BIR Ruling

July 15, 1968 2nd Indorsement Respectfully returned to the Honorable, the Secretary of Finance, Manila, thru the Commissioner of Customs, Manila, the within papers relative to the request of the Navigation Corporation of the Philippines for exemption from the payment of taxes and duties on its shipment of various spare parts for the use of its vessel, the M/S SURIGAO STRAIGHT, under the provisions of Section 190 of the Tax Code, as amended by Republic Act No. 3176, with the following comment. In CTA Cases Nos. 1391 and 1648, the Tax Court, in granting petitioner tax credit for compensating taxes paid on imported spare parts in pursuance of Republic Act No. 3176, among others, said: "It would not be in keeping with the congressional intent to limit the exemption provisions of Republic Act No. 3176 to engines and spare parts of imported vessels to the exclusion of similar equipment which are imported separate and apart from the vessel itself. To construe the law in the manner respondent suggests, would kill the very incentive the law purports to create and grant. For, after acquiring vessels, shipowners or operators would be discouraged from procuring new engines and spare parts to repair or replace those worn out by use. This would result in the operation of unseaworthy vessels or floating coffins." In view thereof, the importation of Navigation Corporation of the Philippines of spare parts for the repair of its vessel is exempt from compensating tax in accordance with Section 190(d) of the Tax Code. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue