G.R. No. 180066 - COMMISSIONER OF INTERNAL REVENUE, VS. PHILIPPINE AIRLINES, INC.. D E C I S I O N - Supreme Court E-Library

Ruling

WHEREFORE , premises considered, the instant Petition for Review is hereby GRANTED . Accordingly, Assessment Notice No. INC FY-3-31-01-000094 and Formal Letter of Demand for the payment of deficiency Minimum Corporate Income Tax in the amount of P272,421,886.58 are hereby CANCELLED and WITHDRAWN . [11] In a Resolution dated 2 January 2007, the CTA Second Division denied the Motion for Reconsideration of the CIR. It was then the turn of the CIR to file a Petition for Review with the CTA en banc , docketed as C.T.A. E.B. No. 246. The CTA en banc found that "the cited legal provisions and jurisprudence are teeming with life with respect to the grant of tax exemption too vivid to pass unnoticed," and that "the Court in Division correctly ruled in favor of the respondent [PAL] granting its petition for the cancellation of Assessment Notice No. INC FY-3-31-01-000094 and Formal Letter of Demand for the deficiency MCIT in the amount of P272,421,886.58." [12] Consequently, the CTA en banc denied the Petition of the CIR for lack of merit. The CTA en banc likewise denied the Motion for Reconsideration of the CIR in a Resolution dated 11 October 2007. Hence, the CIR comes before this Court via the instant Petition for Review on Certiorari , based on the grounds stated hereunder: THE COURT OF TAX APPEALS ERRED ON A QUESTION OF LAW IN ITS ASSAILED DECISION BECAUSE: (1) [PAL] CLEARLY OPTED TO BE COVERED BY THE INCOME TAX PROVISION OF THE NATIONAL INTERNAL REVENUE CODE OF 1997 (NIRC OF 1997). (sic) AS AMENDED; HENCE, IT IS COVERED BY THE MCIT PROVISION OF THE SAME CODE. (2) THE MCIT DOES NOT BELONG TO THE CATEGORY OF "OTHER TAXES" WHICH WOULD ENABLE RESPONDENT TO AVAIL ITSELF OF THE "IN LIEU" (sic) OF ALL OTHER TAXES" CLAUSE UNDER SECTION 13 OF P.D. NO. 1590 ("CHARTER"). (3) THE MCIT PROVISION OF THE NIRC OF 1997 IS NOT AN AMENDMENT OF [PAL'S] CHARTER. (4) PAL IS NOT ONLY GIVEN THE PRIVILEGE TO CHOOSE BETWEEN WHAT WILL GIVE IT THE BENEFIT OF A LOWER TAX, BUT ALSO THE RESPONSIBILITY OF PAYING ITS SHARE OF THE TAX BURDEN, AS IS EVIDENT IN SECTION 22 OF RA NO. 9337. (5) A CLAIM FOR EXEMPTION FROM TAXATION IS NEVER PRESUMED; [PAL] IS LIABLE FOR THE DEFICIENCY MCIT. [13] There is only one vital issue that the Court must resolve in the Petition at bar, i.e. , whether PAL is liable for deficiency MCIT for FY 2000-2001. The Court answers in the negative. Presidential Decree No. 1590, the franchise of PAL, contains provisions specifically governing the taxation of said corporation, to wit: Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax : (a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the provisions of the National Internal Revenue Code; or (b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee f