DUE PROCESS

If the regular income tax is higher than the MCIT, the corporation does not pay the MCIT.
CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC. VS. ROMULO, ET
AL- MINIMUM CORPORATE INCOME

Any excess of the MCIT over the normal tax shall be carried forward and credited against the
normal income tax for the three immediately succeeding taxable years.

This is because deductions are a matter of legislative grace. The assignment of gross
income, instead of net income, as the tax base of the MCIT, taken with the reduction of the
The Secretary of Finance is hereby authorized to suspend the imposition of the [MCIT] on
tax rate from 32% to 2%, is not constitutionally objectionable.
any corporation which suffers losses on account of prolonged labor dispute, or because of
force majeure, or because of legitimate business reverses.

FACTS:
The term ‘gross income’ shall mean gross sales less sales returns, discounts and allowances
Chamber of Real Estate and Builders' Associations, Inc. (CHAMBER) is questioning the and cost of goods sold. "Cost of goods sold" shall include all business expenses directly
constitutionality of Sec 27 (E) of RA 8424 and the revenue regulations (RRs) issued by the incurred to produce the  merchandise to bring them to their present location and use.
Bureau of Internal Revenue (BIR) to implement said provision and those involving creditable
withholding taxes (CWT). [CWT issues will not be discussed]
CHAMBER claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because
it is highly oppressive, arbitrary and confiscatory which amounts to deprivation of property
CHAMBER assails the validity of the imposition of minimum corporate income tax (MCIT) on without due process of law. It explains that gross income as defined under said provision only
corporations and creditable withholding tax (CWT) on sales of real properties classified as considers the cost of goods sold and other direct expenses; other major expenditures, such
ordinary assets. Chamber argues that the MCIT violates the due process clause because it as administrative and interest expenses which are equally necessary to produce gross
levies income tax even if there is no realized gain. income, were not taken into account. Thus, pegging the tax base of the MCIT to a
corporation’s gross income is tantamount to a confiscation of capital because gross income,
MCIT scheme: (Section 27 (E). [MCIT] on Domestic Corporations.) unlike net income, is not "realized gain."
A corporation, beginning on its fourth year of operation, is assessed an MCIT
of 2% of its gross income when such MCIT is greater than the normal
corporate income tax imposed under Section 27(A) (Applying the 30% tax
ISSUE:
rate to net income).

1. WON the imposition of the MCIT on domestic corporations is unconstitutional

This means that even if a corporation incurs a net loss in its business operations or reports
HELD:
zero income after deducting its expenses, it is still subject to an MCIT of 2% of its gross
income. This is consistent with the law which imposes the MCIT on gross income
1. NO. MCIT is not violative of due process. The MCIT is not a tax on capital. The MCIT is
notwithstanding the amount of the net income.
imposed on gross income which is arrived at by deducting the capital spent by a corporation
in the sale of its goods, i.e., the cost of goods and other direct expenses from gross sales.
Clearly, the capital is not being taxed.

Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieu of the normal Villegas vs Hiu Chiong Tsai Pao Ho (1978)
net income tax, and only if the normal income tax is suspiciously low.
Facts: The Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those
employed in the diplomatic and consular missions of foreign countries, in technical assistance
programs of the government and another country, and members of religious orders or
The MCIT merely approximates the amount of net income tax due from a corporation,
congregations) to procure the requisite mayor’s permit so as to be employed or engage in
pegging the rate at a very much reduced 2% and uses as the base the corporation’s gross
trade in the City of Manila. The permit fee is P50, and the penalty for the violation of the
income.
ordinance is 3 to 6 months imprisonment or a fine of P100 to P200, or both.

CHAMBER failed to support, by any factual or legal basis, its allegation that the MCIT is
arbitrary and confiscatory. It does not cite any actual, specific and concrete negative Issue: Whether the ordinance imposes a regulatory fee or a tax.
experiences of its members nor does it present empirical data to show that the
implementation of the MCIT resulted in the confiscation of their property.

