G.R. No. L-68252. May 26, 1995.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC., and COURT OF TAX APPEALS, respondents.

FACTS

Private respondent Tokyo Shipping Co. Ltd., a foreign corporation, chartered its vessel M/V Gardenia to NASUTRA in December 1980 to load raw sugar in the Philippines. Its agent prepaid income and common carrier’s taxes totaling P107,142.75 based on expected gross receipts. Upon arrival at the designated port, however, there was no sugar available for loading. Consequently, the vessel sailed for Japan without any cargo on January 10, 1981, resulting in the charterer realizing no gross receipts from the voyage.
Private respondent filed a claim for refund or tax credit with the Commissioner of Internal Revenue on March 23, 1981, asserting the prepayment was erroneous due to the absence of actual receipt. The Commissioner failed to act, prompting a petition before the Court of Tax Appeals (CTA). The CTA ruled in favor of Tokyo Shipping, ordering the refund. The Commissioner’s motion for reconsideration was denied, leading to this petition.

ISSUE

Whether private respondent Tokyo Shipping Co. Ltd. is entitled to a refund of the prepaid income and common carrier’s taxes.

RULING

Yes, the Supreme Court affirmed the CTA decision and granted the refund. The legal logic is anchored on the fundamental principle that a tax liability for income and common carrier’s tax under the then Section 24(b)(2) of the National Internal Revenue Code is predicated on the actual derivation of gross receipts or income from sources within the Philippines. Since the chartered vessel sailed without cargo and thus generated zero gross receipts from the cancelled charter, no tax liability ever accrued. The prepayment, calculated on an anticipated income that never materialized, was therefore erroneously collected.
The Court rejected the Commissioner’s arguments regarding burden of proof and suppression of evidence. It held that private respondent satisfactorily discharged its burden by presenting unrebutted evidence, including a certification from customs authorities, that the vessel departed without cargo. The government’s own Bureau of Internal Revenue examiners had recommended approval of the refund. The Court emphasized that the government’s duty to refund erroneously collected taxes must be performed without unreasonable delay, noting the inequity of a 15-year litigation over a clear case of erroneous payment. The claim was filed within the two-year prescriptive period, fulfilling all statutory requirements for a valid refund.