CTA Case No. 3192 (Decision)

REPUBLIC OF THE rHILIPPfNES .COURT O F TAX APPEALS QUEZON ClTY MARINDUQUE MINING & INDUSTRIAL CORPORATION , Petitioner , - .versus - C. T. A. CASE NO. 3192 THE COMMISSIONER OF I NTERNAL REVENUE, Respondent . X- - - - - - - - - .X DE C I S I 0 N Thi s is a judic i al cla i m f o r refu nd of the sum of P365,683 . 20 as documentary stamp taxes affixed on f our (4) .fi re i nsurance policies obta ined by petitioner from the Phi l ippine American General Insurance Company cover - ing its mining equipments , buildings, and other mining properti es connected in its mining operations in Surigao del Norte dur i ng the periods from February 21, 1979 to February 21, 1980. It appears that peti tioner had acquired four (4) fire i nsurance policies from the aforesaid fire insurance company , the Philippine Amer i can �General I nsurance Com- pany , during the periods stated, wi th Policy Nos � . F-~73866, F - ~73905 , F-177030 , and F-~89579, effective on February 21 , 1979 , March 1 , 1979 , Apr il 24 , 1979 and February 21, 1980 (Exhs. B, C, D, & E) '� respectively. The aforementioned policies contained endorsements 20

DECISION - CTA CASE NO. 3192 - 2- (Exhs. B-1, C-1 , D-~, and E-1) .to the effect that all the documentary stamp taxes affixed thereon shall be for the account of , and were in fact paid by petitione r. The corresponding amounts of documentary stamp t a xes paid and affixed by .the petitioner on the said fire insur- ance pol icies acquired are as follows: Policy No . Documentary Stamp Taxes Paid F-~73866 D 175,680.15 F-~73905 p 11, 237.55 F-~77030 p 7, 708.50 F-~895 7 9 p 171,057.00 ~=~g~~g~~~~~ The total amount of documentary stamp taxes paid and affixed for the period i n question , or from February 21 , 1979 to February 21 , 1980, th e refore, is P365 , 683 . 20 , which amount is now the subject of petitioner ' s claim for judicial refund. It appears further that petitioner had, s i nce July 3, 1968, an operating agreement with the Republic of the Philippines and continues to this date as an operator engaged in the development of the Surigao Mineral Reser- vation in Surigao del Norte and in the exploration and ut i lization of mineral deposits therein , other than nickel , cobalt and iron, apparently in order to me~t and to take advantage of the increased world demand for mineral resources. This development, exploration and J

DECISION - CTA CASE NO. 3192 -3 - uti l ization of the mineral deposits aforesa id, of which pe titioner is a partic ipa nt, was wi th the intent to substantially help the Government i n the generation of much needed forei gn exchange in the face of the in ter � national economic r~cess ion brought about by the energy or petr oleum crises . Accordingly , the Gover nment had r ationalized its policies in the development of the Sur igao Mineral Reservation tov,rar ds giving more oppor - tunity to private enterprises, of which petitioner is one of th em , a nd which is wi lling to t ake the risk and which will undertake the generation of adequate t echnical and financial resources so as to achieve that goal of mine r a l development . Hence, on September 22 , 1 9 76 , President Fe r dinand E. Marcos had deemed it necessary to issue , and had in fact promulgated Presiden tial Decree No . 1001 and decreed, among other s , by in ser ting Sect i on 6- A to Republ i c Act No . 1828, as amended, and pr oviding c ategorically that opera tors contracted in the development , exploi tation and utilization of mineral deposits in the Sur i gao Mi neral Reservation, shall be s ub ject to the most minimum of terms and conditions , among others , and which are per t i nent to the c ase at bar, firstly, (1} _by paying to the Governmen t only a royalty of 5% of the gross annual rece ipts resulting from t he operation , processing and dispos ition of mineral deposits; secondl:t , (2} .that the said oper a tor or c on tr actor shall be "exempt f rom all ,. J v~ ...

