CTA Case No. 1931

DECISION

Petitioner apvealed from a Secision of reo spondent dated april 1, 1968, denying cane-llation of the 1965 deficiency incone tax assessnent of 2,869.0 » corputed as follows:

Undeclared income from the capt of the Solicitor -eneral ... » 79099 -26 Car maintenance and repair . . « 950.0 Can depreciation een , 800. 00 Di iver's salary . oe 8 @ , 020.00 Insurance *o20©e Ff © © @ © © 6 * "295, 00 Miseellaneous . 2 + 6 © © © © © 120. WO Total net income as per office audit .«.+e-ses-eeveee P23, 514.96.

lesst Personal exap- tion e e ry 3 9 000 e oo

Additional

exemption. . 1,000.00 Hae Amount subject to tax . . « « « SaENerE 20 Amount of tax due. . 1 «6 6 «© 6 « 333 3209

Less:

Amount of tax ; withheld We2 Pf 630,60 Amount of tax with- Balance of tax due Deficiency interest fron 7 ak: 16, 1966 to February 195 " WEF sw ses se eee BS a 3 AMOUN' T DUB ° ee @ . Epdese 2

ON

DECISION «

CPA CASE NO. 1931 \ ; \ . | Petitioner is an Assistant Selieitor General, Of°1ee 0° the Solicitor General, Manila. In March, 1967, petitio er received from respondent's office an Audit Sheet and Assessment No, 25-EA~0649961 demanding payment of P2,869.02, gupra, representing petitioner's 1965 deficiency income tax and inter- est due thereon. The deficiency income tax assessq ment is based chiefly on petitioner's undeclared selary of 717,499.96 as Assistant Solicitor General, On Mareh 10, 1967, petitioner contested the assess ment in question and requested respondent to cancel the same because the privilege of undiminished com- pensation is granted to Assistant Solicitors Gen- eral by Section 1, Xepublic Act No. 4360, which proe vides as follows:

ORCTION Qn ns tw tt The rank, privileges, ond cus). itica dang for appointment to the position of Soliciter Ceneral shall be the same as an Associate Justice of the Court of Appeals; the rank, priv fleges, and qu ificstions for ape ee to the Peer ten otis istant . rf be . . < r ye gt = [ eae and those of Solicitors shall € e same as those prescribed for provinetal fiscals, (Underscoring supplied, ) The other items of deduction from petitioner's gross income were not questioned by petitioner in the appeal and, therefore, we consider them as un-

D ~C

IO ~ •

C A CASE li O. 19 1 3 di puted.

e on y issue -, therefor , to lB r solved in this cas s w t her or not petitioner ' s un eclar d s lary ~ ss stant olicitor Gen ra is xe pt ro~ inco e t x im os by the ational Internal R venue ode der the p_ovi 1 ns of epubli ct

o. 4360, spondent contends th t etitioner is not exe 11pt 1 r "> inco e tax becaus exemption fro tax ti n s a J tter o leg lativ race; tax xemption cannot b presumed but ust be r anted under a clear .an · te o th la ; epublic P.ct o.

4360 does not mak e itioner a j dge wit in tho purview o rticle VIII, S ctio 9 o t he Consti!"' t i t n oft e P 1 .P1in s, anJ that terti n 1 or the pr hibi t · n of t he dirdnutio of S( r es and/cr co .:~ pensct ion of judges is to mai~tain ju 1- J.- · ci 1 independence and thdt reason doe~app ly to t e petitioner who ho du1g a position in th e cut va d p rtm nt th overru ent; an t ord "privileg s 11 in Republic Ac t l o. t.-360 could ean acts, i~munities and preprogat ives which p ti- tioner could enj y as t hat of judges, but not he pr..;.,vi e of x . ption from in o.

tax.

etitioner v gorously obj cted to the c n- t ntion of respondent an ~ cl 1 s th t re pendent's 1965 de ici nc· co e t ex ass ss nent of ·2,869. 02 is illegal and con r to t he ovis ons f t:' c- i~ .· 3 4 Dri I ,1IOl -

T:

CAs·~

0.. 19 l tion 1, publ. c Jet ! o. 4360., ~!lP~a ; t he pr vilag s of j d es under t e co titution n.clude exemption fro n e trut der th doctr e laid down by the upreme rt in the Per ecto nd Endencia- J:tgo case ; the me privileges o · t : • ·xemp ion were extended to et tioner by sa d publ ·c ct • 4)60 cons dermr . the explan t r y notE t the bill and he ftistor c· background of the ; awi and the tax-exe tion grunted by said law was t of egislativ grac • Our C r stitution provides in rti 1 VIII, S ction 9, as follows:

The c stit·· tional .. date pro i"' s tNt the me~th~a:s of 'th Sypreme Court and ~.11 . judges Qf l!,ll:Bll,or .cou.J:t.tc; 11 hall r c !v such co.apens tion s a i d b d rin t h ir continu Intecs o •• ' w, which sha n t be di inished e n ice . ' r cto v. eer, o. '11. No. 1- 35

DECISIO

- CTA C SE ·0. 1931

I

23~8, •eb uary 27, 1950 (85 Ph • 552), t qu r ly presented to t pre e Court is wheth r or not t he i ~osi t ion of an in c o~ t upo the s lary o ustice r gorio Perfecto 1n 1946 unt to a iminu t on hi~ salar • Eight ~ustie s of the :up.rern Court uphold t * a a.f ir ativ vi w w 1 tw jus t ces of the s e court d1ss nted.

cursor read ~g of the constit 1tional provi- s ons in ques· ion do s not explicitly grant exe p- t on rom inc t ax on th s&lari s Oi ju tices an judges bec<..use the non .. pay ther o ·.s not er privi eg but a tasic li .ita ion upon 1 gisl tive or xecutirG o.ct on . i a ur· o .

Consequent ., , we cal"'..not subscri 'J to tho vie-w u ...

vane· d by th(-) eti t on l' in t ' is cas tn t ttby · t k ng :!nto ccount the pr·v e enunciated ther in, Congr ss co .enced grant'n _ tax un ty to a few le ted subj cts. 11 ( Pe t t 1 n ' s ife o • , p.

3 , C r e c. , p . 64. )

t h contrar .. , in t he P r :~cto case our upre ourt s id:

r pr . vil e . ..

The i port and signil icunce 0 the dec sion r th ' u re Court on this p ¥lt is clearly stated in th langu g of th Court ill the P r ect cas t ' ' as fall s:

36

DBCISIO} •

CT'

CASE NO. 193 .

6 \ \ \ Judges would indee "The EJX :J.ntt9!l of tho judiqi&l co11 ensatiou fJ;Qtn. Ladu~tioo is not' in anY true pans~ a stat;itY a .P~~vileg~ or exe~ptinn .

I t. ~s essen~ t ia ly ang Pt,inarily Q0111Qon.- S h tion based upQ~ valtJ.ab!~ co slg ratign.

ibe covenant on th part of th rovern- ent is a guarant y whose ul fill ent is as uch a part of the consi '"lera tion agreed as is t he . oney alary. The ur dert·king has its wn par- ticul r va ue to the oj_ ti.zans in securing the independence of the judiciary in crisis;

a. d the establishment f the eompens tion u on a per an nt fou 1dation whereby jud·cial preferment ma be prudently accepted by those who are qualified by talent , lmow- . dge , integrity and capac- ity, but ar not ,possessed f su h . privr te fort ne as to make an a ... sured salary en b · ~ ct o personal concern.

On the oth r 1and , the e • be:r of the jtdioi relin- quish the_r p siti n at the b , ith all its profession- al e olu ents , sever their oonneetibn with heir c iantc ; and dedicate th m.selves ex- clusively to the di~ char e . ~e' . On'rnfi$1 rdtl;,ie': their high office.

So, it i' 3 7

DiCISION «

7 is irrefutable that the guare ah Li s CPT} .

i i) Oi j tc $3 ua €5 J: ® - -

O WHhLEn OF) 4 > J

bles e exeuption for a public purpose or a valid eonsideration is merely a nominel exemption, since the | walid and full consideration “ or the public purpose promoted is received in the place of the tax. Theory and Practice of Taxation (1900) B.A. Welles, De et (Gordy v. Dennis Mao? 1939, 5 atl. Rep, 24 Ko; underscoring supplied.)

In the light of the ratio dicidendi in the above quoted decision of the Supreme Court, we need not stre+ch our inagination to disagree with the views and conclusion of petitimer thet Article VIII, Section 9, of our Constitution, supra, is a privilege of tax e#enption granted to justices of the Supreme Court and to all judges of inferior courts and, therefore, the said tax exenption may be extended by Congress to a few selected subjects of their bounty, The constitutional provisions in question, far from being a grant of tex exeup- tion, are basic limitations and prohibitions upon legislative or executive action decreasing or diminishing the salaries of judielal officials during their continuance in office. Our views and conelusions on this point were reiterated by

DECISION «

8 eur Supreme Cairt in the cases of Endencia and Jugo ve Davids “eis Nose 1n6355 and Im6356, Auge 31, 19533 93 Phil. 699, 704, 706, the pertinent portions of whieh read as follows:

As already stated a and applying the «boeve constitution- al provisi we held in the Pere fecto case that dudicia’_officers cone tax on their salaries, peeause the collection thereof by the Vove ernment was a decrease or diminution of their salaries during boa: cone tinuance in witecis i e* e# #¢ # 80 we have this situation. The Supreme Court in a decision interpreting the Constitution area section 9, Article I, has held thet jug of- cyre HPaYMe tit C insane taxon their. salarie ; eiUah i201 ne co: : ther “of a

x x x x

When a judieial effice’ ase sumes © plac he does not exactly 9ts

x x x x x

‘¢ « « In other words, for reasons of public policy and public interest, a citizen may justifiably by constitutional provision or -

DECISIO

1 - CT.f CAS0 NO. 1931 9 f th vupre, e Court in t he Perfecto d -tdenci - Jug c;_ s s , s,uura, it is abundantly cle· r t hat t he - ~D~ltltg.tiop _ 1 lU;:ovisions pttohibiting tmd lir i ti .g the po,ver of the legis at i ve and executive departi ents of the govarn ant from reducing the salaries of justices and ~.11 judges o inferior courts , which ar bas d on pu lie: pol cy and ublic interest, can not jud.1c.iously be equate with the ~tatut o;n~ pro y~ ion~ conta ed ;Ln Section , .. epublic Act r • 4360, granting t o th'l Firs t ssistant Solicit r General c.nd ~ ssist a.nt oljeitors General th sa e privil ~ge a s t hose prescr bed for• Judges of Cot:rts of i.rst Instenca .

In the first place, the ~ ~..;..lll~~~;;l;.-ll;;Or:;..;o~"..'l.OiTl.:::;.;. s~l.:;;.:. o~J.2§. in question limi t-L!lSi ~~~~ th diminution o · s.r..laries of ju i c.i• 1 o fici a s while the Jljp.:tutot,Y urov·s1Qn§ r;.rMt privilerr s to non- judicial ofi'i cia s . In the second place , the tar·ns limitation upon and pro .. hibiti against la islative or execut ve action on t l e constitution mandate used by the Supre '~ 4 0 D .CISIOfJ ...

" CTA CASB NO. 1931 10 Court in th Pel' "acto and ndenoin. Jugo oases are opposed and incompatible w th the words e:tnnt Q ativiljggs en t1onad in th stat tory :pr visions .

In short, a justice or ~jud ge does not exactly ask for exemptl on from the inca~ tax s a privilege bee· use it i s a ready attached to 'his offi ce i.Vhile the gr ar1tees or the exe,Jption ar·e .

the bcnefic j.u 'ies f legi slative gro.ce .

In t e - third place , if Congress L"1tended to :h1ple an the constitution 1 pr visions b died in Section , .t•:rtic e VII , or our Consti tution, as envis ioned e~ .. d concluded in Peti t ioner ' s "fem .r .... ndum, ,.Jhy is 1 t t h<.. t Congress f ailed to r~ke a .clear r1an:tfes ta. t1on f i ts p licy and i ntention either in t he Explanat rY ~ote to th bill , "W'licll be arne i·~:: publie Act No . 4,36u, or in the cong:ressiom:;,l delib~ra tions t hereof'?

And fin ally, "':e ong:ress \fere influ:anced by t hlll decisions of' t he Supreme ""ourt in the pr ac- tical result or end-ef ect of t he erfecto and lndencia- Jugo cases, holding thc.;.t ju 'leial of- f.cia l s are not subject to inco e tax on their salaries bee .: se t l1at woul d m n .• a ·-nuni t i on of judicial co. pensation, why is it th ~:;(. t Congress. fail d to grant the tax ex 11ption in clear and un• m s t ' k able lang11 .,.e a don by 1 t in th"' follow- ing .rep1 blic J>.cts , to wit: L • • Lepubl c Act N • 35'. • , Grantinr to any par n , partnership , l~ ' 41·

I

'

DECISION -

CTa CAS® NO. 1931 11 any or Corporation who or whieh shall sugoge in a naw ald heeessary industry and seneting in the iano ippines BEER ue teams a mm a four years fron the fate of the orgeni sation of s seh industry.

12. The.monies to which the legal heirs of the deceased way be antitled to receive shall be axagpt sromn axe- eution and taxation.

3. Republie Act No. 210. SM. 1+ “he Provisions of existing law to. the contrary notwithstandiiy, officors ahd enlisted sen of tue army of the Philippines who served in tho Armed Forces of the Unitad stdtec, duciucing their egy rapsgee ones are preheiy Chae maintenance support albowances earned by virtue of such soarvice for the tax able years Nineteen E undreé and Forty-two, Nineteen Hundred and Forty-three, ‘iineteen llundred and Forty-four and no a ety Tancred and agp enon :

Any amount received by a taxpayor from

the Covernweut of the United States

of of the Philippines, or from any of thoir avoucies and instrumentale ities, ‘for or on account of deneves or loss7s suffersd opting mgr lant war is pereny 27.005 st pines; and any such tax heretofore collected thereon shall be cradited, if such tax credit is requested, within one year frou the approval of this act.

si ona Dv oe munielpal an ety fax28 206 ass.ns- yw 42

DECISION -

CTA CASF 80. 4931 12 New in force or hereafter astehlished,.

| Zig axeuptions authorised tn the preceeding paragraph of this soetion og to all property of the Centr to the resources, receipts expendi tures, DR verreccervel contrests, re Soounente eid a sactions related bo the conduct o the businass of the Satlkk: «2 + 6 Republie Act lo. 304. Gt. 5. pt ple 2 & herein “prove ed : attachuent- or VY, exeep or obligations for euler officers or *crowleas may be airectly isable as “ ded in a

7. Republic Act Ho. 236 . as ~- To facilitate payment of its i debteduess, - 6, excep property tax, frow all euties , fees, inposts charges, and restrictions of che Republic of the Philippines, ite proviness, cities and sunicipali ties, & Republic Aet fo. 360. Grant- ing Aedes assignuent tee claims of cr TS, atecheant, evy .

or seizure, 3 Tes n iilippines Republic Act lo. 702. Orent of tax Fie on to Cooperative Mare . keting Assoclationeg, x * x x x ub iO.> ud, sa annetiatinn aretha wie = f.. 43

DECISION -

CTA CasB 0. 1931 13 j the pay- ment of tae mar onan e sales tax, ne 3200 81) other par- cantare tares of wirtever reture ald description, 106- Republic Act No. 708 Title VI, Part D, ~ Benefite.

atc. 6, peal fe, ry t ~~ 2narit ana the lika reccived by officers and °=ployess of the service in eniisiceration of tasir services, excapt their basic salaries, shail be oxe wt from the 2 2 ; Te ae ae gana nay ineo ax eol- ereon or withholding tax with held therefrom shall be refunded.

12. Mapublic act No. 1175. an Act Lene ong fh Saas the Soe oh . 136 ee het No. 1345.

BAC. 15 (¢).

d ro 2 Rez except as rein pro vided for, All notes, bonds and debentures and other otligations ise gued by thse SA-APCO shall be sx8apt from all taxes, both as te prinecipel and interest, except imeritazes and gift taxes.

7%. MNepublic act lo. 1270, SIC.

6. All donations, contributions, gub- sidies or alfs wiich from time to time may be mace to tha Foundation shall be considered allowable deductions on the incoges of the donors or givers | for income tax purposes; and sip rn - 44

Tes we eae The benefit boxking shows promoted by the 3 ~ sockathcn pursuant to the at t*.. of this act shal) be exempt irom all axes

(Znfrae) |

~- The provis ons of any existing law te the cont eg, 4 ogg tet m all

20. Republic Act No. 3128.

SEC. i. = All eraated and organized under the provisions of this Act, with net assets not exe eseding one million pesos, excluding = counterpart capital subscribed ae in by the gevernzent under sections saven and eight of this Act, 21, Republic act No, 3533.

SEC. 2e = jion- serv on é o. ord Foundation grants be 8x8 nD

OS 22) Sevynen 4

22. Republic Act No. 30%. smc. 98. ~- ~- The operations, as well as holdings, Pe peg property The foregoing Republie Acts granting tax- exemptions, which vere picked at random by this Court, clearly show beyond doubt that, if our law making body intended to grant tax-exeuptions as acts of legislative grace, the said grant of tax- exemptions must be clear, emphatic, unmistakable, and representa the surrender of the sovereign taxing power of the State in favor of the grantees. The same cannot be said of Seetion 1, Republie Act Mo. 4360, supra, despite the pretensions and pro- testations to the contrary.

By invoking the legislative history and evolution ef what is known as Republic Act No. 4360, gupra,petitioner clains that "respondent can not now practically repudiate sueh Law and deny exeuption from the income tax to the officials affected thereby" on the theory "Shat the privilege ef non-dimunition of salary for judges ef the Court of First Instance was clearly held to conprehend tax immunity, following the Perteete v. ‘eer and the Endencia-~Jugo cases." (Petitioner's “amo, pe rp. 46

DECISION -

CTé CASE NO. 1931 16 16, CTA rec. p. 67.) If that was the legislative intent, Congress could have easily stated so in Republic Act No. 4360 that the salaries of the Solicitor General, First Assistant solicitor General, and the Assistant Solicitors General shall not be considered as income of the said of- ficials for purposes of the incowe tax. A typical exaaple of a legislative policy of «mon-diminution of incone is found in Seetion 22 of Republic Act Ko. 1400 whieh provides:

All land certizicates iesue s Act shall be | rag — ro y , apes naiits unée? the authori ty of this Act, whether through a ap oa or pe peo pe b ngt be There is no dispute whatsoever that the eon- stitutional mandate on non-diuinution of the sale aries of judicial officals, wiich in effect ree lieves them from the burden of income tax, is ap- plicable solely and exelusively to wembers of the Supreme Court and all judges of inferior courts. Such enumeration excluces all others by implica- tion, Sxprassio untus est exclusio alterius. Likewise, there is no controversy that our law- making body with the approval of the President, may exempt a citizen from his ordinary obligation

Fr : AT

DECISION «

CTa CaSB NO. 1931 17 ef paying taxes on his income. Sut certainly a government official or body of officials who are mot members of the Supreme Court, and judges of inferior courts or constitutional officials, can not validly claia exemption from the income tax dmpesed by the National Internal Revenue Code based on the constitutional wandate of non-dininu- tion of salaries unless the statutory grant of © tax exemption is specific and clear because exeape tion from taxatioh, which is in derogation of the sovereign power of the State to tax is not favored and is never presumed, It is a well-established jurisprudence in this country and the United States, where our incowe tax laws are patterned, that exemp- tion from taxation is construed strictly against the taxpayer and in favor of the taxing pewer. ‘Thus, in the case of ® Rodrigues, Inc, v. The

Collector of Internal Revenue and the Court of

fax Appsels, Ge. Noe Le230%4, promulgated on daly 31, 1969, our Suprese Court, following a long line of precedents, held as follows:

| We find no eogent reasons to Court of Tex apposis, it has been iS UGGt gg Yt escer See 9 2 he Ad . = ae) 29. M = \ BERS ARC} in feu if it is granted, @ grant mast be strictly construed ageinst the taxpayer. (4). Affirmatively ‘hy ( S00 Commissioner of Internal Revenue vs. 183, and the numerous cases therein cited.

rs 48

DECISION -

Cfa Cas NO. 1931 18 put the lew requires courts to frown on gg _ ine from taxation, hence sion ina legislative 6 bene E should cone atrued in against the taxpayer and libera n favor = the yo prety ype Wek laum — vB. arenes, it was ex- plained beyond any vossibility of ni scouprehension thats Z xx tions fron taxation are hig disfavored, so much so that they aay al- agst be —s Se odious to are full of vory # €xX- pressions on this pol aS was seid by the Suprene _—

of Tennessee in a

6 re Philippine Gueranty Co. vy. Com- aissioner, me ies20 Pes Sept. 6, 1965 (6) Baso Standard Bestern, Ine. v. Come missioner or Customs, iw21Ot, Octe 1 é, 18 SCRA. citing cases.

