Wyeth Suaco Laboratories, Inc. vs. ·- Commissioner of Internal Revenue, et al.

decision

in the Bayer case~ supr-a~ was never- intended as a sor-t of a conundr-um as would incite endless possibilities for- conjectur-e.

Far- be it fr-om a tr-ivial pur-suit~ the Cour-t .Plainly said~ that We accor-dingly r-ule that. since the royalties in question could not be paid or- r-emit. ted in 1972 by petitioner- Bayer- DECISION 2A tJ I CTA CASE NO. Jl/!!!lf!!llfl7 ,fl ~ 0 - 4 - Phannaceutica 1 s ~ Inc. to non-resident foreign corporation Bayer Ak tengese 11- schal ft ~ Leved: usen Bayermerck due to Central Bank restrictions~ petitioner was under no ob 1 iga tion to wi t.hho ld and pay income tax-at-so~rce on said royalties and~ therefore, it is not liable for deficiency withholding tax-at-source asses :.ment of respondent Commissioner of Intern , :~l Revenue in the amount of P36,834.73 for the ye~r 1975. The circumstance obtaining in the case at bar finds no legal constraint to the remittance to speak of~ hence the 1 iabi 1 i ty to wi thho 1 d and pay the .income tax at source on the roy a 1 ties due the non-resident foreign corporation attaches at the time of the accrual and not on actual payment or remittance thereof.

What may seem to be considered an elusi~e and subtle casuistry in the said· decision as petitioner would have it impressed~ the subsequent decision in the case o ·f ~orJstru~tion Resources g_f Asl..a.,._ supra~ relied upon by the respondent provides .

a definitive statement~ thus The 1 iabi 1 i t.y of :petitioner to withholding and pay the income tax withheld-at-source from interests due to a non-r·esiden t foreign corporation at taches at the time of the accrual of said interests and not at the time of actual payment or remittance thereof. 4C ..

DECISION - - -.& G tlf CTA CASE NO. ~, Jf;l, -- 5 - P~yment of the withholding tax-at- source due from a foreign lender attaches upon accrual of the interest to be remitted e:~br" oad.

The interest accr-ues at the time it is earned. At such time~ the tax on the interest attaches and the contr-actor is ob 1 iga ted tD r-emit the ta>: to the gDvernment. · Indeed~ there is no reason why the overseas contractor~ peti tiDner· in this case~ whD is based in the Philippines~ would wait until it.

remits the interest due the foreign lender before pay i.ng the wi thho 1 ding ta:·:-a t- source.

Otherwise, the government will be at the mercy of the taxpayer who may take time in remitting the interest to the foreign lender.

And, finally-, .. the r e cent decision in the Wes tern Palawan Timber CorporatiQn v. Commissioner of Int.er·nal Revenue, CTA Case No.

:::; 544, aune 5, 1987 toughens the appropriate legal moorings of the said holdings, to wit.: This court unequi vocab 1 y rl.1 J. ed t.ha t s ince the roy a 1 ties cou 1 d not be remit ted t.o the non-resident foreign corporation to Central Bank restrictions. the time of payment of the ~yal .ties is the maturation point of the w.i thholding duty. It bears emphasis, therefore~ that. if the income payable to a non-resident foreign corporation can be paid ··-or renli tted because ther;e are no restrictions against its payment.

or remittance thereqf, the liability to withhold and pay the tax then2on attaches at t:'f1e time of accrual, not at the time of actual remittance. Here in the c~se at bar, there is no allegation <::>r ,showing whatsot:?ver that petitioner was restricted from remitting in 1975 the interest on its foreign loan 4

DECISION -

= 2 from non-resident Mitsubishi Corporation. The liability of petitioner to withhold and pay the income tax withheld-at-source from interest due its foreign creditor attaches therefore at the time of the accrual of said interest and not at the time of actual ‘payment or remittance thereof.

As was the said case, s0 here with petitioner. There is no allegation, much less any evidence, to show that it was restricted from remitting the reyalties to the non-resident foreign corporation. The withholding tax-at-source must be upon accrual.

ACCORDINGLY , petitioner is ordered to Pay toa the respondent Commissioner of Internal Revenue the amount of PF1L43,528.71 as deficiency withholding tax~at-source for the fourth quarter of 1975, plus surcharges and interest incident to the delinquency pursuant ta the pertinent provisions of the National Internal RA@venue Code, as amended.

SQ ORDERED.

Quezon City, Metro Manila, July 29, 1988.

‘ ES ~ —.

DECISICJN CTA CASE ND.

I CONCUR:

(Did not take part) AMA!\ITE ILLER Pres . ·:1- g Judge - 7 -- C E R T I F I C A T I 0 N I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ...

·.:.

c 4C3 . ~QUIN Judge Appeals