G.R. No. 148948 - Commission on Elections vs. Tagle

On March 21, 1905, Compania General de Tabacos filed a complaint seeking the refund of P88,698 allegedly illegally collected from it, plus legal interest from April 13, 1904, until settlement.
In addition, the company claimed the return of P45,746.97 purportedly paid as excess taxes, though the latter was not pursued due to lack of evidence that it was remitted to the City of Manila.

The trial court rendered judgment on September 11, 1905, ordering the City of Manila to refund the P88,698 with interest from the date of the complaint and costs, while absolving the defendant of the excess tax claim.
The City of Manila appealed the decision. On February 14, 1907, the appellate court reversed the trial judgment, directing a new trial to establish which portion of the contested “illegal” taxes was actually collected.
A new trial was held on June 5, 1907, with evidentiary presentations (witnesses and documents marked A, B, C, D, and E).
A fresh judgment was rendered on September 28, 1907, again ordering the refund of P88,698 with legal interest from April 13, 1904, and costs; further motions for a new trial were overruled and exceptions were duly noted.

The dispute centers on the computation of tax payments made by the plaintiff under the industrial tax regime as provided by the Regulation approved by the royal order of June 19, 1890, which governed until its repeal on July 1, 1904, by Act No. 1189.
Under the regulation, the so‐called industrial tax was imposed as a 5% tax on net profits distributed to stockholders, but was distinguished from other taxes such as the urbana (city) tax and the land tax later imposed as its substitute.
The plaintiff contended that, as a joint-stock company, it should be taxed only once by computing all relevant taxes (urbana/land and the industrial tax paid in the provinces) within the 5% dividend tax.

The payment of P88,698 was made into the Administracion de Hacienda Publica (Collector of Internal Revenue), which later was turned over to the City of Manila’s treasury, though the municipality itself was only created on August 7, 1901.
The plaintiff acknowledged its obligations:

Payment of the 5% tax on net distributable profits based on its balance sheets, including the corresponding computation for urbana, later substituted by the land tax.
Payment of industrial taxes for its agencies or branch offices in the provinces was separately accounted for under the regulation.

The dispute arises over whether the industrial tax payments made in the provinces and the 5% tax on dividends (incorporating the urbana/land tax) may be aggregated in a “sole tax” computation, as advocated by the plaintiff.

The plaintiff argued that the total tax collected should reflect one combined payment, entitling it to a refund of amounts improperly computed into the 5% dividend tax, namely, amounts representing overpayment of urbana/land tax.
The defendant (City of Manila) maintained that:

There exists a clear separation between the industrial tax and the taxes computed on dividends (urbana/land tax).
The municipality could not be held responsible for amounts collected before its establishment, and the regulation does not authorize the aggregation of industrial tax paid in the provinces with the dividend tax payable in Manila.

Does the applicable regulation permit the computation of the industrial tax paid in the provinces to be aggregated with the 5% tax on dividends, which already includes the urbana (and subsequently, the land tax)?
Is it lawful to claim that a joint-stock company should pay only one “sole tax” instead of separate taxes corresponding to its different business activities and locations?

Can the City of Manila be held responsible for tax amounts that were actually collected by the Collector of Internal Revenue, especially considering that part of the collection occurred prior to the municipality’s creation on August 7, 1901?
What is the proper legal basis for refunding the alleged overpayment of P88,698, particularly when only part of that amount (i.e., the urban/land tax component) is legally attributable to the City?

Do the provisions of the Regulation of June 19, 1890—including articles 1, 22, 23, 36, and the accompanying tariffs and exemptions—explicitly or implicitly allow the computation method proposed by the plaintiff?
Is the theory of a “sole tax” as asserted by the plaintiff supported by the statutory texts and notes attached to the regulation?