{yo ensa, 466, 471.

pe 49

DECISION

«GTA Case NO. 1931 19 emphatic come readily to hand fron the highest authority. In Ohio Life Ins. and Trust Col yg. Debot (16 Howard, - 416), it was said by Chief Jetlee taney, that’ the right of taxation will not be held to have been surrendered, ‘ynless the intention te sure render is manifested by words inthe ee to ve alstaken.' ol ge of Ye Delaward lroad Tax (15 Wallacs, 206,

225 the Supreme Court of

the Uni tec otates said that bee surrender, when clained, t be shown by cleer, un- wots language, whieh will adalt of oo reasonable con- struction comsistent with the of the power. If a arise as to the in- gant of the legislature, that ust be solved in favor ef the ctate. In trie Rallway e Commonwealth vatie (21 Wallace, > 499), Me. Justice sunt, sp 7aicing of am Vone, ob sr = that ' i igs at eee and said ie tics Swayne Fig exemption Se sisinely ts must be shown avd,

DECISION «

CTa CaS® NO. 1931 bhicst toadmh fir of 2 See Rm ue | In a bid to bolster the proposition that the eon- stitutional mandate of non-diminution of salaries | of Supreme Court justices and all jndgss of ine ferior courts is not exelusive and all-snbracing, petitioner argued, and we quotes If petitioner understands cor- reetly respondent's position in this regard, respondent would have the tax exemption privilege eonfined to the purely judicial hierarchy and to the exclusion of all who do not fall within the cateczory ef judges of superior and inferior courts as established by the Constitution and the present laws (p/ 37%, Tafiada & Carreon, Political Law of the Phil.

istrative ineaisel oe.

quasi-judicial powers and the natur of whose functions do not properly pertain to the judicial depertment (p. 356, Abig) dike the Court of ax exeiption (Alhambra Cirar and Cigarette ‘anufacturing Co. vs. ‘The Commissioner of internal Revenue, Lm23226, Nove. 26, 19673 Mlorercio Reyes and Angel Aeyes va_ Coumis- sioner of Interne] fevenue and the ilond Court of Tax Appeals, L-24+020- 21, July 29, 1968). Thus, respon- dent's reasoning spreace tne drag net for all outside the judicial heirarchy established by the Con- stitution and the statutes. (Peti- ne od MONOs.y Ppo 268273 CTA rece, De 77s Because of the bold assertion that the Court a a • D .CISIOH ,...

CT . CASE ~ O. ·1931 21 o fax ppeal _ and ot h r speci l court . ar !"" ttSLd- lUlnt§tEAt1ve trfbunals inv .sted with quasi- judicial powers ana t he nature of w ose functions aoes not pertain t o the ,jud:lc i 1 departm ntn and , ntheir judges wou.ld be di qualified f;rom t e pr vile.g f non ~ dL inu t ~on of th ir s a aries by t ax axe pt on, tt t s quite barrussing for th<l judges of th s Court t o· O,ec de the que.stion !1: re· at i ssue con• s ider:tng tlleir supposed involve ent in the reoolu- tion ther eof.

Be that as it ay , we cannot shirk ro ur sworn dutt ev n if' the -part y or parties to be acted b he deci sion r fr iends of' the Coux t. . B rrowing rot.1 the la.ngt age of the 'upr e. e Court in the Perfecto case and paraJh!.•asing the 1 t ter part t hereo ,. "sti 1 t ...,s thE' outc-or.1e in- . i rectl r ..,ff'ec ts "11 the . e :~ber s of th<; Court, on- sideration of th ~ter is n t without feat ur e.

Yet adjudlcntion may not e declined , b .causa {a) vJe are no t legally disqualified; (b) jurisdi ction ay not bA ren unce , 11 as it is th pet ti ner who a pealed t o th. s Court, and there is no other t ibunal. to ~v~hich the ecision o:f tho respondent Co issioner or Int ernal Rev. nue m y b r :ferr d; (c) t • • Supreme Court has decided a oasa in n;arl- c<zu;:Ha.; d (d) the status of the ax g Court, wheth r it is an ad in str ative tribun 1 or jud o · a ,body, l s rene ate 1y b en de i ded y our oupr e c_ lrt.

..

52 - - -

C SIO

CTA C

'<' O. 93 22 After P ssing on th 1ssu that th constitu- tion 1 andat e bodled n r ticle VIII, ction 9, can onl be av iled ersonally by juntieo ·or th upr e e ourt an al jud es of inf r!or· cour ts, pet tionar c ai s · .h t th 'ol1ci tor n ...

ral , irst sistant ool citor ner. 1, and - s istant o-olic1 t rho> jud e

~ -~ 1 AP

in th c te ry of p rfor in quasi- judici cause t hey ar unct o s ik jJ.dges of the sp cial courts en- tioned above , who ar~ ma bers o istrative trib l s .

o s qu n t y, t · s r u d t h t tl cons t tu tior1 dat o non• d ui nut on of sa rie of judg e~ is likewi e applicabl to p ti- tion r an otl r of . i ci ls s i 1 ar y si uat caus t or d "pr vil es" fo' nd in ction 1, public ct o. 4360 and statutes of s. i ar 1 port grant d th 1 ity fr p ent of inco e t i posed by th ...

c ax us b c n ress.

Const ncio C star1 d who sponsored ouse ill o. 1?5 ere tinrr th ax Court s id in his spo sorship spe ch on ay 3, 1954 th t "llous · i o.

75 s or j_ts purpos the r a r ular Court of T :i?.t- al

It

( . ) .

0 gr ssio al ¢ord , Th rd Con res th ublic, irst ss on, 1 .

, No. 65, p. 2 ; s ·tiontejo,

DECISION «

23 Court of ‘ax Appeals Act Annotated, pp. 179-182.) In reply te an interpellation by then Congressman Diosdado Macapagal, Congressman Castefieda,, in consonance with his previous answers relative to the Board of Tax Appeals created by the late Pres- ident Quirino under Executive Order No. 40l-A, replied as follows:

place, gentlemen from Pampanga, I doubt seriously if this Reorganization Com- mission has jurisdiction to create 2 H A e The Reorganization Conmaission will efe- fect only the reorganization of the executive branch of the governent.

4 4 r ( ec - (+ % reorganization, it will be rent the power or jurisdiction of this Ree organization Commission to do so. (Ibidse, pp» 22092206, 4 It is clear, therefore, from the Explanatory Note to the bill and the discussions in Congrees that the Court of Tax Appeals is a regular court and a part of the judieial branch of the Governnent. And the Supreme Court sustained this view in the case of Ursal v. Court of *ax Appeals, et al., 9R. Hos. 110123 and 1+10355, April 26, 1957; 101 Phil. 211, when it held, among others as follows:

- + « and (b) instead of being (2)" . . . to hear and decide administratively." (Exeeutive Order No, 40l~“, series of 1951,) - -

DECISIO -

CTA C SE 0- 1931

a erea.t d by .rl publie Aot No .• 1125 i s a part o . th judi cial s s em eSU'i1ably t act onl y on prot ests of .pr i va.te persons advq sely affected by the tax, us t o. s , or assess ent . The sa e ruling betw en the s w e parties as iterated by th .;upr ·Court in G •• o.

rJ ... lOl65, pro ulg ted on Augu·st 30, 1957. Wllile i t s true the.t the ax Court pass.es upo.n aru 1nis- tra:tive decisbns , our SUpreme C urt h ld that the ourt o Tax App als is .... judicial , dy. • • • rJ Petitioner•s theory that tho grant of 'pr vil ge Qf a Jud a .of "'irst Instanco 11 inc udes by i p i ca-. t ion tho con t i tutio al a.ndate f non-mi · inution i' 55

