J. V. HOUSE, PLAINTIFF AND APPELLANT, VS. JUAN POSADAS, JR., COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE.

The appellant, J. V. House, is operating an electric, light, heat
and power system in the municipality of Tacloban, Province of Leyte,
under the charter contained in Act No. 2700, as amended in certain
respects by Act No. 2750 of the Philippine Legislature; and at various
times the Collector of Internal Revenue has exacted from him various
sums of money as percentage tax on business, as per section 1462 of the
Administrative Code, as amended; as income tax for the tax years 1921
to 1924, inclusive, and for the year 1926, together with surcharges on
certain items of the percentage tax and the fixed tax of TA imposed by
section 1457 in relation with section 1462 of the Administrative Code.
The present action was instituted by House to recover the aforesaid
taxes, amounting in all to some PS,875.64, as having been illegally
exacted and paid by him under protest. From a decision of the Court of
First Instance of the City of Manila, holding that the taxes were
properly collected and absolving the defendant from the complaint, the
plaintiff appealed.

A question is made as to whether or not the item covering the
percentage taxes from May, 1919, to October, 1924, was actually paid
under protest; but in the view we take of the case the point is
unimportant, and it will be assumed for the purposes of the decision
that protest was properly made.

The question at issue involves the construction of certain
provisions of the plaintiff’s charter, with respect to taxes payable by
the plaintiff in connection with the plant which he is operating. In
section 8 of Act No. 2700 it is among other things provided that the
plaintiff “shall pay quarterly into the treasury of Tacloban one-half
of one per centum of the gross earnings of the enterprise during the
first twenty years, and one and one-half per centum during the
remaining thirty years of the life of this franchise.” Again, in
section 14 it is declared that “The grantee shall pay on his real
estate, buildings, plant, machinery, and other personal property the
same taxes as are now or may hereafter be required by law from other
persons.”

No question is made that the plaintiff has been paying the franchise
taxes due from him by virtue of Act No. 2700, but, as already stated,
the taxes now sought to be recovered were paid under protest. The exact
point to be determined is whether, under the provisions herein-above
quoted, the appellant is exempt from the percentage tax on business,
income tax, and the fixed tax on business imposed respectively by the
Income Tax Law and by sections 1462 and 1457 of the Administrative Code.

We are of the opinion that the contention of the appellant is
untenable and that the taxes which he has paid were all exacted in
conformity with law. It is well recognized in the law of taxation that
an exemption will not be permitted to arise by implication; and a
charter of a corporation will not be construed as conveying an immunity
from the tax laws of the state in the absence of an express provision
to that effect contained in the charter (26 R. C. L., p. 302). We not
infrequently find in corporate charters, in connection with the
imposition of particular charges, that payment of such imposition shall
be in lieu of other taxes. No words to this effect are found in section
8 of Act No. 2700, where the appellant is required to pay quarterly
into the treasury of Tacloban one-half of one per centum of the gross
earnings of the enterprise during the first twenty years; and that it
was not intended that satisfaction of this imposition should exempt him
from other taxes is apparent from the language of section 14 of the
same Act which declares that the grantee shall pay on his real estate,
buildings, plant, machinery, and other personal property the same taxes
as are now or may hereafter be required by law from other persons. It
is obvious that income, after it has accrued to a capitalist, is
personal property, and the income tax collected from the appellant was
properly exacted under the language which requires the grantee to pay
the same taxes on “other” personal property as are required from other
tax-payers.

The percentage tax on business is not so clearly a tax on personal
property, since this tax is rather a tax on the privilege of doing
business. But even so, it is a tax exacted for the benefit of the
general government under the provisions of general laws; and no valid
reason appears to us why the appellant should not pay this tax.

The tax of one-half of 1 per centum of the gross earnings which,
under section 8, must be paid to the treasury of Tacloban, was
undoubtedly imposed upon him in view of a provision contained in
section 28 of the Philippine Autonomy Act (Act of Congress of August
29, 1916), which declares that every grant of franchise shall contain
provision for the payment of a reasonable percentage of the gross
earnings of the corporation into the treasury of the Philippine
Islands, or of the province or municipality within which such
franchises are granted and exercised. But in connection with that
provision it is said that this tax is imposed for the official
inspection and (regulation of the books and accounts of such
corporation; and there is nothing in the language there used which
lends countenance to the contention that the tax there contemplated was
intended to be in lieu of other taxes.

It is insisted by the attorneys for the appellant that the present
case does not involve a question of exemption from taxation but a
substitution of one kind of tax in lieu of all others; and the
contention is that the expression “in lieu of other taxes” should be
understood as* having been intended by the Legislature in connection
with the provision which we have cited from section 8. We are unable to
see the force of this argument, and are of the opinion that the payment
of the fixed tax on gross earnings to Tacloban does not relieve the
appellant from the obligation to pay other sorts of taxes.

In connection with a problem of this character it should be
remembered that a charter of the character of that under which the
appellant is operating is a virtual grant of monopoly; and if an extra
burden is imposed in connection with the franchise, the owner of the
franchise has no just cause of complaint; because his operations are
under the supervision of the public utility commissioner and it is the
duty of that officer to allow the owner of the franchise to fix his
rates for services at a level that will enable him not only to pay all
taxes exacted by the Government but to compensate him reasonably for
the use of the invested capital.

The judgment appears to us to be in accordance with law and must be affirmed. So ordered, with costs against the appellant.

Avanceña, C. J., Johnson, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.