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G.R. No.


December 18, 2001

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tax amnesty under E.O. Nos. 41 and 64 and declared the deficiency taxes subject of said case as deemed cancelled and withdrawn.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.) WON Marubeni Corp failed to avail the tax amnesty 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 ATLAS FERTILIZER CORPORATION, petitioner, vs. COMMISSION OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents; COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ATLAS FERTILIZER CORPORATION and COURT OF TAX APPEALS, respondents. 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: 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.

The Commissioner's argues that AFC cannot simultaneous tax exemtions under the two EOs.



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.

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

JUAN LUNA SUBDIVISION, INC., plaintiff-appellee, vs. M. SARMIENTO, ET AL., defendants-appellants. FACTS: The plaintiff was a corporation duly organized and existing under the laws of the Philippines with principal office in Manila. On December 29, 1941 it issued to the City Treasurer of 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 fortyfour 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 fortyfive shall been paid on or before December thirty-first, nineteen hundred and forty-five.

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, plaintiff's taxes are to be regarded as still due and payable. This argument is well taken but only to the extent of P1,868.92. 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 date that tax was legally and actually paid and settled. The appealed judgment should, therefore, be modified so that the defendant City Treasurer shall refund to the plaintiff the sum of P1,868.92 instead P2,210.52.

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. 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." 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. 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,

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. 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. 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.

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

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.

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 enduser prior to the approval of this amendatory Act as well as goods already delivered to the end-user, and

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:

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:

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: "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

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.

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.