G.R. No. 137377 December 18, 2001
) WON Marubeni Corp failed to avail the tax amnesty
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MARUBENI CORPORATION, respondent.
FACTS:
Respondent Marubeni Corporation is a foreign corporation
organized and existing under the laws of Japan. It is engaged
in general import and export trading, financing and the
construction business. It is duly registered to engage in such
business in the Philippines and maintains a branch office in
Manila.
On August 27, 1986 it was assessed by the Commissioner of
Internal Revenue for failure to declare income derived from two
contracts in the Philippines, both of which were completed in
1984. The assessment involved deficiency in 3 types of taxes
income tax, branch profit remittance tax and contractor's tax.
On September 26, 1986, respondent filed petitions for review
with the Court of Tax Appeals questioning the deficiency
charges.
Earlier, on August 2, 1986, E.O. No. 41 declaring a one-time
amnesty covering unpaid income taxes for the years 1981 to
1985 was issued. Then on November 17, 1986, it was
expanded by E.O. 64, including estate and donor's taxes and
tax on business, also covering the years 1981 to 1985 and
extended the period within which the taxpayer could avail of
the amnesty to December 15, 1986. Marubeni duly filed its tax
amnesty under both EOs.
The Court of Tax Appeals eventually found that respondent had
properly availed of the tax amnesty under E.O. Nos. 41 and 64
and declared the deficiency taxes subject of said case as
deemed cancelled and withdrawn. It was affirmed by the CA.
CIR raised the issue to the SC alleging that respondent is
disqualified from availing of the said amnesties because the
latter falls under the exception in Section 4 (b) of E.O. No. 41.
"Sec. 4. b) Those with income tax cases already filed
in Court as of the effectivity hereof;
Petitioner argues that at the time respondent filed for income
tax amnesty on October 30, 1986, CTA Case No. 4109 had
already been filed and was pending before the Court of Tax
Appeals.
Respondent company opposed this view asserting validity of
its amnesty application. Also, it is respondent's other argument
that assuming it did not validly avail of the amnesty under the
two Executive Orders, it is still not liable for the deficiency
contractor's tax because the income from the projects came
from the "Offshore Portion" of the contracts. The two contracts
were divided into two parts, i.e., the Onshore Portion and the
Offshore Portion. All materials and equipment in the contract
under the "Offshore Portion" were manufactured and
completed in Japan, not in the Philippines, and are therefore
not subject to Philippine taxes.
ISSUE:
a.
due to the pending case in the Court of Tax Appeals
b.) WON, assuming it did not validly avail of the amnesty
under the two Eos, Marubeni is still not liable for the
deficiency contractor's tax.
RULING:
a.) Petitioner's claim cannot be sustained. The filing of income
tax cases in court must have been made before and as of the
date of effectivity of E.O. No. 41. Thus, for a taxpayer not to be
disqualified under Section 4 (b) there must have been no
income tax cases filed in court against him when E.O. No. 41
took effect.
E.O. No. 41 took effect on August 22, 1986. The petiotion was
filed by respondent with the Court of Tax Appeals on
September 26, 1986. When E.O. No. 41 became effective on
August 22, 1986, the CTA Case had not yet been filed in court.
Respondent corporation did not fall under the said exception in
Section 4 (b), hence, respondent was not disqualified from
availing of the amnesty for income tax and branch profit
remittance tax under E.O. No. 41.
However, as regards business tax amnesty under E.O. 64, the
effectivity referred to in Section 4 (b) of E.O. No. 41 should be
November 17, 1986. By the time respondent filed its
supplementary tax amnesty return on December 15, 1986,
respondent already fell under the exception was disqualified
from availing of the business tax amnesty granted therein.
b.) A contractor's tax is a tax imposed upon the privilege of
engaging in business. It is generally in the nature of an excise
tax on the exercise of a privilege of selling services or labor
rather than a sale on products; and is directly collectible from
the person exercising the privilege. Being an excise tax, it can
be levied by the taxing authority only when the acts, privileges
or business are done or performed within the jurisdiction of
said authority. Like property taxes, it cannot be imposed on an
occupation or privilege outside the taxing district.
While the construction and installation work were completed
within the Philippines, the evidence is clear that some pieces of
equipment and supplies were completely designed and
engineered in Japan. They were already finished products
when shipped to the Philippines. These services were
rendered outside the taxing jurisdiction of the Philippines and
are therefore not subject to contractor's tax.
Considering the circunstances, respondent validly availed tax
amnesty for income tax and branch profit remittance tax. While
it failed to qualify for contractor's tax, the assessment was
improper for said taxes were outside of the CIRs jurisdiction.
Therefore, the petition is denied. The decision of the CA is
affirmed.
G.R. No. L-26686 & L-26698 October 30, 1980 The Commissioner's argues that AFC cannot enjoy
simultaneous tax exemtions under the two EOs.
ATLAS FERTILIZER CORPORATION, petitioner,
vs.
COMMISSION OF INTERNAL REVENUE and COURT OF
TAX APPEALS, respondents; ISSUE:

COMMISSIONER OF INTERNAL REVENUE, petitioner, WON PETITIONER HAS IN EFFECT ABANDONED AND
vs. GIVEN UP ITS PARTIAL EXEMPTION PRIVILEGE UNDER
ATLAS FERTILIZER CORPORATION and COURT OF TAX REPUBLIC ACT NO. 901 BY SEEKING TO APPLY ITS TAX
APPEALS, respondents. EXEMPTION UNDER REPUBLIC ACT NO. 3050.

FACTS:

These two (2) cases are appeals by way of certiorari from the
decision dated August 24, 1966 of the Court of Tax Appeals
granting Atlas Fertilizer Corporation a tax credit in the sum of
P81,899.00 which may be applied by said corporation in pay
of its outstanding and/or future liability for internal revenue
taxes.
Petitioner Atlas Fertilizer Corporation was granted by the
Secretary of Finance a certificate of tax exemption under
Republic Act No. 901 as a new and necessary industry for
engaging in the manufacture of fertilizer.
While petitioner was still enjoying partial tax exemption of 50%
as a new and necessary industry under Republic Act No. 901,
Republic Act No. 3050, which took effect on June 17, 1961,
granted tax exemption to any person, partnership, company or
corporation engaged or which shall engage in the manufacture
of of whatever nature from the payment, among others, of
compensating taxes on their importation of capital goods,
equipment, snare raw materials, supplies containers and fuel
To implement z Republic Act No. 3050, the Department of
Finance issued Department Order No. 105, dated September
15, 1961, which provides, among others, as follows:
RULING:
The Commissioner's contention is without merit. Department,
Order No. 105 issued by the Secretary of Finance expressly
directed fertilizer manufacturers enjoying benefits under R.A.
No. 901 to likewise apply for the benefits of R.A. No. 3050.
In compliance with said directive, AFC filed its application for
total exemption under R. A. No. 3050 which was granted by the
Secretary of Finance. R. A. No. 901 grants partial exemption
while R. A. 3050 grants total exemption. Once a manufacturer
of fertilizer chose to come under R. A. 3050, his partial
exemption under R. A. 901 ceased. When AFC availed of the
total exemption under R. A. No. 3050, it has in effect given up
the partial exemption which it was enjoying under R. A. No.
901. In effect, he enjoyed only one exemption benefit, the full
exemption under R. A. No. 3050.
Therefore, the SC affirmed the decision of the Court of Tax
Appeals.

Fertilizer manufacturer ... which are granted

tax exemption under Republic Act No. should
likewise file appellant com/implications for
tax exemption under Republic Act No. 3050,
indicating therein, among other things, that
the applicant waives the benefits of tax
exemption authorized under Republic Act
No. 3127.

On the basis of the tax exemption granted by the Secretary of

Finance under Republic Act No. 3050, petitioner filed with
responded on June 21, 1963 a claim for tax at of the
compensating taxes amounting to P 83,629.00. The
Commissioner's argues that AFC cannot enjoy simultaneous
tax exemtions under the two EOs and refused to issue a letter
of tax credit alleging that the 50% tax exemption availed under
RA 901 precludes the company from availing full tax credit
from RA 3050. Therefore the tax claim should be adjusted to
cover only 50%.

