G.R. No. 122605 - Sea-Land Service, Inc. vs. Court of Appeals

Contract and Taxable Income
SEA-LAND Service, Inc., a U.S. international shipping company licensed by the SEC to operate in the Philippines, contracted with the U.S. Government to transport household goods and effects of U.S. military personnel assigned at Subic Naval Base.
For the 1984 taxable year, SEA-LAND derived gross Philippine billings of ₱58,006,207.54 and paid corporate income tax of ₱870,093.12 (1.5%) under NIRC § 25(a)(2) and Article 9 of the RP–US Tax Treaty.

Administrative and Judicial Proceedings
On April 15, 1987, SEA-LAND filed a written claim for refund with the Bureau of Internal Revenue, alleging mistaken payment.
Before the BIR acted, SEA-LAND petitioned the Court of Tax Appeals (CTA Case No. 4149) to judicially pursue its refund claim and suspend the two-year prescriptive period.
On February 21, 1995, the CTA denied the refund claim. SEA-LAND appealed to the Court of Appeals (CA-G.R. SP No. 36796) on March 30, 1995.
On October 26, 1995, the Court of Appeals promulgated a decision dismissing the appeal and affirming the CTA in toto.
On December 22, 1995, SEA-LAND filed a petition for certiorari with the Supreme Court (G.R. No. 122605).

Whether the income derived from transporting U.S. military household goods and effects falls within the tax exemption of Article XII(4) of the RP–US Military Bases Agreement, thereby exempting SEA-LAND from Philippine income tax.