28. CIR v. Botelbo Shipping Corp.

, 20 SCRA 487

DOCTRINE:

Nature of tax exemptions. Every tax exemption implies a waiver of the right to
collect what otherwise would be due to the government. In this sense, it is prejudicial
thereto. The avowed purpose of a tax exemption is some public benefit or interest,
which the lawmaking body considers sufficient to offset the monetary loss entailed in
the grant of the exemption. There is no constitutional injunction against granting tax
exemptions to particular persons. It is not unusual to grant to specific individuals or
entities legislative franchise with tax exemptions. What the fundamental law forbids
is the denial of equal protection, such as through unreasonable discrimination or
classification.

Reparations Law; Compensating tax. Under Republic Act No. 1789 reparations
goods obtained by private parties are subject to compensating tax since section 14
of said law exempts them only from customs duties, consular fees and the special
import tax.

Tax exemptions under Republic Act No. 3079 on purchased reparations

goods. The exemption from compensating tax, provided for in Republic Act No.
3079, which took effect on June 17, 1961, may be availed of by end-users who
voluntarily assume all the new obligations provided for in said law. The purpose of
the new law is to place persons who acquired reparations goods before the
enactment of the amendatory law on the same footing as those who acquired
reparations goods after its enactment.

FACTS:

1. On August 30, 1960, the Reparations Commission of the Philippines

(Commission) and Botelho Shipping Corporation (Botelho) entered into a
Contract of Conditional Purchase and Sale of Reparations Goods.
2. The Commission agreed to sell to Botelho, for P6,798,888.88, the vessel M/S
Maria Rosello. The vessel was procured by the Commission from Japan,
pursuant to the provisions of the Philippine-Japanese Reparations Agreement of
May 9, 1956.
3. Same contract was entered by the commission to General Shipping Co., Inc.
(General Shipping), selling M/S/ General Lim in the amount P6,951,666.66.
4. Both agreements, couched in identical terms, except as to price.
5. From Tokyo it was delivered to the Philippines. Upon their departure from Tokyo,
the Philippine Vice-Consul in said city issued provisional certificates of Philippine
registry in the name of the Commission, so that the vessels could proceed to the
Philippines and secure therein the respective final registration document.
6. Upon arrival at the port of Manila, the Buyer filed the corresponding applications
for registration of the vessels, but, the Bureau of Customs placed the same under
 custody and refused to give due course to said applications, unless the sums of
P483,433 and P494,824 be paid as compensating tax.
7. Buyers filed with the Court of Tax Appeals for review and motion for suspension
of the collection of the said tax.
8. On June 17, 1961, while these cases were pending, RA 3079 amended RA
1789—the Original Reparations Act, under which the aforementioned contracts
with the Buyers had been executed—by exempting buyers of reparations goods
acquired from the Commission, from liability for the compensating tax.
9. Invoking said law, Buyers applied for the renovation of their utilization contracts
with the Commission and filed with-the Tax Court, their supplemental petitions for
review.
10. Appellants maintain the negative, upon the ground that a tax exemption must be
clear and explicit; that there is no express provision for the retroactivity of the
exemption, established by Republic Act No. 3079, from the compensating tax.
That Congress could not have intended any retroactive exemption, considering
that the result thereof would be prejudicial to the Government.

ISSUE:
Whether the buyers are exempted from paying the said compensating tax.

RULING:

1. Tax exemptions may and do exist, such as the one prescribed in Republic Act
No. 1789, as amended by Republic Act No. 3079, which is "clear and explicit,"
thus, meeting the first ground of appellant's contention.
2. Its purpose is some public benefit or interest, which the law-making body
considers sufficient to offset the monetary loss entailed in the grant of the
exemption.
3. Indeed, section 20 of Republic Act No. 3079 exacts a valuable consideration for
the retroactivity of its favorable provisions, namely, the voluntary assumption, by
the end-user who bought reparations goods prior to June 17, 1961 of "all the new
obligations provided for in" said Act.
4. There is no constitutional injunction against granting tax exemptions to particular
persons. In fact, it is not unusual to grant legislative franchises to specific
individuals or entities, conferring tax exemptions thereto. What the fundamental
law forbids is the denial of equal protection, such as through unreasonable
discrimination or classification.
5. Though RA 3079 does not explicitly exempt those who purchased reparations
goods prior to June 17, 1961, it does not say so, because they do not really enjoy
such exemption, unless they comply with the proviso in Section 20 of said Act, by
applying for the renovation of their respective utilization contracts to the
applicant. Thus, it is manifest that the same intended to give such buyers the
opportunity to be treated "in like manner and to the same extent as an end-user
filing his application after the approval of this Amendatory Act."
6. Thus, both buyers are exempted from said compensating tax and the law may be
retroactively applied to their benefit.