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G.R. No. L-68252 May 26, 1995 COMMISSIONER OF INTERNAL

REVENUE vs TOKO S!I""ING CO.
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
TOKO S!I""ING CO. LT#., $%&$%s%'(%) *y SORIAMONT STEAMS!I"
AGENCIES INC., a') COURT OF TA+ A""EALS, respondents.

"UNO, J.:
For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is
entitled to a refund or tax credit for amounts representing pre-payment of income
and common carriers taxes under the !ational "nternal #evenue Code, section $%
&'( &$(, as amended.
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)rivate respondent is a foreign corporation represented in the )hilippines 'y
Soriamont Steamship *gencies, "ncorporated. "t owns and operates tramper vessel
+,- .ardenia. "n /ecem'er 0123, !*S4T#*
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chartered +,- .ardenia to load
05,633 metric tons of raw sugar in the )hilippines.
,
7n /ecem'er $8, 0123, +r.
9dil'erto Lising, the operations supervisor of Soriamont *gency,
-
paid the re:uired
income and common carriers taxes in the respective sums of F"FT;-!"!9
T<74S*!/ F"-9 <4!/#9/ T=9!T;-T<#99 )9S7S and S9-9!T;-F"-9
C9!T*-7S &)61,6$8.>6( and F7#T;-S9-9! T<74S*!/ S"? <4!/#9/
!"!9T99! )9S7S &)%>,501.33(, or a total of 7!9 <4!/#9/ S9-9!
T<74S*!/ 7!9 <4!/#9/ F7#T;-T=7 )9S7S and S9-9!T;-F"-9
C9!T*-7S &)03>,0%$.>6( 'ased on the expected gross receipts of the vessel.
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4pon arriving, however, at .uimaras )ort of "loilo, the vessel found no sugar for
loading. 7n @anuary 03, 0120, !*S4T#* and private respondents agent mutually
agreed to have the vessel sail for @apan without any cargo.
Claiming the pre-payment of income and common carriers taxes as erroneous since
no receipt was realiAed from the charter agreement, private respondent instituted a
claim for tax credit or refund of the sum 7!9 <4!/#9/ S9-9! T<74S*!/
7!9 <4!/#9/ F7#T;-T=7 )9S7S and S9-9!T;-F"-9 C9!T*-7S
&)03>,0%$.>6( 'efore petitioner Commissioner of "nternal #evenue on +arch $8,
0120. )etitioner failed to act promptly on the claim, hence, on +ay 0%, 0120,
private respondent filed a petition for review
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'efore pu'lic respondent Court of Tax
*ppeals.
)etitioner contested the petition. *s special and affirmative defenses, it alleged the
followingB that taxes are presumed to have 'een collected in accordance with lawC
that in an action for refund, the 'urden of proof is upon the taxpayer to show that
taxes are erroneously or illegally collected, and the taxpayers failure to sustain said
'urden is fatal to the action for refundC and that claims for refund are construed
strictly against tax claimants.
.
*fter trial, respondent tax court decided in favor of the private respondent. "t heldB
"t has 'een shown in this case that 0( the petitioner has complied
with the mentioned statutory re:uirement 'y having filed a written
claim for refund within the two-year period from date of paymentC
$( the respondent has not issued any deficiency assessment nor
disputed the correctness of the tax returns and the corresponding
amounts of prepaid income and percentage taxesC and 8( the
chartered vessel sailed out of the )hilippine port with a'solutely no
cargo laden on 'oard as cleared and certified 'y the Customs
authoritiesC nonetheless %( respondents apparent 'it of reluctance
in validating the legal merit of the claim, 'y and large, is tacked
upon the Dexaminer who is investigating petitioners claim for
refund which is the su'Eect matter of this case has not yet
su'mitted his report. =hether or not respondent will present his
evidence will depend on the said report of the examiner.D
&#espondents +anifestation and +otion dated Septem'er >,
012$(. Fe that as it may the case was su'mitted for decision 'y
respondent on the 'asis of the pleadings and records and 'y
petitioner on the evidence presented 'y counsel sans the respective
memorandum.
*n examination of the records satisfies us that the case presents no
dispute as to relatively simple material facts. The circumstances
o'taining amply Eustify petitioners righteous indignation to a more
expeditious action. #espondent has offered no reason nor made
effort to su'mit any controverting documents to 'ash that patina of
legitimacy over the claim. Fut as might well 'e, towards the end of
some two and a half years of seeming impotent anguish over the
pendency, the respondent Commissioner of "nternal #evenue
would furnish the satisfaction of ultimate solution 'y manifesting
that Dit is now his turn to present evidence, however, the *ppellate
/ivision of the F"# has already recommended the approval of
petitioners claim for refund su'Eect matter of this petition. The
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examiner who examined this case has also recommended the
refund of petitioners claim. =ithout preEudice to withdrawing this
case after the final approval of petitioners claim, the Court ordered
the resetting to Septem'er >, 0128.D &+inutes of @une 1, 0128
Session of the Court( =e need not fashion any further issue into an
apparently settled legal situation as far 'e it from a comedy of
errors it would 'e too much of a stretch to hold and deny the
refund of the amount of prepaid income and common carriers
taxes for which petitioner could no longer 'e made accounta'le.
7n *ugust 8, 012%, respondent court denied petitioners motion for reconsideration,
hence, this petition for review on certiorari.
)etitioner now contendsB &0( private respondent has the 'urden of proof to support
its claim of refundC &$( it failed to prove that it did not realiAe any receipt from its
charter agreementC and &8( it suppressed evidence when it did not present its charter
agreement.
=e find no merit in the petition.
