CTA Case No. 3786

DECISION

fiddly far tax a, a pay oe Fw Ham Te aia) ete rh, vo ee Hank Neste ene Clanrng 7 Ras eontractor’s tax of P531,931.76, for the P389,325.63, should the Court find it Hable for contractor's tax under Section 295 of the Tax Code (0 T.A. Case No. 4042).

AS * Sieanes from the records and the pleadings of the Pad doing business ii the Philippines. It provides directional drilling aged in petroleum operations in the Philippines. The facts are ene FACTS:

Ty Letnentation services wit BPC W-ED whereby the former 3 to provide the fatter (Exh. A}. On same date, both parties entered in another Con

DECISION -

C.T.A. CASE NOS, 3789 & 4042 ~ Page 3 - a » a PNOC-EDC with directional dritling tools and services (Exh. B} Presidential Presidential Recres No.

tees 4. at eat final income tax on f if 2 toner from petroleum anperations as =! a7 = 1 its payments to petitioner therefore, no income tax liability was due therefrom. In effect, os co L4o7,852 00, representing the 424 final taz withheld by PNOr- petitioner had allegedly overpaid its income tax in P ~ ah espect te PHOC-

’ DECISION -

C.T.A. CASE NOS, 3789 & 404?

- Pape 4 - EASTERN). IHC. - PHILIPPINE BRANCH

QF TAZ VITHHELD BY CLIENTS

DECEMBER 31. 1902 sd

DOVEL SCHLUMBERGER ¢

SCHEDULE put 1182549 Ce a ee ray Ps ro TOTAL CLAIMABLE TAX CREDIT IN NON-F D.ISR4¢ RETURNS =P 407 882.00 : x ee,

DECISION -

C.T.A. CASE NOS. 378? & 4042 - Page 5 - contract with ! (Exh.

and third from petitioner 33 contractor’s tax 76, breakdown appearing | 131

DECISION -

(.T.A. CASE NOS, 3789 & 4042 foreign loans contracted by -EDC pursuant to PLD * 444 key P p* S72 2 which:

Receipts which are merely fee harges feo ed teint bursements | from PNOC-EDC 160.042.34 ceipts which should have been mate ober eto beer he ns Sean) or's Tax Dus P 142,606.1: Contracto 3 Tax Paid 2 SLA LTO Claim for Refur Ep &9,225 63 Respondent did ned act on the refund claim filed by as the burden of showing that ally collected Ta or iNegs an “ard ee arc = with t t- aA.

132

DECISION -

C.T.A. CASE NOS, 3789 & 4042 - Page? - Pn SuUppert of 4 = a, Mille Ga ISSUES:

C.T.A. Case No. 3786- C.T.A. Case No. 4042- Whether or not petitioner is entitled to the refund of 133

DECISION -

C.T.A. CASE NOS. 3789 & 4047 - Page d - C.T.A. Case No. 3786:

The laws applicable in this case are Sections’ 1 and 3ha) of Presidential Decree No. 1354 (April 21, 1978) and Section Le) of wet I na ry “SECTION 1. fax on subcoriractors - oer subcontractor, whether. domestic or foreign, tering into a contract with a service contractor aa in mae eum operations in the Philippines efoa final income tax equivalent fo eight 3) of its gross income derived from such a [ae to be in lieu of any and all taxes, I Frovides Sonerer thal any- sources within and in "the ease of domestic 1 tne Philippines in the case tr al Limed ceived a5 4 rest ult 0 of “the » contr act F otulippines (Underscoring supplied.)

ur ur “r ar our ur SPF ur oe. a ok ge oe oh Pos ee “SEC. 3. Manger of collecting the 22x - (2, service contract ior shall deduct, withhold, and B Mnposee in & sechic fh | of this Pectee Aroma on f 2 contract

DECISION -

C.T.A. CASE NOS. 3789 & 4042 - Page % - “Section 1. income payments subject to withholding taz and rates Prescribed therein. - as herein ofherwis fovided, there shall be eld a creditable i fax af the rah i “4 Pye ees +t. 2" rs, ~, led os persons racic bar 4 uy or tr SF uF ty TP our ur x : x 3 a 2% 22 sh an te 2h on f% 28, {e) Amounts paid to certain contractors.

- payments be the following contra we nether i individual or corporation - three mar caer , general building and section] of Presidential Decree No. 1354 makes it plain contractor ed in petroleum operations in the Philippin All other income received from sources other than tenet e bn] =~ Eas im = pane (a!

beeen foment +:

be!

— , 4 be ay) pare * mrt Te 4 wag et tt = 2 Code. In relation te this, tection ite) 135

DECISION -

C.T.A. CASE NGS, 3789 & 4042 - Page 10 - of Revenues Regulations No. 14-74, provides for the vain nelsing teh 82 im eae ty contractors. Thus, for non-PD.

general building ficdl smecia!

ua ~~. ™ on 1254 services, then the tam withheld by PNOC-EDC on petitioner's ~ i ; ee erroneously withheld tax, C.T.A. Case No. 4042:

The word “contractor” when standing alone or fot restrained by the context or particular words, may mean a sub- contractor, or any person,remotely engaged under contract and doing the work, as well as the original contracter. Such a person is a contractor as well as the original contractor. (Epifanio G. Gonzales, National Internal Revenue Code, 1964 Revised Edition, p. 527.) It was formerly held that a contractor and eub-contractor are ine Jependent laxpayers and are separately “Ee 2 a peice t - - “Lae

- DECISION -

C.T.A. CASE NOS. 3769 & 4042 - Page 11 - tax. (P. J. Kiener Co., Ltd. ¥. Commissioner of Internal Revenue, GR. No. L-16417, January 31, 1963, 7 SCRA 75.) However, this is now subject to the last paragraph of ct, uished by arnc sunt iS SHCOFE? act airs uy ract price which is pa ded froth fhe toe TAT shave interpreted the above-mentioned definif fo nin the case of Drayo Philippines, Inc. ¥. Commissioner of Internal Reyenue, C.T.A. Case No. 3487, September 15, 7 4 contract price paid to the subcontractor under subcontract agreement as excluded from the taxable vross receipts of such subcontractor. Accor ding! iy, for the exclusion to apply, it is enough that th 3 aro 3s receipts are those of a subcontractor and they form Fart of the portion of the total contract price of the Prime or principal contractor paid fo such subcontractor. That the subcontractor may be an independent contractor, to cur mind, is therefore of no moment. It seems clear that the philosophy behind On ¢ of the Sarne gross ‘receipts.

° te wha fee &, A Ks 137 CARNE UTM tt ote

DECISION -

(.T.A. CASE NOS. 3789 & 4042 - Page 12 - 3 ‘we te pes ot aid Wud mo os * m, ra ~ oer Deny rey wo bat, a 7) ob fot bea i.

a om amie fax) pend rod a rw co on oy ~] ioe i) or pars) “e, os withheld by ig clear on the definition of "gross receipts”. Gross receipts paid to petitioner as sub-contractor are excluded from its taza ble gross In ifs claim for refund filed with the BIR, it stated that all their contract with PNOC-EDC.

afitisrar - mete ten stage gee contractor as prime contractor is subject to the contractor shall be excluded from the tamable receipts of the sub- & 2 claimed in the amount of

WHEREFORE, in ¥ fA Atar At: F on, : “ ays 4

DECISION -

C.T.A. CASE NOS. 3789 & 4042 - Page 13 - nT ow. oosts mf s ts 50 ORDERED.

ASSOC fate pur doe mo

WE CONCUR:

C Uae. OE ERNESTO D. ACOSTA CERTIFICATION accordance with Section 1s, 1393