CTA Case No. 4207 (Decision)

.. REPUBLI C OF THE PH IL IPP I NES COURT OF TAX APPEALS QU EZON CI TY WARNER BROS . <F. E. > INC. C.T. A. ~ASE N0. 4207 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE. Respondent. x - - - - - - - - - - -x D E C I S� I 0 N Petitioner is foreign corporati on duly licensed by Philippine laws to e ngage in bus iness through its Branch Office. Within a period covering the years 1985 to 1986, the petitioner paid th e following 15Y. br an c h profit remittance taxes with a tota l amount of Pl,247 ,573.62, the computation of which was ba sed o n the ne> t profits: Patf?. .. E~J<:! .lk~nch.J~!QH~ _151 Tax Pa~<.! em. GrQ.!!.!LA�oun.! Feb. l, 1985 P1,609, 894.62 July 19, 1985 P4, 018, 193.18 Fe�i!1~!1.t~ Kar. 17, 1986 T 0 T AL ~?�.�9_~1..~9..~-~~ 241,484 . 21 f=~J!JJ,..~s~" 42 602,728.98 ___1.Q*~...!!2 f_!,_ 2471 573, 62 .. .. Jf;. � � �

DECISION - C.T.A. CASE NO. 4207 -2- On March 11, 1987, the petitioner requested _, respondent for a tax credit on alleged overpayment of the above stated branch profit remittance tax in the amount of P162,727.00 representing the difference between the 15% tax paid on branch profits [~~~-~~~pl~ amounting to P8,317,157.42 and the amoun~ of P7,232,310.80 actually remitted which it allegedly should have been the basis of the computation of the branch profit remittance tax. Petitioner contends that in computing the 15% branch remittance tax on its net profits, it should have first deducted therefrom the branch profit remittance tax � tself. In support of its contention, t he pe i ioner e tea the ruling in the case of Commission r of Internal Revenue vs. Burrough s Ltd. <142 SCRA 324 > and Our own ruling in the case of Bank of America NT & SA vs. Commissioner of Internal Revenue <CTA Case No. 3799, October 29, 1986). However, in a letter dated November 10, 1987, the respondent denied the petitioner's claim contending that: "While in the Burroughs case, the withholding tax was based on the branch profit ac tually remitted citing BIR Ruling dated January 21, 1980, for the reason that the remittance involved therein refers to the year 1979, t he said BIR Ruling was already superseded or revoked 1 ' ) A -,

DECISI ON - C.T.A. CASE NO . 4207 -3 - by Revenue Memorandum Circular No . 8-82, dated March 17, 1982, which explicitly provides: 'Considering that the 15Y. branch profit remittance tax is i mpo sed and collected at source, necessarily the tax based should be the amount actually applied for by the branch with the Central Bank as profit to be remitted ab road . Likewise, while the Court of Tax Appeals i n the aforesaid case of Bank of Amer ica NT & SA interprete d the provisions of Sectio n 24<b> <2> <ii) of the Tax Code to the effect that the withholding tax should be based on the branch profit actually remitted, this decision was appealed by the Bureau of Internal Revenue to the Supreme Court <G. R. No. 76512 >. Hence, the same is not yet final and cannot be cited as t he a pplicable jurisprudence in this case. Since the transactions, which are the subject of the present claim, refer to the years 1985 and 1986, the ruling applicable thereto is clearly Revenue Memorandum Circular No. 8 - 82 <BIR Ruling No. 212-87, dated July 17, 1987>. Accordingly, your claim should be as it is hereby denied. ' " This constitutes the final dec � sion of this Office on t he matter. '" The sole issue in this case as to whether or not the branch profits tax are computed baaed on the profits actually remitted abroad or on the total 1 ~)d .

DECISION - C.T.A. CASE NO. 4207 - 4- branch prof � ts out of wh ic h t h e remittance is made h ad been sq uarely ruled upon by this Court in the very r ecent c ase of Compania General de Tabacos de .I Filipinaa (Philippine Offices) vs. Co��issioner o� Internal Revenue <CTA Case No. 4451. August 23. 1993 > which we hereby reiterate and reproduce as follows: "The case in question is readily distinguishable from the Burroughs Limited case <supra), where the Supreme Court upheld the application of BIR Ruling of January 21, 1980 because the branch profit remittance tax was paid on March 14, 1979. The High Court added that Memorandum Circular No. 8 - 82, dated March 17, 1982, cannot be given retroactive eff~ct in the light of Section 327 of the NIRC. Section 327 provides for the non-retroactive app l ication of rules and regulations revoking, modifying or reversing prior ones if the revocation, modification or reversal is prejudicial to the taxpayers. "In an earlier case, involving the same parties and issue regarding the taxable base for the imposition of the 15X branch profit remittance tax, this Court, in a decision which has already become final and e~ o ~tory, has this to 9 yt ' ~.-J...QL.t..i..Q.�..!. , t h e h o 1 d i n g in the ~.Y.:.!:'.X_Q_y_g_tl_�?-____~.:i._'!!.!:tg_g_ case lends settling cognizance to the validity of the Memorandum Circular no. 8 - 82, where as ruled by the Supreme Court - What was applicable in the case at bar is still the Revenue Ruling of January 21, 1980 because the private respondent Burroughs Limited paid the branch profit remittance tax in question on March 14, 1982.

DECISION - C .T .A. CASE NO. 4207 -5- Memorandum Circular No. 8-8 2 dated March 17, 1982 cannot be given retroactive effect in the 1 g h t of Section 327 of the Nation al Inter n al Revenue Code XXX, I "Stated otherwise, the circular must be pro s pective in applicati on. Established a bar is a payment effected on August 16, 1982 subsequent to the issuance thereof. Hence, petitioner's case falls w't h in the compelling import and force of the Revenue Memorandum Circ lar No, 8 - 82 d ted March 17, 1982. " �Compan �a Gene a De T _bacos De Fili.pi.naa <Philipp n e Br nch), v. The Co11t11ti.as i. oner of Internal Revenue, CTA Case No. 3 827, October 14, 1988. 1 "In the recent case of Commissioner of Internal Rev e nu e v. Bank of Amer i ca NT & SA and the Court of Tax Appeals, CA-G.R. SP No. 22529, September 19, 1990, the Cou t of Appea s upheld the validity of Revenue Memo andum C ircula r No. 8-82 . This Court dop s t he reasoning of the Court of Appe ls wh n it ruled: 1 xxx. The use of the word !'_�?_IJ!.i t t..l�.9. may well be understoo d as referring to that part of the said total branch profits which would be sen t to t h e head office as distinguis h e d f ro m the total pr ofits of t h e branc h <not all of whi c h need b e se n t o r wo uld b e order e d r e mi t ted ab ro ad>. If ,I the legislature i ndeed had wanted to mitig ate th e ha r shness of success ive t axat i on, it would have been simpler to just lower the rate s without in effect requiring the r elatively novel and c o mpli c at e d wa y of c omputing the tax, a s envis i oned by the h e rein private responde nt. The same result would have been achieved. "The attempt to d edu c e l e gislative 1 I) ll ~

�. DECISION - C.T.A. CASE NO . 4207 -6- intent with regard to Section 24<b><2><ii> of the Tax Code would only serve to allow captious and strained intendment of the law. NI MIA SUBTILITAS IN JURE REPROBATUR, ET TALIS CERTITUDO CERTITUDIMEM CONFUNDIT <The law does not allow of a captious and strained intendment, for such nice pretence of certainty confounds true and legal certainty>. As held in the case of _, United Stat es vs. Wurzbach, 280 U.S. 396, 398: 'There is no warrant for seeking refined arguments to show that the statute does mean what it says. ' not "In view of the foregoing, this Court finds that the clear import of Section 24<b><2><ii) of the Tax Code mandates the imposition of fifteen per cent ( 15Y.) tax on the branch profits remittance, which in tax parlance is alluded to as the "tax handle" with the total amount remitted (not the total amount of the branch profits> as base for the tax. " [cited in Commercial Union Assurance Co�pany v. The Commissioner of Internal Revenue. CTA Case No. 189. S ptember a. 1992. 1 "Thus, in view of the :fact that petitioner's branch profit remittance tax for 1985 <partial> and 1986 were paid on tl~Y����---~-L_19�..�}_, after the effectivity of Revenue Memorandum Circular No. 8-82 <March 17, 1982 >, then what should apply as taxable base in computing the 15% branch profit emittance tax ie th amount �Q.P.:t:.~_g_q fo r with th C ntr 1 Sank as profit :t_g____!:l e _ r e '!l.i.:t..t_~..Q__<!._b r_g ad_ and not the :t.Q.t...~J._.�imount of_ branch profits. " Viewed in the same light, inasmuch as the branch profit remittance tax in the present case were paid by the petitioner herein during the years 1985 and 1986 or during the e.f.fectivity of Revenue Memorandum Circular No. 8-82, it su:fficea to state

DECISION - C.T.A. CASE NO. 4207 -7- that the petitioner's claim of overpayment of the said tax is without merit . (\ WHEREFORE, judgment is hereby "' rendered dismissing the instant petition. No pronouncement as to costs. SO ORDERED. Quezon City , Metro Manila, December 21, ~LK. GRUBA Judge WE CONCUR: esiding Judge ~, 17"~ I RAMON o. DE~Yl Associate Judg ,I

DECI SION - C.T.A. CASE NO. 4207 -8- ER-riF CATION 1 hereby certify that this decision was reached after due consultation among the members of the Co urt of Tax App eals in accordance with Sectoion 13, Artic le VIII of the Constitution. ~&~ RHESTO D. ACOSTA Pres iding Judge Court of Tax Appeals