DECISION -—

25 of sclaries of judges beeuuse her position ree quires the exercise of quasi-judicial functions, suffice it to state that our highest tritunal has declared in plain and unequivocal language that petitioner and other officials similarly situated gre executive officials whose functions are plain- ly_excseutive. Thus, in the case of Antonio H. Noblejas v. Claudio Teehankee and Rafael M, Sala, GA, No. 128790, April 29, 1968, our Supreme Mourt: in Passing ‘pon the question as ® the nature of petitioner's function, whether judicial or ex- ecutive, heid as follows: — In the second place, petitioner's theory that the grant of “privileges of a Judge of First Instance" includes by implication the right to inves- tigated only by the Supreme t and to be suspended or removed upon its recommendstion, would necessarily result in the same pr’ eine pogs= isialg upen whon the Legislature had indiscriminetely conferred the same privileges. These favoured officers inelude (a) the Judicial Superinten- dent of the Department of Justice (Judiciary Act, sece 42); (b) the Assistant Sglicitors General, seven in nunber (ep. Act No. 43603; {c) the City Fiseal of Quezon City, (R.A. No. 4495); (a) the City Fiscal of Manila ( 8. No. 4631) and (e) the

Securities and Exéange Comnissioner

tioner's theory, therefore, would mean plaeing upon the Supreme Court the duty of investigating and dis~ ciplining all these officials, whose erscoring supplied.

r. B86

DECISION =

CTA CASS NO. 1931 26 The non-diminution of the dularion of men- bers of the Supreme Covrt and all judges of | inferior courts embodied in Article VIII, Section 9, of our Constitution, gunra, whether we call it a “right" or a “privilege," is not merely & pere sonal privilege which can be transmitted by an aet of Congress, but a basic limitation upon legislative or executive action imposed in the public interest (Perfecto case, supra.), unless the statutory grant of tax exemption leaves no room of doubt as to its interpretation, Ewen a statutory grant of tax exemption can only be availed of by the grantee and nobody else ex- cept in cases where the statutory grant ‘tself ineludes or refers to another statutory grant of tax exemption which is adopted by it.

The above rules should be ape plied to the case at bar re je... daw invoked (Section 9 oft epubt e act No. 333) does not make any

Pence a

| : eetatiee te the arise paid by the “overnnent for any agricultural land acquired for resale to tenants,

DECISION =

CTA CASE HO. 1931 . « « « ‘the pertinent Congres sional Record of the proceedings held during the consideration of the bill 333. (Boao became Republic Act Ho. 35 “does not show that Congress:

{ ponas Sie the said Law. eee (=. Rodriguez, Ince We tne “ollector of Inte 1 Revenue and the Co rt of “ax Appeals,

Sunras)

A controversy, which is Jo pari causa with the case @ bar, wis decided by the Circuit Court of the United States for the Middle District of

1 20 £OVe TH AeL

Tennessee in favor of the taxpayer. The '.3. Supreme Court reversed the decision of the lower court in the case entitled P.P. Piekard v. The Bast Tennessee, Virginia and Georgia Railroad Come pany, 130 U.& 637-642, 32 Law, Ed. 1051-1053, under the following facts:

This is a suit to enjoin the eolleection of certain taxes for he pears 1823 and 188i assessed by the oard of Railroad tax Assessors of Tennessee against the property of the complainant, the Bast Tennessee,

Virginia and Georgia Eailroad Con~

ony The property formerly belonged o the Cincinnati, Cumberland Gap and

(8) consideration of House Bill No. 2003, Vongree~ sional “ecord, House of Representatives, Vol. III, Nos. 1<9, June 14=2, 1948, pe 323, et seq.

DECISION «

CTA CASE NO, 1931 te 28 Charleston Railroad a> trig | and the claim asserted by the bill is that the property} whilst held by that pany, wis exempt from taxation, and that such exe otion has accon- panied it in its transfer to the com- Plainant. That company was incorporae ted by an Act of the Legislature of Tennessee, passed November 16, 1853. Among other things the Act provided that whenever the coup should have eonpleted its road fron berlLand ap to the last Tennessee and Vire inia Railroad, or to the sa ther, Coeadery line of the State, it should “have all the rights and leg conferred by its charter fon a period of ninetyenine years, (Acts of Tenn., 185304, chap. 301 5 6.) It also deo @lared that the company should be vested, except as otherwise provided by its cherter, with “all the rights, powers and privileges, and subjeet to all the restrictions and liabilities,

of the Nashville and Lousville Xaile

- road Company." « « « In reversing the decision of theCironit Court, the United States Suprere Coyrt tock into aecount that imaunity from taxation is not in itself trans« feysble unless otherwise. so declared in express terms or by language so clear and unmistakable os to leave no doubt of the purpose of the legislature, immunity from taxation is personal and incapable of transfer without express statutory direction; and the term "privileges" has been held in some exses to inelude immunity from taxation but only where other provisions of the statutory grant have given such meaning to its otherwise, it will not be 80 construed. These views 2nd eonclusions of

DECISION «

» the 0.8, Supreme Cotrt are now part of our estab- lished legal jurisprudence which wes succinntly reiteratelin the case of E. Rodriguez, ‘Ines, supra. However, as the question of the term "privileges" involving iamunity f rom taxation is a cise of first impression in this jurisdiction, we will seek solace and refuge in disposing the prin- cipal gene in this cove by invoking the decision of the U.S, Supreme Court in the Pickard ecese, supra, wherein it was ‘eld’ By this sale and the conveyance which followed, itommnity from tax- etion did not pass. Guch iununity is not in ttself transferable, been held, sna the octrine ias_peen iouen qiexiion. hat th tasieia- i An See pare 2 st pee site to _lea bt 4, a of fhe legislature. The power of tax- ation is one of the highest attributes) of sovereignty, and the suspension of its exereise as to any persons or prope ty is not a matter to be pre« sumed or inferred. it must be declared or it will not be deened to exist. If dhe ierisluture can ley aside a povor

30 so declared in express terns. me —_ eon cee: which cai! Ze clear and unam ous 1 @ to ustify the conclusion at Geemnity rom taxation has been granted in any inatenee, must require similar dis-= tinetness of expression before the immunity will w extended to others than the original grantee. It will not pass merely by a conveyance of the property and franchises of a railroad company, although such company may hold its property exempt from taxe ation. 4s we said in Ve - 9 93 eS 217, 223 232860, : e franchises of a raflroad corpora tion are rights or privileges which are essential to the operation of the corpefation, and without which its road and works would be of little value, such as the fyanchise to run cars, to take tolls, to appropriate earth and gravel for the bed of its road, or water for its engines, and the Like. They are positive rights or privileges, without the possession of which the road of the company could not be successfully worked. Imaunity from taxation is not one of then, The former may be conveyed to a pure chaser of the road as part of the property of the company; the latter is personal, and incapable of transfer without express statutory direetion."

31 » » » The court held that im- munity from taxation did not pass to the purchaser upon the sale of the Te tas alt Weoueed ae bate against the company (Underscoring supplied.)

