Bank of America Nt | & Sa, et al. vs. C_T.A. Case No. 4182 Commissioner of Internal Revenue

DECISION -

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Petitioner alleged that by virtue of the ruling of the Supreme Court in the case of Commissioner of Internal Revenue v. Burroughs Limited and the Court of Tax Appeals, G.R. No. 66653, June 19, 1986, the basis for computing the branch profits remittance tax should be the profits actually remitted abroad pursuant to BIR Ruling dated January 21, 1980. Since the profits actually remitted abroad amounted only to R326,896,462.90, the 15% branch profits remittance tax should be based on B326,896,462.90 and not R364,584,074.00, the amount actually applied for with the Central Bank as branch profits to be remitted.

On July 24, 1987, petitioner without waiting for respondent's decision filed the instant petition for review in order to toll the running of the prescriptive period for filing a suit | for the recovery of an erroneously paid tax.

Respondent answered that the Burroughs case is not applicable to the case at bar because the issue raised was not the tazable base for computing the 15% branch profits remittance tax but the prospéctive application of Revenue Memorandum Circular No. §-§2 dated March 17, 1982. The branch profits remittance tax is a tax imposed and collected at source and therefore, the taxable base should be the amount actually applied for by the branch with the Central Bank of the Philippines as profits to be remitted abroad.

DECISION ··

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The i:;::ue is V·lhetller ('r not the br:J.nch profits remitta.nce t:tx is c:Nnputed based on the profits actually rE>mitted :3.bn:,ad or ~~·n the tot::!.l branch profits out oi '.:·lhkh the r~7tnit.tJ.w::e is nnde. Revenue Iviemoranr:lum Cir··: ul::.\r No. i)-i:""\2, dated ~'I.Ya.r c h 17 . "•:"'\f.TP..fE(T · .~ 1 ..

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~ . . c asslltca Jon as ;) J.lt? proper .ax ~):::r;e m U1e computation 1)f the 1 5:~ bra.nch profit remittJnce t<~x

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All Internal Revenue Officers and Others

Conr.:erned.

In BIR Ruling No, 0 16-79 da.ted Apnl 1 (3.. 1979 anent the 1 :,,% brand1 profit rs-mitt;3.tlo:e t:1x as an in•:>)m>? tax imposed under Section 24(h)(2). N;:Jth:mal Internal Revenue ((,(le of 1977, as a.mended, tlli::: Office ruled that · :r .x x the 1 S.:16 bram:ll profit remittance t;3.X should be ba:3<:-r:l on the amount d- ~ l504 .. }Y).4.3. representing profit derived ffi)tn the disp%ition of the sharE>:;, 1 :)% /Of v..rhich is P-22 ;.,649.::.7.' It. v..rill be noted t.ll::Jt. tlle 1\:J::.:is of c•:,mput.3tion i -t J•:con:latKe v.rith the ruiing i·; profit without deducti·)n for the 1 :=.~:~ t::).X.

On January 2 1, l9i30, this Office, in another ru.ling issue(! in ans·Ner to a query as to the ta.x base upon which , the 15% branch profit remitt:J.nce t.::1.x should be imposed held thr.J.t 'tJ1e 15% branch pr.:Ait remittance tB.x shall l)e imposed on the prrAit actua.lly . remitted al}rOc:tcl :3.nd not on the t0taJ branch profit ()ut of V·Thich thB remittance is t0 be mr de .· A8 the tatter ruli 1g :::eems to h3.ve given rise tf.) sc•nP misconception tlHt it modified BIR Ruling No. I) 16-79 v1ith n?sp~?.ct to t11e nEmn<?r of c:omt·utat on oi the 15?6 branch profit remitt3.nce t:J.x, this Office

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tssued a darificatory r1J1ing on OctJ)ber 2 3.. 19(~ 1 explaining - The a.b..::;.ve ruling (of January 2 l. 19(Yi) merely emphasize,.j the distinction b>?.tv..reen the total branch pr(:ofit V·thkll is remittable and that portion of the bra.nch prr)fit actt.\ally remitted ~Nithou t. deduction on account of the tax to be paid.

The phrase ·any profit remitted e.brt)8.d · should be C()ns rued to mean tJ1e profit to be remit. .e Heance. t.h ~re must l)e J.n actual remittance, ;Js distinguished from profit which is remittable.

To give n exa.mple:

ff the total l)ranch pr )fit is P. ll S,OOO. )0 but the ::nnou.nt b) be rernit~d is P 100,000.00, U1<:>n the tax base should bo?. P 100,000.00. Iv!oreover, the 1 ~' % profit remittance ta.x imposed by Sectic·n 2 4(b)(2) of the Tax (rxle is ::l.n inconre ta.x, it is therefore clear that tll>:? s:une is non -der:luctible from the gross (profit) inconw. Inasmuch a.s the tax is an exaction on profit re:;).lized for remitt:ulCe abroad, the deduction U1ereof as an expew::e i:3 not sustained by laV·l nov .. 1wre in Section .30 of the Tax Code is it pr(1Vided that the same is deductible. Besides dedudions from QToss income are , u matters of legislative grace, what is not expre~sly granted by the laV·l is deemed withheld.'

Considering

that .the 1 )% branch profit rernittanc:e tax is itnposed awl collected<.g.t source. ne<:essa.rily the tax base should be the amount actuallv applied for by tlle branch ~Nitll the Central EianR of the Philippines as profit to be remitted abroad. [ t 1. ,-. (·lt::.C:t. f"t:>rj t11·"> t tl·!l'-. (t't· ''111·"> 1" }··A 0'1. u .-. fl . .., ,-. '<Yl. tlA •· .:)

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'-" publicity as possible." (Emphasis Our:;.)

- Page b - Tht:; court in the case of Compaiiia General De Tabacos De Filipinas (Philippine Branch), v . the Commissioner of Internal Revenue, CTA Case No. 3827, October 14, 1988, upheld that the Burroughs case recognizes the v~hdity of Memorandum CiP:u.1ar No. ()-i)2, dated Ivla.rch 17, 19()2, tl.) ~~>tit: "A fortiori, the holding in the Burroughs Limit>td case ls-nds settling cognizance tr) the validity of the Iviemora.ndum Cirr::u.lar No. 8-02, V.Jl1ere as ruJ-2o::l by the Supreme Court - 'vVha.t v.r::y:; applica.ble in the ca.se ;3.t ba.r i·3 still the Revenue Ruhn!2' of fanuarv '-• •

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2 l. 19(.\0 bec:J.use the private respondent Burroughs Limited paid the branch profit rernitt:mce tax in question on J·.Jarch 14, 19.)2.

r-.... Iemorandum Circular No.

f~-.32 (late(l Ivla.rch 17, 19(>2 cannot l:H? given retroactive effect. in the light of Section .?.~2 7 of the Na.tioml1 Internal Revenue Code St::1.ted othervvise, the ctrcula.r must be prospective in application.

E:;tablished at bar is a pa~.rment effed.ed on Auo·ust 16.

1 9 ·~· 2 subse(tus-nt to .a.

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b · t11e issuance t11s-reoi.

Hence petitioner's case falls v.,;ithin the compelling imp·:rrt and force of the Revenue lvlemoratidum Circular No. 8-62 dated Ivia.rch 17, 19a2 ...

Lik~v.;rise

Court of

Appeals

in th~ case of Commissioner of Internal Revenue v. Bank of America NT & SA and the Court of Tax Appeals, CA -G .R_ SP No. 2 2 569, September 19, 1990, upheld the validity and prospective application of Revenue l··:femorandum Circula.r V·lhen

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it ruled:

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DECJSION-

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"x x x. Tht::> us~? of the V·lord remitted may ~..vell be u.nderstx)Oci as referrini2' to t11at nart of the s::_~.id '-' r- t..)I:J.l branch profits :\·\rhich ~hmu.ld be sent to the hea.d offir:e as distingt: ished from tl1e t~ tal profits of the branch (not all of V·!hic:h need be $ent or wouh:l l)e 6rdered r~mi .t~d abroad), If the legislature indeed lnd Vlanted to mitigate the harshness of .successive - .

