W Allem Maritime Services, Inc. vs. Commissioner of Internal Promulga~Ed: ~ re'\I'Enue, et al.

DECISION

This is a petition seeking for the refund of P189,842.35 representing the 5% expanded withholding tax alleged to be erroneously and/ or illegally withheld and collected from the "Contributions" from February 1992 to February 1993. TI1e facts of the case are simple.

Petitioner is a manning or crewing agency quly organized and existing as a corporation under and by virtue of the laws of the Philippines, and is duly licensed and authorized by the Philippine Overseas and Employment Administration (POEA) to hire, recruit and deploy Filipino seamen for overseas employment. Petitioner, in consequence of its business of recruiting, hiring and deploying Filipino seamen for oversea'! employment for and in behalf of different foreign shipping principals/employers, received almost eveiy month in 1991 and 1992 from the latter, sums of money as remittances/contributions (the "Contributions") to the seamen's Family Medical and Dental Plan (the "Plan"), which is furnished by aforesaid foreign 990

Pagt; 2 shipping employersiprincipals as a means of promoting the health, goodwill, contentment and efficiency of the seamen (Exhs. A to B-7, inclusive). The Plan is being managed by a local labor wrion or organization called Associated Marine Officers' and Seamen's Union of the Philippines (AMOSUP) to which all of said seamen are affiliated with as union members. The aforesaid

"Contributions"

being remitted ey the said foreign principals/employers amount to US$8.00 or P200.00 more or less, a month per seaman, which in hJrn are being remitted by the petitioner to AMOSlJP in accordance ,,..., with the pertinent provisions of the collective bargaining agreement (Exhs. A to A-2, inclusive).

Believing that said "Contributions" tormed part of the seamen's compensation, the petitioner, from January 1992 to January 1993 deducted and withheld therefrom the total amount of P189,842.35 as expanded withholding taxes (Exhs. C to M-2, inclusive).

Said taxes were remitted and paid to the respondent through United Coconut Pla11ters Bank (UCPB) (Exl1s. 0 to Q, inclusive). Subsequently, the petitioner received a letter, dated March 22, 1993 (Exhs. N ..

and N-1), from the President of MfOSUP informing them of their exemption from tax as a right of a legitimate labor organizati~n. Al\10SUP through this letter demanded from the petitioner the return of the sum withheld from the "Contributions". On September 28, 1994, after obtaining a definitive ruling of tax exemption from the respondent (Exhs. R and R -1 ), petitioner fi]ed an administrative c1aim for refund (Exhs. S to S-2, inclusive) with, the Bureau of Internal

Revenue for the

recovery of the alleged erroneously and/or illegally withheld taxes. Considering that the two-year period mandated by law under Sections 204 and 230 of the Tax Code is about to expire, inaction of the respondent on the 991

Pag~ 3

aforementioned claim prompted the petitioner to file the instant petition before Us on December 21, 1994.

Petitioner fomlally offered in evidence the following documents which were properly identified by its witness:

1.

Collective

Bargaining

Agreement

between the seamen's union (AMOSUP) and one of the foreign shipowners/principals (Exh. A to A-2, inclusive) and representative sample copy of the breakdown of some of the Family Medical & Dental Plan remittances from different foreign vessels and the amount ofUS$8.00 credited to each seaman every month (Exhs. B to B-7, inclusive);

2.

:rvfunlhly R~rniUanc~ R~lums (BIR Form Nu. 1746\V) uf incum~ Lax.~s withheld from January 1992 to January 1993 (Exhs. C, D, E, F, G, H, I, J andK);

3.

Brcakdo\\n of expanded withholding tax payable from January 1992 to January 1993 (Exhs. C-1, D-1, E-1, F-1, G-1, H-1, I-1, J-1 and K-1); 4.

Check payments to the BlR. for expanded withholding tax from January 1992 to January 1993 (Exhs. C-2, D-2, E-2, F-2, G-2, H-2, I-2, J-2 and

K-2)

5.

Check payments to Al\tiOSUP for the months covering September 1991 to November 1992 (Exhs. C-3, C-5, D-3, E-3, F-3, G-3, G-5, H-3, H-5, I-3, J-3 and K-3);

6.

Official Receipts issued by AMOSUP for the said amounts (Exhs. C-4, C- 6, D-4, E-4, F-4, G-4, G-6, H .. 4, H-6, I-4, J-4 and K-4); 7.

Annual Information Returns (BIR Form No. 1743-1:3/1743-IR) of creditable income tax \~ithheld for calendar years 1992 and 1993 (Exhs. L and M, respectively);

· · 8.

Alpha List of creditable income tax withheld for the calendar years 1992 (Exhs. L-1 to L-3, inc.lusive) and 1993 (Exh. M-1); 9.

Certificates of Creditable Income Tax Withheld at Source (RIR Form No. 1743-T/1743-750) for 1992 and 1993 (Exhs. L-4 and lvf-2, respectively); 10.

Demand letter of MfOSUP to petitioner, dated March 22, 1993 (Exhs. N and -N-1);

11.

Certification from the remitting bank (UCPB), dated November 3, 1994, stating that petitioner had paid the monthly remittance return of income taxes withheld from February 1992 to February 1993 (Exh. 0); 992

DECISION

· · CTA CASE NO. 5181

Pagt: 4

12.

Certification from the Revenue Accounting Division of the BIR, dated November 23 and December 2, 1994 (Exhs. P and Q, respectively), stating that the taxes withheld for the period F ebmary 1992 to F ebmary 1993 have actually been remitted and received by the BIR; 13.

Letter of the DIR addressed to the petitioner, dated September 12, 1994 (Exhs. R and R-1) ruling on the exemption from tax of the Plan's contributions; and ' 14.

Letter of the petitioner to the Commissioner of Irtternal Revenue, dated September 28, 1994 claiming for the refund of Pl89,842.35 (Exhs. S to S-2, inclusive).

Respondent for her part failed to present evidence to substantiate the denials and affinnative defenses raised in her answer.

She also manifested in open court through her counsel that she will no longer submit a memorandum in support of her case.

The lone issue to be resolved in this case is whether or not the petitioner is entitled to the refund of P189,842.35 alleged to have been erroneously and/or illegally withheld from the "Contributions" to the "Plan" from February 1992 to Februacy 1993.

We answer in the affirmative.

Section 2(a) of Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86, implemen~g Section 28 of the National Internal Revenue Code, as amended, pro,~des, thus:

"Section 2. Compensation. - (a) In general.

For purposes of withholding tax, the term "compensation" means all remuneration for services performed by an employee for his employer wuess specifically excepted w1der Sections 28, 29 and 90 of the National Internal Revenue Code. ,

X X X

XX X

X X X

Ordinarily, facilities or privileges (such as entertainment, medical services, or so called "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered

Page;;5 compensation subject to withholding if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwilL contentment. or efficiency of his employees." (Underscoring supplied.) Evidently, the aforementioned Revenue Regulations mandates that privileges offered by an employer to his employees which are of relatively small value are NOT t considered as compensation subject to withholding. In the case at bar, the foreign employer's "CONTRIBUTIONS" to the seamen's Family Ivledical and Dental Plan in the amount ofUS$8.00 or more or less P200.00 a month per.~amen, are relatively of sma11 value and offered to the employees to promote goodw111, contentment and efficiency. This is done in consonance with the provisions of the collective bargaining agreement between AMOSUP and the toreign shipowners or principals. In addition, the respondent herself through a letter, dated September 12, 1994, has ruled that the "Contributions" is not subject to withholding tax. A portion of said ruling is quoted hereunder:

"Such being the case, the conttibutions ofP200.00 a month per seaman to the seamen's Family Medical and Dental Plan by the foreign employers of the said seamen need not be included as compensation subject to withholding tax since the same is of relatively small value and offered by the foreign employers to promote goodwill, contentment and efficiency of their employees (BlR .Ruling No. 030-92 dated January 20, 1992).

Finding the amounts deducted and withheld from the "Contributions" to be erroneous, a refund is in order. Petitioner is entitled to a refund of P189,842.35, computed a.~ fo11ows:

Date of Payment

February 10, 1992 AprillO, 1992 May 13, 1992 July 10, 1992 August 10, 1992 99lt

Amount

p '37,348.00 17,886.78 19,427.64 16,064.87 31,023.45

October 9, 1992 December 10, 1992 January 11, 1993 Febmary 10, 1993

TOTAL

Page 6

31,075.99 14,816.36 5,032.40 17.166.86 P189,842,35 \VHEREFORE, in view of all the foregoing, respondent is hereby ordered to refund in favor of the petitioner the antount ofP189,842.35 representing 5% expanded withholding a tax erroneously and/or illegally vvithhcld from the "Contributions" from February 1992 to February 1993.

~·~J~

RAMON 0. DE VE .

Associate Judge

Q~IQ~~

ERNESTO D. ACOSTA

Presiding Judge

CERTIFICATION

I hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Cunsliluliun.

~Tgu~

995

Presiding Judge

Court of Tax Appeals