CTA Case No. 4158

DECISION

""'\ a the overpaid royalties in 1984 but paid in 1985 in the amount of P27,247.86, and ovet~ paid te c hnical service fee paid in 1985 in the amount of P10,830.52 or the total s um of P38,078.38. The alleged t~ efundable amount of P 3 8,078.38 was due to reduction of r ates of tax b r ought about by the effectivity of the RP- West German Treaty on January 1, 1985, pat~ ticul.::n~ ly At~ ticle 12( 2 ) (b) thereof, in t~ elation to At··t i cle 13( 2 ) (b) (ii> of the RP - US Tax Treaty a s follows= . I a.) ten percent ( 10'}(.)

tax from twenty five percent (25 '1.)

t a x on royalties.

b.) ten percent ( 10'}(.) t a x ft~om fifteen (15'>'> tax on te c hni c al servi ce fee. The i s sues are as follow s : 1.

Whether m~ not petitionet~ is entitled to tax c redit of P27, 2 47.86, allegedly repre s ent i ng overpa id withholding tax on acc t~ u e d t~ oyaltie s in 1984 b ut paid in 1985; 2.

Whet he t~ o t~ n o t pet it i one t~ i s en t it 1 e d t o tax credit of P10,830. 5 2 , representing overpaid withholding tax on technical set~ vice fee paid in 1985; and 3 .

Whethet~ or not the claim for tax ct~ edit hll !l p r e~ c ribec:l.

We will now come to the 1 s t and 2 nd 1 is s ue0n 5~7

- 3 - the basis of the most favot~ed nation pt~ovision of the RP - U.S.

Tax Tt'eaty, At~ t. 13 (2) (b) (iii>, taken i n ;'t'e lation to At'tic le 12 (2)

(b) of the RP- ~Jest Get'man Tax Tt'eaty and BI~ Ruling No. 263-86 , pet it ioner should h a ve withheld and paid only 10" tax in9 te ~d of 25" on the royalties paid by peti t ioner to General Electric Company in the U.S. Of the accrued royalties in 1984 in the amount of P15,570,208.22 paid in 1985 25" tax was actually paid by petitioner on May 10, 1985 by way 'I of withholding tax in the amount of P81,743.59 <Exh s. I, K & J, pp.

53-~i4 , CTA t' ec. > Si nee the tax due thereon is only 10~, according to the above provision of law, the su m of P54,495.73 was due and paid resu lting to an overp~yment of P27,247.86. Of the technical set'vice fee o f P168,474. 91, petitioner paid on June 1 o, 1985 the "'d.thholdi.ng tax in the sum of· P25,271.23. <Exhs.

E, G & F, pp. 50- 51 CTA rec). Since the tax due is only 10", according to the abo ve provision of law, the su m of P14,440.71 was due and paid resulting to an overpayment of PlO, 830. 52.~ ~ All in a ll, there is a total amount refundable to petitioner in the sum of P38,078.38. On the 3t'd issue as to whethet' ot~ not the action has pt'esct' i bed, payment in these two cases ... '+ - having been made on May 10, 1985 <Exhs.

I, K 8· J, .i.J~. tf.P And June 10, 1985 ( E'l{h s. E, G & F, J. .. b .:!:_q) , and the c lAi~ for tax credit filed on May 8, 1987 <Ex h. A, pp. 39 - 41 CTA t'ec.) and t he Peti t ion fot' Review f i 1 e d on May 8, 1 9 8 7, t he c 1 a i m f o t' t a>< c t' e cl i t and petition for review was fil ed w~ll within the two- year period prescribed by law counted from the peri od of payment.

The judicial claim fot' a tax credit i s, the r F:? fore, f i l "d on t l me.

WHEREFORE, re~pondent CoMmissioner of Internal Revenue is hereby ordered to grant a tax credit to petitioner General Electric Philippines Meter and In~tru•ent Co., Inc. the sum of P38,078. 38, without pronouncement a~ to costs.

I CONCUR:

~~~'~ ERNESTO D. ACOSTA Associate Judge 1991.

ROAQUIN Judge

·- 5 - · C E R T I F I C A T I 0 N I hereby certify that this decision was re~ched after due consultation among the members of the Court of Tax Appe~ls Section 13, Article VIII of the 57P in accordance · with -s5ociatP. .Judne Court of T~x Appeals . I