On June 22, 1963, the day after petitioner had filed its for tax
credit with respondent, petitioner filed a petition for review with
this Court seek an order to compel respondent to issue the
corresponding letter of tax credit.
G.R. No. 156 September 27, 1946

MILTON GREENFIELD, plaintiff-appellant,

vs.
BIBIANO L. MEER, defendant-appellee.

FACTS:

This is an appeal from the decision of the Court of First

Instance of Manila which dismissed the complaint of the
plaintiff and appellant to reclaim the sum of P475 collected by
defendant from plaintiff illegally according to the latter, because
the former has erroneously computed the tax on personal and
additional exemptions.

the defendant MEER assessed plaintiff's income tax return for

the year 1939. In that assessment, the defendant computed
the graduated rate of income tax due on the entire net income
without first deducting therefrom the amount of personal and
additional exemptions to which the plaintiff is entitled.

Greenfield alleged that his personal and additional ememptions

(which amounted to 3,500) should be deducted first from the
income before the tax is levied upon it. By deducting
exemptions to net income before tax, he exercises full benefit
from the exemptions (the benefit would be P525). To him, what
Meer had essentially done is levy tax upon the income then
levy tax on the exemption (which gave him only P50 benefit
from the exemptions). This then resulted in the decrease of
impact of the exemptions to his tax due.

ISSUE: whether the personal and additional exemptions

granted by section 23 of Commonwealth Act No. 466 should be
considered as a credit against or be deducted from the net
income, or whether it is the tax on such exemptions that should
be deducted from the tax on the total net income.

RULING:

Exception is an immunity or privilege; it is freedom from a

charge or burden to which others are subjected.

If the amounts of personal and additional exemptions fixed in

section 23 are exempt from taxation, they should not be
included as part of the net income, which is taxable. There is
nothing in said section 23 to justify the contention that the tax
on personal exemptions (which are exempt from taxation)
should first be fixed, and then deducted from the tax on the net
income.

As exempt from taxation, they should be immediately deducted

from net income and not levied upon as done by defendant.

The lower court, therefore, erred in not declaring that personal

and additional exemptions claimed by appellant should be
credited against or deducted from the net income, and
consequently in not sentencing appellee to refund to appellant
the sum of P475.
G.R. No. 146984 July 28, 2006 matter how the said sale may hew to those transactions
deemed sale as defined under Section 100
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MAGSAYSAY LINES, INC., BALIWAG NAVIGATION, INC.,
FIM LIMITED OF THE MARDEN GROUP (HK) and
NATIONAL DEVELOPMENT COMPANY, respondents.

FACTS:

Pursuant to a government program of privatization, NDC

decided to sell to private enterprise all of its shares in its
wholly-owned subsidiary the National Marine Corporation
(NMC). The NDC decided to sell in one lot its NMC shares and
five (5) of its ships. The NMC shares and the vessels were
offered for public bidding. On 3 June 1988, private respondent
Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the
shares and the vessels. The bid was approved by the
Committee on Privatization, and a Notice of Award dated 1 July
1988 was issued to Magsaysay Lines.

On 28 September 1988, the implementing Contract of Sale

was executed between NDC, on one hand, and Magsaysay
Lines, on the other. Paragraph 11.02 of the contract stipulated
that "[v]alue-added tax, if any, shall be for the account of the
PURCHASER."

In January of 1989, private respondents through counsel

received VAT Ruling No. 568-88 dated 14 December 1988
from the BIR, holding that the sale of the vessels was subject
to the 10% VAT.

Private respondents moved for the reconsideration but yheir

motion was denied.

On 10 April 1989, private respondents filed an Appeal and

Petition for Refund with the CTA. The Commissioner of Internal
Revenue (CIR) opposed the petition arguing that the sale of
the vessels were among those transactions "deemed sale,"
and therefore subject to VAT.

ISSUES:

whether the sale by the NDC of of its vessels to the private

respondents is subject to VAT.

RULING:

the tax is levied only on the sale, barter or exchange of goods

or services by persons who engage in such activities, in the
course of trade or business.

"Course of business" or "doing business" connotes regularity of

activity. In the instant case, the sale was an isolated
transaction. The sale which was involuntary and made
pursuant to the declared policy of Government for privatization
could no longer be repeated or carried on with regularity. It
should be emphasized that the normal VAT-registered activity
of NDC is leasing personal property.

Accordingly, the Court rules that given the undisputed finding

that the transaction in question was not made in the course of
trade or business of the seller, NDC that is, the sale is not
subject to VAT pursuant to Section 99 of the Tax Code, no
G.R. No. L-3538 May 28, 1952 It is said that the plaintiff's check was in the nature of deposit,
held trust by the City Treasurer, and that for this reason,
JUAN LUNA SUBDIVISION, INC., plaintiff-appellee, plaintiff's taxes are to be regarded as still due and payable.
vs. This argument is well taken but only to the extent of P1,868.92.
M. SARMIENTO, ET AL., defendants-appellants. The amount of P341.60 as early as February 20, 1942, had
been applied to the second half of plaintiff's 1941 tax and
become part of the general funds of the city treasury. From that
FACTS: date that tax was legally and actually paid and settled.

The plaintiff was a corporation duly organized and existing The appealed judgment should, therefore, be modified so that
under the laws of the Philippines with principal office in Manila. the defendant City Treasurer shall refund to the plaintiff the
On December 29, 1941 it issued to the City Treasurer of sum of P1,868.92 instead P2,210.52.
Manila, and the City Treasurer accepted checks No. 628334
for P2,210.52. This check was to be applied to plaintiff's land
tax for the second semester of 1941 the exact amount of which
was yet undetermined.

The check was deposited with the Philippine National Bank, on

December 29, 1941, and that it was presented by that Bank to
the Philippine Trust Company on May 1, 1944 and was cashed
by the drawee.

The City refused after liberation to refund the plaintiff's deposit

or apply it to such future taxes as might be found due. The City
Treasurer's defense is that his office was not benefited by the
check.

The plaintiff claims the whole amount of the check contending

that taxes for the last semester of 1941 have been remitted by
Commonwealth Act No. 703.

Section 1 of this Act, which was approved on November 1,

1945, provides:

All land taxes and penalties due and payable for the
years nineteen hundred and forty-two nineteen
hundred and forty-three nineteen hundred and forty-
four and fifty per cent of the tax due for nineteen
hundred and forty-five, are hereby remitted. The land
taxes and penalties due and payable for the second
semester of the year nineteen hundred and forty-one
shall also be remitted the if the remaining fifty per cent
corresponding to the year nineteen hundred and forty-
five shall been paid on or before December thirty-first,
nineteen hundred and forty-five.

ISSUE: WON the provision cover taxes paid before its

enactment, or does it refer, only to taxes which were still
unpaid.

RULING:

There is no ambiguity in the language of the law. It says "taxes

and penalties due and payable," the literal meaning of which
taxes owned or owing. Note that the provision speaks of
penalties, and note that penalties accrue only when taxes are
not paid on time. To remit is to desist or refrain from exacting,
inflicting, or enforcing something as well as to restore what has
already been taken.
G.R. No. L-14878 December 26, 1963
SURIGAO CONSOLIDATED MINING CO., INC., petitioner,
vs.
COLLECTOR OF INTERNAL REVENUE and COURT OF
APPEALS, respondents.
FACTS:
This is a petition to review the decision of the Court of Tax
Appeals in Manila Civil Case No. 4770 dismissing for lack of
merit the action of the Surigao Consolidated Mining Company
for the refund of the total amount of P17,051.14 allegedly
representing overpayment of ad valorem tax for the fourth
quarter of 1941.
another statement of adjustment was filed reducing the claim
for refund to P17,158.01. Finally, on March 15, 1947, a third
statement of adjustment was submitted further reducing the
claim for refund to the amount of P 17,051.14.
As the Collector of Internal Revenue denied the request for the
refund of the said P17,051.14 on the ground that the money
already paid as ad valorem tax was legally due to the
Government, the Surigao Consolidated instituted with the
Court of First Instance of Manila civil action for its recovery. the
case was remanded to the court of tax appeals.
The Court of Tax Appeals, on July 16, 1958, finding that the
amount sought to be refunded been lawfully collected,
rendered its decision denying the claim for refund.

