First Holdings Co. vs Batangas City (300 SCRA 661)

First Philippine Industrial Corporation vs Court of Appeals
300 SCRA 661 [GR No. 125948 December 29, 1998]

Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Some time in January 1995, petitioner applied for a mayor’s permit with the office of the mayor of Batangas City. However, before the mayor’s permit could be issued, the respondent city treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the local government code. The respondent city treasurer assessed a business tax on the petitioner amounting to Php956,076.04 payable in four installments based on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to Php181,151. In order not to hamper its operations, petitioner paid the tax under protest in the amount of Php239,019.01 for the first quarter of 1993.

Issue: Whether or not petitioner is exempt from paying the alleged business tax as a common carrier.

Held: Yes. The definition of common carrier in the civil code makes no distinctions as to the means of transporting, as long as it’s by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operations are considered common carriers.

Under the petroleum act of the Philippines (RA 387), petitioner is considered a common carrier.

In BIR Ruling no. 069-83, the Bureau of Internal Revenue otherwise considers the petitioners as a common carrier.

From the foregoing disquisitions, there is no doubt that petitioner is a common carrier and, therefore, exempt from the business tax as provided for in section 133 (j) of the local government code, to wit:

Sec 133 Common limitations on the taxing power of local government units – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities and barangays shall not extend to the levy of the following:


j. Taxes on gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land, or water except as provided in this code.

It is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent duplication of the so-called common carriers’s tax.

Petitioner is already paying 3% common carrier’s tax on its gross sales/earnings under the NIRC. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the local government code.

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