William C.
Reagan, Petitioner vs The respondent after deducting the landed
Commission of Internal Revenue
G.R. No. L – 26379; December 27, 1969
TOPIC: Territoriality
Nothing is better settled than that the
Philippines being independent and
sovereign, its authority may be exercised
over its entire domain.
There is no portion thereof that is beyond its
power. Within its limits, its decrees are
supreme, its commands paramount. Its
laws govern therein, and everyone to whom
it applies must submit to its terms. That is
the extent of its jurisdiction, both territorial
and personal. Necessarily, likewise, it has
to be exclusive. If it were not thus, there is a
diminution of its sovereignty.
FACTS:
The petitioner is a citizen of the United State
and an employee of Bendix Radio, Divison
of Bendix Aviation Corporation, which
provided technical assistance to the United
States Air Force was assigned at the Clark
Air Base Pampanga, honor about July 7, 19.
Nine months, before his tour duty expires,
petitioner imported a tax free 1960 Cadillac
car which valued at $6443.83. More than
two months after the car was imported,
petitioner requested the Clark Air Base
Commander for a permit to sell the car. The
request was granted with the condition that
he would sell it to a member of the United
States Armed Forces or an employee of the
U.S. Military Bases.
On July 11, 1960, petitioner sold the car to
Willie Johnson for $6600, a private in US
Marine Corps, Sangby Point, Cavite as
shown by a bill of sale executed at Clark Air
Base. On the same date William Johnson
Jr. sold the car to Fred Meneses for
P32,000 as evidence by a deed of sale
executed in Manila.
cost of the car and the personal exemption
which the petitioner was entitled, fixed as
his net income arising from such transaction
the amount of P17912.34 rendering him
liable for income tax of P2979.00. After
paying the sum, he sought refund from the
respondent claiming that he is exempted.
He filed a case within the Court of Tax
Appeals seeking recovery of the sum
P2979.00 plus legal rate of interest.
ISSUE:
Whether or not the said income tax of
P2979.00 was legally collected by
respondent from petitioner.
HELD:
The Philippine is an independent and
sovereign country or state. Its authority may
be exercised over its entire domain. Its laws
govern therein and everyone to whom it
applies must submit to its term. It does not
prelude from allowing another power to
participate in the exercise of jurisdictional
rights over certain portions of its territory.
Such areas sustain their status as native
soil and still subject to its authority. Its
jurisdiction may be diminished but it does
not disappear.
The Clark Air Base is one of he bases under
lease to the American armed forces by
virtue of the Military Bases Agreement
which states that a “national of the US
serving or employed in the Philippines in
connection with the construction,
maintenance, operation, or defense of the
bases and residing in the Philippines only
by reason such unemployment is not to be
taxed on his income unless derived in the
bases which one clearly derived the Phil.
Therefore, the Supreme Court sustained the
decision of the Court of Tax Appeals
rendering the petitioner liable of the income
tax arising from the sale of his automobile
that have taken place in Clark Air Field
which is within our territory to tax.