William C.
Reagan, Petitioner vs The respondent after deducting the landed
Commission of Internal Revenue cost of the car and the personal exemption
G.R. No. L – 26379; December 27, 1969 which the petitioner was entitled, fixed as
his net income arising from such transaction
TOPIC: Territoriality
the amount of P17912.34 rendering him
Nothing is better settled than that the liable for income tax of P2979.00. After
Philippines being independent and paying the sum, he sought refund from the
sovereign, its authority may be exercised respondent claiming that he is exempted.
over its entire domain. He filed a case within the Court of Tax
Appeals seeking recovery of the sum
There is no portion thereof that is beyond its P2979.00 plus legal rate of interest.
power. Within its limits, its decrees are
supreme, its commands paramount. Its ISSUE:
laws govern therein, and everyone to whom
Whether or not the said income tax of
it applies must submit to its terms. That is
P2979.00 was legally collected by
the extent of its jurisdiction, both territorial
respondent from petitioner.
and personal. Necessarily, likewise, it has
to be exclusive. If it were not thus, there is a HELD:
diminution of its sovereignty.
The Philippine is an independent and
sovereign country or state. Its authority may
FACTS:
be exercised over its entire domain. Its laws
The petitioner is a citizen of the United State govern therein and everyone to whom it
and an employee of Bendix Radio, Divison applies must submit to its term. It does not
of Bendix Aviation Corporation, which prelude from allowing another power to
provided technical assistance to the United participate in the exercise of jurisdictional
States Air Force was assigned at the Clark rights over certain portions of its territory.
Air Base Pampanga, honor about July 7, 19. Such areas sustain their status as native
Nine months, before his tour duty expires, soil and still subject to its authority. Its
petitioner imported a tax free 1960 Cadillac jurisdiction may be diminished but it does
car which valued at $6443.83. More than not disappear.
two months after the car was imported,
The Clark Air Base is one of he bases under
petitioner requested the Clark Air Base
lease to the American armed forces by
Commander for a permit to sell the car. The
virtue of the Military Bases Agreement
request was granted with the condition that
which states that a “national of the US
he would sell it to a member of the United
serving or employed in the Philippines in
States Armed Forces or an employee of the
connection with the construction,
U.S. Military Bases.
maintenance, operation, or defense of the
On July 11, 1960, petitioner sold the car to bases and residing in the Philippines only
Willie Johnson for $6600, a private in US by reason such unemployment is not to be
Marine Corps, Sangby Point, Cavite as taxed on his income unless derived in the
shown by a bill of sale executed at Clark Air bases which one clearly derived the Phil.
Base. On the same date William Johnson
Therefore, the Supreme Court sustained the
Jr. sold the car to Fred Meneses for
decision of the Court of Tax Appeals
P32,000 as evidence by a deed of sale
rendering the petitioner liable of the income
executed in Manila.
tax arising from the sale of his automobile
that have taken place in Clark Air Field
which is within our territory to tax.
