William C. Reagan,
Petitioner vs
Commission of Internal
Revenue
Facts:
The petitioner is a citizen of
the United State and an employee of Bendix Radio, Divison of Bendix Aviation
Corporation, which provided technical assistance to the United States Air Force
was assigned at the Clark Air Base Pampanga, honor about July 7, 19. Nine
months, before his tour duty expires, petitioner imported a tax free 1960
Cadillac car which valued at $6443.83. More than two months after the car was
imported, petitioner requested the Clark Air Base Commander for a permit to
sell the car. The request was granted with the condition that he would sell it
to a member of the United States Armed Forces or an employee of the U.S.
Military Bases.
On July 11, 1960, petitioner
sold the car to Willie Johnson for $6600, a private in US Marine Corps, Sangby
Point, Cavite as shown by a bill of sale executed at Clark Air Base. On the
same date William Johnson Jr. sold the car to Fred Meneses for P32,000 as
evidence by a deed of sale executed in Manila.
The respondent after deducting
the landed cost of the car and the personal exemption which the petitioner was
entitled, fixed as his net income arising from such transaction the amount of
P17912.34 rendering him liable for income tax of P2979.00. After paying the
sum, he sought refund from the respondent claiming that he is exempted. He
filed a case within the Court of Tax Appeals seeking recovery of the sum
P2979.00 plus legal rate of interest.
Issue:
Whether or not the
said income tax of P2979.00 was legally collected by respondent from
petitioner.
Ruling:
The Philippine is an independent
and sovereign country or state. Its authority may be exercised over its entire
domain. Its laws govern therein and everyone to whom it applies must submit to
its term. It does not prelude from allowing another power to participate in the
exercise of jurisdictional rights over certain portions of its territory. Such
areas sustain their status as native soil and still subject to its authority.
Its jurisdiction may be diminished but it does not disappear.
The Clark Air Base is one of he
bases under lease to the American armed
forces by virtue of the Military Bases Agreement which states that a “national
of the US serving or employed in the Philippines in connection with the
construction, maintenance, operation, or defense of the bases and residing in
the Philippines only by reason such unemployment is not to be taxed on his
income unless derived in the bases which one clearly derived the Phil.
Therefore the Supreme Court
sustained the decision of the Court of Tax Appeals rendering the petitioner
liable of the income tax arising from the sale of his automobile that have
taken place in Clark Air Field which is within our territory to tax.