CTA Case No. 3827

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

COMPANIA GENERAL DE TABACOS

DE FILIPINAS (PHILIPPINE

BRANCH),

Petitioner-,

THE COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

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C.T.A. CASE NO. 3827

0

N

The

case

involves

a

claim

for-

refund

of

a 11 eged over-p :rd br-anch profit r·emi t tance ta:<.

The essential fac t s are not in dispute.

Petitioner-

is

a

foreign

cor-poration

duly

licensed to engaged in business through its branch

office in the Philippines.

On August 16, 1982 petitioner- paid the amount

of P1,506,440.78 as branch profit r-emf·ttance tax

based on 1978 net profit after- income tax.

DECI S ION ·-·

CTA CASE NO. 3 8 2 7

2

··-

On Augus t 15, 1984 it filed a c laim for refund

of

the

of

F' 196, 492 . 2 7

repres enting

e rroneous ly overpaid bran c h profit remittance tax;

a nd

On Augus t

16, 1984, the

in s t a nt pet.i t..ion for

The .iss ues raised are :

1)

l.Jhe ther·· the Court

has

a c quired juri s d .i c t.ion,

a nd 2 ) Whether the

15/.

branch pro f it remittance t a x be based on the amount

ac tua lly remit t e d

..or~ the tota l

amount a ppli e d for

with the Cen t ral Ba nk o f the Philipp i nes.

As to t he

t .! L? .. t , the

i mpt-ession pre c ipi tate 1 y

broac hed

by

t he

r es po nden t

i s

that the

in s tant

pet i t i cm

i ~;

t i.me··· ba r·-r--e!d

ha vincJ

been fil e d

a f t er· a

laps e of 731 d ays (198 4

bei ng a

l ea p year )

he nce,

on e (1) d a y be y o nd t he 2-year pe riod of limita tion

pr··e s c ribf.:?d in Sec tion 2 92 .o ·f thr,? Ta :-: ·c ode .

At thi s juncture

We d o not s e e our way c lear

through th i s myopi c view.

Thi s

k~~d of pecayunish

approach would

be str·etching

too far the narrow

labyr-i.nthi c al technicalities;; of the law.

Between

Augus t

16, 1982 (payment of the ta:<)

and August

16, 1984 (filing of petition) is manifestly a two-

year· period.

"In computing a period, the first day

C ... ti

DECISIOI\I --

CTA CASE NO. 3827

s ha ll

be

e :-:c: luded

and

the

last

day

included."

(Art . 1 3 Ci v il Code of the Philippines) .

The Court takes juris di c tion.

The

?.~~= (JQ_g_ iss ue bears on the ta:-:able base for

the imposition of the 15%

br~nch profit remittance

ta:·:

mandated

in Section

2 4 (b) ( 2) ( ii) of the Ta:·:

Code~ v 1. z. • :

Ta:-:

on branc h profits remittances. -

Pny

profit t' E.'I'n.i.tted abtr·oad by a br-·;.:mch to .its head

of "f ice s t I<'~ 11 be subject to a ta:·: of fifteen per·

C:E.."'fl t. ( 15/. ) :·: :-: :-: •

In a

l etter ¢ated January 2 1~ 1980 i n res ponse

to

a

query

t he

then

Commissioner

of

Internal

Revenue interpreted the

a bove-c ited

provision

to

" ..

mt::!a n

th c.\t

''th€·?

l ~:i%

br··anc::h

pr·o"fit

ta:-:

s ha ll

be

imposed

on

the

bran c h

profits actually remitted

a broad a nd not on the total branch profits out o"f

whi c h the n:?mi ttance is to be ma de ."

Thi s Court had the occasion to apply the said

ruling in the Burroughs Limited v. Commissioner of

Internal Revenue~ CTA Case No.

3204~ _June 23~ 1983,

wher·e

it

he ld,

inter

alia,

that

"Respondent

concedes at least that in his ruli~g dated January

21, 1980 he held that under Section , 24(b)(2) of the

Tax Code the 15% branch pro fit re mittanc~ tax shall

... (

DECISION ~

be imposed on the profit actually remitted abroad

and mot on the total branch profit out of which the

remittance is to be made." (Affirmed by the

Supreme Court, 142 SCRA 325).

Going by the said pronouncement petitioner

comes with the instant claim for the refund of an

overpayment of branch prafit remittance tax in the

amount of Fil96,492.27, camputed this wise:

1978 net profit after incane tax

but before branch profit

remittance tax FiO, 042.978 .50

Profit actually remitted abroad FO B,385, 497.80

S54 tax cue thereon FOL 409,948.91

Tax actually paid by petitioner 1,506,440. 78

Overpayment Fe 196,492.27

The respondent's unvarying assertion is that

the BIR Ruling of January 21, 1980 was revoked and

repealed by Revenue Memorandum Circular No. 8-82

dated March 17, 1782, stating that ~

Considering that the 15% branch profit

remittance tax is imposed and collected = at

source, necessarily the tax base shculd be the

amount actually applied for by the branch with

the Central Bank of the Fhilippines as profit to

be renitted.

Apparently the intendment was to resolve a

seemingly troubling and recurring question which

centers around the interpretation of Section

Cle

we

DECISION ·····

CTA CASE NO . 3827

-

5 --

2 4 ( b) ( 2 ) ( i i ) ,

cited

The

loopy

circumstance

in

the

January

2 1,

1980

ruling is

s tressed by the respondent as thus:

How l..,OL.tl d the

amount

of

P.1,506,440.78

which

n:?pr-esen ts

the

diff e renc e between P.10,042 ,938 . 78 a nd P8,538 ,487.80

be treated?

I s

it s till

a

pC\rt of the

profit

remittable or not?

What is the

logical reason for

deduc t.ing

f i. r- s t

the 15/.

br-·anch profit.

remi. t tance

t<:l.:-:

fr-om the

ta:·:able base of P.10,042,938.58?

It

goes without sayi ng that the

me mor-andum

c i rc:ul ar

now sc"!ts in p 1 ace if not strengthens the moor-ings

of the statute.

fL ..... f.<::.!.r.:·t,j,_g,r:,i_, ,

the

holding

!::::.:i.._f!l_.t.t. g~J.

c a s e

l e nd s

settling

cognizance

to

the

validity of the Memorandum Circ ul ar No . ' 8 - 82, where

a s ruled by the Supreme Cour-t

Wha t

l~s applicable in the case at bar· is

s till

tt-w~

H~?NE!flUe Ruling of January 21,

1980

bec.: \use thE:! pr·i vate re=,pcrldent BLtrroughs Li.mi ted

paid thE~ br .. .:mch pr-of i. t remi. ttance ta:·: in question

on Mar·L:h 14, 1979.

Memorandum Circular No. 8-82

dated 1'1::-.r-ch 17, 1982 cannot l:oe given retroactive

effect

·i1 1

the light of Section

'S2.7

of

tt'E

Nationa:. Internal Revenue Code :·: :-: :·:.

Stated

otherwise,

the

circular

ITIL!St

be

prospective in application.

Established at bar is

a payment effected on Augus t 16, 1982 subsequent to

...

DECT STON ~

CTA CASE NO. 2827

the issuance thereof. Hence petitioner's case

falls within the campelling import and force of the

Revenue Memorandum Circular No, &8°-82 dated March

17, i988,

Accardingly , the alleged erroneous ly paid

PL, 806,440, 78 representing khie ISA branch profit

remittance tax hased oan the 19°78 net profit after

income tax in the’ amaunt of PLO ,Od? 726,88 is

rightly imposed and collected.

JUDGENENT far the respondent Commissioner of

Internal Revenue at petitioner’ s casts.

SO ORDERED.

Quezen City, Hetero Manila, October 14, 19988.

Mm REYES

Associate Judge

WE CONCUR s

(On leave)

AMANTE FILLER

a Judge

oG

7

a

CONG@TARTE “2. ROAQUIN

ssoc ate Judge