POLIREV | Lirah Alorra
WILLIAM C. REAGAN, ETC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE,
respondent.
G.R. No. L-26379 | December 27, 1969 | EN BANC
J. Fernando
[Topic based on the syllabus: Sovereignty as Auto-Limitation]
FACTS:
William C. Reagan, petitioner, is a citizen of the United States and an employee of Bendix
Radio, Division of Bendix Aviation Corporation, which provides technical assistance to the
US Air Force. Reagan was assigned at Clark Air Base, Philippines.
Nine (9) months thereafter and before his tour of duty expired, Reagan imported a tax-free
1960 Cadillac car with accessories valued at $6,443.83, including freight, insurance and
other charges. More than two (2) months after the importation, Reagan requested the Base
Commander for a permit to sell the car, which was granted provided that the sale was
made to a member of the US Armed Forces or a citizen of the US employed in the US
military bases in the Philippines. On the same day, Reagan sold his car for $6,600 to a
certain Willie Johnson, Jr., US Marine Corps, Sangley Point, Cavite, Philippines, as shown by
a Bill of Sale executed at Clark Air Base. Also on the same date, Johnson sold the car to Fred
Meneses for P32,000 as evidenced by a deed of sale executed in Manila.
As a result, Commissioner of Internal Revenue (CIR), respondent, rendered him liable for
income tax in the sum of P2,979. After paying the sum, he sought a refund from respondent
claiming that he was exempt.
However, pending action on his request for refund, he filed the case with the Court of Tax
Appeals (CTA) seeking recovery of the sum plus the legal rate of interest.
CTA found nothing objectionable in the assessment and the payment of P2,979 as income
tax. Therefore, CTA denied the refund on the same.
Hence, this appeal before the Supreme Court.
ISSUE/S:
Whether the sale was made outside the Philippine territory and therefore beyond the
Philippine jurisdictional power to tax. (NO)
RULING:
No, the sale was made within the Philippine territory and therefore within the Philippine
jurisdictional power to tax.
POLIREV | Lirah Alorra
It is to be admitted that any state may, by its consent, express or implied, submit to a
restriction of its sovereign rights. There may thus be a curtailment of what otherwise is a
power plenary in character. That is the concept of sovereignty as auto-limitation, which, in
the succinct language of Jellinek, "is the property of a state-force due to which it has the
exclusive capacity of legal self-determination and self-restriction." A state then, if it chooses
to, may refrain from the exercise of what otherwise is illimitable competence.
There is nothing in the Military Bases Agreement that lends support to such an assertion. It
has not become foreign soil or territory. This country's jurisdictional rights therein,
certainly not excluding the power to tax, have been preserved. As to certain tax matters, an
appropriate exemption was provided for.
Petitioner relied to an obiter dictum by Justice Tuason in the case of Saura Import and
Export Co. vs. Meer, which provides that "while in army bases or installations within the
Philippines those goods were in contemplation of law on foreign soil." It was clearly obiter
not being necessary for the resolution of the issue before this Court.
Petitioner also relied on the case of Co Po vs. Collector of Internal Revenue. Justice Tuason
repeated this previous obiter. However, it was emphasized by Justice Barrera, who penned
the Co Po decision: "It is true that the areas covered by the United States Military Bases are
not foreign territories both in the political and geographical sense."
We hold, as announced at the outset, that petitioner was liable for the income tax arising
from a sale of his automobile in the Clark Field Air Base, which clearly is and cannot
otherwise be other than, within our territorial jurisdiction to tax.
There is further satisfaction in finding ourselves unable to indulge petitioner in his plea for
reversal. We thus manifest fealty to a pronouncement made time and time again that the
law does not look with favor on tax exemptions and that he who would seek to be thus
privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted. Petitioner had not done so. Petitioner cannot do so.
DISPOSITIVE PORTION:
WHEREFORE, the decision of the Court of Tax Appeals of May 12, 1966 denying the refund of
P2,979.00 as the income tax paid by petitioner is affirmed. With costs against petitioner.
