CTA Case No. 3827 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY COMPANIA GENERAL DE TABACOS DE FILIPINAS (PHILIPPINE BRANCH), Petitioner-, C.T.A. CASE NO. 3827 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. } �~---- -------}{ �.:. E-- D�.........s 0N The case involves a claim for- refund of a 11 eged over-p :rd br-anch profit r�emi t tance ta:<. The essential fac t s are not in dispute. Petitioner- is a foreign cor-poration duly licensed to engaged in business through its branch office in the Philippines. On Augu st 16, 1982 petitioner- paid the amount of P1,506,440.78 as branch profit r-emf�ttance tax based on 1978 net profit after- income tax.

DE C I S ION �-� CTA CASE NO. 3 8 2 7 2 ��- On Augu s t 15, 1984 it filed a c laim for refund of the of F' 196, 49 2 . 2 7 repre s enting e rroneous ly overpaid branc h profit remittance tax; a nd On Augu s t 16, 1984, th e in s t a nt pet.i t..ion for The .iss u es rai se d ar e : 1) l.Jh e ther�� th e Court ha s a c quired juri s d .i c t.ion, a nd 2 ) Whether th e 15/. branch pro f it remittan ce t a x be based on the amount ac tu a lly re mi t t e d ..or~ th e tota l am ou nt a ppli e d for with the Cen t ral Ba nk o f the Philipp i n es. As to t h e t .! L?..t , th e i mpt-es sion pr e c ipi tate 1 y broac hed by t he r es po nden t i s that the ins tant pet i t i cm i ~; t i.me��� b a r�-r-- e! d h a vincJ b ee n fil e d a f t er� a laps e of 731 d ays (198 4 bei ng a l ea p y ear ) he nce, on e (1) d a y be y o nd t he 2-year pe riod of limita tion pr��e s c ribf.:? d in S ec tion 2 92 . o �f thr,? Ta :-: �c ode . At thi s juncture We d o not s e e our way c lear through th i s myopi c view. Thi s k~~d of pecayunish approach would be str�etching too far the narrow labyr-i.nthi c al technicalities;; of the law. Between Augus t 16, 1982 (payment of the ta:<) and August 16, 1984 (filing of petition) is manifestly a two- year� period. "In computing a period, the first day C.. ti

DECISIOI\I -- CTA CASE NO. 3827 s h a ll b e e :-:c: luded and the last day included." (A rt . 1 3 Ci v il Code of the P hilippines) . The Court takes juris di c tion. The ?.~~= (JQ_g_ is s ue bear s on the ta:-:able base for the imposition of the 15% br~nch profit remittance ta:�: mandated in Section 2 4 (b) ( 2) ( ii) of the Ta:�: Code~ v 1. z. � : Ta:-: on branc h profits remittances. - Pny profit t' E.'I'n.i.tted abtr�oad by a br-�;.:mch to .its head of "f ice s tI<'~ 11 be s ubject to a ta:�: of fifteen per� C:E.."'fl t. ( 15/. ) :�: :-: :-: � In a l etter �a ted Janu ary 2 1~ 1980 i n res ponse to a query t he then Commissioner of Internal . Revenue interpreted the a bov e-c it ed pr ovision to " mt::!a n th c.\t ''th�? l ~:i% br� anc::h pr� o"fit ta:-: s h a ll be imposed on the bran c h profits actually remitted a broad a nd not on th e total branch profits out o"f whi c h th e n:?mi ttance is to be ma de ." Thi s Court had the occasion to apply the said ruling in the Burroughs Limited v. Commissioner of Internal Revenue~ CTA Case No. 3204~ _June 23~ 1983, wher�e it h e ld, inter alia, that "Respondent concedes at least that in his ruli~g dated January 21, 1980 he held that under Section , 24(b)(2) of the Tax Code the 15% branch pr o fit re mittanc~ tax shall ( ...

