VOL.

187,JULY19,1990

525

Garrisonvs.CourtofAppeals
*

G.R.Nos.4450105.July19,1990.

JOHN L. GARRISON, FRANK ROBERTSON, ROBERT H.

CATHEY,JAMESW.ROBERTSON,FELICITASDEGUZMAN
and EDWARD McGURK, petitioners, vs. COURT OF APPEALS
andREPUBLICOFTHEPHILIPPINES,respondents.
TaxationAliensThe Internal Revenue Code requires the filing of an
incometaxreturnalsobyanalienresidinginthePhilippines,regardlessof
whether the gross income was derived from sources within or outside the
Philippines.But even if exempt from paying income tax, said petitioners
were,itiscontendedbytherespondents,notexcusedfromfilingincometax
returns.FortheInternalRevenueCode(Sec.45,supra)requiresthefiling
of an income tax return also by any alien residing in the Philippines,
regardlessofwhetherthegrossincomewasderivedfromsourceswithinor
outside the Philippines and since the petitioners, although aliens residing
withinthePhilippines,hadfailedtodoso,theyhadbeenproperlyprosecuted
andconvictedforhavingthusviolatedtheCode.
SameSameSameWhatthelawrequiresismerelyphysicalorbodily
presenceinagivenplaceforaperiodoftime,nottheintentiontomakeita
permanent place of abode.What the law requires, states the challenged
judgmentoftheCourtofAppeals,ismerelyphysicalorbodilypresencein
a given place for a period of time not the intention to make it a permanent
placeofabode.Itisonthisproposition,takeninthelightoftheestablished
factsonrecordtotheeffectthatalmostalloftheappellantswerebornhere,
repatriatedtotheUSandtocomeback,inthelatestin1967,andtostayin
the Philippines up to the present time, that makes appellants resident aliens
not merely transients or sojourners which residence for quite a long period
of time, coupled with the amount and source of income within the
Philippines,rendersimmaterial,forpurposesoffilingtheincometaxreturns
ascontradistinguishedfromthepaymentofincometax,theirintentiontogo
backtotheUnitedStates.
SameSameSameSamePetitionersfallwithintheletterofthecodal
preceptthatanalienresidinginthePhilippinesisobligedtofileanincome
taxreturn.Each of the petitioners does indeed fall within the letter of the

codalpreceptthatanalienresidinginthePhilip
_______________
*FIRSTDIVISION.

526

526

SUPREMECOURTREPORTSANNOTATED
Garrisonvs.CourtofAppeals

pines is obliged to file an income tax return. None of them may be

consideredanonresidentalien,ameretransientorsojourner,whoisnot
under any legal duty to file an income tax return under the Philippine Tax
Code.
Same Same Same Bases Agreement Exemption granted to the
petitioners by the Bases Agreement from payment of income tax is not
absolute.Quite apart from the evidently distinct and different character of
therequirementtopayincometaxincontrasttotherequirementtofileatax
return, it appears that the exemption granted to the petitioners by the Bases
Agreement from payment of income tax is not absolute. By the explicit
termsoftheBasesAgreement,itexistsonlyasregardsincomederivedfrom
their employment in the Philippines in connection with construction,
maintenance,operationordefenseofthebasesitdoesnotexistinrespect
of other income, i.e., income derived from Philippine sources or sources
other than the US sources. Obviously, with respect to the latter form of
income,i.e.,thatobtainedorproceedingfromPhilippinesourcesorsources
otherthantheUSsources,thepetitioners,andallotherAmericannationals
whoareresidentsofthePhilippines,arelegallyboundtopaytaxthereon.

PETITIONforcertioraritoreviewthedecisionoftheCourtof
Appeals.
ThefactsarestatedintheopinionoftheCourt.
Quasha,Asperilla, Ancheta, Valmonte, Pea & Marcos for
petitioners.
NARVASA,J.:
Sought to be overturned
in these appeals is the judgment of the
1
CourtofAppeals, whichaffirmedthedecisionoftheCourtofFirst
Instance of Zambales at Olongapo Cityconvicting the petitioners
of violation of Section 45 (a) (1) (b) of the National Internal

RevenueCode,asamended,bynotfilingtheirrespectiveincometax
returns for the year 1969 and sentencing each of them to pay a
fine of Two Thousand (P2,000.00) Pesos, with subsidiary
imprisonmentincaseofinsolvency,andtopaythe
_______________
1 Rendered on May 17, 1976, the ponente being Lim, J., with whom concurred

