Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17962
April 30, 1965
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
BLAS GONZALES, defendant-appellant.
Office of the Solicitor General for plaintiff-appellee.
Cesar C.
 Cruz for
defendant-appellant.

REGALA, J.:
This is an appeal from the decision of the Court of First Instance of
Manila under Civil Case No. 42912 the dispositive portion of which
provided:
IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor
of the plaintiff and against the defendant, ordering said defendant to
pay plaintiff the sums of P106, 226.75 and P37, 849.58 as deficiency
income taxes for the years 1946 and 1947, respectively, (each inclusive
of the 50% surcharge) plus the 50% surcharge and 1% monthly interest
on the aforesaid amount from June 15, 1957 until the whole amount is
fully paid, and costs of this suit.
The records of this case disclose that since 1946, the defendantappellant, Blas Gonzales, has been a private concessionaire in the U.S.
Military Base at Clark Field, Angeles City: He was engaged in the
manufacture of furniture and, per agreement with base authorities,
supplied them with his manufactured articles.
On March 1, 1947 and March 1, 1948, the appellant filed his income
tax returns for the years 1946 and 1947, respectively, with the then
Municipal Treasurer of Angeles, Pampanga. In the return for 1946, he
declared a net income of P9, 352.84 and income tax liability of P111.17
while for the year 1947, he declared as net income the amount of P16,
829.10 and a tax liability therefor in the sum of P1, 395.95. In the
above two returns, he declared the sums of P80, 459.75 and P1,
707,355.57 as his total sales for the said two years, respectively, or an
aggregate sales of P1, 787,848.32 for both years.
Upon investigation, however, the Bureau of Internal Revenue
discovered that for the years 1946 and 1947, the appellant had been
paid a total of P2, 199,920.50 for furniture delivered by him to the base
authorities. The appellant do not deny the above amount, which, for the
record, was furnished by the Purchasing Officer of the Clark Field Air
Base on the Bureau of Internal Revenue's representation.
Compared against the sales figure provided by the base authorities,
therefore, the amount of P1, 787,848.32 declared by the appellant as
his total sales for the two tax years in question was short or under

declared by some P412, 072.18. Accordingly, the appellee considered
this last mentioned amount as unreported item of income of the
appellant for 1946. Further investigation into the appellant's 1946
profit and loss statement disclosed "local sales," that is, sales to
persons other than the United States Army, in the amount of P124,
510.43. As a result, the appellee likewise considered the said amount as
unreported income for the said year. The full amount of P124, 510.43
was considered as taxable income because the appellant could not
produce the books of account on the same upon which any deduction
could be based.
Adding up the above two items considered as unreported income the
appellee assessed the appellant the total sum of P340, 179.84, broken
down as follows:
Net income as per return
Add: Sales, US Army
Local Sales

P9, 352.84
P492, 531.93
124,510.43

536,582.61

Net income as per investigation

545,935.45

Less: Personal & additional exemptions

4,500.00

Net taxable income

P541, 435.45

Tax due thereon

P226, 897.73

Less: Tax already assessed

111.17

Deficiency tax due

P226, 786.56

50% surcharge

113,393.28

TOTAL AMOUNT DUE & COLLECTIBLE

P340, 179.84
=========
=

On November 14, 1953, the Bureau of Internal Revenue sent a letter of
demand to the appellant for the above amount as deficiency income tax,
the sum of P300.00 as compromise for his failure to keep the required
journal and ledger, and finally, the sum of P153.75 as additional
residence tax, all for the year 1946.

When the appellant failed to pay the above demand. the above assessment was further revised by segregating the appellant's tax liability for the two years in question. fees. 1954. 1958 and Naguiat v. namely. Moreover. thru. No business shall be established in a base. The income tax. In support of the claim. subsequently. 1958. fees and taxes enumerated therein to the right to establish Government agencies. the appellee instituted the present suit on April 7. which is certainly not on the right to establish agencies or on the merchandise or services sold or dispensed thereby. 289. 2. and to the merchandise or services sold or dispensed by such agencies.58 as income taxes due from him for the years 1946 and 1947. 1.26. the Bureau of Internal Revenue reinvestigated the case. however. 076. in dealing particularly with the matter of income tax. generally. recommended a reduction of the same to P249. The appellant ascribes several errors to the decision of the court a quo. In due time. In the latter case this Court said: The provision relied upon by the appellant plainly contemplates limiting the exemption from the licenses. messes and social clubs. which are sold under the provisions of this Article to persons not entitled to buy goods at such agencies. to enable the members of the United States Military Forces and authorized civilian personnel and their families to procure merchandise or services within the bases at reduced prices. serving in the Philippines in connection with the bases and residing in the Philippines by reason only of such services. 179.33. 1957. 849. No. for the exclusive use of the United States military forces and authorized civilian personnel and their families. At the end of this new inquest. such as sales commissaries and post exchanges. on request of the appellant. Pursuant to a memorandum of the BIR Regional Director of San Fernando. The appellant filed his answer on July 7. Government agencies including concessions.26 as deficiency income tax and 50% surcharge for the year 1946 and 1% monthly interest and penalty incident to delinquency was forthwith issued to the appellant. Pampanga. the defendant-appellant was declared in default. G. and. 289. 1960. that if the appellant disagreed with the said finding he could submit the same for study. 1960. The merchandise or services sold or dispensed by such agencies shall be free of all taxes. This construction is unmistakably borne out by the fact that. the more fundamental of which is the claim that as a concessionaire in an American Air Base. he is not subject to Philippine tax laws pursuant to the United States-Philippine Military Bases Agreement. May 31. the Military Bases Agreement provides as follows: INTERNAL REVENUE TAX EXEMPTION 1.84. 1960 and amended it on July 19. or his dependents. except Filipino citizens. . After the recommendation was approved by the Bureau. to prevent abuse of the privileges granted under this Article.R. it being understood that the Government agencies mentioned in the preceding paragraph shall not be regarded as businesses for the purpose of this Article. the lower court rendered the decision under appeal. for failure of the appellant or his counsel to appear at the scheduled hearing. December 22.11035. The same was. It suggested. —Sales and Services within the Bases 1. On November 7. including concessions. insisted on the payment of the original assessment of P340. the corresponding assessment notice for the sum of P249.
 A. duties and inspection by the Philippine authorities. The above provision of the Military Bases Agreement has already been interpreted by this Court in at least two cases.
 Republic. The payment by the latter of the income tax is perfectly content with and would not frustrate the obvious objective of the agreement. There shall be cooperation between such authorities and the Philippines to this end. as deficiency income tax for the year 1946. after the appellee had presented its documentary evidence against the appellant. the above assessment was heard before the said body which. Except as may be provided in any other agreements. review and decision by the Conference Staff of the Bureau of Internal Revenue. The motion for reconsideration of this last order declaring the appellant in default for failure to appear was also denied by the trial court for lack of merit.
 Araneta. the appellee. On May 21. Administrative measures shall be taken by the appropriate authorities of the United States to prevent the sale of goods. Prior to the trial of the case. It is mutually agreed that the United States shall have the right to establish on bases. L-11594.
 J. sales excise or other taxes or imposts. free of all license. respectively. but on the owner or operator of such agencies. no persons shall habitually render any professional services in a base except to or for the United States or to or for the persons mentioned in the preceding paragraph.75 and P37. though. or a total of P144. shall be liable to pay income tax in the Philippines except in respect of income derived from Philippine sources. the then Collector of Internal Revenue. denied by the lower court as unmeritorious.R.On March 31. is logically excluded. the following provision of the above Bases Agreement is invoked: ARTICLE XVIII. however. another demand was made upon the appellant for the payment of P106. G. the appellant filed with the court below a motion to dismiss grounded on prescription and lack of jurisdiction. 226. The contention is clearly unmeritorious. No. namely: Canlas v. 1960. No member of the United States armed forces.

the normal license plate and registration fees. 1957. operation and defense of the bases. The appellant cannot seek refuge in the use of "excise" or "other taxes or imposts" in paragraph 1 of Article XVIII of the Military Bases Agreement. was engaged in and duly licensed by the U. or any tax in the nature of a license in respect of any service or work for the United States in connection with the construction. maintenance. Tondo. however. Absence of opposition. continuances and reconsideration of orders of default lies within the discretion of courts and will not be interfered with either by mandamus or appeal (Samson v. that the rulings in the above two cases are inapplicable to the suit at bar because the said cases involved the income of public utility operators in the Air Base who were not "concessionaires" like him. Tecson. operation and defense of the bases.. in the Canlas case above. postponements. No persons referred to in paragraphs 1 and 2 of this article shall be liable to pay the Government or local authorities of the Philippines any poll or residence tax. L-8182. L-10507. We said: There is no dispute as to the fact that defendant Manila Pencil Company. and we see no excuse for failing to take them into account... The other point raised by the appellant on this appeal pertains to the refusal of the trial court to reconsider its order declaring him in default for the failure of his counsel to appear at the scheduled trial despite due notice. Naval. Military authorities to operate a freight and bus service within the Clark Field Air Base. (Sandejas v.G. or any other tax on personal property imported for his own use. March 31.R. Thus. 88 Phil. Moreover. In the premises. p. he should not be heard to complain that he was deprived of his day in court. The applicant's complaint of unfairness could have some weight if the objections on appeal had been on points not previously passed upon. that the rulings of this Court in the two cases above cited are applicable to this appeal under consideration. The appellant maintains. operation or defense of the bases and residing in the Philippines by reason only of such employment. No national of the United State serving or employed in the Philippines in connection with the maintenance. or any import or export duty. supra. No national of the United States. L-20151. from the payment of the income tax. however. shall be liable to pay income tax in the Philippines in respect to any profits derived under a contract made in the United States in connection with the construction. like the appellant. 838) unless a showing of grave abuse can be made against said courts. May 30. as already stated. 3. therefore. even the exemption in favor of members of the United States Armed Forces and nationals of the United States does not include income derived from Philippine sources. Robles. this Court already ruled that operators of freight and bus services are within the meaning of the word "concession" appearing in the Military Bases agreement. he was denied his day in court. where the absence of a party from the trial was due to his own fault. Siojo v. June 29. as successor-in-interest of the Philippine Consolidated Freight Lines. But the deficiencies here in question are not new but well-known. No. or his spouse. G. 81 Phil. Manila Pencil Company. And as such grantee of a franchise. The same conclusion was reached in the case of Canlas v. which this Court was held to be embraced within the meaning of the word "concession" appearing in the treaty and was declared exempted from the payment of the contractor's tax (Araneta v. on that morning of August 8. said terms are employed with specific application to the right to establish agencies and concessions within the bases and to the merchandise or services sold or dispensed by such agencies or concessions.R.S.
. with a view to preventing the conferment of citizenship to persons not fully qualified therefor (Lee Ng Len vs. Manila. a military reservation established in conformity with the agreement concluded between the Government of the Philippines and the United States on March 14. 3. 4.It is urged for the applicant that no opposition has been registered against his petition on the issues above discussed. The matter of adjournments.
 Republic. G. when certified as being used for military purposes by appropriate United States authorities. his counsel insists that this absence then was for a good and reasonable cause. because. G. No. No. 421. resident in the United States.R. Suffice it to say in regard to the above that the matter complained of is beyond this Court to disturb. For one thing. 41 Phil. 2. maintenance. Republic. The above contention is as unmeritorious as it is untrue. Inc. when torrential rain poured down in his locality. None of the above-quoted covenants shields a concessionaire. 1020). provided that privately owned vehicles shall be subject to the payment of the following only." The lower court did not deem this as a sufficiently valid . having been ruled upon repeatedly by this Court.
 Manila Pencil Company Ins. 1958). No. does not preclude the scanning of the whole record by the appellate court. 1965).. shall be liable to pay income tax in the Philippines except in respect of income derived from Philippine source or sources than the United States source. In the case of Araneta v. or corporation organized under the laws of the United States. He complains that when the trial proceeded in his absence. 531) The-counsel's excuse for his absence at the trial was alleged "lack of transportation facilities in his place of residence at Gagalangin. 1947 (43 O. It is very clear. and minor children and dependent parents of either spouses.

. A to D-3 inclusive) On January 3. G. The substantial undeclaration of income in the income tax returns of the appellant for four consecutive years.explanation because it observed that despite such torrential rain. INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES. 4273) for 2. the said co-owners leased to Construction Components International Inc. Delfin Pacheco and his sister. R. filed an amended complaint for reconveyance of Lot. the trial court's ruling can hardly be considered as an abuse of his discretion. 1976. (Appendix I. JR.R.169 square meters only. in the Municipality of Polo (now Valenzuela). 44-45. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco (Exhs. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines. since fraud is a state of mind. and DELPHIN PACHECO.: The petitioners question the decision of the Intermediate Appellate Court which sustained the private respondent's contention that the deed of exchange whereby Delfin Pacheco and Pelagia Pacheco conveyed a parcel of land to Delpher Trades Corporation in exchange for 2. more or less. were the owners of 27. B to B-6 inclusive) The contract of lease. Finally. judgment is hereby rendered affirming in full the decision here appealed from. as well as the assignment of lease were annotated at he back of the title.500. T-4240 of the Bulacan land registry. coupled with his intentional overstatement of deductions made the imposition of the fraud penalty proper. pp. So ordered. now the petitioners.. somehow made it to the court. vs. the appellant disputes the lower court's finding of fraud against him in this incident. the Court of First Instance of Bulacan ruled in favor of the plaintiff. 1974.. The failure of the appellant to declare for taxation purposes his true and actual income derived from his furniture business at the Clark Field Air Base for two consecutive years is an indication of his fraudulent intent to cheat the Government of its due taxes. for Lot 1095 whose area is 27. Inc.) IN VIEW OF ALL THE FOREGOING. 1095. As rightly argued by the Solicitor General's office. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions (Exhibits A to A-5) On August 3. Pelagia Pacheco. L-69259 January 26. J.. Metro Manila (TCT No. a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property (TCT No. Briefly. pp. filed a petition for certiorari to review the appellate court's decision. Inc.247). 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and Delphin Pacheco. 1-2. 1974.00 (Exhs. a lady attorney who was then a resident of a usually inundated area of Sampaloc. Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. Rec. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. the counsel for the plaintiff-appellee. No. the judgment is hereby rendered declaring the valid existence of the plaintiffs preferential right to acquire the subject property (right of first refusal) and ordering the defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer to acquire the same at the rate of P14.00 per square meter. Under these circumstances. (Eugenio Perez v. Rollo) The lower court's decision was affirmed on appeal by the Intermediate Appellate Court. petitioners. The defendants-appellants. GUTIERREZ.T-4240) together with another parcel of land also located in Malinta Estate.169 square meters of real estate Identified as Lot. Valenzuela. No. with costs against the defendantappellant. 134. Malinta Estate.000. respondents. He argues that the facts invoked by the lower court do not sufficiently establish the same. The dispositive portion of the decision reads: ACCORDINGLY. After trial. inclusive) (pp. it need not be proved by direct evidence but may be inferred from the circumstances of the case. (Appellant's Brief.500 shares of stock of defendant corporation with a total value of P1. Court of Tax Appeals and Collector of Internal Revenue. Rollo) On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease agreement. p. lessee Construction Components International. No. 1988 DELPHER TRADES CORPORATION. Manila. On April 3. 1958. as per stipulation of the parties (Exhs. May 30. Inc. respondent Hydro Pipes Philippines.500 shares of stock was actually a deed of sale which violated a right of first refusal under a lease contract. No. 246. C to C-5. INC.. L-10507. Without pronouncement as to attorney's fees and costs. the facts of the case are summarized as follows: In 1974.

that the leased property was transferred to the corporation by virtue of a deed of exchange of property. 251-252.366. a certified public accountant and son-in-law of the late Pelagia Pacheco testified that Delpher Trades Corporation is a family corporation. or a total of P380. Private respondent is allowed to exercise its right of first refusal even if there is no "sale" or transfer of actual ownership interests by petitioners to third parties. 1095 which had been leased to Hydro Pipes Philippines. the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation. 1638. we set aside the resolution denying the petition and gave it due course. Consequently. v. Thus. there was no transfer of actual ownership interests over the land when the same was transferred to petitioner corporation in exchange for the latter's shares of stock. Commentaries and Jurisprudence on the Commercial Laws of the Philippines." (Rohrlich 243. if anything. 609). "Hence. 252. 649.500 original unissued no par value shares of stocks of the Delpher Trades Corporation. Civil Code). 254. The petitioners allege that: The denial of the petition will work great injustice to the petitioners. There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. they refer to this scheme as "estate planning.500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the other owners only owned 2. in exchange for their properties. were transferred to the corporation.169 square meters or 2. No. In the petitioners' motion for reconsideration. Inc. 1980 Edition. Thus..We initially denied the petition but upon motion for reconsideration. Assuming arguendo that there has been a transfer of actual ownership interests. private respondent will acquire the land not under "similar conditions" by which it was transferred to petitioner Delpher Trades Corporation. Rollo) Under this factual backdrop. although the prevailing value thereof is approximately P300/sq." (p. and that at the time of incorporation. having treated Delpher Trades Corporation as such a separate and distinct corporate entity. Fulton [1912]. It maintains that there was actual transfer of ownership interests over the leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of stock. Respondent Hydro Pipes Philippines. They argue that there was no sale and that they exchanged the land for shares of stocks in their own corporation. one becomes a stockholder of a corporation by subscription or by purchasing stock directly from the corporation or from individual owners thereof (Salmon. that in exchange for these properties. 233 Pa." (p. p. including Lot No. is not a party who may allege that this separate corporate existence should be disregarded.000 shares.7 hectares (located right after the Valenzuela. hence the corporation and the co-owners should be deemed to be the same. and 3. the private respondent argues that Delpher Trades Corporation is a corporate entity separate and distinct from the Pachecos. . We rule for the petitioners. Pelagia and Delfin acquired 2. 430) It is significant that the Pachecos took no par value shares in exchange for their properties.
 meter. Rollo) The resolution of the case hinges on whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which. in effect. After incorporation. was merely in form but not in substance. formed or to be formed. the Pachecos acquired 2.1 Million. prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange. Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. he knew all about the contract of lease of Lot. the petitioners allege: "Considering that the beneficial ownership and control of petitioner corporation remained in the hands of the original co-owners. as provided in the same contractual provision invoked by private respondent. meter or P8. Vol. petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners. or even spirit of the contract. (pp. it contends that it cannot be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit. Rollo) On the other hand. In reality." Eduardo Neria. 2. 254-255. there being in substance and in effect an Identity of interest. In the case at bar. that in order to accomplish this end. cited in Agbayani. that the corporation was organized by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes. citing Bole v. Rollo) The petitioners maintain that the Pachecos did not sell the property. Unson. in that: 1. such transfer is not within the letter. ("private respondent") will acquire from petitioners a parcel of industrial land consisting of 27." (pp. 1468. III. two pieces of real estate. 1095 to Hydro Pipes Philippines. that petitioner Delfin Pacheco. Dexter & Co. 47 Phil. The transfer of ownership. Bulacan exit of the toll expressway) for only P14/sq. the petitioners contend that there was actually no transfer of ownership of the subject parcel of land since the Pachecos remained in control of the property.

The holder of no-par shares may see from the certificate itself that he is only an aliquot sharer in the assets of the corporation. as in the case of par value shares.00 a square meter was turned over to the family's corporation for only P14. .. they were able to execute the deed of exchange free from income tax and acquire a corporation. Neria. if the property is held by the spouse the property will be tied up in succession proceedings and the consequential payments of estate and inheritance taxes when an owner dies. But this character of proportionate interest is not hidden beneath a false appearance of a given sum in money. but only an aliquot part of the whole number of such shares of the issuing corporation. (2) Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized if a person exchanges his property for stock in a corporation of which as a result of such exchange said person alone or together with others not exceeding four persons gains control of said corporation. the Delpher Trades Corporation is a business conduit of the Pachecos. 107). Land valued at P300. testified during the last hearing that the decision to have no par value share in the defendant corporation was for the purpose of flexibility. LINSANGAN: Q Mr. p." Q Did you explain to the spouses this benefit at the time you executed the deed of exchange? A Yes. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them. COURT: Q What do you mean by "point of view"? A To take advantage for both spouses and corporation in entering in the deed of exchange. tax exemption benefits. December 15. On the other hand. Commentaries and Jurisprudence on the Commercial Laws of the Philippines. 1. Moreover. since a corporation does not die it can continue to hold on to the property indefinitely for a period of at least 50 years. Q What are these advantages to the said spouses from the point of view of taxation in entering in the deed of exchange? A Having fulfilled the conditions in the income tax law. providing for tax-free exchange of property. is there any flexibility in the holding by the corporation of the property in question? A Yes. sir. Their equity capital is 55% as against 45% of the other stockholders. (pp.A no-par value share does not purport to represent any stated proportionate interest in the capital stock measured by value. by means which the law permits. Q Now also from the point of taxation. In effect. no matter what value they may have. to the extent of 100/1. tsn. Q What provision in the income tax law are you referring to? A I refer to Section 35 of the National Internal Revenue Code under par. Vol. but instead is expressed to be divided into a stated number of shares. there was no attempt to state the true or current market value of the real estate. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. 3-5. 1981) The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos.000 shares. The board can fix the value of the shares equivalent to the capital requirements of the corporation.00 a square meter. The capital stock of a corporation issuing only no-par value shares is not set forth by a stated amount of money. the attention of persons interested in the financial condition of a corporation is focused upon the value of assets and the amount of its debts. Q So the benefit you are talking about are inheritance taxes? A Yes. 1980 Edition. such as. LINSANGAN: Q (What do you mean by "point of view"?) What are these benefits to the spouses of this deed of exchange? A Continuous control of the property. This indicates that a shareholder of 100 such shares is an aliquot sharer in the assets of the corporation. is there any benefit to the spouses Hernandez and Pacheco in connection with their execution of a deed of exchange on the properties for no par value shares of the defendant corporation? A Yes. sir Q You also. sir. Can you explain flexibility in connection with the ownership of the property in question? A There is flexibility in using no par value shares as the value is determined by the board of directors in increasing capitalization. As explained by Eduardo Neria: ATTY. It is to be stressed that by their ownership of the 2. ATTY.000 or 1/10. the Pachecos have control of the corporation. by removing the par value of shares. Q Now what advantage is this continuity in relation to ownership by a particular person of certain properties in respect to taxation? A The property is not subjected to taxes on succession as the corporation does not die. from the point of view of taxation. C-sub-par.500 no par shares of stock. (Agbayani. and other inherent benefits in a corporation. who also belong to the same family group. Thus. III.

In the accompanying letter. deposited a check amount of P27. the Surigao Consolidated instituted with the Court of First Instance of Manila civil action for its recovery. the case was remanded to the latter court for proper disposition. vs.S.. a third statement of adjustment was submitted further reducing the claim for refund to the amount of P 17.107. No costs. on March 15. In each case. ed. on January 19. but for the refund of the amount of P18. 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.54 as the " tax subject to revision. INC. on February 26. 596). 4770 dismissing for lack of merit the action of the Surigao Consolidated Mining Company for the refund of the total amount of P17. In order to avoid incurring any tax penalty. 2 SCRA 632 citing Gregory v. was operating its mining concessions in Mainit. Pursuant to section 246 of the Internal Revenue Code.189. 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.cannot be doubted. finding that the amount sought to be refunded been lawfully collected.87. for short). The questioned decision and resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE. On October 19. the Surigao Consolidated Mining Company (called SURIGAO CONSOLIDATED. 465.486. 1946.000." However. 1946.189.00. The Pacheco family merely changed their ownership from one form to another. No. And crediting itself with the amount of P27.00 previously deposited with the City Treasurer of Iloilo. on July 16. the private respondent has no basis for its claim of a light of first refusal under the lease contract.00. upon the enactment of Republic Act No. 1942. 1945 and the payment of ad valorem tax on said minerals to February 28.051.
Office of the Solicitor General for respondents. L-14878 December 26.000. 1945. the returns indicated an unpaid balance of P16. Surigao. which provided for the filing of returns for minerals removed during the last quarter of 1941 up to December 31.051. 722 was enacted. J. Inc. Leido. On September 24. it paid the remaining balance of P10. on December 28. There was no transfer of actual ownership interests by the Pachecos to a third party.00 previously deposited with the City Treasurer of Iloilo. 7 L. Helvering. 1947. The record shows that before the outbreak of World War II. The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale." After the termination of the war. After hearing. the instant petition is hereby GRANTED. v. rendered its decision denying the claim for refund. another statement of adjustment was filed reducing the claim for refund to P17. petitioner.051.00 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. Availing of the provisions of the aforementioned Act. of the communications outbreak of the war. subject to adjustment upon the receipt of the smelter showing the actual market value of the minerals to the United States. WHEREFORE.158. the Court of Tax Appeals. Angeles and Valladolid for petitioner. 885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. 1946. 1125 creating the Court of Tax Appeals. the Surigao Consolidated filed an amended ad valorem tax returns under which amendment it declared a reduced ad valorem tax in the amount of P37.14. The ownership remained in the same hands. However. Finally. a domestic corporation which then had its principal office in the City of Iloilo.14 allegedly representing overpayment of ad valorem tax for the fourth quarter of 1941.. The collector of Internal Revenue.
 REGALA. 1963 SURIGAO CONSOLIDATED MINING CO. the principal office of Surigao Consolidated lost contact with its mines and never received the production reports for the fourth quarter of 1941. the Surigao Consolidated. The Surigao Consolidated in due .. Applying the amount of P27. respondents. As the Collector of Internal Revenue denied the request for the refund of the said P17. ad valorem tax returns for the fourth quarter declaring as its tax liability the amount of P43. 1946.486. COLLECTOR OF INTERNAL REVENUE and COURT OF APPEALS.54. Commonwealth Act No. a request was made.000.: This is a petition to review the decision of the Court of Tax Appeals in Manila Civil Case No. The amended complaint in Civil Case No. computation of the ad valorem tax was based on the market value of the minerals set forth in the returns.14 on the ground that the money already paid as ad valorem tax was legally due to the Government. this time not only for the reduction of tax.R. Due to the interruption. Republic of the Philippines SUPREME COURT Manila EN BANC G.01. which prescribes the time and manner of payment of royalties or ad valorem taxes. said company. 293 U." (Liddell & Co. Hence. 1958.

Petitioner having failed to point to Us 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 above quoted provision. item in petitioner's claim for refund in the amount of P1. The argument merits careful consideration. (Statutory Construction by Francisco. it would be unfair to deny this benefit to those taxpayers who had been prompt in paying theirs. as a statute which releases a person or corporation from a burden common to the whole community should be strictly (Louisville Water Co. this petition for review. v. 25 Phil. p. of course be considered sufficient to establish that the minerals were in fact lost. These testimonies cannot be taken on their full face value. In connection with the alleged looting of the minerals. petitioner seeks to recover the amount of P15. the Tax Court has this to say: We are again confronted with the case where plaintiff has.
net The question to be resolved is whether or not Surigao Consolidated. 517. With this observation. It is to be noted that petitioner's evidence of the alleged loss in transit as observed by the Court of Tax Appeals.time filed a motion for new trial on the ground that the decision was "not justified by the overwhelming weight of evidence" and that it was contrary to law. there being no showing that they are not substantiated by the evidence. The evidence. At first it would seem to be sound and logical. The refund is sought under section 1 (d) of Republic Act No. Under the circumstances. it should be sustained only when expressed in explicit terms.lawphil. failed to present adequate evidence to prove such loss. and it cannot be extended beyond the plain meaning of those terms. Going over the record.191.609. itemized as follows: 1 Ad valorem tax on minerals removed from the mines but . unless by the terms thereof it clearly appears to be the intention of the legislature that the exemption shall relate back to taxes which have already become fixed. shipped to the United States 249. such royalties. v. is merely limited to the general and uncorroborated statements of plaintiff's officers that the same were lost in the mines.73 representing the ad valorem tax paid on minerals extracted from its mines but alleged to have been looted during the enemy occupation. Even assuming arguendo that the provisions of Republic Act No. We find no reason to disturb the above findings of the Court of Tax Appeals. We are constrained to hold that the benefits of said provision does not extend to it. cited 6 American and English Ann. allegedly looted during the Japanese occupation 15.051.051. and which minerals were lost by reason of the war or circumstances arising therefrom. is entitled to the refund of ad valorem tax in the total amount of P17. Petitioner argues that since the law condones the taxes due from taxpayers who failed to pay their taxes. Under the second item. which provides as follows: SECTION 1. we cannot make the finding that the minerals were in fact lost. ad valorem or specific taxes on the same shall be immediately due and demandable.191. Any provision of existing law to the contrary notwithstanding: (d) All unpaid royalties. Much less had these officers have personal knowledge of the loss. I.609. Being so. The condonation of a tax liability is equivalent and is in the nature of a tax exemption.46 represents the amount of ad valorem tax paid on minerals removed from the mines but alleged to have been lost in transit on account of the war.. citing Government of P. however.46 2 Ad valorem tax on minerals extracted from the mines but . which gave rise to the loss. Such evidence cannot. nineteen hundred and forty-two. the latter would not still be entitled to the refund sought for under the first item.14 The first. Judge Luciano of the Court of Tax Appeals during the trial. allegedly lost in transit on account of war P1. Hamilton. Monte de Piedad. 81 authorizes the refund of taxes already paid by petitioner. 81 Ky.) The application of a statute creating an exemption for taxation to taxes already assessed depends upon whether it is retrospective in its operation. Hence. would be to create a dangerous precedent. 81. are hereby condoned: Provided. petitioner herein. Such a statute has no retrospective operation. Cases. it would be useless ceremony to delve into the issue of whether ad valorem tax should be or should not be paid on minerals extracted from the mines ..14.95 P17. ad valorem or specific taxes on all minerals mined from mining claims or concessions existing and in force on January first. if at all. 438). . 42. That if said minerals had been or shall be recovered by the miner or producer. 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.73 3 Alleged overpayment of ad valorem tax on minerals . especially because they had no direct supervision over the handling of such minerals at the time of the alleged loss. The tax court. But the aforequoted section clearly refers to the condonation of unpaid taxes only. merely of testimony of witnesses who did not have personal knowledge of the circumstances. to our mind. denied the motion.

Conformably to the above. It is that an ad valorem tax in the amount of P20. as amended. 2338 (entitled "An Act to Provide for Reward to Informers of Violations of the Internal Revenue and Customs Laws. Branch III. two (2) informants submitted sworn information under Republic Act No. Pampanga. MARIANO CASTAÑEDA JR. describing the details of alleged violations of the tax code.387. VICENTE LEE TENG. These returns are admittedly petitioner's possession. as indicated above. L-46881 September 15. Sometime in 1971.
 Santos for respondent Judge.387. J. Granados Department of Justice. 439 for violation of Sec. 170 (2) of the National Internal Revenue Code.49. the accused FRANCISCO VALENCIA. The record of this case includes an affidavit executed on 27 December 1971 by Mr.
 Antonio N.34. the decision appealed from is hereby affirmed. 1959) to the Bureau of Internal Revenue ("BIR"). One more item in petitioner's claim is the alleged overpayment of ad valorem tax in the amount of P249. and (b) that the dismissal of the criminal cases against accused Valencia inured to the benefit of his co-accused Vicente Lee Teng and Priscilla Castillo de Cura. petitioner. Apolonio G.
 Roque for respondents Priscilla Castillo Vda. San Fernando. Philippines. 1 After conducting an investigation.
 FELICIANO. and denying the People's Motion for Reconsideration of said Orders.137. 370. and that after deducting all allowable deductions amounting in all to P1. No." effective June 19.895. committed as follows: That on or about the 19th day of January.81 and P20.but not removed therefrom. the amount of ad valorem tax on the minerals shipped to the United States is subject to adjustment upon the receipt of the smelter returns showing their actual market value Petitioner contends that the statements of adjustment alleged to contain the figures and data set forth in the smelter returns are adequate evidence of the actual market value of the minerals shipped to the United States. Erespe y Comia and Priscilla Castillo de Cura.28. much less abused its discretion. in refusing to give any probative value statements of adjustment. filed with the Court of First Instance of Pampanga an information docketed as Criminal Case No. APOLONIO ERESPE Y COMIA and PRISCILLA QUIAZON OR "QUIAPO" alias "MARY JO. Under the circumstances.
 Martin N. HON. against Francisco Valencia. the burden is upon the taxpayer to establish the facts which show the illegality of the tax or that the determination thereof is erroneous." conspiring and confederating with one another. We are of the opinion that the Court of Tax Appeals did not commit any error in denying petitioner's claim. unlawfully. vs. claims difference between the amount of P20.81 was originally paid on the minerals shipped to the United States with a gross value of P410. petitioner failed to produce them during the trial.137. 1988 PEOPLE OF THE PHILIPPINES.. In July 1973.299. criminal informations were filed in court against the private respondents. there arises the presumption that if produced they would be adverse to petitioner. The Solicitor General for petitioner. Judge of the Court of First Instance of Pampanga. William Chan. in the premises of Valencia Distillery located at del Pilar Street. In this case.828. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. .86 is an overpayment. and within the jurisdiction of the abovenamed Court. Costs against petitioner.
 de Cura and Francisco Valencia. the true and correct amount of ad valorem tax on said minerals was P20. the People seek the annulment of the Orders of respondent Judge quashing criminal informations against the accused upon the grounds that: (a) accused Francisco Valencia was entitled to tax amnesty under Presidential Decree No. respondents. Petitioner. that the smelter returns from the United States show that the actual market value of the minerals shipped to the States was P416. did then and there willfully.: In this Petition for certiorari and mandamus. therefore.95 on the minerals shipped to the United States. petitioner failed to show that the amount of taxes sought to be refunded have been erroneously collected. but for unknown reasons. WHEREFORE.86. one of the said informers.R. the BIR applied for and obtained search warrants from Executive Judge Malcolm Sarmiento. As there is no credible and satisfactory explanation for the non-production of said returns. It is not disputed that. The best evidence of the actual market value minerals shipped to the United States are the smelter returns themselves. Following investigation and examination by the BIR of the materials and documents yielded by service of such search warrants. It is a settled doctrine that in a suit for the recovery of the payment of taxes or any portion thereof as having been illegally or erroneously collected. concerning alleged violations of provisions of the Internal Revenue Code committed by the private respondents. 1972. DE CURA and FRANCISCO VALENCIA. PRISCILLA CASTILLO VDA. State Prosecutor Estanislao L. the Court of Tax Appeals cannot be said to have committed error.

The State Prosecutor further argued that the accused Valencia was not entitled to avail himself of the benefits of P. custody and control. ONE (1) BOTTLE. as amended against the same persons. paragraph 2 of the National Internal Revenue Code. No. 208 of the National Internal Revenue Code as amended. conspiring and confederating together. 2571891 to 2571901 to 2571910. CONTRARY TO LAW." and Francisco Valencia.. failure to hold the preliminary investigation was not a ground for a motion to quash. bearing Serial Nos. dismissing not only Criminal Cases Nos. net. Pampanga. 182 (A) (1) 3c and Sec. unlawfully and feloniously distill. as amended. the remaining accused Vicente Lee Teng and Priscilla Castillo de Cura. 05381 to 05390 and 05391 to 05400. false and counterfeit or fake internal revenue labels consisting of five (5) sheets containing ten (10) labels each purporting to be regular labels of the Tanduay Distillery... On 22 April 1974. did then and there wilfully.A. 1 Ib. Inc. No. 750 cc. The respondent Judge granted the Motion to Quash and issued an Order. The State Prosecutor opposed the Motion to Quash arguing that the necessary preliminary investigation in the six (6) criminal cases had in fact been conducted and that in any case.D. pale. No. 538-543 but also Criminal Cases Nos. net of the wine improvers (full). 1970 and 1971] in the premises of Valencia Distillery located at del Pilar Street. CONTRARY to the provisions of Section 170. FOUR (4) BOTTLES of Ginebra San Miguel (alleged) 350 cc. 370 and that. 375 cc. and TWO (2) BOTTLES of Tanduay Rum. 375 cc. TWELVE (12) BOTTLES of alleged Tanduay Rum. No. have in their possession. A Motion for Reconsideration by the People was similarly denied by respondent Judge. the total specific tax due on which is P160. San Fernando. 375 cc. The six (6) informations uniformly charged the accused as follows: The undersigned State Prosecutor accuses VICENTE LEE TENG alias VICENTE LEE alias LEE TENG. the above-named accused. upon the common ground that the dismissal of said cases insofar as accused Francisco Valencia was concerned.. ONE (1) GALLON bottle of wine improver. CONTRARY to Section 174 of the National Internal Revenue Code. conspiring and confederating together and mutually helping one another. 1968. 375 cc.and feloniously have in their possession. 2 On the same date. 2571911 to 2571920. 538-543 were filed in the Pampanga Court of First Instance against Vicente Lee Teng alias "Vicente Lee. inured to their benefit. and FRANCISCO VALENCIA of the crime of Violation of Sec. on 14 March 1974. dated 15 July 1974. Pampanga. 538-543 and 439 and 440. the resulting immunity from criminal prosecution was personal to accused Valencia.D. locally manufactured articles subject to specific tax. On 14 December 1975. Philippines and within the jurisdiction of this Honorable Court. 1 Ib. having been arraigned. THIRTY THREE (33) boxes of 24 bottles each of alleged Anejo Rum.. did then and there willfully. charging them as follows: That on or about the 19th day of January 1972 in the premises of Valencia Distillery located at del Pilar Street. ERESPE y COMIA and PRISCILLA QUIAZON or QUIANO alias MARY JO. 2338 as of 31 December 1973. repair compound or manufacture alcoholic products subject to specific tax without having paid the privilege tax therefor. in relation to Sections 182 (A) (1) (3c) and 208 of the National Internal Revenue Code. APOLONIO G. 440 was filed by the same State Prosecutor in the same court for violation of Section 174 (3) of the National Internal Revenue Code. another criminal information docketed as Criminal Case No. filed Motions to Quash Criminal Cases Nos. six (6) more criminal informations docketed as Criminal Cases Nos. As a result of further investigation of the sworn complaints filed by the informers with the BIR. NINE lbs. THREE (3) BOXES OF TWENTY FOUR (24) BOTTLES each. the tax on which has not been paid in accordance with law. The People opposed the Motions to Quash upon the ground that the accused were not entitled to the benefits of the tax amnesty under P. unlawfully and feloniously.D. half-full." alias "Lee Teng. NINE (9) BOXES of alleged Tanduay Rum of TWELVE (12) BOTTLES each. upon the grounds that the six (6) informations had been filed without conducting the necessary preliminary investigation and that he was entitled to the benefits of the tax amnesty provided by P. 1969.. 750 cc. as amended based on their failure to pay annual privilege taxes for each of the six (6) years from 1966 to 1972. the accused FRANCISCO VALENCIA. ONE (1) SMALL BOTTLE. TWENTY (20) BOXES of alleged Ginebra San Miguel Gin of TWENTY FOUR (24) BOTTLES each. . 178 in relation with Sec. Philippines and within the jurisdiction of this Honorable Court. 439 and 440 insofar as accused Francisco Valencia was concerned. of Ginebra San Miguel Gin. committed as follows: That on or about the 19th of January 1972. net with actual contents of 1/5 of the bottle. San Fernando. rectify. 538-543 inclusive. These informations charged the two (2) with violations of Section 178. custody and control. 370. assuming the dismissal of said criminal cases was valid insofar as accused Valencia was concerned.01. accused Valencia filed a Motion to Quash Criminal Cases Nos. as amended. [also during the years 1967. after arraignment. of Rum Jamaica. 370 since his tax cases were the subject of valid information submitted under R.

on 18 November 1974. however. as it is hereby condoned. 157. as amended. Tax liabilities with or without assessments. on withholding tax at source provided under Sections 53 and 54 of the National Internal Revenue Code. in other words. who for any reason whatsoever failed to avail of Presidential Decree No. is marked by a gross disregard of the legal rights of the People. to the first substantive issue that needs to be resolved: whether or not the accused Valencia. Such previously untaxed income and/or wealth must have been earned or realized prior to 1973. receipts. the Court resolved to dismiss this Petition in a Resolution dated 5 July 1978. bequests or any other acquisitions from any source whatsoever which are or were previously taxable under the National Internal Revenue Code. 16. We hold that. but has not complied with the conditions thereof. In the case at bar. This defense need not detain us for long for it is clearly premature in the present certiorari proceeding. A tax amnesty is hereby granted to any person. which need to be addressed before dealing with the questions of substantive law posed by this case. a state of facts which. natural or juridical. a Petition for certiorari brought seven (7) months after rendition of the last order sought to be set aside might be regarded as barred by laches. the AntiGraft and Corrupt Practices Act. in so availing of the said Presidential Decrees failed to include all that were required to be declared therein if he now voluntarily discloses under this decree all his previously untaxed income and/or wealth such as earnings. In the certiorari petition at bar.The respondent Judge granted the Motions to Quash by Vicente Lee Teng and Priscilla Castillo de Cura. The second preliminary issue was also raised by private respondents in their Answer. We turn. the Court believes that the equitable principle of laches should not be applied to bar this Petition for certiorari and Mandamus. perhaps. No. which was denied on 17 February 1977. Approximately seven (7) months later. respondent Judge granted their Motions to Quash on 31 March 1976. Vicente Lee Teng and Priscilla Castillo de Cura filed their respective Motions to Quash on 14 December 1975. criminal or administrative liabilities. provided a tax of fifteen (15%) per centum on such previously untaxed income and/or wealth is imposed subject to the following conditions: a. therefore. but rather the perpetuation of the state of facts brought about by the orders of the respondent Judge. the Civil Service Laws and Regulations. and denied the People's Motion for Reconsideration. gifts. as will be seen later. Lee Teng and de Cura are entitled to the benefits available under P. Ordinarily. or any other applicable law or proclamation. Capital gains transactions where the taxpayer has availed of Presidential Decree No. set aside its Resolution of dismissal and considered this case as submitted for decision. the legal consequence would follow that the first jeopardy commenced by the eight (8) informations against the accused has not yet been terminated and accordingly a plea of second jeopardy must be rejected both here and in the continuation of the criminal proceedings against the respondents-accused. Moreover. If. Should the Court uphold these dismissal orders as valid and effective and should a second prosecution be brought against the accused respondents. is compelled to take into account both the importance of the substantive issues raised in this case and the nature of the result brought about by the respondent Judge's orders. the validity and legal effect of the orders of dismissal issued by the respondent Judge of the eight (8) criminal cases are precisely in issue. The private respondents. . 370. in other words. under the National Internal Revenue Code. Initially. the Revised Administrative Code. upon the other hand. There are two (2) preliminary issues. in its Resolution of 1 October 1979. the dismissal of the cases was resisted vigorously by the prosecution which filed both oppositions to the Motion to Dismiss and Motions for Reconsideration of the Orders granting the Motions to Quash. were under no illusion as to the position taken and urged by the People in this Case.D. 5 The respondent Judge denied the People's Motion for Reconsideration of his Order granting Francisco Valencia's Motion to Quash the eight (8) criminal cases. or. the Court finds the dismissal orders to be invalid and of no legal effect.D. except the following: b. No. The Court. The first preliminary issue-whether or not the People of the Philippines are guilty of laches-was raised by private respondents in their Answer. whether or not the defense of double jeopardy became available to them with the dismissal by respondent Judge of the eight (8) criminal cases. the Revised Penal Code. The scope of application of the tax amnesty declared by P. filed a Motion for Reconsideration of that Order and the Court. that second prosecution may be defended against with the plea of double jeopardy. in the circumstances of this case. realized here or abroad by condoning all internal revenue taxes including the increments or penalties on account of nonpayment as well as all civil. the Petition for certiorari and mandamus is not barred by laches. The effect of such application would not be the avoidance of an inequitable situation (the very raison d'etre of the laches principle). however. 370 is marked out in the following broad terms: 1. The People filed a Motion for Reconsideration. the present Petition for certiorari and mandamus was filed by the People. The People. that is. as amended. on 12 September 1977. c. on a more practical level. laws and regulations on Immigration and Deportation. 23 and Presidential Decree No.

It follows that. No. 1 973. 439 and 440 against the respondent accused. had been filed with the BIR as of 31 December 1973. none of the informations filed against him could have been condoned under the express provisions of the tax amnesty statute. 2338 prior to 31 December 1973.D. No. while filed in court only on 14 March 1974.D.D. or any of their deputies.A. 538-543. No. the claimant is not entitled to the benefits of P. No. 370. 6 Where the disclosure of such previously untaxed income or wealth was not voluntary but rather the accompaniment or result of tax cases or tax assessments already pending as of 31 December 1973. 370 took effect on 9 January 1974. The six (6) informations docketed as Criminal Cases Nos. 370 would have the effect of condoning or extinguishing the liabilities consequent upon possession of false and counterfeit internal revenue labels. (2) that the information must be definite and sworn to and must state the facts constituting the grounds for such information. the claimant must have voluntarily disclosed his previously untaxed income or wealth and paid the required fifteen percent (15%) tax on such previously untaxed income or wealth imposed by P. No. No. entitlement to benefits of P. 1973. had been based upon the sworn information previously submitted as of 31 December 1973 to the BIR." Thus. 2338 as of December 31. in other words. No. and the possession. or a relative of such official or employee within the sixth degree of consanguinity. 370: "tax cases which are the subject of a valid information under R. under the Internal Revenue Code. acceptance by the BIR agents of accused Valencia's application for tax amnesty and payment of the fifteen percent (15%) special tax was no more than a ministerial duty on the part of such agents. 370. that to be entitled to the extinction of liability provided by P. laws and regulations on Immigration and Deportation. criminal or administrative liabilities. expressly excluded from the coverage of P. 370. refers not to a criminal information filed in court by a fiscal or special prosecutor. 1973. the Anti-Graft and Corrupt Practices Act. and f. 370 is that compliance with all the requirements of availment of tax amnesty under P. The first point that should be made in respect of P.d. Accused Valencia does not pretend that the BIR had actually ruled that he was . 2338" referred to in Section 1 (a) (4) of P. 8 In the instant case. the Civil Service Laws and Regulations. considering that agents of the BIR had already accepted his application for tax amnesty and his payment of the required fifteen percent (15%) special tax. Section 1 (a) (4) of P.D. No. accused Francisco Valencia had in fact already been subjected by the BIR to extensive investigation such that the criminal charges against him could not be condoned under the provisions of the amnesty statute.D." 7 In the instant case. 370. Further.D. At the time he paid the special fifteen percent (15%) tax under P.D. No. by 31 December 1973. No. or any other applicable law or proclamation.D. those two (2) affidavit-complaints had matured into two (2) criminal informations in court -Criminal Cases Nos. This contention does not persuade. Tax cases which are the subject of a valid information under Republic Act No. Property transferred by reason of death or by donation during the year 1972. Accused Valencia argued that the People were estopped from questioning his entitlement to the benefits of the tax amnesty. but rather to the sworn information or complaint filed by an informer with the BIR under R. the criminal liabilities sought to be imposed upon the accused respondents by the several informations quoted above. custody and control of locally manufactured articles subject to specific tax on which the taxes had not been paid in accordance with law. 370. as the case may be. by reason of the sworn information or affidavitcomplaints filed by informers with the BIR under Republic Act No.370. the Revised Penal Code. No. or the Secretary of Finance or any of his deputies or agents. No.A.D. not one but two (2) "informations' or affidavitcomplaints concerning private respondents' operations said to be in violation of certain provisions of the National Internal Revenue Code. 2338 may be considered "valid" where the following conditions are complied with: (1) that the information was submitted by a person other than an internal revenue or customs official or employee or other public official.D. Tax liabilities with assessment notices issued as of December 31. 2338 as of December 31. secondly.A. It should be underscored.D. the manufacture of alcoholic products subject to specific tax without having paid the annual privilege tax therefor. 370 would have the effect of condoning not just income tax liabilities but also "all internal revenue taxes including the increments or penalties on account of non-payment as well as all civil. had already been discovered by the BIR when P. The sworn information or complaint filed with the BIR under R. e. No. even assuming respondent accused Francisco Valencia was otherwise entitled to the benefits of P. the Revised Administrative Code. No. agents or examiners. and (3) that such information was not yet in the possession of the BIR or the Bureau of Customs and does not refer to "a case already pending or previously investigated or examined by the Commissioner of Internal Revenue or the Commissioner of Customs. the violations of the National Internal Revenue Code with which the respondent accused were charged. 370. 2338 in the hope of earning an informer's reward.D. No. In fact. It is necessary to note that the "valid information under Republic Act No.

" 9 which finds application in the case at bar. in order to enjoy the benefits of the tax amnesty statute here involved. In the second place. 10 Valencia's payment of the special fifteen percent (15%) tax must be regarded as legally ineffective. is never favored nor presumed in law and if granted by statute.724. SO ORDERED. 439 and 440. Jr. it is a dismissal without due process and. 370 and that the dismissal of the criminal information as against him was serious error on the part of the respondent Judge. In any case. respondent-appellee. the allegation of conspiracy made in the several criminal informations here involved. It seems appropriate to stress. deprives the State of fair opportunity to prosecute and convict.
Dakila F. It denies the prosecution its day in court.D. Republic of the Philippines SUPREME COURT Manila EN BANC G. Because of the conclusion reached above. The defense of the tax amnesty under P. much like to a tax exemption. as it were: the claimant must disclose his previously untaxed income or wealth (which then may be effectively subjected to future taxation) and surrender to the Government fifteen percent (15%) of such income or wealth. that accused Francisco Valencia was (and he was not) legally entitled to the benefits of P.
 for petitioners-appellants. 13 is hereby ORDERED to proceed with the trial of these criminal cases. Respondent Judge no longer being with the Judiciary. WHEREFORE. L-20960-61 October 31. No. 1968 COMMlSSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS.: On appeal by the Government from the decision — rendered jointly in Tax Cases Nos. Costs against private respondents. that accused Francisco Valencia was not legally entitled to the benefits of P. for that defense relates to the circumstances of a particular accused and not to the character of the acts charged in the criminal information. 370 the defense of amnesty which (hypothetically) became available to Valencia was personal to him. vs. 31 March 1976 and 17 February 1977 are hereby SET ASIDE. We turn to the second substantive issue. the branch of the Regional Trial Court of Pampanga seized of Criminal Cases Nos. The statute makes the defense of extinguishment of liability available only under very specific circumstances and on the basis of reciprocity. We conclude that the respondent Judge's error in respect of the first and second substantive issues considered above is so gross and palpable as to amount to arbitrary and capricious action and to grave abuse of discretion. There was in fact nothing that could have inured to the benefit of Valencia's co-accused. subsequent correct application of the statute and that the government is never estopped by mistake or error on the part of its agent. a personal defense. which is whether or not the dismissal by the respondent court of the criminal informations against accused Valencia. INC. that co-accused and corespondents Lee Teng and Priscilla Castillo de Cura. null and void. Office of the Solicitor General Antonio Barredo. though only arguendo. then.
 Castro & Associates for respondent-appellee. for present purposes only. petitioners-appellants. Assistant Solicitor General Felicisimo R.D. like insanity. that the BIR had so ruled. J. 964 & 984 — of the Court of Tax Appeals. A dismissal invalid for lack of a fundamental requisite.
 Rosete and Special Attorney Francisco J. must show that they have individually complied with and come within the terms of that statute. It is well-settled that: [a] purely capricious dismissal of an information as herein involved. did not have the effect of making a defense available to one co-conspirator automatically available to the other co-conspirators. a tax amnesty. No.entitled to the benefits of the tax amnesty statute. Once more. No. the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority. Accordingly. would the claimant's liability be extinguished. Lee Teng and Pricilla Castillo de Cura never pretended that they had complied with the requirements of PD No. that is. against the surviving respondent accused. there is the long familiar rule that "erroneous application and enforcement of the law by public officers do not block. the Orders of respondent Judge dated 15 July 1974. including that of reciprocity. they denied the People its day in court. such as due process. 370.
 Malate. Still further. inured to the benefit of Valencia's co-accused. will not constitute a proper basis for the claim of double jeopardy.R. moreover. Those orders effectively prevented the People from prosecuting and presenting evidence against the accused-respondents. therefore. assuming.D. PHILIPPINE ACE LINES.57 as compensating taxes on four (4) ocean-going cargo vessels acquired by . 11 The fact that conspiracy had been alleged in each of the criminal informations here involved certainly could not result in an automatic exemption of Lee Teng and Priscilla Castillo de Cura from compliance with the requirements of the tax amnesty statute. even assuming. 370 is. 18 November 1974. Inc. liable to pay the aggregate amount of P1. No. and 538-543 inclusive. nonetheless. reversing the rulings of the Commissioner of Internal Revenue holding the Philippine Ace Lines.. it may not be strictly necessary to deal with this second issue.407. and only then.
 ANGELES.

the vessels were operated and utilized by Philippine Ace Lines in its shipping business. P499. at the agreed prices of P4. alleging that the legal title and ownership of the vessels operated by it were still vested with the Reparations Commission which. The Commisioner of Customs. compensating tax. — All reparations goods obtained by the Government shall be exempt from the payment of all duties. In the meantime.Japanese Reparations Agreement of May 9. 1959. and demanded payment of the said amounts.275. While the cases were pending trial.428.073. writs of preliminary injunction were issued upon the filing of surety bonds to guarantee payment of the amounts claimed. Sometime later. and C. M/S NARRA. fees and taxes on all reparations goods obtained by it.995.47 as compensating taxes on the M/S YAKAL.A.457. joining the Commissioner of Internal Revenue. respectively. Philippine Ace Lines petitioned the court a quo to enjoin the collection of the compensating tax assessed against it and after hearing. 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. and refused to give due course to the "clearance" of said vessels as requested by their respective owner and operator — Reparations Commission and Philippine Ace Lines — unless the compensating taxes assessed against the latter were first paid to the Commissioner of Internal Revenue. 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.44. under Section 14 of the Reparations Act. for the price of P3.292. Offshoots of the controversy. the Reparations Commission agreed to sell to the Philippine Ace Lines the cargo vessel M/S YAKAL and M/S MOLAVE which were procured by the former from Japan for the enduse of the latter under the Philippine. P256. 3079 (effective June 17.T. among others. 1956. 1959. and provided as follows: SEC. they were taken to the Philippines where they were registered in the Bureau of Customs in the name of the Reparations Commission. M/S TINDALO and M/S MOLAVE. 1959. Philippine Ace Lines protested said actions of the Commissioners of Internal Revenue and of Customs. 20.10 and P305. however. the Commissioner of Internal Revenue assessed against the Philippine Ace lines the amounts of P304. Exemption from tax. 1961) which amended Republic Act No.948. referring to the purchase and sale of M/S TINDALO for the price of P7. concerning the purchase and sale of M/S NARRA under date of December 14. shall not apply to contract for the .054. The antecedent facts of the case are not in dispute and may be summarized briefly as follows: Under date of January 23. then placed the vessels under customs custody at the different ports of the Philippines where they were found at the time. but the said officials rejected the protest and ruled that the compensating taxes should first be paid.78 and. 14. Subsequent protests — calling the attention of the Commissioner of Internal Revenue and the Commissioner of Customs to the substantial loss and irreparable injury it has suffered by the tying up of the four ships in port — also proved futile.48 and P4.283. per directive to that effect by the Secretary of Finance. to the Court of Tax Appeals where they were docketed as C.A. 984. SEC. 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.00.177. Philippine Ace Lines interposed two (2) separate appeals (petitions for review) from the above rulings or decisions of the Commissioner of Internal Revenue and the Commissioner of Customs. dated November 11. concerning M/S TINDALO and M/S MOLAVE. and thereafter. Similar agreements involving two (2) other ocean-going cargo vessels were subsequently entered into by and between the same parties: one.said company from the Reparations Commission of the Philippines. and the execution of a performance bond before delivery of reparations goods. 964. Case No. Case No. All these agreements — invariably denominated as "Contract of Conditional Purchase and Sale of Reparations Goods" — stipulated. involving M/S YAKAL and M/S NARRA. This Act shall take effect upon its approval. The four (4) vessels referred to were thereafter delivered to Philippine Ace Lines in Japan. plying between ports of foreign countries and the Philippines.241.T. 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. Congress enacted Republic Act No. consular fees and the special import tax.48.00. the other. Reparations goods obtained by private parties shall be exempt from the payment of customs duties. otherwise known as the Reparations Act. fees and taxes. respectively.599. 1789.1 was exempt from payment of all duties. and of the Commissioner of Customs to place the four vessels under customs custody until the aforementioned amount claimed by the Government was first paid.

On January 25. the Court of Tax Appeals rendered a joint decision in the two cases. The Government does not deny the fact that petitioner has complied with all the requirements of law in order that it may avail itself of all the favorable provisions granted in Republic Act No. They claimed. 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." the Reparations Commission and the Philippine Ace Lines have agreed as follows: NOW THEREFORE. reversing the rulings of the Commissioner of Internal Revenue and the Commissioner of Customs. the parties herein agree to execute this renovation of contract of Conditional Purchase and Sale and the Conditional Vendor hereby transfers and conveys unto the herein Conditional Vendee the ocean-going vessels above-described .. with the allegation that "expressly implementing section 14 of Republic Act No.utilization of reparations goods already entered into by the Commission and the end-users prior to the approval of thisamendatory Act: Provided. however. as amended. submitting therewith copies of the said renovated contracts it had entered with the Reparations Commission regarding the purchase and sale of M/S MOLAVE. Petitioner claims that it is not liable on the grounds that said vessels are still owned by the Reparations Commission and that. [Emphasis supplied] Invoking the favorable provisions of the new law (Republic Act No. on condition that said applicants shall voluntarily assume all the new obligations provided in the new law. 1963. subject further to the pertinent provisions of Republic Act No. in relation to Section 14 of Republic Act 1789 before its amendment. 3079 shall be available to applicants for renovation of their utilization contracts. It had previously acquired from the latter under the Reparations Act. for and in consideration of the premises above stated and of the payments to be made by the herein Conditional Vendee as stipulated in Annex "B" hereof which is made an integral part of this contract. M/S TINDALO. that even if Philippine Ace Lines and the Reparations Commission have agreed to implement the provisions of Section 14 of Republic Act No. 1789. 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. 3079. such implementation did not relieve the Philippine Ace Lines from the payment of the compensating taxes in question. in the "Renovated Contract of Conditional Purchase and Sale of Reparations Goods" entered into between them. In providing that the favorable provisions of Republic Act No. assuming that it was liable therefor under Section 190 of the National Internal Revenue Code. as an implemented machinery. M/S YAKAL and M/S NARRA. Thereafter. This is so because of the provision that once an application for renovation of a utilization contract has been approved. including particularly the exempting provisions of Section 14 thereof relative to the exemption from payment of compensating tax which the herein Conditional Vendee. 1789. ." To deny exemption from compensating tax to one whose utilization contract has been renovated. as amended by Republic Act No. while granting the exemption to one who files an application for acquisition of reparations goods after the approval of the new law. 3079 in the aforesaid renovated contracts. contended that the favorable provisions mentioned in Section 20 of said Act which may be availed of by an applicant for renovation of his utilization contract with the Reparations Commission do not include exemption from compensating tax because such exemption is not expressly stated in the law. covering the four (4) cargo vessels. 3079 in relation to Section 14 of Republic Act No. The parties thereafter submitted the cases for decision upon a stipulation of facts containing. the said company filed a "Supplement to the Petition for Review" in each of the above entitled cases before the Court of Tax Appeals.. In their "Answer to Supplement to Petition for Review" filed with the court below by counsel for the Commissioner of Internal Revenue and the Commissioner of Customs. it is now exempt from said tax by virtue of Section 20 of Republic Act No. 1789 as amended. On the other hand. above quote Philippine Ace Lines then entered into "Renovated Contract(s) of Conditional Purchase and Sale of Reparations Goods" with the Reparations Commission. 3079. do hereby. in the following rationale: The sole issue presented for our consideration is whether or not petitioner is liable for the compensating tax on the four ocean-going vessels in question. 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. implement. It would be a manifest distortion of the literal meaning and purpose of the law. however.. the foregoing allegation was admitted.. 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. 3079. respondent claims that petitioner is liable and that the latter's liability is not affected by the exemption provision of the new law. . the facts as above set forth. by these presents. 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.. substantially. It is.

In much the same way as other statutory commands. and the extension of the grant to those whose contracts of purchase and sale were made before said date. "in order to avail of any provision of the Amendatory Act which is more favorable" to the applicant. the decisions appealed from in both cases are hereby reversed. Appellant now charges that the lower court had erred in holding that the renovation of the contracts of purchase and sale of the vessels involved in these cases. the aforementioned section 20 thus seeks. 1961. Indeed. after the approval of Republic Act No. especially the equal protection clause. if true. by the way. 3079. there could be no tax exemption of any kind whatsoever. by the way. It is true that Republic Act No. even if Congress should wish to create one. but to abolish the discrimination. purchased reparations goods procured by the Commission. 3079 would be prejudicial to the Government. by applying for the renovation of their respective utilization contracts. by the end-user. It may not be amiss to add that no tax exemption — like any other legal exemption or exception — is given without any reason therefor. meeting the first ground of appellant's contention. The argument adduced in support of the third ground is that the view adopted by the Tax Court would operate to grant exemption to particular persons. it would have provided for such exemption in clear and explicit terms. the Government has interposed the instant appeal therefrom to this Court. under Republic Act No. much less depart from the conclusion reached in Bothelo. appellants do not assail the Constitutionality of said section 14. 1961. What the fundamental law forbids is the denial of equal protection such as through unreasonable discrimination or classification. In fact. which. it is difficult to find substantial justification for the distinction between the one and the other. not to discriminate or to create an exemption or exceptions. and. It does not say so. 3079. its avowed purpose is some public benefit or interest. the Buyers therein. 1961. as amended. entitled Philippine Ace Lines to the exemption from payment of compensating tax under the provisions of the said law. Indeed. is "clear and explicit. 3079 does not explicitly declare that those who purchased reparations goods prior to June 17. from the language of said section 20. In other words. . there is no difference between the grant of exemption to said end-users. No pronouncement as to costs. after the approval of Republic Act No. section 20 of Republic Act No. it is manifest. not particular persons but persons belonging to a particular class. and that to grant such exemption to end-users who have acquired reparations goods before the approval of Republic Act No. the voluntary assumption.FOR THE FOREGOING CONSIDERATIONS. are exempt from the compensating tax. exemption or exception that would otherwise result. conferring tax exemptions thereto. tax exemptions may and do exist. that there is no constitutional injunction against granting tax exemptions to particular persons. such as the one prescribed in section 14 of Republic Act No. It should be noted..
 Bothelo Shipping Corporation. 1789. in the following wise: The inherent weakness of the last ground becomes manifest when we consider that. in favor of the end-user who bought after June 17. 1961 and against one who bought prior thereto. 3079 invoked by Philippine Ace Lines and relied upon by the decision of the court below cannot include exemption from compensating tax. 3079. however. namely. that the same intended to give such buyers the opportunity to be treated "in like manner and to the same extent as an end-user filing his application after the approval of this Amendatory Act. which the law-making body considers sufficient to offset the monetary loss entailed in the grant of the exemption." Like the "most favored nation clause" in international agreements. did not expressly authorize such exemption. of "all the new obligations provided for in" said Act. unless they comply with the proviso in Section 20 of said Act. is prejudicial thereto. the surety bonds filed by petitioner to guarantee payment of the tax in question are thereby cancelled. however. Indeed. insofar as it grants exemptions to end-users who. We find no cogent reason to modify. Furthermore. exempts from the compensating tax. it is not unusual to grant legislative franchises to specific individuals or entities. that the tax exemption contained in Section 14 of the amendatory Act cannot have retroactive application in the absence of any provision for retroactivity. because they do not really enjoy such exemption. on June 17.. Section 14 of the Law on Reparations.2 the factual setting of which is on all fours with the case at bar. Appellant's position calls to mind Commissioner of Internal Revenue vs. Accordingly. 1789." thus. speaking through Chief Justice Roberto Concepcion. in this sense. notwithstanding the fact that the vessels referred to were acquired from the Reparations Commission long before the approval of said amendatory Act which. Not satisfied with the foregoing decision of the Court of Tax Appeals. and where this Court. It is argued that the favorable provisions of Republic Act No.
 3079 exacts a valuable consideration for the retroactivity of its favorable provision. otherwise. as amended by Republic Act No. In fact. disposed of the same charge and contentions in clear and unequivocal terms. had Congress intended so. who bought reparations goods prior to June 17. From the view point of Constitutional Law. as expressed in the above-quoted . because every such exemption implies a waiver of the right to collect what otherwise would be due to the Government.

