Borja v. Collector of Internal Revenue
REITERATIONFacts
The Antecedents: Petitioner Consuelo P. Borja, a grantee of a legislative franchise (Act No. 3810) to operate an electric light, heat, and power system in Iligan City, imported electrical materials and equipment from Japan during the years 1953, 1954, and 1955. She paid a compensating tax of P4,104.25 on these importations. Procedural History: Petitioner sought a refund of P3,977.62 from the Collector of Internal Revenue. Before the claim was acted upon, she filed a petition for review with the Court of Tax Appeals (CTA). The CTA denied her claim for refund, prompting the present appeal. The Petition: The core issue is whether petitioner is exempt from the compensating tax under her franchise (Act No. 3810 and Act No. 3636 incorporated therein) on the imported electrical materials and equipment.
Issue(s)
Whether petitioner is exempt from the payment of the compensatory tax on imported electrical materials and equipment under her legislative franchise. Whether the exemption clause in the franchise, which states that the grantee shall pay the same taxes as others and that certain taxes shall be in lieu of others and the grantee is expressly exempted therefrom, extends to compensating taxes on imported goods.
Ruling
The petition for review is dismissed, and the decision of the Court of Tax Appeals denying the claim for refund is affirmed in toto.
Ratio Decidendi
On whether petitioner is exempt from the payment of the compensatory tax on imported electrical materials and equipment under her legislative franchise: The Court held that the petitioner is not exempt from the compensating tax. While the franchise granted certain exemptions, these were specifically enumerated and did not clearly and manifestly include exemption from compensating tax on imported goods. The Court emphasized that exemptions from taxation are highly disfavored and must be granted by the clearest grant of law. The purpose of the compensating tax is to place importers of goods from abroad on an equal footing with those who purchase goods locally, who bear the burden of sales tax. Allowing exemption would create an inequality, contrary to the intent of the law. On whether the exemption clause in the franchise extends to compensating taxes on imported goods: The Court clarified that the exemption provided in Section 10 of Act No. 3636, incorporated into petitioner's franchise, pertains to taxes on installations and the franchise itself, not to compensating taxes on importations. The phrase "in lieu of any and all taxes of any kind, nature or description levied, established, or collected by any authority whatsoever... on its franchise, rights, privileges, receipts, revenues and profits, from which taxes the grantee is hereby expressly exempted" was interpreted to cover taxes directly related to the operation and franchise, not the acquisition of necessary equipment from abroad. The Court relied on the principle of stare decisis, citing the case of Panay Electric Co. vs. Collector of Internal Revenue, which involved a similar franchise and issue, and found no substantial dissimilarity to warrant a departure from the established ruling. The Court reiterated that any claim for exemption must be clear and manifest, and vague implications are insufficient to grant such exemption.
Main Doctrine
A legislative franchise granting exemption from certain taxes does not automatically exempt the grantee from the payment of compensating tax on imported goods, especially when such exemption is not clearly and manifestly stated, and considering the purpose of the compensating tax to equalize tax burdens.