Kawasaki Heavy Industries, Ltd., et al.

DECISION

CTA CASE NO. 3502 - 2 - F'eti tioner is a resident foreign corporation duly licensed to engage in business in the Philippines through its Manila Branch Office.

(par.

1~ Petition; admitted par. 1~ AnsNer.)

During the fiscal year ending March 31, 1980~ for royal ties and technical services rendered to Kawasaki Motor (Phi 1 i. ppines) Corporation (hereinafter called I<MPC for brevity) and Philippines Shipyard and Engineering Corporation (hereinafter called PHILSECO for brevity), on various occasions~ remitted to petitioner's home office in Japan service fees and royalties due the petitioner.

In remitting the same~ PHILSECO erroneously withheld and remitted to respondent's BureaLI the 35/.

ta:-:

on said roy a 1 ty fees imposable on non - resident foreign corporation in the total amount of P1~991~223.24 as shown below:

R~_t§ 11-24- 78 04-27-79 03-12- 79 11-20·-79 04-24-80 Sub Total Q:L'f.!!; .!~LB.~§!P-t.J~!9..-'!. ~nt;

rn A-37610425 P113,::!47 .45C*J CR A-2555486 67~865.78

RTR A-0784191

rn A-1774319 rn A-2896114 RTR A-2617.!.626 CA A-929t/X2.

RTR A-435.39::!4 ;

20,447.66 114~8B).43 70 ~ 16.3. 57 216 ~~h;l,_b.!j;

X c C-1 w D D-1 E E-1 DECISION CTA CASE NO. 3502 - 3 - f.IY_Et!.H,~ P.~t~ Qffici~l R~-~:!:.P-~2.. ~nt ~':5..bibit

04- 29- B)

CR A-::!6.35795 P1, 499, 125.31 [ **] G 06- 17-B:l Sub Total Grand Total

RTR A-4648646

G-1 CR A-::!6.'!85.-:::~) RTR A-'Y.:R6.?:·fJ6 105,393.04 f' .. l ... ~J4 1..~-t. .. e..!.~~ Pl.. • .~l.!' .. ~!24 F F-1 On Ju 1 y 15, 1980, petitioner filed with respondent ' s ROO 32, Maka ti, its corporate annual income tax return CExh.

U) for the fiscal year ending In said return, it credited the erroneous withholding tax payment of P1,991,223.24, against its income tax liability of F'1,292,944.00.

Accordingly, there resulted a refundable amount of P698,279.24 for said fiscal year 1980.

When petitioner filed its return for its profit remittance (Exh.

U-1), which tax amounted to P220,286.00, it applied its 1980 overpaid income tax in the sum of P698,279.24 against said ta>:.

Consequent 1 y, there remained a balance of F'477,993.24 which constitutes petitioner's 1980 adju~ted overpaid income tax . During . petitioner's fiscal year ended tl9...rch _~_.L_J.

... 9~j_, KMF'C and PHILSECO 1 ikewise remitted royalty and techf1ical service fees to pe'ti tioner' s I 21 7

DECISION —

CTA CASE NO. 3502 home office in Japan. As in the previous year 1980, the former erroneously subjected said income of petitioner to the 35% withholding tax imposable on non~resident foreign corporations, which tax amounted to F587,576.11 as shown in the schedule of withholding tax at source (Exhibit H) as follows:

BY_ EMEC

Date Official Receipt No. Ament Exhibit 10-08-80 CR A-SMOx37 P 37,721.50 I

RTR A-4781190 I~1

O%—20-B1 CR @-7145241 31,567.07 J RTR A-6086200 _.

Sub Total P 69,318.57 BY_PHILSECO Date Official Receipt No. Amaunt Exhibit 07-28-80 CR A-7%642690 F 73,282.40 K RTR A-S096586 fom 07-28-80 CR A-2642695 39,243.70 L

RTR A-8096585 L~-1

C9—-20-B0 CR A-—670107 102,212.26 M

RTR A-8096995 M1

10-29-80 CR A-BLS4052 41,441.10 N

RTR €-8097085 NEL

11-24-80 CR €-5782114 41,961.20 a)

RTR A-8097152 O-1

12~29-B0 CR 4-565ce82 40,982.15 F

RTR A-5097244 P-1

01-22-81 CR A-6711718 49,787 0) Q RTR A-5097404 roe O2~-24-B1 CR A-5718209 42,025.40 R RTR A-SB16572 , R-1 218 DECISION CTA CASE NO. 3502 03-23-81 04- 27-81 81...1b Total Grand Total - 5 - rn A-70::!4422

RTR A-6556127

rn A-7524450

R'TR A-6559718

45,484.56 41~727.07 ----1~.L~.!!.~ E.~~L~~:z.~.-~ ~-~-! .. !.~.!~-~-~~ s T T-1 When petitioner filed its amended corporate annual income ta>: return on August 26~ 1981 for fiscal year ending March 31~ 1981 (f.,fh.

VJ, it showed a refundable amount of P765,298.00 computed as follows:

Net Income TaN Due Less:

1) 35/. withhold- ing t.a:·:

P795 '846. 00 ~7,576.00 ~111t of Ta:·: RefL~ndable P3t"X), 271 • 00 When peti t.ioner f i 1 ed its amended return for the branch profit remittance tax (£xh.

V-U, it credited its 1981 income tax refund of P765~298.00 (£xh. V-1 - a) against its branch profit remittance tax liability of P64,640.00. Consequently, there remained balance of P700~658.00, which constitutes petitioner's adjusted income tax refund for 1981.

On July 9 ~ 1982~ petitioner through its ' auditors SGV & Cp.~ filed with respondent's office 219 DECISION CTA CASE NO. 3502 - 6 - a claim for refund (Exh.

AJ in the amount of F'700,658.00.

The only issue posed for determination is whether or not petitioner is entitled to the refund claim of P700,658.00. We agree with the c 1 aim for refund of the amount of P700,658.00.

This amount represent erroneously withheld 35% withholding tax at sourc~ computed as follows:

Income & rnrporate Dev. TaN due ta:·:able year ended March 31, 1981 P~~),271.00 (Exh. V) Branch Pro·fi t Remittance t.a>:ab 1 e year· ended March 31, 1989 Total Less:

Overpaid income TaH- _,_ 64,61:9.00 (Exh. V-1) F-::!.64,911.00 taH carried forward ·from FY ended March 31' 198() Ta>: withreld (35%) by F'eti ticner' s clients during FY ended March 31, 1981 Ara..tnt claimed _4ffi993.0Q (Exhs. lJ-1;V) < P113, em. ex:>> h"'e7 .~.~9..!.QQJ. (E>th. V) ~!C~_.~~~~ It is apparent · that the refundable amount of P700,658.00 is composed of the 35% withholding tax paid in the amount of P587,576.00 and a portion of the overpaid income tax carried forward for fiscal year ended March 31, 1980 in the amount of P477,993.00, thus:

220 DECISION CTA CASE NO. 3502 - 7 - Fr·om 1981 withholding ta>: Fr-om F'477 ,993.00 car-r-ied for-war-d fr-om FY ended Mar-c h 31 ~ 19B) T o t a 1 P587,576.00

WHEREFORE, the claim for refund of petitioner Kawasaki Heavy Industries, Ltd., in the ~um of P700,658.00 is hereby granted. No pronouncement as to costs.

WE CONCUR:

Pr-esid' ~Z.REV Associate J 221 89.

"'---.._ ROAGUIN Judge

DECISION -

CTA CASE NO. 3502 - 8 - CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of the Court of Ta x Appeals in accordance with Section 13~ Article VIII of the Constitution. Presid.i: g Judge Court of Tax Appeals 222