FACTS
Hopewell Power, is a corporation organized and existing under Philippine laws, entered into a Mortgage Trust Indenture (MTI) with Hopewell Energy, a company organized under the laws of Hong Kong. The execution of the MTI was done in Hong Kong.
Hopewell Power filed with the BIR a claim for refund of the documentary stamp tax (DST) it paid amounting to P24,864,781.58, on account of the MTI’s execution in Hong Kong.
The Commissioner of Internal Revenue did not act on the request stating that the DST was paid in accordance with Sec. 195 of the Tax Code and, therefore, not refundable.
The CTA held otherwise, ruling that Hopewell should be given a refund of the DST paid.
RULING
The Supreme Court ruled in favor of Hopewell Power.
Inasmuch as the MTI was executed and signed in Hong Kong prior to the effectivity of Republic Act No. 7660, no DST is imposable on the same in the Philippines. This conclusion is also in keeping with one of the inherent limitations of taxation, namely, that it may be exercised only within the territorial jurisdiction of the taxing authority.
The SC reiterated its ruling in Allied Thread Co., Inc. v. City Mayor of Manila, where it held that "the power to levy an excise upon the performance of an act or the engaging in an occupation does not depend upon the domicile of the person subject to the excise, nor upon the physical location of the property and in connection with the act or occupation taxed, but depends upon the place in which the act is performed or occupation engaged in.
Thus, the gauge for taxability x x x does not depend on the location of the office, but attaches upon the place where the respective x x x transaction(s) is perfected and consummated."