J.. for the purpose of generating electric light. mains. the pertinent provisions of which read as follows: 6. 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. As the Collector of Customs later ruled unfavorably on the protests (Nos. maintain and operate and improve gas. 8.. power stations and transmission lines in Davao City. denying the claim of Davao Light & Power Co.. that the rates of charges shall not be subject to revision by the Public Service Commission. INC. The Davao Light & Power Co.R. 10. In the Court of Tax Appeals. 120. to establish. Inc. heat and power plant in the city (then Municipality) of Davao. for the purpose of developing hydraulic power from any river..
 Barredo. develop. 3636 (Standard Electric Power & Light Franchises Law) provides: "In the event of any competing individual. for refund of the amount paid by said company as customs duties. J. Inc. L-28739 and L-28902 March 29. 267. or from any province. respondents-appellees. — That the National Power Corporation was created by virtue of Commonwealth Act No. Davao Light went to the Court of Tax Appeals. — That Section 17 of (pre-Commonwealth) Act No. special import taxes. THE COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS. it imported electrical supplies. and Davao light paid under protest. construct. 1972 DAVAO LIGHT and POWER CO. And when said official sued the action of the Collector. 268.B. vs. to sell electric power and to fix the rates and provide for the collection of the charges for any service rendered: Provided. to acquire. customs duties and taxes in the total amount of P9. 1337 and 1551. spring and waterfalls in the Philippines and supplying such power to the inhabitants thereof..L. compensating taxes and wharfage fees on the importations of electrical supplies and materials for installation and use at its power plant. No. pipes.
 Bernardo for respondents-appellees. On two different occasions in 1962. Abelardo P. and the same should resolve the identical problem now brought before Us in this proceeding. — That the petitioner (Davao Light) is a grantee of a legislative franchise under Philippine Legislature Act No. 269 and 278) and denied its claim for refund of the taxes and duties paid on the imported articles. materials and equipment for installation in its power plant. power stations and substations and other works. operate and maintain and administer power and lighting systems for the use of the Government and the general public. 7. hereafter referred to as Davao Light. Assistant Solicitor General Isidro C. is the grantee of a legislative franchise to install. heat and light in the City of Davao. heat and power for the inhabitants of Davao City and its surrounding areas and that it is presently operating and maintaining said power plant. power station and transmission lines and selling electric power. association of persons or corporation receiving either a franchise or permission from the Government of the Philippine Islands.00. — That by virtue of this authority given the National Power Corporation. to conduct a similar business in all or any substantial portion of the territory covered by this franchise to that of the grantee.. on which the Collector of Customs imposed. maintaining its claim to exemption from the taxes and duties imposable on the aforementioned motions. transmission lines. 3760. (g) it was empowered and granted authority: "To construct.
 Borromeo and Solicitor Sumilang V.. generators and other machinery in plants and/or auxiliary plants for the production of electric power. and under Section 2. auxiliary plants. WHEREFORE. reservoirs.928. lake.:p These are appeals from the decision of the Court of Tax Appeals in CTA Cases Nos. it established and constructed a power plant. the decision of the Court of Tax Appeals appealed from in these cases is affirmed. creek. city or municipality thereof. Republic of the Philippines SUPREME COURT Manila EN BANC G.. install.
 Cecilio for petitioner-appellant. operate and maintain an electric light. petitioner-appellant. the parties entered into a stipulation of facts.
 REYES." 9.
 Office of the Solicitor General Antonio P. The importations arrived in the port of Cebu City. ." . for a period of 50 years. operate and maintain power plants. 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. par. Davao Light appealed to the Commissioner of Customs. — That the petitioner was granted by the Public Service Commission its Certificate of Public Convenience and Necessity in 1931 and by virtue of said franchise has established and has been maintaining and operating a power plant generating electric light. dams. oil or steam engines and/or other prime movers. heat and power and distributing the same for sale within the municipality (now City) of Davao..opinion of the Court there.. no pronouncement as to costs.

2 In other words. its claim to exemption from taxes and customs duties on the importations in question. except real property tax. for use of the government and the general public. instead. as duly authorized in its charter. approved on 4 June 1949. At any time that the Board certifies that the Corporation is able to furnish electric power for lighting an other purposes to any office. petitioner can not rely on the provisions of Republic Act 358. which is the basic idea behind the provision. province. power stations and transmission lines in Davao City and selling electric power. and from all duties. There is no merit in petitioner's contention. municipality or other political subdivisions. it is aiding petitioner in its business operations. The provisions of this section shall also apply to firms or business owned or controlled by the National Government or by the government of any city. its provinces. 1 As envisioned by the law creating it. In its decision of 15 December 1967. and said corporation is enjoying exemption from all taxes. the NPC can not be considered as posing competition to petitioner's business. fees. 937. raising the same issue of the correctness of the imposition of taxes and customs duties on its importations of electrical supplies and materials for use in its electric plant. Sec. in its Section 17. there is evidence on record that the NPC does not sell electric lower directly to the general public. associations or corporations.12 — That under Section 2 of Republic Act No. the aforecited provision of Section 17 of Act 3636 makes mention of franchise or permit issued to "competing" individuals. 10. because Section 10 of Commonwealth Act 120 (NPC charter) made it NPC's duty to supply power to the NDC. Be that as it may. amended Section 2 (k) of Commonwealth Act 120. cities and municipalities. heat and light in said locality. Section 1 of Republic Act 358. municipality or other political subdivision of the Commonwealth of the Philippines. In operating and maintaining a power plant. Secondly. the Court holding that the tax exemption privileges granted to the National Power Corporation were intended to benefit only said government corporation and did not extend to other bodies or entities. association of persons or corporation" shall ipso facto become part of a franchise earlier issued. the provision of Republic Act 987 granting tax exemption privileges to the National Power Corporation ipso facto became part of its franchise. engaged in the same business. the activity to be pursued by the NPC can hardly be motivated by profit or income. the NPC is even the source of petitioner's merchandise. province. etc. charges and restrictions of the Republic of the Philippines. the National Government and the government of said city. as amended by Republic Act No. shop. imposts. was specifically created to undertake the development of hydraulic power throughout the country and the production of power from other sources. Petitioner in this instance reiterates the contention that is legislative franchise to construct. association. As the National Power Corporation (NPC) is actually operating a power plant. province. fees. such an isolated case of sale of electric power to one government-owned plant would not be enough to classify the NPC as a "competing" concern to petitioner's enterprise. it did sell lower to petitioner for resale to the latter's customers. provides that any favorable terms granted to any "competing individual. as amended by Republic Act 987 3." It was therein petitioner's contention that pursuant to Section 17 of Act 3636. the National Power Corporation shall exempt from all taxes. Davao Light thus brought the present petition for review in this Court. 358. duties. The idea is to place both competing groups or entities on equal footing and not to give one an advantage over the other. which Act. not competing with it. This principle of fair play. or establishment operated and/or owned or controlled by the National Government or by any city. on the other hand. etc. Nor would the fact that the NPC supplies electric power to the National Development Company (NDC) plant in Davao justify the claim that the NPC is a competitor to petitioner's business. Firstly. to support its claim for tax exemption. which authorized the NPC to "contract indebtedness and issue bonds subject to the approval of the . shall automatically be considered incorporated in the franchise or permit earlier issued to another individual. it is argued that such tax exemption benefits ipso facto became part of its franchise and are not available to petitioner. municipality or other political subdivision shall be compelled to secure from the Corporation as soon as practicable such electric power as it may need for lighting and the operation of its offices. does not find operation in the present case. In fact. maintain and operate an electric light. it is provided that "to facilitate payment of its indebtedness. the Court of Tax Appeals affirmed the ruling of the Customs Commissioner. power stations and transmission lines in Davao City. hence. which must be assumed to be catering to the general public to which the NPC has no dealing. by express provision of law favorable terms contained in a subsequent franchise issued to an individual. heat and power system (granted by Act 3760) was specifically made subject to Act 3636. The NPC. imposts and charges collectible by the government. shops or establishments or for any work undertaken by it. It is undeniable that petitioner's purpose in securing a franchise to establish and operate an electric plant and power stations was to engage in a business or profit-making venture. In short. association.

FOR THE FOREGOING CONSIDERATIONS. On the same day. the National Power Corporation shall be exempt from all taxes. must be construed as intended to benefit only the NPC. on behalf of the NPC. absolutely and unconditionally. 5 for tax exemption to be recognized.President of the Philippines. In granting such tax exemption. its provinces. authorizing the President of the Philippines to negotiate and contract loans from time to time from the International Bank for Reconstruction and Development. 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. imposts. peculiar only to the NPC. The legal principle on the matter is firmly established and well-observed: exemption from taxation is never presumed. as primary obligator and not merely as surety. notably Republic Act 357. Then in its Section 2. fees. the lawmakers expecting (as so unequivocally expressed in the law) that by relieving said corporation of tax obligations. 6 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. To facilitate payment of its indebtedness. and municipalities. duties. and restrictions of the Republic of the Philippines. charges. the decision of the Court of Tax Appeals is hereby affirmed. the payment of loans therefore contracted. the absolute lack of basis for awarding of equal privileges (granted to the NPC) to said petitioner. 4 The provisions of Section 2 of Republic Act 358 granting tax exemption to the NPC." (emphasis supplied). 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 grant must be clear and expressed. Republic Act 357 was approved. the same law provided: SEC 2. the government actually waived its right to collect taxes from the NPC in order to facilitate the liquidation by said corporation of its liabilities. it cannot be made to rest on vague implications. cities. and to guarantee. the NPC would be enabled to pay easily its indebtedness or whatever indebtedness it is certain to incur. with costs against the petitioner. Such condition. upon recommendation of the Secretary of Finance" in an amount not to exceed one hundred seventy million five hundred pesos. taken in the light of the existing legislation affecting the NPC. 4 June 1949. Similarly. cannot be said to exist in petitioner's case. hence.