� DECI SION - CTA CASE NO 3192 - 4- taxes , duties , f ees and charges , both national and local , directly payable by it for any work or activity , equip- me nt, machine ry , materials, instruments, supplies, acces- sor i es, s t ructures, buildings , l ands , improvement, and/or other properties directly connected with or needed in the operation xxx and exempt those f ees and charges that are i mposed f or work or services actually r endered to the operator 11 i thirdly , ( 3) _that th '~ operator shall furn ish all the management, technological and fin a ncial serv ices necessary to carry out the operation i and , f ourthly , (4) . the operator or contractor shall file a bond to guarantee full and fru itful compliance with a ll its obl i gat ions. The pertine nt prov isions of P.D. 100~ (Phil. Pres . Decre es & Ot her Legal Doc ., Vol . 38 , CBS , Inc., PP e 5 6- ~0 .) and as far as it i s applicable with the in stant case , is ~ quoted hereunder : "PRESIDENTIAL DECREE NO . 1001 AUTHORIZING THE DEVELOPMENT, EXPLOITATION AND UTILIZATION OF MINERAL DEPOSITS OTHER THAN THOSE � OF NICKEL, COBALT AND IRON WITHIN THE SURIGAO MI NERAL RESERVATION, AMENDING FOR THE PURPOSE REPUBLIC ACT NO . 18 28 AND REPEALING PRESIDENTIAL DECREE NO . 958 . WHEREAS , there i s an ur gent need to max1m1ze the de velopment , explo ita tion and uti l i zat ion of mineral depos its other than those of nickel, cobalt and iron within the Surigao Mineral Reser- vation in order to take advantage of the i ncreased world demand for mineral r esources i WHEREAS, the immed iate development , exploit- ation and utilization of mineral deposits other than nickel, cobal t and iron within the Sur i gao

DECISION - CTA CASE NO. 3192 - 5- Mineral Reservation will substantially help the Government in the generation of much needed foreign exchange in the face of international economic recess ion brought about by the energy crisis; WHEREAS , there is a need to make the exist- i ng laws on the administration and disposition of the surigao Mineral Reservation more respon- sive to prevailing circumstances and to mod i fy and rat ionalize Government policies i n the development of the s aid Reservati on t owards giving more opportunity to private enterprises willing to take risk and can generate adequate technical and financial resources for mineral development. NOW, THEREFORE , I , FERDINAND E$ MARCOS , President of the Republic of the Philippines , by virtue of the powers vested in me by law, do hereby o rder and �decree the foll owing : SECTION 1 . Republic Act No . 1828 , as amended , is further amended by inserting bet- ween Sec tion 2 and 3 thereof, the f ollowing section : ' SEC . 2(a). The prov i sions of Sec- tion 2 hereof notwithstanding , the President of the Philippines , i n the interest of the nationa l economy, may authorize the Bureau of Mines t o explore, develop and exploit mineral deposits, other than those of nickel , cobalt and _ i ron , within the Surigao mi neral rese ~ vati on, either directly or through a qualif i ed contractor or contractors under an operating contract selected after public bidding or negotiation . The contract herein author ized shall , subj ect t o the approval of the President, be executed by the Secretary of Natural Resources upon recommendation of the Director of Mines. The term of the con- tract shall be for twenty-five (25 ) years, renewable for another twenty~ five (25) .Years .' SEC . 2. The same Act is further amended by inserting bet ween Sections 6 and 7 thereof the following new sections:

DECISION - CTA CASE NO. 3192 - .6 - �s~c . 6-A Should the President of the Philippines decide to have the operation or any part thereof conducted as authorized by Section 2-A hereof, the same shall be subject to the forbwing minimum terms and conditions: (a) The operator shall pay and guaran- tee payment to the government out of the gross annual receipts from all minerals, mineral and metal products~ and by-products resulting from the operation, processing and disposition of mineral deposits, other than those of nickel, cobalt and iron, a royalty of not less than five per centum (5%) of the said gross annual receipts. F.O.B. pofnts of export beginning with the end of the first year af t er the effective date of the contract: Provided, That the operator shall from the effective of the contract up to and including the fifth year after commencement of actual production, be exempt from all taxes, duties, fees and charges, both national and local, directly payable by it for any work or activity, equip- ment, machinery, materials, i ns truments , sup- plies, accessories, structures, buil dings , lands, imporvement, and/or other properties directly connected with or needed and to be used or being used exclusively in the oper- ation, other than those provided in this Act and except those fees and charges that are imposed for work or services actually rendered to the operator: Provided, futher, That the operator shall put in operation the area or areas covered by the contract within two ( 2) years from the effective date of the contract. Thereafter, penalties may be applied against the operator for failure to effect such pro- duction and/or reach certain levels of pro- . duction within specific time periods, as may be agreed upon: Provided, finally, Tha t exemp- tions from taxes shall not extend to taxes due from contractor's personnel in their per- sonal capacities; (2) The operator shall furnish all the management, technological and financial ser- vices necessary to carry out the operation; (3) The operator shall fil e a bond to guarantee full and faithful compliance with all its obligations; � vd

DECISION - CTA CASE NO . 3192 -7 XXX XXX XXX XXX XXX XXX SEC . 5. This Decree shall take effect immediately . DONE in the City of Manila this 22nd day of September, in the year of Our Lord, nineteen hundred and sev~nty-six." (Underscoring supplied .) After noting that the continued development of the Surigao Mineral Reservation has become more important to the national economy and that the costs of operations : n such development has greatly increased, President Ferdinand E. Marcos, deemed i t necessary to extend, and in fact extended the exemptions already granted to contractors a nd/ or operators under P . D. 1001, by reason of which he forthwith later i ssued Presidential Decree No . 1714, which further amended paragraph (1) _of Section 6 of Republic Act No . 1828, as amended . The pertinent provisions of paragraph (1) of said Section 6, as amended by P.D . 1714 (Phil . Pres . Decrees & Other Vital Legal Docs., Vol. 74, CBS , Inc ., pp . 47-48 ) ~rovides as � follows: "SECTION 1. Paragraph (1) _of Section 6 of Republic Act No . 1828, as amended , is hereby fur- ther amended to read as follows : (1 ) The operator shall be paid for services "rendered and expenditures incurred beginning wi th the end of the first year after the effective date of the contract the sum of one pesos (Pl . OO) per year , and the operator shall receive by way of addi- tional compensation , an amount equ i valent to a portion of the gross annual receipts, from all minerals, mi neral and metal pro- ducts, and by-products resulting from the

DECISION - CTA CASE NO. 3192 - 8- operation, processing, and disposition thereof computed such that the Govern- ment shall retain not less than three and one-half per centum of the gross annual receipts, f . o.b. point of exports: Provided, That the operator shall, from ~anuary 1, 1980 to Decembe ~ 31, 1 981, be exempt f rom all taxes, dut1es , fe e s and charge_s, 'both national and local, directly payable by it for any work or activity, equipment, machinery, materials, instru- ments su lies accessories structures buildin s lands im rovements a nd or other properties direct ly connected with or needed and to be used or being used exclus1vely in the operation , other than those provided in this Act and except those fees and charges that are imposed for work or services actual ly rendered to the operator: Provided, however, That the operator shall put the are or areas covered by the contract into actual pro- duction within five years from the effect- ive date of the contract. Thereafter, penalties may be applied aga inst the ope- rator for failure to effect suchRroduction , and/or reach certain levels of production within specific time period, as may be agreed upon : And Provided, further, That exemptions from taxes shall not extend to taxes due from contractor's personnel in their personal capacities. XXX XXX XXX SEC . 3. This Decree shall take effect immediately~ Done in the City of Manila, this 21st day of August, in the year of Our Lord, nineteen - hundred and eighty. (Underscoring supplied.) . On the strength of the above p rov isions of law , and considering itself under the ambit of said laws (P.D. 1001 and P . D. 1714) _as a tax-exempt operator, petitioner wrote �a letter to respondent on December 9, 1980 , claiming for ') J VI

DECISION - CTA CASE NO . 3192 - 9- the refund of the aforesaid sum of ~365,683.20 as erro- . neously paid documentary stamp taxes aff i xed on the four (4) .fire insurance policies to insure its mining equip- ment, buildings, and other properties, consisting of refinery, chemical plant, explosives, mine and mobile equipment, etc. connected and used in its mining oper ations in Surigao Mineral Reservation in Surigao del Norte. (see Annex A, Petition for Rev i ew, p. 4, CTA rec.) Despite its formal request, this claim for refund was never acted upon by respondent Commiss ioner of Internal Revenue. Hence , petitioner filed its judicial claim for refund in a "PETITION" brought to Us on January 20, 1981. The issue to be disposed of in this instant case is whether or not petitioner is exempt from the documentary stamp taxes it paid on the four (4) .insurance policies obtained from the Philippine American General Insurance Co., Inc. Petitioner contends affirmatively that it is exempt from the payment of the documentary stamp taxes on the strength of the provisions of P.D. Nos. 1001 and 1714 of President Marcos. It argues that it is not only its equipments or other property that i s exempt under said laws but also any " activity " it may perform subject to tax, and which is necessarily connected with, or needed, in the efficient operation of petitioner like in the case of the insurance obtained by it on its mining equipments uU'

- . -------�-~~-- DECISION - CTA CASE NO. 3192 - 10 - and properties, and which are t o be given as security on a loan, and which procurement of such insurance is a condition sine qua non before it can borrow or secure loans from lending institutions, in this case the DBP and PNB, for money which is needed in its operations. On the other hand, respondent con tends otherwise. He argues most strong ly that documentary stamp taxes petitioner paid is not directly payable by it, but instead payable by the insurer, Philippine American General Insurance Co., and this is in order to prevent tax evasion. Finally, he argues that not all activities or transactions relative to petitioner ' s mining operations are entitled to e :<Ernptions, which relates only to those connected in the development, exploration and utilization of mineral deposits with the Surigao Mineral Res�ervation. He asser ts that the affix- ture of documentary stamps on insurance pol icies i s an imposition on a transaction intended to indemnify peti- tioner againsmloss or damage to properties caused by fire, lightning, typhoon, earthquake as stipulated in the insu- ranee policies; hence, this transaction is distinct and separate from, and is not directly connected with, peti- tioner ' s mining operations with the Surigao Mineral Reser- vations. He further contends that insurance is not indis- pensable, but only incidental to petitioner's operation. Finally, he maintains that exemptions from taxation is strictly construed against the taxpayer and the lawgranting

DECISION - CTA CASE NO. 3192 - 11 - the tax exemption must be clear and beyond doubt extends the exemption privilege to the taxpayer . In conclusi on, respondent avers that petitioner failed to show that payment of the documentary stamp tax is within the scope of its tax exemption privilege under P.D. 1001 as amended by P.D. 1714 . The laws (P.o.� 1001 and P.D. 1714) ~ as pertinently quoted heretofore, clearly evoked that clearest intention to bail out operators, which petitioner in this case undoubtedly falls, from the i ncreasing cost of their oper- ations, which of course entails increased expenditures in all areas and facets of operations of the mining business, and in order to help in great measure their mining business, extended to them exemptions "from all taxes, duties, fees and charges, xxx directly payable by it for any work or activity, equipment, machinery xxx." It was particularly emphasized by President Marcos as an outlying policy that one of the reasons for the promulgation of P.D. 1001 was to "xxx rationalize Government policies in the deve- lopment of the said (Suriqao Mineral) Reservation towards giving more opportunity to private enterprises willing to take risks and can gene ~ ate adequate technical and financial resources for mineral development. " When, t~ere fore, �P.D. Nos. 1001 and 1714 exempts from 'taxes , duties, fees and charges " operators and contractors of the Surigco Mineral Reservation, it refer red to all taxes, duties, fees and charges paid in relation not only to their properties, but also to their necessarily connected activities. 40

DECISION - CTA CASE NO. 3192 - 12 - When the two ( 2) .l aws (P.D. Nos . 1001 and 1714) included as exempt an "activity" of the petitioner as operator and contractor of the Surigao Mineral Reser - vation , the term or word "activi ty" i n those l aws is understood in its usual or ordinary signification. Note that P.D. Nos . 1001 and 1714 did not d e f i ne that word "activity". The term "activity", the refore , in a statute, in the absence of a definition, is given its usual and .!{ ordinary meaning; of its natural or normal function of operation . (Carbide & Ca rbon Chemicals Corp . v. Carson , 239 s.w. 2d 27, 36, 37 , 192 Tenn . 150, cited in 2 Words & Phrases, 1954 Cumulative Annual Pocket Part, p. 42.} The word "activity" i s also understood as an occupation, pursuit, in which a person is active and often referred to generally a s business ac tivities. (Webster ' ~ Third New Inte rnationa l Diction ary i 1976 Ed., p . 22. ) Some- times, "activity" is referred to an organizat ional unit for performing a specific functi on, that is, the perform- ance of funct ions and duties. (Webster ' s New Colleg iate Dictionary, 1977 Ed . , p. 12.) Also, it means the acts of one or several persons in a common enterpr i ses . (2 Words and Phrases 154) The literal t erm " activ ity" in P.D. 1001 and P . D. 1714, taken in relation to any business, includes an act, or series of acts, performed by the operators of the Surigao Mineral Reservation, li ke the peti tioner in this case, 41

DECISION - CTA CASE NO. 3192 - 13 - connected in the carrying of , or properly doing its busi- ness � So much so that where a corporation , like the petitioner, borrows money for its capital from lending institutions to be used in its mining activity, it wa s properly a carrying on of an activity - .a business acti- vity . (Celanese Lanese Corp. v. Higgins, DCNV, 86 F Supp. 667 , 670, cited in 6 Words & Phrases 57, 1954 Cumulative Annual Pocket Part) Said the u.s. District Court S.D. New York, in the cited case of Celanese Lanese Corp. at pages 669-670 , ibid.: "xxx. Entering into contracts for the purchase of property or the construction of a plant are also corporate acts and constitute doing business. In other words, it is not necessary that a corporation be actually engaged in the manufacture of its intended product or that it be actually creating pro- fit or gain to incur liability, since making contracts , buying materials or machinery, and employing or discharging individuals are necessary business acts leading to the ulti- mate attainment of the objects and purposes for which the corporation was created and has its existence." XXX XXX XXX XXX XXX XXX "( 1 ) The test which produces consistent results iri all the cases cited is whether the taxpayer 's activities were confined to per- . fecting its corporate organization, or whether, its period of legal gestation having been com- pleted, it had actually entered into the world of business. See Cargill, Inc., v. United States, D.C., Del. 1942, 46 F. Supp. 712, 714- 715. "(2) . Here the taxpayer after being fully organized and capitalized, borrowed capital and bought property to be used in its manufacturing activity � . xxx"

