G.R. No. L-68252 May 26, 1995 Petitioner contested the petition.

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;
COMMISSIONER OF INTERNAL REVENUE, petitioner, that in an action for refund, the burden of proof is upon the taxpayer to show that
vs. taxes are erroneously or illegally collected, and the taxpayer's failure to sustain
TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP said burden is fatal to the action for refund; and that claims for refund are
AGENCIES INC., and COURT OF TAX APPEALS, respondents. construed strictly against tax claimants.7

After trial, respondent tax court decided in favor of the private respondent. It held:
PUNO, J.: 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
For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is
the two-year period from date of payment; 2) the respondent has not issued any
entitled to a refund or tax credit for amounts representing pre-payment of income
deficiency assessment nor disputed the correctness of the tax returns and the
and common carrier's taxes under the National Internal Revenue Code, section 24
corresponding amounts of prepaid income and percentage taxes; and 3) the
(b) (2), as amended.1
chartered vessel sailed out of the Philippine port with absolutely no cargo laden on
Private respondent is a foreign corporation represented in the Philippines by board as cleared and certified by the Customs authorities; nonetheless 4)
Soriamont Steamship Agencies, Incorporated. It owns and operates tramper respondent's apparent bit of reluctance in validating the legal merit of the claim, by
vessel M/V Gardenia. In December 1980, NASUTRA2 chartered M/V Gardenia to and large, is tacked upon the "examiner who is investigating petitioner's claim for
load 16,500 metric tons of raw sugar in the Philippines. 3 On December 23, 1980, refund which is the subject matter of this case has not yet submitted his report.
Mr. Edilberto Lising, the operations supervisor of Soriamont Agency, 4 paid the Whether or not respondent will present his evidence will depend on the said report
required income and common carrier's taxes in the respective sums of FIFTY- of the examiner." (Respondent's Manifestation and Motion dated September 7,
NINE THOUSAND FIVE HUNDRED TWENTY-THREE PESOS and SEVENTY- 1982). Be that as it may the case was submitted for decision by respondent on the
FIVE CENTAVOS (P59,523.75) and FORTY-SEVEN THOUSAND SIX HUNDRED basis of the pleadings and records and by petitioner on the evidence presented by
NINETEEN PESOS (P47,619.00), or a total of ONE HUNDRED SEVEN counsel sans the respective memorandum.
THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE
An examination of the records satisfies us that the case presents no dispute as to
CENTAVOS (P107,142.75) based on the expected gross receipts of the
relatively simple material facts. The circumstances obtaining amply justify
vessel.5 Upon arriving, however, at Guimaras Port of Iloilo, the vessel found no
petitioner's righteous indignation to a more expeditious action. Respondent has
sugar for loading. On January 10, 1981, NASUTRA and private respondent's agent
offered no reason nor made effort to submit any controverting documents to bash
mutually agreed to have the vessel sail for Japan without any cargo.
that patina of legitimacy over the claim. But as might well be, towards the end of
Claiming the pre-payment of income and common carrier's taxes as erroneous some two and a half years of seeming impotent anguish over the pendency, the
since no receipt was realized from the charter agreement, private respondent respondent Commissioner of Internal Revenue would furnish the satisfaction of
instituted a claim for tax credit or refund of the sum ONE HUNDRED SEVEN ultimate solution by manifesting that "it is now his turn to present evidence,
THOUSAND ONE HUNDRED FORTY-TWO PESOS and SEVENTY-FIVE however, the Appellate Division of the BIR has already recommended the approval
CENTAVOS (P107,142.75) before petitioner Commissioner of Internal Revenue on of petitioner's claim for refund subject matter of this petition. The examiner who
March 23, 1981. Petitioner failed to act promptly on the claim, hence, on May 14, examined this case has also recommended the refund of petitioner's claim.
1981, private respondent filed a petition for review6 before public respondent Court Without prejudice to withdrawing this case after the final approval of petitioner's
of Tax Appeals. 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 The pivotal issue involves a question of fact — whether or not the private
and common carrier's taxes for which petitioner could no longer be made respondent was able to prove that it derived no receipts from its charter
accountable. agreement, and hence is entitled to a refund of the taxes it pre-paid to the
government.
On August 3, 1984, respondent court denied petitioner's motion for
reconsideration, hence, this petition for review on certiorari. The respondent court held that sufficient evidence has been adduced by the
private respondent proving that it derived no receipt from its charter agreement
Petitioner now contends: (1) private respondent has the burden of proof to support with NASUTRA. This finding of fact rests on a rational basis, and hence must be
its claim of refund; (2) it failed to prove that it did not realize any receipt from its sustained. Exhibits "E", "F," and "G" positively show that the tramper vessel M/V
charter agreement; and (3) it suppressed evidence when it did not present its "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to load and
charter agreement. 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
We find no merit in the petition.
while Exhibit "F" is the Certification by the Officer-in-Charge, Export Division of the
There is no dispute about the applicable law. It is section 24 (b) (2) of the National Bureau of Customs Iloilo. The correctness of the contents of these documents
Internal Revenue Code which at that time provides as follows: 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
A corporation organized, authorized, or existing under the laws of any foreign that in the course of the proceedings in the court a quo, petitioner hedged and
country, engaged in trade or business within the Philippines, shall be taxable as hawed when its turn came to present evidence. At one point, its counsel
provided in subsection (a) of this section upon the total net income derived in the manifested that the BIR examiner and the appellate division of the BIR have both
preceding taxable year from all sources within the Philippines: Provided, however, recommended the approval of private respondent's claim for refund. The same
That international carriers shall pay a tax of two and one-half per cent (2 1/2%) on counsel even represented that the government would withdraw its opposition to the
their gross Philippine billings: "Gross Philippine Billings" include gross revenue petition after final approval of private respondents' claim. The case dragged on but
realized from uplifts anywhere in the world by any international carrier doing petitioner never withdrew its opposition to the petition even if it did not present
business in the Philippines of passage documents sold therein, whether for evidence at all. The insincerity of petitioner's stance drew the sharp rebuke of
passenger, excess baggage or mail, provided the cargo or mail originates from the respondent court in its Decision and for good reason. Taxpayers owe honesty to
Philippines. The gross revenue realized from the said cargo or mail include the government just as government owes fairness to taxpayers.
gross freight charge up to final destination. Gross revenue from chartered flights
originating from the Philippines shall likewise form part of "Gross Philippine In its last effort to retain the money erroneously prepaid by the private respondent,
Billings" regardless of the place or payment of the passage documents . . . . . petitioner contends that private respondent suppressed evidence when it did not
present its charter agreement with NASUTRA. The contention cannot succeed. It
Pursuant to this provision, a resident foreign corporation engaged in the transport presupposes without any basis that the charter agreement is prejudicial evidence
of cargo is liable for taxes depending on the amount of income it derives from against the private respondent. 10 Allegedly, it will show that private respondent
sources within the Philippines. Thus, before such a tax liability can be enforced the earned a charter fee with or without transporting its supposed cargo from Iloilo to
taxpayer must be shown to have earned income sourced from the Philippines. 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
We agree with petitioner that a claim for refund is in the nature of a claim for petitioner itself thru the proper use of a subpoena duces tecum. It never did either
exemption8 and should be construed in strictissimi juris against the because of neglect or because it knew it would be of no help to bolster its
taxpayer.9 Likewise, there can be no disagreement with petitioner's stance that position. 11 For whatever reason, the petitioner cannot take to task the private
private respondent has the burden of proof to establish the factual basis of its respondent for not presenting what it mistakenly calls "suppressed evidence."
claim for tax refund.
We cannot but bewail the unyielding stance taken by the government in refusing to Whether Tokyo Shipping is entitled to a refund or tax credit for the prepayment of
refund the sum of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY taxes
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 RULING:
clear showing that it was erroneously paid, the government succeeded in delaying Yes. The power of taxation is sometimes called also the power to destroy.
its refund for fifteen (15) years. After fifteen (15) long years and the expenses of Therefore, it should be exercised with caution to minimize injury to the proprietary
litigation, the money that will be finally refunded to the private respondent is just rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax
worth a damaged nickel. This is not, however, the kind of success the government, collector kill the “hen that lays the golden egg”. Fair deal is expected by taxpayers
especially the BIR, needs to increase its collection of taxes. Fair deal is expected from the BIR and the duty demands that BIR should refund without unreasonable
by our taxpayers from the BIR and the duty demands that BIR should refund delay the erroneous collection.
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,

SO ORDERED.

CIR v Tokyo Shipping Co. LTD

CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Tokyo Shipping filed a claim for refund from the BIR for erroneous prepayment of
income and common carrier’s taxes amounting to P107,142.75 since no receipt
was realized from its charter agreement. BIR failed to act promptly on the claim
and thus it was elevated to the Court of Tax Appeals which decided in favor of the
refund. Hence, this petition for review on certiorari.

ISSUE: