FACTS
Pursuant to its legislative franchise, flag-carrier Philippine Airlines (PAL) is supposed to be exempt from payment of taxes. This is why since 1956, it has not been paying motor vehicle registration fees.
Commissioner Elevate, however, issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees, refusing to register PAL’s motor vehicles unless the amounts imposed were paid.
PAL paid under protest and subsequently filed a claim for refund, arguing that as per the SC's ruling in Calalang v. Lorenzo, motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise.
RULING
The Supreme Court ruled in favor of PAL, although it said PAL is still not entitled to refund.
The Court held that motor vehicle registration fees are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.
The SC added that fees may be properly regarded as taxes even though they also serve as an instrument of regulation. License fees are charges looked to as a source of revenue as well as a means of regulation. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax.
But PAL is still not entitled to a refund, since they wanted refunds for payments in 1971 when in fact their tax exemption was repealed in 1968 and was only reinstated in 1979.