DECISION - CTA CASE NO. 3192 - 14 - It is not, therefore, right to say that the acti- vity of petitioner, in borrowing money from l end ing insti tu tions such as the DBP a nd the PNB, which loans sha ll bQe secured by the mortgage of its properties r equ ired to be first insured under a non-life insurance for which i t was requ i red to pay the documentary stamp taxes, a condition sine qua ~ to the granting of a loan, i s not exempt from documentary stamp taxes under P.D. Nos. 1001 and 1714. On the contrar y, the acqu i - s ition of insurance pol i c ies on petitioner ' s properties, and the payment of documentary stamp taxes on said poli- cies are naturally a par t of i ts on-going business activities. Petitioner, therefore, under that circum- stance is clearly and undoubtedl y intended by President Marcos to be exempt under said decrees . This exemption is not only true to petitioner, but also to all those taxpayers simi larly situated , or those engaged in and under the same or similar businesses, and par ticularly, those participating in the development, exploitation and utilization of the mineral deposits within the Surigao Mineral Reservations. Because of the clarity of the terms o f the exemption l aws aforesaid (P.D. Nos. 1001 and 1714) ~ we can see the exemption of petitioner from documentary stamp taxes in that l ight. Moreover, Presidenti a l Decrees Nos . 1001 and 1714, are accorded the status of legislative enactments

.. DECISION - CTA CASE NO . 31 92 - 15 - (Aquino, Jr . vs. Enrile, 59 SCRA 183; De Chavez vs. Zobel, 55 SCRA 26 , 31. ) .and, hence, like any other laws or statutes , their essence is their intent, their policy , their purpose or their objective; and it is the judicial duty of this court ~o ascertain the essence of the law; and after knowing it, it becomes our distinct duty to declare and carry it into judicial effect . (Vda. de Macabenta vs. Davao Stevedoring Te rmina l Co. , 32 SCRA 553 , 557 ; Sarcos vs. Castillo, 26 SCRA 853, 859-861; u.s . v. Toribio, 15 Phil. 85, 90; Riera v. Palmar oi1, Phil . 829, 833-834.) We should all bear in mind that the terms or langu- age of statutes , which expresses a definitely sensible and rational meaning, shall provide the safest guide as to statu tor y policy or intent, to whic h we must be obe- dient too , and deviation therefrom we cannot be allowed. (Bell Hobart Manufacturing Inc . vs . Comm. of Customs, CTA Nos . 2750 , etc., March 10, 1978; Campos Rueda Corp. vs . Comm. of Int. Rev. , CTA 2828, Aug. 15 , 1984, citi ng Procter & Gamble Phil . Mfg. Corporation v. Comm. of Customs, CTA 2788, Feb. 27, 1981.) The terms of P.D. Nos. 1001 and 1714 provide the statutory policy of giving exemption to any activ ity of petitioner related to its mining business with the Surigao Mineral Reserva t ion.

DECISION - CTA CASE NO. 3192 - 16 ~ When the terms or mandate of the law is clear, the rule that exemption from taxation, or from the common burden of paying a tax is disfavored in la~ becomes inapplic- abl e. The clear objective of the law must perforce have to be carried into effect. {Sarcos vs. Catillo , ~ � cit; Helvering vs. Hammel, 311 US 50 4 , 510, 512; Frank Trust of 1931 vs . Comm., 145 Fed 411, 413 .) While, it is true that tax exemption must be str i cLly construed against the taxpayer, it is not so where the tax exemption law is very clear. There is also that prohibition against the narrow application of tax exemption ; narrower than l what the statute itself provides. Exemption laws should I not be read so grudgingly as to thwart the purpose of the lawmakers, {and in this case, the intent of President Marcos.) {Waynesboro Manufacturers Assoc. v. Comm ., 1 BTA 911 , 915; Sue v. Hord, 12 Phil . 485; U.S. vs . Toribio , 15 Ph il. 85; Sarcos vs. Castillo, ��� cit , pp. 859-~61; Riera vs . Palmar ~ li, 40 Phil. 105; Comm. of Customs vs. Ca ltex, 106 Ph il. 829 . ) . The Supreme Court, speaking through Chief Justice Fernando, admonished all courts to the effect that in the course of interpret- ation and construction of the law, significations of words and verbal distinctions should be minimized in favor of the rule of carrying the clear objective thereof {Sarcos vs. Castil lo, .�12.� cit .) '� and between conflicting theories of the litigants, that which best accords with

DECISI ON - CTA CASE NO . 3192 - 17 - the purpose or policy d the l aw must preva il. (Vda de Macabenta vs. Davao Stevedors Terminal Co ., �� � cit; Sue vs . Hood , 12 Phil . 485; u.s. v . Toribio, ��� cit; Riera vs . Palmarilo , �� � cit. ; Comm. of Customs vs. Cal tex , ~ � c it.; Sarcos vs . Castillo, ��� cit.) . Our eyes can not be myopic of this f.act. As a matter of legal knowledge, this Court is not free to reject or shun aside the l iteral words o f t.he statute wh i ch con- vey its true i ntent and purpose. (Jacob Mertens, Law of~ederal Income Taxation, Vol. 1, 1956 Ed ., Chap . 3, Sec. 302, pp. 3-4, citing Bankers Trust Co. vs. Comm . , 33 BTA 746, 74 7; Wayne ~boro Manufacturers Assoc. vs . Comm . , ��� c it.; Helvering v. Hammel,��� cit .; WK Frank Trus t of 1931 vs . Comm., 145 F 2d 411,413. ) The rule that exemption from taxation is a matter of grace and highly disfavored in law should not be appl i ed with regards to Pres i dential Decrees Nos . 1001 and 171 4 . There is a limit to such a str i ct i nterpret- ation . There is a 11 limit to the technical i nterpretation even of an exemption statute. .. (Comm. vs . White's Estate, 144 F 2d 1019, 1021; Jacob Mertens, Law of Federal Income Taxation, Vol. 1, 195G Ed, Chap. 3, Sec. 3.02, pp. 3-4, cit i ng Bankers Trust Co., 2�� c i t.; Waynesboro Manu- facturers Assoc . v . Comm., �� � cit . ) . While laws pro- viding exemptions from taxation should be strictly cons- trued , this rule must finally and definitely bow to the

DECISION - CTA CASE NO. 3192 - ,18 - clear literal words , or statutory language or policy of said exemption law. (Philip Zinet, Law of Federal Income Taxation Cumulative Supplement, Vol. 1, Sec. 308, p. 14, citing City Bank Farmers Trust Co. v. Pedride, 168 F 2d 618.) In effect, restriction or strict applic- action of the rule that exemption from taxation is dis- favored in l aw does not always apply , as we think it does not properly apply under thE: law and circumstances of this instant case. It must be borne in mind that petitioner plays a very impor tant role to the frenzied development, exploit- ation and utilization of mineral depos its in the Surigao Mineral Reservation which greatly help the Government in the generation of much needed foreign exchange in this time of economic recession, and in view of this, it is the rationalized policy of Government therefore to give exemptions like petitioner in P.D. Nos. 1001 and 1714 from documentary stamp taxes. In addition, petitioner is a highly capital intensive industry. It certainly use up a great amount of material and financial resources in the maintenance and operation of its business, and this is so in order to comply with its commitment and� other obligations to the Government under its oper- ating contract. It was only but rational that suffi- cient assistance and protection is given to petitioner's industry by the granting of exemption, as expressed in

DECISION - CTA CASE NO . 3192 - 19 - the explanatory notes of P . D. No . 1001, which exemption was evidently granted as an "fct o' public policy", . when President Marcos therein said that "xxx there is a need to make the existing laws on the admini stration and disposition of the Surigao Mineral Reservation more responsive to prevailing circumstances and to modify and rationa lize Government policie~__i_n__t_h_e__d__e_v_e_l_o_p_m__e_n_t of the said Reservation towards Gi ving more opportunity to private enterprises willing to take risk and can generate adequate technical and financial resources for mineral development." (Par. 3, P.D. 1001 , Phi l. Pres . Dec. & Other Vi tal Legal Docs . , CBS, Inc., p. 57.} It is evident that the exemption granted to petitioner is a matter of publ ic policy and intent, and not a matter of grace and favor by the Government. Tax exemp- tions that are begotten of publ ic policy are granted to organizations whose activiti es and services redound to the public interest and welfare, like the activity of petitioner i n availing itsel f in the development of mineral resources, an area in which if otherwise operated by the Government itself, it will entail gre_at drain i n its financial resources. Tax exempti ons granted t o organizations of this kind, like petitioner in this case, is liberally construed and applied. (Jacob Mertens, ibid, citing Estate of Emily Tait, 11 TC 731, 737; Comm. v . Wh i te ' s Estate , �12. c i t . } .

--------- - DECISION - CTA CASE NO. 3192 - 20 - In this particular case, petitioner had established by the law, the evidence , real and testimonial, of its being clearly under the plain and unambigous exemption grant from the payment of documentary stamp taxes. There is proof that one of the natural business activities, regardless of any line of business one undertakes , is the procur ement of loans to capitalize, to finance, or to pay for its projects and opera i:.ions or to otherwise settle its obligations. Consequently , where it borrows money to finance its business and, in the occasion, it insures its proper ties as required in order to be able to avail of the loan, and pays the documentary stamp taxes on the insurance policies acquired, that is a natural part of its business activity~ and such acti- vity is not only connected with, but ind ispensable, for it can not expect to borrow money if it will not insure its properties to stand securities for the loan as requ ired by the banking instit~tions. If it will fail to borrow money for its operations and profits, then such failure will understandably adversely affect the administration and operations of its mining business. Moreover, we agree with petitioner that getting an insu- ranee on its properties is a normal and necessary busi- ness activity, and is now the prevalent pr actice of prudent businessmen, and that insurance is related to petitioner 's activity as a mining operator because the

DECISION - CTA CASE NO . 3192 - 21 - DBP and PNB, who loaned money to petitioner made the insurance a requ ir ement or condition for the loan. (Tes timony of Asst. Vice-Pres. Domingo Beltran , Surigao Nickel Refinery , pp . 9-14, t.s.n., Hearing of July 15 , 1982.) The testimon y of Vice -Pr es . Beltran has not been controverted by respondent. Moreover, the exemption of petiti oner from the payme nt of documentary stamp tax ~ s on i ts "ac tivity", does not confine the act only on those activit i es directly in relation to the mi ning business. The exemp- tion laws (P,D. Nos. 1001 and 17 14) _do not qualify whether the ~ct i v ity" which is exempt is one directl y related to its business , o r merely inc idental to the same. When the law grants an exception on the basis of a term in the law, and that law does not make any distinction of that term, then distinction shou ld not be made . Very well known is the l egal principle: Ubi l ex non distinguire debemos . When the decree , or the l aw , does not distinguish, neither the respondent nor this Court is authorized to make a dis tinction of that word "activity" as basis of exemption. (Colgate-Palmolive Phil., Inc . vs. Gimenez, 1 SCRA 267, 271; Li gget & Myers Tobacco Co. vs. Coll. of Int . Rev ., 53 OG , 15, p. 4831; 50 Am Jur . 217.) The assertion by respondent that the documentary stamp t ax was not directly p a y able by p e titi oner but by

DECISION - CTA CASE NO . 3192 - 22 - the Philippine American Gener al Insurance Co., and, therefore, not subject to exemption and entitled to the refund of the documentary stamp taxes does not hold water. The law, Section 222 of the National Internal Revenue Code, which provides for the imposition of ~amp tax is to be payable by the person maki n ~ signing, issuing, acceptin9, or transferring the documents, instruments and papers to which the insura r- ce policies belong. Osten- sibly, either petitioner, who accepted the policies and who did in fact paid the documentary stamp taxes and the Philippine American General Insurance Co., who made and issued thec policies , may pay the said tax . As correctly observed by petitioner, Section 222 of the National Internal Revenue Code leaves the tax to be paid indifferently by either party (Sta. Clara Lumber Co. , Inc. vs. Jose Aranas, CTA No. 502, June 12, 1959.) and under Section 2, Rev. Reg. No. 26, the insured as well as the insurer are liable for documentary stamp tax on the insurance policy. (Jose Aranas, National Internal Revenue Code of 1977 (as amended) ~ 1978 Ed., Vol. 2, p. 366.) Considering that under the contracts of non-life insurance, it was petitioner who was required to pay for the documentary stamp taxes , the taxpayer that made payment is the one who can properly claim for the refund of the tax. (Atlas Consolidated Mining Dev. Corp. vs. Comm. of Int. Rev., CTA 3022, Sept. 30, 1980,