DECISION CTA CASE NO . 3 8 2 7 �- IJ. -:.. be imposed on the pf-of it ac tua 11 y r-emit ted abr-oad and not on the total br-anch pr-ofit out of which the r-emittance is to be ma de." (Affir-med by the Supr-eme Court, 142 SCRA 325). Going by the said pr-onouncement petitioner- c omes with the insta nt cl a im for- the r-efund of an ove r-payment of br-a n c h profit r-emittanc e tax in the amo unt of P 1 96,492.27, comput e d thi s wi s e: .1978 net pl'"�ofit afte r- inc ane ta:�: but be f cw�e br��anc: h pnTfi t n~'fni t.tc1nce~ ta:�: Pr-ofit <"':\ctually r-emitted abr-oad p��-�-8-��! �5--"-�!�6-��!L4..-�9���-7�-�-.--8�����0��� .15% ta:-: clue the~r �ecr1 p .1 '":!1..."'17' 948. 51. Ta:: ac tua 11 y paid by r:eti. t .ic:ne r- �- .J. L~~29_s_44.Q_.]� Over-payrnen t 1.96,492 .27 The r-es pol:,d e:mt' s un va r-y i ng asse r-tion i s that the BIR Ruling of Janu a r-y 2 .1, 1 9 8 0 wa s r ev o ke d and r-e pea 1 ed b y Revenue !'lema r-an c! Uin Ci r-c ul a r- No � 8-82 dated Mar-ch 17, 1?82, stating that - O::n s ider-.ing that the 15% branch pr-ofit r-emi ttanc:e ta:{ is imposed <3-nd collected at sa.lr-cE!, nec:essar-i 1y the ta:�: base s t-o...ll d be the c:\IT'ICJLUTI: ;.;~c:tuall y applied for- by the br-anch ~o.Ji th the Centr-a1 Bank of the Phi 1i ppi.nes as pr-ofit to be r-emitted. Appar-ently the intendment was to r-esolve a s eemingly tr-oubl i ng and r-ecur-r-ing question which center-s the inter-pr-etation Section

DECISION ����� CTA CASE NO . 3827 - 5 -- 2 4 ( b) ( 2 ) ( i i ) , cited The loopy circumstance in the January 2 1, 1980 ruling is s tre sse d by the respondent as thus: How l..,OL.tl d the amount of P.1,506,440.78 which n:?pr-esen ts the diff e renc e between P.10,042 ,938 . 78 a nd P8,538 ,487.80 be treated? I s it s till a pC\rt of the profit remittable or not? What is the logical reason for deduc t.ing f i. r- s t the 15/. br-�anch profit. remi. t tance t<:l.:-: fr-om th e ta:�:able ba se of P.10,042,938.58? It goes without sayi ng that the me mor-andum c i rc:ul ar now sc"!ts in p 1 ace if not stre ngthens the moor-ings of the statute. fL..... f.<::.!.r.: �t,j,_g,r:,i_, , the h olding !::.:i._f!l_.t.t. g~J. c a s e l e nd s settling cognizance to the validity of the Memorandum Circ ul ar No . ' 8 - 82, where a s ruled by the Supreme Cour-t Wha t l~s applicable in the case at bar� is s till tt-w~ H~?NE!flUe Ruling of January 21, 1980 bec.::\use thE:! pr�i vate re=,pcrldent BLtrroughs Li.mi ted paid thE~ br...:mch pr-of i. t remi. ttance ta:�: in question on Mar�L:h 14, 1979. Memorandum Circular No. 8 -82 dated 1'1 ::-.r-ch 17, 1982 cannot l:oe given retroactive effect �i1 1 the light of Section 'S2.7 of tt'E Nationa :. Internal Revenue Code :�: :-: :�:. Stated otherwise, the circular ITIL!St be prospective in application. Established at bar is a payment effected on Augus t 16, 1982 subsequent to ...

DECISION ..... CTA CASE NO. 3827 -- 6 ..... the issuan ce thereof. Hen ce petitioner's case f a l l s ~AJithin th E? co rnpE:? l l irHJ .impor- t <'\ nd i'on:e of the neven Uf:" 1'1emur-a n dum C i t-�c u l i'\ r�� l'.lo. 0 �-� 02 dated Mar-c: h .17, 1982. the '" l J. E:?ged erTo n eou~; l y paid P .1, 506,11-40. 7 EJ n:?presen t.inq th e'! 15% br-a n c h pr-ofit r-emittance t.a:-: ba se d on tltE~ .1978 nr2 t pnJf.it a �fter rightly .imposed and collected � .JUDGEI'1ENT for- thf.~ re s pondent Commi s sioner� of Internal Re venue at petiti o ner 's c o sts . f::;Q CJr\DEF:;:ED. Qu ez on City, Metro Mani l a, October 14, 198EJ. ~E~ A s~ o c i a te ~Judge WE CONCUR= (On leave ) AI''! AN TE F I LLER J u dge ssoc -...._ C. ROAQU I N ate J u d g e r t.)

DECISION - CTA CASE NO. 3827 - 7- CERT I F I CAT I 0 N I hen0by c<:~rti fy t h at. this decision was reached af 1 r due consultation among the members of the Court of Tax Appeals in accordance wit h Section 13, Ar�tic le VIII of the Cons / tion. _soc.i. ate ,Judge CoJrt. of Tax Appea l s