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G.R. No. 140230. December 15, 2005.COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.PHILIPPINELONG DISTANCE TELEPHONE COMPANY,

The facts:PLDT is a grantee of a franchise n!er Re"b#ic $ct %R.$.& No. '0(2to insta##, o"erate an! maintain a te#ecommnications s)stem

throghot the Phi#i""ines.*or e+i"ment, machineries an! s"are "arts it im"orte! for itsbsiness on !ierent !ates from -ctober 1, 12 to /a) 31, 14,simi#ar im"ortations ma!e beteen /arch 14 to /a) 31, 14,

-n /arch 15, 14, PLDT a!!resse! a #etter to the R seeing aconrmator) r#ing on its ta eem"tion "ri6i#ege n!er 7ection 12of R.$. '0(2, hich rea!s:7ec. 12. The grantee sha## be #iab#e to "a) the same taes on theirrea# estate, bi#!ings, an! "ersona# "ro"ert), ec#si6e of thisfranchise, as other "ersons or cor"orations are no or hereafter

ma) be re+ire! b) #a to "a). n a!!ition thereto, the grantee,sha## "a) a franchise ta e+i6a#ent to three "ercent %38& of a##gross recei"ts of the te#e"hone or other te#ecommnicationsbsinesses transacte! n!er this franchise b) the grantee, itssccessors or assigns, n! t"e si! per#ent$e s"%% &e in %ie'o( %% t)es on t"is (rn#"ise or ernin$s t"ereo(: Pro6i!e!,That the grantee sha## contine to be #iab#e for income taes"a)ab#e n!er Tit#e of the Nationa# nterna# Re6ene 9o!e"rsant to 7ec. 2 of ecti6e -r!er No. '2 n#ess the #atterenactment is amen!e! or re"ea#e!, in hich case the amen!mentor re"ea# sha## be a""#icab#e thereto. %m"hasis s""#ie!&.

Res"on!ing, the R isse! on $"ri# 1, 14 R#ing No. ;Ntherein seeing a refn! of, or the issance ofa ta cre!it certicate in, the amont of P2(0,552,2(.00,re"resenting com"ensating taes, a!6ance sa#es taes, @$T an!other interna# re6ene taes a##ege! to ha6e been erroneos#) "ai!on its im"ortations-n *ebrar) 1(, 1(, the 9T$ ren!ere! a !ecision=>grantingPLDTs "etition, "ertinent#) sa)ing:This 9ort has note! that "etitioner has inc#!e! in its c#aimrecei"ts co6ering the "erio! "rior to December 1, 12, ths,"rescribe! an! barre! from reco6er). n conc#sion, Ce n! that the

"etitioner is entit#e! to the re!ce! amont ofP223,25,2'.00after ec#!ing from the na# com"tation those taes that ere"ai! "rior to December 1, 12 as the) fa## otsi!e the to

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taes on its im"ortation of e+i"ments %sic&, machineries an! s"are"arts for the "erio! co6ering the taab#e )ears 12 to 14.

, the R 9ommissioner mo6e! for a reconsi!eration bt the 9T$, inits Reso#tion=(>of /a) ', 1(, !enie! the motion,

e#e6ate! the matter to the 9ort of $""ea#s %., the a""e##ate cort, , !ismisse! the Rs "etition, thereb)eecti6e#) aArming the 9T$s ?!gment.

Dissatise! ith the 9$ !ecision in that case, the R9ommissioner initia##) #e! ith this 9ort a motion for time to #ea "etition for re6ie, Eoe6er, on the #ast !a) for the #ing of theinten!e! "etition, the then R 9ommissioner ha! a change ofheart an! instea! manifeste!=11>that he i## no #onger "rse G.R.

No. 1343(, there being no com"e##ing gron!s to !isagree iththe 9ort of $""ea#s !ecision in 9$as isse! b) the 9ort of $""ea#s in 9$ths its !t) to aban!on an) !octrinefon! to be in 6io#ation of the #a in force. =1>

$s it ere, the former R 9ommissioners !ecision not to "rse his"etition in G.R. No. 1343( !enie! the R, at #east as ear#) as in

that case, the o""ortnit) to obtain from the 9ort an athoritati6einter"retation of 7ection 12 of R.$. '0(2. $## is, hoe6er, not #ost.*or, the go6ernment is not esto""e! b) acts or errors of its agents,"artic#ar#) on matters in6o#6ing taes. 9oro##ari#), the erroneosa""#ication of ta #as b) "b#ic oAcers !oes not "rec#!e thesbse+ent correct a""#ication thereof.=1'>Citha#, the errors ofcertain a!ministrati6e oAcers, if that be the case, sho#! ne6er bea##oe! to ?eo"ar!ie the go6ernments nancia# "osition.=1(>

Eence, the nee! to a!!ress the main isse ten!ere! herein.$ccor!ing to the 9ort of $""ea#s, the in lieu of all taxesc#asefon! in 7ection 12 of PLDTs franchise %R.$. '0(2& co6ers a## taes,hether !irect or in!irectHEe sbmits that the eem"ting in lieu of all taxesc#ase co6ers!irect taes on#), a!!ing that for in!irect taes to be inc#!e! in theeem"tion, the intention to inc#!e mst be s"ecic an!nmistaab#e. Ee ths fa#ts the 9ort of $""ea#s for erroneos#)!ec#aring PLDT eem"t from "a)ment of @$T an! other in!irecttaes on its im"ortations.

The so#e isse at han! is hether or not PLDT, gi6en the tacom"onent of its franchise, is eem"t from "a)ing@$T, com"ensating taes, a!6ance sa#es taes an! interna# re6enetaes on its im"ortations.

, !irect taes are those that are eacte! from the 6er) "erson ho,it is inten!e! or !esire!, sho#! "a) themH=1>the) are im"ositionsfor hich a ta"a)er is !irect#) #iab#e on the transaction or bsinesshe is engage! in.=20>

in!irect taes are those that are !eman!e!, in the rst instance,

from, or are "ai! b), one "erson in the e"ectation an! intentionthat he can shift the br!en to someone e#se.=21> #iabi#it) for the"a)ment of the ta fa##s on one "erson bt the br!en thereof canbe shifte! or "asse! on to another "erson, sch as hen the ta isim"ose! "on goo!s before reaching the consmer ho #timate#)"a)s for it. the se##er "asses on the ta to his b)er, , shifts the tabr!en, not the #iabi#it) to "a) it, to the "rchaser as "art of the"rice of goo!s so#! or ser6ices ren!ere!.Chat is shifte! on#) to the interme!iate b)er an! #timate#) to thena# "rchaser is the br!en of the ta. a se##er ho is !irect#) an!#ega##) #iab#e for "a)ment of an in!irect ta, sch as the @$T on

goo!s or ser6ices, is not necessari#) the "erson ho #timate#)bears the br!en of the same ta. t is the na# "rchaser or en!

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ser of sch goo!s or ser6ices ho, a#thogh not !irect#) an!#ega##) #iab#e for the "a)ment thereof, #timate#) bears the br!enof the ta.=23>

The NR9 c#assies @$T as an indirect tax the amount of [which]may be shifted or passed on to the buyer, transferee or lessee ofthe goods.108 @$T on im"ortation of goo!s "artaes of an ecise

ta #e6ie! on the "ri6i#ege of im"orting artic#es. t is not a ta onthe franchise of a bsiness enter"rise or on its earnings. t isim"ose! on a## ta"a)ers ho im"ort goo!s hether or not thegoo!s i## e6enta##) be so#!, bartere!, echange! or ti#ie! for"ersona# consm"tion. The @$T on im"ortation re"#aces thea!6ance sa#es ta "a)ab#e b) reg#ar im"orters ho im"ort artic#esfor sa#e or as ra materia#s in the manfactre of nishe! artic#esfor sa#e.=25>

t bears to stress that the #iabi#it) for the "a)ment of the in!irecttaes #ies on#) ith the se##er of the goo!s or ser6ices, not in the

b)er thereof. Ths, one cannot in6oe ones eem"tion "ri6i#ege toa6oi! the "assing on or the shifting of the @$T to him b) themanfactrersBs""#iers of the goo!s he "rchase!. =2>Eence, it isim"ortant to !etermine if the ta eem"tion grante! to a ta"a)ers"ecica##) inc#!es the in!irect ta hich is shifte! to him as "artof the "rchase "rice, otherise it is "resme! that the taeem"tion embraces on#) those taes for hich the b)er is!irect#) #iab#e.=30>

Time an! again, the 9ort has state! that taation is the r#e,eem"tion is the ece"tion. $ccor!ing#), stattes granting taeem"tions mst be constre! in strictissimi jurisagainst the

ta"a)er an! #ibera##) in fa6or of the taing athorit).=31>

To him,therefore, ho c#aims a refn! or eem"tion from ta "a)mentsrests the br!en of ?stif)ing the eem"tion b) or!s too "#ain tobe mistaen an! too categorica# to be misinter"rete!.=32>

$s ma) be note!, the c#ase in lieu of all taxes in 7ection 12 of R$'0(2 is imme!iate#) fo##oe! b) the #imiting or +a#if)ing c#ase onthis franchise or earnings thereof, sggesting that the eem"tion is#imite! to taes im"ose! !irect#) on PLDT since taes "ertaining toPLDTs franchise or earnings are its !irect #iabi#it). $ccor!ing#),in!irect taes, not being taes on PLDTs franchise or earnings, areotsi!e the "r6ie of the in lieu"ro6ision.

$## to#!, e fai# to see ho 7ection 12 of R$ '0(2 o"erates asgranting PLDT b#anet eem"tion from "a)ment of in!irect taes,hich, in the #timate ana#)sis, are not taes on its franchise orearnings. PLDT has not shon its e#igibi#it) for the !esire!eem"tion. None sho#! be grante!.$s a na# consi!eration, the 9ort taes "artic#ar stoc, as the 9T$ear#ier !i!, of PLDTs a##egation that the rea of 9stoms assesse!

the com"an) for a!6ance sa#es ta an! com"ensating ta forim"ortations entere! beteen -ctober 1, 12 an! /a) 31, 14hen the 6a#en!ee!,"rsant to ecti6e -r!er No. 2'3=41>hich too eect on Fanar)1, 1((, a m#ti

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*HEREFORE, the "etition is "artia##) GRANTED.The Decision ofthe 9ort of $""ea#s in 9$