Republic v. PAL

Facts:

see CIR & COC v. PAL

Issue:

Whether or not Sections 6 and 10 of R.A. 9334 repealed Section 13 of P.D. 1590.

Held:

No. In CIR v. PAL, the Court has already passed upon the very same issues raised by the same petitioners. The only differences are the taxable period involved and the amount of refundable tax. It is a basic principle in statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of the earlier statute. Provisions of P.D. 1590 and R.A. 9334 shows that there was no express repeal of the grant of exemption.

The franchise of PAL remains the governing law on its exemption from taxes. Its payment of either basic corporate income tax or franchise tax − whichever is lower − shall be in lieu of all other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property tax. The phrase “in lieu of all other taxes” includes but is not limited to taxes, duties, charges, royalties, or fees due on all importations by the grantee of the commissary and catering supplies, provided that such articles or supplies or materials are imported for the use of the grantee in its transport and non-transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price.

However, upon the amendment of the 1997 NIRC, Section 2211 of R.A. 933712 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter.

In this case, the CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary and catering supplies, provided it shows that 1) such articles or supplies or materials are imported for use in its transport and non-transport operations and other activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price.

As to the issue of PAL’s noncompliance with the conditions set by Section 13 of P.D. 1509 for the imported supplies to be exempt from excise tax, it must be noted that these are factual determinations that are best left to the CTA. The appellate court found that PAL had complied with these conditions. The CTA is a highly specialized body that reviews tax cases and conducts trial de novo. Therefore, without any showing that the findings of the CTA are unsupported by substantial evidence, its findings are binding on this Court.