FELS ENERGY, INC., G.R. No.

168557
Petitioner,

-versus-

THE PROVINCE OF BATANGAS and

THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS,
Respondents.
x----------------------------------------------------x
NATIONAL POWER CORPORATION, G.R. No. 170628
Petitioner,
Present:

YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
LOCAL BOARD OF ASSESSMENT CHICO-NAZARIO, JJ.
APPEALS OF BATANGAS, LAURO C.
ANDAYA, in his capacity as the Assessor
of the Province of Batangas, and the Promulgated:
PROVINCE OF BATANGAS represented
by its Provincial Assessor, February 16, 2007
Respondents.
x--------------------------------------------------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628,
which were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation
(NPC), respectively. The first is a petition for review on certiorari assailing the August 25,
2004 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its
Resolution[2] dated June 20, 2005; the second, also a petition for review on certiorari,
challenges the February 9, 2005 Decision[3] and November 23, 2005 Resolution[4] of the CA
in CA-G.R. SP No. 67491. Both petitions were dismissed on the ground of prescription.
The pertinent facts are as follows:

On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30
MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement[5] (Agreement), was for a period of five
years. Article 10 reads:

10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all
taxes, import duties, fees, charges and other levies imposed by the National Government of
the Republic of the Philippines or any agency or instrumentality thereof to
which POLAR may be or become subject to or in relation to the performance of their
obligations under this agreement (other than (i) taxes imposed or calculated on the basis of the
net income of POLAR and Personal Income Taxes of its employees and (ii) construction
permit fees, environmental permit fees and other similar fees and charges) and (b) all real
estate taxes and assessments, rates and other charges in respect of the Power Barges. [6]

Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The
NPC initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the
Agreement.

On August 7, 1995, FELS received an assessment of real property taxes on the power
barges from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which
likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred
the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate
taxes. It then gave NPC the full power and authority to represent it in any conference
regarding the real property assessment of the Provincial Assessor.

In a letter[7] dated September 7, 1995, NPC sought reconsideration of the Provincial

Assessors decision to assess real property taxes on the power barges. However, the motion
was denied on September 22, 1995, and the Provincial Assessor advised NPC to pay the
assessment.[8] This prompted NPC to file a petition with the Local Board of Assessment
Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as
non-taxable items; it also prayed that should LBAA find the barges to be taxable, the
Provincial Assessor be directed to make the necessary corrections. [9]

In its Answer to the petition, the Provincial Assessor averred that the barges were real
property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the
LBAA that the Department of Finance (DOF) had rendered an opinion[10] dated May 20, 1996,
where it is clearly stated that power barges are not real property subject to real property
assessment.
On August 26, 1996, the LBAA rendered a Resolution[11] denying the petition.
The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate
tax in the amount of P56,184,088.40, for the year 1994.

SO ORDERED.[12]

The LBAA ruled that the power plant facilities, while they may be classified as movable or
personal property, are nevertheless considered real property for taxation purposes because
they are installed at a specific location with a character of permanency. The LBAA also
pointed out that the owner of the bargesFELS, a private corporationis the one being taxed, not
NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a privilege can only be granted to
NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was
filed out of time.

Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals
(CBAA).

On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and
Warrant by Distraint[13] over the power barges, seeking to collect real property taxes
amounting to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially
served to FELS on November 8, 1996. It then filed a Motion to Lift Levy dated November 14,
1996, praying that the Provincial Assessor be further restrained by the CBAA from enforcing
the disputed assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order[14] lifting the levy and distraint on the
properties of FELS in order not to preempt and render ineffectual, nugatory and illusory any
resolution or judgment which the Board would issue.

Meantime, the NPC filed a Motion for Intervention[15] dated August 7, 1998 in the
proceedings before the CBAA. This was approved by the CBAA in an
Order[16] dated September 22, 1998.

During the pendency of the case, both FELS and NPC filed several motions to admit bond to
guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event
that the judgment be unfavorable to them). The bonds were duly approved by the CBAA.

On April 6, 2000, the CBAA rendered a Decision[17] finding the power barges exempt from
real property tax. The dispositive portion reads:

WHEREFORE, the Resolution of the Local Board of Assessment Appeals of

the Province of Batangas is hereby reversed. Respondent-appellee Provincial Assessor of
the Province of Batangas is hereby ordered to drop subject property under ARP/Tax
Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll. The
Provincial Treasurer of Batangas is hereby directed to act accordingly.

SO ORDERED.[18]

Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC;
since they are actually, directly and exclusively used by it, the power barges are covered by
the exemptions under Section 234(c) of R.A. No. 7160.[19] As to the other jurisdictional issue,
the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax
exemption in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a
motion for reconsideration, which was opposed by FELS and NPC.

In a complete volte face, the CBAA issued a Resolution[20] on July 31, 2001 reversing
its earlier decision. The fallo of the resolution reads:

WHEREFORE, premises considered, it is the resolution of this Board that:

(a) The decision of the Board dated 6 April 2000 is hereby reversed.

(b) The petition of FELS, as well as the intervention of NPC, is dismissed.

 (c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby
affirmed,

(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is
likewise hereby affirmed.