�-- --�----------------lilr;:!l:== DECISION - CTA CASE NO. 3192 23 - citing Phil. Acetylene Co., Inc. vs. Comm . of Int. Rev., etc . , 20 SCRA 1056; Cebu Portland Cement vs . Coll . of Int. Rev. , 25 SCRA 789, 792 .) It is a recogn i zed prin- ciple in taxation that tax l aw concerns itself with actual facts, or what actually transpired between the parties, regardl ess of thei r designati on of the trans- action . In other words , in taxation, the substance and l true facts of the case give way to form . {China Mutual Steam Naviga ti on Co ., Ltd. vs. Comm. of Int. Rev. , CTA Case No . 2728, March 30, 1979; Comm . of Int. Rev. vs. Constantino, 31 SCRA 77 9 , 782; Balao v . Domingo, 21 SCRA 444; Shell Co. of the Phils. Ltd. v . Fi reman ' s Ins. Co. of Nevada , 100 Phi l. 757, 764-765.) What actually happened was that petitioner paid the documentary stamp t ax it sought in this proceeding to be refunded. The claim of respondent that said taxes i s to be directly payable by the Phil ippine American General Insurance Co . is a fact which did not happen. Therefore , what is important is who paid the tax . It having been paid by petitioner, and claiming it to be erroneous, as it is a tax-~xempt industry , it devo l ves upon it to claim its ri ght over the documentary stamp tax which peremptori~y i s its own . Consequently, we are of the opin i on and so hold that peti tioner is exempt from the payment of documentary stamp taxes under P. D. Nos. 10 01 and 1714. The amount

-- ---- --- -------=------------- DECISION - CTA CASE NO. 3192 - 24 - of 1365 , 683.20 paid by petiti oner as documentary stamp t axes i s subject to the refund by the respondent C9mmis- sione r of Inte rnal Revenue . WHEREFORE, the c laim by pe titioner Marind uque Mining & I ndustrial Corporation , for the r efund of the documentary stamp taxes it paid to respondent in the amount of ?365,683.20, is hereby granted without interest. Respondent Commissione r of Inter nal Revenue is hereby ordered to refund to petitioner the said amount within thirty ( 30 ) _days fr om the date this dec i si on becomes final. Wi thout pronou ncemen t as to costs. SO ORDERED . Quezon City , Metro Manila, C~TANTE C N ,/ ��ssociate l CONCUR : AMAN T Presid (Dissents in sepa r ate opinion . ) ALEX z. REYES Associate J udge

~tEPUDLIC OF THE PHILIPPINE) COURT OF TAX APPEALS QUEZON ClTY MARINDUQUE MINING & INDUSTRIAL CORPORATION , Petitioner , - versus - C.T.A . CASE NO. 3192 THE COMMISSIONER OF INTERNAL REVENUE, Responden t . X - .- ---X DISSENTING OP INION The majority in granting the r efund of an amount representing documentary stamp taxes affixed and paid on fire insurance policies has considered the unde~~r itin g on the mining concessioner ' s properties an "activity" within the contemplation of the provision, which "exempt from a l l taxes, duties, fees and charges, both national and local, directly payable by it for any work or activity , equipment, machinery, instruments, supplies, accessories , structures , buildings, lands, improvement, and/ or other properties directly connected with or needed and to be used exclusively in t he opera tion ." (Sec. 6-A. PD 1001 amending RA 1828) _(Underscoring supplied) ~ My co lleagues must have confused what seefus feasible with what i s right. The majority's view seems more generous than candid and distressingly monochromatic, so to speak, considering that "The statutory grant is not of such a broad spectrum

DISSENTING OPINION - CTA CASE NO. 3192 - 2- with open-~nded features as would sire every conceivable tax assessment or burden which petitioner may proffer to attach . " (Marinduque Mining & Industrial Corporation v. Commissioner of Internal Revenuer CTA Case No. 3019, March 27, 1981) ~ That was the sense of this Court in denying a claim f or a refund of an amount representing payment of 35% transaction tax on interest conseque nce d by the same herein petitioner-operator's borrowings, likewise based on the statutory authority now invoked. The ruling was reiterated in the Western Minolco Case (CTA No. 3011) as affirmed by the Supreme Court (L-61632 , August 16, 1983, 124 SCRA 121}. Suffice it to state that if the tax relief sought on the pecuniary burdens incurred f or the specific purpose of raising funds for the mining operation was deemed " remote and removed from the activities normally involved or necessarily connected with the petitioner ' s undertaking" much less could the petitioner in the case at bar avail of a tax exemption from the payment of docu me ntary stamp ta xes ( ass uming arguendo that bene- fici a ry-petitioner is directly liable) _required on the insurance policies, which transac tion poses no acute concern for carrying on the operation. I would rather

DISSENTING OPINION - CTA CASE NO. 3192 - 3- curtail the enjoyment of the tax exemption privilege than lend currency to an aggravated chutzpah of a flip- flop precipitous overruling of established precedents. I I I \ I r u