Luzon Stevedoring Corp. vs.

Court of Tax Appeals

GR L-30232, 29 July 1988

Second Division, Paras (J): 4 concur

Facts: Luzon Stevedoring Corp. imported various engine parts and other equipment for tugboat repair
and maintenance in 1961 and 1962. It paid the assessed compensation tax under protest. Unable to
secure a tax refund from the Commissioner (for the amount of P33,442.13), it filed a petition for review
with the Court of Tax Appeals (CTA). The CTA denied the petition, as well as the motion for
reconsideration filed thereafter.

Issue: Whether the corporation is exempt from the compensation tax.

Held: As the power of taxation is a high prerogative of sovereignty, the relinquishment of such is never
presumed and any reduction or dimunition thereof with respect to its mode or its rate, must be strictly
construed, and the same must be couched in dear and unmistakable terms in order that it may be
applied. The corporation’s tugboats do not fall under the categories of passenger or cargo vessels to
avail of the exemption from compensation tax in Section 190 of the Tax Code. It may be further noted
that the amendment of Section 190 of Republic Act 3176 was intended to provide incentives and
inducements to bolster the shipping industry and not the business of stevedoring, in which the
corporation is engaged in.

Luzon Stevedoring Corp. is not exempt from compensating tax under Section 190, and is thus not
entitled to refund.