WILLIAM C. REAGAN, ET. AL vs. COMMISSIONER OF INTERNAL REVENUE G.R. No. L-26379 December 27, 1969

 G.R. No. L-26379 December 27, 1969

WILLIAM C. REAGAN, ET. AL vs.
COMMISSIONER OF INTERNAL REVENUE

FACTS:
Petitioner Reagan, a civilian employee of an American corporation providing technical assistance to the US Air Force in the Philippines, questioned the payment of the income tax assessed on him by respondent CIR on an amount realized by him on a sale of his automobile to a member of the US Marine Corps, the transaction having taken place at the Clark Field Air Base at Pampanga. It is his contention, that in legal contemplation the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax. He seeks that an amount of P2,979.00 as the income tax paid by him be refunded.

ISSUE: WON the Clark Field Air Base is a foreign property therefore excluded from the power of Philippine taxation.

HELD: NO.
By the [Military Bases] Agreement, it should be noted, the Philippine Government merely consents that the United States exercise jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or expediency over the bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed therein. This provision is not and can not on principle or authority be construed as a limitation upon the rights of the Philippine Government.

The State is not precluded from allowing another power to participate in the exercise of jurisdictional right over certain portions of its territory. If it does so, it by no means follows that such areas become impressed with an alien character. They retain their status as native soil. They are still subject to its authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the bases under lease to the American armed forces by virtue of the military bases agreement of 1947. They are not and cannot be foreign territory.