SURIGAO CONSOLIDATED was operating its mining
concessions in Mainit, Surigao. Pursuant to section 246 of the
Internal Revenue Code, which prescribes the time and manner
of payment of royalties or ad valorem taxes, it filed a bond and
had been regularly filing its returns for minerals removed from
its mines during each calendar quarter and paying ad
valorem tax thereon within 20 days after the close of every
quarter. In each case, computation of the ad valorem tax was
based on the market value of the minerals set forth in the
returns, subject to adjustment upon the receipt of the smelter
showing the actual market value of the minerals to the United
States.
Due to the interruption, of the communications outbreak of the
war, the principal office of Surigao Consolidated lost contact
with its mines and never received the production reports for the
fourth quarter of 1941. In order to avoid incurring any tax
penalty, said company, on January 19, 1942, deposited a
check amount of P27,000.00 payable to and "indorsed in favor
of the City Treasurer (of Iloilo) in payment of the ad
valorem taxes (approximate adjustment to be made when
circumstances allow it) for the fourth quarter of 1941."
The petitioner contends that despite the difficulties of the war, it
had dutifully allocated payments for ad valorem taxes. And
now, since the enactment of CA 722 condones non payment of
such taxes during the war period, those taxes it has paid for
those periods should be refunded to him.
ISSUES:
WON Surigao Consolidated, petitioner herein, is entitled to the
refund of ad valorem tax
RULING:
The condonation of a tax liability is equivalent and is in the
nature of a tax exemption. Being so, it should be sustained
only when expressed in explicit terms, and it can not be
extended beyond the plain meaning of those terms. It is the
universal rule that he who claims an exemption from his share
of the common burden of taxation must justify his claim by
showing that the Legislature intended to exempt him by words
too plain to be mistaken.

After the termination of the war, Commonwealth Act No. 722
was enacted, which provided for the filing of returns for
minerals removed during the last quarter of 1941 up to
December 31, 1945 and the payment of ad valorem tax on said
minerals to February 28, 1946.
Petitioner having failed to point to the court any portion of the
law that explicitly provides for a refund of those taxpayers who
had paid their taxes on the items and under circumstances
mentioned in the abovequoted provision, We are constrained
to hold that the benefits of said provision does not extend to it.

Availing of the provisions of the aforementioned Act, the

Surigao Consolidated, on December 28, 1945, ad valorem tax
returns for the fourth quarter declaring as its tax liability the
amount of P43,486.54. Applying the amount of P27,000.00
previously deposited with the City Treasurer of Iloilo, the
returns indicated an unpaid balance of P16,486.54 as the " tax
subject to revision."

However, on February 26, 1946, the Surigao Consolidated filed

an amended ad valorem tax returns under which amendment it
declared a reduced ad valorem tax in the amount of
P37,189.00. And crediting itself with the amount of P27,000.00
previously deposited with the City Treasurer of Iloilo, it paid the
remaining balance of P10,189.00.

