GR L 20942; (September, 1967) (Digest)
G.R. No. L-20942 September 22, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. A. D. GUERRERO, Special Administrator, in substitution of NATHANIEL I. GUNN, as Administrator of the Estate of the late PAUL I. GUNN, respondent.
FACTS
The respondent, as special administrator of the estate of the late Paul I. Gunn (an American national who operated an air transportation business under the name Philippine Aviation Development), filed a claim for a refund of P2,441.93 with the Commissioner of Internal Revenue. The claim represented 50% of the specific taxes paid on aviation gasoline used from October 3, 1956, to May 31, 1957, pursuant to Section 142 of the National Internal Revenue Code, which allowed such a refund to Filipino citizens. The estate claimed entitlement to this refund based on the Ordinance appended to the Philippine Constitution, which granted citizens of the United States and business enterprises owned or controlled by them the right to operate public utilities “in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.” The Commissioner of Internal Revenue denied the claim, ruling that the tax refund was not included under the Ordinance and that, under the statute, a similar exemption must be shown to be granted by the United States to Filipinos. The Court of Tax Appeals reversed the Commissioner and ordered the refund. The Commissioner appealed to the Supreme Court.
ISSUE
Whether or not the tax refund privilege under Section 142 of the National Internal Revenue Code, available to Filipino citizens, can be availed of by the estate of an American national based on the parity rights granted under the Ordinance appended to the Constitution.
RULING
No. The Supreme Court reversed the decision of the Court of Tax Appeals and sustained the Commissioner of Internal Revenue. The Court held that the tax refund, being in reality a tax exemption, must be strictly construed against the taxpayer. The Ordinance does not contain any categorical declaration granting tax exemptions or refunds; it only guarantees the right to operate public utilities under the same conditions as Filipino citizens. This language does not expressly or impliedly include exemptions from taxation. The Court emphasized the settled doctrine that tax exemptions are not favored, are never presumed, and must be construed in strictissimi juris against the claimant. The historical background of the Ordinance, enacted in the context of post-war economic conditions and the Philippine Trade Act of 1946, did not indicate an intent to surrender the state’s power of taxation. Therefore, the respondent estate failed to justify its claim for a tax refund under the Ordinance.