There is no dispute a'out the applica'le law. "t is section $% &'( &$( of the !ational
"nternal #evenue Code which at that time provides as followsB
* corporation organiAed, authoriAed, or existing under the laws of
any foreign country, engaged in trade or 'usiness within the
)hilippines, shall 'e taxa'le as provided in su'section &a( of this
section upon the total net income derived in the preceding taxa'le
year from all sources within the )hilippinesB Provided, however,
That international carriers shall pay a tax of two and one-half per
cent &$ 0,$G( on their gross )hilippine 'illingsB D.ross )hilippine
FillingsD include gross revenue realiAed from uplifts anywhere in
the world 'y any international carrier doing 'usiness in the
)hilippines of passage documents sold therein, whether for
passenger, excess 'aggage or mail, provided the cargo or mail
originates from the )hilippines. The gross revenue realiAed from
the said cargo or mail include the gross freight charge up to final
destination. .ross revenue from chartered flights originating from
the )hilippines shall likewise form part of D.ross )hilippine
FillingsD regardless of the place or payment of the passage
documents . . . . .
)ursuant to this provision, a resident foreign corporation engaged in the transport of
cargo is lia'le for taxes depending on the amount of income it derives from sources
within the )hilippines. Thus, 'efore such a tax lia'ility can 'e enforced the taxpayer
must 'e shown to have earned income sourced from the )hilippines.
=e agree with petitioner that a claim for refund is in the nature of a claim for
exemption
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and should 'e construed in strictissimi juris against the taxpayer.
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Likewise, there can 'e no disagreement with petitioners stance that private
respondent has the 'urden of proof to esta'lish the factual 'asis of its claim for tax
refund.
The pivotal issue involves a :uestion of fact H whether or not the private
respondent was a'le to prove that it derived no receipts from its charter agreement,
and hence is entitled to a refund of the taxes it pre-paid to the government.
The respondent court held that sufficient evidence has 'een adduced 'y the private
respondent proving that it derived no receipt from its charter agreement with
!*S4T#*. This finding of fact rests on a rational 'asis, and hence must 'e
sustained. 9xhi'its D9D, DF,D and D.D positively show that the tramper vessel +,-
D.ardeniaD arrived in "loilo on @anuary 03, 0120 'ut found no raw sugar to load and
returned to @apan without any cargo laden on 'oard. 9xhi'it D9D is the Clearance
-essel to a Foreign )ort issued 'y the /istrict Collector of Customs, )ort of "loilo
while 9xhi'it DFD is the Certification 'y the 7fficer-in-Charge, 9xport /ivision of
the Fureau of Customs "loilo. The correctness of the contents of these documents
regularly issued 'y officials of the Fureau of Customs cannot 'e dou'ted as indeed,
they have not 'een contested 'y the petitioner. The records also reveal that in the
course of the proceedings in the court a quo, petitioner hedged and hawed when its
turn came to present evidence. *t one point, its counsel manifested that the F"#
examiner and the appellate division of the F"# have 'oth recommended the
approval of private respondents claim for refund. The same counsel even
represented that the government would withdraw its opposition to the petition after
final approval of private respondents claim. The case dragged on 'ut petitioner
never withdrew its opposition to the petition even if it did not present evidence at
all. The insincerity of petitioners stance drew the sharp re'uke of respondent court
in its /ecision and for good reason. Taxpayers owe honesty to government Eust as
government owes fairness to taxpayers.
"n its last effort to retain the money erroneously prepaid 'y the private respondent,
petitioner contends that private respondent suppressed evidence when it did not
present its charter agreement with !*S4T#*. The contention cannot succeed. "t
presupposes without any 'asis that the charter agreement is preEudicial evidence
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against the private respondent.
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*llegedly, it will show that private respondent
earned a charter fee with or without transporting its supposed cargo from "loilo to
@apan. The allegation simply remained an allegation and no court of Eustice will
regard it as truth. +oreover, the charter agreement could have 'een presented 'y
petitioner itself thru the proper use of a subpoena duces tecum. "t never did either
'ecause of neglect or 'ecause it knew it would 'e of no help to 'olster its position.
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For whatever reason, the petitioner cannot take to task the private respondent for
not presenting what it mistakenly calls Dsuppressed evidence.D
=e cannot 'ut 'ewail the unyielding stance taken 'y the government in refusing to
refund the sum of 7!9 <4!/#9/ S9-9! T<74S*!/ 7!9 <4!/#9/
F7#T; T=7 )9S7S *!/ S9-9!T; F"-9 C9!T*-7S &)03>,0%$.>6(
erroneously prepaid 'y private respondent. The tax was paid way 'ack in 0123 and
despite the clear showing that it was erroneously paid, the government succeeded in
delaying its refund for fifteen &06( years. *fter fifteen &06( long years and the
expenses of litigation, the money that will 'e finally refunded to the private
respondent is Eust worth a damaged nickel. This is not, however, the kind of success
the government, especially the F"#, needs to increase its collection of taxes. Fair
deal is expected 'y our taxpayers from the F"# and the duty demands that F"#
should refund without any unreasona'le delay what it has erroneously collected.
7ur ruling in Roxas v. Court of Tax Appeals
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is apropos to recallB
The power of taxation is sometimes called also the power to
destroy. Therefore it should 'e exercised with caution to minimiAe
inEury to the proprietary rights of a taxpayer. "t must 'e exercised
fairly, e:ually and uniformly, lest the tax collector kill the Dhen that
lays the golden egg.D *nd, in order to maintain the general pu'lics
trust and confidence in the .overnment this power must 'e used
Eustly and not treacherously.
"! -"9= <9#97F, the assailed decision of respondent Court of Tax *ppeals, dated
Septem'er 06, 0128, is *FF"#+9/ in toto. !o costs.