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CIR Vs United Lines Company - Obli Con - Art 1158

The Supreme Court upheld the Court of Tax Appeals' ruling that U.S. Lines Company was not liable for the conversion of freight fees collected abroad, as these were not remitted to its Philippine office. However, the Court ruled that U.S. Lines Company, acting as a local agent for the shipowner, is liable for the 2% carrier's percentage tax on gross receipts from chrome ore shipments. The decision emphasizes that contracts in this jurisdiction incorporate relevant legal provisions, including tax obligations.

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22 views1 page

CIR Vs United Lines Company - Obli Con - Art 1158

The Supreme Court upheld the Court of Tax Appeals' ruling that U.S. Lines Company was not liable for the conversion of freight fees collected abroad, as these were not remitted to its Philippine office. However, the Court ruled that U.S. Lines Company, acting as a local agent for the shipowner, is liable for the 2% carrier's percentage tax on gross receipts from chrome ore shipments. The decision emphasizes that contracts in this jurisdiction incorporate relevant legal provisions, including tax obligations.

Uploaded by

FCM DHSVUSOL
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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G.R. No. L-16850 CIR vs.

United States Lines Company May 30, 1962

FACTS:

U.S. Lines Company, is the operator of ocean-going vessels transporting passengers and freight to and
from the Philippines. It is also the sole agent and representative of the Pacific Far East Line, Inc., another
shipping company engaged in business in the Philippines as a common carrier by water. In examination
of its books, it was found that the Company also acted on behalf of the West Coast Trans-Oceanic
Steamship Lines Co., Inc which transported chrome ores from Zambales to the United States. As a
consequence, the CIR demanded deficiency tax for each company it acts as an agent for. A petition was
filed in the CTA contesting the correctness of the collections and demands for:

(1) the conversion of "collect" revenues in the Philippines, but payable in the United States, at the rate of
P2.00375 to $1.00 and (2) the demand on the Company of the 2% carrier's percentage tax on the gross
receipts of the West Coast Trans-Oceanic Steamship Lines from the chrome ore shipments of November
27, 1951 and April 29, 1952

CTA ruled for the company on first issue stating that the United States dollars collected abroad were not
actually converted to and received in Philippine pesos, and therefore there is no occasion nor reason to
use a conversion rate aside from the legal rate of exchange. On the second issue, it rules that the 2% tax
is imposable only on owners or operators of common carrier, and no law on shipping agents. Unless the
agent voluntarily assumes obligation, in which US Lines Company did not.

ISSUE: Whether or not the CTA erred in its decisions

RULING:

Anent the conversion of freight fees, the SC upholds the decision of the appellate court. No evidence was
presented rebutting the positive allegation of respondent taxpayer, which was sustained by the Tax
Court, that the "collect" freightage fees were not remitted to the local office of the U.S. Lines Company
(in the Philippines) nor actually converted to and received in Philippine pesos. In other words, no foreign
exchange operations were involved here.

Anent the issue on the carrier's percentage tax as an agent, the SC ruled on the contrary as it adopts a
restrictive interpretation of Sec 192 of the Tax Code. What the legal provision purports to tax is the
business of transportation, so much so that the tax is based on the gross receipts. Whoever acts on his
behalf and for his benefit may be held liable to pay, for and on behalf of the carrier or operator, such
percentage tax on the business. The Company acted as it held itself to the public and to the Customs as
the shipowner's local agent representing ownership of the vessel. Respondent is thus held liable for
payment.

Any agreement or contract to be enforceable in this jurisdiction is understood to incorporate therein the
provision or provisions of law specifying the obligations of the parties under such contract. The contract
between herein respondent Company and its principal consequently imposed upon the parties not only
the rights and duties delineated therein, but also the provisions of law such as that of the Code of
Commerce aforecited.

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