On September 24, 1946, the Surigao Consolidated again filed

a statement of adjustment allegedly containing figures and
data of the complete smelter returns for minerals shipped to
the United States. In the accompanying letter, a request was
made, this time not only for the reduction of tax, but for the
refund of the amount of P18,107.87. On October 19, 1946,
G.R. No. L-20960-61 October 31, 1968
COMMlSSIONER OF INTERNAL REVENUE and
COMMISSIONER OF CUSTOMS, petitioners-appellants,
vs.
PHILIPPINE ACE LINES, INC., respondent-appellee.
FACTS:
The Reparations Commission agreed to sell to the Philippine
Ace Lines four vessels procured by the former from Japan for
the end-use of the latter under the Philippine- Japanese
Reparations Agreement of May 9, 1956. All these agreements
invariably denominated as "Contract of Conditional
Purchase and Sale of Reparations Goods" stipulated,
among others, that the Reparations Commission retains title
and ownership of the above-described vessels until they were
fully paid for and that the purchase prices of the vessels were
to be paid by Philippine Ace Lines to the Reparations
Commission under deferred payment plans in ten (10) equal
annual installments.
Sometime later, however, the Commissioner of Internal
Revenue assessed against the Philippine Ace lines the
amounts of P304,428.00, P256,275.00, P499,948.10 and
P305.073.47 as compensating taxes on the M/S YAKAL, M/S
NARRA, M/S TINDALO and M/S MOLAVE, respectively, and
demanded payment of the said amounts.
Philippine Ace Lines protested said actions of the
Commissioners of Internal Revenue and of Customs, alleging
that the legal title and ownership of the vessels operated by it
were still vested with the Reparations Commission which,
under Section 14 of the Reparations Act,was exempt from
payment of all duties, fees and taxes on all reparations goods
obtained by it.
In the meantime, Congress enacted Republic Act No. 3079
(effective June 17, 1961) which amended Republic Act No.
1789, otherwise known as the Reparations Act, and provided
as follows:
SEC. 14. Exemption from tax. All reparations
goods obtained by the Government shall be exempt
from the payment of all duties, fees and taxes.
Reparations goods obtained by private parties shall
be exempt from the payment of customs
duties, compensating tax, consular fees and the
special import tax.
xxx xxx xxx
SEC. 20. This Act shall take effect upon its
approval, except that the amendment contained in
section seven hereof relating to the requirements for
procurement orders including the requirement of
downpayment by private applicant end-users shall not
apply to procurement orders already duly issued and
verified at the time of the passage of this amendatory
Act, and except further that the amendment contained
in section ten relating to the insurance of the
reparations goods by the end-users upon delivery
shall apply also to goods covered by contracts
already entered into by the Commission and the end-
user prior to the approval of this amendatory Act as
well as goods already delivered to the end-user, and
except further that the amendments contained in
sections eleven and twelve hereof relating to the
terms of the installment payments on capital goods
disposed of to private parties, and the execution of a
performance bond before delivery of reparations
goods, shall not apply to contract for the utilization of
reparations goods already entered into by the
Commission and the end-users prior to the approval
of thisamendatory Act: Provided, That any end-user
may apply the renovation of his utilization contract
with the commission in order to avail of any provision
of this amendatory Act which is more favorable to an
applicant end-user than has heretofore been granted
in like manner and to the same extent as an end-user
filing his application after the approval of this
amendatory Act, and the Commission may agree to
such renovation on condition that the end-user shall
voluntarily assume all the new obligations provided
for in this amendatory Act.
Philippine Ace Lines invoked the favorable provisions of the
new law but the CIR claimed, however, that even if Philippine
Ace Lines and the Reparations Commission have agreed to
implement the provisions of Section 14 of Republic Act No.
1789, as amended by Republic Act No. 3079, in the
"Renovated Contract of Conditional Purchase and Sale of
Reparations Goods" entered into between them, such
implementation did not relieve the Philippine Ace Lines from
the payment of the compensating taxes in question.
ISSUE: whether or not petitioner is liable for the compensating
tax on the four ocean-going vessels in question.
RULING:
In providing that the favorable provisions of Republic Act No.
3079 shall be available to applicants for renovation of their
utilization contracts, on condition that said applicants shall
voluntarily assume all the new obligations provided in the new
law, the law intends to place persons who acquired reparations
goods before the enactment of the amendatory Act on the
same footing as those who acquire reparations goods after its
enactment. This is so because of the provision that once an
application for renovation of a utilization contract has been
approved, the favorable provisions of said Act shall be
available to the applicant "in like manner and to the same
extent as an end-user filing his application after the approval of
this amendatory Act." To deny exemption from compensating
tax to one whose utilization contract has been renovated, while
granting the exemption to one who files an application for
acquisition of reparations goods after the approval of the new
law, would be contrary to the express mandate of the law that
they both be subject to the same obligations and they both
enjoy the same privileges in like manner and to the same
extent. It would be a manifest distortion of the literal meaning
and purpose of the law.
Therefore, Phil Ace Lines is deemed not to be liable for
compensating taxes.

G.R. No. L-28739 and L-28902 March 29, 1972
DAVAO LIGHT and POWER CO., INC., petitioner-appellant,
vs.
THE COMMISSIONER OF CUSTOMS and COURT OF TAX
APPEALS, respondents-appellees.
FACTS:
These are appeals from the decision of the Court of Tax
Appeals in CTA Cases Nos. 1337 and 1551, denying the claim
of Davao Light & Power Co., Inc., for refund of the amount paid
by said company as customs duties, special import taxes,
compensating taxes and wharfage fees on the importations of
electrical supplies and materials for installation and use at its
power plant.
The Davao Light & Power Co. is the grantee of a legislative
franchise to install, operate and maintain an electric light, heat
and power plant in the city of Davao, for a period of 50 years.
On two different occasions in 1962, it imported electrical
supplies, materials and equipment for installation in its power
plant. The importations arrived in the port of Cebu City, on
which the Collector of Customs imposed, and Davao light paid
under protest, customs duties and taxes in the total amount of
P9,928.00. As the Collector of Customs later ruled unfavorably
on the protests (Nos. 267, 268, 269 and 278) and denied its
claim for refund of the taxes and duties paid on the imported
articles, Davao Light appealed to the Commissioner of
Customs. And when said official sued the action of the
Collector, Davao Light went to the Court of Tax Appeals,
maintaining its claim to exemption from the taxes and duties
imposable on the aforementioned motions.
The petitioners invoked Section 17 of (pre-Commonwealth) Act
No. 3636 (Standard Electric Power & Light Franchises Law)
provides:
National Power Corporation were intended to benefit only said
government corporation and did not extend to other bodies or
entities. Davao Light thus brought the present petition for
review to the SC.
ISSUE:
WON the tax exemption granted to the NPC ipso facto became
part of the franchise of Davao light .
RULING:
In granting such tax exemption, the government actually
waived its right to collect taxes from the NPC in order to
facilitate the liquidation by said corporation of its liabilities, and
the consequential release by the government itself from its
obligation (as principal obligor) in the transactions entered into
by the President on behalf of the NPC. Such condition, peculiar
only to the NPC, cannot be said to exist in petitioner's case;
hence, the absolute lack of basis for awarding of equal
privileges (granted to the NPC) to said petitioner.
petitioner can not lay claim to the enjoyment of the tax
exemption benefits given to NPC because said corporation
happened to be operating a power plant in the same locality
where petitioner has a franchise. The legal principle on the
matter is firmly established and well-observed: exemption from
taxation is never presumed; for tax exemption to be
recognized, the grant must be clear and expressed; it cannot
be made to rest on vague implications. The possession by
petitioner of a permit to operate an electric plant in Davao City
does not entitle it to the same exemption privileges enjoyed by
another operator without an express provision of the law to that
effect.
Davao Light did not enjoy the tax exemptions granted to the
NPC.
Therefore, the decision of the Court of Tax Appeals is affirmed.

"In the event of any competing individual, association

of persons or corporation receiving either a franchise
or permission from the Government of the Philippine
Islands, or from any province, city or municipality
thereof, to conduct a similar business in all or any
substantial portion of the territory covered by this
franchise to that of the grantee, in which franchise or
permission there shall be any term or terms more
favorable than those herein granted or tending to
place the herein grantee at any disadvantage, then
such term or terms shall ipso facto become a part of
the terms hereof and shall operate equally in favor of
the grantee as in the case of said competing
individual asssociation of persons or corporations."

Because the NPC also operated a powerplant in Davao city,

Davao light is deemed to be its competitor. It was petitioner's
contention that pursuant to Section 17 of Act 3636, the
provision of Republic Act 987 granting tax exemption privileges
to the National Power Corporation ipso facto became part of its
franchise; hence, its claim to exemption from taxes and
customs duties on the importations in question.

In its decision of 15 December 1967, the Court of Tax Appeals

affirmed the ruling of the Customs Commissioner, the Court
holding that the tax exemption privileges granted to the
G.R. No. L-18080 April 22, 1963
TAN KIM KEE, petitioner,
vs.
THE COURT OF TAX APPEALS, ET AL., respondents.
FACTS:
The petitioner is a producer of copra in Davao City. Petitioner
produces copra in two ways, namely, the sun-dried method
and the kiln-dried method. Under both methods, the copra
underwent a certain process of unhusking, cutting and other
physical processes to facilitate its drying whether through the
sun or inside a kiln.
For the period from August 24, 1956 to December 31, 1956,
petitioner's gross sales of copra produced by him amounted to
P17,917.53 on which he paid to the treasurer of Davao City, on
January 10, 1957, the sum of P1,254.24 as the 7% sales tax
imposed by section 186 of the National Internal Revenue Code
as amended by Republic Act No. 1612.
On September 6, 1957, petitioner filed with respondent a claim
for the aforesaid taxes, alleging that the copra making process
was exempt from sales taxes and therefore the amounts levied
had been improper. The claim was denied by the CTA.
This case involves an interpretation of Section 188(b) of the
Tax Code, as amended by the shortlived revenue statute,
Republic Act No. 1612, when applied to copra making. Said Act
took effect on 24 August 1956 until it was superseded by
Republic Act 1856 on 22 June 1957. This section, as it stood
before and during the effectivity of Republic Act No. 1612, and
after subsequent amendment by Republic Act 1856, provides
(all emphasis supplied):
Before effectivity of RA No. 1612
(b) Agricultural products and the ordinary salt when
sold, bartered, or exchanged in this country by the
producers or owner of the land where produced, as
well as fish and its by-products when sold, bartered,
or exchanged by the fisherman or fishing
operator, whether in their original state or not.
During the eleven-month effectivity of RA No. 1612
(b) Agricultural products and the ordinary salt in their
original form when sold, bartered, or exchanged by
the producer or owner of the land where produced.
The term "agricultural products" as used herein shall
not include cultured fish and other products raised or
produced in fishponds, and those which have
undergone the process of manufacturing as defined
in section one hundred ninety-four (x) of this Code.
After repeal of RA No. 1612 by RA No. 1856
(b) Agricultural products and the ordinary salt whether
in their original form or not when sold, bartered, or
exchanged in this country by the producer or owner of
the land where produced, as well as all kinds of fish
and its by-products when sold, bartered or exchanged
by the fisherman or fishing operator whether in their
original state or not.
The majority of the Tax Court held that because of the
unhusking and halving of the coconut fruit, removal and cutting
into several pieces of its meat, and dehydrating by sun or kiln,
the fruit in its original form underwent a process of
manufacturing, and, therefore, became taxable; but after the
repeal of Republic Act 1612 by Republic Act 1856, the exempt
agricultural products included once more those
products "whether in their original state or not". It decided,
therefore, that the taxability of copra making under Republic
Act No. 1612 is in accordance with the legislative intent to
increase revenue by imposing taxes on "greater coverage of
subjects of taxation",
On the other hand, the petitioner would consider copra as the
agricultural product in its original form and the coconut fruit
merely the crop of the producer and because copra is the only
product that may be produced from coconut lands while the
process of manufacture involved in the conversion of the
coconut fruit to copra is a part of the genuine agricultural labor
of the farmer.
ISSUE:
WON copra making was included in the exemption from
taxation.
RULING: The original statute excepted from the tax
"Agricultural products xxx whether in their original state or not",
but under the shortlived R.A. No. 1612 it was altered and
reduced to "agricultural products in their original form"
exclusively. The change in scope was further emphasized by
the qualification in the same Act that "agricultural products
xxx shall not include cultured fish . . . and those which have
undergone the process of manufacturing . . . ." Plainly, R.A.
No. 1612 was intended to restrict the exemption and broaden
the subject of taxation, in order to increase the state revenues;
and this purpose becomes indubitable when we consider that
ordinary salt and fish were also originally exempt, but the
exemption was not restated in R.A. No. 1612.
The legislative intent to increase revenue by widening the
coverage of taxable subjects is evident under Republic Act
1612, and by it the exempt agricultural products were only
those that remain in their original form, and have not
undergone the process of manufacture and this did not include
copra making.
Therefore the decision of the CTA is affirmed.
Copra products are not to be in its original agricultural form and
are deemed to have undergone a manufacturing process. As
such, it is not exempt from taxation.