In 1965 and 1966, petitioner claims that respondent refunded to her and to First assistant Solicitor General usmereido Umali cer- tain arount of withholding income tax presumably on the basis that their salaries, like judges of the Courts of First Instance, are tax-exempt under Republic Act No. 4360.

An examination of the 1965 income tax return of petitioner (Exh, 4, p. 36, CLA rec.) shows thet shatallei to declere amy amaunl os her Sabary during tbe sais yeur because the spece for the amount of selary received by her from the Sovernmment wes left in blank, The salary of 2,829.40 which she received in 1965 from the Vniversity of the “ast was below her exenption of 3,000.00 as head of the familly, Vonsequently, the emount of #134.75 as income tax withheld from her salary of 72,529.40 was refunded to her by the Bureau of Internal Revenue, In short, the ineome tax refund of 7434.00 (Exh, ©, p. 35, GEA rec.) has nothing to do with petitioner's income

DECISION «

CTA CASE NO. 193} 32 as Assistant Solicitor General which was not Geclared for income tax purposes. The question, therefore, of tax-exenption under Republic Aet #o, 4360 was never passed upon by respoment in the said refund of P13%,00 The 1045 incane tax return of First Assist- ant Solicitor General Usmeraido Was... .

Pe 42, CTA rec.) shows on page 2 thereof that he received °18,249.96 a2 salary during the year from the Office of the Solicitor General ami de- ducted therefrom tue amount of 710,133.31 as salary received froa June 19 to December 31, 1965. There is no showing, however, that the tax~ exemption of said official under Republic Act No. 4360 was formally passed upon by respondent on the basis of the said return because no amount wie: ever refunded to the aforesaid official, (Sven assit@ing excuende that petitioner and the iret assistant Solicitors General were granted tax refumis on the basis of their salaries, the said refunds made without statutory sanction Canno. tind the Government following the well- known rule and established jurisprudence that erroneous application and enforcement of the law by public officers do not block subsequent correct se

DECISION «

33 application of the statute, and that the Govern- ment is rever estopped by mistake or error on tne part of its agents, ) o « « Lt is a well-known rule that erroneous application and en- forcement of the law by public of- ficers do not block subsequent ooFs rect appligation of the statute, 49) and that the Government is never estopped by misteke or error on the art of its agents.(10), . . B, Rodriguez, Inc. v. The Uollecto of Internal wevenue, et al., suuree) After determining and holding that petitioner is subject to the 1965 deficieney income tax, we find that said tax, plus deficiency interest, - amount to #3,224.23, computed as followss Amount of tax due . . « « « 3,363.00 Less: Amount of tax withe held sae + = ~B30n60 Belance of tax due. « 6 #@ @ P25 / 326 Adds Deficiency interest of $5 qa month from April 16, 1966 to Total anount due oe © © @ @ 92 2 ses () Philippine Long Cistance Lelepnone Co. ve Collector of Internal Hovenve, 90 Phil, 674, 680; Nepublic v, Philippine Long Vistenee lelephone Company, L=18844, January 27, 1969 26 3CRA 620, 631.

(10)>aneda v, Sourt of First Instance of layabas, 52 “hil, 803, 8073 Benguet Consolidated Mining Company vs Pineda, bs Phil, 711, 724%; ven tral Agucarera de larlac v. Volleeter, et al.

104 Phil, 653, 656; Philippine American Vrug Vo,

v. Collector of Internal Kevernme, et al., 106, 168; Aoppel (Phil.) Ine. v. Collector of Internal Revenue, L=10550, September 19, 1961; luzon Steves doring vorporation v. Court of Tax Appeals, 1-21005, Oetober 22, 1966, 18 SCRA 436, pan Zan Guan vs Court of Tax Appeals, 123676, April 27, 1967, 19 SCKA 903, 907; Aepublic v. Lippine Lots Jistunce lelephone Go., suatae

DECISION «

CTA CaSE WO, 1931 3%

WHEREFORE, the decision of the respondent Commissioner of Internal Revenue appealed from is sustained, Petitioner is hereby ordered to pay respondent or his duly authorized collection agent the sum of 73,224.23 inclusive of 18% de= ficiency interest, If the said amount iz not paid within thirty (30) days from the date this decision becomes final and executory, petitioner shall pay © surcharge of 5% plus a delinquency interest of 14) a month on the unpaid deficiency income tax until fully peid, provided that said interest shall not exceed a period of three (3) yeare, or 36%. Ko costs. 30 ORDSRED, . Quezon City, February 27, 1970.

QZIGINAL SIGNED

BSTANISLAO R. ALVAREZ

Associate Judge

Presiding Judge ROWAN M. UNALT andi Associate Judge RAMON Le aValiGiua concur in separate opinions.

GONCURRING OPINION OF

PRESIDING JUDGE ROMAN M, UMALI I coneur in the opinlon of my colleagues that Hepublie Act No, 4360, which grants to Assistant Solicitors General the sane "privileges" enjoyed by Judges of Gourts of First Ingtanee, does not comprehend exemption of the salaries of the former from incdue tax. I should like to stresa, however, one other point, Theye is no lav or provision of the Consti+ tution which expressly exenpts from income tax the salaries of Judges of Courts of First In stance, The exemption from income tax of the salaries of Judges of Courts of First Instance, as in the case of all other members of the judi-+- clary, emanates solely from the provision (Sec, 9, Art, VIII) of the Constitution which prohibits iimimation of their salaries during their terms of office, Agesuming that the prohibition against diminution of the compensation of the members of the judiciary is ea “privilege,“ yet Congress may not, by lew, prohibit dimimtion of the salaries of executive officers for it would he tantamount te enactment of an irrepealable law. Congress can not bind a future Congress, ‘ince Congress cannot prohibit diminution of the solaries of executive officials, as in the case of the | salaries of the members of the judiciary, it — oe ee CONCURRI G ....

c ~ t ...

Ci~£

m,~ 1, 931 follows that ssistant Solicitor s Gener al. can not be deemed to have been grante ... t e same "priv l eges ' hy .t epublio ct -so. >t-]60 ; (Jnd th~ ~xemption r om income ta.x 0. the salaries or judicial officer s hieh s merely implied ~rom the undim'nish l e char acter of uch sularies , can not likevis be "e med o hav been extended to them. 'llere s no quest_on that 'ong:reos has full :po'Vr r to exempt trom taxation the s larles of certain oxe utive ffi cials . ut eaoh exemp- t ion must be expressly provided y 1a\r. i~ 67 c;~lGI··l~.L SIGI\JI:.D l Ql/ .• -. H. iJ!'.'U LI

Presiding

Judge

The questi p sed befrre the Court turns on the anin f the ter tt pr vile estt as s e is ed in epub ic ct 436 pr vi ino t hat rthe ran , privile es , and ua· ifications1 f the As is t olici ors ene al shall e the same as t hose f Jud·:es of the Court f First Inst ce .

etitio r •s po _iti n is th t t e ter »pr iv le ge~ ·n s i a i .t.Clu e eYe pti n fr ttle incom - t w oft e sal ries of he Ass,stant 'elicitors

Gener

• t i ur · eq ha his is . •o bee se Ju es f the urt rst nsta tee enjoy sai.d t n privilege n the trength f tte d c r e a d wn ln the cases of erfecto v .. ~eer (85' h • 5'2) an uencia a J"ue

v. Uavid (4~ .. G.