GatmaitanandDomondon,JJ.
527

VOL.187,JULY19,1990

527

Garrisonvs.CourtofAppeals
2

costsproportionately.
ThepetitionershaveadoptedthefactualfindingsoftheCourtof
3
Appeals, viz.:
1. JOHNL.GARRISONwasborninthePhilippinesandxx
xlivedinthiscountrysincebirthupto1945,whenhewas
repatriated and returned to the United States. He stayed in
theUnitedStatesforthefollowingtwentyyearsuntilMay
5,1965,whenheenteredthePhilippinesthroughtheClark
AirBase.ThesaidaccusedlivedinthePhilippinessincehis
returnonMay6,1965.HeliveswithhisFilipinowifeand
their children at No. 4 Corpus Street, West Tapinac,
Olongapo City, and they own the house and lot on which
they are presently residing. His wife acquired by
inheritance six hectares of agricultural land in Quezon
Province.
2. JAMES W. ROBERTSON was born on December 22,
1915 in Olongapo, Zambales and he grew up in this
country. He and his family were repatriated to the United
Statesin1945.TheystayedinLongBeach,Californiauntil
the latter part of 1946 or the early part of 1947, when he
was reassigned overseas, particularly to the Pacific area
withhomebaseinGuam.HisnextarrivalinthePhilippines
wasin1958andhestayedinthiscountryfromthattimeup
to the present. He is presently residing at No. 25 Elicao
Street,EastBajacBajac,OlongapoCity,andhishouseand
lotaredeclaredinhisnamefortaxpurposes.
3. FRANK W. ROBERTSON was born in the Philippines
and he lived in this country up to 1945, when he was
repatriated to the United States along with his brother, his

coaccused James W. Robertson. He stayed in the United

Statesforaboutoneyear,duringwhichtimeheresidedin
Magnolia Avenue, Long Beach, California. Sometime in
1946orearly1947,hewasassignedtoworkinthePacific
Area,particularlyHawaii.Atthattimehehadbeenvisiting
the Philippines off andon in connection with hiswork. In
1962,hereturnedoncemoretothePhilippinesandhehas
been residing here ever since. He is married to a Filipino
citizen named Generosa Juico and they live at No. 3
National Road, Lower Kalaklan, Olongapo City. The
residential lot on which they are presently residing is
declared in his wifes name for tax purposes, while the
house constructed thereon was originally declared in his
nameandthesamewastransferredin
_______________
2RenderedonMay28,1983byJudgeAugustoM.Amores(BranchI)
3InturnadoptedfromtheTrialCourt.Rollo,pp.10122729.

528

528

SUPREMECOURTREPORTSANNOTATED
Garrisonvs.CourtofAppeals

hiswifesnameonlyinFebruary,1971.
4. ROBERT H. CATHEY was born in Tennessee, United
States,onApril8,1917hisfirstarrivalinthePhilippines,
as a member of the liberation forces of the United States,
wasin1944.HestayedinthePhilippinesuntilApril,1950,
whenhereturnedtotheUnitedStates,andhecamebackto
thePhilippinesin1951.HestayedinthePhilippinessince
1951uptothepresent.
5. FELICITASDEGUZMANwasborninthePhilippinesin
1935 and her father was a naturalized American citizen.
While she was studying at the University of Sto. Tomas,
Manila, she was recruited to work in the United States
NavalBase,SubicBay,Philippines.Afterwards,sheleftthe
Philippines to work in the United States Naval Base,
Honolulu,Hawaii,andshereturnedtothePhilippinesonor
about April 21, 1967. The said accused has not left the
Philippinessincethen.SheismarriedtoJosedeGuzman,a
Filipino citizen, and they and their children live at No. 96
Fendler Street, East Tapinac, Olongapo City. Her husband
is employed in the United States Naval Base, Olongapo

City, and he also works as an insurance manager of the

TravellersLife.
6. EDWARDMcGURKcametothePhilippinesonJuly11,
1967 and he stayed in this country continuously up to the
presenttime.
ALL THE PETITIONERS are United States citizens, entered this country
underSection9(a)ofthePhilippineImmigrationActof1940,asamended,
andpresentlyemployedintheUnitedStatesNavalBase,OlongapoCity.For
the year 1969 John L. Garrison earned $15,288.00 Frank Robertson,
$12,045.84RobertH.Cathey,$9,855.20JamesW.Robertson,$14,985.54
FelicitasdeGuzman,$8,502.40andEdwardMcGurk,$12,407.99xx.
ALL SAID PETITIONERS received separate notices from Ladislao
Firmacion, District Revenue Officer, stationed at Olongapo City, informing
them that they had not filed their respective income tax returns for the year
1969,asrequiredbySection45oftheNationalInternalRevenueCode,and
directing them to file the said returns within ten days from receipt of the
notice.Buttheaccusedrefusedtofiletheirincometaxreturns,claimingthat
they are not resident aliens but only special temporary visitors, having
enteredthiscountryunderSection9(a)ofthePhilippineImmigrationActof
1940, as amended. The accused also claimed exemption from filing the
returninthePhilippinesbyvirtueoftheprovisionsofArticleXII,paragraph
2oftheUSRPMilitaryBasesAgreement.

The petitioners contend that given these facts, they may not under
thelawbedeemedresidentaliensrequiredtofileincome
529

VOL.187,JULY19,1990

529

Garrisonvs.CourtofAppeals

taxreturns.Hence,theyargue,itwaserrorfortheCourtofAppeals

1) to consider their physical or bodily presence in the

country as sufficient by itself to qualify x x (them) as
residentaliensdespitethefactthattheywerenotresidents
ofthePhilippinesimmediatelybeforetheiremploymentby
the U.S. Government at Subic Naval Base and their
presencehereduringtheperiodconcernedwasdictatedby
their respective work as employees of the United States
NavalBaseinthePhilippines,and
2) torefusetorecognizetheirtaxexemptstatusxxunderthe
pertinent provisions of the RPUS Military Bases
Agreement.

The provision alleged to have been violated by the petitioners,

Section 45 of the National Internal Revenue Code, as amended,
readsasfollows:
SEC. 45.Individual returns. (a) Requirements.(1) The following
individuals are required to file an income tax return, if they have a gross
incomeofatleastOneThousandEightHundredPesosforthetaxableyearx
xx
(b) If alien residing in the Philippines, regardless of whether the gross
incomewasderivedfromsourceswithinoroutsidethePhilippines.

The sanction for breach thereof is prescribed by Section 73 of the

samecode,towit:
SEC.73.Penaltyforfailuretofilereturnortopaytax.Anyoneliableto
pay the tax, to make a return or to supply information required under this
code, who refuses or neglects to pay such tax, to make such return or to
supplysuchinformationatthetimeortimeshereinspecifiedeachyear,shall
be punished by a fine of not more than Two Thousand Pesos or by
imprisonmentfornotmorethansixmonths,orbothxxx.

The provision under which the petitioners claim exemption, on the

other hand, is contained in the Military
Bases Agreement between
4
thePhilippinesandtheUnitedStates, reading
_______________
4ART.XII,L.par.2,part2,seeRollo,p.32.

530

530

SUPREMECOURTREPORTSANNOTATED
Garrisonvs.CourtofAppeals

asfollows:
2. No national of the United States serving in or employed in the
Philippines in connection with construction, maintenance, operation or
defense of the bases and reside in the Philippines by reason only of such
employment, or his spouse and minor children and dependents, parents or
her spouse, shall be liable to pay income tax in the Philippines except in
regard to income derived from Philippine sources or sources other than the
USsources.

The petitioners claim that they are covered by this exempting

provisionoftheBasesAgreementsince,asisadmittedonallsides,

theyareallU.S.nationals,allemployedintheAmericanNavalBase
at Subic Bay (involved in some way or other in construction,
maintenance, operation or defense thereof), and receive salary
therefrom exclusively and from no other source in the Philippines
anditistheirintention,asisshownbytheunrebuttedevidence,to
returntotheUnitedStatesonterminationoftheiremployment.
That claim had been rejected by the Court of Appeals with the
tersestatementthattheBasesAgreementspeaksofexemptionfrom
the payment5 of income tax, not from the filing of the income tax
returnsxx.
To be sure, the Bases Agreement very plainly identifies the
personsNOTliabletopayincometaxinthePhilippinesexceptin
regard to income derived from Philippine sources or sources other
than the US sources. They are the persons in whom concur the
followingrequisites,towit:
1) nationalsoftheUnitedStatesservinginoremployedinthe
Philippines
2) their service or employment is in connection with
construction, maintenance, operation or defense of the
bases
3) they reside in the Philippines by reason only of such
employmentand
4) theirincomeisderivedexclusivelyfromU.S.sources.
Now,thereisnoquestion(1)thatthepetitionersareU.S.nationals
servingoremployedinthePhilippines(2)thattheiremploymentis
inconnectionwithconstruction,maintenance,
_______________
5Rollo,pp.3132.

531

VOL.187,JULY19,1990

531

Garrisonvs.CourtofAppeals

operation or defense of a base, Subic Bay Naval Base (3) they

resideinthePhilippinesbyreasononlyofsuchemploymentsince,
as is undisputed, they all intend to depart from the country on
terminationoftheiremploymentand(4)theyearnnoincomefrom
PhilippinesourcesorsourcesotherthantheU.S.sources.Therefore,
bytheexplicittermsoftheBasesAgreement,noneofthemshallbe
liable to pay income tax in the Philippines x x. Indeed, the

petitioners claim for exemption pursuant to this Agreement had

been sustained by the Court of Tax Appeals which set aside and
cancelledtheassessmentsmadeagainstsaidpetitionersbytheBIR
6
for deficiency income taxes for the taxable years 19691972. The
decisionoftheCourtofTaxAppealstothiseffectwascontestedin
7
thisCourtbytheCommissionerofInternalRevenue,
butthesame
8
wasnonethelessaffirmedonAugust12,1986.
But even if exempt from paying income tax, said petitioners
were, it is contended by the respondents, not excused from filing
incometaxreturns.FortheInternalRevenueCode(Sec.45,supra)
requiresthefilingofanincometaxreturnalsobyanyalienresiding
in the Philippines, regardless of whether the gross income was
derived from sources within or outside the Philippines and since
the petitioners, although aliens residing within the Philippines, had
failedtodoso,theyhadbeenproperlyprosecutedandconvictedfor
havingthusviolatedtheCode.
What the law requires, states the challenged judgment of the
CourtofAppeals,ismerelyphysicalorbodilypresenceinagiven
placeforaperiodoftime,nottheintentiontomakeitapermanent
place of abode. It is on this proposition, taken in the light of the
established facts on record to the effect that almost all of the
appellantswerebornhere,repatriatedtotheUSandtocomeback,
inthelatestin1967,andtostayinthePhilippinesuptothepresent
time,thatmakesappellantsresidentaliens
_______________
6DecisiondatedDec.14,1984,writtenfortheCourtbyAssociateJudgeAlexZ.

Reyes.
7G.R.Nos.7011619.
8143SCRA397thedecisionhavingbeenwrittenfortheSecondDivisionofthe

CourtbyParas,J.,withwhomconcurredFeria,Fernan,Alampay,andGutierrez,Jr.,
JJ.
532

532

SUPREMECOURTREPORTSANNOTATED
Garrisonvs.CourtofAppeals

notmerelytransientsorsojournerswhichresidenceforquitealong
period of time, coupled with the amount and source of income
withinthePhilippines,rendersimmaterial,forpurposesoffilingthe
income tax returns as contradistinguished from the payment of
incometax,theirintentiontogobacktotheUnitedStates.
Each of the petitioners does indeed fall within the letter of the
codal precept that an alien residing in the Philippines is obliged

to file an income tax return. None of them may be considered a

nonresidentalien,ameretransientorsojourner,whoisnotunder
anylegaldutytofileanincometaxreturnunderthePhilippineTax
Code. This is made clear by Revenue Regulations
No. 2 of the
9
DepartmentofFinanceofFebruary10,1940, whichlaysdownthe
relevantstandardsonthematter:
An alien actually present in the Philippines who is not a mere transient or
sojourner is a resident of the Philippines for purposes of income tax.
Whetherheisatransientornotisdeterminedbyhisintentionswithregards
tothelengthandnatureofhisstay.Amerefloatingintentionindefiniteasto
time, to return to another country is not sufficient to constitute him as
transient.IfhelivesinthePhilippinesandhasnodefiniteintentionastohis
stay, he is a resident. One who comes to the Philippines for a definite
purpose which in its nature may be promptly accomplished is a transient.
Butifhispurposeisofsuchanaturethatanextendedstaymaybenecessary
toitsaccomplishment,andtothatendthealienmakeshishometemporarily
in the Philippines, he becomes a resident, though it may be his intention at
all times to return to his domicile abroad when the purpose for which he
camehasbeenconsummatedorabandoned.

The petitioners concede that the foregoing standards have been a

good yardstick, and are10in fact not at substantial variance from
American jurisprudence. They acknowledge, too, that their
exemptionundertheBasesAgreementrelatessimplytononliability
for the payment
of income tax, not to the filing of x x (a return).
11
But,theyargue
_______________
9SEC.5.
10Petitionersbrief(Rollo,p.90),pp.10,11
11Id.,p.11

533

VOL.187,JULY19,1990

533

Garrisonvs.CourtofAppeals
x x after having expressly recognized that petitioners need not pay income
tax here, there appears to be no logic in requiring them to file income tax
returns which anyhow would serve no practical purpose since their liability
on the amounts stated thereon can hardly be exacted. The more practical
view, taking into account policy considerations that prompted the
GovernmentoftheRepublicofthePhilippinestoexemptthepetitioners,as
well as other American citizens similarly situated, from the payment of

incometaxhere,istorecognizethelesseractoffilingwithintheexemption
granted.Thisissimplybeingconsistentwiththereasonbehindthegrantof
taxexemptstatustopetitioners.

Pointing out further to what they consider the administrative

implementation of that (taxexemption) provision (of the Bases
Agreement)bybothgovernmentsforabout22years(whichdidnot
require the filing of income tax returns by American citizen
employees holding 9A special visas like petitioners), and to the
higher plane of political realities which prompted the Philipine
Government to partially surrender its inherent right to tax,
petitioners submit that the particular problem involved in these
casesisamatterthathastofindsolutionandoughttobedealtwith
12
inconferencetablesratherthanbeforethecourtoflaw.
Quiteapartfromtheevidentlydistinctanddifferentcharacterof
therequirementtopayincometaxincontrasttotherequirement to
file a tax return, it appears that the exemption granted to the
petitionersbytheBasesAgreementfrompaymentofincometaxis
notabsolute.BytheexplicittermsoftheBasesAgreement,itexists
only as regards income derived from their employment in the
Philippinesinconnectionwithconstruction,maintenance,operation
ordefenseofthebasesitdoesnotexistinrespectofotherincome,
i.e.,incomederivedfromPhilippinesourcesorsourcesotherthan
the US sources. Obviously, with respect to the latter form of
income,i.e.,thatobtainedorproceedingfromPhilippinesourcesor
sources other than the US sources, the petitioners, and all other
AmericannationalswhoareresidentsofthePhilippines,arelegally
boundtopaytaxthereon.Inotherwords,sothatAmerican
_______________
12Id.,pp.1415.

534

534

SUPREMECOURTREPORTSANNOTATED
Garrisonvs.CourtofAppeals

nationalsresidinginthecountrymayberelievedofthedutytopay
incometaxforanygivenyear,itisincumbentonthemtoshowthe
Bureau of Internal Revenue that in that year they had derived
income exclusively from their employment in connection with the
U.S.bases,andnonewhateverfromPhilippinesourcesorsources
other than the US sources. They have to make this known to the
Governmentauthorities.Itisnotinthefirstinstancethelattersduty
orburdentomakeunaidedverificationofthesourcesofincomeof

Americanresidents.ThedutyrestsontheU.S.nationalsconcerned
toinvokeandprimafacieestablishtheirtaxexemptstatus.Itcannot
simply be presumed that they earned no income from any other
sources than their employment in the American bases and are
therefore totally exempt from income tax. The situation is no
differentfromthatofFilipinoandotherresidentincomeearnersin
the Philippines who, by reason of the personal exemptions and
permissibledeductionsundertheTaxCode,maynotbeliabletopay
income tax year for any particular year that they are not liable to
pay income tax, no matter how plain or irrefutable such a
propositionmightbe,doesnotexemptthemfromthedutytofilean
incometaxreturn.
These considerations impel affirmance of the judgments of the
CourtofAppealsandtheTrialCourt.
WHEREFORE,thepetitionforreviewoncertiorariisDENIED,
andthechallengeddecisionoftheCourtofAppealsisAFFIRMED.
Costsagainstpetitioners.
SOORDERED.
Cruz,Gancayco,GrioAquinoandMedialdea,JJ.,concur.
Petitiondenied.Decisionaffirmed.
Note.Viewthatwhereincometaxationofserviceisinvolved,
the income is sourced in the place where the service is rendered
(Commissioner of Internal Revenue vs. British Overseas Airways
Corporation,149SCRA395.)
o0o
535

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