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G.R. No.

L- 41383 August 15, 1988

PHILIPPINE AIRLINES, INC., plaintiff-appellant,
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO
CARBONELL, in his capacity as National Treasurer, defendants-appellants.


The disputed registration fees were imposed by the commissioner Elevate pursuant to
Section 8, RA 4136,the Land Transportation and Traffic Code.PAL as a corporation is engaged in
the air transportation business under the legislative franchise. Under its franchise, PAL is
exempt from the payment of taxes. In 1971 however, appellee Commissioner elevate issued a
regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration
fees. Despite PALs protest, appellee refused to register the appellant’s motor vehicles unless
the amounts imposed were paid. PAL thus paid, under protest, P19, 529.75 as registration fees
of its motor vehicles. After paying under protest, PAL wrote to Commissioner Edu demanding a
refund of the amounts paid, invoking Calalang vs. Lorenzo where it was held that motor vehicle
registration fees are in reality taxes from thepayment of which PAL is exempt by virtue of its
legislative franchise.Edu denied request for refund based on Republic v. Phil. Rabbit Bus, that
motor vehicle registration fees are regulatory and not revenue measures and, therefore, do not
come within the exemption granted to PAL under itsfranchise.PAL filed the complaint against
LTC Commissioner EDu and National Treasurer Carbonell.


Are motor vehicle registration fees taxes or regulatory taxes?


They are taxes. Tax are for revenue, whereas fees are exactions for purposes of
regulation and inspection, and are for that reason limited in amount to what is necessary to
cover the cost of the services rendered in that connection.

It is the object of the charge, and not the name, that determines whether a charge is a
tax or a fee. The money collected under the Motor Vehicle Law is not intended for the
expenditures of the Motor Vehicle Law is not intended for the expenditures of the Motor
Vehicles Office but accrues to the funds for the construction and maintenance of public roads,
streets and bridges.

As the fees are not collected for regulatory purposes as an incident to the enforcement
of regulations governing the operation of motor vehicles on public highways, but to provide

CTA reversed its earlier ruling and ordered petitioner to issue a Tax Credit Certificate in favor of respondent citing CA GR SP No. For said period respondent granted a total of ₱ 904. FACTS: Respondent is a domestic corporation engaged in the retailing of medicines and other pharmaceutical products. Moreover. CA affirmed CTA decision reasoning that RA 7432 required neither a tax liability nor a payment of taxes by private establishments prior to the availment of a tax credit.revenue with which the Government is to construct and maintain public highways for everyone’s use. not merely fees. 1968 to April 9.00 alledgedly arising from the 20% sales discount. ISSUE: Whether or not respondent. G. On April 15. respondent filed its annual ITR for taxable year 1996 declaring therein net losses. except for the period between June 27. thus. they are veritable taxes. such credit is not tantamount to an unintended benefit from the law. Respondent. vs. CENTRAL LUZON DRUG CORPORATION. despite incurring a net loss. vs. 159647 April 15. Central Luzon Drug Corp.” From January to December 1996 respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant to RA 7432. PAL is.R. exempt from paying such fees. In 1996 it operated six (6) drugstores under the business name and style “Mercury Drug. 2005 COMMISSIONER OF INTERNAL REVENUE. On Jan. 1997. Unable to obtain affirmative response from petitioner. 1998 respondent filed with petitioner a claim for tax refund/credit of ₱ 904. 60057 (May 31. CTA dismissed the same but on MR. 229 of RA 7432 deals exclusively with illegally collected or erroneously paid taxes but that there are other situations which may warrant a tax credit/refund. but rather a just compensation for the taking of private property for public use. where its tax exception in the franchise was repealed. 2001. No.769. 16. . respondent elevated its claim to the CTA via Petition for Review. Petitioners.769. 1979. CIR) citing that Sec. may still claim the 20% sales discount as a tax credit.

There will be no reason for deducting the latter when there is. and no other taxes are currently due from. A tax credit should be understood in relation to other tax concepts.RULING: Yes. The latter may then claim the cost of the discount as a tax credit. One of these is tax deduction – which is subtraction “from income for tax purposes. the availment or use is not. there will obviously be no tax liability against which any tax credit can be applied. While the grant is mandatory. to begin with. as will be presented shortly. Such credit can be claimed even if the establishment operates at a loss.” It is an “allowance against the tax itself” or “a deduction from what is owed” by a taxpayer to the government. any tax credit application will be useless. . Without that liability. the existence of a tax credit or its grant by law is not the same as the availment or use of such credit. A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability. tax deduction reduces the income subject to tax in order to arrive at the taxable income. it is clear that Sec. A tax credit is used to reduce directly the tax that is due. If a net loss is reported by. there ought to be a tax liability before the tax credit can be applied. a business establishment. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their purchase of medicine from any private establishment in the country.” In other words. However.” or an amount that is “allowed by law to reduce income prior to the application of the tax rate to compute the amount of tax which is due. no existing obligation to the government. For the establishment to choose the immediate availment of a tax credit will be premature and impracticable. whereas a tax credit reduces the tax due.