~o . 11, p. 4 2' ; which hel that he pr - hibltion agaiY at t e r eduction o s 1 ries of ju cial o fleers during their tenure it1 office pr vi eo. by S ction 9, Art c e VIII of the C ~l ti- i ..l..ll_, udes in irec re u i n b we.

0 t ation.

t urther e th t t e histor y o:t.' the w ru as it 1s usea 1n rlepubl·c Act 4360 1 ows hat the sa e haa. been inter r eted s·nce 19 lt t incluu.e e em ti n fro.u Lc me t , es of salaries of of icers i ilar y situated as petiti ~ r .

Re-

spv 1 ent 1 s 1-· si on m.~.

h _ other han is tnat t e

CONCURRING ~

2 term “privileges*® used in said Republic act does not clearly embrace tax exemption and the estab- lished rule is that exemption should appear in Clear and unambiguous language.

The established principles of taxation applicable to the case at bar are those applied to corporations with charters granting powers to exercise all the powers and privileges conferred on another corporation. On this point the author- ities say the followings A statute authorizing or direct- ing the grant or transfer of the "privileges" of a corporation which pt immunity from taxation should not interpreted as including that immunity. Charter power "to exercise. ali the powers and privileges" con- ferred on another company does not grant a partial exemption from taxa- tion possessed by the other company. Wright v. Georgia Railroad « Banking 54s, 30 Sup. Ct. 242, reviewing ear- jier federal decisions and following Rockester R. Co. Ve City of Rochester, 205 U.8. GaSe 252s 51 Le. Bd. 784, 27 Sup. Ct. 9.

"It is true there are sone cases where the term ‘privileges! has been held to include immunity from taxation, but that has generally been where other provisions of the act have given such meaning to it. The later ‘and, we think, the better opinion is that unless other pro- visions remove all doubt of the intention of the legislature to in- clude the immunity in the term ‘privilege,’ 1t will not be so con-

o. 193 . 3 strue •

I

cal.t h e l t ·u . force by confinin it to other g~ ts to the co p rati •1 i ckar d ast ennessee, v. &. c •• Co., 13 u •• 637, 3 L. Td . l05l, Sup. Ct .

640.

{ oot note, p. 1523, Cooley on Ta ti r , 4th ' ti n , olut e 2.)

tere is 1 tti in t he pr visions of Rep- ublic ct 436 . from which one may cather t hat t he privi e ·es r ante:

o the Aasistant Sol citors Gen r al i c u e exemption of their s larie~ from t e Inc me Tax Law.

Said law use~ the term Vi eee 11 1a ..

1 an

u. re y confers upon the ssista t So icitor Gener al he same pr lv• ile es h t e 5e ~ f he Court of lir t ns ance en· oy, Il - t e reference ma well be confined o > an o her th n. immunity f r om t xa- ion of s~ a ies , fo loving establishe octrine 1 the mat ter.

,he · er ect v.

'leer, sugr a d.

ndencia cases strengthens re- spon ent •s tan rather han supports petitioner ' p sit on.

under the d c r1ne o t hese tv1o cases , he ju icial o-f iclal does not eujoy t e immunity f liS sa ary r I.l the _come Tax Lav.J in the c n- cept 0 pr i il ge a t ·1e term is used in its CO!' I:t n ac e. a 1 l in rela on to tax e ew.pt· ns .

,.,..- li .'a lwut;. t .,.

""1·tn ::..1 tJ.~O erfect case ae ..

"'"- ,, 7 0

o. 1931 4 is pt l e pressed ir. the followin · language of the decision t ereof;

"Secon pe.rio · • 1862 ... 191 • n July , 1862 , a statute tlas p ssed sub acting he sal ries o' ' ci il fleers 0 the uni e ' tes 1 to 1 i ncorne tax o t hr e per cent .

eve ue offlc rs, constr ued it as i.t.lc di g the coCLpensc:< tion of 11 'ud:es; but .Chle" Justice Tan y, spea·· ng for the judiciary, itTrote v the oecretary • 1e Treasury a 1 · er of p ote t sayin , among otler th ngs :

'The act i n uesti n, as ' u interpret it, diminishes the cor:~­ pe.sation o.a. eery judt;e 3 per cent, if .it can be diminished t that ' te J. byte r;.a..u.e fat x , it may , in the samv w . ' be reduce r om i e to i l.e , at the pl a.sure of the le i latu e .

*Th

judiciarJ i ne of the throe great depart.:.4ents of the governme.t:1t , create - a11 establis;1ed by the onst.ituticn.

Its · ties · ~' pO\-lers re specificall.Y set forth , an · a e of a charucter ·at re·uires it to be . eri"e tly · ndepe -..~.ont of th two t er depart ~ent s , ~.u in o aer to place it beyond ~he reac h and above even he u p.Lc f 8..1"1Y such inf ue1.c , the povJer to reduce their compens ion s expressly withheld f r o1.4 CL~::*..:..ress , an exce tea. from their ~o ers of le islation. • p.age could no be 1 ... or e p a. n than t.tl t r sed in tn.e Con- st·tution.

It is, mor over , 01e of its most iw ortant an e ss ~1tiel pr ovis~o . ~ • 'or t.he rti cles vThict li J t the p wers of tle le 6 i lative an ' exec tive branches o t he ·overn- ~ ents, anu those which provi e safe- " ' ' 71

CUNCURRING -

5 guards for the protection of the citizen in nis person and property, would be of little value without a judiciary to uphold and maintain them, which was free from every influence, direct anu indirect, | that might by possibility in tines of political excitement warp their judguents, 'Lpon these grounds I regard an act of Congress retaining in the Treasury a portion of the compen- sation of the judges, as unconsti-, tutional and void.'

x x x x x

“Judges would indeed be hape less guardians oF the Constitution if they did not perceive and block encroachments upon their preroge= tives in whatever form. The undim inishable character of judicial Salaries is not a mere privilege of judgese-personal and therefore waivadle--but a basic limitation upon legislative or executive action imposed in the public interest (Evans Vg Gore).

"Indeed the exemption of the judicial salary from reduction by taxation is not really a gratuity or privilege. Let the highest court of Maryland speak:

'The exemption of the judicial compensation @rom reduction is not in any true gense a gratuity, prive dlege or exemption. It is essential- ly and primarily compensation basea upon Valuable consideration. The ecOM@iant on the part of the govern~ ment is a guaranty whose fulfillment is as much as part of the considera- tion agreed as is the money salary. The undertaking has its own parti-~ cular value to the citizens in securing the independence of the judiciary in crises; and in the establishment of the compensation

CUNCURRING ~-

CT& CASE No. 1931 6 upon a permanent foundation where judiciel preferuent may be prudently accepted by those wno are quaiified by taient, <nowledge, integrity and capacity, but are not possessed of such a private fortune as to make an assured salary am object of ver« sonal concern. vn the other rand, the members of the judiciary reline quish their position at the bar, with all its professional enoluments, sever their connection witua their ' clients, enc dedicate themseives saia exclusively to the discharge of the onerous duties of tieir high office. Bo, it is irrefutable that the guare anly against a reduction of salary by the imposition of a tax is not an exemption from taxation im the sense of freedom from a burden or service to which others are liable. The exemption for e publie purpose ora valida consideration is merely a avi inal exemption, since the valid and full consiueration or tue puoiic. purpose promotea is received in the place of the tax. ‘theory and rrace- pe D4l.' (Gordy ys, bennis (iMd.)

