FACTS
Blas Gonzales was a manufacturer and supplier of furniture at the US Military Base in Clark Field, Angeles City. In his tax returns for the years 1946 and 1947, Gonzales reported total sales of P1,787,848.32 – a far cry from the P2,199,920.50 gross sales that the BIR said he had earned during the same period.
Consequently, the BIR demanded that Gonzales pay P340,179.84 in tax deficiency. In a case lodged by the BIR before the CFI of Manila, the court ordered Gonzales to pay the tax deficiency plus surcharges and monthly interest.
Gonzales refused to make any tax payment, insisting that he was not subject to Philippine tax laws pursuant to the US-RP Military Bases Agreement and that “concessionaires” like him were not supposed to pay taxes as per the SC's ruling in Canlas v. Republic and Naguiat v. Araneta.
RULING
The Court ruled in favor of the Republic.
]The failure of Gonzales to declare for taxation purposes his true and actual income derived from his furniture business at the Clark Field Air Base for two consecutive years is an indication of his fraudulent intent to cheat the Government.
He cannot seek refuge from the terms of the US-RP military agreement because the terms “excise” or “other taxes or imports” were employed with specific application to the right to establish agencies and concessions within the bases and to the merchandise or services sold or dispensed by such agencies or concessions.
Finally, the SC noted that contrary to Gonzales's assertion, operators of freight and bus services, such as those in the cases of Araneta and Canlas, are not public utility operators but “concessionaires” within the meaning of the term as used in the US-RP military agreement.
