Oe EE a a EE SM ‘ 9 Ln a Ala Ce an Oot Ane Thane Gemini Eat AAA Pete Tee. Cepoblig of the Fuilippings “Ourt of Tax Appeals Avaefren City “Burroughs Limited vs. Commissioner of Internal Revenue

DECISION -

CTA CASE NO . 3204- - 2 - Net. profit after Pt-.ilippine i ncome t ax P7 ,647 ,u58.00 15% bl.'anch prof1t remitt ance t:ax 15% Tax paid t o tne government ~!~~~z~g1a~1~ t-Jet. ;;>ro.d t- after Pnilipp · ne incane tax fl7 , 64 7, 058. 00 Less: Tax pc:1id to the gcverrunent -~47 ,058 •. 7_Q.

Net amoun~ actually r~mitted ~g!~221-~~~~~Q Relying however on t he provisions of Section 24 ~b ) (.2) .of t he 1977 National I n t e r na.1. Re ve nue Code , as amendea , the pert1nent port ion of wh i ch r ead s a t t.,e time c.S follows:

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Resident

C orpor at~ons -

A

c orporat-ion-organized , authorized, or existing nder the laws of a ny f ore ign country , eng.ag,ed i n trade or bus iness wi th in the Philippines , sha l l be tax- able as provided in subsect-io_l1 a ) of th i s s ection upon the t otal ne t income rec e i ved i n the preceding taxable year fr om al l sources within t he Ph ilippines;

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Provided , furthe r , rr·:.at. a ny profit- r erni t't"e<rat.:>r'Oag ·by a br '-lnc h off ice to i ts mother c ompany shall be subject to t ax of fifteen pe r c e nt. (except. those r egiste r ed with the Export Proc-ess ing / / Zone Au thor i t.y) • " (Under s coring supplied e ) And t he ru lin<;J dated January 21 , 1980 o f r espondent. cons t ruing. Section 24 (b) (_2) '· whe r ein he held that : "In r eply to your letter of November 3 , 1978 , relat ive t o you r q uery as to the tax base upon which the 15!1. branch profit remittance t ax. provided f or unde r Sec t ion 24(b) (2) of the 1977 Tax Code shall be im~os ~d , please be adv ised t hat. the 15% branch profit r emitt ance tax shall be i mposea £!} t he profit actually r emi t ted abroac! and not on the total branch prof i t .. -~l of which the remittance i s to be made." (Underscor · ng suppl ied . )

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DECI SION

CTA CASE NO .

20 4 ' - 3 - Peti tioner avers that it. s hould have paid on y t he amoun t .of P974 999 . 89 in remittance t ax com- puted by t aking 15% of t he profi ts actually remitted , t hus:

Prof its ac tually r emi tted - - ~ P6 , 499 , 999.30 Remi t tance Tax rate · - - - - - 15% Remi ttance Tax due -------- !==~1!&~~~~~2 Petitioner the r efore claims an overpayment in the amount of Pl72 , 058 . 90 computed as t he di f ference between the remi ttance tax ac t ual ly pa i d of Pl,l47 ,058 . 70 and t he remittance t ax t hat should have been paid of P974,999 . 89 . On December 24 , 198 0, petit ioner f iled with respondent 0 s office a c laim f or r e f u~ d or t ax cred i t of the amount of Pl7 2, 058.90 r epresenting its alleged over paid branch profi t remit tance tax And apparently, the cla i m f or refund or t ax credit was filed within two years f rom March 14 , 1979 when the alleged overpayment of t he branch profit. remit:t- ance t ax was made .

However, without waiting for the dec i s ion of re spondent Commissioner of I nt ernal Revenue on i ts claim for efund or t ax credit, peti- t i oner commenced this suit on Februar y 24, 1981 f or r ecovery of the amount of P ~ 72 , 0 58 . 90 repr esenting al eged erroneously pai d branch profit remittance 182 Se et | cnet ete nN Re eR —— = =

DECISION =

CTA CASE NO. 3204 tax paid by it, pursuant to Section 292 of the present National Internal Revenue Code.

In his answer to the petition for review, respondent alleges as special and affirmative defenses, among Others, thats | Respondent. may vectugy any error he may have committed in the implementation of tax laws and regulations on the ground that the government is not bound by the mistakes of its agents (Pineda v. Court of First Instance of Tayabas, 52 Phil. 303).

Respondent. has the authority to revoke, repeal or abrogate the rulings of his predecessor in office because the construction of a statute by those who administer it, is not binding on their successors if thereafter the latter becomes satisfied that a different construction should be given (Asso- ciation of Clerical Employees vs. Brotherhood of Railway & Steamship Clerks, 85F (2d) 152, 109, A.CoR. 345 cited in Hilado vs. Collector, L-9408, October 31, 1956, 100 Phil. 288).

Respondent. concedes at least that in his ruling dated January 21, 1980 he held that under Section 24(b) (2) of the Tax Code the 15% branch profit re- mittance oe shall be imposed on the profit actually remitted abroad and not on the total branch profit 183 ' .

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DECISION -

CTA CASE NO . 3204 - 5 - out of which the r emittance is to be made .

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on such ruiing pe tit ioner should have paid only the amcunt of P9 74 , 999.89 . in remi ttance tax com- puted by t aking the 15% of the profits of ~6 , 499 , 999 .3 0 actually remitted t6 i ts head office in the United States , instead of Pl , l 47 , 058 .7 0, on its net profit of P7 , 64 7,058. 00 . Undoubtedly, peti- tione r has overpaid its branch profit remittance tax in t he amount of Pl72 , 058. 90 . / Respondent con t ends , however , as sta t.ed earlier, that he has the authority t o r evoke , repeal or abrogate the rul ings of his predecessor in office because the construction of a statute by those who administer it i s not binding on him if thereafter he becomes satisf i ed t hat a different construction should be given.

Nevertheless, the records of t his case and the pleadings , on t he. basis of which re~ ponden t submi tied tl}is case for dec ision , do not show of any reyocation , mod ~f i -:- cation or r eversal of r espo nde n t '~ r uling of and 39 of the BIR r ecords a cer tif ied xe rox copy of a Revenue Memorandum Circular No. 8-82 issued to all i nternal r evenue offi cers and others con- cerned, t he subjec t of which is: 184 .-'-·

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DECISION -

CTA CASE NO. 3204 - 6 - "Clarif i cation as to proper tax base in th~ computation of the 15% branch refit remittance tax. "

and which prescribes :

"Considering t hat the 15% branch profit remittance tax i s imposed and collected at source , necessar i ly the t ax base should .be the amoun t -actually_ ~EEJ.ieSI for by the branc h with the

Central Bank of the Philippines as

profi t to be remitted abroad .

the said revenue memorandum circular is dated March 17 , 1982 and it i s devoid of an revis ion or i ntent t hat: it: operates r etrospectively . ?vw On t he assump~ion t ha t Revenue Memorandum Circular No . 8-82 revoked , r epealed or abrogated responden t' ~ ruling of January 21, 1q10 and the proper tax base of the 15% branch profit remit-tance tax should be the amount ~u ;:lll y apElied Jar by the branch with the Central Bank as profit to be remitted and not on the profit;.,.!ctu ~ lly remi tted abroad, i n point is Section 327 of the National I nternal Revenue Code which provides : Sec . 327 .

Non- r etxoactivity of r ulings. - Any r evocat ion , modificat i on , or r eversal of any of t he r ules and r egulations promulgated in accordance with t he preced ing section or any of t he rulings or circulars promulgated by the Commissioner shall not be given r etroac t ive applicati on if t he revo- cation , modificat i on, or reversal will be pr ej udicial to the t axpayers except in the following cases : {a ) where the 185 ·, ~ ... ~.~ - ~ ' ' ' ; ';

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DECISION -

CTA CASE NO . 3204 - 7 - t axpayer del i berat e ly misstates or omits material f acts f rom his return or in "any document requ i red of him by the Bureau of In t.ernal Revenue;

(b) where t he f acts subsequently g at~ered by t he Bur eau of Internal Revenue are materially di f ferent f r om t he facts on whi ch the r uling i s based ; or (c ) where t he taxpayer ac ted i n bad faith . · I t is clear from t he foregoing t hat rulings or circulars promulgated by the Comr:tinsioner of Internal Revenue have no r etroactive applic ation where to so apply them would be prej udic i al t o taxpayers .

The pre j udice t o petit.ioner of the r etr oact i ve applicati on of Revenue Memorandum Circular No . 8-82 is beyond ques t ion . It was issued only on March l 7, 198 2 , or a _,nos t one and one-half years after petitioner had f iled wi th r espondent ' s of fice its tt1r itten claim f or refund or tax c r ed i t of overpaid branch profit r emittance t.ax , and more t han one year a f t er t he suit for recovery of such overpa i d branch profit remi ttance tax had been commenced i n this Court. As a matter of fac , r es ponden t has not deni ed or taken any action on pe titioner ' s claim for r e fund or tax credit except t he bar e allegations i n hi s answer that he may rectify any error he may have commi tted in t he i mplementation of tax l aws and regu l a tions on -t he ground tha t t he gove r nmen t is not bound bY

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DECISION -

CTA CASE NO. 3204 - 8 - the mistakesof its agents; and hi s authority to • r evoke , repeal or abr ogate rulings of his prede- cessor in office .

And i n so far as t he enumerated exceptions are concerned , admittedly, peti tioner does not fall under any of them.

See ABS-CBN

Broadcasting Corporation vs. Cour t of Tax Appeal s

and Commissioner of

I~ter n al Revenue , L-$2306 , Octobe r 12 , 1981 , 108 SCRA 142 .) Wi thout i n the least attempt i ng to expr ess , in this proceed ing, an opin ion as to the proper tax base of the l Si branch profit remittance t ax pro- vided f or under Sect ion 24(b) (2 ) of t he Revenue Code,J it will be noted that i ~ h:s r ·1 ... i.ng dat.ed January 21 , 1980 , r espondent c l early and specifi- cally held that " the 15% branch profit remittance tax shall be i mposed on the profi t actually r emitted and !!,2l on the total branch profit out of which the remittance is to be made'.

The accent i s on the words "pr ofit actually r emit ted" .

And the ruling even stressed that it is "not on t he total branch profit ou t of which the remittance i s to be made". We are not t o indulge in statu tory construction . /'Based on said r uling, petitioner has over aj.d, ilS s hown ear- l i er , t he amoun t of Pl72, 058 . 90 and entitled, there- for~ , to the refund or tax credit thereof . If t~ere 18'1 f l

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DECISION -

CTA CASE NO. 3204 - 9 - was mi scomprehension or misconception on the part .

of r espondent as to the correc t interpretation of Sect ion 24( b) ( 2) ~ the i ssuance of Revenue Memo- randum Circular No . 8- 82 on March 17 , 1982 pres- cr ibi ng t hat t he tax base of the 15% branch profit remittance tax should be the amount actually appl i ed f or by the branch with the Central Bank as profit to be remitted abroad should not be given retro- . active application.

We ar e not unaware of the well- ~ntre nche d principle that the Government is never estopped from collecting taxe s because of mis takes or errors on t he part of its agents .

(Vi say21n ·: ·:;bu Terminal Co . Inc. vs . Commissioner of I nternal Revenue, 13 SCRA 357 , 1965 ; Zamora vs . Cour t of Tax Appeals , 36 SCRA 77 , 1970; Balmaceda vs o Coromi nas & Co . I nc., 66 SCRA 55 5 , 1975 . )

In fact , utmost caution should .

be taken i n this r egard e (Senator J ames Couzens, 11 BTA 1040 , 1928 ; 48 Harvard Law Rev iew 1281, 1300 , ci t ed in lOA Mertens , Law of Federal Income Taxat i on , Sec . 60 .13, p. 189.) . But , like other pr i nc i ples of law, this also admits of exception i n the inter est of justice and f ai rplay .

The i nse rt i on of Sec t ion ~38-A into the Na t ional I nternal Revenue Code , which is .now Section 327 , as held i n t he c ase of Tuasori ,Jr.

DECISION -.

CTA CAS NO. 3204 = 1p vs. Lingad, 58 SCRA 170, 1974, is indicative of legislative intention to support the principle of good faith. In fact, in the United States, from where Section 24(b) was patterned, it has been held that. the Commissioner or Collector is precluded from adopting a position inconsistent with one previously taken where injustice would resW1t therefrom (Ford Motor Co. vs. U.S., 9 F. Supp. 590, 1935), or where there has been a ise epEeeentatich to the taxpayer (Tuason, Jre VS. Lingad, 58 SCRA 170, 1974; Connel Bros. Co. /Phil./ vs. Collector of Internal Revenue, 10 SCRA 470, 1964). (See ABS-CBN Broadcasting Corpo- | ration vs. Court of Tax Appeals & Commissioner of Internal Revenue, supra.) | | ACCORDINGLY, respondent Commissioner of Internal — Revenue is hereby ordered to grant a tax credit in favor of petitioner Burroughs Limited the amount of P172,058.90. Without pronouncement as to costs.

AMANTE BILLER

Presiding Judge

WE CONCUR:

pa e ROAQUIN ; pe nebogtas Judge EX) 2. REYES

Associate Judg

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