CTA Case No. 1495

YEPUBLIC OF THE PHILIPPINES

COURT @F TAX APPBAIS

QUEZON CITY

Petitioner, versus CTA CASE NO, 1495 BRAJAMIN WN. TABIOS,

as Coumissioner of

Internal Revenue

MANILA ELBCTRIC COMPABT, ( rt it t.

xRewenaeewnw ese we we ewe

DECITSAGIOR

This is a petition filed by petitioner seek- ing the refund of 62,335.00 paid as compensating tex on its inmportations of copper wires, trensforn- ers and insulators in 1962. | Petitioner, « domestic corporation, is engaged in the operation of an electric light, heat and power system in “anilse end suburbs under a muni- cipel franchise granted by the Municipal Soard of the City of Manile in Ordinance Wo. “+ to Charles “. Swift and later assumed and taken over by peti- tioner. The authority of the safd Board to ¢grent e franchise for electric street railway and electric light, heat and power system is sanctioned by Sece- tion 1 of Aet No. 484 of the Philippine Commission which was enacted on October 29, 1902 (CTA rece, pp.» 80, 83 and 84; par. 2, Petition for Review). Under Seetion 2 of Act Se. 484, the franchise to be granted by the Municipal Board of the City of Manila is "subject to necessary anenéments to be

DECISION «

CTA Gase Wo. 1495 * fixed by the terms of the successful bid.”

Qn various dates in 1962, petitioner imported articles consisting of net work protectors, solder- less connectors, copper wires, transformers and insulators (Bxhs. C and C-1, pp. S¥=55, CTA rec.) which vere used in the operation cf its business, on which the Collector of Customs, as deputy of re- spondent, collected compensating tax amounting to 962,335.00 (Sxhs. By B14 to B-15, pow 38=53, CT rete; Exh. F, Fol. Il, BIR recs, pe 33) On February 2), 1964, within the two-year pericd provided by Section 396 of the Netional Internal Revenue Code, petitioner filed with re- spondent « claim for the refund of 962,335.00 paid by it as compensating tax based on its alleged tax exemption under the provisions of paragraph D, Part Two, of Act lic. 44 of the Philippine Comais- sion (Mxh, H, ‘BIR rec., Vol. Ty ps 4). No setion having been teken by respondent on petitioner's cleats for refund and in order to avoid the prescriptive period provided for under Section 309 of the Revenue Code, petitioner filed the instant petition for review on February 25, 196%, The only iesve subaitted to the Court for resolution is whether or not petitioner 1s exempt from compensating tax on the wires, transformers and insulators imported by it {n 1962.

Prersyon -

CTA CAGE SO. 1855 3 The Age eited OY Petits Omer to fewer of its exemption from the Compense’'ing tex imnosed by Seetion 190 of the fevenue “Ode reads as tou lows:

Pan. 9. ~ ene toga epee?

liable to sare ts real estate, potiding?,, Plant (nor ia- ané fepcisterst Ae j Ag peEsonal or sey be Rereatter required ww per In consideration of . tea.

Piet ee ac tric eurreot he and power and to cherge fol ' By» tne erantee’ ee nd to the Cit) UV. Manila, not less n mes eentun of the gross earnings reeeived from ite busi- ness unter this franchise in the City ang its suburbs. ‘aid pereentage shell be due and payable at the tine stated 4m peragraph nineteen of Part One here- of, end efter an audit, Like that —— in peracraph twenty of Part thereof, and shall be in lieu of ell taxes and assessments of whatsoever neture, end y whatsoever authority upon the privileges, earnings, income, franchise, end poles, wires, transform- ers, snd insula ors of the grantee, from which texes and assesements the ntee is hereby expressly exeupted. bids shall be reeeived from this franchise which do not provide for the payment of at Least one and one-half per centum of the gross earnings ree eeived by the greases from its = ness in bs eity and its suburbs ea ‘f |, Philippine Commission of 4 .

Petitioner contends that the franchise tax peyable under the foregoing provisions of its franchise, 4ct Ho, 484 of the Philippine Commission of 1902, is “in liew of all taxes ané assesanents of whatever nature" which include the conpensating $12 DECISION .

CTA CASE WO, 1405 tax on its imported copper wires, transformers and insulators. Petitioner argues, therefore, that the tax exemption under its franchise is broad and alleembraecing as to inelude exemption from the compensating tax. “etitioner contends that nowhere in the tax-exemption granted under Paragraph 9, Part Two, of Act No. ¥@% of the Phil- ippine Commission can it be inferred that peti- tioner's exemption is limited only for taxes upon its installations or upon the privilege of using public streets and other public places. It fur- ther argues that since Republic Act Yo. 901 grants new and necessary industries exemption from the compensating tex, it should not equally be liable for such tex inasaceh as its exemption under said Act No. 48% of the Philippine Commission of 1902 is broader in seope than the tax-exemption provisions of Republic Act No, 901.

Respondent contends otherwise and insists that petitioner is not exempt from the compensating tax on copper wires, transformers and insulators imported by it, in line with the ruling of this Court involving the same parties and the same legal issue.

At the outset it should be noted that the franchise granted by the Monicipal Board of the City of Menila to Mr. Charles ". Swift and later

DECISION «

CTA CASE NO, 1495 5 aseumed and taken over by petitioner (see Rep. Ket So. 15%, CTA rec. p. M%), 48 @ punicivel frap- ‘ghise end not a legislative franchise. While it fis true that Section 1 of Aet No. 484 of the Phile ippine Commission of 1902 suthorizes the Municipal Board of the City of Manila to grant a franchise to | the person or persons making the most favorable ‘bid for the construction end maintenance of an electric street railway and the construetion, maintenance, and operation of an electric light, heat, and power system in Nanila end its suburbs, Section 2 of the sane Act authorizes the said ‘un- ietpal Board to wake necessary amendments to be fixed by the terme of the successful bid, other- wise, the form of the franchise to be granted shali be in the words and figures eppesring in Aet %o. 484 of the Philippine Commission, which includes Par. 9, Part Two, thereof, gunra. This Court is not aware whether or not the tex exemption provisions contained tn Par. 9, Part Two of Act lo, Wk of the Philippine Commission of 1902 was incorporated in the municipal franchise eranted to Nr. Charles ™. Swift by the Municipal board of the City of Manila and later sesumed and taken over by petitioner beceuse no admissible copy ef Ordinance Yo. 4+ of the said Board wes ever presented in evidence by the herein petitioner.

DPCTSION

CTA CASR MO. 9495 Neither is this Court aware of enyanendment to the terms of the franchise granted by the afore- seid Municipal board to the successful bidder in the ebsence of Ordinanee “Yo. + and the amendments thereto, if any. In the circumstanees, we are at a loss to interpeot ent apply the tex exemption provisions relied upon by petitioner.

Atvany rate, the legal issue before us is not a ease of first impression. It is the saze issve controverted to by the same perties before this Court fm the ease of Manila Blectrie Co. v. Nenjamin S, Tabios, CTA Case So. 1493, September 23, 1964, now on appeal, wherein this Court held as follows:

( 4 cursory perusal of afore-queteé paragraph br to foeus the fact that the on provision refers to those rights and privile waieh are not enjoyed by the public in age es Det only by the grantee of franchise, ané does not enbrace the common right or privilege of every eitizen to uske purchases The Supreme Court a ruled in several cases, (Panay Sleetric Co.

vs. Collector of Internal Revenue, G.8. No. £6753, July 30, 1955; Men- flea Gas » Vs. © or of Internal _ Reverme, Geli, So, 1-1176%, Cet. 2%, 195%; Dorje vs. Colleetor of Internal Revenue, S.A, No. L-1213%, November 3°, 1961) and we quote:

DECIGION «

CTA CASE RO, 1495 7 pensating tax hes been in- atituted. x x Xx *The purpose of this proposal is to place persons has goods from dealers doing busi- ness in me festien be on an equel foo ‘or tax purposes, with those inpines. Under the pres- ent tax law, the former bear the burden of the — local sales tax because 4t is shifted to them as part of the selling price demanded by the local mer- Gp acti ths preyensd ts o net. @ pr ax will do away with this ine equality and render jus- t to merchants and firms ef all sationalities who are in legitimate business here, ne taxes and giv- ing employment to a large number cf people.‘ “If petitioner had purchased the equipszent in question in the Philippines, there would be so question that it would have to bear the burden of the sales tax because the sane would have to be added to the purchase price by the desler and petitioner might not escape the eden by invoking the exemptions granted in ite fran- chise. There would eppear to be no good reason why petitioner should be allowed to e thet burden by exempting it from paying compenseti tex when it a equipment abroad.

x «x

x x x x x

Wurthermore, petitioner's clais for tion from nt of the ponte pee) Spt Be +: ear OF ex- pressed. It is a cardinal rule in r SG

DECISIGN «

CTA CASE NO, 1495 taxation that “exemptions from tez- ation ere nigaly disfavored in lew, and he who claims exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be rermitted to exist upon vague implications. (Coll. of Int. Rev. va. Nenila Jockey Club, 0. R. No. 198755, Merch 2%, 1956; House vs. Posadas, 53 Phil. 338), 4s atic » 466).

Petroleum vs. nes, In connection with petitioner's contention that the ruling in the case of ‘anay "lectrie Company, SuBE As is mot controlling, we believe t aven though there ere dissinilaritiesa in the twe cases, yet the fundamentel issue involved in both is the seme - the question of exenption from con- pensating tax on imported goods or articles, not for sale, but for use in connection with their business.

iluden ok’ ae to the legal SeRtREet st tne Suprene Court is Mining pea this Courts We see no justifiable reason to éepert or deviate from the ebove-quoted decision, Con-_ sequently, we hold that petitioner is not exempt from the compensating tax on ite imported articles consisting of copper wires, transforuers and in- sulators.

with respect to petitioner's argument that it should be exempt from the compensating tax on its imported goods, in the seme manner as @ new and necessary industry under “epublie Act lo. 991, we find 4t to be without merit, "oe anslogy could be made between petitioner and 8 new and necessary industry because the consideration that impelled 317

DECISION =

9 Congress to grant tax exeuption to a new and neces- sary industry is distinet and different fron that whieh motivated the Philippine Commission of 1902 an granting tax exemption te petitioner and its predecessor (Collector of Internal Revenue v. In- dustrial Textiles Co. of the Philippines, et al., 103 Phil. 1090-1051).

WHEREPORE, petitioner's claim for the refund ef °62,335.°0 as compensating tax on imported cop- per wires, transforners and insulators has to be, as it is hereby, denied. With costs against peti- tioner. | SC ORDEARD.

Quezon City, November 28, 1966.

221 hos loc, ¢ RETANIGLAO BR. ALY

Associate Judge

WE CONCUR:

Presiding Judge

| =| RAMON L. AVANCETA

Associate Judge

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