As a rule, any claim for exemption from a tax statute is strictly ISSUE: Whether or not the claim for
he claim for exemption from tax statute be
construed against the taxpayer. However, where the law is clear and
unambiguous, the law must be taken as it is, devoid of judicial
additional or subtraction
ACTING COMMISSIONER OF CUSTOMS V. MANILA ELECTRIC
COMPANY AND COOURT OF TAX APPEALS
FACTS:
Petitioner, "claims that it is exempt from the special import tax not only by
virtue of Section 6 of Republic Act No. 1394, which exempts from said
tax equipment and spare parts for use in industries, but also under
Paragraph 9, Part Two, of its franchise, which expressly exempts is
insulators from all taxes of whatever kind and nature.
"Par. 9. The grantee shall be liable to pay the same taxes upon its
real estate, buildings, plant (not including poles, wires,
transformers, and insulators), machinery and personal property
as other persons are or may be hereafter required by law to pay.
xxx ... and shall be in lieu of all taxes and assessments of
whatsoever nature, and by whatsoever authority upon the
privileges, earnings, income, franchise, and poles, wires,
transformers, and insulators of the grantee, from which taxes
and assessments the grantee is hereby expressly
exempted." 5
It noted that the above "exempts it from all taxes of whatever nature, and
by whatever authority, with respect to its insulators in consideration for
the payment of the percentage tax on its gross earnings."
strictly construed against the respondent Meralco?
HELD: The law frowns on exemption from taxation, hence, an exempting
provision should be construed strictissimi juris."
"It is true that in the construction of tax statutes tax exemptions (and
deductions are of this nature) are not favored in the law, and are
construed strictissimi juris against the taxpayer.
However, it is equally a recognized principle that where the provision of
the law is clear and unambiguous, so that there is no occasion for the
court's seeking the legislative intent, the law must be taken as it is,
devoid of judicial addition or subtraction.
In this case, the provision of Section 186-A -whenever a tax free
product is utilized, ...
— all encompassing to comprehend tax-free raw materials, even if
imported.
Where the law provided no qualification for the granting of the privilege,
the court is not at liberty to supply any.
Court of Tax Appeals construed the statutory provision as it is written
Considering that the law is clear and ambiguous, to look further for any
legislative intent, as "the law must be taken as it is, devoid of judicial
addition or subtraction.
PETITION DISMISSED
 Tax exemption must be strictly construed against the taxpayer and
liberally in favor of the state
MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC. V.
DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BIR
AND REVENUE DISTRICT OFFICER, BIR, MISAMIS ORIENTAL
FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a
domestic corporation engaged in the buying and selling of copra.
Petitioner alleges that prior to the issuance of Revenue Memorandum Circular
47-91 which implemented VAT Ruling 190-90, copra was classified as
agricultural food product under Section 103(b) of the National Internal Revenue
Code and, therefore, exempt from VAT at all stages of production or
distribution.
Sec. 103. Exempt Transactions. — The following shall be exempt from
the value-added tax:
(a) Sale of nonfood agricultural, marine and forest products in their
original state by the primary producer or the owner of the land where the
same are produced;
(b) Sale or importation in their original state of agricultural and marine
food products, livestock and poultry of a kind generally used as, or
yielding or producing foods for human consumption, and breeding stock
and genetic material therefor;
Under Section 103(a):
The sale of agricultural non-food products in their original state is exempt from
VAT only if the sale is made by the primary producer or owner of the land from
which the same are produced. The sale made by any other person or entity,
like a trader or dealer, is not exempt from the tax.
Under Section 103(b)
The sale of agricultural food products in their original state is exempt from VAT
at all stages of production or distribution regardless of who the seller is.
Respondent Commissioner of Internal Revenue issued the circular in question,
classifying copra as an agricultural non-food product and declaring it "exempt
from VAT only if the sale is made by the primary producer pursuant to Section
103(a) of the Tax Code, as amended."
The reclassification had the effect of denying to the petitioner the exemption it
previously enjoyed when copra was classified as an agricultural food product
ISSUE: Whether copra is an agricultural food or non-food product?
HELD: Copra is a non-food product.
In interpreting Section 103(a) and (b) of the NIRC, the CIR gave it a strict
construction consistent with the rule that tax exemptions must be strictly
construed against the taxpayer and liberally in favor of the state.
The ruling was made by the CIR in the exercise of his power under Section 245
of the NIRC to "make rulings or opinions in connection with the implementation
of the provisions of internal revenue laws, including rulings on the classification
of articles for sales tax and similar purposes."
In the case at bar, we find no reason for holding that respondent Commissioner
erred in not considering copra as an "agricultural food product" within the
meaning of Section 103(b) of the NIRC.
Solicitor General contends,
"copra per se is not food, that is, it is not intended for human
consumption. Simply stated, nobody eats copra for food."
That previous Commissioners considered it so, is not reason for holding that
the present interpretation is wrong. The Commissioner of Internal Revenue is
not bound by the ruling of his predecessors.
PETITION DISMISSED
 Tax exemption must be strictly construed against the taxpayer.
RESINS, INCORPORATED VS. AUDITOR GENERAL OF THE
PHILIPPINES AND THE CENTRAL BANK OF THE PHILIPPINES
FACTS:
Petitioner Resins seek a refund2 from respondent Central Bank on the
claim that it was exempt from the margin fee under Republic Act No.
2609 for the importation of urea and formaldehyde, as separate units,
used for the production of synthetic glue of which it was a manufacturer.
RA 2606: AN ACT TO AUTHORIZE THE CENTRAL BANK OF
THE PHILIPPINES TO ESTABLISH A MARGIN OVER BANKS'
SELLING RATES OF FOREIGN EXCHANGE.
Section 2: The margin established by the Monetary Board pursuant to
the provision of section one hereof shall not be imposed upon the sale
of foreign exchange for the importation of the following:
XVIII Urea formaldehyde for the manufacture of plywood
and hardboard when imported by and for the exclusive use
of end-users.
ISSUE: Whether or not Resin could claim refund pursuant to RA 2609?
HELD:
Since the specific language of the Act speak of "urea formaldehyde," and
petitioner admittedly did import urea and formaldehyde separately, its
plea could be granted only if we could construe the above provision of
law to read "urea and formaldehyde."
In further denying the petition, the SC declared:
There is merit in the contention of the Solicitor General, as counsel for
respondent Central Bank, and the Auditor General, that as a refund
undoubtedly partakes of a nature of an exemption, it cannot be allowed
unless granted in the most explicit and categorical language.
it has been the constant and uniform holding that exemption from
taxation is not favored and is never presumed, so that if granted it must
be strictly construed against the taxpayer.
Affirmatively put, the law frowns on exemption from taxation, hence, an
exempting provision should be construed strictissimi juris."
PETITION DISMISSED
Strictissimi Juris
-the strictest letter of the law.
-A process in which the rule of process shall be applied strictly or a document
interpreted strictly
Naturalization laws should be rigidly enforced and strictly construed in favor of the
government and against the applicant
ONG CHIA VS. REPUBLIC OF THE PHILIPPINES
FACTS:
In 1923, petitioner was born China In 1932, he arrived at the port of Manila on board the
vessel "Angking." Since then, he has stayed in the Philippines where he found
employment and eventually started his own business, married a Filipina, with whom he
had four children.
At the age of 66, he filed a verified petition to be admitted as a Filipino citizen under C.A.
No. 473, otherwise known as the Revised Naturalization Law, as amended.
On Chia, after stating his qualification and the lack of disqualifications, stated that his
petition for citizenship was not acted upon by the Special Committee on Naturalization,
OSG, since the same was not reconstituted after the February 1986 revolution.
During the hearings, Ong Chia along with 3 witnesses testified as to his qualification.
Since the Prosecutor was impressed and decided not to counteract the testimonies, the
trial court granted the petition and admitted Ong Chia to Philippine citizenship.
However, the State, through the OSG, appealed (with annexed documents) contending
that Ong Chia:
(1) failed to state all the names by which he is or had been known i.e. Loreto Chia Ong; (2)
failed to state all his former places of residence in violation of CA 473 i.e. J.M. Basa
Street, Iloilo; (3) failed to conduct himself in a proper and irreproachable manner during his
entire stay in the Philippines i.e. he cohabited with his wife 8 years prior to their marriage
(annexed is the marriage contract in 1977 and Joint Affidavit of Ong Chia and his wife); (4)
has no known lucrative trade or occupation and his previous incomes has been insufficient
or misdeclared as per the annexed income tax returns; and (5) failed to support his
petition with the appropriate documentary evidence i.e. marriage contract for the alleged
first marriage before a judge in 1953.
The CA reversed the trial court decision. Hence, the present petition by Ong Chia
contending that CA erred in considering the documents which had merely been annexed
by the State to it’s appellant’s brief. Not having been presented and formally offered as
evidence, they are mere scraps of paper devoid of any evidentiary value contrary to Rule
132, sec. 34 of the Revised Rules on Evidence which provides that the court shall
consider no evidence which has not been formally offered.
ISSUE: Whether or not the documents annexed by the State to its appelant’s brief without
having been presented and formally offered as evidence under Rule 132, Section 34 of the
Revised Rules on Evidence justified the reversal of of the Trial Court’s decision.
HELD:
According to Rule 143 of the Rules of Court: “These rules shall not apply to land
registration, cadastral and election cases, naturalization and insolvency proceedings, and
other cases not herein provided for, except by analogy or in a suppletory character and
whenever practicable and convenient.” (Emphasis added)
The rule on formal offer of evidence (Rule 132, Section 34) now being invoked by Ong
Chia is clearly not applicable to the present case involving a petition for naturalization. The
only instance when said rules may be applied by analogy or suppletorily in such cases is
when it is "practicable and convenient."
That is not the case here, since reliance upon the documents presented by the State for
the first time on appeal, in fact, appears to be the more practical and convenient course of
action considering that decision in naturalization proceedings are not covered by the rule
on res judicata. Consequently, a final favorable judgment does not preclude the State from
later on moving for a revocation of the grant of naturalization on the basis of the same
documents.
The Court additionally discussed the effect of Ong Chia's failure to include the address
"J.M. Basa St., Iloilo" in his petition, in accordance with Section 7, C.A. No. 473. This
address appears on his Immigrant Certificate of Residence, a document which forms part
of the records as Annex A of his 1989 petition for naturalization. He admits that he failed to
mention said address in his petition, but argues that since the Immigrant Certificate of
Residence containing it had been fully published, with the petition and the other annexes,
such publication constitutes substantial compliance with §7. This is allegedly because the
publication effectively satisfied the objective sought to be achieved by such
requirement, i.e., to give investigating agencies of the government the opportunity to check
on the background of the applicant and prevent suppression of information regarding any
possible misbehavior on his part in any community where he may have lived at one time or
another.
It is settled, however, that naturalization laws should be rigidly enforced and strictly
construed in favor of the government and against the applicant.
PETITION DENIED