CTA Case No. 3389 (Decision)

REPUBJJIC OF 'I'HJi: PHH.IPPJNES C~JRT OF TAX APP R~L S QUEZON CITY MADRIGAL SHIPPING CO. , INC. , Petitioner , - versus - C. T. A. CASE NO . 3389 COMMISSIONER OF INTERNA L REVENUE , Respondent. X- - - - ------X D s (_) N Th is a p pt?.a L i nvolves l.i.ab.i li t i. ~?s ,. def i. e i<~ ncy 1.i't hho 1 d i.nq C:l t. s o ur�c e du e on i n t e r�es t on �fo n? .iqn l o ans, .i.n s t.~r� ;;~. n ce pr�emium s paid J to �fore .i. <;Jn i n ~s u r�a 1�1 c E�~ c:: 0 1,..p or� at io n , c CJ n tr-61:: t. cl r ' s; ta >: of for� th e l E'! a s; e of p r=~r� ~:;cma l p r� o pt? r- t .i.E?~5 a nd t a:�: on gross r ecei pts fr o m in s u ran ce pre miums . foll o w ~:; : Pet i t ion er, Madri g a l S h i ppi.n q Co., In c ., a domes ti c co rpora ti o n is e n gaged i n inter n ati onal and CCJas tw.i ~;e s h i p pi.nq and o p f~ l"� at1::1s l a un c h es and 1 ighbe r� s. 195

DECISION CTA CASE NO. 3389 \II~ s; ~; e 1 s l r:\L.ll"lC: h f::~S and 1 icJ ht ens. Both �tesse l s on over-se a~. tr�a f �flc a r- e em time c: har- t~?f"' l .o for-e .i. q n E'n t .i �!�.:i.E' S. Rf::~ m .i. t tances on thE~ Tf.:!S "lj. f"lr::\d f�" .l. g r::\ 1'' W~:? l'" f:? mad f:~ Offi ce. thu s pr~ t.i. t i o nE' t'" acquir-e d / A-<-�-; of $ 3 , 500,000.00 v~ l �1i c ll ~~;;,~:; p <J. r-t ir:~l1y p aid .:~nd th e=~ 1775 peti tion er sec UI'" f:'?c:f a noth t"? t � for�E~i �J n 1 na n �for � $ 7 55, 1. 93. DO �f r.. o m We l l !:;; Far-go 8 .::\ nk, s." n Ff�..�a nci s co, fo r� u r::. �0 :i.n th E:' dr-yd nc:k.i. n~l o �f �t-,t:-,,,r.,�t,�. r:.:.�. r� � 1 - t h e Ce ntr-a l Ban k the P l�1i 1 i. ppi n e s; i n ter- ests to Mobil T a nk e r- s Ltd. were as follows: A pr� i l 23, l97 ::r, $81,250, (H) Oc: t.obe1~ 29, 1. 9 T 'r. f:)Cf ~ 375 � ()() Apr-il 29, 1.971.~ <77, 5 0 0, (H) [ !'etit.ion er- ' s inter-e~;t. pa y me n b; to Wells Far�go B<:~nk, Sa n Fr�.::mci :.;co, wer-e su bje c t to ~-Jit. hh o ldi ng tax at s ourc e, n e v er-t he less, it failed to wi t hhold 196

DECISION CTA CASE NO. 3389 the income ta x due on the aboves tated interes t remittances to l"lobi 1 r.:m ken�,; L tel. ' BEn-mud a ' in violation of Sections 53 and 54 of t he Tax Code, as amendE~ d . Likewise, i t W r.>S de te r-� m .i n t~d t hat petitioner insured its ocean - going v es sels wi t h the Steams h ip Mutu al Under�wr� it.in ~:l (~ s s nci a t..icm Ltd . o�f L o ndon with for "F'rotec tion and I n deHH l.i. ty " ( F'~~ .[ ) r-�.i. s k s and fo1~ "Tank ers Owner��s P�t;Jre e ment Conc e rnin g Liab i l.i ty For Oil Pollution" (TAVALOP), and with the Pioneer In surance Cor-p<::>r ,:\t.ic.m HK br�,:m c h �for "Hull and M.:\C:h.inery" r �i s k s . Conf :.Lnnat.i.cm with the � Pioneer Insur�an c e Coq:>o r-�at:ion, 1'1an.ila, d .i.~c losed that the prem iu ms pa i.d dir e ctly to i t s Ho ng k ong branch were paid the corr� esponding Phi J. ippinE!s .interna l r� eve nue ~J.i th n :::s p ec t , t o the foreign in s ur a nce comp 21 ny which has no known Phi J. ippine branch or agent, and the Ho ngkong agency which also has no local �sub--� agen t, peti t.i cmer paid the premiums to t.h F! said .insu r-er� v1i thout wi t.hholding and remitting the tax required under Section 53 and 54 in F'!:�?l ation to Sf:::>c: t i cm 2 4-(b)(l) , a l l of th e Ta}: CCJde, a s amend e d. For t he yea r::; 197 4 and 197 5 197

DECISION CTA CASE NO. 3389 �- I.J. -�� peti ticme1r� p a id i n s ur-a n c (::> pn~~ rnium s amountin g to Analysi ~'� o �f t h e ' 'Mi �:;t �:r,,ll<~ n t?u u <; Incom e' ' ;,:~cc oun t. of pet i ticmer�� �fu r�- t h e r- d i r..:;c: l. o se d that it. l ea�=.;e d out. with in the s cope of c on t r �c\ c t .i.n g s ubj e::�c t to :un. per-c:e nt a g E~ t a:-: unch?r � ~i ec:tio n of th e T ;::~:-: Co d e as :::::oo - 303, BIR n:.~ c:~ . � ). On April 12, 1980, p etition e r was assesse d t h e withholding ta::-..�r. \1:.-- so LW ct:-: d u E"~ o n :.i rd: (~n-?.st~; p.:d .d on foreign l.oc"H1 S fn :Jm t h e lst. qLt<:.\r t. �:~r- of 1971 to th e 2nd qu .::~rter� o �f 1 974, i n c lu :;ive~ ~ <'lnd on in s uran ce premiums paid to f oreig n i n surance c orporat ion for 1974 t o 1.9 '75 i n dcc::on:fan c: E> \'ll .i t h !3!;:� c t.icm s 5 :::;. a nd !5 4 of the Ta x Co(e . (pp . B I R n?c: s. ) � Lik ewise~ petiti~ner was asse s sed the amount of P26, 2 47.9 0 . ~; d e �f .ic i.e ncy pr-.i vi l. f:?gE:! t.:u: re cei pt. as con tr�ac: tor� , p e n :e!n tage ta :�: on t:hr:.? g r �oss n �::>e: ei pt as rr:?cei p t s 'f r�om in c;; u ran c:E~ pr�e m.i.urn s . ( PP. 323-3 2 ~', BIR rec: s .). 193

DECISION CTA CASE NO . 3389 1930 (pp. n::>cs. ) , <<nd said protest by t he r�es ponden t:. Commissioner em August 3 1. , 19fH (/~nn e~: c:II II ' Petition) � Henc e , this pi~? tit. .i. on rr.d.si ng following issues: / l.. W!1et.her� or� not: th f? a s;s psment rJ'f P ' . 2 :3;:~;,7129 . 59 <.'IS d cd i r:i t.,? n c:y Wit.h -- h~ld in g tax du e on i nt e rest an d inSUI'"i:':\ n �:: e pr-emiums, p aid to fo l'"e i gn co r.. pc:wat..i.on is valid <".ncl le!_Jal; 2. Wheth e ~ o r � not th e ~ s~es s m e nt of P26 :. ~;~ 4� 7. 9 0 '"~:; !'l c.,,. f..iJ :. iPn c: } . pr� iv.i.J.ege a nd p e rc e n t age taxes a s contractor, a nd pr.. e mi um t <:\ :<, is v<:~lid a nd legal; 3. Wh eth e ~ or not t h e twin a ss e ss me nt s are r: over. ed by t .~ :< d fTIIl E~<; tie s und er� F'r-es :i.ci E-:'nt.i .::\ 1 Dr:?c r� ee s Nos. 23, 1 57 , ::::7 0 an d 631.; e.md 4. Wh et h e r or not the as s es s me nt s h ave pr� Qsc: r- .i be d . By and posits the proposit ions this wi s e : Actually no foreign loc.m Wi:':\S ob ta i n ed by th e petit i oner frcJm e 'fot-eirJn co mp.:11 1y . Th e s-,o - cal. l ed wa s inc:ludecl in '1". h e~~ p r e�-� d E:~ t e r�mi ned purchased price of the oi l tanker ( vess e l) that was pur c hased by the petitione~ f r o m Mobi l T a nk er, Ltd. 193

