CTA Case No. 4247 (Decision)

- . . .. . . REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS .' QUEZON CITY �! HUNT UNIVERSAL ROBINA CORPORATION, Petitioner. - versus - C.T.A. CASE NO . 4247 THE COMlorH SSIONER OF INTERNAL al51q 1 REVENUE, 7> R...;..:..~r�rn-� r.�)t�l�'.�..i,:..:..l�lt.. X- - - - - - - - - - - - - - - - - - - - - - - X DECISION Tl1i::: petition for revievyr sed~s the refund or t-=:tx credit of P22 3.69.\0 1 a.11egedly representing overpaid vvithllolding ta.x on 1- '.���,,�\r�'-~�llt��t' ;.:�.�c-:� 1- \~..., r� lO.J'-~--!' f.,.. T\,-\rl-11� t.--.1~-l 1r.-JP�..t�1. .(t.�t�.c_J r1 e i�- _. Hnr�lt.- (.�H'.l.TF ', I1�1c -� � '.~TP.~=; :=; o l�-1 k~ ' ( /) (!:=; �' �, � fI J� f' ~- - � \,. �- � Tl-1;:> 1� ��~-1�"�-���r�~-.;-:'- ~�-�-�,1� LI J-1 1. �C- �� \._�..�.::>t_C._�.t.:�;.t ..-:1..1'<'='>7 �C-��1� lt'I'lf-~)1t�:��:'. -� - Petitioner i:; :=:t. corporation duly org;:mized anc:l eyjsting � under the t::~.T1qs of tlw Philippine::; �1'\'ith office at UHC .J3.uilding, 110 Ll.h t'::; 0 11 C:t' P- 0!1 7 - t-.~~\7 � t . -.. ..._ - � -" C-4 - 66.

'' DECISION- LLA . CASE HO _4217 -2- \Vessc�n Fc�ods, Inc. (HVlF). :3 tYm-resident foreign corporation TT �-: -=-mF�1 t. f' �-� . ..... .J. .l . _, ~ �-- �-� 1l;r �. 1. Tradenv:trt Licen~:e .l!..greernent (Ex.h . E-l. pp. 109-116, CT._!.>. rec.) concerning the sole and exd~_v:;ive licen~;e to vI ;:�.-�c;:cJ;�;-.�t��-:~--��- h,._l.;;.�--�=�- '� n- t���.J..--.+1;�:-:�-I�� t�-l��i;:�-.� t-�t � ��=--��� .�.--l P�-� t.rl::-11-l' "HT�-P� 1��IT '�.:...:." '--=-�~t�I..�--1 ,.,.._,_.�--�.,,�.--�,1.'.1�1-loC-� .:�:.~.t�l ,�.--1 c-_,;=-_t_}i_t.(.l &. ' - � ... <:Al und-er the tu:v:lerna.rk ""lllESSON": ;:1.nd 2. Technic:::t.ll~�.-:::::istance ,l!...greement (Exh . F- 1. pp . 119- 12 ~'. �':--'.�Jt.�l.--�-1. t._�... t_�._t-1P._.1. t_"lP._. \�o\�l rn-� t�,-.-�,(._lJ_h._ -�.�-t__c_-,. .:::rn February l . 19.::;4 up t.c� _la.n.1_1_ary 31 . appn::rval <::rf the Philippine (]overnnwnt. Petitioner regist.:?.red the Bo::1rd On October 2D. 19.~\6, Certificate~: of Registration Nos . 0704 (Exh . E. p. 107. CTi;.. rec.) and 07(J~, (Exll . F. p. 117, CTA rec.)_ ~~v-e.t�tS> is::;ued in favr:::�r of petitioner 1,.\,;rith respect to the Trademart License Technical ...11.::sistance r;;�-.�c�--r�r--,�;:�-.�.�.--��'-~�i ~�! p�.�1l,\.! . The Tr;::v:!etn;:t.rk License Agreement provides for the 668

DECISION- LT _A_ CASE HO_ 1217 -3- -IlL PAYMENT OF ROYALTIES i�.) Royalty_ Licem:ee shall pay to tlw LL:err::�::.r :} r.:::�yalty c�f (:.t1e percent ( 1;:6) �:::.f net. �::ale:: in Pe::o::: i <:�r the u:::e �A the Licensor's t.ra.dem:J.rt�:: in ;:J.ll Licen::3ed Pn::..:Juds :3old 1' ,-.1-1��11 \-,,:, nt- ,4���:'~ 1;' '��.-�lT'�'T�l'.�.-+J,:�_-�, '��.-i. t���l-.~.. -.:-.j�t.-.� t�-1� -1�>=-.>- 1- rlTT�41tTT 1-,~,,:�-,� -=� �:1. �-� �-� t.._. '.' �: -. �-� ��� rer:nitt:1.t.1e �:)nlv if tlw Licensee has earned suffici>?nt. net foreif:�n exchang�e earninf:s to l..�-...t-..,.~..y ,t:-:,: 1- [r;.'�,'�-~j� n\, f-I-1,�:-:�,f-1t-� t-i�'-1'.�--~"� f-.~--,,.---�.,1- . 1) net forei�2n exclla.n!2e ea.rnings shall refer to: 'tlw !2To::::: increment.:t.l export::: of Hunt ('()rrl()t-�=iti�-)n TTniv,::,p=..1l P nl-�i1F1 �= i t F l 1,.,:, O�~ f t ''�c�c- �- � l. I '�' �- " - � J. \. '� �' -'-� �-� '� ' , �. '� ' .1. 1_, �' ._, '� '� ' ._1._1 1�1-1(-:.t;-,;-;1-H-"=--'t.-1-t;:.-1.1I f-1(_-)f-1-11_.-1-:-:vJ1' ti - --~C�t~-1;-:u1 t:'-.�.<rs.1r).:_-:.!-_t:-;; !2'etwn:t.ted bv Hunt Universal Robin;3. . -�,f (..'..,..-..�.,r-:r:..�.-,.�}t- �\:.,:\.t'-1�,..-...,1�1 ,.-...,..1- �\.:\:.1-1~�' .._. 1�+.:- \.-::1 �C�1\ _1_1. 11��~~1-to.:.:._...c._-I \�.~�\1-1....-..1J. ��=-:�n-..r1:�-, 1~-1� 11',::. l�- ��-=��, ';,,�,1y1\-11...�--�-1-1 ��=-�'l-1.-<1..11 tL-.,,.:_., ."-�..-_�.�t-l�.=_.�t'.._-lov::.r-,-:-:�.,.�--I~ �,=_ i-�=~�� 'J t,_.l -1 '---'.�'.=_.: ;:_-__�., ...-_.�,-f .T.... 1.r�-��;.:..:.:.t-l�':-'�.~::;:.u_��--� '.�:-�� .f.. .�.--��,t- r� l-l.t-ln:'..�.--��,,.-:.�,�:-:�. ��:-�' ,�--�., 1- ,t:' rovaltv cc�mputatiott3 ' minus 'total foreig�n e~~ch;::t.ns:�fj �:)UtJlovi from rav.,r r.nateria.l and int.ennediate <:(:�mponent. irnports in c<::�!i!le.:::tion v.ritll tlle nl:::tnufacture ()f the -1.-. ,-. � t-�t�� ;!_tl-~-,�-..!t- !.:-:7..!-ll-t,=.-.' ..t. ...:u1 t.-:.' ,..:�r~r)�(-.'1-t-� .,:-....:.1. l:7-:�. f �:)r t.l1i::; pun::t(:.:::-2 incrernE>nLJl expc�rt salE>::: �.:d�'-l��:J11 �L-.,,.:_:.. (..�(._�.,�l-f-l-r"'..1._l.f._:.:�.:_...,.-_1+ ..-:,1�.-_=�. O._.::~.':.r.yr��,..._-�!t-t.��=_....J~ 1;..:_:....:-;�. 1-,�--.�,1- t_'.-I,L::. cu.rrent. yea.r rninus tlle ex,port �;ales for the vear l q,:q 2) net sa.les i:; defined as : mvo1ce value t:�ased on actual :::ales rninus a'! trade, qu;:1.ntitv . or c;:1.:::1l di:.count:; a.nd l)roter�s or a�;:�ent.'�:: commi'3siott if any; b) return credits and allov-la.tKes; c) t;:.tx exd::;e or ot.ller !2�overnnwnt clHtTes: and d) frei1zht. 1�!-1�:;nr �- � �- � .&. �4t-l '-� �r�.��;�:.;:�. c1_.:,-,1_~n'r� l .ntc::~-.1t�-. �.lt'o....l~_1, .0_'1� !-10� o::>'IT; o'J"::>.t&v. �-:;�,':�:',..;-)� � � �- '�' ..._ ..., �. 669

DECISION- C. LA . CASE HO . 4247 -4- Pavm.8nt r� "� h '<;I .. F'o~:f~.iTt-II- -P.�>t-1t� t��) t� �o�:f.11 '�-~'/T-.-:(1t1�� pv,~c'- . . . E.~ _1i s1Et11 be in Philippine Pesos a.t such Dlace as Licen:::or ::::ha.ll de::igna.tE> from tirne to tinw . .<\11 rovaltie:: shall be r)a\,;rable (lUart.erlv or earlier I J:" r I U[.:u:)n rnut.ua.l :::t_gr>?.ernent of both p;::Hties. E;::1.ch (._�,�_~1_!_?�:..-.!.L,-1�-~-��.1�� (-1<1_1_,-_~.1.1�t.-,��d. Ti,,"� p�-� .-~_i..!. ,.�_11�J'.1.1�11. ;!::i. t.J.��L0::.:. 11�1-.p, (-~�,1� t.-1�lL�;:- �6.g:reement :31la.11 be a.n accr.)unting peri.:)d tt- t.-� 1 i\.of.r� ��-:H�� ��--�+'.�-1-�,.-4.~r-1��~- ,-1� �r�11�t1� -~ �-:-:�-n.ll ,�---1 t��.~.:._:.:..!�r�r-11�1-1�-:-1� �. .ta�..,L.-;=,-� 1n�,':�:-,�t�1�.-�--�1.-�--l��-='� 1 _...... t�~,::. J � -� 1 -� �- �- treated as ac�>:::.unting periods ). Li.:::ensee undertJke:: t�::. remit 1�)eriodicallvI the rova.ltie:; I due to Licerr::or in U S currency at the prevailing bant ::;e!ling rate in TJ.S. dollar:; at t1"1e tirne �A rernitt::Jtlce net of atr1.r ta.i~ tll;:Jt rnav be f I impo�::ed t�y U1e Pli.ilippine Government. Observa.1v'2 by Lice!Eee of any subs:::KpJ.s-nt 1. .'.�-"� 11-�'-~'�.l�--,;=c�,;':�:":. ..r t�,::,on1�1t1-,"l!l ;c=.-J.-.-:~>r;'�:':,r-!t'!_1I_�''.,o:.l:,-~p-h- l r1 I�I_~, nI > ,���,�1�1� .:&. ' � ' ;=I - � '-� �' '�' .0. preventing .:.r re..::tri.:::ting p:::~.yrnent in US . currencv shall not f:.:;nstitute a. br.::;-a.:::h r:A this I i\greenwnt.. In :::uch event the pa.rtie::; ::;h;::1.ll negotiate a rnutual acceptable rnet11od of p;::t.yrnent." (Empl1:::1si:: their:::.) 1� Ir-) ,.-)-.1�1:�._ -�:1.1�11�.�._1 .-1 t~-).':�:�:�'�:.1�1�,=-.�.. �11� � � �1 t~-).�:. :..t:''-� t,.-) 1--:::"�01:.t.1�,--.=-.�-� t,_,,.-)-.t�r�l-L1 t).��)� ,.:-u..-:1.1-1-'�-�-�-"-:-:-: .�-:1.1�1'��-1 :...;.:_.:.t)�.�_-.t-il-l�rI-) lJ.1-11-.-_I,;v::.t- HWF t..�1t-,�,;�:�-;�. "~~,~;::._..�._:���.:_��(._�., t�1-" t_t_�,�J~(--~l;.:_.. I��l�! -�:J r� �t.;" r.-.--�, 1- (._l (._�.,t"f",LC:...�:_�, t_.l�,-.-_.. �.=_.�.�J~_lA-~ ,-~JrL..-1 1�,-.-_.-,1- ,.'::",~'.r;'-�T---,-()1-t.-, n r- �:-}-l -~111 t.r,�---�1 ._IJ. �-- 1� ;::,,.-�;::,1� ~F� r�t-,--�� t�r�l HT�-T� f'~ �-� -~~ "t_r-.-;:--.�.--�-1-11-11.,�-----��=--11 �.,=_�,;�:-:�. t-71..--�,;::. f ;::.,;::. ;::.,.-1111� ~TI -r-:1..1;:�-:�.1�1t-� <--�' riA._.. -� �-� .... �-� I �-� �-� �-� �-� � 'lr:;; �- � �-� �- -- t.�..u�-.rl"l::.:-.' -, , t.l��11�:�:�:' f~---'1-�-.-_-! r��r-1�,._11-1�cLVi t.;-;-:..�'--�.--�t1�1-11.C--.c-.\1 .--:.�.1-:::.'"1TT'I l�'.---.-~:.:-:.',--:�. t-�- . _!._! Anv t�-�r� �.-:1. 7'-"��1 rT .'-:1-. 1-1.:.:-:.' HTTP(� I I 'I -..-'1 � �--. 'I<::' 670

D:ECISIOH- LT .A . CAS� HO. 4247 -5- r- r� - - �, H F 1 1.-, ) t-'-�-~�,1.� t_1.�1'�:��: �-:-~.'.-.-.�'�--�-'�-.�-~1-�11�1t_. '�----'r� wp " . . ::::. .)_~ 11 � {��L.L"..�.:,�u}-,..... - �' !) . (~! ...-J. t-:~::~... . _, ._. T1w RP-US T::Jx Tre.a.t.y of C'<::t.obe.r l. 1976 prr::!Vide~; : X Ar-ticle 13 Royalties 1. Ec�y;:f.lt.ie::; derived t�y :::1. re:::io::lent ()f one of the Contr;:J_ctin�2� State:: from scoJJ.rce:; 'Nithin the other '-' C:.::mtn:v::t.ing State rnay be taxed by� both Cont.ra(:ting St:J.t.e~; _ 2. Hovvrever. the t:Jx imposed bv that other I ContractinQ�-�� St;:tte shall not exceed (a.) In tt1e case of t11e United State:;) 15 percent c�f the gross amount of the rovalt.ie::;. andI. (b) In the case c.f the F�hilippines. the least of: (i) 2c_) p�ercent of tlle �Q-�TO::s amount of Ui) 15� percent c�f the gro:;s amount of �1-i>=>!"?l tl"l?l 1 >=>�=� t~-1.:> .�1 �-� t"r�"-�f':Ii�=�---11t.1� �<�-=�>-�-=�1_, , ,...I �-� �-� tl� -.:o.... --� r� ..-..,yo-1-;' r�:'--1�� - --� �-� �-' >::tre paid by ;:1. corporation re��-~�t;tered Vlith the Philif-)f-)ine Boa.rd of Invest.inent:; and en'd'-�'a.'.d_�,ed �=�r�>=>�::. �:� r-,1- �=�1�1rl it-1 .& p�t- >....=. >1'.~...1-r>=..>..(..l \..l """ '-""-' ... !�_=\�.._(. �tJ�.~.r l� ti~..c. ~.-) \-\ .. 1�._.1�1�1� �_) ri-11.~_. 1'�--�--'T..�.,.T�?-�)��=-"--t- �l--.:-1.t):-;--' �-.--;r� Pt�11�11�.,r=._~~F- 1� r�1\.:-:.' ~'-�--:.�.~~-y,_ r�c ltl� �- t�~i�.1L �0..,. t-� 111.�:.1,. .",. �.)~!::~=' 1.111~r���-'�'c--~�~''��-j !�.')11 v C-..l. -� t~:' -:. ,I �' of the :;ame l::.ind D;::J.id under ~:;itr.dla.r cin::um~:tances to a resident �)f a third State." (Emplla.sls Ours.) Tl-1>=> "Pf�- W>=>�=�t (!c.:.t-ri�l�=tnT�' T;}x Tre;:ltv ~Nliicll t(::oot effect on I �-� .1 \ I i �-� �-' �� �- ��� '-� / 671

DECISION- C.T .A . CASE HO. 4247 -6- ., � Article 12 Royalties 1. Rc�y::lltie::: a.rising in a. Contr::1.cting State ::1.nd paid t�:) :J re::ident of the other Contracting State HFJY be taxed in t11::.1.t otller St3.te . . -, H 1!P1- r ), ,',! 6 c:1vt�1 t� ;; ul ;':- J� l t�t' o�-=�:�--c'� 1�!�1'�:-1�1l! �:tlc�r1 1J�;:;, �- � I o ��� I �-� } l_ , . _1 �- � � �-� ~- �- � - � �- � - .L �-� taxed in the C(::.ntr:lo::t.inso� State in vo?hich thev a.rise. and I � V accon:ling to the tJv,, of that Sta.te. t:.ut the t::m sou . 1:. (a.) per cent of t11e gux::::: amount of roya.ltie; :3.rising� from the use of.. c�r tlle ri!2'ht tr.) use, anv,. ~� ' -' c;;:.l-i}VTi�:,-o�ht of liter:::trv. :.uti:;t.ic or scientific V�lOrk f ~ '. including cinenn. togra p11 film':: or t:J.pes for t.elevisi�:::on �::.r br�:)adca.:; t.ing, or (b) 10 per cent of tlw gross arnount of rovalties :lri::ing fr otn U1e use o::{ or the right to us e, any r- t r-��1'-' -��.-":-1� ~�P�-� "1l t'��,, t-t�~� �~F-IP 1- 1�1�1 �~~ l1�'._ 1 ijo=:- �:�1� ;c=r,r�1 ,�.�-�.,1- l.-I-1(..�- f"-lu�-.�1 .� r1 -� ,_ ._ L I 1 '- ����- �-� - �� � �-� �- � -�-=-�~�.���.-�t� c�..�t�-� 1-,�,-�.,l�t--rlll-l��-:>�:�. '�-'��-f' 1,..�.�., !� !�'-��,.(�.� .~.o.:�--��-.~J, n�.� t� !--i-,....',111 t1-�1o�=�-:-� 1-�1���-~���~-- n�-�t�' n�-� t� tlie ri2v�11t to use.. indus trial.. C�:)nunercia.l.. or :::ciE-n t.ific i?(1' ui,rnnent... or for informa.tion C�)ncernin�: indu.stria.l. cornmercial c�r scientific �-� ;�:-:-.~'.r*r�,o�=-:�-t�l�o=:-t�l t.-_...t:�.r _ F(_. 1�'� tt'�lt'l�-�1�.�.�- .�. � t -�� r'!;::.t� ,l' (--.1.,.,-:I. l.) l�,�1.~ -.. .-.�: \_f.:'I� 1I,-.1�1'�;�:�:' �' ;:., .: : "'::! 1 1-) 1 1'' .-.l-11'1 11 --~ 1-.� i- f',_i, l(,)� ,,~-,I.., 1 V - � ... ' � .-. .J:�� 1t-11� H1 � l~.!� vr�'1�1-11:::' 1'-�:-1.,�,'�.,, 1�..-:.� .,:-�.LU.t.-!. J�".=-.-'�.--�.1'--� tA��! .c-l.,r~-�! ,r..!�r�'.�--,� .��1,.d-1. , t-f��;1::.... 1�i �l-l-i1� "1_-,-:~,t.i-.'.�}�1�1 r.'_�!!� the t3.x rate mentioned uncler (b) sha.ll, in the case of t- ..-~ ~�::ilt'.=:>�:� C'- '.t!_1��.=_.�1�!-1;o=,� 1�1-1 t-�l�l,�:-:�, Dy..,�-:�:t,-n� n-.it-,-11�,.�--�. n�-� t� t-1-�1,::�-:�, .n11~li. .1... .1L .f-�' f'1� 1-1P�=� } -� �-� �- ' .... / �- . -�.1. �.r �-� (:.nlv a.pplv if tlle contr~.ct !2�ivin2� rise to such rovalties 1-1�.-~1.�<:-:�: t����,o'=":-o�-=�:-t-1 ��:-:�,j~=n� tr-�'t�r���,-r,,;;�:-:�.,�.--1 \L-.,-.,;7 '-1�,.-. rr:<ltl1. 11� !~-�.,!~-.�,1� 1-1�-A� ,�����.(��,t�I�ln[,o:.' =,:.-t.o� v=:-t�l,t. 1_� � J:::' :::nJ.thorit.ies .- (.Under::;corin!d�-� Our:::.) .

DECISION - C_T _A_ CAS� MO . 421? -7 - r, - nF�� �1 T- ..-:l_r!--'.1~-�-.-11�r..-�....-:J.r'"�1. .!.�_��! t-1 1.--).Lf t�l� �1':.:-:.' "I�-l-l�.-)- .�:-�..t..- 1-.�,:�.,,,' r..-,.!t��':-:-:'1-. u�:J.t.1��1--.-�.�L~-l .. ---1-.�1.-:1-_1_�!.c._-��':�:�:' 1�!-1 t.l��1':-:-:-' J:"� . - r.,r�.:~_, d.nr. Tt-;�-:�:.�-:-. 1�-�t/v ,�:"..�' 1-t..l--1 t�;�:-�:.-c-~�lrj�J::--:-' ��t'--� -� t) .--_.~ t-1� �1�'�:�: 1- r.)�,I\FI P;�::'c�-��t-� t� {�-._1t.;�:�-:�. --1 !- F�.�l�J�..i!.li�rr,r�-i1)�!-1'"V'' t -,,. .�:J....s:i. t.1� �-t-�:-.1t-� t�r�l.�-:1.,,T !._. BIE Euling N.::�. ~:.7 - ;:_~_- (H)(J-(H)-26_3.-i:H::r. dated November 27. Inc, is quoted in full "Gent.lernen : -l t-.�.�;._-; 1-;:_::._fer.��::_; t_/_:r- - ~._r c_:.l_1_1�- lc.._:t_.t__;::._:r d�1t;::.ri --~ :_ _ -� �-� �- .1il.rL --�-��! �1�1 1 .:!.... . .. 1(:1. ?�,)-f�--�, - f rs<lU.<?.�:tit1'.2_., tli.;:J.t. -:.;',;rou te allov-.led to a'lail of t1w beneiit r f .-�,r �-�1�� �. tllP- di e t;::. 1 �;: n f 1.11 �,r����, ;ri..-1 ~..-l r :=l~� 1� - �, � o .i �.+ ��� .._,.. .i. �.� - .>. i:..1 ~.a. �.�.!. ��� �,� ._ .1 r-���=lr� '�-=�~;o=,� ll ~) ( tr-,J ��,{1� 1���~ ��� - � �.� . � 1- �� ! ,: 1, EP-US Ta.x Tre;J.ty. rega.rding the lr)v.,rest rate of Philirrr.rine t=Jx tln.t rn:=Jv be in:t1~) osed on the rova.lties .!. ..,. ~ I pa.ya.ble by you tc� hicDotEtld 's (USA )_. by -=:tpplying tlw . rate c�f 1(J:r:; t :nr on rov, altie::-, as lr-::.fOVided for in the HP- '.,ltl e~;t (ierrnanv' Ta.x Treat"~l . Dc�curnent:u-y evidence :;ut�mitted sl10\il:: t11:::1.t I�ilr:::Gec�P2�e Food Industries . Inc.. a dulv re�;dstered ~ � � I W v-tlwlly-ov.nwd dome::;tic corporation. entered into a lic<?.nse :J.greement 1..vith 11ik:Dr:::.nald's CorpouJtion. a non- re:;ident f�:::.reign cc�rporation based in DeL:.rt:,...,r;:,.re, lJ.S.A., r� . tl"i�-- T\i\i1"1�0�:-:�:.!"f?_.1_"_.�,T\r 1 1�1.-.- \ It�_�.�C_rf?_. '---���t�r~:;�;.:_,. .\,\'r�-:-j-��-:�� Ccr� t� .�=_1_1"lt-.-:~:--- t�;' �-_=_~1-.1,-1�t_--.�. .\�_-�.�tl.�l;:.:_..l-.,:_�. _J _. ~ 0 right to tEe in its business operations the trade rnarl:, ser:::ret f�:)rtWJ.la.. t.echnolr:)�.2.....:,V aa.::i/or 1r.iatented fH-C�Cess c�vmer:i t)y I�.,..IcDc�n:Jlr::l �s (USA)_; tli.::J.t tlie licen:;e ;:J.greement dated October 7. 1965�. cc�ncerning tlle operation :md developrnent of re:::t:J.ur:::mt i::: duly re!2� i~trS-red \ l11 ith t11e Technoloq�- =vr Transfer Bo:Jrd of t.lle :_: }.,Hni:;trv c�f Trade :Jnd Industrv under Certificate of ' ' r� . --.r��nn i.:, . --,�� I�.. t-�-, . --,f s�--_.._. --� )._. th;:.::. 1�,-. ._. _ .-... !.�.- _ -~- - 1 ____ l �-�- �.� .L ~l_.;.:_:.. ..-.---t1-!,l�l,-...--\ 11.--.-.; ;u='\'r, .�lr._.-'r._~r;:.:_....-_-�.,r�Cf!.;=:t.:�-:�. .:J ..._-.\ ~,._�_��'1 �1�,-.--=jt ;::...-i �t-���~-��.,..., 1�� ��1 ,.-- .r!..!,--.--,1�-.,. :~..l. !! t�-+l '��:-�� l\ . {q�~ 1 ��=-1 - .�---��;�-:-:.t�t_..-.~__11...1-1 .(-.1_1_1_1.-�--���J_1l,. t-l'"l� ,.--, I- 1-..--,\?�:-; lt..'..:_;�t .a../ �-� / �-�� i. .� �. �-� ....'.!. �-� 1"iC. nn ,-.,n J 1~---�,��:-:j-� >'tf _..-,, .;o �-.-� .... _ �::1 r!�.� p�~�f>�'.C��-�:L.tlt�-�~:-j-;t;i:,"C��-�. ,C-:,:-�f '�-'.-,���-:'���:-:'' C�- "�=- �JlC�....C�-' t�..!���'-,� .� �... r c��-�.!�_tl i't"-t.�P�-�.�-.i. �-� �-- � -�� .. '- '� 6'73

DECISION- C.LA . CASE NO . 4247 -8- In reply, 1 lEl.Ve the honor to inform you t11at your reque::t is hereb)l gn:tnted . Under the mo:::t favored nation prO'lision of the EP-US Tax Treaty [Article l J. par::}gr;::t.pll 2(h)(iii) Ltlw t1x imposa.ble on ro;l:~tltie::; derived by a resident of the United States from sources Vvithin tlle Philippines shall be the lov-teM. nJ.te of Philippine tax tlla.t may be imposed on royalties of the same bnd paid under simihlr c:ircumst:mces to a. resident of a third State. Article 12, p:::t.ragra.ph (2)(b) of the RP-Viest Germany Tax Tt 1 1{\ d,.,_,.. P.!�r� J�:::ct-1 �,:.:..:...�,:_:,ctT.,.;;} ... ;.:.:.:...(.�.t1�' '1';::.:.-. '-" 1L1\C'".>\ f"TI;T .. ';1(�_=t.1C_')_, .rr-��,t"(..'T.J\T.l c:".:'l tiJ-JlC~�.t\� royalties arising in the Philippines and paid to a re:::ident of ~tYe:st Germany m.ay also t)e t;:txe(l in the Philippines_. but tlle tax sc� chan;re shall not e:xceed 10% of the !2To:::::: amount of rovaltie::: a.rising from the use of or t11e right to use, any patent, trade mark_. design or nlc..::lel, plan_. secret formula or process; or from tlle u~:;e of, or the right to use, industri;::1.l. cornmercial_. or scientific equipment, c;r for infonnation concerning indu:::trial. commercial or ::dentine experience. The said treaty also provirje~; th;::t.t 'for as long a~:; t11e transfer of technology under Philippine law, is subject to approva.l, the lirnit:J.tion of the tax rate mentioned under (b) shall, in tlw ca.se of royalties arising in the ��r� ('t Dl"'a. ~-�-IrJJ1-1- \L-��'It"r�-�� 1.,.1 F:'llt"lt" t_i.-,Ll;:.:.....t �f-ll. r�l~S '�,__) 1"11;�7 a�:j.r) p..l�ir 1-f t...l"LA�-� i..'.t.l..!"lt.r�-�:..t �-� J.J I - � �-� ""'} u!d'ivin!�urise to such ro�>ralties have been a"~~~)T)roved buI . . t11e Philipj:)ine u.::.mpetent aut1"1orities.� Such l)eing the (:;;:1_:::e a.nd in as muc11 as tlw �=ttl �:l 11-.�._-...~_.11.'':, f':�j "o".'00"1"....-A.....P.tl1�-�Allt-� l)'~ �'t-�~'ArP�'::�:'t":"- 11 1"Y"1 1��.'��f-T~~.,~.-.'-.).ol. �(o:r�-~� �:. 1,_ "p',��lr.'_. D'�~.} llo'".'l.r_j'vc has been approved by the Transfer Technology Board of the Iviinistry of Trade ancl Industry_. royalties arising in the Philippines and payable to 1\�kDi)nald's (USA ) by IvlGGeorge Food lndustries, Inc._. are subject to Uw Philippine tax at tlle rate of 1o~: because tl1is r- P.F-' 1-:,:41. -lf::." d- 1r) r1.:n:.~;":�.'!".(""j .1�!.1 t.�t�1e. �� - UYVTe. ~~t~ I.J~ A., 1"1"1-10-. 1ui' T-::t'.{ Tt�;::,:..�d- t��T) 'c~1.1"1r-j pUfSlJ.::I.flt to Article 13, paragra.pll 2(t:�)(iii) of the RP- US T:~x Tr<?.aty. The said tax shall be v\rithheld and p:::1i'l i 1 the :::ame manner and . subject to the sarne con�._hti�:)!1S ::ts provided in Section 52 of the Tax Code, as amended. 6?4

.... - DECISION - 9- C.f.:A . CASE HO . 4247 .�, t�c� r i ,___. -- tt-JJ i ��11 T O:::,t- ~T \� �. _. J. / �-� jp ~T -- =�� . J. (SGD ) BIEN\TENIDO i!,�. TAN_. JR . Cornrni':::::ionE>r of Internal Revenue TAN-T-5� 15�CJ-_I 092 3-A -4 .. r�. �:> f!ill.::. H;::. �- l. �-� 1.-t- -.- i�.'-Pl--ll.1- 1"I �n' In--1'1l>=�->� '�-=�� .���~ .' T- .tLlJ..;�-'�.} ~1i..Tl{ll; ,-..._�l1 nt� r�. ~;l";-.1;::.,~ �--�,1- �:.1. '._=;' l..aP. l lt"l .0.,.!- oC��t�:�~- -t1t. �.=_t_�__::,' 1.!1 j �' --- I ._.J. �-� �- � For the ye;:_~_r 19f.6. pet.itkmer remitted to the f::.I.R the :3um t.-. F'F:. !-�'-'. T�:>'" '"-=1�11,.�.-l t>,�=�.>� ��,d-J.l l'J.'i.��,'��:-:"i�, l ��-:'� .�:.:�. 1� -~ll� ,.-.::. r�.::..::. �::- ~-..:li .-j H 1;);'F Ill ''1� .::.~.�.! n t� t llP _TF' i:J�.Z-. t �- � ��� �- ' .!. �. . � �. � .&. II . 1 ��� o o �-� , � �,� '\. ,_. L.) �- � ��� !- 1-. rD�'"1-�1-1-1�1�1,-:...,:_.-.,.-:~� 1...~:�...~::.1_1._J~:::' 1�-.�1 1_'; "Iv t._.f1!�:'7-' .1-t.:-:..-=~� ..._~.-:��.'.-�' tt'!l��-�L+~-.1.1t.-., "'� ~.� t ii--J. t'-�l�'�-)' .l.J,. t�:'::' 1� !-l�l l�:'j'r._j .o..,. '��'~�1�c".t1.111 '��-��1� ':i r-��""lH 1 ,-.il ."'l��l t'"">'" 1� t n�:,> �1!�:�::''!.'1_J..t~.�1 �._ ~.-~,- 11 ~���- ,:~~�j.. 1t�1 (-=j." t���)-)-~. =~:1.t:_. �� -:�1 1-) f_!. '�- )�:'.'.' '���-��' 1�11~1T �-� ���.:� T�Nt 11'." 1 �_. llll!"._'.1l �j1-.. _J"!1'�'=- ~:1.,a."}'. '�.)'tl ,_ , �-� ,. ' \_.f rova1t.i<?.s and technical �::ervice fees remitted abroad to H1NF. ' i'� f H�;.:.:.. 1} �'�.'��.�:.::�. ,. n f� t�"�1~1 A��� ..~:)1_1�! 11 �.� r,.-'�c...t�~l. t.l.� ,�..-�.,11-c-.�.1�� -�-:-��.-��.��,J�-J�:n::-. 1 � +- t...~11�w.�. t� ;::.t- 1�-1.1� 1 �,.-.-~l i.�'.��!. t.-�':...1,�.,:.:~. ;� t�p .-�11� t~ v ~� L l� � J. �.� - v J. ��� ��� F'22 ~:,_. 69(U) 1 as o7erpa.id Vlithhold.ing t=J::~ on ro:�r:J.ltie::; and f) ua.rters s-ndin!2. +: 2c:1:1: ..,NT (._�J�v� ..:_:..t�p_. c�-1.1...._-1 **Do:?-:: . 3 1. 19D ::l rr:. f,._., '7'7 f�:~�; f-:-�, L-iI. nr '}""' ! 7' 1(1.....f_.,f--�, p ..(..)6 c:, .r,~.f!�.,� . - Li. 1, ../ �~ 1 f.�� I�.:ll�.-~i.l�� 6 1,5�0 l .f.7 -~; -~:t. (;.3' 1.51f, 4 ~}.47 0. 29 c�.I'-1 �;: .' 1' >::"� ,�=:, 2 2_J2 .~:~~i _ f,f:. :.)f)_,722. ;,4 - �-�' ) �-� �- JUtk 30. 19,=:=,(. ��-;:-L' i_� .r Li_;:;f, . (OJ ) .1 \ ) ..... -� ... s~r~t. .3c'. 1()fJ=) 79. 71 9.12 ) 1 '-'f, ._)'7 7 "~1 �-� L~i. 7 q-�.:J~.f..:.,. ., f) ! ( .!._..1 I ... -6 D>=>c 3 1. 966 147?. ?. l .o �=:, r:-iq lr::,2.41 t..:=:. 72g _62 p =:.72 ,60 1.2(J p 14 .:~..90 .~.. 19 i?22 �;;,6 9[).0 1 -1 {�-;:.::.;::. r�,_ .-1 1 r-�_ �+: ..:, �:� :~, n �=:�t.::... '� '-' ._.�� L4��.../.r\.�..�!,.1. . .. n 1. , _ �-� ._ �- ���-� .��-� .__ +:l ~-�.;, id n 1':J ;=;6 67 5

-- DECISION- C.LA. CASE NO. 4247 - 10 - -�, 1.�lt.t1�l t1�1e:. /!. c J. J. �-I ;- J:~!l� t�r�i !"t::-!-11[1 (�.1! ~I.~Ir'~-�'��C-�' .f..t'l.::'�.'�'��l !�.::.�::r�( i l"!('�l�t:'�:'-t�lf~., � '�' -� � '"- ' I�.''J �. �.a.�-� !. 1�,-.,r�� (i!-ft'(�p , ��, ' '�'- TI .� '� ' '�''�' pt �..-:.1.1 r;,.. .�11 f.), 1� (�:�hr). O,-, . .T. 1�1 ,.�)�.r. '��-I '�=-::�'.tL� t_,_�_�.�~ p-..-1,.1..-.~ t-.�-�---�' 11 t-l���,!�..�t:�:: pJr���~-�-c�'�-�-���r�-lr_�.r~ t-�t��,y,. .~-. r-_.�r~�;�:�:t�l�,�--J.'.---1 t�1t- r-��,��:::'.>'tt�-l t_�. _~f...'.'~.. rn-�t:--:� --t�t' t-"i"t�-�'t"l0�-:-:�.1" 1- 'tJ�.o�- �c-��tt'-t� J-�Jt-C���-�.�(-l tl�j.:, r �t"C.C�uf"1t 1n�;�:�:-�.tt-�'tt-'i-.>�-�!� "l fr-)..-t� t�;.:_.:.�~,~t'�.�-:�,t..,\1T - - -� � -� -- ���-� J. -� �-� ... �-� . (i) 'N1wt11er o:::�r not netitioner h::ts ;3_ cause of action in bringuinfu: t11is SlJit fc�r t11e refund or tax credit of tlle allee5~ed for ;:J.nd in be1r::df of it::; Licensor - H\~lF; ;:md (2) If so, ~.>llhet.her or not petitk:rner is entitled to dc:t.im for the refund (::.r t:J.x credit c�f the alleQ�ed overp::t.id ~~v�ithlwldin�' w - u tax on roy;::t.ltie~; pursua.nt tc� the "rriC�~t-fa.vored nation" clause of the RP-US Tax Tre::J.tv. ' ~.iVith reg.::trd to the first is:::ue, re~;pondent alleged that the petition st:t.tes no ca.use of ;:J(:tion since petitioner is not the real Fr�.':J:-t�'tI~r 1-�1-1 1�1�11+_.;.:_.:.l�;.:_:...c_.�tJ "t�,1_.._. 1-��;1�1�1�1;i:;i. �C-��JJ.!�t-� 1�v���1� t-l� �1�e.,:. 1�;:._:.-i.�_..,..-) ~IT,:�-:� .t-I1< .�--��;t- �~:I'.I;::..,n~e:::;;.�-..�--J .,-)uv''v!"P-'�::l\l.u-l ihTit.hholding taxes c�n royalties. The t:J.xpa.yer ;:md real party in interest is Hunt- )h'e~son Foods; Inc ., a non-resident foreign Petitioner ~;1Y-''.ved to the Court its aut.ho:::.rity to bring this uit f�:)r ~1�,,:::. recovery c�f .::.v!:?.rpa.id V?ithholding taxes on i oyalties . .....,~,.?~!-�":of 1 .�_~) <r.J:~�-1�.~_.1.o:il..~ 1 t-~(:) iAT(i ~; I1�I { T ' .iJ. L :-\ rr-�-.,;::. t i ::-�1 o ,- -- l!.tJ (!H l;::. v (k'vt�l [-:> - f""L � �. �-� - - .1. - .1.1.- - � - - - -� ,/ o, L .:. i l . / �' � . �.���?.. ;~:-:--....�_�. n__t--;�:�:-�.,.-_.l,. 1.._,�ty. JT(-�-,-~1--~ l-_1 '1k �-:- t n '"''- _.._. llc--:� �t-�;�:.�:.1i. t�r�l_ ;::.l� .� Ey;... :A.:�..�,�-~-��-1-1 t1� ,~.c:. '~-'1..--�;::. rr, l. �~--c�-�1it ��t ;::.t�1t nt� : ._.. --� _. -.� __ : --� ._ ._ t.- �!.1� lr"��l.::�-:�. rt , 1_��_. 676

-- DECISION- C.I .A. CASE NO . 1247 - 11 - file ~he iw::;tant. pe-tition V�?i tll thi:: C.:)urt :md to represent H'iNF ~.vith the BIR. The a.bove-rnentioned ::nJ.tlienticated by the f.- . _ r�r rr)ll L').j f.>.f-.,1�1�., �..:.:., r._.�..-_�..,!.LC� t1.1_ (.. .~....v.t:..�.tl. L'��i-1 , > 1 '~_, C_.>, ._. �II\ 1��..:_:.,.i�,� .,.i . (._I.!1. t.1��L;::, .C_,�.cJ.!�I��h.::-, o.'.lc.3.t1.-�.:.:..:,, r\� f.-p . d.-. " ~'::�' ]-]~�-�--'c�A -1-�l. t,'I_J.tJ���..�.�rt.'l '��.��.' t' _ .,~',._t:'(J..�...'!.!l."::�':�' yTT - .rL.,.-).:;d.-.�.��,�t..." l',_rtT. lT:.i..t�l:.-�. . ~ .. 1To'T~- 1 ..3.1.1��..i I\I -t-.~.� , ; Iv-L::t . C Vinzon a::: its :::ub::titu.te at.torney- in-fa.ct to represent H~NF (Hunt USA ) . T1t-1;�:.:�. ��-="� �-~~�!�,~-,-,;��;.�, 1�;-�;! '�=-'<��c-'� r..�� t�(�-��r-_�.,.;:_.:._t�l1'I' ��=:~>-J�J.�tll;:.�:. .t�rt.�l�iv��O�:>. t�;..:�.:.�r.l. '1.�.)1;,r t��l�rp���. It was lv!r. Rafael '��I�- ,.-- r1� �� r�r� l-t .:1.. �- ~1r l� t�, ~,.,'.-)�.r�J. 1,�'T? 1�l.,_,.� !'tl ��� �l �. !~ iJ.t..!-. .l �-:-��t_..�:-.~. tlt_. p)~���t-1�.t.1-�'.�-��.'1-1_, ._.f 1 rA-J.f--�11�1�1 "'r'~ �' .' ... l. '=::" t �." (:(:rlJ.nsel fo r the peti tioner Furtl:kn:nore., in the rnore recent case of Commissioner of Internal Revenue v . The Court of Tax Appeals. et. al., G.R . No . 93901 , February 11. 1992, the Supreme Court in a c-it-.-irw-=� t.hP. it-:-=: (-:.vm f.:,::-:.c-:(-i-l-n� t�.k:.rtl in t-h,:::-. (-:;-:,�c-;,::-:. of Com.missi.oner of ~ -- Internal Revenue v . Procter and Gamble Philippine Manufacturing Corporation, et. aL. G.R. No. 66383. l 91 D ~ ""C"~"ffi~LJ>fz>.lr. ?u :f. <'"";11 .� t..o� 1,�1'r1�t...- ":;-: :-:: x. It. tll 1J.:3 be�:~ornes import:.mt to note tll;3.t und-2r Secth)n 5�3(r:::) r::�f the NIP.C, th.;. V�liUlh�::.lding agent t.(r ' 1il�t.1l1-tn1cl �:=: dP.dlld. '..,\�iL~l�c.. ! - '�L�P_.n�111__l'l�P. .c�l<t- � � ;:-,�1-1)'7 t. 7- 1- '-~ � 1�::-; ;:11.1( l � ���� --. � l\ . -. . .f. -- � .i' l. t -=-11�'�11 it�� ..-!;::.;::.,�1 ic� �n �:l .1 .>.'-� .--��.1l .�::�. ' p;::.t � c--~�(--�,- t �,::t11~~ 11 1�-'-~~�t~--.-,1�;-:.:�. 1� ,��--�~ t- �-' �-� �-� t-::.v ' f-\ .. .a. :~~1-1'1 �- �� �� .1 L �� . �-� ��� �� .._ ._ , .� �-� J. �- � .:. t 6?7

DECISION - C.LA_ CASE HO _4247 - 12 - -, an1.:::.u.nt of rT)�;3...vrnent-:; effected bv, the 'Nithholdinq._. a.gent in ;:J.cc�:>rd;Jnce v..rith the provisions c�f tlle NIRC. - ~11-1~ T�:\1L. tl-L1-F-)1(�_1L�tl- r;~� t ;-:1.;r~�i-?1-L. F�'c�~{l-_~T- f��l-11�1 ., b�- (_-~1� 1-e- c-t_.lT'IT .~:tl-l(-1 �I in<:ler>e.tldentlv li;::1.ble for the correct amount o:)f t11e tax that slKHJ.ld be ~Nitlllleld frot:n the dividend remittance~; . Tlle V�litllllc�lding agent. is moreover, ~:;JJ.bJ.� ec t. t o::� and lia.tle f�::.r cleficiencv, (.t3se~:srnent::.. :::urcha.rge~; ;:1.nd penalties ~;hou.ld the ::nrwunt of the tax , ,.1lithlleld be firr:J.llv found t.) bs- less than the amount ' tha.t ~3llo u.ld lla~.re been V�Tit11held under la'il. l�. 'p.er~::on liable f�:::rr ta.x� 1l::1s been held to be a 'person subject to tax� a.nd properly conslo::lered a 'ta.xpa.yer '. The terms 'Hable f or ta.x� and �:::ubject to tax� troth connote legal obligation or duty to r�ay a tax. It is very difficult. indeed conceptu::t.lly irnpossil)le to tr�,r-1�1u '11. f.-�.t- ,�.~..�,.�--.�,t-l-�=-��<i,�.--1;":..:!'.1- �~1 Ir��',;':�:'.t- ��=-��..�--��� t-1� ~ ,,Jt-1,.-�� ic ��-=-�t�"�':-1-'-h��-l� -��-� ,v 11-1 �-~-1�.�.--l;:�-:�. �--~- t~�-�-,l;:�:-�. ._.. J. I I J. --� �.... 1. -_. tax� a~; -n_, �.=o-�.1-t1-..�--��1-'1:;.cu-.,.blrJ-�-��,�e:-:�:.rc-,�=-t�.~-.---,11to�.=-�.1-1't��--:�,1.-G1�1((---.1 f.v anv' ' rea:;(:otHble '-�--l ��:-.~r- ��=-�� t_.�:-,.t-l '��--1 1-,:�-:�:.c,-,..�-: ,.t-�'�--l,::�.:r. �j ., r-� t --~�-� tL-,,:�:-:�. �: . -: � L\ n �~�-t�� �- -:-. 1 .. 1�!-l l�!�lt---6---t-;.:.:...�c-��t-�_, ,�.--�)!- ��:-,-c�-�� �--:1- rn-,�::�-:�.r-c._..,.�--�).t1-..1.. l-l-=tv1� t-lrcr. �0-�1-1�ff1�,..-_..1�,�:-�::.t-lt-� l,:::..-r�=1l �-- � J. �-� ;::. �- � int,:::.p::.st h 1-,riro �1 �-�r r,:::.f,J�l �-1 ..-�f ..-. hA lY�li -��-� �-��- .�_, ) ... �. �-nit � !;=, �: -. -:'- - � �.- 1 1-) �-� - .1 1 .) t...-rA~~--~~ ��� �� J:::' ~�-� H'�.' ,:�-�.�.:'~! �� I lT -r1 1� p �lt-l l. 1 1lf:.� 1~-:r 1��1>.-->. (--; 1-1�;-:,�r-;-~1�1-1t- v' (~,.y1-r-1rl::r�.-~~��l-l v/ 1 1-1c. TT - '/ � l Cornmi~::�::ioner r:)f Internal Revenue. this Court pointed �:)ut tlla.t a 'ilitllholdin:;: a!cJ�ent. is in fa.ct the agent t�oth \ _1 I 1_1 .::.~f the govermnent ;:Jnd of the t::t.xpayer. and that the '1'\ritll11r:)h:lirv2� �:i�-,.~pt i~: t1()t :lt1 ()f(litlEtf1l Q"()~lert1t11-1lt ,_ , ' - ' � ;::. --� -.l -� ,. �- � a.,!_2�,ent: "'::T -o:.:r "':7 .._�:,.. ....-lo. ...;:":.. If. as po::.inted ou.t in .Philippine Guar;:ultv. t11e ':\rithllc�ldin:2v� aEu ent. i�3 also an aqw ent of tlle beneficial OV�lti'?.r of tlie. d �videw:l::: ~~'~'ith re~:;pect t1:) the filing of the- r (ess::1.ry mc~::.nw tax return and i 1lith respect to . -� t t.--) tllA :-~-1---� .'~.1 :�' s'. 1n.-��-~1--v.,." r~ 1�1 ,.:.:.:.1�1.t~� ,-_..,f1 t._l-1,::._:.. v t-~�=-1-~ ... ��-- _. ._. 0o....-_.�,~�'A._. !_!_l..rl-1,.,:J:.:i.�-l t-"] ,.--;:..1_,�_ t._�.l-1 ;) JJ tli�)t i ty tn.:)Y re;:t.:::ona.bly bE:> held to include the o-:t�L1t.1'1 -�, '1Ll.y;..y t o f1l ..., c-t .~-:1c-.tj..l-!-l f o� r t-e-f�Llfl,.,-1-c.tl-l(-1 t o h.).-1"1-1)-:f, an ;:v::t1�/-. for reu:.~.~~ry of ~:;tV)l claim. x x x. 6?8

DECISION - C.I _A _CAS� HO _1247 - 13 - r--_Jr~ J-::-:'-�----�111--1.�t-l 1--:7� tA'-l l.:-:.:' .P.,_�IF-'~ f_r-(__�.,r-I-l r--':-:-:'�'---1P--''-11_1�r-l;u=~ rn ,Q_:-: r._, r-nr111�1. t_.,-__~.. ��=-' }1-i._-1. ''>l/' -1 1 - - tt - - - -1- � - -- - 1J f t t �- - ::- :\-)!-1-1<-:' T-~.'lT'f- l� _. _~BH ()1 _.<:' ~~ T .:->T.<-:'( .:_:o!l111IW. J011 tI-))T'T nrco{;� _(~r-_ :r-:':�6~� 0- tlle ::ub:::idiarv '::: c:1utlJ.()ritv to c:l::tim tlw refund or tax ' r- t--:-'r-.(...11.t-� r-)'�r-(.-) (��--i.-:.:.:'-.~('�i�--=�~ (.}�f -- r-1.-::.::' �-.�11� t. -�:-1 . t-1 .�1 t '� t-�l-t�t-:7� .,. 1-1~ r- ~r11 t-1(1 --- r- t --) ) .) . � .&. � - � �-� -� �- .' } ..... 1._. 1,_ '-) . appl;:� _511e~t:J::~ cr~dit to :::o::~rne Pliilippin~ tax ob~igation or F�b:t._r-U 2.P�.. bet ore :Jct.u.al Dayment ot the retund or 'IT.ll-��-1t t.--, .---r-,::. r-11-t .-'c.r-tt.f1�.----:-ot;::. .--1f t,;-1v 1-1,::. 1� �__=,-�_=_,� J-J-�--~1�!-1���--�-.��:-:�. �-� ��~-1�- ._.3_._.... --- .... �- . �-���-� -� .... -.-�:�. ----� . f ' i~. �-� �~:1f.-'--f-'-�'�"--'- ,�=_-_11--�-=-� -��-� .,? �- � vi ti3.ted b~l b::t:=:ic unfairne-:s i:::: petitioner 's position t.h;:Jt, altllOUQ-11 PS:(J--Ftlil. is direc:tlv and r-)ersona.ll-r.l U I I Hable to the Government for tlle taxes and any defidency as:::e:::sments to be collected, the (1-0'lernrnent i~; not legally liable for a rduw:l sirnpl~T bec:::nJ.::;e it �::lid w::.t dernand a v.rritt.en coniirrnation of P.Y.f-Phil ':::. implied authority from the very beginning. - �::}-1.--'tJl.--I -,!-,;-�1-,1v 1-1r-,t-1.. '1!-1{1 8.l L -:y, ~I�;�:-�:.t-�-,�:..:L,;=i,otl :.:-:..-.(..,. ~�!?..>..!-!-1f-il.:�:.-.1�-.,.. t-� �-� .., . �- ~ ~--t ... .... �.J. -� I c.. �- �- ' �-� ,__ .., -� fairly at :Jll tinw:::, even 'li::;-a-vis t:::rxp::Jye.rs ." (Citation:; omitted: ern_ph:J.se�:: in the original). Aga.in in :::1.11 earli~?r ruling of the Third Division of t11e Suprenw Court in Commissioner of Internal Revenue v_ Wander Philippines, Inc _, and the Court of Tax Appeals, G_R _No_ L-683 75, April 15, 1988, it Vl;:Js held that: c-nt�t-:r: t "I r- r- .::.r- (��t- t 1-1 �>:::>'. 1-'r'.~ .�-:-:-. -r..1e��-:�.1-j �... t1-j.~_. ~� '-' . 11.o~:�::o~:��t�..)- 1 �-� ~-.�,>.=>tl� t1.. f")!-1.. tl~-li:~.t . -�,f �=-ro >=>r1t hP t ~~v1~--.11-1.'.�-l>=�.:�.1�- i �: � ,,. _\�~� -*~-,� ':.1'1. tl-t ll..-��1 ,.-11� !-1~.- '-�j~ '�' ... \.�� t..-t1-1;:�.:.�. u;:, .�.--�-.~I ~~�.�!-!-l!_I_l(:'�:'.!-lt�' of �� �. � �� 0 J.�- ' :u1d therefore c;:u1n()t clairn reimburser.nent oi the alleged overpaid tJ.:-:es, is untenable . It ~Nill be rE~.::alled, that :;aid corp.::�ration is firs t ::md fo remo~;t a V/holly O\�Vned subsidiary of Gl:3.ro. The fad. that it -.:.�.ritlll-,.--�,lrlinu -.:.. ,--�.f t-�-.~'�.' -'�-�- '--�~~... m'~�' ''=-'!� I I �' ... '�' '� ;=I �-~-�1tC:1l .._:, :.nt'�' '�' t.�h~'�' ;u::-.r'�'�.I~'�r' ~-rnm~'�' nt�' I I~lli.-'�-�' 11 v,,::r:: not by choice but by compulsion under Section :) ~,(b ) of tlw Ta:z Code, cann()t. t:.y any stretch �:)f t11e irmlginat ion t�e .:::.:n1::;idere(l ;::1.::: an at�(licath::.n c.f it::: re::r-~~:)rr::ibilit.y tc� its rnc�tlter cornpany . Thus, ttlis Court (On::truitw Sec tion c:, �.}::(b) .-,:.f the Int<?.nHl Ee7<?.nue Code . L' -�. held that 'the obli :~::J.. t.ion ir.npo:::ed thereund~?r upon the 'A'itllholding a.gent is compulsory .� It i:=: ;::t. devi�>?. to in :;J_�r-'? tlH �::c,11ecti.-)n !)y tl1e .Philippine Governrnent of t.~ T-___,_ � on �H,_.:_:�nl.:;::. derived fr om soun: e:; in the f'rJ -il!1rrr-��..i..r.J....:.:.-=--'.' b'. :.~ :::di.en::: '�i�lh o are outside t.he taxing,_,

.' DECISION- C.LA _CASE HO _4247 . '- - 14 - juri~:didion of ttd~: Court (Cornmi~:sioner of Interrr3.1 It'1( } 1 t.. p;:,;;;;:,!-111~ ";T:::; '�..�l ;:1l:=JV;:"j!-, It�l:=;lJt- ::1!-lC~ ((j .... - -� - � - . J,. ' - � - �,., -� ... - -� -� - - - - � �' - ".' ~ J("-(Df'=-.. l. ... (-�j.�i 4- �,t . lr !��1 !�:=.l.d. .... ~"~T;:.J.1-1(.1 ~- 1- l-I-1;-:1�',;'l 1�-:o P.. ;.:j.c.;:-:;p-;.-:;:-::P-.C-l 1-0-1- C-1P- .f1.C- 1.P- .1-1JC)'l Vlithholding tax at :::ource, plus penalties cr.::onsi:::ting of �::,��1..-l ��=-:1-1��1�.-�--�.1--,�':-:,�t�oi:.):�:..� t..;.l -- 1. .t&.�lt..�:�:-�.�1-,:�-:�,�c-'�t�� (,_�:._::r.:._:....�.-��t�1� � (�-��, t-1 C_)' .:::L1., I��iTIR\. r~��, T l�l.::.t- P.fr�,t�o::. ._. �� ._. ._.J �- �J. ::r:: t11e P11ilippine count.erpart. ~.lilan(ler i::: t11e proper entitv V�lllo :;houlo:J (laim for the refund or credit of overp' ::1.id Vlith1i01ding ta.x on dividends paid or rernitted l:JV C~laro." I ,:!..nent the second issue. petitioner rn;:::dntains that pursuant t�:) the "rno:;t-f:tV�:)red nati�:)n .. (l::uJse of Article 1~) of the RI>-U S Tax T1-1.-:.:.'�.:-1.t-y)�' 1.!'1' 1-'�:�:�'1��:-1t.1.-' '.�---.'1-1 t..'.�.--.' i"...11--t�l'�'._.�}..:_:.. 1..:-_:., f'�r.-.'_ t_t. �1-A_. ID\rn - �\1nA.....:-�-t_. (~T>:.:-.!!' !"11 d.- 1�1TJT T��-::..r."<~ T1-J.;,::'r.�.:1.-t~�T'�T l� t�~� 1�-,~-. lh\-.j-��t:f ~) .., :: ��... 1..-_.)f-11T1'-T.' .f;_..',._). t_1. �1�~�� l f.�.'j'(:J�.:'�' T'!�'�/i...t. l�-�11�1 (.j� 1��11�1-1 Ci t�=lY -~--~ .&. 1..-_,.11-1 1-�1,-)�,T��T�:-f.">.l.tt.'A...:r)� ; -1 1.. ..__ , ��1 1�1�1�-:-J t.J:�-::�'��:-1.1�� .-. 1- t�1� �lJ:�::'' �e-o.�r_::} �;:"t�:):� T�,���,�T1.t_1. �l1�1'�-�)� 1'��--It.!1C0� t-.-�=":!..".:~' 1�t�� l�l"e"tr-.l l .-. ,.-� tJJ�=l11 ~T t�o�-:�:.t1_11.t-t--'-~���.�.l t�--'���-�) t-�l-1.:-:.�. '�..' Q _.__ ____ .:.. .!_,~overnrnent Re:;r-..::ondent f�::or her pa.rt st.re:;sed that petitioner should ::Jwv.,; tln.t this c:3se is covered bv tlw RP-US Ta.x Trea.tv. I ' rov' :3.ltie:; �:)f tlP same tind .paid under simil;;u- circumstances to a tl� .f.. t��'�--��'t-I1 _. 1A-.- 1_1_ ,�.�:,�..:_:.. '��-��)1- 1�t--�~� t.-r-,~:1.r--l~'�t-I-l�.:,t1-1t.'..S. "Hll__l�,...t-�--~�" �o".t1-r-l 1r_.A' ._.t.i�.&. t l� , -__-_.�t�1�.A--- t- .� ,.__-._,._-_.) .�,�. .-:-:�.!- _ . Tt- t" t-=1 .-1 T:) v f~.::.t-r1�1 �- �-� .._.... �~t .t.. �I~l l ""''. ..,o..&. .::. :::1 -�,.= ) tl-1.::. ~ .111. t..�!l�11-1�r.��, 1.�..-11� 1-1Cj=,,. � _,._ ,.V...A.._�.. -~~ r-.��,�:::A:.1� �. t-11.::.1�.::...-��t1 �=�1�1,-'�lllrl o1 I.,.. �- � ._. �, � �J '�' �-� .� I. .. �� � �- �� . �.a. �-� i_-_.) .-.';::' nco::� ��1 t 1 -.-:':'1 �==:1...1.�11-. 1-! ,.._-..I_. -G~�_)c,.�'�J:t;::_�, t.1--l':.-!. 1-:~:.1.t.o��:-:-. .�-:1.'�-�-��t-J� -J-��=:-i.11T'j� c~..1. r-� r-_�.111�.-:.:-.�(.1 tt--.' TyT r-.�-'.�:.�:.t.�1�t.1�� '�---�)r-l ..:,:.r . _.1 .nr ..:_:...t_.�1_t.1�.._-�,.1-.~.,_::.,1-'.,:-). !�..:.:..1l�.�~JJ-�L..-�..:_:.. .,.-_.)1-1 Lr!,.Jl~'., .f'.lJ.11�!-1.-6. .:J:; I.,Lr,.-.,.-:-:>.. f.,-;. - ? .�)1 .::J: 1-1t.j /_-::1 _(J(J(J_ (J( i -~} �. .) f:) �-� ._. ._. I �-�� ._. ._. �.) � - � o?. 1�.'l::Jrch ?,6- :? �.�. t.P..-1 r�r r-; ..-1:=1 -:-11 f>, � -� I - ;= J -~} (., ~:- ��� � 7 _;:-). ~ o ~iP.t11 1'!P.1- ~ 1(..i;.=)(_�.. ::_1.1-1(1 _.. ._ .l � '�' I � �,� 1 � - �� � � � '� , - '- � - 6 80

DECISION - LT _A_ CAS� HO _4247 - 15 - '' rn:,.;�;�...�:�-�r'l�".,..-,�,ut�u���-l;.:.:.�.t1�t_. .�.--1� 1�����-} .t-L.,.-.,�t.� �,.--�.,.._.-.1,-1 1~.,.�;;....c..t_. t_l.�,L;;. f.�l_t-e��c._�.�e� r�1t�.=":�>. -t�t�..��--.�,11 i.l,l- {�-::�.1,71�,�..-l.;:,::.t�1,..-,�;.::,:. t�-;�1F r� ���r� -. 1 t. -� t t [!. �.';-:..:..t-�l�t--1�-�'.--.) .n..~.0-. - !D�,��~� c� -��.r)� 1._.1 11-��.1�~�� 1�1t...'.,:-�. t�.�_�l�._-;. J-J� !-1 ,-:-.�.~ ~U~���:~�.1� n�,�r':;�:\._��1 11�1��c-�' 1�_1�,r:r:,t1-! , _..) p.r�.;:,:.._~,r~- r�1 .. � u -Vidence H�,.;.;.. !-I.I6�--� f�.��:-�:1,l,1-l .�_:.�J.J.1.�.�-,tuYlt�t.r..�.{.:_:...(_! t..1. �1-{:.:�. (�.���"-'�~.�;-:��.-�> t�_�.,-.:J:-..C_�.,.:_:..>�-(�l (._�.,trL t�l.�,1;�;.... rr--.�1;::.:_.'.:,:_-1_r,_i1'1�!<(:i:�C-�' FE>tit.i�.:mer. on ths- c�t.11er h;:J.nd, submittP.d as part of its a) Letter claim f.::.r rP.fun.:l or tax credit dated April 15, 1(;ii:),!~, fils-d Vlit.11 the DIE on April 6. 19.::;.::) (Ei�1L i!.., pp. 94 -99, CTi~. rec.)_; b) S(:hedu1e of 1Nithllolding Tax Her.nitt:ulCE>S on r�r " �;: :. � � � n..- F'.��~'1"y�.3l. t-i���~�c�-�� t....�_��. t_1.�)~�-� f':�IF�', 1�\..-..'!- t.�.-!.1-.~ 1;y~.-..--=.1.-! t c}-o�>f._..t { � ��.[-... 1 ._. "i, -~ r. ! ., '�-�.�i,,� Cornl1-"':;.utation of 1Jverr1:-:�aid "'i,"Tithllo1ding,_, Ta.xes on ,..,r- r� 1 1 p 1oc;, cr .e.. r�P_.c__).,� "P t1� 1� th;:::. L ..(._1, 1l1��=---t1' .1' ;::.c � ., .-... J.. �-- p,I;::�:.�.C�1-. q f� -� ,!_=_-) __, (�. E.y.. ~t-1. [l. - I ... . - -� - ... ... - . .. �-� d ) Central Ba.nk (>:mfirma.t.ion HH:E>ipts to prove that the ~Nit1lholdin!2' t:c~ on r(N;:llt.ies v-1ere actu.ally V-?itlllleld and ! ,_, rernit.ted t :) the governrnent. (E:dl::;_H-6, H-7, H-6 a.ncl H-9, pp. Certific;::ttion i ssued iYV' tlle BIR's Industrv ' i�.udit . Di>?ision and Revenue i�.u:.:::.untitw._, Divi::;h:m t.ha.t the C:mfirmation ;::.r� tc- nJ:",<��:�...(��.,.;.;..t�tr-�'t����=-'� t�.��:-�:.yr�,t�;�:o:.��.:��,�;�;..�ti�l t..L; t1. e,..;,., Jr"�,~r'�-�tt.t..l���.)-� rf� .,~-~~-7, 1: ���f ��� f .l._..1_l >.=J> t�.�l.,;��.;�.t1 �-�1.�. ;::. lT)'�CJ."; !..1,-1�~��.r1---' l.j I, } ., \-1!1.t1�� 1�1(�,f(l;�.1Ci h �at�1f:l \7';:::.1�1�1�1�;:::.,.�1 1l�:jU{::. l-11-f ( r .� 1 _�-� {._ 1!_ ~1 t_=.~._iy. ..,. ~;�;-.�.�:-�' �-� r�(�,~T�::-tl tl' ;::.c� '-� Y ._. b. .;�:::._..,:.:_,.,.,t,-.1 tr�Jj,::.> ._,. .. t~--.~ ;::. . _. / ' - � _ � �_�� _r ._, _.t.._ �� � ".1 � � � "J 681

DECISION - LLA_ CASE HO . 1247 - 16 - -, The documents presented by petiti�::.ner were su.ifident. pn=:nA f�::.r the Cc�urt to believe tlr3.t indee.d petitioner is entitled to the claim f�::.r refund c�r t:J.x credit ;:J.pplied for. Thi::; Cc�utt 1Etve time :Jnd :J.:�2-��ain �2-�r:J.nted simila.r .::laim.s for t�e-..,.:.t.�n-��t�! ,�.��i '.�-~-.' f1. '��-���.� v~�.:��:-�:.t��r..ls�::l>. .t(.�l ~��",.J1.t��1�1}~-1 �r.��.!J_.�-..�il' t-1.uC_1 t �:>v o~:1, ,;:a, ��� 11 t�--l�p�..,ltl� 1��;:�:'.c_1� f�-�\l-l�l�c._�,J-]�'�:-I�1-1�t� t.�(�-��' t�1.� 1.:��:-:�. ~ '�-�' .L f._. ,� (.1. . � # F�'F:. - T�.�F._':, T�d- ."... Tt�.�.:_=.:,.:�1-_h'�'T/ i' t�1 t-1� �1".:-.:.' �..-_..-~:f...:-�.".�:-:'�c-�� '�-.~!1- Polygram Corporatt-0 n v - The Commissioner of Internal Revenue. CTA Case No _ 3890. December 15, 1989; and Beecham Group. P.LC.� Bristol Myers Co ., American Homes Products, and Chemfields. Inc. v . Commissioner of Internal Revenue. CTA Case No_ 3812, March 30. 1992. WHEREFORE. tlw petition is found meritorious a.nd the claim for refund or ta.x credit is GRANTED. Respondent i::; hereby ordered t.:) refund or i~:su.e a t:tx credit c:ertific:J.t.e in favor of I��fr�l., nI't�,.-..J.1-1.�.--���1-1�tl f.�,P�-�.t.-!,-!P�-�.1_1._1-� '�:-1-�c-�� t .-,)._.� (�.�'f�.�ic�- �' t,. SO ORDERED _ 1994. Q."""~Q - G~ ERfiESTO D. ACOSTA Pre:3iding Judge 68 2

.' DECISION- - 17 - C.T .A . CASE NO _ 4247 .-, WE CONCUR: . '- RAMON 0_ DE VEYRA CERTIFICATION ��r� T�- �T 'p n;:.�-1�-� �',�.��,-.t�t�1.:-:..,_,,ltd�-tl�'�--�.'1-1 c�-tt-1�1��,-!� t��~~t-,:.. tcj�1�~;�:�; 11��1;:-,.1�ll-l..!iO-.;.-:;.1- .;-:.. �,.t t.J1�~�;�:�; r~-'.,-..t,d.t�t. r,.�t1� 1�1- -:t..i~ ~1~~'.r----et;:. 1 accordan(:e '.I.Jith Sectio::on 13. .I:..rtide VI II of t11e Constitution . ~ -~ ER.NESTO D. ACOST_.A_. Presiding Judge Court of Ta.x .e..ppe;:J.ls 683