Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

122605 April 30, 2001

SEA-LAND SERVICE, INC., petitioner, vs. COURT O APPEALS !"# COMMISSIONER O INTERNAL REVENUE, respondents. PARDO, J.$ T%& C!'& ppeal via certiorari fro! the decision of the "ourt of ppeals affir!in# in toto that of the "ourt of Ta$ ppeals %hich denied petitioner&s clai! for ta$ credit or refund of inco!e ta$ paid on its #ross Philippine billin#s for ta$able 'ear ()*+, in the a!ount of P*,-,-)..(/. ( T%& !()' The facts, as found b' the "ourt of ppeals, are as follo%s0 1Sea23and Service Incorporated 4S5 23 ND6, an !erican international shippin# co!pan' licensed b' the Securities and 5$chan#e "o!!ission to do business in the Philippines entered into a contract %ith the 7nited States 8overn!ent to transport !ilitar' household #oods and effects of 7.S. !ilitar' personnel assi#ned to the Subic Naval 9ase. 1Fro! the aforesaid contract, S5 23 ND derived an inco!e for the ta$able 'ear ()*+ a!ountin# to P:*,--;,/-,.:+. Durin# the ta$able 'ear in <uestion, S5 2 3 ND filed %ith the 9ureau of Internal Revenue 49IR6 the correspondin# corporate Inco!e Ta$ Return 4ITR6 and paid the inco!e ta$ due thereon of (.:= as re<uired in Section /: 4a64/6 of the National Internal Revenue "ode 4NIR"6 in relation to rticle ) of the RP27S Ta$ Treat', a!ountin# to P*,-,-)..(/. 1"lai!in# that it paid the afore!entioned inco!e ta$ b' !ista>e, a %ritten clai! for refund %as filed %ith the 9IR on (: pril ()*,. ?o%ever, before the said clai! for refund could be acted upon b' public respondent "o!!issioner of Internal Revenue, petitioner2appellant filed a petition for revie% %ith the "T doc>eted as "T "ase No. +(+), to @udiciall' pursue its clai! for refund and to stop the runnin# of the t%o2'ear prescriptive period under the then Section /+. of the NIR". 1On /( Februar' ()):, "T rendered its decision den'in# S5 23 ND&s clai! for refund of the inco!e ta$ it paid in ()*+.1 / On March .-, ()):, petitioner appealed the decision of the "ourt of Ta$ ppeals to the "ourt of ppeals.. fter due proceedin#s, on October /;, ()):, the "ourt of ppeals pro!ul#ated its decision dis!issin# the appeal and affir!in# in toto the decision of the "ourt of Ta$ ppeals.+ ?ence, this petition.:

T%& I''*& The issue raised is %hether or not the inco!e that petitioner derived fro! services in transportin# the household #oods and effects of 7.S. !ilitar' personnel falls %ithin the ta$ e$e!ption provided in rticle AII, para#raph + of the RP27S Militar' 9ases #ree!ent. T%& Co*r)+' R*li", Be den' the petition. The RP27S Militar' 9ases #ree!ent provides0 1No national of the 7nited States, or corporation or#aniCed under the la%s of the 7nited States, shall be liable to pa' inco!e ta$ in the Philippines in respect of an' profits derived under a contract !ade in the 7nited States %ith the #overn!ent of the 7nited States in connection %ith the construction, !aintenance, operation and defense of the bases, or an' ta$ in the nature of a license in respect of an' service or %or> for the 7nited States in connection %ith the construction, !aintenance, operation and defense of the bases.1 ; Petitioner Sea23and Service, Inc. a 7S shippin# co!pan' licensed to do business in the Philippines earned inco!e durin# ta$able 'ear ()*+ a!ountin# to P:*,--;,/-,.:+, and paid inco!e ta$ thereon of (.:= a!ountin# to P*,-,-)..(/. The <uestion is %hether petitioner is e$e!pted fro! the pa'!ent of inco!e ta$ on its revenue earned fro! the transport or ship!ent of household #oods and effects of 7S personnel assi#ned at Subic Naval 9ase. 13a%s #rantin# e$e!ption fro! ta$ are construed strictissimi juris a#ainst the ta$pa'er and liberall' in favor of the ta$in# po%er. Ta$ation is the rule and e$e!ption is the e$ception.1 , The la% 1does not loo> %ith favor on ta$ e$e!ptions and that he %ho %ould see> to be thus privile#ed !ust @ustif' it b' %ords too plain to be !ista>en andtoo cate#orical to be !isinterpreted.1* 7nder rticle AII 4+6 of the RP27S Militar' 9ases #ree!ent, the Philippine 8overn!ent a#reed to e$e!pt fro! pa'!ent of Philippine inco!e ta$ nationals of the 7nited States, or corporations or#aniCed under the la%s of the 7nited States, residents in the 7nited States in respect of an' profit derived under a contract !ade in the 7nited States %ith the 8overn!ent of the 7nited States in connection %ith the (o"')r*()io", -!i")&"!"(&, op&r!)io" !"# #&.&"'& o. )%& /!'&'. It is obvious that the transport or ship!ent of household #oods and effects of 7.S. !ilitar' personnel is not included in the ter! 1construction, !aintenance, operation and defense of the bases.1 Neither could the perfor!ance of this service to the 7.S. #overn!ent be interpreted as directl' related to the defense and securit' of the Philippine territories. 1Bhen the la% spea>s in clear and cate#orical lan#ua#e, there is no reason for interpretation or construction, but onl' for application.1) n' interpretation that %ould #ive it an e$pansive construction to enco!pass petitioner&s e$e!ption fro! ta$ation %ould be un%arranted. The avo%ed purpose of ta$ e$e!ption 1is so!e public benefit or interest, %hich the la%!a>in# bod' considers sufficient to offset the !onetar' loss entailed in the #rant of the e$e!ption.1 (- The haulin# or transport of household #oods and personal effects of 7. S. !ilitar' personnel %ould not directl' contribute to the defense and securit' of the Philippines. Be see no reason to reverse the rulin# of the "ourt of ppeals, %hich affir!ed the decision of the "ourt of Ta$ ppeals. The Supre!e 1"ourt %ill not set aside li#htl' the conclusion reached

b' the "ourt of Ta$ ppeals %hich, b' the ver' nature of its function, is dedicated e$clusivel' to the consideration of ta$ proble!s and has necessaril' developed an e$pertise on the sub@ect, unless there has been an abuse or i!provident e$ercise of authorit'.1 (( ?ence, the "ourt of ppeals did not err or #ravel' abuse its discretion in dis!issin# the petition for revie%. Be can not #rant the petition.
1wphi1.nt

T%& 0*#,-&") 12ERE ORE, the "ourt DENIES the petition for lac> of !erit. No costs. SO ORDERED. Davide, Jr., Puno, Kapunan, and Ynares-Santiago, JJ., concur. oo)"o)& In " 28. R. SP No. .;,);, pro!ul#ated on October /;, ()):, Rollo, pp. .,2+(. Dacinto, D., ponente, Monto'a and #caoili, DD., concurrin#.
(

/ Ibid., at pp. .,2.*.

.

Doc>eted as " 28. R. SP No. .;,);. Supra, Note (.

Filed on Dece!ber //, ()):. Rollo, pp. (+2.;2 . On March ((, ());, the "ourt re<uired respondents to co!!ent on the petition %ithin ten 4(-6 da's fro! notice. Rollo, p. ++. On Septe!ber /., ());, respondent "o!!issioner of Internal Revenue filed his co!!ent. Rollo, pp. ;(2;,.
:

#ree!ent bet%een the Republic of the Philippines and the 7nited States of !erica concernin# Militar' 9ases, rticle AII 4+6.
;

"'na!id Philippines, Inc. v. "ourt of ppeals, .// S"R ;.), ;:- E/---F, citin# "o!!issioner of Internal Revenue v. Mitsubishi Metal "orporation, (*( S"R /(+, //.2 //+ E())-F.
,

* "o!!issioner of Internal Revenue v. P. D. Giener "o., 3td., ;: S"R (+/, (:. E(),:F, citin# Rea#an v. "o!!issioner of Internal Revenue, (+( Phil. ;/(, ;.. E();)F. Republic v. "ourt of ppeals, .:) Phil. :.-, ::) E())*F, citin# 3and 9an> of the Philippines v. "ourt of ppeals, ./, Phil. (-+,, (-:/ E());F.
)

"o!!issioner of Internal Revenue v. 9otelho Shipplin# corp., (/; Phil. *+;, *:( E();,F.
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"'ana!id Philippines, Inc. v. "ourt of ppeals, supra, Note ;,at p. ;:+, citin# "o!!issioner of Internal Revenue v. "ourt of ppeals, ..* Phil. .//, ..;2.., E()),F.
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