30 - CIR V Botelho Shipping Corp

30.
CIR v Botelho Shipping Corp

FACTS:
Reparations Commission of the Phils (“RCP”) & Botelho shipping entered
into a "Contract of Conditional Purchase and Sale of Reparations Goods,"
whereby the former agreed to sell to Botelho for P6.7M the vessel "M/S
Maria Rosello," procured by the Commission from Japan, pursuant to the
provisions of the Philippine-Japanese Reparations Agreement. The
Commission signed a similar contract with General Shipping Co., Inc. —
(“General Shipping “)— for the sale thereto of "M/S General Lim" at the
price of P6.9M. The terms include the ff:
a.) Reparations Commission "retains title to and ownership of the above
described vessel until it is fully paid for and b.) The stipulated purchase
price of the M/S MARIA ROSELLO was to be paid by Botelho to the
Commission under a deferred payment plan in 10 equal yearly installment
Upon arrival of the vessels at the Port of Manila, BOC refused to the
Botelho’s application for registration of the vessels unless compensating
taxes were paid by the buyers (Botelho). Botelho simultaneously filed with
the Court of Tax Appeals their respective petitions for review vs
Commissioner of Customs and the CIR w/ urgent motion for suspension of
the collection of said tax. While said cases were pending, RA 3079 amended
RA 1789 (wherein buyers were subject to compensating tax) — 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.
There was no express provision for the retroactivity of the exemption,
established by RA 3079 re: compensating tax. Botelho invoked sec.20 of
said act and applied for the renovation of their utilizations contracts with the
commission -GRANTED
Per tax court : EXEMPT from compensating tax sought to be assessed
CIR: Botelho shipping (the buyers)is liable for payment of compensating
taxes on the vessels M/S Maria Rosello" and "M/S General Lim."
CTA: Reversed
ISSUE: Whether or not Botelho is entitled to be granted exemption from
liability for the compensating tax
HELD: YES. Botelho must be exempted from paying the compensating tax
assessed by the BOC. There is no constitutional injunction against granting
tax exemptions to particular persons belonging to a particular class. In fact,
it is not unusual to grant legislative franchises to specific individuals or
entities, conferring tax exemptions thereto. In the same way as other
statutory commands, its avowed purpose is some public benefit or interest,
which the law-making body considers sufficient to offset the monetary loss
entitled in the grant of the exemption. Section 20 of RA 3079 seeks, not to
discriminate or to create an exemption or exception, but to abolish the
discrimination, exemption or exception that would otherwise result, in favor
of the end-user who bought after June 17, 1961 and against one who bought
prior thereto. In this case, the vessels were bought in 1960 after the
amendment of said statute took place, after the contracts involved in these
appeals had been perfected and partly consummated, but, also, after the
corresponding compensating tax had become due and payment demandable.
Hence, Botelho shipping is entitled exemption from liability for the
compensating taxes from reparation goods.
DOCTRINE : Every tax exemption implies a waiver of the right to collect

what otherwise would be due to the Government, and, in this sense, is
prejudicial thereto. No tax exemption, however, is given without any reason
therefor. In much the same way as other statutory commands, its avowed
purpose is some public benefit or interest, which the law-making body
considers sufficient to offset the monetary loss entailed in the grant of
exemption. Sec 20 of RA 3079 seeks to abolish the discrimination, exemption
or exception that would otherwise result, in favor of the end user who
bought after June 17, 1961 and against one who bought prior thereto.

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30.

CIR v Botelho Shipping Corp

DOCTRINE : Every tax exemption implies a waiver of the right to collect

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