K Kpubl1c. of 1 U Il Philipp Ink's Court of Tax Appeals of ' F.7.0N City ~L:G<II10 R..TL.JL.IAO -as vs. Tlle Cohhissioner of Inteiu1tal Revenue

DECISION -

CTA CASE KO. 2973 - 2 ~ the amount of $9 ,599 .32 as his gross income in 1976, a personal exemption of $4, ooo , arriving at an adjusted gross income of $5, 599 . 32, computed 1% t ax thereon in the sum of ~>5 5. 99, pursuant to Section 21 (a) and (b) of the National Internal Revenue Code, as amended, rounded up the amount of $55. 99 tax due , and paid the sum of $60 . 00 , (p. 6 , BIR records) After inve:; t:Lgation of the said r eturn , how- ever , Assistant Commissioner Lauro D. Abraham sent petitioner a letter dated April 5, 1978 , holding that petitioner failed· to qualify as non- r esident f or the taxable year 1976, to be subject to the preferent.ial incolne tax rates of 1 ~; , 2% and 3~'v , under Section 21 (a ) and (b) of the National Internal Revenue Code, as amended , and instead subjected the income of petitioner abroad to the normal tax rates from 3,; to 70 ~~ , under the same Section 21, and computed a deficiency income tax, inclusive of 14~ interest thereon in the ammmt of ¥22 ,1 68 . 94 (p. 16 , BIR rec.) , co1npu ted as follov:s : Gross income per return. .. .. .

. . . P71 , 994. 90 Less : 10;.; Optional standar d deduction 5, ooo .oo H et income per invest.iga tion • • • • • • • • • 66 , 994-. 90

Less:

Per~onal and additional exeH1ption lt- , 000 . 00 Amount subJect to tax •••••••••••••••• 62 , 994.90 Tax due thereon ••••••••••••••••• •••• • 19,798.00

Less:

illnount already paid... .... .. .. (450.00) B a 1 an c e •• •• ••••••••• •••• · ··· · · · 19,348.00

DECISION -

CTA CASE NO . 2973 - 3 - Add: 14% i nterest per annwn ••• ••.• • • • 2, 820. 94 ~\10UNT STILL DUE .AND COLLECTIBLE uu• ¥22 , 168 . 94 which amount petitioner was r equired to pay on Hay 16 ,

1978 .

On May 17, 1978 , petitioner requested for re - cons iderati on and -vri t hdrawal of the defici ency i ncome t ax assessment f rom respondent assert ing t ha t , under Section 21 (a ) and (b) of t he Nat ional I nternal Revenue Code , as amended by PD 323 , a non- resident is to be unders t ood as one Hho establishes , to the satisfactj_on o f' t:te ComlJ1is sioner , his physical pre :... sence abroad for an entire taxable year ; t hat U..Y)der Section 2 of Revenue Regulation No. 9- 73 , a non- r esident citizen is one who establishes to the sat is - faction of the CQrunissioner , the fact of his presence abroad for an uninterrupted period Hhich includes an entire taxabl e year ; that the phrase 11unj_nterrupted period" should not be interpreted literally to n~gate the continuity of residence abroad ; that neither PD 323 nor Revenue Regulation ~ ; o . 9-73 r equires that t he "uni nterrupted period" of pt.ysical presence abroad shou.ld start f r om January to December of a year ; tin t the term 1 t axable year , 0 under Section 84 ( 0) of the Revcmue Code, includes a return made for a fractional part of a year , and theref ore , does not

DECISI OtJ -

CTA CASE NO . 2973 - 4- necessarily r:1ean a 12 month period ; and that the r ationale behind PD 323 is t o lighten the tax hu.rdens of non- resident Fi lipinos who have es t ablished the i r r esidence abroad .

( pp . 18-21, BI R r ec .)

This aforesaid request for reconsideration and wit hdr awal of the assessment was denied in a l etter dated May 24 , 1978 (p . 9, BI R rec . ) of Fortunato ~ guas , Chief , International Operations Division of the Bureau of Internal Revenue .

Thia letter was admittedly l'eceived by petitioner on June 6 , 1978 . lJot satisfied , petitioner , on June 19, 1978 , requested fo r reconsideration of Ul'i-: denial which Has r eceived by respondent on June 22 , 1<)78 . ( pp . 22- 30, Bi it r ec. )

Hm-Jev ,~ r , in a l etter da ed Jul y 28 ,1978, and received by petiti oner on August 29 , 1978, res - pendent deni ed pe tLtioner ' s re ~uest . ( p . 31, BI R rec . ) !1ence , t:·d.s appeal on Se!)t ernbf~r 27 , 1978. The issue on the rnerits involved in this case is vJher~her or no.t petitioner 1:1ay be considered as a non - resident, ci ti?.en for 1976 and , t~H ~ refore , his adjusted :sr oss inC01!1e frorn abroad is subject to t he prefcrcntLul i"lco:nc: tax rates of 1 ~; , 2 1b and 3;:; under Section 21 (a ) and ( b) of the Tax Code , as rt.:'ICmded 1 by PD 323 .

We note , however , that res pondent raised the issue of jurisdiction , i.e . ,,!he tht: r the appeal "t (\ (" ' )

DECI SION -

- 5 - i n this case was seasonably filed within 30 days f r om the receipt of the final decision . Thi s question of jurisdiction must first have t o be det ermined , since i f t he clai m of lack of juris - diction is founded , this Court can not decide t he case on tL.e merits .

In connection ,,lit h the jurisdictional question , r espondent cont~nds t hat the letter of May 24, 1978 constituted the appealable decision , and that when petitioner a cknovrledged re cei 1! t -thereof on June 6, 1978 , he should have interposed the appeal 'dithin thirty- day period in accordance Hith the provisions of Sect:Lon 11 of Republic Act _To . 1125. Petitioner, on his part , assailed the stand of r espondent and argued t ha t the decision Hhich i s appealable to this court is t~ f inal decisibn of respondent on tlte disputed assessment dated July 28 , 1978 , which was r eceived by peti tioner on August 29 , 19'78.

It is 'dell established doctrine th<.:tt the f ·inal de cis i on is that decision \-Jh·j ch from the very terms or vJOrds of r espondent therein , he has 1:-Jeant it to be his final decisi.on .

(.St.

-St~ phtm' s Association v::; . Call . of Int . Rev . , 10Lt- Phil . 31 4; ;:ror al es v . Call . of Int. Rev . , 17 SCRA 10 18 .) ') \

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' ~ - 6 - Respondent 1 s letter of f·1ay 2l1-, 1972 '.;h"lch stated thus -

11Please

dvise your client a ccorcli.n:;ly to pay the said amount of P22 , 168. 94- to any collection agent of t he Bureau of Inter - nal Revenue nearest his pl ace in order t hat the same may be consider ed closed and termi- nated. "

does not cont~in t he el ement of final ity , andj therefore , it can not be considered as tre f:inal decision of r espondent appealable to this Court. Vie bel:i ev e that the subsequent l etter of res~ pondent dated July 28, 1978 is the final decision on the dis puted assessment.

This i s so because it is t~w dec .ision of the Commissioner of Internal Revenue on the disputed assessment . Where a t a x- payer y_uestions an assess r:Hmt , ::md asks trw Collector ( Cor1missioner of Internal 3.ev enu8 ) to re consider or cancel ~1e same be c~use he (the taxpayer) believ es h e i s not l iable therefor , t !1e assessment bc;corne:.:; a " disputed asse::;sment 11 tha t the Collector ( Cor:'l!nis- sioner) mc.st decide and the taxpayer can appeal to t !'1e Court of Tax Appeals only upon re c c~ipt of the decision on t:h~ cLsimted assessment .

(S t . Stephen ' s A ssocla~inn vs . Sollector , supra . ) Considering , therefore , t:1at the petiti.orwr

DECISION -

CTA CASE NO . 2973 - 7 - h erein received r esoondent's decis i on dated J uly 28 , 1978 only on August 29, 1978 , and the instant appeal was filed on September 27 , 1978 , only t v1enty- nine

(29) days vi er e consumed. The appeal vms filed 11li thin t he re,slementc.n~y period of 30 days and th is Court has jurisdiction to decide t he instant case . We now come to the is sue of whether or not pet:Ltl.one:c 1nay be consider ed as a non-resident cit:L- zen for 1976 so that his inclU.e f r oin abroad in l~ha t year will be subject to the preferent ial income t ax r a t es of 1;; on the adjusted (:Sr oss inc >:ne of $5, 599 .32 , Hhich is \·li thin the statutory adjusted gross income of $6 , 000 under 3ect1on 21 ( a ) and ( b) of the Revenue Code , a s a ~ended by PD 323 .

This issue is not nevJ.

In a s :um.lar ca:.:;e (Carmencita ? . Pat:i.o v.s .

Co rw ;~ . of I nt . Itev., CTA Case Fa . 2913 , February 26 , 1981) , as t his ins t ant case , this Court held that a l~axp0.yer , '.-Iho stayed for l ess than 12 uonths in his initial year of ~tay a broad , can not be cons i_dered a nun- J~esident ci tL~en du.r"Lnc the period in ctuest'ion , and , hence is not en ti t.led t:) a pply the rate of 1 ;& on h:Ls adjusted ' gross inc .:ne of .$5, 599 .32 , but on those;) rates from 3 }~ to 70,& ordinar i.ly impos ed on resident citizens . ~:le held i.n the aforeci t.8cl c::1.s e o [' Ca rmenc:L :-.a P . Patio: 7

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« 6 = We agree with respondent. The law is clear that in order to qualify as a non- resident citizen and avail of the preferen- tial income tax rates under Section 21, one must have actually and physically stayed or sided abroad for an uninterrupted period of one entire taxable year, i.e. for the period starting from January 1 and ending December 31, of a given year. Otherwise, if the pericdof the taxpayer's stay abroad is less than one year, the income earned abroad during that period of less than one year will subject the same to the progressive incone tax rates of 3% to 70%, and to this income abroad shall be included the income earned in the Fhilippines during that same period of Jess than one year, just like the incomes of petitioner in question. This must be so because the term "taxable year", in Section 21, as amended by P.D. 323, means the. calendar year, which begins on January 1 and ends on December 31, of each year. Petitioner not being considered aq non-resident citizen ‘who had established her physical presence abroad for an uninterrupted period of an entire taxable year, her income earned abroad for the period of less than one taxable year, or from May 1, 1975 to December 31, 1975, including that income earned in the Philippines for the period from January 1 to February 274 1975, should be subjected to the progressive tax rates of from 3;; to 70% pursuant to Section 21, as amended by P.D. 323.

We find no cogent reason to modil'y ovr afore- said decision and todepart from the conclusion reached therein. The decision of respondent Commis- sioner of Internal Revenue assessing against peti- tioner deficiency income tax, plus interest, must be necessarily have to be upheld.

WHEREFOHN, the decision appealed from is hereby

SL”

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DECISIOF -

CTA CASE ITO. 2973 - 9 - uffir::1ed .

:!?oti tioner l1axi':10 :a. Jumao-as is hereby ordered to pay , within thirty ( 3 0 ) days f ro~ receipt o~ this decision , the a~ount of P1 9 , 348 . oo , as deficiency inco::ne te.x for 1976 , plu s 5 ,~ surcharge thereon , and 14)b i n terest per annu:-11 f ro ~n ~,';ay 16 , 1978 to the date of full payment , providerl t he ma xi ~1um a mount t hat may be collected o.s i nterest on fue defic i ency shall in no case exceed the amount oor- responding to a period of three (3) years , pursuant to Section 51 ( d ) of the Tax Code , a s a~ended . With costs a gai~st petitioner .

,so ORDEi:lliD.

~~uezon City , July 20 , 1981 • .

irJE concrr:t:

Presiding

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Associate Judge

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