Bank of America NT & SA vs. Court of Appeals

The 15% branch profit remittance tax under Section 24(b)(2)(ii) of the National Internal Revenue Code is computed on the net profit actually remitted abroad by the branch to its head office. The tax liability is not inclusive of the amount deemed remitted; the tax itself does not constitute part of the taxable base.

Petitioner Bank of America NT & SA, a foreign corporation with a Philippine branch, paid a 15% branch profit remittance tax on its 1982 net profits. The Bureau of Internal Revenue (BIR) computed the tax on the total net profits after income tax but before deducting the remittance tax itself. The petitioner contended the tax should be calculated only on the amount of profit actually remitted abroad, which would be the net profit after deducting the remittance tax. This resulted in a claimed overpayment, for which the petitioner sought a refund.

• Parties and Nature: Petitioner is Bank of America NT & SA, a foreign corporation licensed to do business in the Philippines. Respondents are the Court of Appeals and the Commissioner of Internal Revenue.
• Taxable Event: For the taxable year 1982, petitioner's Philippine branch computed its net profits after income tax. The BIR assessed and petitioner paid a 15% branch profit remittance tax on the total net profits (P53,228,339.82) before deducting the remittance tax itself.
• Disputed Computation: Petitioner argued the tax should be computed on the amount of profit actually remitted, which is the net profit after deducting the 15% tax (P45,244,088.85). This method yielded a lower tax liability.
• Refund Claim: Petitioner filed a claim for refund of P1,041,424.03, representing the alleged overpayment resulting from the BIR's computation method.

• Statutory Interpretation: Petitioner argued that the plain language of Section 24(b)(2)(ii) imposes the tax on "any profit remitted abroad," meaning the amount actually sent overseas after the tax is paid.
• Tax Base Exclusion: Petitioner maintained that the remittance tax itself should not be included in the tax base, as this would constitute a tax on a tax, which is not provided for by law.
• Distinguishing Precedent: Petitioner distinguished its case from the general withholding tax system, noting that in remittance tax, the branch itself is the taxpayer paying from its own funds, unlike a withholding agent collecting tax from a separate payee.

• General Tax Practice: Respondent Commissioner contended that in ad valorem and withholding taxes, the tax is typically computed on the gross amount before the tax itself is deducted (e.g., income tax, VAT).
• Constructive Remittance: Respondent argued that the tax should be based on the amount applied for with the Central Bank as profit to be remitted, invoking the concept of constructive remittance.
• Legislative Intent: Respondent, through the Solicitor General, argued that if the legislature intended to mitigate tax burden, it would have simply lowered the rate rather than adopting a novel computation method.

• Statutory Construction: Whether the tax base for the 15% branch profit remittance tax under Section 24(b)(2)(ii) of the NIRC is the net profit before or after deducting the remittance tax itself.
• Applicability of Withholding Tax Principles: Whether the general principles governing withholding taxes and constructive remittance apply to the branch profit remittance tax.

• Statutory Construction: The tax base is the profit actually remitted abroad. The language of Section 24(b)(2)(ii) is clear and unambiguous: "Any profit remitted abroad... shall be subject to a tax of fifteen per cent (15%)." The term "remitted" means forwarded or sent. The law does not state that the tax is imposed on the total amount before the tax is deducted, nor does it reference the withholding mechanism of Sections 53 and 54. Accordingly, the tax is computed on the amount actually transmitted abroad.
• Applicability of Withholding Tax Principles: The analogy to the ordinary withholding tax system is inapt. In withholding taxes, the payor acts as a collection agent for the tax imposed on a separate payee. In the branch profit remittance tax, the branch is the single taxpayer paying from its domestic funds. The concept of constructive remittance does not apply to funds used by the taxpayer itself to settle its own tax liability.

• Plain Meaning Rule (Verba Legis) — When the language of a statute is clear and unambiguous, it must be applied as written without further interpretation. The Court applied this rule to hold that "profit remitted abroad" plainly means the amount actually sent overseas.
• Branch Profit Remittance Tax as a Separate Levy — The 15% branch profit remittance tax is a distinct imposition designed to approximate the tax on dividends remitted by a domestic subsidiary to its foreign parent. It is not a withholding tax collected at source on behalf of another taxpayer; the branch itself is the taxpayer.

• "The statute employs 'Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15%)' — without more. Nowhere is there said of 'base on the total amount actually applied for by the branch with the Central Bank of the Philippines as profit to be remitted abroad...'" — This passage underscores the Court's reliance on the plain, unqualified text of the law.
• "To say that there is constructive remittance even of such funds would be stretching far too much that imaginary rule. Sound logic does not defy but must concede to facts." — This rejects the Commissioner's attempt to apply the constructive remittance doctrine to the branch's own tax payment.

• Burroughs Limited v. Commissioner of Internal Revenue, G.R. No. L-66189, 21 January 1986 (142 SCRA 324) — Distinguished. The ruling in Burroughs was based on the non-retroactive application of a subsequent BIR ruling (Revenue Memorandum Circular No. 8-82) under Section 327 of the NIRC, not on a definitive interpretation of the tax base.
• Development Bank of the Philippines v. Court of Appeals, G.R. No. 85370, 13 December 1989 (180 SCRA 609) — Cited procedurally. This case established the authority of the Supreme Court to refer appealed CTA cases to the Court of Appeals.

• Section 24(b)(2)(ii), National Internal Revenue Code (1982) — The provision imposing a 15% tax on "any profit remitted abroad by a branch to its head office." The Court interpreted this to mean the tax is levied on the net profit actually sent abroad, not on the amount before the remittance tax is deducted.
• Section 327 (now Section 246), National Internal Revenue Code — The non-retroactivity of rulings provision, which was the basis for the decision in Burroughs Limited, distinguished from the present case.

• Justice Abdulwahid A. Bidin
• Justice Flerida Ruth P. Romero
• Justice Jose A.R. Melo

N/A. Justice Florentino P. Feliciano took no part.