REPUBLICOFTHEPHILIPPINES

COURTOFTAXAPPEALS
QUEZONCITY

HOPEWELL
POWER
(PHILIPPINES)

CORPORATION,
Petitioner,

versus
C.T.A.
CASE
NO.
5310
COMMISSIONER
OF

INTERNAL
Promulgated:

REVENUE,

Respondent.

NOV
18 1998

X
--------------X

DECISION

This

is

judicial claim

for

the

refund of

P24,864,781.58allegedlyrepresentingerroneouspaymentofdocumentarystamptax("DST",for
short)overloanandsecuritydocumentsexecutedinHongKongonDecember29,
1993.

PetitionerisacorporationorganizedandexistingunderPhilippinelaws,withaddressatSuite
202,CTC

Building,2232RoxasBoulevard,PasayCity.Thefactsareashereunderstated.
OnDecember29,1993,petitioner,togetherwithHopewellEnergyInternationalLimited, a
companyorganizedunderthelawsofHongKong,enteredintoaMortgageTrustIndenture
("MTI",forbrevity)forthemortgageoftheirchattelandrealestateassetswiththe
BankAmericaNationalTrustCompany,acorporation

DECISION
C.T.A.CASENO.5310
2

Organized under

the

laws

of

New

York, U S A

The

Execution oftheMTIwasdoneinHongKong.
Onevendate,petitionerpaidunderprotesttheabovesaidamountofDSTwithrespondent's
BureauinordertofacilitatetheregistrationoftheMTIwiththeRegisterofDeedsofLucena,
ProvinceofQuezon.Onthesameday,therespondent'sBureaureceivedfromthepetitionera
letterofrequest,datedJuly211993, askingforconfirmationonthetaxexemptionfromDST
ofmortgagedocumentsexecutedabroad.
Consequently,onNovember17,1995,petitionerfiledtherequisitewrittenclaimforrefund
withrespondent'sBureauallegingerroneouspaymentonaccountoftheMTI'sexecutionin
HongKong.
Duetothecontinuedinactionoftherespondentonitsclaimforrefundandonitsrequestfor
confirmation,petitionerwasconstrainedtoelevateitscasebeforethisCourt.Hence,the
instantpetitionforreview.

Atbar,petitionercontends,int:eralia,thataDST,beinganexcisetax,doesnotattachtothe
executionofthedocumentsinHongKongfollowingrespondent'spreviousrulingsonthe
1

matter ;thatatthetimetheMTIwasexecuted,theprevailingprovisionsofSection 173of

1BIRRulingsNos.15093,06893'23591'07291,20590'14790'06490'16489'14389,07489,
06989,06889,04589,01789,01689,00689'00589'49788,48888,48088,38888,37388,290
88,23488,03088,05086and06883(Petition,p.3)

DECISION
C.T.A.CASENO.5310
3

theTaxCodedidnotcoverdocumentsexecutedabroad;andthat,thesubsequentenactmentof
RepublicActNo.7660whichbecameeffectiveonJanuary14,1994,specificallyaddressed
suchperceivedloopholeinthelaw2bymakingtheexecutionofloanagreementsabroad
subjecttoDSTwhentheobligationorrightarisesfromPhilippinesourcesorthepropertyis
situatedinthePhilippines.

InherAnswer,respondentadmittedtheexistenceofAuthoritytoAcceptPaymentNo.
1140274anditscorrespondingBIROfficialReceiptNo. 2319144L,bothofwhicharedated
December29,1993,andinpaymentforDST
in

theamountof~24,864,781.58.

Bywayofspecialandaffirmativedefenses,however,respondentasserts,amongothers,that
theDSTinquestionwaspaidinaccordancewithSection195oftheTaxCodeand,therefore,
notrefundable;thatpetitionerfailedtoshwproofthatthedocumentssubjectoftheDST
wereexecutedabroad;andthatclaimsforrefundareconstruedstrictlyagainsttheclaimant,
thesamebeinginthenatureofexemptionfromtaxes.

Duringthetrial,petitionerofferedinevidenceadulynotarizedcopyoftheMTIdocument,
togetherwiththeauthenticationofthePhilippineconsulinHongKong.

2
Asshownby
congressional
deliberations
on
House
Bill
No.
7789
and
SenateBill
No.
1330
and
the

explanatorynotes
of
HouseBill
No.
4821

and
Senate
Bill
No.
1308

(Annexes
to
thePetition)

DECISION
C.T.A.CASENO.5310
4-

Respondentadmittedthesame,withoutanyqualification,inhercommentthereto.

AsWeseeit,theonlyissueremaininginthecaseatbarispurelylegal,thatis,whetherornot
theMTIdocumentexecutedinHongKongisexemptedfromDST,beinganexcisetax.

Afteracarefulreviewoftheattendingfacts,thedisquisitionofthepartiesandtheprovisions
oftheTaxCodeandjurisprudenceinpoint,thisCourtrulesinfavorofthepetitioner.

Thepositionoftherespondentinitsvariousrulingsaforecitedisinconformitywiththe
HonorableSupremeCourt'sdictumontheissueatbarinthecaseof
Allied ThreadCo., Inc.vs. CityMayor ofManila,

133

SCRA 338atp.343,towit:

Thepowertolevyanexciseupontheperformanceofanactortheengaginginanoccupation
doesnotdependuponthedomicileofthepersonsubjecttotheexcise,noruponthephysical
locationofthepropertyandinconnectionwiththeactoroccupationtaxed,butdependsupon
theplaceinwhichtheactisperformedoroccupationengagedin.

Thus,thegaugefortaxabilityxxxdoesnotdependonthelocationoftheoffice,butattaches
upontheplacewheretherespective xxxtransaction(s)isperfectedandconsummated.(See
Koppel(Phil)vs.Yatco,77Phil.496[1946].)(Underscoringsupplied)

Thus,inasmuchastheMTIwasexecutedandsignedinHongKongpriortotheeffectivityof
RepublicActNo.

DECISION
C.T.A.CASENO.5310
5-

7660onJanuary14,1994,noDSTisimposableonthesameinthePhilippines.This
conclusionisalsoinkeepingwithoneoftheinherentlimitationsoftaxation,namely,thatit
maybeexercisedonlywithintheterritorialjurisdictionofthetaxingauthority (51Am.Jur.
88as

cited

in

Compendium

ofTax Law

and

Jurisprudence

by

Vitug, 1993ed.)

Prescinding

fromthe

above,thisCourtsees

Section

173oftheTaxCode,asamendedbyRepublicActNo7660,asimposingDST,notdirectlyany

moreupontheactorprivilegeoftransactingdocuments,instruments,papers

andloanagreementsperse,butratherontheactorprivilegeofsimplytransactingonany
obligationorrightarisingfromPhilippinesources,oronanyproperty
situatedinthe
Philippines.
Unlike
before
the
amendment
where
the
execution
of
the
document,
instrument,
paper
or
loan
agreement
itself
automatically
gives
rise
to
the
imposition
of
DST,
such

execution
isnow
deemedto
be
merely
incidental.

WHEREFORE,
in
view
of
the
foregoing,
the
instant
Petition
for
Review
is
hereby
GRANTED.
Accordingly,
respondent
is
hereby
ORDERED
to
REFUNDtheamount
of

P24,864,781.58
SO

tothepetitionerimmediately.

ORDERED.