(R.A.) No. 7082 To Install, Operate and Maintain A

Commissioner of Internal Revenue, petitioner,
vs.
Philippine Long Distance Telephone Company (PLDT), respondent.
GR No. 140230
Date of
December 15, 2005
Promulgation
Ponente Cancio C. Garcia
Facts PLDT is a grantee of a franchise under Republic Act
(R.A.) No. 7082 to install, operate and maintain a
telecommunications systems throughout the Philippines.
For equipment, machineries and spare parts it imported
for its business on different dates from October 1, 1992
to May 31, 1994, PLDT paid the BIR the amount of
P164,510,953.00 broken down as follows: (a)
compensating tax of P126,713,037.00; advance sales
tax of P12,460,219.00 and other internal revenue taxes
of P25,337,697.00. For similar importations made
between March 1994 to May 31, 1994, PLDT paid
P116,041,333.00 value-added tax (VAT).
BIR’s Decision On March 15, 1994, PLDT addressed a letter to the BIR
seeking a confirmatory ruling on its tax exemption
privilege under Section 12 of R.A. 7082, which reads:
Sec. 12. The grantee ' shall be liable to pay the same
taxes on their real estate, buildings, and personal
property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by
law to pay. In addition thereto, the grantee, ' shall pay
a franchise tax equivalent to three percent (3%) of all
gross receipts of the telephone or other
telecommunications businesses transacted under this
franchise by the grantee, its successors or assigns, and
the said percentage shall be in lieu of all taxes on
this franchise or earnings thereof: Provided, That
the grantee ' shall continue to be liable for income taxes
payable under Title II of the National Internal Revenue
Code pursuant to Sec. 2 of Executive Order No. 72
unless the latter enactment is amended or repealed, in
which case the amendment or repeal shall be applicable
thereto.
On April 19, 1994, the BIR issued Ruling No. UN-140-94

that PLDT shall be subject only to the following taxes, to
wit:
xxx 7. The 3% franchise tax on gross receipts which
shall be in lieu of all taxes on its franchise or earnings
thereof. xxx ;
The 'in lieu of all taxes' provision under Section 12 of RA

7082 clearly exempts PLDT from all taxes including the
10% value-added tax (VAT) prescribed by Section 101
(a) of the same Code on its importations of equipment,
machineries and spare parts necessary in the conduct of
its business covered by the franchise, except the
aforementioned enumerated taxes for which PLDT is
expressly made liable.
On December 2, 1994, PLDT filed a claim for tax

credit/refund of the VAT, compensating taxes, advance
sales taxes and other taxes it had been paying 'in
connection with its importation of various equipment,
machineries and spare parts needed for its operations' .
CTA’s Decision With its claim not having been acted upon by the BIR,
and obviously to forestall the running of the prescriptive
period therefor, PLDT filed with the Court of Tax Appeals
(CTA) a petition for review, therein seeking a refund of,
or the issuance of a tax credit certificate in, the amount
of P280,552,286.00, representing compensating taxes,
advance sales taxes, VAT and other internal revenue
taxes alleged to have been erroneously paid on its
importations from October 1992 to May 1994. The
petition was docketed in said court as CTA Case No.
5178.
On February 18, 1998, the CTA rendered a decision

granting PLDT's petition.
In conclusion, the petitioner is' entitled to the reduced

amount of P223,265,276.00 after excluding from the
final computation those taxes' that were paid prior to
December 16, 1992 as they fall outside the two-year
prescriptive period for claiming for a refund as provided
by law.
The CTA decision, is punctuated by a dissenting opinion

of Associate Judge Amancio Q. Saga who maintained
that the phrase 'in lieu of all taxes’ found in Section 12
of R.A. No. 7082, supra, refers to exemption from
'direct taxes’ only and does not cover 'indirect taxes',
such as VAT, compensating tax and advance sales tax.
The BIR Commissioner moved for a reconsideration but

the CTA, in its Resolution of May 7, 1998, denied the
motion, with Judge Amancio Q. Saga reiterating his
dissent.
CA’s Decision The BIR Commissioner elevated the matter to the Court
of Appeals (CA) by way of petition for review, thereat
docketed as CA-G.R. No. 47895 .
The appellate court, dismissed the BIR's petition,

thereby effectively affirming the CTA's judgment.
Dissatisfied with the CA decision in that case, the BIR

Commissioner initially filed with this Court a motion for
time to file a petition for review, docketed in this Court
as G.R. No. 134386. However, on the last day for the
filing of the intended petition, the then BIR
Commissioner had a change of heart and instead
manifested that he will no longer pursue G.R. No.
134386, there being no compelling grounds to disagree
with the Court of Appeals' decision in CA-G.R. 40811.
Ratio Whether or not PLDT, given the tax component of its
Decidendi franchise, is exempt from paying VAT, compensating
taxes, advance sales taxes and internal revenue taxes
on its importations
Ruling As it were, the former BIR Commissioner's decision not
to pursue his petition in G.R. No. 134386 denied the
BIR, at least as early as in that case, the opportunity to
obtain from the Court an authoritative interpretation of
Section 12 of R.A. 7082. All is, however, not lost. For,
the government is not estopped by acts or errors of its
agents, particularly on matters involving taxes.
Corollary, the erroneous application of tax laws by

public officers does not preclude the subsequent correct
application thereof. Withal, the errors of certain
administrative officers, if that be the case, should never
be allowed to jeopardize the government's financial
position. Hence, the need to address the main issue
tendered herein.
NO
As may be noted, the clause 'in lieu of all taxes' in

Section 12 of RA 7082 is immediately followed by the
limiting or qualifying clause 'on this franchise or
earnings thereof, suggesting that the exemption is
limited to taxes imposed directly on PLDT since taxes'
pertaining to PLDT's franchise or earnings are its direct
liability. Accordingly, indirect taxes, not being taxes on
PLDT's franchise or earnings, are outside the purview of
the 'in lieu’ provision.
We fail to see how Section 12 of RA 7082 operates as

granting PLDT blanket exemption from payment of
indirect taxes, which, in the ultimate analysis, are not
taxes on its franchise or earnings. 'PLDT has not shown
its eligibility for the desired exemption. None should
be granted.
On the other hand, as urged by PLDT, that

compensating tax and advance sales tax were no longer
collectible internal revenue taxes under the NILRC when
the Bureau of Customs made the assessments in
question and collected the corresponding tax. Stated a
bit differently, PLDT was no longer under legal
obligation to pay compensating tax and advance sales
tax on its importation from 1992 to 1994.
Petitioner has not made an issue about PLDT's

allegations concerning the abolition of the provisions of
the Tax Code imposing the payment of compensating
and advance sales tax on importations and the non-
existence of these taxes during the period under review.
On the contrary, petitioner admits that the VAT on
importation of goods has 'replace[d] the
compensating tax and advance sales tax under the
old Tax Code’.
The amount PLDT paid in the concept of advance sales

tax and compensating tax on the 1992 to 1994
importations were, in context, erroneous tax payments
and would theoretically be refundable. It should be
emphasized, however, that, such importations were,
when made, already subject to VAT.
Factoring in the fact that a portion of the claim was

barred by prescription, the CTA had determined that
PLDT is entitled to a total refundable amount of
P94,673,422.00 (P87,257,031.00 of compensating tax
+ P7,416,391.00 = P94,673,422.00). Accordingly, it
behooves the BIR to grant a refund of the advance sales
tax and compensating tax in the total amount of
P94,673,422.00, subject to the condition that PLDT
present proof of payment of the corresponding VAT on
said transactions.

(R.A.) No. 7082 To Install, Operate and Maintain A

Uploaded by

Copyright:

Available Formats

(R.A.) No. 7082 To Install, Operate and Maintain A

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(R.A.) No. 7082 To Install, Operate and Maintain A

Uploaded by

Copyright:

Available Formats

Commissioner of Internal Revenue, petitioner,

On April 19, 1994, the BIR issued Ruling No. UN-140-94

The 'in lieu of all taxes' provision under Section 12 of RA

On December 2, 1994, PLDT filed a claim for tax

On February 18, 1998, the CTA rendered a decision

In conclusion, the petitioner is' entitled to the reduced

The CTA decision, is punctuated by a dissenting opinion

The BIR Commissioner moved for a reconsideration but

The appellate court, dismissed the BIR's petition,

Dissatisfied with the CA decision in that case, the BIR

Corollary, the erroneous application of tax laws by

As may be noted, the clause 'in lieu of all taxes' in

We fail to see how Section 12 of RA 7082 operates as

On the other hand, as urged by PLDT, that

Petitioner has not made an issue about PLDT's

The amount PLDT paid in the concept of advance sales

Factoring in the fact that a portion of the claim was

You might also like