t;3xation. it would h8.'fe been simpler to just lower the rab?S without in effect requiring the relati~.rely novel a.nd complh> tJ.?.d vvav of comput.itw the t1.x. as

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envisione· by the herein privatA respondent. The s21.me result v\!ould 11 ve been achieved. The at .tE-mpt tr. deductE> 1egislati 1e intent -vvith regard to Section 24(b){2)(ii) 0 the Tax Code 'Nr:,u.ld only ~5e rve b) allow .::ap iou.s a.nd strained intendment of the law. NIMIA SUBTI LIT AS IN JURE REPROBATUR ET TALI S CERTITUDO CERTITUDIIv!Efvi CONFUNDIT (Tlit? lav; does not allow of a captious and :::trained intendment. fc-·r such nice pretence of CE·rtainty confi)lJ.Wls true ancllegal cert:linty). As held in the case of United States v::;. v•rurzbach, 2 (>0 US. ·;~.-:l 6 -~qa :

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There i:; no ~Nar ra nt for seeking refined argument; to :;how that the statute doe~; not mean Vlh ;J.t it savs.

' In viev-l of t11e fc·regoing, this Cou.rt finds that the cle3.r import c·f Section 2 41J:. )(2 )(ii) of the Tax ((:U:ie · rn:Jndates the impo:;ition of the fifteen per cent ( 1 :,::r;) t1x ori the branch profits remitt::mce, which in t::rx f-·,·1t·l·"'t-!·· u 1· .~ -~11 JJ (1 A<(l t ··, . .,. c- tl·!A< " t_.,. V lla!-!(11A" ' •Tt'tll tl-!A< _.a:..

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} '•"'•' -· - · ..., total arrwunt remitted (not the total amount of the branch r;rofits) 'a::; base . for the tax." [Cited in the cases of Commercial Union Assuran'ce Company v . The Commissioner of Internal Revenue. CTA Case No_ 4189. September 8. 1992; Compania

General De Tabacos De Filipinas (Philippine

Offices), v . The Commissioner of

Internal

Revenue, CTA Case No. 445 1, August 23.. 1993; and Warner Bros_ (F_EJ Inc_ v _ Commissioner of 1

DECISION-

C.T .1 • CASE NO. 4182

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lnternal Revenue,

CTA

Case

No.

4207, December 2 1, 1 993L (.:,nsidering that petitioner's t·ranch profits remitt:lnce tax r.,ver~ paid on Od.ober 2 5~ 1985 i· ncl Odober 2 0. 19(36 or during tilE- eifedivity of Revenue t.;lemoratElum Circular No. (~>- (3 2 Uvla.rcll

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17. 191)2 '!_. the tax8.ble base for computing tlw 15.% branch profits remitt:Hl ( E> tax sllou d be the_ 8tn(11Jnt :tppli<?d for •v .. lit.h the Central Bant of the Philippine::: :3.s profits to be remitted abroad by the bran..:·h ~i·a thou t dedu.ct.ing the l5% branC'l1 profit remittance tax from the t.a;~Jble base and rl('t t.h€' profits actually remitted as .::=-tnb•::.died in BIR Ruling dated January 2 l. 19<)0.

Revenue

I·.,..lemoran:-lum Circular d-f>2 should be applied prospectivelY' . Therefore. the ::::arne should gov.::=-rn payinents of branch profits rernitta.nc>? tax in 191):,. and 1 ~ () 6 :3.S in the <:as<:> on hand.

WHEREFORE, in vi~w •) f th.:;. foregoing. W~ find th~ t.h~ same is her~bv ' .:Hsmis·::<?d Petiti()n<?r'·; claim for rMund is tllo?retor~ DENIED. Costs of suits against tll<?. petitioner.

WE CONCU~

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Q .~

~TO

D. ACOSTA

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~~d:;:;:;~ / l\:::sodato? Jtv:lge

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CERTIFICATION

hereby certify that this decision -vvas reached after due consultation among the members of tl1e Court of Tax Appeals in acc<>rdatKe ~Nith Se(:tion 19, Artide \lii I of the Constitution_ - t 20 ~-~~~ ERNESTO D. ACOSTA

Presiding Judge

Court of Tax Appeals

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