G.R. No. 179259 - COMMISSIONER OF INTERNAL REVENUE, VS. PHILIPPINE AIRLINES, INC. (PAL).D E C I S I O N - Supreme Court E-Library

Ruling

accordingly ordered for the cancellation and withdrawal of Assessment Notice No. INC-FY-99-2000-000085 and Formal Letter of Demand for the payment of deficiency MCIT in the amount of P326,778,723.35, covering the fiscal year ending 31 March 2000, issued against respondent. The CTA Second Division made the following factual and legal findings, to wit: (a) Section 13 of PD 1590 acquiring and limiting the extent of the tax liability of respondent under its franchise is coached in a clear, plain and unambiguous manner, and needs no further interpretation or construction; (b) Section 13 clearly provides that respondent is liable only for either the basic corporate income tax based on its annual net taxable income, or the 2% franchise tax based on gross revenue, whichever is lower; (c) Respondent-grantee must only choose between the two alternatives mentioned in Section 13 in the payment of its tax liability to the government, and its choice must be that which will result in a lower tax liability; (d) Since the income tax return of respondent reflected a zero taxable income for the fiscal year ending 31 March 2000, obviously being lower than the 2% franchise tax, its choice of the former is definitely a better alternative as basis for its tax liability to the government; [5] (e) The basic corporate income tax mentioned in Section 13 of PD 1590 does not refer to the MCIT under Section 27(E) of the NIRC of 1997, as amended, but particularly to the applicable rate of 32% income tax under Section 27(A) of the same Code, on the taxable income of domestic corporations; (f) The MCIT is regarded to belong to other taxes as it was not included in the choices provided by the franchise. To hold otherwise would be to give another option to respondent which is evidently not within the ambit of PD 1590; [6] (g) The in lieu of all other taxes clause under Section 13 of respondents legislative franchise exempts it from all taxes necessary in the conduct of its business covered by the franchise, except the tax on its real property for which respondent is expressly made payable; [7] and (h) The rationale or purpose for the exemption from all other taxes except the income tax and real property tax granted to respondent upon the payment of the basic corporate income tax or the 2% franchise tax is that such tax exemption is part of inducement for the acceptance of the franchise and the rendition of public service by the grantee. [8] Simply put, it pronounced that the only qualification provided for in the law is the option given to respondent to choose between the taxes which will yield the lesser liability. Thus, if as a result of the exercise of the option, the respondent ends up without any tax liability, it should not be held liable for any other tax, such as the MCIT, except for real property tax. [9] On 30 January 2007, the CTA Second Division denied petitioners Motion for Reconsideration for lack of merit. [10] Aggrieved, petitioner appealed to the CTA En Banc