Commissioner of Internal Revenue vs.

Philippine Long Distance Telephone

Company
G.R. No. 140230
December 15, 2005

FACTS: PLDT is a grantee of a franchise under R.A 7082 to install, operate and
maintain a telecommunications system throughout the Philippines. For equipment,
machineries and spare parts it imported for its business on different dates from October
1, 1992 to May 31, 1994, PLDT paid the BIR the amount of P164,510,953.00, broken
down as follows: (a) compensating tax of P126,713,037.00; advance sales tax of
P12,460,219.00 and other internal revenue taxes of P25,337,697.00. For similar
importations made between March 1994 to May 31, 1994, PLDT paid P116,041,333.00
value-added tax (VAT).On March 15, 1994, PLDT addressed a letter to the BIR seeking
a confirmatory ruling on its tax exemption privilege under Section 12 of R.A. 7082,
which reads:
Sec. 12. The grantee shall be liable to pay the same taxes on their real estate,
buildings, and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay. In addition thereto, the
grantee, shall pay a franchise tax equivalent to three percent (3%) of all gross receipts
of the telephone or other telecommunications businesses transacted under this
franchise by the grantee, its successors or assigns, and the said percentage shall be in
lieu of all taxes on this franchise or earnings thereof: Provided, That the grantee shall
continue to be liable for income taxes payable under Title II of the National Internal
Revenue Code pursuant to Sec. 2 of Executive Order No. 72 unless the latter
enactment is amended or repealed, in which case the amendment or repeal shall be
applicable thereto. (Emphasis supplied).

Responding, the BIR issued its ruling stating that PLDT shall be subject only to the 3%
franchise tax on gross receipts which shall be in lieu of all taxes on its franchise or
earnings thereof and holds PLDT exempt from VAT on its importation of equipment,
machineries and spare parts needed in its franchise operations. With the ruling, PLDT
filed on December 2, 1994 a claim for tax credit/refund of the VAT, compensating taxes,
advance sales taxes and other taxes it had been paying in connection with its
importation of various equipment, machineries and spare parts needed for its
operations. With its claim not having been acted upon by the BIR, and obviously to
forestall the running of the prescriptive period therefor, PLDT filed with the CTA a
petition for review, therein seeking a refund of, or the issuance of a tax credit certificate
in, the amount of P280,552,286.00.
On February 18, 1998, the CTA rendered a decision granting PLDTs petition. BIR
elevated the case to the CA but the latter denied the petition and affirm the decision of
the CTA.

ISSUE: WON PLDT is exempt from the payment of value-added taxes, compensating
taxes, advance sales taxes and other BIR taxes on its importations, by virtue of the
provision in its franchise that the 3% franchise tax on its gross receipts shall be in lieu of
all taxes on its franchise or earnings thereof.
HELD: Time and again, the Court has stated that taxation is the rule, exemption is the
exception. Accordingly, statutes granting tax exemptions must be construed in
strictissimi juris against the taxpayer and liberally in favor of the taxing authority. To him,
therefore, who claims a refund or exemption from tax payments rests the burden of
justifying the exemption by words too plain to be mistaken and too categorical to be
misinterpreted. As may be noted, the clause in lieu of all taxes in Section 12 of RA 7082
is immediately followed by the limiting or qualifying clause on this franchise or earnings
thereof, suggesting that the exemption is limited to taxes imposed directly on PLDT
since taxes pertaining to PLDTs franchise or earnings are its direct liability. The amount
PLDT paid in the concept of advance sales tax and compensating tax on the 1992 to
1994 importations were, in context, erroneous tax payments and would theoretically be
refundable. It should be emphasized, however, that, such importations were, when
made, already subject to VAT. The petition is partially GRANTED.

SILKAIR (SINGAPORE) PTE, LTD., vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 173594
February 6, 2008

FACTS: Silkair (Singapore) Pte. Ltd. (Silkair), a corporation organized under the laws of
Singapore which has a Philippine representative office, is an online international air
carrier. On December 19, 2001, Silkair filed with the Bureau of Internal Revenue (BIR) a
written application for the refund of P4,567,450.79 excise taxes it claimed to have paid
on its purchases of jet fuel from Petron Corporation from January to June 2000. As the
BIR had not yet acted on the application as of December 26, 2001, Silkair filed a
Petition for Review before the CTA. CTA denied Silkairs petition on the ground that as
the excise tax was imposed on Petron Corporation as the manufacturer of petroleum
products, any claim for refund should be filed by the latter; and where the burden of tax
is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes
an added cost of the goods purchased. Thus the CTA discoursed that the liability for
excise tax on petroleum products that are being removed from its refinery is imposed on
the manufacturer/producer. Silkair filed a Motion for Reconsideration but the CTA denied
it.

ISSUE: Whether Silkair PTE. Ltd. can claim for tax credit.

HELD: The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even if
he shifts the burden thereof to another. Thus, Petron Corporation, not Silkair, is the
statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC
of 1997. Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price which
Silkair had to pay as a purchaser.
 SEA-LAND SERVICE, INC. vs. COURT OF APPEALS and PHILIPPINE HOME
ASSURANCE CORPORATION
G.R. No. L-57828
June 14, 1993

FACTS: On July 13, 1974, Domingo Javier, the checker of defendant Sea-Land went to
the LBC Compound at Shaw Boulevard, Pasig, and without securing permission from
Bureau of Customs and the consignee, broke the seal of the container in the presence
of one in charge of the LBC compound. With the help of the LBC stevedors, he removed
the contents of the container and checked them on July 13, and 14, 1974. On June 7,
1975, private respondent Philippine Home Assurance Corporation filed an action in the
CFI of Manila as subrogee of the assured-consignee, Republic Flour Mills (RFM) to
recover from the defendants, including the petitioner, herein, the sum of P66,289.29,
which it paid to RFM, after the defendants had refused to pay the claim for the loss or
damage suffered by RFM's shipment, consisting of three units of Smokehouse
Airconditioning System and one unit of Mepaco Smoke Generator. During the pendency
of the case in the trial court, the original claim was reduced to P30,980.04 because
some of the items claimed to have been lost were found by the consignee and their
value refunded to the insurer. After trial, the CFI rendered a decision Ordering the
defendants Donmac Corporation and Sea Land Services, Inc., jointly and severally, to
pay the plaintiff the sum of P20,253.36 with interest at the legal rate of 6% per annum
from the date of the filing of the complaint on June 7, 1975 up to the date said amount is
fully paid. Sea-Land appealed from the decision to the CA but CA affirmed the decision
of CFI. Hence, this petition.

ISSUE: Whether petitioner had been relieved of its obligations under the Bill of Lading
when it "devaned" the cargo on July 13, 1974.

HELD: Section 15 of the Bill of Lading provides: The carrier or master may appoint a
stevedore or any other persons to unload and take delivery of the goods and such
delivery from ship's tackle shall be considered complete and all responsibility of the
carrier shall then terminate. This means that the carriers can "send the goods to store,
warehouse, put them on lighters or other craft, put them in possession of the authorities,
dump, permit to lie where landed or otherwise dispose of them, always at the risk and
expenses of the goods . . ." after the constructive delivery of the goods. Hence, the
carriers can "devan" the goods from the container without the prior consent of the
consignee or the Bureau of Customs. The petition for certiorari is GRANTED and the
decision of the Court of Appeals appealed from is REVERSED.

ERNESTO M. MACEDA vs. HON. CATALINO MACARAIG, JR.,

G.R. No. 88291 June 8, 1993

FACTS: This matter of indirect tax exemption of the private respondent National Power
Corporation (NPC) is brought to this Court a second time. Unfazed by the Decision We
promulgated on May 31, 1991 petitioner Ernesto Maceda asks this Court to reconsider
said Decision. A Chronological review of the relevant NPC laws, specially with respect
to its tax exemption provisions. On November 3, 1936, Commonwealth Act No. 120:
creating the National Power Corporation. The main source of funds for the NPC was the
flotation of bonds in the capital markets 4 and these bonds...issued under the authority
of this Act shall be exempt from the payment of all taxes by the Commonwealth of the
Philippines On June 24, 1938, C.A. No. 344, the provision on tax exemption in
relation to the issuance of the NPC bonds was neither amended nor deleted. On
September 30, 1939, C.A. No. 495, the provision on tax exemption in relation to the
issuance of the NPC bonds was neither amended nor deleted. On June 4, 1949,
Republic Act No. 357, any such loan or loans shall be exempt from taxes, duties, fees,
imposts, charges, contributions and restrictions of the Republic of the Philippines. On
the same date, R.A. No. 358, to facilitate payment of its indebtedness, the National
Power Corporation shall be exempt from all taxes. On July 10, 1952, R.A. No. 813
amended R.A. No. 357. The tax provision as stated in R.A. No. 357, was not amended.
On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax
exemption for real estate taxes. On September 8, 1955, R.A. No. 1397, the tax
exemption provision related to the payment of this total indebtedness was not amended
nor deleted. On June 13, 1958, R.A. No. 2055, the tax provision related to the
repayment of loans was not amended nor deleted. On June 18, 1960, R.A. No 2641
converted the NPC from a public corporation into a stock corporation. No tax exemption
was incorporated in said Act. On June 17, 1961, R.A. No. 3043. No tax provision was
incorporated in said Act. On June 17, 1967, R.A. No 4897. No tax provision was
incorporated in said Act.

On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC.
The bonds issued shall be exempt from the payment of all taxes. As to the foreign loans
the NPC was authorized to contract, shall also be exempt from all taxes. On January
22, 1974, P.D. No. 380shall also be exempt from all direct and indirect taxes. On
February 26, 1970, P.D. No. 395, no tax exemption provision was amended, deleted or
added. On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00
would be appropriated annually to cover the unpaid subscription of the Government in
the NPC authorized capital stock, which amount would be taken from taxes accruing to
the General Funds of the Government, proceeds from loans, issuance of bonds,
treasury bills or notes to be issued. On May 27, 1976 P.D. No. 938, declared exempt
from the payment of all forms of taxes. On January 30, 1976, P.D. No. 882 was issued
withdrawing the tax exemption of NPC with regard to imports. On July 30, 1977, P.D.
1177, All units of government, including government-owned or controlled corporations,
shall pay income taxes, customs duties and other taxes and fees are imposed under
revenues laws: provided, that organizations otherwise exempted by law from the
payment of such taxes/duties may ask for a subsidy from the General Fund. On July 11,
1984, P.D. No. 1931, all exemptions from the payment of duties, taxes, fees, imposts
and other charges heretofore granted in favor of government-owned or controlled
corporations including their subsidiaries, are hereby withdrawn. On December 17, 1986,
E.O. No. 93 was issued with a view to correct presidential restoration or grant of tax
exemption to other government and private entities without benefit of review by the
 Fiscal Incentives Review Board, WHEREAS, in addition to those tax and duty
exemption privileges were restored by the Fiscal Incentives Review Board (FIRB), a
number of affected entities, government and private, had their tax and duty exemption
privileges restored.
Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC.