1939, 5 Atl. Hep. 2d Series, p. 50.)* In the case of Endencie and Jugo, it was thats “When a judicial ofjicer assumes office, he does not exactly ask for exemption from payment of income tax on Mis salary, as a privileges. It is already attached to his office, provices ara seecired by tae funda- mentel law, not primarily for his benefit, but based on public inter- est, to secure and preserve Gis ine agependence of juaicial thought end NCU.

ING -

CT

'ASt • 1 31 7 r o the pr on uncel!tents f the tS pr e e L.

C urt in the fore oin. e:x.corpts it is har lY . .recess r y to say that the uu s of the ourt f Fir t Insta 1 o not enjo t~e i ,u it their sal ries from the .!.CO e Ta aw in the f concept of a pr i vi e e a"-> lis ter is used in its usu cceptati n in rel.at on to tax exemp- tion.

his is n..,.ue cle ~ it Gor y v.

er is ( ~ . ) 939, 5 tl .

ep. 2d eriest P• , ·w ich is cite by the Gupr e e .ourt in su port of i eci i in erJ.ect

v. heer , · xempti n 1 an irn.munit or privile -. e; i is freedom froi a char ·e or b tr e ··o \ihic 1 o he s are su. jecte •'' (Greenfield v • . 1eex·. 77 hil. · 314. )

Gor dy v.

Den .~.is , supr§, learl holds that "the guaranty a ainst a r uc ion of al ries by the i.u.~.p si ... tion of a ta i.s n t an exem.l,)tio .from atio in the ·ense of f ree o r .m bur den or ·er ice t which hers are liable. 11 Ra 1e , the Judges t e Court of First nstc:.nce enjoy the immuni ~cau e it is a condition attache · t their f4ice by a constitutio p~ vision pursuant t the po i c i s una. r1.11 g the U..Lstribut ·on an li t&- tions o · powers :f th th1·ee .re t p rtments ur gover e 1 T put i differ en ly, the i~ t-:1 1

I

' ' { r

I

C(; ~cu I ·u -

T

C ~~ ·~· . 1931 8 imr un.i ty is part of the attr ibute riven by the co stlt t n t the jud'clal depaJ:·tment . ~1 - e t bl she is the rule that the rig t of taxa ior '!.vil . n t be held t have been surren• .erea unless the in en ion to ~urr nuer 1~ ~ l1- fasted by ~ r s too plain to be fuis t a1 en and it i when the tar1 s of the c n ession are too ex licit to a ·mit fa ' r :t of an other con true- t o ..

at he ta_x e; el!lption oay be en oyea •. • ri uez , I c • v. 'he 1 ector f nternal ever.lu a t e 'ourt of T ..

ppeals , G.

No.

.J • -23 41, y 3 ' <;6') . )

We ca har ly give s expa sive a mea in, to the grant f rivile es o t e s istun elicit rs ene;r.

a to i.~:Icluae w· t Ju · ·es o n. t clea ly enj .l in t.t1e con- • c pt f privi e-"e' ithout vio ting the rules of' str ct con truct n ot· tt~X oxeopt on.

It is ure;ed. tnat wL..en ·epublle Act N • lt 6v use the \ ord 1 priv 0b€SH tpe same b d already ad~in strative y received a prac ical co st ucti as i c uding therein e· e pti? n frv income t f s lari P- judicial of icer t wh u the snwe privileg >:1 as J'ua e ~ the ourt f 'ir·t Ins~ance h~u . eon xpr e s gr(;.ntea by law.

n - C J~q ·

I I NO -

CT i A ~ E .- • 9 1 ~ ort f t is c n t1 n, it is al ged by pe i loner th the law creating the Lan \ egi - tr tion o is ion ef ective 19~4. p ovid ' t at t e Co ni sione.r n shall be entitled t the s n e com.pensati n , era luments and privi eges as til se o t1e uct es o~ t e ur o ·"irs ns ance ."

·o ssessm nts wer e ma~ of the salary f the and egistra ion C mmissio .Ler .. ;;;ince hen r greS enac e la\'JS bra:nti 4 to f ~ c ·l' ls ut- si e of' "the judicial hierarchy as \¥ell as o mem- bers of r e sp ci c urts the ame pr'vilege s Juuges o t.. 1e ourt of i/' rst Inst" .. ca . With r pect to the salarl s f "the e o ficial t1e .bureau o uterna 1.1.evtm · e fol ot-1eo. then i 'ts . actice o r n- assess.ment o . sa r-ie of n n ...

j ici l officers r a ted the s e rivi e es as ju · ges of t~1e Court of ""ir

Insttutc •

l 65 , ep blic ct 4360, la raising the s laries of th Solici~ors but not of he ssistant S llcitors Gener 1, grantetl the la ter the same pr.ivile ·es s JU ..,es of the urt f "irst nstance .

' 'h s , · t raa be presum.ed that when hi 1 w a a s Con~ress 1as cogn z nt o ' he practical a it r tive int.e pre a on of t1e term' pr1.vileges 11 when si 1 arl.

use , t . at is,· that it 'ncludes !' 7 6 - • l~o . 193l 0 ax e ...... tion.

Th r 1 is f course t the fe t hat r~reat vteight hould be given to ax administr 1ve interpretati • artie construct n in ind .

rly wh Con ress pre• with that d~ini trat ve n co .ression 1 1 ter retations owever hould e in harmon; 'th the accepte c n~ tuti nal · c c ncepts and wt viclativ thereof. t ee 1s uif icu t t acce t n inter ret ~io th t 1 er'fect c n erts in o a pr ivile e wi1a.t is co.~.- et a l not a r Vi e e er he pertiJ.ent provisio of the c n tit ti n in t e llg t of the decisions in Per fecto v . Heer , su r a , and nuenci n Ju o v. David , Aithouoh r co ,i1z'n that a · r e sur J 1 ·.ulation, if valid, eng in ff .ct an never d:isap.~Jroved b Congress , notw:i· t.~. tan i · the amend- ment by that b several ti -~of e i ome t s , ma· be treats as n afu ... inistr· ive i terpretation ot th :>..isti!.L a.v, the ourt in liilge Iberg v . uni teci Sl:at s (1.~3 ;

JJC) .il '""Sup.t- 45, sai ' that clta• ion o au horit es wa~ scarce y neces ary 'tO refute the proJositi n hc.t what is not in fac i c t;.~e wit - in tne .moani g o · he ixtee t 1end· 1uent can be "-• o.

such by 1 islati ve act or by a mer r la ion o an a in"strati e department . ( 8 u.s.

84 d 73 · ) / fe

CQNCURRING -

11 ) WHBREFORS 4, I concur with the decision of Judge Estanislao R. Alvarez.

(Sgd.) RAMON L. AVANCENA

Associate Judge