COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE AIRLINES, INC. - Overseas Communications Tax

FACTS:

PHILIPPINE AIRLINES, INC paid the 10% Overseas Communications Tax (OCT) for overseas telephone calls made through PLDT. It then later filed with the BIR a claim for refund of the amount paid as Overseas Communications Tax, claiming that other than being liable for basic corporate income tax or the franchise tax, whichever was lower, it was exempted from all other taxes by virtue of the "in lieu of all taxes" clause in its charter.

ISSUE:

Is PHILIPPINE AIRLINES, INC liable for the Overseas Communications Tax?

HELD:

NO. The language of PHILIPPINE AIRLINES, INC’s franchise is clearly all-inclusive --- the basic corporate income tax or franchise tax paid by respondent shall be "in lieu of all other taxes” except only real property tax. It is not the fact of tax payment that exempts it, but the exercise of its option. In the event that respondent incurs a net loss, it shall have zero liability for basic corporate income tax, the lowest possible tax liability. There being no qualification to the exercise of its options, then Respondent is free to choose basic corporate income tax, even if it would have zero liability.