ISSUE: WON NPC is exempted to pay Indirect Income Tax

HELD: Yes. Classifications or kinds of Taxes: According to Persons who pay or who
bear the burden:
. Direct Tax that where the person supposed to pay the tax really pays
it. WITHOUT transferring the burden to someone else.
Examples: Individual income tax, corporate income tax, transfer taxes (estate tax,
donor's tax), residence tax, immigration tax
. Indirect Tax that where the tax is imposed upon goods BEFORE reaching the
consumer who ultimately pays for it, not as a tax, but as a part of the purchase price.
Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and
the tariff and customs indirect taxes (import duties, special import tax and other dues).
A chronological review of the NPC laws will show that it has been the lawmaker's
intention that the NPC was to be completely tax exempt from all forms of taxes direct
and indirect.
P.D. No. 380 added phrase "directly or indirectly". P.D. No. 938 amended into exempt
from the payment of ALL FORMS OF taxes. President Marcos must have considered
all the NPC statutes from C.A. No. 120 up to P.D. No. 938. One common theme in all
these laws is that the NPC must be enable to pay its indebtedness 56 which, as of P.D.
No. 938, was P12 Billion in total domestic indebtedness, at any one time, and U$4
Billion in total foreign loans at any one time. The NPC must be and has to be exempt
from all forms of taxes if this goal is to be achieved. The tax exemption stood as is
with the express mention of "direct and indirect" tax exemptions. Lawmakers wanted
the NPC to be exempt from ALL FORMS of taxes direct and indirect. Therefore, that
NPC had been granted tax exemption privileges for both direct and indirect taxes under
P.D. No. 938. The Court rules and declares that the oil companies which supply bunker
fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By
the very nature of indirect taxation, the economic burden of such taxation is expected to
be passed on through the channels of commerce to the user or consumer of the goods
sold. Because, however, the NPC has been exempted from both direct and indirect
taxation, the NPC must be held exempted from absorbing the economic burden of
indirect taxation.

LUZON STEVEDORING CORPORATION vs. COURT OF APPEALS, HIJOS DE F.

ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES
G.R. No. L-58897 December 3, 1987

FACTS: On May 30, 1968 at past 6:00 in the morning a maritime collision occurred
within the vicinity of the entrance to the North Harbor, Manila between the tanker LSCO
"Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando Escano" a
passenger ship owned by Hijos de F. Escano, Inc. as a result of which said passenger
ship sunk. An action in admiralty was filed by Hijos de F. Escano, Inc. and Domestic
Insurance Company of the Philippines against the Luzon Stevedoring Company (LSC)
in the Court of First Instance of Cebu. In the course of the trial, the trial court appointed
two commissioners representing the plaintiffs and defendant to determine the value of
the LSCO "CAVITE." Said commissioners found the value thereof to be P180,000.00.
After trial on the merits, a decision was rendered on January 24, 1974 finding that
LSCO "Cavite" was solely to blame for the collision. The defendant interposed an
appeal therefrom to the CA wherein in due course a decision was rendered on June 30,
1981 affirming the decision of the court a quo in toto with costs against appellant. MR
was filed but was denied by the CA.

ISSUE: Whether under Art. 837 of the Code of Commerce abandonment of vessel at
fault is necessary in order that the liability of owner of said vessel shall be limited only to
the extent of the value thereof, its appurtenances and freightage earned in the voyage.

HELD: There is no question that the action arose from a collision and the fault is laid at
the doorstep of LSCO "Cavite" of petitioner. Undeniably petitioner has not abandoned
the vessel. Hence petitioner cannot invoke the benefit of the provisions of Article 837 of
the Code of Commerce to limit its liability to the value of the vessel, all the
appurtenances and freightage earned during the voyage. In case of collision of vessels,
in order to avail of the benefits of Article 837 of the Code of Commerce, the shipowner
or agent must abandon the vessel. In such case the civil liability shall be limited to the
value of the vessel with all the appurtenances and freight earned during the voyage.
However, where the injury or average is due to the ship-owner's fault as in said case,
the shipowner may not avail of his right to limited liability by abandoning the vessel.
The SCs previous decisions held that the real and hypothecary nature of the liability of
the shipowner or agent is embodied in the provisions of the Maritime Law, Book III,
Code of Commerce. Although it is not specifically provided for in Article 837 of the
same code that in case of collision there should be such abandonment to enjoy such
limited liability, said article on collision of vessels is a mere amplification of the
provisions of Articles 587 and 590 of same code where abandonment of the vessel is a
pre-condition. Even without said article, the parties may avail of the provisions of
Articles 587 and 590 of same code in case of collision. This is the reason why Article
837 of the same code is considered a superfluity. Hence the rule is that in case of
collision there should be abandonment of the vessel by the shipowner or agent in order
to enjoy the limited liability provided for under said Article 837. The exception to this rule
is when the vessel is totally lost in which case there is no vessel to abandon so
abandonment is not required. WHEREFORE, the petition is DENIED.

COMMISSIONER OF INTERNAL REVENUE vs. ARNOLDUS CARPENTRY SHOP,

INC. and COURT OF TAX APPEALS
G.R. No. 71122 March 25, 1988

FACTS: Arnoldus Carpentry Shop, Inc. is a domestic corporation which has been in
existence since 1960. It has for its secondary purpose the "preparing, processing,
buying, selling, exporting, importing, manufacturing, trading and dealing in cabinet shop
products, wood and metal home and office furniture, cabinets, doors, windows, etc.,
including their component parts and materials, of any and all nature and description".
Sometime in March 1979, the examiners of the petitioner Commissioner of Internal
Revenue conducted an investigation of the business tax liabilities of private respondent
and the examination shows that the total gross sales of private respondent for the year
1977 from both its local and foreign dealings amounted to P5, 162,787.59. From this
amount, private respondent reported in its quarterly percentage tax returns
P2,471,981.62 for its gross local sales. The balance of P2,690,805.97, which is 52% of
the total gross sales, was considered as its gross export. Based on such an
examination, BIR examiners classified private respondent as an "other independent
contractor" under Sec. 205 (16) [now Sec. 169 (q)] of the Tax Code.
As a result thereof, the examiners assessed private respondent for deficiency tax in the
amount of P88,972.23 . Later, on January 31, 1981, private respondent received a
letter/notice of tax deficiency assessment inclusive of charges and interest for the year
1977 in the amount of P 108,720.92 . This tax deficiency was a consequence of the 3%
tax imposed on private respondent's gross export sales which, in turn, resulted from the
examiners' finding that categorized private respondent as a contractor.
Against this assessment, private respondent filed on February 19, 1981 a protest with
the petitioner Commissioner of Internal Revenue. In the protest letter, private
respondent's manager maintained that the carpentry shop is a manufacturer and
therefor entitled to tax exemption on its gross export sales under Section 202 (e) of the
National Internal Revenue Code. On June 23, 1981, private respondent received the
final decision stating that they are considered a contractor and not a manufacturer.
On July 22, 1981, private respondent appealed to the CTA alleging that the decision of
the Commissioner was contrary to law and the facts of the case. On April 22, 1985,
respondent CTA rendered the questioned decision holding that private respondent was
a manufacturer thereby reversing the decision of the petitioner.

ISSUE: Whether or not the CTA erred in holding that private respondent is a
manufacturer and not a contractor and therefore not liable for the amount of
P108,720.92, as deficiency contractor's tax, inclusive of surcharge and interest, for the
year 1977.

HELD: The petition is without merit.

Private respondent is a "manufacturer" as defined in the Tax Code and not a
"contractor" under Section 205(e) of the Tax Code. (a) Section 205 (16) [now Sec. 170
(q)] of the Tax Code defines "independent contractors" as:
... persons (juridical and 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. Private respondent's business does not
fall under this definition.
Private respondent is entitled to the tax exemption under See. 202 (d) and (e) mow Sec.
167 (d) and (e)] of the Tax Code which states:
Sec. 202. Articles not subject to percentage tax on sales. The following shall be exempt
from the percentage taxes imposed in Sections 194, 195, 196, 197, 198, 199, and 201:
xxx xxx xxx
(d) Articles shipped or exported by the manufacturer or producer, irrespective of any
shipping arrangement that may be agreed upon which may influence or determine the
transfer of ownership of the articles so exported.
(e) Articles sold by "registered export producers" to (1) other" registered export
producers" (2) "registered export traders' or (3) foreign tourists or travelers, which are
considered as "export sales."
Any claim for tax exemption from tax statutes is strictly construed against the taxpayer
and it is contingent upon private respondent as taxpayer to establish a clear right to tax
exemption. In the present case the respondent Tax Court did not err in classifying
private respondent as a "manufacturer". Clearly, the 'latter falls with the term
'manufacturer' mentioned in Art. 202 (d) and (e) of the Tax Code.