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FPIC v. CA Digest

The Supreme Court ruled that First Philippine Industrial Corporation (FPIC) is a common carrier and therefore exempt from local business taxes. FPIC transports petroleum products through pipelines. To be a common carrier, one must transport goods for hire, indifferently to all, through an established business. FPIC meets these criteria. As a common carrier, it is exempt from business taxes under the Local Government Code to prevent double taxation for its common carrier tax payment.

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138 views2 pages

FPIC v. CA Digest

The Supreme Court ruled that First Philippine Industrial Corporation (FPIC) is a common carrier and therefore exempt from local business taxes. FPIC transports petroleum products through pipelines. To be a common carrier, one must transport goods for hire, indifferently to all, through an established business. FPIC meets these criteria. As a common carrier, it is exempt from business taxes under the Local Government Code to prevent double taxation for its common carrier tax payment.

Uploaded by

DGDelfin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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First Philippine Industrial Corporation v.

CA

 Definition of a common carrier


 4 tests to determine whether a party is a common carrier
 A business engaged in transporting petroleum products under the Petroleum Act of the
Philippines is a common carrier.
 BIR exempts a common carrier from withholding tax.
 LGC exempts the imposition of business tax against common carriers to prevent a
duplication of the so-called "common carrier's tax."

FACTS:

Petitioner is a grantee of a pipeline concession in Batangas City. Respondent City Treasurer


required Pet. to pay business tax (a local tax) based on its gross receipts amounting to P956K.
The Pet. paid the tax under protest.

Pet.’s Argument:
1. FPIC is engaged in the business of transporting petroleum products and is exempt from
paying tax on gross receipts under Sec. 133 of the LGC. Transportation contractors are
not included in the enumeration of contractors under Sec. 131. Therefore, the authority
to impose tax does not include the power to levy on transportation contractors.
2. If FPIC is liable for the license fee, the amount based on gross receipts is not
commensurate to the cost of regulation, inspection and licensing. The fee is already a
revenue raising measure and not a mere regulatory imposition.

Resp.’s Argument: Pet. is not engaged in transportation business. It cannot claim exemption
under the Sec. 133 of the LGC. The exemption applies only to transportation contractors and
persons engaged in the transportation by hire and common carriers by air, land, and water.

Trial Court’s Decision:


1. Neither the law nor the Deed of Concession grant any tax exemption upon the Pet. Pet.
is not a common carrier, but a special carrier extending services and facilities to special
customer, under a special contract.
2. LGUs have local autonomy to make them economically and financially viable.

CA’s Decision: Affirmed Trial Court’s ruling.

ISSSUE:
1. WON FPIC is a common carrier.

RULING:

FPIC is a common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the goods
by land and for compensation. The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.

Article 1732 of the Civil Code:


a "common carrier" as "any person, corporation, firm or association engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public."

4 tests to determine whether a party is a common carrier:


1. He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
4. The transportation must be for hire.

The Civil Code does not provide that the transportation of the passengers or goods should be
by moving vehicle or vessels either by land, sea or water. In fact, in the United States, oil pipe
line operators are considered common carriers.

 Under the Petroleum Act of the Philippines (Republic Act 387), petitioner, being engaged
only in transporting petroleum products, is considered a "common carrier."
 BIR also considers Pet. as a common carrier.

FPIC, being a common carrier, is not subject to withholding tax prescribed by BIR. It is also
exempt from the business tax as provided for in Section 133 (j), of the Local Government Code.

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. —
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

(j) Taxes on the gross receipts of transportation contractors and persons


engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code

It is clear that the legislative intent in excluding from the taxing power of the local government
unit the imposition of business tax against common carriers is to prevent a duplication of the so-
called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings
under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of the Local Government Code.

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