CIR vs Magsaysay Lines

CIR vs Magsaysay Lines (G.R. No. 146984, July 28, 2006) FACTS: National Development Company (NDC) deided to !ell to p"ivate ente"p"i!e all o# it! !$a"e! in it! %$olly&o%ned %$olly&o%ned !u'!idia"y t$e National a"ine Co"po"ation Co"po"ation (NC). n t$e !tipulated te"m and ondition!, t$e %innin* 'idde" %a! to pay a value added ta+ o#  10 on t$e value o# t$e ve!!el!. -"ivate "e!pondent a*!ay!ay ine!, /n. (a*!ay!ay ine!) o##e"ed to 'uy t$e !$a"e! and t$e ve!!el!. $e implementin* Cont"at o# ale %a! e+euted 'et%een NDC, on one $and, and a*!ay!ay a*!ay!ay ine!, ali%a* Navi*ation, Navi*ation, and 3/ imited, on t$e ot$e". -a"a*"ap$ 11.02 o# t$e ont"at !tipulated t$at 5, i#  any, !$all 'e #o" t$e aount o# t$e pu"$a!e". 5 Notie o# 5%a"d dated 1 July 1988 %a! i!!ued to a*!ay!ay ine!. -"ivate "e!pondent! "eeived 5 Rulin* No. 68&88 #"om t$e /R, $oldin* t$at t$e !ale o# t$e ve!!el! %a! !u'7et to t$e 10 5. $e "ulin* ited ited t$e #at #at t$at t$at NDC %a! a 5 5&"e*i! &"e*i!te"e te"ed d ente"p" ente"p"i!e, i!e, and t$u! it! t"an!at t"an!ation! ion! inident to it! no"mal 5 "e*i!te"ed ativity o# lea!in* out pe"!onal p"ope"ty inludin* !ale o# it! o%n a!!et! t$at a"e mova'le, tan*i'le o'7et! %$i$ a"e app"op"ia'le o"  t"an!#e" t"an!#e"a'le a'le a"e !u'7et !u'7et to t$e 10 5. -"ivate -"ivate "e!pond "e!pondent! ent! #iled an 5ppea 5ppeall and -etition #o" Re#und %it$ t$e C5. $e C5 "e7eted t$e C/R! a"*ument! and *"anted t$e petition.

"e!pondent! i! ISSUE: $et$e" t$e !ale 'y t$e NDC o# #ive o# it! ve!!el! to t$e p"ivate "e!pondent! !u'7et to 5. HELD: $e !ale o# t$e ve!!el! %a! not in t$e o"dina"y ou"!e o# t"ade o" 'u!ine!! o#  NDC %a! app"eiated 'y 'ot$ t$e C5 and t$e Cou"t o# 5ppeal!, t$e latte" doin* !o even in it! #i"!t dei!ion %$i$ it eventually "eon!ide"ed. e ite %it$ app"oval t$e C5! C5! e+planation on t$i! point: In Imperial v. Collector of Internal Revenue , G.R. No. &;924, eptem'e" <0, 19 (9; -$il. 992), t$e te"m =a""yin* on 'u!ine!!= doe! not mean t$e pe"#o"mane o# a !in*le di!onn di!onnete eted d at, 'ut mean! mean! onduti ondutin*, n*, p"o!eu p"o!eutin* tin* and ontinui ontinuin* n* 'u!ine 'u!ine!! !! 'y pe"#o"min* p"o*"e!!ively all t$e at! no"mally inident t$e"eo#> %$ile =doin* 'u!ine!!= onvey! t$e idea o# 'u!ine!! 'ein* done, not #"om time to time, 'ut all t$e time.=Cou"!e o# 'u!ine!!= i! %$at i! u!ually done in t$e mana*ement o# t"ade o" 'u!ine!!.

Cou"t e+plained t$at =ou"!e o# 'u!ine!!= o" =doin* 'u!ine!!= onnote! "e*ula"ity o#  ativity. /n t$e in!tant a!e, t$e !ale %a! an i!olated t"an!ation. $e !ale %$i$ %a! involunta"y and made pu"!uant to t$e dela"ed poliy o# Gove"nment #o" p"ivati?ation ould no lon*e" 'e "epeated o" a""ied on %it$ "e*ula"ity. /t !$ould 'e emp$a!i?ed t$at t$e no"mal 5&"e*i!te"ed ativity o# NDC i! lea!in* pe"!onal p"ope"ty. @ARA3RA, t$e petition i! DAN/AD.