DECISION CTA CASE NO. 3389 -� 6 - of New York Ci t y (U .s.n .) . ThE? t.r-tmsacti.on that transpire d i s cle a rly one of sa les and not acqui s ition of f or�eign loans as con t e mpl a t e d by the respond e nt upon whi ch th e so �-ca llecl .interest:; were ba s f.?d. As s um i ng thai:. the s ed cl s.::'llr:.' of an oil t a nk er fr�om 1'1ob.il T.:mb::~n; Ltd. tt-:> t he! p1'?t..i.ti. cm er has a char�act.er o f that of f o r ~o""? .i.qn l oan upon whi c h <H1 inter-est is auto rn e:ttic:al l y a ttach P d t>Jh e n bf-:?ing pa id~ s t i l l , the pE?t..i.t i o n er� :is n o t dut y h o und u nch~ r� th e l a w to withh old th e:~ c:o t� � r� r,~!:; p t)11cl:i t l tJ ta>: on a n y int.er�est. ~; to a lo e:t n pi:l.id l:o a �for-eiq n comp a ny basr:?d on the �follow .i nq n?r.~s o n s . Fir s t, the subjec t sale U.S.A., a fcH�e .i.qn country wh E�I'"l'l)i n t h~? s.:�,l.icl ve ss el wa s then loc ated (l.S. N., Nov .. 2 '2~ :l'lF.J5~ pp. B�-9). Sec:ond~ the se ll�?. l'" Mobil Tanker s , Ltd. has i t s office in New York C.i.ty, a ncm �- r t-:!!5 ident foreign corpor� ation n ot e:mq aqed .in tr"",J.dE-~ o r- busine ss in the Philippine s . T h i r �d, thl? pun.: h<HH~ p1��.i c e o f the said vessel was paid by t.hF..? p eti. t i one r� ' s �for eign aqent to the vendor Mobi l T a nker, Ltd. o f New York City at the p 1ace ou ts.ide of the Phi 1 i pp.ines. FoLwth , there wa s no do J. 1 .;,r- n;~ mi t. L"' nc:�::o:; co ul... !sed t:f"lr�ough the 200

DECISI ON CTA CASE NO. 3389 -- '7 -- local b;ank.ing system lil::!~ th ,"t. o �f fo,~ eiqn loan !:,, a n d if any inter~sts wer e paid to the said foreign c om pany (l"lob.i.l), the same were earned i n the foreign co '"try outs ide of the Ph ilippi n es ta x system. Likewise, t.h e bor.:>k s .:~ r:c <:~unt.~s of thf.::' petitioner had been fully v erified a nd in v estigated by the agents Df the BIR sometime in 1975 f or withholding t a:.: at so urce pur.. poses (f:.>:h. "E") . And o n Auqust 25!t .1.975 the then Commissioner of Internal Revenue ha d iss ued a c learance letter ( E:-:h .. "E -- 1") ~d. t h .i. n �f orrn ;,~ '\".i on no disc re p a ncy has been found f or 1974 a nd prior years ( Underscor ing pe ti t ioner' s) . i �f at a l l , only t .a :-:F's .:.~f t.r,:> r.. th1:= ) ' ff.'i�~r- .1.9 '7 4 rn ;:~y be su bj ec t to fur� t he-~1��� t ,;,, s~'5 E~'"=i<Ei m E' rl or�� i ,. , v Ps t .i. gat ion � Granting arguendo that it is indeed liable for withholding tax at source on the interests paid on the alleged �for-e i gn lnans, the samf.~ should not be charged by 3~31.. wi th hold.ing at sour��ce as err�orH?ous 1 y a ~5!:5 e~;~;, pcJ by t. h.-~ n :-' 'Eipnnden t, but on 1 y .15/. for� t he J.a\1'1 is c:h:? .:u - and f.~>:pl.icit. on the miatt.er, thus: 201

DECISION CTA CASE NO. 3389 ..... [1 ..... "Sec . 5 :3 (National Intern i'll Revenu e Code (2 ) Non - resident for ~ iqn c orpo - rations. - In case of foreign corpora tion s s ubject to tax u nder this Tit l e~ not �-?ngaged in t r�ade or� business within the Ph i lipp ines, ther e sha ll be d ~ duct e d a nd withh e ld at so ur ce in th e same ma n ner a nd upon the s;a rr-e i tEHTl S '"~:; p r�ov.idr:' d in t=;u b -��� sec:ticm (b)(l) o�f th is; SF.;? cti. Dn~ as we ll as on renum r�? t"a t.ion fo r.. t.E~cl"ln i.e .," 1 ser� v ices or otherwi se, a ta x e qual to thirty-five pl~r t.":e n tum ( :::;.:31.) t l"lm -e of: f.r.:J1.1' iAg. q'_, __. Il:.l~"\J:, Jn �t~_r.:ga.t........... qiJ_... .. :tnr.::.!?. i._gn. .......... J,.o..~.n.~L- ... ..2.h~ .J.J. . ....... t.J e 2_qJ?.J .�..~..:t. . . .tq ...!'.!.;LJ:,hlJ9J . 9.J.r:L9....t~:I)�L. _qf..._ f .i. of_i;_�:?.~_1] .P.!?.r... . . " �;_~.nt4.Jil_____U, _~;~J ( Un d f'!r �s;c <JI'" in9 �::; u pp 1 .i. ed) to the i.n S UI'" C\r1CE! pr�emium to fon;> ign in s Lwance comp i:;my fr� om t. h ��? 1 st quart er o�f 1 97 4 to t: h r~ 4th qu .:�~r� t.er of / inclusive~ transacted in a f on,?.iq n c:ountt��y �few ri s k not fo und in the Phi li.pp i . nr �~> , by n f ot� �c!:iqn <:l qF.? nt (( ~ i.J. ma n I?~ Co.~ Hongkong) of the p eti tioner to the foreign insur ance compan y not engaged in trad e or bu si nes s in the Philippi ~es . Be s id es th e said subject in the Philippine wat e r, thus, Sec:ticm 258 o'f the Nat ional In tern a l Revenue Cod e is n ot applicable. I n taking a n unvar� ying a~;se rt. .i. on , however, t.o the leg a lity of the assessment of P1,233,929 . 59 as deficiency wi thho J. cling t.::\ :-: on in ter�est on foreign loans and in surance premium payments to 'foreign 202

DECISION CTA CASE NO. 3389 �- 9 '"" cor-por-a t..ions t h E� r-e s p o ndE':!n t. C r::> rnm iss i. one r" of Inter-n a l F~ev enu e m<:d .nt.a .i.ns that s aid p a ymem t<..=, arr e income subject t o tax under- Section 2 4(b)(1) o f the " Sec. 2.11�. Ra t�e ::; o1~ tax o n c orpo -�- r a t i o n :::: � ( <:1) x >: N (b) Ta~� on fo re ign corporation::::. (1) Non - r e s i d e n t c orp o r�a tion s. - A f o reign c:or-por�at:.icm n o t e nq aqec l .in tr� ade~ o r- bu si n ess .i n th e� P hil i p p .i r i P !S i nc J.ud i nq a i' or-e.ign J. i i' f? in s u r �a n c E? c. o mp .:my no t e ng age d .in th e l.i. fe :i. n s t.w a n c: e bu s in e~:;s in the F' hi 1 i. ppines ~:; h a J. 1 pay e:\ t..:.u: equa 1 to t.h ir-ty- �f .ive ~ 35/. ) pE�r- c ent of t he g1r oss income r- ec rdved d1.wino e.:;~. c h t .::1:-: a ble year- f r �o m a J. 1 s o u r-c: es within the Ph i l j_pp.i. n F.~ ~; as inter-est pt~� em.i um ~; >: >: :-: . Pro v .ide..:i .� hoNever, That pn?.m.i.um s s hal J. n o t include r� e -- i n s ur� an c: e pt'" t?. rn.i.u m ~s . " And~ Sect.icm ~. 5 3 and 5 4 (now S ees . 51 and 52) of the Ta>: Cod!?. pr-ov i d f:? t hr:il.t t.hl?. t. a>: due on th e inter-est a r. . pr.. E�m.i.um p <;~. y m e n t:. s rTi iHi!::> to a non -... resident fore.i.(]fl r.: orpor-ati o n no t engaged in tr-ade and bu siness in the Ph.i.l.i p p ine s hc::\ s; to be ~t-Ji thhe 1 d by the payor- Madr- i gal Shipping Co. an d r-emitted to the Commissioner- o f Inter-nal Revenu e ~ thus "Sec. ~)3. lo/ithholdin g ta x at ::::o ur ce .- ( a ) x x x (e) No n - r e s ide nt aliens and foreign co rporati on s c orporations . - (1) x x x 203

DECISION CTA CASE NO. 3 3 89 .... 10 - ( 2 ) No,�, ��� re s .i dent- �fore .i gn c:orpo��.. r at io ns. - In t h e c .J.~;e~ o'f �f on:.d .qn c or-por� a t. ions �::;ubj ec t. to t:.a>: und e 1�� t h is Ti t 1 e n ot e i'H] <:\qe d .in tr-,':l de c:w� bu ~> in ess wi t hin th P F' h .i.l.i p pi n f:?s , th<:.:' l'"�c:~ ~; h r.:\ 11. bt? de du ct ed a n d vd.t:. hhe l d at t h e s o u n:e in th e~ sa me mannr..?.r" and upo n t.h P. ::;a mr.~ i tern<::; as i s p n :;,vid ;::!d :i. n s t ll:l "'"Sl?(:: t.:i.on (h ) ( 1 ) of t. h :ir:; sec: t i 0 11 . :�: :�: :-: i:l t<'' >( Ei:> q u ,'i\ 1 t o thir- t y- f iv e per cent-um ( 35~) the r eof . Th i~; t c:n: !5h r..l l l b e n::>turnE!d c:.'\nd p r:~i d in th e sc:1m f.? ma nr�lf?.r� a n d s ub j f'~ c t to th e sam �"~ c ond it ion s as provi d e d i n Section 5 4 . :{ >: >:. Th is; df.?. d uc:t. .ion and wit hh n l din q s h a ll n ot b e r-equ ired i n the case of r- ei n s ur-an ce pr e miu ms ce d ed to f or-eign in s ur- cu. H.:e cor- p or-a t..ions n ot Emg ,::~ g e d .i.n tr- ;o\Ci e or� b u s :�. n r.?.ss in t h e P h i. l .i. p pi. n r.?.s ." In t h e in::; t ~u� d: c:c::\St;;.> i n ~; p :i. t.F.? of th r:::~ c: l e a l'" manda t f.? of th f.? <':\ fon?.- quot ed 1aws, M<iild r.. i g a 1 S hi ppin<J Company fa .i 1 ed t o s ubj ec t t h e i n co m E~ paymt~ n t s u nd e 1~ the C:OV t?.rc':\ g e til e \1\l .i t. hh<Jl.dinr .~ t. a:�: ���c:-:1 t-. so u r- ce (Se es. 53 a nd 8~). In t h e case at b.:H - WE! f .ind n nt hin<.;J amb.i. q uou s nor- ob sc ur-e in th e l c:m g u ,':\gr.?. o �f f.\f~c: t.i cm 2 4 (b) ( .t) taken in r� f.?l at. ion tn SE-?c:t .i. o n ~.D (b ) ( 2 ) , a b o v e-- quoted, in s of ar- C:l �5 t ht:? s r.~ rn e r.u� e b 1�� o ug ht t o b e ,-a r- upon the cir-cum s tan ces o b ta ining. T hus s hown the bas�"'s for� 1: h e 1"'��?~-; pond e nt ' !5 ass f?ss nHo.�~n t a r-e n o t s hor-t of s peci f ic sup p � ~n- t. i n tr.?. r�ms o f t:. l'" c:\ C tab 1 e dat a openly laid and �fully d isc lo se d, as such deser-ve the c r- e d e n c e no nr .':\ 1 J.y ac:c: o n:Jf.~ d i n t he a b se:mc:e o �f 204

DECISION CTA CASE NO. 3389 �- l l "" contrary ev .id e nt:E' . Excep t for the r edu c ed rate of 15% ta x en interes t on for ei gn loans (PD 1 3 1 cone lusion ought to b~? r� f.!c::u: h�:~ d. F'et..itic:mer� ne}:t.: ii:H" CJUe~s that .i t. i s not liable for the co n t.r-a c: tor" ' s t .:u : on t h E~ l e .:1se o �f fod:: 1 i. i' t and crane bE~i ng ch i efly e ng a (:;J ~?d :i.n the s h.ipp.in!J busines s and not in th e l eas ing of equip ment. r;:quipm e nt Wf?r �e ~.:; imply l e nt to companies shou J. dt:~r- t h e ac tual oper-ating CO!StS. As to the pre mium tax presc ribed in Section 2513 of th e T .::1:-: C m :IP t h e ~=-� "=I Illi? i1s n et: C.:\ppl i c: a ble for- the rea ~;cm th a t the .i.n ~;un~ d Vf?SS ��?1 i s not located in the F'h .i 1 i ppinf?S and the insl.w e r- therenf is a fcwe.ign cor-p o r.. a t .ion not. E?n !J a !J ~=c:l in t r a ch�? o r business in Philippines. Thus n egating altoCJether� a n y U. i:\ bili. t y for de �f.i c:.i.e nc:y pr-i vilege and perc:entaCJ e taxe s as contr a ctor a nd premium ta x ~ agCJregating P26,247. 90. A "consumm a tion Ch?V OU t.E?d 1 y to be I�Ji shed" perhaps but th B t � s nnt ~1h .::1 t t. h �-:~ 1 a w c:ord:E.� mp 1 a te s. Petit i oner st.u mbJ es on .i t: s o~r-m P '"""' mi.s t:! . B y thr? 205

DECISION CTA CASE NO. 338'i' �- 12 -� facts obta i nin g , petition e r did l ease the equi pment for consid~ :� r-a t.ion and in s ur-ed it~:; vesse 1 dir-ect 1 y with foreign insurer. Such activities come within the statutory int. t::> ndrnent a nd 1:;co p r?. of Be ct.ions 191. (now S e c. l. 70) ;md 2 5!3 ( nol-'1 Sec. 2 2f.:>) of the T .:~:{ code, r-espectively, thus Sec � 1 1 ~ 1 . Con t r- a c tor- ::: , pr- op r i e -t-or ::;: or operat�ors ot� dockyar~.1 .s,. a nd other::;. -� A contractor' s t..::IN o �f t.hn?.e per-cent. of the gro �~s-, r eceip ts J.s her-eby i mpo sed on the fnll ow .i.nq: And, Sec . 2~)8 . Tax <lue ir-om 1~ ore.i(ln i n:.::ura n (: f? compan.ie�;: . ;.� :-: >: . Jq a 1 1 c a sec-; VI l lP r��E' uwn �,~~ r� �,:; o 'f 1:� ,.. n ,�,r,�., ,.. t. y Db t .c\ .i.n .i.nsur�an c E' d .i.r� f.?.c:t l y ''l .'i.!". ll fo i �Pi::Ji l i r�l!::;ur�f:'n(.:f? c:c:lnlp 2\nie r::;, .lt s l1r.~ll be t.h f.J dt..tt.y <::lf said owners to r e port to the In s urance Comm.is s .i.or1 ,:;~ nd to t h e Com m issioner�� of Inter-nal R eve nue each cas e wher e insur-ance h as b een so effected, and s h a ll p.:~y the t < ~:-: cl �f f i ve per- c entum on prem.i.urns paid, in th e m;:_mner- n ?. qu i r�ed hy S ec tion 255 o f i. n !;;ur-.:HH.:e cornp."'n.ie~s, and shr.�d l be r:-~ ubj r:o>ct to the sr.une pf?. n.:ll ty �f o r� fa i lur-e to do so. Peti t.icmer-' s at. tempt to car-ve e:�:ceptions out of the aforesaid provi s ions pe r vasive coverage must be rejected. Finally, pe ��: it.i. cmer- c:Ci n c: luc:I E: ~:;, " a�Sl::i t.trning for- 206

DECISION CTA CASE NO. 3389 .... J ::;. ... the sakE' o f .:H�� quments, but 1-'lithnut D. dmi t t i ng , th a t herein petition e r i s liab l e to a ll of the aforesaid s t i l l , it: i s n :.? s p nctf u l l y s Lll:1rnitt.E! d~ t he Bun::~<'H.I of Internal Reven u e (BIR) could n o lon ger l ega ll y en for-e f.? the r:; aid agai n s t: the pet iticmer for� th r.~ s~ impl P n'? <~!:>o n t hat :l. t i s n ot only b.::,r� r�r~ d b y tl �l E;� St .::~tut P of L:im �i. t.:<:J. t .ion <.:l ( l .3. psF.~ d thr� u pr-E? s c r� ip tion ), but the p c t.it.iune r h a d a lr� eady availed o f seve ral tax amn es ti es th e n i ssu ed by the depo !5E~d Pr�� esich:mt F. Mar.. c os ( T . H . N . , pp . J~) -- 18, Nclvember� 22 , 1985) � 11 of r� c:~ pi'"E' ~::.p n t i n q Decrees Nos. 2::~ , .1~)7, 370 a nd 6 :3.1.~ whi c h apply tn un ta >: ed inc: om �.~ a1�1 d I or�� l�lf.~ .'.\ 1 t 1�1 ear� n E! d , rr~ce .i ve d n r� availment C)f ta:�: amn�~sty pr�ovisions s pec:i �fic:ally exclude l.i ab.i. lit. ies , 1-'Jith or lo'J.i. thou t assess ments , on withholding t ax at s ourc e provided in Sections 5 ~~ r.mc:l 5 4 of t h f? N .::1 U .ona 1 In ter� na 1 Revenue Code, .:<.s a mf?nd �-?c:l . 11 ( P .O.' s 3 70 and 6 3 .1 a s 20 I

DECISION CTA CASE NO. 3 3 8 9 j l! -- imp 1 e men tE.~ d b y n ev en u e r::E?g u 1 a t..io n <,:; No. .l --7!5 dat e d Janua ry 9 ~ 1975 ) . the e:-: c: E?p t. i o n is th u s st t"' l?. s s e d ~ ( T h e e:-: c lu s :i. on o �f thi s withhold i ng t c.u: a t s o ut"'ce l i a b i l i ty �fr o m the coverag e~ o'f t h e r.Hnn e ~.t. y d!!! C:n-:>E�!:; i'"' J. oq.ic:a l . The ./ Co., bu t a ga.i.n !::> t thE:! p a y r:� F~ a 1�1d / or- t h e r �e c i p .i.E!nt. of the i n c ome, i. � e. ' t. h E? n o n - r- ~:-?s i d e n t foreiqn corp o r-a t i o n n ot e:� n ga~.:J e d in t .r-a cl �:! o 1� b u si. n E.~ s s i n th e Philippines. paid and remitt e d to the fo reign cor por a ti o n is hot Shippi n g .i n co me a nd / o r- t1 ;"ck ig <d wh ic h u nc:IP r th e i s c: o n t. E~ m p I. ;:~ t:.e d t h e r e f o r �e p et..i. t. ion e r' s n :::.�l i. a nc:1? thereon is m.i.spl a c: E~ d. ( A~; to th l? a l l e g�,�d pr esc r �i.p t .i. on to legally enfor-ce the t ass e~s~; men let it suffice that pet i t ion e r �f a i l e d to wi th h old <:<.n d f .i. l. e tt1.:~ n~ tu r n required und er� Sr.:~ c t icln s ~-i ~) a nd 5 4 o �f the T e:u-: Co de 208

� -- ~ DECIS ION CTA CASE NO. 3389 -- .l ~; -�- as amended, :.:. u r ra, ~:l e e t: io n :3: : : :.2 !f .i bi d. applies, to wit: / Sec. 332. Exc eptio n a s to t he pe rio d of lim itat-ion s of a :; e s s me nt and colle c t i on o �f ta .>.;�e ::; . - ( a) In c a sE� n f <:~ false or fraudul e nt r e turn wi th i n t e nt t o f?V o~ d (:? t.a H D r � D �f :ff:.'_,l.. _! _1,\F E!_____t,q _. _f j J._ f.'~......~~...J~Ej-.1.._\ r:�n , ttl(~ __j; ~): .. rn a \I. . .J:�f~ .....!'~!!'!.~" ~:~~;~;~~ cl . n ,.. .- ~ p t�� o c e E.~ c~ i n q i n co ur-- t �ror�� t i-lE! c o l l E'C t i o n r � f s;u c h tr.:1~-: may b!?. b e qu n w .it hou t ,3 ~; ~::;r,.�~::; ~;, m e n t ~.:~----- ---~D Y ct t .tmg__.... ~jJ:. tLtn_....t.!~.Ll.......Y.~-�~L.~~--- - ~.:f.J.~L ... i. ?~.Q_y:g_r.Y.. __g:f._ tJJ�. f c:\ 1 s .i t y, f t��aud n r� P.ffi.! ..?.?Jn r:!.. >: )�! :-: '' (Und ersoc: ring s upplied) c j ':.:e el J'1 t�� o v .i. S i. D rl <::;. the years from the date of dj sc o ve ry of the omi ss ion to file a r�eturn, i .e. , July ~~ B , .1 9 T7 pE! t- n ?. por� t of And, the .~~s r:; e f:; s nH?. n t s cl,:\ t e d Apt.. i l J2 , .1980 ar E! we 11 within the ten ye ar regl e me nt a r y p e rind. It need s ne?ith er:� ar-~, '..lln f')nt no r� c:it <.:\ t.i.on o f <-"ut:.hnr�.i.t if.' ""; to establi~:; h ~ he v a lidity o f r- es pondent ' s aS~>f2SSITH? I1 t s . FOR 1\LL T HE FOREGO ING, We ho ld petitioner liable for defi c iency withholding tax at source for 1971 to , 1975; deficiency fixed, percentage and premium taxes for 1974 and 1975 in a ccordance with the respondent's assessments, qual i fied however as to the appli ca bl e rate of 15% on interest on 203

- DECISION CTA CASE NO. 3389 ... .l. f ) -�- foreign loan s as ear li e r n o t ed, whi ch iH f.~ h e reby affirmed and the� p~?titicm d i~ ; mi<::se d ~<~ ith c ost s against the petiti oner . SO ORDERED . Quezo n City , Metro Man il a, May 3 1, 1989. (4 <;:;<:; n �:: .i.. ,,, t e ~~ udqe WE CDNCU1=1:: ~~~/ f-�r-�? 5 1 c:l J. nq ,.J u d q F2 ( on 1 e;::\VF.~) CONSTANTE C. ROt~QIN Ass oc .i.i':\t.e ,J t..ldq e C E J::t. T I F I C A T I 0 N I h e r ::. b y c: e l'-ti 'fy t h .::~ t thi!5 d PC:i!'3.i.On was rea c hed after due consu lt ation a mon g the memb e rs o'f the CcJur-t o�f T c:t :-: App<O?<:I 1s in ac cordance with Sectio n 1 3 , Ar tic l e VI I I of th e Con s ti tu ti on. AMANTE F Prr?s.i d.in J ,]ud<]e Court o 'f Tax App ea ls 210