Held: The ordinance’s purpose is clearly to raise money under the guise of regulation by
exacting P50 from aliens who have been cleared for employment. The amount is
Taxation is necessarily burdensome because, by its nature, it adversely affects property
unreasonable and excessive because it fails to consider difference in situation among aliens
rights. The party alleging the law’s unconstitutionality has the burden to demonstrate the
required to pay it, i.e. being casual, permanent, part-time, rank-and-file or executive.
supposed violations in understandable terms.
[ The Ordinance was declared invalid as it is arbitrary, oppressive and unreasonable, being Customs to refund the overpaid amount. Hence this petition by the Commission of Customs.
applied only to aliens who are thus deprived of their rights to life, liberty and property and ISSUES: 1. WON the appraisal made by the Commissioner was in accordance with Sec. 201
therefore violates the due process and equal protection clauses of the Constitution. Further, of the Tariff and Customs Code. (NO) RATIO: 1. NO. Sec. 201 of the same Tariff and
the ordinance does not lay down any criterion or standard to guide the Mayor in the exercise Customs Code (prescribing the criteria for the determination of the dutiable values of
of his discretion, thus conferring upon the mayor arbitrary and unrestricted powers. ] imported articles) has not been complied with, even if appraisers of the Bureau of Customs
are given ample leeway in determining the correct customs duties under Sec. 1405 of the
TCC. According to Sec. 201 of the TCC: o The dutiable value of an imported article is based
on the home consumption value or price as declared in the consular, trade or sales invoice. o
Comm. Of Customs v. CTA & Campos Rueda Co. – Melencio-Herrera, J. Petitioner:
Where there is reasonable doubt, the correct dutiable value shall be ascertained from the
Commissioner of Customs Respondent: Court of Tax Appeals & Campos Rueda Co.
reports of the Revenue Attache or Commercial Attache and from such other information that
Concept: Constitutional Limitations: Due Process Clause Brief Facts: Campos Rueda Co.
may be available to the Bureau of Customs. o Also required by the statute is the publication
imported "tungsol flashers" and sealed beams from the US. The Bureau of Customs re-
from time to time of the lists of the home consumption values. In the corresponding Import
appraised them on a higher rate based on alert notices sent by Finance Attaches abroad.
Entries, Campos Rueda Co. quoted the prices of the imported merchandise as declared in
Campos Rueda paid in protest and argued that it had overpaid the duties, claiming that the
the consular invoices and as required by Sec. 201. o Reasonable doubt wasn’t proven by the
Commissioner of Customs violated Sec. 201 of the Tariff and Customs Code (RA 1937, as
Commissioner in reassessing the values. o There was also no compliance to the publication
amended by PD 34 & 1464). Doctrine: The dutiable value of an imported article is based on
from time to time of the list of home consumption values. The "Alert Notices" from Finance
the home consumption price as declared in the consular, commercial, sales, or trade invoice.
Attaches abroad (which the Bureau of Customs based its reappraisals) were not disclosed
But where there is reasonable doubt, the correct dutiable value shall be ascertained from the
during the proceedings of Campos Rueda Co. nor presented in evidence before the Court. o
reports of the Revenue Attache or Commercial Attache and from such other information that
Under these circumstances, the re-appraisal was clearly not in accordance with the
may be available. Also required is the publication from time to time of the lists of the home
provisions of Section 201 of the Tariff and Customs Code. o The re-appraisal made by the
consumption value. FACTS: 1. Campos Rueda Co. imported several articles from United
Bureau of Customs, therefore, can be faulted with arbitrariness in disregard of the standard of
States (“tungsol flashers and sealed beams). 2. Campos Rueda filed the corresponding
due process to which all governmental action should conform to impress upon it the stamp of
import entry. 3. The Bureau of Customs re-appraised the items for higher rate based on alert
validity. Administrative proceedings are not exempt from the operation of due process
notices sent by Finance Attaches abroad. 4. Campos Rueda paid under protest Php 18,000,
requirements. o One of which is that a finding by an administrative tribunal should be
Php 52,000, and Php 67,000 for import duties. 5. Campos Rueda argued that it had overpaid
supported by substantial evidence presented at the hearing or at least contained in the
the duties and filed for refund. Campos Rueda: The Commissioner of Customs violated Sec.
records or disclosed to the parties affected. DISPOSITIVE: Petition is DENIED. Appealed
201 of the Tariff and Customs Code (RA 1937, as amended by PD 34 & 1464). There was
Judgment is AFFIRMED.
violation of due process. o Reasonable doubt as to the value or price of the imported article
declared in the entry was not proven to have existed; the “Alert Notices” from the Finance
Attaches were not shown. 6. The protest was denied by the Collector of Customs. 7. Campos
Rueda appealed to the Commissioner of Customs, but the re-appraisal was confirmed. 8.
Campos Rueda appealed to the Court of Tax Appeals, which favored them. Court of Tax
Appeals: The Bureau of Customs violated the Tariff Code. 9. The CTA ordered the Bureau of