Non-exemption on the Diesel Fuel Oil for Use in the Operation of Its Bus Lines Subsidiaries

December 15, 1959 BIR RULING NO. 636-59 The General Manager Manila Railroad Company M a n i l a S i r : Reference is made to your 1st Indorsement dated September 7, 1959, requesting reconsideration of our letter dated August 17, 1959 wherein we held that the exemption granted by this Office to that Company, pursuant to its franchise (ACT 1510), from the specific tax on diesel fuel oil used in its railway business cannot embrace diesel fuel oil for use in the operation of its bus lines subsidiaries, the Benguet Auto Line and Luzon Bus Line. In support of said request, you stated that "Under its Articles of Incorporation which forms part of the charter of the MRR Co., . . . this Company has been expressly authorized to own or operate bus lines such as the Benguet Auto Line and the Luzon Bus Line" and that under section 12 of Act 1510, "the exemption covers all other property owned or operated by the Company. . . The mere fact that a certain property is owned by this Company would suffice to exempt the said property from any tax." In answer thereto, I regret to have to inform you that we are enable to share in the view taken by that Company. We have read and re-read Act 1510 but failed to find anything there regarding the operation, or otherwise, of bus lines by that Company. As therefore, we found nothing treated therein except matters having to do exclusively with the construction, equipment, operation and maintenance by the Manila Railroad Company of railway lines. In fact the title itself of Act 1510 states: AN ACT GRANTING TO THE MANILA RAILROAD COMPANY A CONCESSION FOR RAILWAY LINES IN THE ISLAND OF LUZON . . . ." Neither were we able to find anything in said Act to support your argument that the Company's articles of incorporation forms part of Act 1510. While it is true that under subparagraph (h), 2nd paragraph of its articles of incorporation, the operation of a bus line is undoubtedly included as one of the purposes for which the Company was formed, nevertheless, as Act 1510 treats of the railway business only and nothing more, it follows that the provisions thereof, particularly those on the matter of tax exemption, cannot be made to apply to other businesses of the Company. With respect to the other argument, we are quoting hereunder the second paragraph of section 12 of ACT 1510: "Such annual payments, when promptly and fully made by the grantee, shall be in lieu of all taxes of every name and nature municipal, provincial or central upon its capital stock, franchises, right-of-way, earnings, and all other property owned or operated by the grantee under this concession or franchise ." (Emphasis Supplied) It seems quite clear that under the aforequoted provisions, for a property to be tax exempt, it is not enough that the same be owned or operated by the Manila Railroad Company, it being further necessary that such property have some bearing or relation with the conduct of the railway business of the Company. In view of all the foregoing, it is regretted that your request has to be, as it is hereby denied. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue