Concepcion, C.J.: B. Commissioner of Internal Revenue vs. Marubeni Corporation December 18, 2001 G.R. No. 137377

A. Collector of Tax Internal Revenue vs. GoodRich International Rubber Co.
December 22, 1967

G.R. No. L-22265
Concepcion, C.J.
(*Yung nakalagay sa Syllabus natin kay Atty. Capuno ay September 1965 na Decision, however, wala
ako makita na 1965 na Decision ng SC. Yung pinaka-malapit ay eto yung Dec. 22, 1967.)
Facts:
B. Commissioner of Internal Revenue vs. Marubeni Corporation

December 18, 2001
G.R. No. 137377
Puno, J
Facts:
Marubeni Corporation (Marubeni) is a foreign corporation organized and

existing under the laws of Japan. It is engaged in general import and export
trading, financing and construction business. It is also duly registered to
engage in such business in the Philippines and maintains a branch office in
Manila.
Sometime in November 1985, the Commissioner of Internal Revenue

(CIR), issued a letter to Marubeni for the purpose of examining their
accounting books for the fiscal year of March 1985. Through the course of
the examination, the CIR found that Marubeni has previously contracted two
contracts in year 1984 with National Development Company (NDC) and
Philippine Phosphate Corporation (Philphos), to which both have accumulated
undeclared income. The CIR found that the NDC and Philphos contracts were
made on a “turn-key basis” and the gross income from the two projects
amounted to P967,269, 811.14.
The revenue examiners then issued a letter to Marubeni containing the

assessed deficiency internal revenue taxes, inclusive of surcharge and interest
and in case that Marubeni disagree with the assessment they may file an
appeal to the Court of Tax Appeals (CTA). The Marubeni then filed a petition
to the CTA questioning the assessment made by the CIR. However, during
the pendency of their case in the CTA, Executive Order No. 41 (EO No. 41)
has been enacted which declares a one-time tax amnesty covering the period
of 1981 to 1985. Marubeni then filed a tax-amnesty covered by EO No. 41
and later on the covered period of EO No. 41 was EO No. 64 which was also
availed by Marubeni.
As a result, the CTA issued a decision in favor of Marubeni due to their

availment of tax amnesty provided by EO Nos. 41 and 64. The CIR then
appealed to the Court of Appeals, however, the same was dismissed.
Issues:
1.) Whether or not Marubeni is exempted from paying the tax?
Held:
Marubeni is exempted from paying the taxes for the following

reasons:
On date of effectivity
CIR claims Marubeni is disqualified from the tax amnesty because it falls
under the exception in Sec 4b of EO 41:
“Sec. 4. Exceptions.—The following taxpayers may not avail themselves of

the amnesty herein granted: xxx b) Those with income tax cases already
filed in Court as of the effectivity hereof;”
CIR argues that at the time Marubeni filed for income tax amnesty
on Oct 30, 1986, a case had already been filed and was pending before
the CTA and Marubeni therefore fell under the exception. However, the
point of reference is the date of effectivity of EO 41 and that the filing of
income tax cases must have been made before and as of its effectivity.
EO 41 took effect on Aug 22, 1986. The case questioning the 1985
deficiency was filed with CTA on Sept 26, 1986. When EO 41 became
effective, the case had not yet been filed. Marubeni does not fall in the
exception and is thus, not disqualified from availing of the amnesty under
EO 41 for taxes on income and branch profit remittance.
The difficulty herein is with respect to the contractor’s tax
assessment (business tax) and respondent’s availment of the amnesty
under EO 64, which expanded EO 41’s coverage. When EO 64 took effect
on Nov 17, 1986, it did not provide for exceptions to the coverage of the
amnesty for business, estate and donor’s taxes. Instead, Section 8
said EO provided that:
“Section 8. The provisions of Executive Orders Nos. 41 and 54 which are

not contrary to or inconsistent with this amendatory Executive Order shall
remain in full force and effect.”
Due to the EO 64 amendment, Sec 4b cannot be construed to refer

to EO 41 and its date of effectivity. The general rule is that an
amendatory act operates prospectively. It may not be given a retroactive
effect unless it is so provided expressly or by necessary implication and no
vested right or obligations of contract are thereby impaired.
On situs of taxation
Marubeni contends that assuming it did not validly avail of the

amnesty, it is still not liable for the deficiency tax because the income
from the projects came from the “Offshore Portion” as opposed to
“Onshore Portion”. It claims all materials and equipment in the
contract under the “Offshore Portion” were manufactured and
completed in Japan, not in the Philippines, and are therefore not
subject to Philippine taxes.
(BG: Marubeni won in the public bidding for projects with government
corporations NDC and Philphos. In the contracts, the prices were broken
down into a Japanese Yen Portion (I and II) and Philippine Pesos Portion
and financed either by OECF or by supplier’s credit. The Japanese Yen
Portion I corresponds to the Foreign Offshore Portion, while Japanese Yen
Portion II and the Philippine Pesos Portion correspond to the Philippine
Onshore Portion. Marubeni has already paid the Onshore Portion, a fact
that CIR does not deny.)
CIR argues that since the two agreements are turn-key, they call
for the supply of both materials and services to the client, they are
contracts for a piece of work and are indivisible. The situs of the two
projects is in the Philippines, and the materials provided and services
rendered were all done and completed within the territorial jurisdiction of
the Philippines. Accordingly, respondent’s entire receipts from the
contracts, including its receipts from the Offshore Portion, constitute
income from Philippine sources. The total gross receipts covering both
labor and materials should be subjected to contractor’s tax (a tax on the
exercise of a privilege of selling services or labor rather than a sale on
products).
Marubeni, however, was able to sufficiently prove in trial that not

all its work was performed in the Philippines because some of them were
completed in Japan (and in fact subcontracted) in accordance with the
provisions of the contracts. All services for the design, fabrication,
engineering and manufacture of the materials and equipment under
Japanese Yen Portion I were made and completed in Japan. These
services were rendered outside Philippines’ taxing jurisdiction
and are therefore not subject to contractor’s tax.
C. Hospital De San Juan de Dios vs. Pasay City, et. Al

February 28, 1966
G.R. No. L-19371
Dizon, J.
Facts:
The Hospital of San Juan de Dios (HSJD) on the dates of July 24, 1954
and May 27, 1957 paid under protest the City Government of Pasay (CGP) the
amounts of P829.60 and P879.90, respectively. The said amounts represent
the allegedly due of HSDJ to the CGP for the electrical inspection fees which
is provided under the City Ordinance No. 7, series of 1945, as amended by
City Ordinance No. 22, series of 1947 and further amended by Ordinance No.
54, series of 1955 which provides that:
“The City Electrician shall inspect all the electric wires, poles and
other apparatus whether electric crude oil, charcoal or gasoline
installed or used for generating, containing, conducting or
measuring electricity or telephone service, issue to owner or user
x x x Churches and such other religious institutions and
buildings housing charitable organizations, are likewise
subject to annual inspection but exempted from the
payment of inspection fees.” (emphasis supplied)
HSJD then appealed to CGP about the assessment that they made against them.
HSJD contends that they should be exempt from the payment of the annual inspection
fees due to the fact that according to the above-mentioned City Ordinance, charitable
institutions are exempt from the said fees. However, HSDJ was still compelled to pay
the same, by reason that Mayor Pablo Cuneta and City Engineer R.N. Ascano refused to
issue a building permit on their favor of HSJD until they fully paid the said inspection
fees.
HSJD then filed a case to the RTC to recover the amounts that they have paid to
CGP but the decision of the RTC was not ruled in their favor, rather it held that the
HSJD being a charitable institution was not managed and operated as a charitable
institution but one for profit and, as such, they are not entitled to be exempt from
paying the said amounts.
ISSUE:
W/N HSJD, a charitable institution, is exempted from the payment of the annual
inspection fees provided under City Ordiance No. 7?
HELD:
Yes, HSDJ is exempted from paying the annual electrical inspection fee.
It is not disputed that HSDJ was organized as a charitable institution; the

presumption is that it is operating as such, the burden of proof is on CGP to
show that it is operating otherwise.
As provided in several jurisprudence, a hospital is generally considered to

be charitable institution. It is public policy to encourage works of charity. The
general rule is that charitable institutions do not lose its charitable character and
consequent exemption from taxation merely because recipients of its benefits
who are able to pay are required to do so, where funds derived in this manner
are devoted to the charitable purposes of the institution, applies to hospitals.

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A. Collector of Tax Internal Revenue vs. GoodRich International Rubber Co.

December 22, 1967

B. Commissioner of Internal Revenue vs. Marubeni Corporation

Marubeni Corporation (Marubeni) is a foreign corporation organized and

Sometime in November 1985, the Commissioner of Internal Revenue

The revenue examiners then issued a letter to Marubeni containing the

As a result, the CTA issued a decision in favor of Marubeni due to their

1.) Whether or not Marubeni is exempted from paying the tax?

Marubeni is exempted from paying the taxes for the following

“Sec. 4. Exceptions.—The following taxpayers may not avail themselves of

“Section 8. The provisions of Executive Orders Nos. 41 and 54 which are

Due to the EO 64 amendment, Sec 4b cannot be construed to refer

Marubeni contends that assuming it did not validly avail of the

Marubeni, however, was able to sufficiently prove in trial that not

C. Hospital De San Juan de Dios vs. Pasay City, et. Al

It is not disputed that HSDJ was organized as a charitable institution; the

As provided in several jurisprudence, a hospital is generally considered to

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