EN BANC

[G.R. No. L-9408. October 31, 1956.]

EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF
INTERNAL REVENUE and THE COURT OF TAX
APPEALS, Respondents.

Petitioner moved for reconsideration, but the same was denied.

Consequently, he filed a petition for review with the Court of Tax
Appeals.
Issues:

Facts:

Whether or not the deduction is a business asset?

On March 31, 1952, Petitioner filed his income tax return for 1951
with the treasurer of Bacolod City wherein he claimed, among other
things, the amount of P12,837.65, a loss consisting in a portion of
his war damage claim which had been duly approved by the
Philippine War Damage Commission under the Philippine
Rehabilitation Act of 1946 but which was not paid and never has
been paid pursuant to a notice served upon him by said Commission
that said part of his claim will not be paid until the United States
Congress should make further appropriation, as a deductible item
from his gross income pursuant to General Circular No. V-123 issued
by the Collector of Internal Revenue.

Whether or not there is a taxable year? Or a interregnum period?

On the basis of said return, an assessment notice demanding the

payment of P9,419 was sent to Petitioner, who paid the tax in
monthly installments, the last payment having been made on
January 2, 1953.
Meanwhile, on August 30, 1952, the Secretary of Finance, through
the Collector of Internal Revenue, issued General Circular No. V-139
which not only revoked and declared void his general Circular No. V123 but laid down the rule that losses of property which occurred
during the period of World War II from fires, storms, shipwreck or
other casualty, or from robbery, theft, or embezzlement are
deductible in the year of actual loss or destruction of said property.
As a consequence, the amount of P12,837.65 was disallowed as a
deduction from the gross income of Petitioner for 1951 and the
Collector of Internal Revenue demanded from him the payment of
the sum of P3,546 as deficiency income tax for said year.

Whether the Secretary of Finance acted with valid authority in

revoking General Circular No. V-123 and approving in lieu thereof,
General Circular No. V-139.
Held:
I.
In the second place, said amount cannot be considered as a
business asset which can be deducted as a loss in contemplation
of law because its collection is not enforceable as a matter of right,
but is dependent merely upon the generosity and magnanimity of
the U. S. government. Note that, as of the end of 1945, there was
absolutely no law under which Petitioner could claim compensation
for the destruction of his properties during the battle for the
liberation of the Philippines. And under the Philippine Rehabilitation
Act of 1946, the payments of claims by the War Damage
Commission merely depended upon its discretion to be exercised in
the manner it may see fit, but the non-payment of which cannot
give rise to any enforceable right, for, under said Act, All findings of
the Commission concerning the amount of loss or damage
sustained, the cause of such loss or damage, the persons to whom
compensation pursuant to this title is payable, and the value of the
property lost or damaged, shall be conclusive and shall not be
reviewable by any court. (section 113).
II.
It is true that under the authority of section 338 of the
National Internal Revenue Code the Secretary of Finance, in the
exercise of his administrative powers, caused the issuance of
General Circular No. V-123 as an implementation or interpretative

regulation of section 30 of the same Code, under which the amount

of P12,837.65 was allowed to be deducted in the year the last
installment was received with notice that no further payment would
be made until the United States Congress makes further
appropriation therefor, but such circular was found later to be
wrong and was revoked.
Petitioners contention that during the last war and as a
consequence of enemy occupation in the Philippines there was no
taxable year within the meaning of our internal revenue laws
because during that period they were unenforceable, is without
merit. It is well known that our internal revenue laws are not
political in nature and as such were continued in force during the
period of enemy occupation and in effect were actually enforced by
the occupation government. As a matter of fact, income tax returns
were filed during that period and income tax payment were effected
and considered valid and legal. Such tax laws are deemed to be the
laws of the occupied territory and not of the occupying enemy.
Furthermore, it is a legal maxim, that excepting that of a political
nature, Law once established continues until changed by some
competent legislative power. It is not changed merely by change of
sovereignty. (Joseph H. Beale, Cases on Conflict of Laws, III,
Summary section 9, citing Commonwealth vs. Chapman, 13 Met.,
68.) As the same author says, in his Treatise on the Conflict of Laws
(Cambridge, 1916, section 131):
There can be no break or
interregnun in law. From the time the law comes into existence with
the first-felt corporateness of a primitive people it must last until
the final disappearance of human society. Once created, it persists
until a change takes place, and when changed it continues in such
changed condition until the next change and so forever. Conquest or
colonization is impotent to bring law to an end; inspite of change of
constitution, the law continues unchanged until the new sovereign
by legislative act creates a change. (Co Kim Chan vs. Valdes Tan
Keh and Dizon, 75 Phil., 113, 142-143.)
III.
It is likewise contended that the power to pass upon the
validity of General Circular No. V-123 is vested exclusively in our

courts in view of the principle of separation of powers and,

therefore, the Secretary of Finance acted without valid authority in
revoking it and approving in lieu thereof General Circular No. V-139.
It cannot be denied, however, that the Secretary of Finance is
vested with authority to revoke, repeal or abrogate the acts or
previous rulings of his predecessor in office because the
construction of a statute by those administering it is not binding on
their successors if thereafter the latter become satisfied that a
different construction should be given. [Association of Clerical
Employees vs. Brotherhood of Railways & Steamship Clerks, 85 F.
(2d) 152, 109 A.L.R., 345.]
When
the
Commissioner
determined
in
1937
that
the Petitioner was not exempt and never had been, it was his duty
to determine, assess and collect the tax due for all years not barred
by the statutes of limitation. The conclusion reached and announced
by his predecessor in 1924 was not binding upon him. It did not
exempt the Petitioner from tax, This same point was decided in this
way in Stanford University Bookstore, 29 B. T. A., 1280; chan
roblesvirtualawlibraryaffd., 83 Fed. (2d) 710. (Southern Maryland
Agricultural Fair Association vs. Commissioner of Internal Revenue,
40 B. T. A., 549, 554).
With regard to the contention that General Circular No. V-139
cannot be given retroactive effect because that would affect and
obliterate the vested right acquired by Petitioner under the previous
circular, suffice it to say that General Circular No. V-123, having
been issued on a wrong construction of the law, cannot give rise to
a vested right that can be invoked by a taxpayer. The reason is
obvious: a vested right cannot spring from a wrong interpretation.
This is too clear to require elaboration.
It seems too clear for serious argument that an administrative
officer cannot change a law enacted by Congress. A regulation that
is merely an interpretation of the statute when once determined to
have been erroneous becomes nullity. An erroneous construction of
the law by the Treasury Department or the collector of internal
revenue does not preclude or estop the government from collecting
a tax which is legally due. (Ben Stocker, et al., 12 B. T. A., 1351.)

Art. 2254. No vested or acquired right can arise from acts or

omissions which are against the law or which infringe upon the
rights of others. (Article 2254, New Civil Code.)

(3) Has the period of assessment prescribed?

H E L D:

DECISION AFFIRMED.
---------------------------------------------------------------------------------------------CIR v. Toda, Jr.
GR No. 147188; 14 September 2004
F A C T S: On 2 March 1989, CIC authorized Benigno P. Toda, Jr.,
President and owner of 99.991% of its outstanding capital stock, to
sell the Cibeles Building. On 30 August 1989, Toda purportedly sold
the property for P100 million to Rafael A. Altonaga, who, in turn,
sold the same property on the same day to Royal Match Inc. (RMI)
for P200 million. Three and a half years later Toda died. On 29 March
1994, the BIR sent an assessment notice and demand letter to the
CIC for deficiency income tax for the year 1989. On 27 January
1995, the Estate of Benigno P. Toda, Jr., represented by special coadministrators Lorna Kapunan and Mario Luza Bautista, received a
Notice of Assessment from the CIR for deficiency income tax for the
year 1989. The Estate thereafter filed a letter of protest. The
Commissioner dismissed the protest. On 15 February 1996, the
Estate filed a petition for review with the CTA. In its decision the CTA
held that the Commissioner failed to prove that CIC committed
fraud to deprive the government of the taxes due it. It ruled that
even assuming that a pre-conceived scheme was adopted by CIC,
the same constituted mere tax avoidance, and not tax evasion.
Hence, the CTA declared that the Estate is not liable for deficiency
of income tax. The Commissioner filed a petition for review with the
Court of Appeals. The Court of Appeals affirmed the decision of the
CTA, hence, this recourse.
I S S U E S:
(1) Is respondent Estate liable for the 1989 deficiency income tax of
Cibeles Insurance Corporation?
(2) Whether or not this is a case of tax evasion or tax avoidance.

1.
A corporation has a juridical personality distinct and separate
from the persons owning or composing it. Thus, the owners or
stockholders of a corporation may not generally be made to answer
for the liabilities of a corporation and vice versa. There are,
however, certain instances in which personal liability may arise. It
has been held in a number of cases that personal liability of a
corporate director, trustee, or officer along, albeit not necessarily,
with the corporation may validly attach when:
1. He assents to the (a) patently unlawful act of the
corporation, (b) bad faith or gross negligence in directing its
affairs, or (c) conflict of interest, resulting in damages to the
corporation, its stockholders, or other persons;
2. He consents to the issuance of watered down stocks or,
having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable
with the corporation; or
4. He is made, by specific provision of law, to personally
answer for his corporate action.38
It is worth noting that when the late Toda sold his shares of stock to
Le Hun T. Choa, he knowingly and voluntarily held himself
personally liable for all the tax liabilities of CIC and the buyer for the
years 1987, 1988, and 1989. Paragraph g of the Deed of Sale of
Shares of Stocks specifically provides:
g. Except for transactions occurring in the ordinary course of
business, Cibeles has no liabilities or obligations, contingent
or otherwise, for taxes, sums of money or insurance claims

other than those reported in its audited financial statement as

of December 31, 1989, attached hereto as "Annex B" and
made a part hereof. The business of Cibeles has at all times
been conducted in full compliance with all applicable laws,
rules and regulations. SELLER undertakes and agrees to
hold the BUYER and Cibeles free from any and all
income tax liabilities of Cibeles for the fiscal years
1987, 1988 and 1989.39[Underscoring Supplied].
When the late Toda undertook and agreed "to hold the BUYER and
Cibeles free from any all income tax liabilities of Cibeles for the
fiscal years 1987, 1988, and 1989," he thereby voluntarily held
himself personally liable therefor. Respondent estate cannot,
therefore, deny liability for CICs deficiency income tax for the year
1989 by invoking the separate corporate personality of CIC, since its
obligation arose from Todas contractual undertaking, as contained
in the Deed of Sale of Shares of Stock.

2.
Tax avoidance and tax evasion are the two most common
ways used by taxpayers in escaping from taxation. Tax avoidance is
the tax saving device within the means sanctioned by law. This
method should be used by the taxpayer in good faith and at arms
length. Tax evasion, on the other hand, is a scheme used outside of
those lawful means and when availed of, it usually subjects the
taxpayer to further or additional civil or criminal liabilities.23
Tax evasion connotes the integration of three factors: (1) the end to
be achieved, i.e. the payment of less than that known by the
taxpayer to be legally due, or the non-payment of tax when it is
shown that a tax is due; (2) an accompanying state of mind which is
described as being evil, in bad faith, willfull, or deliberate
and not accidental; and (3) a course of action or failure of action
which is unlawful. All these factors are present in the instant case.
The scheme resorted to by CIC in making it appear that there were
two sales of the subject properties, i.e. from CIC to Altonaga, and
then from Altonaga to RMI cannot be considered a legitimate tax

planning. Such scheme is tainted with fraud. Altonagas sole

purpose of acquiring and transferring title of the subject properties
on the same day was to create a tax shelter. The sale to him was
merely a tax ploy, a sham, and without business purpose and
economic substance. Doubtless, the execution of the two sales was
calculated to mislead the BIR with the end in view of reducing the
consequent income tax liability.
3.
No. Section 269 of the NIRC of 1986 (now Section 222 of the
Tax Reform Act of 1997) read:
Sec. 269. Exceptions as to period of limitation of assessment
and collection of taxes.-(a) In the case of a false or fraudulent
return with intent to evade tax or of failure to file a return, the
tax may be assessed, or a proceeding in court after the
collection of such tax may be begun without assessment, at
any time within ten years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment which
has become final and executory, the fact of fraud shall be
judicially taken cognizance of in the civil or criminal action for
collection thereof .
Put differently, in cases of (1) fraudulent returns; (2) false returns
with intent to evade tax; and (3) failure to file a return, the period
within which to assess tax is ten years from discovery of the fraud,
falsification or omission, as the case may be.
As stated above, the prescriptive period to assess the correct taxes
in case of false returns is ten years from the discovery of the falsity.
The false return was filed on 15 April 1990, and the falsity thereof
was claimed to have been discovered only on 8 March 1991.37 The
assessment for the 1989 deficiency income tax of CIC was issued on
9 January 1995. Clearly, the issuance of the correct assessment for
deficiency income tax was well within the prescriptive period.
----------------------------------------------------------------------------------------------

G.R. No. 115349 April 18, 1997

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
THE COURT OF APPEALS, THE COURT OF TAX APPEALS and
ATENEO DE MANILA UNIVERSITY,respondents.
FACTS:
Private respondent is a non-stock, non-profit educational institution
with auxiliary units and branches all over the Philippines. One such
auxiliary unit is the Institute of Philippine Culture (IPC), which has no
legal personality separate and distinct from that of private
respondent. The IPC is a Philippine unit engaged in social science
studies of Philippine society and culture. Occasionally, it accepts
sponsorships for its research activities from international
organizations, private foundations and government agencies.
On July 8, 1983, private respondent received from petitioner
Commissioner of Internal Revenue a demand letter dated June 3,
1983, assessing private respondent the sum of P174,043.97 for
alleged deficiency contractor's tax, and an assessment dated June
27, 1983 in the sum of P1,141,837 for alleged deficiency income
tax, both for the fiscal year ended March 31, 1978. Denying said tax
liabilities, private respondent sent petitioner a letter-protest and
subsequently filed with the latter a memorandum contesting the
validity of the assessments.
On March 17, 1988, petitioner rendered a letter-decision canceling
the assessment for deficiency income tax but modifying the
assessment for deficiency contractor's tax by increasing the amount
due to P193,475.55. Unsatisfied, private respondent requested for a
reconsideration or reinvestigation of the modified assessment. At
the same time, it filed in the respondent court a petition for review
of the said letter-decision of the petitioner. While the petition was
pending before the respondent court, petitioner issued a final
decision dated August 3, 1988 reducing the assessment for
deficiency contractor's tax from P193,475.55 to P46,516.41,
exclusive of surcharge and interest.
CA set aside petitioners decision.

Hence, this instant Petition.

Issue:
Is Ateneo de Manila University, through its auxiliary unit or branch
the Institute of Philippine Culture performing the work of an
independent contractor and, thus, subject to the three percent
contractor's tax levied by then Section 205 of the National Internal
Revenue Code?
The Court's Ruling
The petition is unmeritorious.
Interpretation of Tax Laws
The parts of then Section 205 of the National Internal Revenue Code
germane to the case before us read:
Sec. 205. Contractors, proprietors or operators of dockyards, and
others. A contractor's tax of three per centum of the gross
receipts is hereby imposed on the following:
xxx xxx xxx
(16) Business agents and other independent contractors, except
persons, associations and corporations under contract for
embroidery and apparel for export, as well as their agents and
contractors, and except gross receipts of or from a pioneer industry
registered with the Board of Investments under the provisions of
Republic Act No. 5186;
xxx xxx xxx
The term "independent contractors" include persons (juridical or
natural) not enumerated above (but not including individuals
subject to the occupation tax under Section 12 of the Local Tax
Code) whose activity consists essentially of the sale of all kinds of
services for a fee regardless of whether or not the performance of
the service calls for the exercise or use of the physical or mental
faculties of such contractors or their employees.
The term "independent contractor" shall not include regional or area
headquarters established in the Philippines by multinational
corporations, including their alien executives, and which
headquarters do not earn or derive income from the Philippines and

which act as supervisory, communications and coordinating centers

for their affiliates, subsidiaries or branches in the Asia-Pacific
Region.
Petitioner Commissioner of Internal Revenue erred in applying
the principles of tax exemption without first applying the wellsettled doctrine of strict interpretation in the imposition of taxes. It
is obviously both illogical and impractical to determine who are
exempted without first determining who are covered by the
aforesaid provision. The Commissioner should have determined first
if private respondent was covered by Section 205, applying the rule
of strict interpretation of laws imposing taxes and other burdens on
the populace, before asking Ateneo to prove its exemption
therefrom. The Court takes this occasion to reiterate the hornbook
doctrine in the interpretation of tax laws that "(a) statute will not be
construed as imposing a tax unless it does so clearly, expressly, and
unambiguously . . . (A) tax cannot be imposed without clear and
express words for that purpose. Accordingly, the general rule of
requiring adherence to the letter in construing statutes applies with
peculiar strictness to tax laws and the provisions of a taxing act
are not to be extended by implication." 8 Parenthetically, in
answering the question of who is subject to tax statutes, it is basic
that "in case of doubt, such statutes are to be construed most
strongly against the government and in favor of the subjects or
citizens because burdens are not to be imposed nor presumed to be
imposed beyond what statutes expressly and clearly import." 9
To fall under its coverage, Section 205 of the National Internal
Revenue Code requires that the independent contractor be engaged
in the business of selling its services. Hence, to impose the three
percent contractor's tax on Ateneo's Institute of Philippine Culture, it
should be sufficiently proven that the private respondent is indeed
selling its services for a fee in pursuit of an independent business.
And it is only after private respondent has been found clearly to be
subject to the provisions of Sec. 205 that the question of exemption
therefrom would arise. Only after such coverage is shown does the
rule of construction that tax exemptions are to be strictly
construed against the taxpayer come into play, contrary to

petitioner's position. This is the main line of reasoning of the Court

of Tax Appeals in its decision, 10 which was affirmed by the CA.
The
Ateneo
de
Manila
University
Did
Not
Contract
for the Sale of the Service of its Institute of Philippine Culture
After reviewing the records of this case, we find no evidence that
Ateneo's Institute of Philippine Culture ever sold its services for a
fee to anyone or was ever engaged in a business apart from and
independently of the academic purposes of the university.
In the first place, the petitioner has presented no evidence to prove
its bare contention that, indeed, contracts for sale of services were
ever entered into by the private respondent.
Moreover, the Court of Tax Appeals accurately and correctly
declared that the " funds received by the Ateneo de Manila
University are technically not a fee.
For one, the established facts show that IPC, as a unit of the private
respondent, is not engaged in business. Undisputedly, private
respondent is mandated by law to undertake research activities to
maintain its university status. In fact, the research activities being
carried out by the IPC is focused not on business or profit but on
social sciences studies of Philippine society and culture. Since it can
only finance a limited number of IPC's research projects, private
respondent occasionally accepts sponsorship for unfunded IPC
research projects from international organizations, private
foundations
and
governmental
agencies. However,
such
sponsorships are subject to private respondent's terms and
conditions, among which are, that the research is confined to topics
consistent with the private respondent's academic agenda; that no
proprietary or commercial purpose research is done; and that
private respondent retains not only the absolute right to publish but
also the ownership of the results of the research conducted by the
IPC. Quite clearly, the aforementioned terms and conditions belie
the allegation that private respondent is a contractor or is engaged
in business.
For another, it bears stressing that private respondent is a nonstock, non-profit educational corporation. The fact that it accepted

sponsorship for IPC's unfunded projects is merely incidental. For, the

main function of the IPC is to undertake research projects under the
academic agenda of the private respondent. Moreover the records
do not show that in accepting sponsorship of research work, IPC
realized profits from such work. On the contrary, the evidence
shows that for about 30 years, IPC had continuously operated at a
loss, which means that sponsored funds are less than actual
expenses for its research projects. That IPC has been operating at a
loss loudly bespeaks of the fact that education and not profit is the
motive for undertaking the research projects.
Then, too, granting arguendo that IPC made profits from the
sponsored research projects, the fact still remains that there is no
proof that part of such earnings or profits was ever distributed as
dividends to any stockholder, as in fact none was so distributed
because they accrued to the benefit of the private respondent
which is a non-profit educational institution. 14
Therefore, it is clear that the funds received by Ateneo's Institute of
Philippine Culture are not given in the concept of a fee or price in
exchange for the performance of a service or delivery of an object.
Rather, the amounts are in the nature of an endowment or donation
given by IPC's benefactors solely for the purpose of sponsoring or
funding the research with no strings attached. As found by the two
courts below, such sponsorships are subject to IPC's terms and
conditions. No proprietary or commercial research is done, and IPC
retains the ownership of the results of the research, including the
absolute right to publish the same. The copyrights over the results
of
the
research
are
owned
by
Ateneo and, consequently, no portion thereof may be reproduced
without its permission. 15 The amounts given to IPC, therefore, may
not be deemed, it bears stressing as fees or gross receipts that can
be subjected to the three percent contractor's tax.

obtained or the results of research projects undertaken by the

Institute of Philippine Culture.
Furthermore, it is clear that the research activity of the Institute of
Philippine Culture is done in pursuance of maintaining Ateneo's
university status and not in the course of an independent business
of selling such research with profit in mind.

It is also well to stress that the questioned transactions of Ateneo's

Institute of Philippine Culture cannot be deemed either as a contract
of sale or a contract of a piece of work. "
In the case at bench, it is clear from the evidence on record that
there was no sale either of objects or services because, as adverted
to earlier, there was no transfer of ownership over the research data

FACTS:
Olimpio Fernandez and his wife Angelina Oasan had a net worth of
P8,600 on December 8, 1941. During the Japanese occupation the
spouses acquired several real properties, and at the time of his
death on February 11, 1945 he had a net worth of P31,489. The
Collector of Internal Revenue assessed a war profits tax on the

Public Service, Not Profit, is the Motive

The records show that the Institute of Philippine Culture conducted
its research activities at a huge deficit of P1,624,014.00 as shown in
its statements of fund and disbursements for the period 1972 to
1985. 23 In fact, it was Ateneo de Manila University itself that had
funded the research projects of the institute, and it was only when
Ateneo could no longer produce the needed funds that the institute
sought funding from outside.
PETITION is DENIED and the assailed Decision of the Court of
Appeals is hereby AFFIRMED in full.
--------------------------------------------------------------------------------------------[G.R. No. L-9141. September 25, 1956.]
Testate Estate of OLIMPIO FERNANDEZ, deceased. REPUBLIC
OF THE PHILIPPINES, claimant-Appellee, vs. ANGELINA
OASAN VDA DE FERNANDEZ, PRISCILLA O. FERNANDEZ, and
ESTELA O. FERNANDEZ, Oppositors-Appellants.
DECISION
LABRADOR, J.:
Appeal from a decision of the Court of Tax Appeals sustaining the
validity of a tax amounting to P7,614.60 against the estate of
Olimpio Fernandez under the War Profits Tax Law (Republic Act No.
55).

estate of the deceased at P7,614.60, which his administratrix

refused to pay.
The case was brought to the Court of Tax Appeals which sustained
the validity and legality of the assessment.
Hence, this petition.
Issue: Whether or not the war profits law can be applied
retroactively? Or it is an ex post facto law?
Held:
(1) Appellants contention that the law is invalid or unconstitutional
because it acts retroactively, thus violating the due process of law
clause, is not supported by reason or authority. The tax, insofar as
applicable to the estate of the deceased Olimpio Fernandez, is both
a property tax and a tax on income. It is a property tax in relation to
the properties that Fernandez had in December, 1941; and it is an
income tax in relation to the properties which he purchased during
the Japanese occupation. In both cases, however, the war profits tax
may not be considered as unconstitutional.
The doctrine of unconstitutionality raised by Appellant is
based on the prohibition against ex post facto laws. But this
prohibition applies only to criminal or penal matters, and not to laws
which concern civil matters or proceedings generally, or which
affect or regulate civil or private rights (Ex parte Garland, 18 Law
Ed., 366; chan roblesvirtualawlibrary16 C.J. S., 889-891).
At an early day it was settled by authoritative decisions, in
opposition to what might seem the more natural and obvious
meaning of the term ex post facto, that in their scope and purpose
these provisions were confined to laws respecting criminal
punishments, and had no relation whatever to retrospective
legislation of any other description. And it has, therefore, been
repeatedly held, that retrospective laws, when not of a criminal
nature, do not come in conflict with the national Constitution, unless
obnoxious to its provisions on other grounds than their respective
character. (1 Cooley, Constitutional Limitations, 544-545.)

We have applied the above principle in the cases of Mekin vs. Wolf,
2 Phil. 74 and Ongsiako vs. Gamboa, 47 Off. Gaz., No. 11, 5613,
5616.
It has also been held that property taxes and benefit assessments
on real estate, retroactively applied, are not open to the objection
that they infringe upon the due process of law clause of the
Constitution (Wagner vs. Baltimore, 239 U. S. 207, 60 L. Ed.
230); that taxes on income are not subject to the constitutional
objection because of their retroactivity. The universal practice has
been to increase taxes on incomes already earned; yet
notwithstanding this retroactive operation, income taxes have not
been successfully assailed as invalid. The uniform ruling of the
courts in the United States has been to reject the contention that
the retroactive application of revenue acts is a denial of the due
process guaranteed by the Fifth Amendment (Welch vs. Henry, 305
U. S. 134, 83 L. Ed. 87).
It has also been held that in order to declare a tax as transgressing
the constitutional limitation, it must be so harsh and oppressive in
its retroactive application (Idem.). But we hold that far from being
unjust or harsh and oppressive our war profits tax is both wise and
just. Those who were able to retain their properties found
themselves possessed of increased wealth because inflation set in,
the currency dropped in value and properties soared in prices. It
would have been unrealistic for the legislature to have ignored all
these facts and circumstances. After the war it could not, with
justice to all concerned, apportion the expenses of government
equally on all the people irrespective of the vicissitudes of war,
equally on those who had their properties decimated as on those
who had become fabulously rich after the war. The law may not be
considered harsh and oppressive because the force of its impact fell
on those who had amassed wealth or increased their wealth during
the war, but did not touch the less fortunate. The policy followed is
the same as that which underlies the Income Tax Law, imposing the
burden upon those who have and relieving those who have not. No
one can dare challenge the law as harsh and oppressive. We declare
it to be just and sound and overrule the objection thereto on the
ground of unconstitutionality.

The contention that the deceased Olimpio Fernandez or his estate

should not be responsible because he died in 1945 and was no
longer living when the law was enacted at a later date, in 1946, is
absolutely without merit. Fernandez died immediately before the
liberation and the actual cessation of hostilities. He profited by the
war; there is no reason why the incident of his death should relieve
his estate from the tax.

Under section 84 of the National Internal Revenue Code, the term

person means an individual, a trust, estate, corporation, or a duly
registered general co-partnership. If the individual is already dead,
property or estate left by him should be subject to the tax in the
same manner as if he were alive.
DECISION AFFIRMED.
-------------------------------------------------------------------------------------------