the appellant and the appellee; (6) the
findings of fact of the Court of Appeals are contrary to those of the trial court; (7) said findings of fact are
conclusions without citation of specific evidence in which they are based; (8) the facts set forth in the
petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (9)
when the finding of fact of the Court of Appeals is premised on the absense of evidence and is
contradicted by the evidence on record (Thelma Fernan vs. CA, et al., 181 SCRA 546, citing Tolentino vs.
de Jesus, 56 SCRA 67; People vs. Traya, 147 SCRA 381), none of which is present in this case.

The rule is that in case of doubt, tax statutes are to be construed strictly against the Government and
liberally in favor of the taxpayer, for taxes, being burdens, are not to be presumed beyond what the
applicable statute (in this case P.D. 213) expressly and clearly declares (Commission of Internal Revenue
vs. La Tondena, Inc. and CTA, 5 SCRA 665, citing Manila Railroad Company vs. Collector of Customs,
52 Phil, 950).

WHEREFORE, the petition for review is denied. No costs.

 Sources of Tax Laws
Administrative Issuances by the BIR: Legislative Rule and
Interpretative Rule

C. Cases:

CIR v. CA and Fortune, GR No. 119761, 29 August 1996

Facts:

Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of
cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark
registration over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06 January 1987, of then
Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the
Presidential Commission on Good Government, "the initial position of the Commission was to classify
'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as
belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope' to 'Hope
Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category.
Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original
Fortune Tobacco Corporation register and therefore a local brand."

Under the foregoing, the test for imposition of the 55% ad valorem  tax on cigarettes is that the locally
manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the
foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally
owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not
definitely determinable, ". . . the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern. . . ."

Issue:

Ruling:

. . . a legislative rule is in the nature of subordinate legislation, designed to implement a primary

legislation by providing the details thereof . In the same way that laws must have the benefit of public
hearing, it is generally required that before a legislative rule is adopted there must be hearing. In this
connection, the Administrative Code of 1987 provides:

Public Participation. — If not otherwise required by law, an agency shall, as far as practicable, publish or
circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior
to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been
published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon.

(3) In case of opposition, the rules on contested cases shall be observed.

In addition such rule must be published. On the other hand, interpretative rules are designed to provide
guidelines to the law which the administrative agency is in charge of enforcing. 12

It should be understandable that when an administrative rule is merely interpretative in nature, its
applicability needs nothing further than its bare issuance for it gives no real consequence more than what
the law itself has already prescribed. When, upon the other hand, the administrative rule goes beyond
merely providing for the means that can facilitate or render least cumbersome the implementation of the
law but substantially adds to or increases the burden of those governed, it behooves the agency to
accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before
that new issuance is given the force and effect of law.
 PBCom v. CIR, G.R. No. 112024, January 28, 1999

Facts:

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly

organized under Philippine laws, filed its quarterly income tax returns for the first and second quarters of
1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by
applying PBCom’s tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax
Debit Memo Nos. 0746-85 and 0747-85 for P3,401,701.00 and P1,615,253.00, respectively.

Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for
the year-ended December 31, 1985, it declared a net loss of P25,317,228.00, thereby showing no income
tax liability. For the succeeding year, ending December 31, 1986, the petitioner likewise reported a net
loss of P14,129,602.00, and thus declared no tax payable for the year.

But during these two years, PBCom earned rental income from leased properties. The lessees withheld
and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986.

On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax
credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their
lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a
Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA).

Issue:

Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground
of prescription, despite petitioner’s reliance on RMC No. 7-85, changing the prescriptive period of two
years to ten years?

Ruling:

When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period
of two years to ten years on claims of excess quarterly income tax payments, such circular created a
clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply
interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the
sense of more specific and less general interpretations of tax laws) which are issued from time to time by
the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute
by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts.
Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous.
20 Thus, courts will not countenance administrative issuances that override, instead of remaining
consistent and in harmony with, the law they seek to apply and implement.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed from is
AFFIRMED, with COSTS against the petitioner.
SO ORDERED.chanrobles virtual lawlibrary88
 CIR v. Michel Lhuiller GR 150947, July 25, 2003

Facts:

On 11 March 1991, CIR Jose U. Ong issued Revenue Memorandum Order (RMO) No. 15-91 imposing a
5% lending investor’s tax on pawnshops; thus:chanrob1es virtual 1aw library

A restudy of P.D. [No.] 114 shows that the principal activity of pawnshops is lending money at interest and
incidentally accepting a "pawn" of personal property delivered by the pawner to the pawnee as security
for the loan.(Sec. 3, Ibid). Clearly, this makes pawnshop business akin to lending investor’s business
activity which is broad enough to encompass the business of lending money at interest by any person
whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor’s
tax based on their gross income pursuant to Section 116 of the Tax Code, as amended.

Issue:

Ruling:

Let us first distinguish between two kinds of administrative issuances: the legislative rule and the
interpretative rule. A legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. An interpretative rule, on the other hand, is designed
to provide guidelines to the law which the administrative agency is in charge of enforcing.

When an administrative rule is merely interpretative in nature, its applicability needs nothing further than
its bare issuance, for it gives no real consequence more than what the law itself has already prescribed.
When, on the other hand, the administrative rule goes beyond merely providing for the means that can
facilitate or render least cumbersome the implementation of the law but substantially increases the burden
of those governed, it behooves the agency to accord at least to those directly affected a chance to be
heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law.
15chanrob1es virtua1 1aw 1ibrary

RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing rules or corrective
measures revoking in the process the previous rulings of past Commissioners. Specifically, they would
have been amendatory provisions applicable to pawnshops. Without these disputed CIR issuances,
pawnshops would not be liable to pay the 5% percentage tax, considering that they were not specifically
included in Section 116 of the NIRC of 1977, as amended. In so doing, the CIR did not simply interpret
the law. The due observance of the requirements of notice, hearing, and publication should not have been
ignored.

In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void.
Consequently, Lhuillier is not liable to pay the 5% lending investor’s tax.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The decision of the Court of Appeals
of 20 November 2001 in CA-G.R. SP No. 62463 is AFFIRMED.

SO ORDERED.
 Tax Ordinances
Case:
Tuzon v. CA, 212 SCRA 739

Facts:

Issue:

Ruling:
 D. Income Taxation

E. Income

Cases:

Conwi v. CTA, 213 SCRA 83

CIR v. BOAC, 149 SCRA 395

Madrigal v. Rafferty, 38 Phil. 414

Limpan v. CIR 17 SCRA 703

Republic v. dela Rama, 18 SCRA 861