BIR Ruling

July 20, 1976 Automobiles Registered in the Name of Philippine Air Lines (PAL), Exemption from Payment of Energy Tax This is in reply to your letter dated May 21, 1976 referred to this Office by the Commissioner of the Land Transportation Commission for our opinion on the matter of your request for exemption from payment of the energy tax of your motor vehicles as provided under Presidential Decree No. 843. It is claimed in your letter that you are exempted from paying the energy tax in view of Section 13 of your franchise, Act No. 4271 as amended by Republic Act No. 2360, quoted as follows: "SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National Government during the life and this franchise a tax of two percent of the gross revenue or gross earning derived by the grantee from its operation under this franchise. Such tax shall be due and payable quarterly and shall be in lieu of all taxes of any kind, nature and description, levied, established or collected by any municipal, provincial or National Authority : Provided, That if, after the audit of the accounts of the grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due, the deficiency tax shall be payable within ten days from the receipt of the assessment. The grantee shall pay the tax on its real property in conformity with existing law." (Emphasis supplied) The phrase "in lieu of all taxes of any kind, nature or description" has been generally considered as a commutation tax, that is, it is a combination of two or more taxes as an excise or franchise tax, payment of which would give rise to privilege exemption from all other taxes. (Philippine Air Lines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 45, Feb. 8, 1956, citing 12 Corpus Juris 216). Interpreting a similar provision in Philippine Railway Co. vs. Nolting (34 Phil. 401), the Supreme Court said: ". . . The phrase 'all taxes of every name and nature' is a very inclusive statement, especially when it names in connection therewith, the only governmental entities who have a right to collect taxes. It is not only all inclusive, but it is also as well exceedingly exclusive. It not only includes all payments which may be regarded as taxes, but it excludes everything which might, by any possibility, be denominated taxes, other than those expressly named in said Act No. 1497." It is plain that under the above-quoted provision of your franchise, your exemption covers all payments which might be denominated as "taxes." The only tax to which you are subject is the real property tax which is expressly stated in the said provision of law. Accordingly, it is the opinion of this Office that automobiles registered in the name of Philippine Air Lines are exempt from payment of the energy tax imposed by Presidential Decree No. 843. cdtech