SO ORDERED.[21]

FELS and NPC filed separate motions for reconsideration, which were timely opposed
by the Provincial Assessor. The CBAA denied the said motions in a
Resolution[22] dated October 19, 2001.

Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP
No. 67490. Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.

On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R.

SP No. 67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution[23] dated February 12, 2002, the appellate court directed NPC to re-file its motion
for consolidation with CA-G.R. SP No. 67491, since it is the ponente of the latter petition
who should resolve the request for reconsideration.

NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth
Division of the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the
petition on the ground of prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed
Resolutions dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment
Appeals are AFFIRMED.

SO ORDERED.[24]

On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal
of the appellate courts decision in CA-G.R. SP No. 67490.

Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court,
docketed as G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No.
67490. The petition was, however, denied in this Courts Resolution [25] of November 8, 2004,
for NPCs failure to sufficiently show that the CA committed any reversible error in the
challenged decision. NPC filed a motion for reconsideration, which the Court denied with
finality in a Resolution[26] dated January 19, 2005.

Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that
the right to question the assessment of the Provincial Assessor had already prescribed upon
the failure of FELS to appeal the disputed assessment to the LBAA within the period
prescribed by law. Since FELS had lost the right to question the assessment, the right of the
Provincial Government to collect the tax was already absolute.

NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of
the February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a
Resolution[27] dated November 23, 2005.

The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier
denied for lack of merit in a Resolution[28] dated June 20, 2005.

On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this
Court, raising the following issues:

A.
Whether power barges, which are floating and movable, are personal properties and therefore,
not subject to real property tax.

B.
Assuming that the subject power barges are real properties, whether they are exempt from real
estate tax under Section 234 of the Local Government Code (LGC).

C.
Assuming arguendo that the subject power barges are subject to real estate tax, whether or not
it should be NPC which should be made to pay the same under the law.

D.
Assuming arguendo that the subject power barges are real properties, whether or not the same
is subject to depreciation just like any other personal properties.

E.
Whether the right of the petitioner to question the patently null and void real property tax
assessment on the petitioners personal properties is imprescriptible.[29]
 On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No.
170628), indicating the following errors committed by the CA:

I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO
THE LBAA WAS FILED OUT OF TIME.

II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.

III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH
LAW.[30]

Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution[31] dated March 8, 2006.

In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit
their respective Memoranda within 30 days from notice. Almost a year passed but the parties
had not submitted their respective memoranda. Considering that taxesthe lifeblood of our
economyare involved in the present controversy, the Court was prompted to dispense with the
said pleadings, with the end view of advancing the interests of justice and avoiding further
delay.

In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-
barred. FELS argues that when NPC moved to have the assessment reconsidered
on September 7, 1995, the running of the period to file an appeal with the LBAA was tolled.
For its part, NPC posits that the 60-day period for appealing to the LBAA should be reckoned
from its receipt of the denial of its motion for reconsideration.

Petitioners contentions are bereft of merit.

 Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of
1991, provides:

SECTION 226. Local Board of Assessment Appeals. Any owner or person having
legal interest in the property who is not satisfied with the action of the provincial, city or
municipal assessor in the assessment of his property may, within sixty (60) days from the date
of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of
the province or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in
support of the appeal.

We note that the notice of assessment which the Provincial Assessor sent to FELS on August
7, 1995, contained the following statement:

If you are not satisfied with this assessment, you may, within sixty (60) days from the date of
receipt hereof, appeal to the Board of Assessment Appeals of the province by filing a petition
under oath on the form prescribed for the purpose, together with copies of ARP/Tax
Declaration and such affidavits or documents submitted in support of the appeal.[32]

Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC
opted to file a motion for reconsideration of the Provincial Assessors decision, a remedy not
sanctioned by law.

The remedy of appeal to the LBAA is available from an adverse ruling or action of the
provincial, city or municipal assessor in the assessment of the property. It follows then that
the determination made by the respondent Provincial Assessor with regard to the taxability of
the subject real properties falls within its power to assess properties for taxation purposes
subject to appeal before the LBAA.[33]

We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and
CA-G.R. SP No. 67491. The two divisions of the appellate court cited the case of Callanta v.
Office of the Ombudsman,[34] where we ruled that under Section 226 of R.A. No 7160, [35] the
last action of the local assessor on a particular assessment shall be the notice of assessment; it
is this last action which gives the owner of the property the right to appeal to the LBAA. The
procedure likewise does not permit the property owner the remedy of filing a motion for
reconsideration before the local assessor. The pertinent holding of the Court in Callanta is as
follows:

x x x [T]he same Code is equally clear that the aggrieved owners should have brought
their appeals before the LBAA. Unfortunately, despite the advice to this effect contained in
their respective notices of assessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow
this procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set
unreasonably high, and then subsequently reduced upon the request of a property owner. In
the latter instance, allusions of a possible covert, illicit trade-off cannot be avoided, and in fact
can conveniently take place. Such occasion for mischief must be prevented and excised from
our system.[36]

For its part, the appellate court declared in CA-G.R. SP No. 67491:

x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to
the owner or lawful possessor of real property of its revised assessed value, the former shall
no longer have any jurisdiction to entertain any request for a review or readjustment. The
appropriate forum where the aggrieved party may bring his appeal is the LBAA as provided
by law. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs
without interruption. This is what We held in SP 67490 and reaffirm today in SP 67491.[37]

To reiterate, if the taxpayer fails to appeal in due course, the right of

the local government to collect the taxes due with respect to the taxpayers property becomes
absolute upon the expiration of the period to appeal.[38] It also bears stressing that the
taxpayers failure to question the assessment in the LBAA renders the assessment of the local
assessor final, executory and demandable, thus, precluding the taxpayer from questioning the
correctness of the assessment, or from invoking any defense that would reopen the question
of its liability on the merits.[39]

In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having
been filed out of time; the CBAA and the appellate court were likewise correct in affirming
the dismissal. Elementary is the rule that the perfection of an appeal within the period
therefor is both mandatory and jurisdictional, and failure in this regard renders the decision
final and executory.[40]
 In the Comment filed by the Provincial Assessor, it is asserted that the instant petition
is barred by res judicata; that the final and executory judgment in G.R. No. 165113 (where
there was a final determination on the issue of prescription), effectively precludes the claims
herein; and that the filing of the instant petition after an adverse judgment in G.R. No. 165113
constitutes forum shopping.

FELS maintains that the argument of the Provincial Assessor is completely misplaced
since it was not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It
avers that it did not participate in the aforesaid proceeding, and the Supreme Court never
acquired jurisdiction over it. As to the issue of forum shopping, petitioner claims that no
forum shopping could have been committed since the elements of litis pendentia or res
judicata are not present.

We do not agree.

Res judicata pervades every organized system of jurisprudence and is founded upon
two grounds embodied in various maxims of common law, namely: (1) public policy and
necessity, which makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the hardship on
the individual of being vexed twice for the same cause nemo debet bis vexari et eadem causa.
A conflicting doctrine would subject the public peace and quiet to the will and dereliction of
individuals and prefer the regalement of the litigious disposition on the part of suitors to the
preservation of the public tranquility and happiness.[41] As we ruled in Heirs of Trinidad De
Leon Vda. de Roxas v. Court of Appeals:[42]

x x x An existing final judgment or decree rendered upon the merits,

without fraud or collusion, by a court of competent jurisdiction acting upon a
matter within its authority is conclusive on the rights of the parties and their
privies. This ruling holds in all other actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction, touching on the points or matters in
issue in the first suit.

xxx

Courts will simply refuse to reopen what has been decided. They will not allow the
same parties or their privies to litigate anew a question once it has been considered and
decided with finality. Litigations must end and terminate sometime and somewhere. The
effective and efficient administration of justice requires that once a judgment has become final,
 the prevailing party should not be deprived of the fruits of the verdict by subsequent suits on
the same issues filed by the same parties.

This is in accordance with the doctrine of res judicata which has the following
elements: (1) the former judgment must be final; (2) the court which rendered it had
jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits;
and (4) there must be between the first and the second actions, identity of parties, subject
matter and causes of action. The application of the doctrine of res judicata does not require
absolute identity of parties but merely substantial identity of parties. There is substantial
identity of parties when there is community of interest or privity of interest between a
party in the first and a party in the second case even if the first case did not implead the
latter.[43]

To recall, FELS gave NPC the full power and authority to represent it in any
proceeding regarding real property assessment. Therefore, when petitioner NPC filed its
petition for review docketed as G.R. No. 165113, it did so not only on its behalf but also on
behalf of FELS. Moreover, the assailed decision in the earlier petition for review filed in this
Court was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was
the petitioner. Thus, the decision in G.R. No. 165116 is binding on petitioner FELS under the
principle of privity of interest. In fine, FELS and NPC are substantially identical parties as to
warrant the application of res judicata. FELSs argument that it is not bound by the erroneous
petition filed by NPC is thus unavailing.

On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping
exists when, as a result of an adverse judgment in one forum, a party seeks another and
possibly favorable judgment in another forum other than by appeal or special civil action
or certiorari. There is also forum shopping when a party institutes two or more actions or
proceedings grounded on the same cause, on the gamble that one or the other court would
make a favorable disposition.[44]

Petitioner FELS alleges that there is no forum shopping since the elements of res
judicata are not present in the cases at bar; however, as already discussed,res judicata may be
properly applied herein. Petitioners engaged in forum shopping when they filed G.R. Nos.
168557 and 170628 after the petition for review in G.R. No. 165116. Indeed, petitioners went
from one court to another trying to get a favorable decision from one of the tribunals which
allowed them to pursue their cases.
 It must be stressed that an important factor in determining the existence of forum
shopping is the vexation caused to the courts and the parties-litigants by the filing of similar
cases to claim substantially the same reliefs. [45] The rationale against forum shopping is that a
party should not be allowed to pursue simultaneous remedies in two different fora. Filing
multiple petitions or complaints constitutes abuse of court processes, which tends to degrade
the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the
congestion of the heavily burdened dockets of the courts. [46]

Thus, there is forum shopping when there exist: (a) identity of parties, or at least such
parties as represent the same interests in both actions, (b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and (c) the identity of the two
preceding particulars is such that any judgment rendered in the pending case, regardless of
which party is successful, would amount to res judicata in the other.[47]

Having found that the elements of res judicata and forum shopping are present in the
consolidated cases, a discussion of the other issues is no longer necessary. Nevertheless, for
the peace and contentment of petitioners, we shall shed light on the merits of the case.

As found by the appellate court, the CBAA and LBAA power barges are real property
and are thus subject to real property tax. This is also the inevitable conclusion, considering
that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax
assessments by tax examiners are presumed correct and made in good faith, with the taxpayer
having the burden of proving otherwise.[48] Besides, factual findings of administrative bodies,
which have acquired expertise in their field, are generally binding and conclusive upon the
Court; we will not assume to interfere with the sensible exercise of the judgment of men
especially trained in appraising property. Where the judicial mind is left in doubt, it is a
sound policy to leave the assessment undisturbed.[49] We find no reason to depart from this
rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et
[50]
al., a power company brought an action to review property tax assessment. On the citys
motion to dismiss, the Supreme Court of New
York held that the barges on which were mounted gas turbine power plants designated to
generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges,
and the accessory equipment mounted on the barges were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that [d]ocks and structures
which, though floating, are intended by their nature and object to remain at a fixed place on a
river, lake, or coast are considered immovable property. Thus, power barges are categorized
as immovable property by destination, being in the nature of machinery and other implements
intended by the owner for an industry or work which may be carried on in a building or on a
piece of land and which tend directly to meet the needs of said industry or work. [51]

Petitioners maintain nevertheless that the power barges are exempt from real estate tax
under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively
used by petitioner NPC, a government- owned and controlled corporation engaged in the
supply, generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable
properties is petitioner FELS, which in fine, is the entity being taxed by the local
government. As stipulated under Section 2.11, Article 2 of the Agreement:

OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all
the fixtures, fittings, machinery and equipment on the Site used in connection with the Power
Barges which have been supplied by it at its own cost. POLAR shall operate, manage and
maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into
electricity.[52]

It follows then that FELS cannot escape liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of R.A. No. 7160, which reads:

SECTION 234. Exemptions from Real Property Tax. The following are exempted
from payment of the real property tax:

xxx

(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or controlled corporations engaged in the
 supply and distribution of water and/or generation and transmission of electric
power; x x x

Indeed, the law states that the machinery must be actually, directly and exclusively
used by the government owned or controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease Period, subject to
the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it
will operate the Power Barges to convert such Fuel into electricity in accordance with Part A
of Article 7.[53]

It is a basic rule that obligations arising from a contract have the force of law between
the parties. Not being contrary to law, morals, good customs, public order or public policy,
the parties to the contract are bound by its terms and conditions. [54]

Time and again, the Supreme Court has stated that taxation is the rule and exemption is
the exception.[55] The law does not look with favor on tax exemptions and the entity that
would seek to be thus privileged must justify it by words too plain to be mistaken and too
categorical to be misinterpreted.[56]Thus, applying the rule of strict construction of laws
granting tax exemptions, and the rule that doubts should be resolved in favor of provincial
corporations, we hold that FELS is considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it
shall be responsible for the payment of all real estate taxes and assessments, does not justify
the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The
covenant is between FELS and NPC and does not bind a third person not privy thereto, in this
case, the Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted
in the local governments deprivation of revenues. The power to tax is an incident of
sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter
so that security against its abuse is to be found only in the responsibility of the legislature
which imposes the tax on the constituency who are to pay for it. [57] The right of local
government units to collect taxes due must always be upheld to avoid severe tax erosion. This
consideration is consistent with the State policy to guarantee the autonomy of local
governments[58] and the objective of the Local Government Code that they enjoy genuine and
meaningful local autonomy to empower them to achieve their fullest development as self-
reliant communities and make them effective partners in the attainment of national goals. [59]

In conclusion, we reiterate that the power to tax is the most potent instrument to raise
the needed revenues to finance and support myriad activities of the local government units for
the delivery of basic services essential to the promotion of the general welfare and the
enhancement of peace, progress, and prosperity of the people. [60]

WHEREFORE, the Petitions are DENIED and the assailed Decisions and
Resolutions AFFIRMED.

SO ORDERED.
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.

PUNO, J.:

For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit for
amounts representing pre-payment of income and common carrier's taxes under the National Internal Revenue
Code, section 24 (b) (2), as amended.1

Private respondent is a foreign corporation represented in the Philippines by Soriamont Steamship Agencies,
Incorporated. It owns and operates tramper vessel M/V Gardenia. In December 1980, NASUTRA2 chartered M/V
Gardenia to load 16,500 metric tons of raw sugar in the Philippines. 3 On December 23, 1980, Mr. Edilberto Lising,
the operations supervisor of Soriamont Agency, 4 paid the required income and common carrier's taxes in the
respective sums of FIFTY-NINE THOUSAND FIVE HUNDRED TWENTY-THREE PESOS and SEVENTY-FIVE
CENTAVOS (P59,523.75) and FORTY-SEVEN THOUSAND SIX HUNDRED NINETEEN PESOS (P47,619.00),
or a total of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE
CENTAVOS (P107,142.75) based on the expected gross receipts of the vessel. 5 Upon arriving, however, at
Guimaras Port of Iloilo, the vessel found no sugar for loading. On January 10, 1981, NASUTRA and private
respondent's agent mutually agreed to have the vessel sail for Japan without any cargo.

Claiming the pre-payment of income and common carrier's taxes as erroneous since no receipt was realized from
the charter agreement, private respondent instituted a claim for tax credit or refund of the sum ONE HUNDRED
SEVEN THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE CENTAVOS (P107,142.75)
before petitioner Commissioner of Internal Revenue on March 23, 1981. Petitioner failed to act promptly on the
claim, hence, on May 14, 1981, private respondent filed a petition for review6 before public respondent Court of
Tax Appeals.

Petitioner contested the petition. As special and affirmative defenses, it alleged the following: that taxes are
presumed to have been collected in accordance with law; that in an action for refund, the burden of proof is upon
the taxpayer to show that taxes are erroneously or illegally collected, and the taxpayer's failure to sustain said
burden is fatal to the action for refund; and that claims for refund are construed strictly against tax claimants. 7

After trial, respondent tax court decided in favor of the private respondent. It held:

It has been shown in this case that 1) the petitioner has complied with the mentioned statutory
requirement by having filed a written claim for refund within the two-year period from date of
payment; 2) the respondent has not issued any deficiency assessment nor disputed the
correctness of the tax returns and the corresponding amounts of prepaid income and percentage
taxes; and 3) the chartered vessel sailed out of the Philippine port with absolutely no cargo laden
on board as cleared and certified by the Customs authorities; nonetheless 4) respondent's
apparent bit of reluctance in validating the legal merit of the claim, by and large, is tacked upon
the "examiner who is investigating petitioner's claim for refund which is the subject matter of this
case has not yet submitted his report. Whether or not respondent will present his evidence will
depend on the said report of the examiner." (Respondent's Manifestation and Motion dated
September 7, 1982). Be that as it may the case was submitted for decision by respondent on the
basis of the pleadings and records and by petitioner on the evidence presented by
counsel sans the respective memorandum.

An examination of the records satisfies us that the case presents no dispute as to relatively
simple material facts. The circumstances obtaining amply justify petitioner's righteous indignation
 to a more expeditious action. Respondent has offered no reason nor made effort to submit any
controverting documents to bash that patina of legitimacy over the claim. But as might well be,
towards the end of some two and a half years of seeming impotent anguish over the pendency,
the respondent Commissioner of Internal Revenue would furnish the satisfaction of ultimate
solution by manifesting that "it is now his turn to present evidence, however, the Appellate
Division of the BIR has already recommended the approval of petitioner's claim for refund subject
matter of this petition. The examiner who examined this case has also recommended the refund
of petitioner's claim. Without prejudice to withdrawing this case after the final approval of
petitioner's claim, the Court ordered the resetting to September 7, 1983." (Minutes of June 9,
1983 Session of the Court) We need not fashion any further issue into an apparently settled legal
situation as far be it from a comedy of errors it would be too much of a stretch to hold and deny
the refund of the amount of prepaid income and common carrier's taxes for which petitioner could
no longer be made accountable.

On August 3, 1984, respondent court denied petitioner's motion for reconsideration, hence, this petition for review
on certiorari.

Petitioner now contends: (1) private respondent has the burden of proof to support its claim of refund; (2) it failed
to prove that it did not realize any receipt from its charter agreement; and (3) it suppressed evidence when it did
not present its charter agreement.

We find no merit in the petition.

There is no dispute about the applicable law. It is section 24 (b) (2) of the National Internal Revenue Code which
at that time provides as follows:

A corporation organized, authorized, or existing under the laws of any foreign country, engaged in
trade or business within the Philippines, shall be taxable as provided in subsection (a) of this
section upon the total net income derived in the preceding taxable year from all sources within the
Philippines: Provided, however, That international carriers shall pay a tax of two and one-half per
cent (2 1/2%) on their gross Philippine billings: "Gross Philippine Billings" include gross revenue
realized from uplifts anywhere in the world by any international carrier doing business in the
Philippines of passage documents sold therein, whether for passenger, excess baggage or mail,
provided the cargo or mail originates from the Philippines. The gross revenue realized from the
said cargo or mail include the gross freight charge up to final destination. Gross revenue from
chartered flights originating from the Philippines shall likewise form part of "Gross Philippine
Billings" regardless of the place or payment of the passage documents . . . . .

Pursuant to this provision, a resident foreign corporation engaged in the transport of cargo is liable for taxes
depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax
liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines.

We agree with petitioner that a claim for refund is in the nature of a claim for exemption 8 and should be construed
in strictissimi juris against the taxpayer.9 Likewise, there can be no disagreement with petitioner's stance that
private respondent has the burden of proof to establish the factual basis of its claim for tax refund.

The pivotal issue involves a question of fact — whether or not the private respondent was able to prove that it
derived no receipts from its charter agreement, and hence is entitled to a refund of the taxes it pre-paid to the
government.

The respondent court held that sufficient evidence has been adduced by the private respondent proving that it
derived no receipt from its charter agreement with NASUTRA. This finding of fact rests on a rational basis, and
hence must be sustained. Exhibits "E", "F," and "G" positively show that the tramper vessel M/V "Gardenia"
arrived in Iloilo on January 10, 1981 but found no raw sugar to load and returned to Japan without any cargo
laden on board. Exhibit "E" is the Clearance Vessel to a Foreign Port issued by the District Collector of Customs,
Port of Iloilo while Exhibit "F" is the Certification by the Officer-in-Charge, Export Division of the Bureau of
Customs Iloilo. The correctness of the contents of these documents regularly issued by officials of the Bureau of
Customs cannot be doubted as indeed, they have not been contested by the petitioner. The records also reveal
that in the course of the proceedings in the court a quo, petitioner hedged and hawed when its turn came to
present evidence. At one point, its counsel manifested that the BIR examiner and the appellate division of the
BIR have both recommended the approval of private respondent's claim for refund. The same counsel even
represented that the government would withdraw its opposition to the petition after final approval of private
respondents' claim. The case dragged on but petitioner never withdrew its opposition to the petition even if it did
not present evidence at all. The insincerity of petitioner's stance drew the sharp rebuke of respondent court in its
Decision and for good reason. Taxpayers owe honesty to government just as government owes fairness to
taxpayers.

In its last effort to retain the money erroneously prepaid by the private respondent, petitioner contends that
private respondent suppressed evidence when it did not present its charter agreement with NASUTRA. The
contention cannot succeed. It presupposes without any basis that the charter agreement is prejudicial evidence
against the private respondent. 10 Allegedly, it will show that private respondent earned a charter fee with or
without transporting its supposed cargo from Iloilo to Japan. The allegation simply remained an allegation and no
court of justice will regard it as truth. Moreover, the charter agreement could have been presented by petitioner
itself thru the proper use of a subpoena duces tecum. It never did either because of neglect or because it knew it
would be of no help to bolster its position. 11 For whatever reason, the petitioner cannot take to task the private
respondent for not presenting what it mistakenly calls "suppressed evidence."

We cannot but bewail the unyielding stance taken by the government in refusing to refund the sum of ONE
HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY TWO PESOS AND SEVENTY FIVE CENTAVOS
(P107,142.75) erroneously prepaid by private respondent. The tax was paid way back in 1980 and despite the
clear showing that it was erroneously paid, the government succeeded in delaying its refund for fifteen (15) years.
After fifteen (15) long years and the expenses of litigation, the money that will be finally refunded to the private
respondent is just worth a damaged nickel. This is not, however, the kind of success the government, especially
the BIR, needs to increase its collection of taxes. Fair deal is expected by our taxpayers from the BIR and the
duty demands that BIR should refund without any unreasonable delay what it has erroneously collected. Our
ruling in Roxas v. Court of Tax Appeals 12 is apropos to recall:

The power of taxation is sometimes called also the power to destroy. Therefore it should be
exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector kill the "hen that lays the golden egg."
And, in order to maintain the general public's trust and confidence in the Government this power
must be used justly and not treacherously.

IN VIEW HEREOF, the assailed decision of respondent Court of Tax Appeals, dated September 15, 1983, is
AFFIRMED in toto. No costs.

SO ORDERED.
G.R. No. L-25043 April 26, 1968

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial
co-guardians of JOSE ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

Leido, Andrada, Perez and Associates for petitioners.

Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary
succession the following properties:

(1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu,
Batangas province;

(2) A residential house and lot located at Wright St., Malate, Manila; and

(3) Shares of stocks in different corporations.

To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose
Roxas, formed a partnership called Roxas y Compania.

AGRICULTURAL LANDS

At the conclusion of the Second World War, the tenants who have all been tilling the lands in Nasugbu for
generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually occupied. For
its part, the Government, in consonance with the constitutional mandate to acquire big landed estates and
apportion them among landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings.
Conferences were held with the farmers in the early part of 1948 and finally the Roxas brothers agreed to sell
13,500 hectares to the Government for distribution to actual occupants for a price of P2,079,048.47 plus
P300,000.00 for survey and subdivision expenses.

It turned out however that the Government did not have funds to cover the purchase price, and so a special
arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y Cia. the amount of
P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the farmers. Under the
arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and
contracted with the Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly
amortizations paid by the farmers.

In 1953 and 1955 Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and P29,500.71.
Fifty percent of said net gain was reported for income tax purposes as gain on the sale of capital asset held for
more than one year pursuant to Section 34 of the Tax Code.

RESIDENTIAL HOUSE

During their bachelor days the Roxas brothers lived in the residential house at Wright St., Malate, Manila, which
they inherited from their grandparents. After Antonio and Eduardo got married, they resided somewhere else
leaving only Jose in the old house. In fairness to his brothers, Jose paid to Roxas y Cia. rentals for the house in
the sum of P8,000.00 a year.

ASSESSMENTS
On June 17, 1958, the Commissioner of Internal Revenue demanded from Roxas y Cia the payment of real
estate dealer's tax for 1952 in the amount of P150.00 plus P10.00 compromise penalty for late payment, and
P150.00 tax for dealers of securities for 1952 plus P10.00 compromise penalty for late payment. The assessment
for real estate dealer's tax was based on the fact that Roxas y Cia. received house rentals from Jose Roxas in
the amount of P8,000.00. Pursuant to Sec. 194 of the Tax Code, an owner of a real estate who derives a yearly
rental income therefrom in the amount of P3,000.00 or more is considered a real estate dealer and is liable to pay
the corresponding fixed tax.

The Commissioner of Internal Revenue justified his demand for the fixed tax on dealers of securities against
Roxas y Cia., on the fact that said partnership made profits from the purchase and sale of securities.

In the same assessment, the Commissioner assessed deficiency income taxes against the Roxas Brothers for
the years 1953 and 1955, as follows:

1953 1955
Antonio Roxas P7,010.00 P5,813.00
Eduardo Roxas 7,281.00 5,828.00
Jose Roxas 6,323.00 5,588.00

The deficiency income taxes resulted from the inclusion as income of Roxas y Cia. of the unreported 50% of the
net profits for 1953 and 1955 derived from the sale of the Nasugbu farm lands to the tenants, and the
disallowance of deductions from gross income of various business expenses and contributions claimed by Roxas
y Cia. and the Roxas brothers. For the reason that Roxas y Cia. subdivided its Nasugbu farm lands and sold
them to the farmers on installment, the Commissioner considered the partnership as engaged in the business of
real estate, hence, 100% of the profits derived therefrom was taxed.

The following deductions were disallowed:

ROXAS Y CIA.:
1953
Tickets for Banquet in honor of P
S. Osmeña 40.00
Gifts of San Miguel beer 28.00
Contributions to —
Philippine Air Force Chapel 100.00

Manila Police Trust Fund 150.00

Philippines Herald's fund for Manila's

neediest families 100.00
1955
Contributions to Contribution to
Our Lady of Fatima Chapel,
FEU 50.00
ANTONIO ROXAS:
1953
Contributions to —
Pasay City Firemen Christmas Fund 25.00
 Pasay City Police Dept. X'mas fund 50.00
1955
Contributions to —
Baguio City Police Christmas fund 25.00
Pasay City Firemen Christmas fund 25.00

Pasay City Police Christmas fund 50.00

EDUARDO ROXAS:
1953
Contributions to —
Hijas de Jesus' Retiro de Manresa 450.00
Philippines Herald's fund for Manila's
neediest families 100.00
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00
JOSE ROXAS:
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00

The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an
appeal in the Court of Tax Appeals on January 9, 1961. The Tax Court heard the appeal and rendered judgment
on July 31, 1965 sustaining the assessment except the demand for the payment of the fixed tax on dealer of
securities and the disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas de
Jesus' Retiro de Manresa. The Tax Court's judgment reads:

WHEREFORE, the decision appealed from is hereby affirmed with respect to petitioners Antonio Roxas,
Eduardo Roxas, and Jose Roxas who are hereby ordered to pay the respondent Commissioner of
Internal Revenue the amounts of P12,808.00, P12,887.00 and P11,857.00, respectively, as deficiency
income taxes for the years 1953 and 1955, plus 5% surcharge and 1% monthly interest as provided for in
Sec. 51(a) of the Revenue Code; and modified with respect to the partnership Roxas y Cia. in the sense
that it should pay only P150.00, as real estate dealer's tax. With costs against petitioners.

Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court. The Commissioner of Internal
Revenue did not appeal.

The issues:

(1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?

(2) Are the deductions for business expenses and contributions deductible?

(3) Is Roxas y Cia. liable for the payment of the fixed tax on real estate dealers?
The Commissioner of Internal Revenue contends that Roxas y Cia. could be considered a real estate dealer
because it engaged in the business of selling real estate. The business activity alluded to was the act of
subdividing the Nasugbu farm lands and selling them to the farmers-occupants on installment. To bolster his
stand on the point, he cites one of the purposes of Roxas y Cia. as contained in its articles of partnership, quoted
below:

4. (a) La explotacion de fincas urbanes pertenecientes a la misma o que pueden pertenecer a ella en el
futuro, alquilandoles por los plazos y demas condiciones, estime convenientes y vendiendo aquellas que
a juicio de sus gerentes no deben conservarse;

The above-quoted purpose notwithstanding, the proposition of the Commissioner of Internal Revenue cannot be
favorably accepted by Us in this isolated transaction with its peculiar circumstances in spite of the fact that there
were hundreds of vendees. Although they paid for their respective holdings in installment for a period of ten years,
it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the ten-year amortization
period.

It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of
our Government to allocate lands to the landless. It was the bounden duty of the Government to pay the agreed
compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to subsequently subdivide them
among the farmers at very reasonable terms and prices. However, the Government could not comply with its duty
for lack of funds. Obligingly, Roxas y Cia. shouldered the Government's burden, went out of its way and sold
lands directly to the farmers in the same way and under the same terms as would have been the case had the
Government done it itself. For this magnanimous act, the municipal council of Nasugbu passed a resolution
expressing the people's gratitude.

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with
caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly,
lest the tax collector kill the "hen that lays the golden egg". And, in order to maintain the general public's trust and
confidence in the Government this power must be used justly and not treacherously. It does not conform with Our
sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and
later on to penalize him for duly answering the urgent call.

In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to
Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale
thereof is capital gain, taxable only to the extent of 50%.

DISALLOWED DEDUCTIONS

Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in honor of
Sergio Osmena and P28.00 for San Miguel beer given as gifts to various persons. The deduction were claimed
as representation expenses. Representation expenses are deductible from gross income as expenditures
incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided the taxpayer proves
that they are reasonable in amount, ordinary and necessary, and incurred in connection with his business. In the
case at bar, the evidence does not show such link between the expenses and the business of Roxas y Cia. The
findings of the Court of Tax Appeals must therefore be sustained.

The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and Baguio
City Police Christmas funds, Manila Police Trust Fund, Philippines Herald's fund for Manila's neediest families
and Our Lady of Fatima chapel at Far Eastern University.

The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are
not deductible for the reason that the Christmas funds were not spent for public purposes but as Christmas gifts
to the families of the members of said entities. Under Section 39(h), a contribution to a government entity is
deductible when used exclusively for public purposes. For this reason, the disallowance must be sustained. On
the other hand, the contribution to the Manila Police trust fund is an allowable deduction for said trust fund
belongs to the Manila Police, a government entity, intended to be used exclusively for its public functions.
The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the ground
that the Philippines Herald is not a corporation or an association contemplated in Section 30 (h) of the Tax Code.
It should be noted however that the contributions were not made to the Philippines Herald but to a group of civic
spirited citizens organized by the Philippines Herald solely for charitable purposes. There is no question that the
members of this group of citizens do not receive profits, for all the funds they raised were for Manila's neediest
families. Such a group of citizens may be classified as an association organized exclusively for charitable
purposes mentioned in Section 30(h) of the Tax Code.

Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel at the
Far Eastern University on the ground that the said university gives dividends to its stockholders. Located within
the premises of the university, the chapel in question has not been shown to belong to the Catholic Church or any
religious organization. On the other hand, the lower court found that it belongs to the Far Eastern University,
contributions to which are not deductible under Section 30(h) of the Tax Code for the reason that the net income
of said university injures to the benefit of its stockholders. The disallowance should be sustained.

Lastly, Roxas y Cia. questions the imposition of the real estate dealer's fixed tax upon it, because although it
earned a rental income of P8,000.00 per annum in 1952, said rental income came from Jose Roxas, one of the
partners. Section 194 of the Tax Code, in considering as real estate dealers owners of real estate receiving
rentals of at least P3,000.00 a year, does not provide any qualification as to the persons paying the rentals. The
law, which states: 1äwphï1.ñët

. . . "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging,
leasing or renting property on his own account as principal and holding himself out as a full or part-time
dealer in real estate or as an owner of rental property or properties rented or offered to rent for an
aggregate amount of three thousand pesos or more a year: . . . (Emphasis supplied) .

is too clear and explicit to admit construction. The findings of the Court of Tax Appeals or, this point is sustained. 1äwphï1.ñët

To Summarize, no deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose Roxas.
For 1955 they are liable to pay deficiency income tax in the sum of P109.00, P91.00 and P49.00, respectively,
computed as follows: *

ANTONIO ROXAS
Net income per return P315,476.59
Add: 1/3 share, profits in Roxas y
P 153,249.15
Cia.
Less amount declared 146,135.46

Amount understated P 7,113.69

Contributions disallowed 115.00

P 7,228.69
Less 1/3 share of contributions
amounting to P21,126.06 disallowed
from partnership but allowed to
partners 7,042.02 186.67

Net income per review P315,663.26

Less: Exemptions 4,200.00
Net taxable income P311,463.26
Tax due 154,169.00
Tax paid 154,060.00

Deficiency P 109.00
==========
EDUARDO ROXAS
P
Net income per return
304,166.92
Add: 1/3 share, profits in Roxas y
P 153,249.15
Cia

Less profits declared 146,052.58

Amount understated P 7,196.57

Less 1/3 share in contributions
amounting to P21,126.06 disallowed
from partnership but allowed to
partners 7,042.02 155.55

Net income per review P304,322.47

Less: Exemptions 4,800.00

Net taxable income P299,592.47

Tax Due P147,250.00
Tax paid 147,159.00

Deficiency P91.00
===========
JOSE ROXAS

Net income per return P222,681.76

Add: 1/3 share, profits in Roxas y
P153,429.15
Cia.
Less amount reported 146,135.46

Amount understated 7,113.69

Less 1/3 share of contributions

disallowed from partnership but
allowed as deductions to partners 7,042.02 71.67

Net income per review P222,753.43

 Less: Exemption 1,800.00

Net income subject to tax P220,953.43

Tax due P102,763.00

Tax paid 102,714.00

Deficiency P 49.00
===========

WHEREFORE, the decision appealed from is modified. Roxas y Cia. is hereby ordered to pay the sum of
P150.00 as real estate dealer's fixed tax for 1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are
ordered to pay the respective sums of P109.00, P91.00 and P49.00 as their individual deficiency income tax all
corresponding for the year 1955. No costs. So ordered.