CTA Case No. 3161 (Decision)

kEI't.H\I.lC OF �1 fli~ Pll!LJPPINli'.~ CO\JRT OF T.AX APPEALS CH'V.70N CJ'fV KA1'SUHIRO OTA~ C.T.A. C A ~E NO. 3161 Petitioner, / ' - versus - fJ! /! (; COMt-HSSICN E H GF 11\! TI: i ~N ...-'\ L REVLN UE, Hespondent. X- - - - - - - - - - - X DE C I S I 0 N This case comes before us on appeul from an assessment for deficiency income tax as a result of the respondent�s disallowance of certain items of deductions claimed by petitioner on his income tax return for the taxable year 1975. In pr~ci s , petitioner a Japanese national (1) arrived in the Philippines on April 3, 1975 . and admitted as temporary visitor under Section 9(a) of the Philippine Immigration Act of 1940, as amended; (2) had secured a converDion of said visa into a pre-arranged employee or a non- im.7.igrant status pursuant to .Section 9(g) of the same Act on July 23, 1975 and authorized for a y e ar s :.:.d y but subsequently rene\..'ed; ( 3) wc rked with the Japan Air Lines (Manila off i ce) as an Assistant ~anager f or m~intena n ce an d remained so until 1979; (4) fJled an incom(~ r e turn for the calendor year 1975 on Feb ruary 2, 1976, likewise 127

DE;CISICN - CTA CASE NO 3161 - 2 ... for the years subsequent, under the status of a r;::,sident nlien in the Philippines; ( 5) was assessed for a deficiency income tax for the said year resulting from the di~allowance of the claimed deductions under notice of August 31, 1977 in the amoun t of ~3,727.40 exclusive of t he increment incident to the delinquency; (6) was served warrant of distraint on personal property dated Noverubt:r 9, 1978: {7) prot.ested the assess-- ment under letters dated September 2, 1977 and December 15 1 1978 cla~ning as a resident alien entitlement to the disallowed deductions and reqlles�tir g cane ella tion /v;i thdrawal thereof: but respondent den.i.ed tht'J sarne on August 2 9, 1980 .. Hence this petition. In assailing the deficiency assessment, petitioner holds Limself ou�t as a resident alien in the Philippines for income tax purpose during the taxable year 1975 within the purview of the pertinent provisions of the lncome Ta x Regulations~ that, an alien actually present in the Philippines who is not a mere transient or sojourner is a rer; ident of the f hi .U.ppines (i~;ec ~ 5) and retains hi~ status as a resident until he abandons the same and actually departs fromthe Philippines (~ec~ 6). As such a r e side n t b e comes entitled Al 2. (('j

DECISION - CTA CASE . NO j161 - 3- to the personal ahd additional exemptions (Section 23), optional standard deduction (Section ~0) under the rates ~rescribed in Section 21, all of the Tax Code. as amended. ~1ich petitioner avail~d for his income tax return in calendar year 1975, computed as follows; Tot 1 grosa income * � � � � � � � � ~ 4 � � � 4� ~ P41, 00�1..00 Le~~s: ____!,.1...Q0.4~9 P36 0 903.60 Optional standard deduction (10% of the gross income) ........ ,, ..... ., .. Total net income �� Less: Exemptions - Personal {Head of family~~P3.ooo~oo .Z1.ddit.ional pt~r dependent .....1.....Q90.00 __i,_Q.,<~p_.O_Q Taxable net income �� r32~903.60 Amount of tax due (R a tef . in ~ec. 21} �� 6,805.30 Less: Amount withheld �~���e������~�~���~�� 8~425.98 1\mount .:.:�efunda.bJ.e ".P'""i,'G2o��~68 Raspondent . maintains, hcwever~ that as a pre- arranged em~loyee. petitioner was a non-resident alien engaged in trade or business in the Philip- pines and cannot avail of the benefits of deductions normally c:~cccrded resj.dent.s and c.:i.tizens for. .i.ncome tax purposes, thus the diaallowqnce and the con- sequent de� iciency 1 i.abiLi. ty in the amount of !, 3.727n70, excluding increment incident to the del inq uenc:::t" l'U:t:"ther StreSS lnq that f:.>f.?;t:J tiOner IS intended stay in the :Hlilippi.nes was t~emporary notvJithst:anding the ct1anrJo of t he v5.sitct�' s visa <) -<'! 0. 1 "' �

DECISION - CTA CASE NO 3161 - 4- taxable year 1975, petitioner had less than one year stay in the country which period was too short to convert the original intention to stay temporarily in the Fhilippines to that of a resident alien but long enough under revenue laws to qualify him as a non-resident engaged in trade or business pursuant to Section 22(a) of the Tax Code, which provides, insofar as pertinent, that, "a non-resident alien indi v !dual \"t'ho shall come to the Phili~pines and stay therein for an aggre- gate period of more than one hundred eighty days during any calendar year shall be deemed a non- resident alien doing business in the Philippines." The issue of whether or not petitioner is a resident alien is at its core a question of intention as regards the tenure and nature of his stay in the Philippines. s uffice it to state that for purpc ses of income tax, alien individuals are generally divided into two classes, namely, resident and non-resident aliens. The first are treated at par with citizens of the Philippines and accorded the benefits of deductio n in their income as invoked by the petitioner. The second are classified into those o..> engaged in trade or business who may avail of itemized ~~ o pt ional , 13 0

DFCISION - CTl\. C/\SE NO 3161 - 5- standard deduction pursuant to Section 30, as well as personal exemption upon proof of reciprocity as provided in Section23. and (2} not engaged in trdde or business. taxed on a flat rate of 30% on gross income derived from Fhilippine sources under Section 22(a) and (b)~ all of the Tax Code. Ee that as it may, there is no dis pute as to any material fac-ts in th:Ls suit f.' Ut the parties seem trying to get the better of ecch other over by a quibble on the propor import of the pertinent provisions of the lncome Tax Regu- lations# which r e ad: I " S ec .. 5 . Definition.- i\ non-resident. individual' n1eans an in d ividual (~~) whose residence is not with in the Phili ppines; and {b) who is net a citizen of the Phili ppi nes � .. An alie.n actud~ly pres~nt in the f::...l'U:..~.ll?f2.1f'es who is .!lot a mere transien~ �E_~ojoun~r__i...�.. c. res:t d ent qt .the Phi1iJ2- E.!qes .. tpr l~ur,pos e s of the inco~_!:-.2..:5..!. ~ hether he is a transient or not i5 deterwined by hi z i.nten tions with regard to thH len .;th and n a tu r�e of his stay. i\ mere floating intenti on indefinite as to time, to return to ano t her country is not sufficient to constitute him a t ransient. If he lives in the f.'hillppines ami has no de f inite intention as to his stay, he is a r t ~ s ident. One t�1ho comes to the Ph i 1 :lppines for a definite purpor: e which in i ts naturP may be promptly ac c om p lish e d 2f is a transient~ pyt if his Eurpo se is s u�h _a .. natu r�.!= ~L.~.!L..~.?.~..t�Sllil.�9 s t a ~. !!13:\'L .�.e n ee f:" s s1:.�Y f 0..�...1..!:.@-2..S�9E'R.l J.shm e n t 1'.~ to that end the alien make s his home .~.!EPO r ,,U."Tf.::i:.fi1' t.h e~h i..:llil?..inest 'hebecomeE. 13 l

DFCISlOtl - C'I'A CA::)J::.. NC' . 3161 - 6- s..e .. a s ide n t t __thou g!J._J.J:..~.'L be h is_.!.!!.t~Y?:.!J:.�!:! at all times to ret.urn to h .i.s domicil e :fo� a;)road ..lvhen th~.. .f~urr.:2 se whichhe-S.?~~ has been consummated (.; r abandoned." ( Under- scoring supplied)___ - � -- - - " ::; ec. 6 . Loss of residence by alien.- Ar. alien 1r~ho has acquired res;ldence in the Ph i.l ippines retains his st.atus as a resident until he abandons the same and ac t ually departs from t.he FhiU.ppines. nn intention to change his residence does not change his status as a resident alien t o that of a non-res1dent alien . Th.lS an <.1 lien who acquired a rP..sic1ence in the l hi 1 i l�pines is taxable as a resident for the remainder of 'his stay in the r'hi1ippines. 11 We f ind nothing ambiguous nor obscure in the language of the regulations insofar as the same is brought t o bear up on the circumsta'lces of the petitioner in the case at bar. As disclosed in the re cords, the conversion of the temporary visitor's visa issued on March 20 . 1975 by th e ~ hilip0ine ~mb~ssy in Tokyo~ Japan, into a category of a pre-arranged employment under ~e ction 9(g), '"iU p ra. 9ranted by the Commission of I~nigration and Deportation o n July 23, 197 5 gave a more definite shape to pe titioner's intended stay, so to speak. He had now t h at involvement fo r the specif ic purpose ~f a c o n- tinued em p loyrr. e nt and for suc h indef in J t.e time as may be re0 uired b y the ex i gency of his position as Assistant Manager fo r mainten~,ce in the M&nila office of the J ap~n Air Line s. Th e locus of the

DECISION - CTA CASE _NO~ 3161 - 7- undertaking established, petitioner did take his home and continued to reside and live with his family in the Philippines through the years 1975 to 1979 until transferred to another foreign stat ion. We think such circumstances found for petitioner an arpropriate legal cubbyhole fit for a resident status vis a vis a mere trDnsient o r sojourner within the contemplation of :;ection:; 5 and 6 of the Hegulations , .�.!;1...�2�2., ap�tly ensconced in a holdins �that, "As used in the statute and as interpreted by the regulations, 'res idence ' means broadly, presence as an inhabitant in a given placeu not as a mere transient, but eithet in- definite a~ b~ ��ime or for a purpose ttat is such a nature that ~n extended st~y ma y be necessary for i �ts accornplj.shrnen �t." (Jc nes v. Kyle. 10 Circuit 191 1 190 F 2d 353) o We see no threat of ambigu ity arising from petitioner ' s intention which arpears amply sufficient to dispel any pall of uncertainty cast over his status us a resident alien. Petitioner's status as a resident alien need not possibly result in an inconclusive dith ering yet loose to ~un the gauntlet of respondent ' s rulings fashioned for non-resident aliens engaged in trade or business. It does not need . t .o be. It is beyond the reach of the

:.:J::,crsroN - CTA CASF NO~ 3161 - 8- issue in the instant case, which as earlier stated,is nothing but simply a question of distinguishing a resident alien from a mere trahsient or sojourner for income tax purposes ~ as conceived and defined in the lncome Tax Regulations. ~1gnificantly noted. moreover, is the fact that. "pet.i tion~r has consistently filed his income tax returns in 1976, 1977, 1978 and 1979, as a resident alien, availing of the optional standard deduction as well as personal and additional exemptions and until now the same have never been questioned. " (Memorand~m for ~etitioner , p. 7) � The situation where petitioner stood during the calendar year 1975 remained obtaining through the subsequent taxable years 1976-1979. \�le see no reason and none is offered for such a q uirk of a variance in the treatment of petitioner's income tax return for the year 197~. W~ hold that peti- tioner stands relieved of the tax liabilities for the calendar year 197c consequenced by the deficiency assessment , a contradiction by fiat with the unquestioned inco me tax retu r ns for the taxable years 1976 through 1979. v!e conclude~ and thett js a l l we need dec.ide, that petitioner qualified as a resident alien 1 3 ;}

DLCI:3ION - CT/1 Ct~~~J L.;C; . 3161 - 9 �. and find his income tax rr: .._; rn for the cule!1dar year 1975 in crcler . T]"le cr~ fun<l of i l , b 20 . 60 rep resenti ng payment in excPs3 ot the amount leyally due for s21id year hus still to be met by respondent. pet i U .on .;_ C,:l hereby -'�"' H .i thou t pl� onouncem<,nt a s t.u costs. JE CCl'-JCU R: