CTA Case No. 3137 (Decision)

~ ~�~a\'..K! OS' 'fli1fl: J"�~IIUl'f' lf~'" l:OURT OF TAX . P'P.EJ\l.. (JU!'SZON Cl'"' EX, ON CHDHCAL EASTERN, INC., C.T .A. CASE NO. 3137 (Formerly Esso Eastern Chemicals, Inc.), Petitioner, - VeT.'DUS -� THE ACTING COMMISSIONER OF INTERNAL REVENUE , Respondent:. X ------- --- ------------- ---- X DECISION The case before Us presents no dispute as to the relatively simple material facts but the parti es seem trying to get the better of cnch other by a quibble on the proper import of "any profit remitted abroad" a~3 a basis for the ~ branch profit remit- tance tax imposed under Sect ion 24(b)(2) of the Tax Code. Petitioner is a foreign corporation incorporated under the laws of the Unit ed States and is licensed to do business in the Philippines through its local branch with office at the Bank of the Philippine Islands Buildi ng, Ayala Avenue cor . Paseo de Roxas , Makati, Metro Manila. 21 2

DECISION - CTA CASE NO. 3137 2 On September 4, 1978 and September 25, 1979 said branch office paid the branch profit remittance taxes in the respective amounts of B244,63 5 .00 and E361,380.15 computed at 15% of the total branch profits of El , 630 , 900.00 for cal endar Year 1977 and 82,409,201,00 for 1978 out of which the actual remit- tances were made. On January 21, 1980 the Acting Commissioner of Internal Revenue issued a ruling where he held as follov-;s: "x x x relative to your query as to the tax ba se upon which the 15% branch profit remittante tax provided for under Section 24(b)(2) of th e Tax Code shall be imposed, please be advised that the 15% branch profit remittance tax shall be imposed on t he profit actually remitted ab road and nGt on the total branch profit out of l'lhich--the remittance is made," Sectio n 24(b)(2) of the Tax Code insofar as per- tin en t provides : "x x x Provi.ded further, That any pro fit remi tte d abroad by a branch office to its mother company shall be subject to tax of fifteen pe r cent (15%) (except those regis- tered with the Export Processing Zone Authority) x x." 213

.' DE:CISION - CTA CASE NO. 3137 3 Hewed c l ose to the conte ' t of Section 2l!-(b)(2) St!.~�2. as com;trued by the aforesaid R~Jinq_ of January 21 , 1980, petitioner claims that it should have paid the branch pr cfit tax of only e212,726.09 instead of 8244,635.00 and e314,243.61 instead of e36 1 ,380.15 of its actual profit remittances for the years 1977 and 1978, respe~tively. As a consequence it overpaid the branch profit remittance taxes in the total amount of 879,045.45, computed as follows: Net Profit Brar~h Remit- Correct Date Paid After Income Tax _t a~~--T a~- ( B_H T) _ GR T__ .Qv ~.E.Pi:.1~~.0..~ 1977 �Profit Tax computed and paid .� 15% of E?l,630,900.00 ~1ould be �� 15% of 8212,726 .09 e31,90B.9l E?l,L~l8 , 174.9J.* 1978 Prof.i t TCJX com puted E361,3BO � .l5 and paid �� 15% of !:?2,LJD9,20l.OO Should be �� 15?~ of _____ _E_L_O___.). 1:36.54 e2,094,Lt57 .39* Amount claimed for refund or credit ���. e79,045.45 ~Remitted amount) On August 26, 1980 petitioner filed with the respondent's Office a claim for the refund or tax L 21 4

DECISION - CTA CASE NO . 3137 credit of the amount of 879,045.45 repr~senting its alleged overpaid branch profit tax liabilities . On September 2, 1980 in order to toll the two- - year statutory period o f limitation had this petition fi l ed with this Court. Respondent takes no issue as to the clear and unambiguous .language of the ruling of January 21, 1980, ~~ra , that the 15% brnm;h profit remittance ~E.E..�~~ and .r:!.E..~. on the br a nch profit. out of which the rsrni t: Lance is to be made. Ha t.her , he invokes the right to rectify any error committed in the imple- mentation of the tax laws and regulations on the ground that the government is not bound by the mis- takes of its agents (Pi neda v. CFI Tayabas, 52 Phil. 80 3 ) , a nd a c c o r d i n g1 y c i t e s Re v e n u e i11e mo r a n d u m Circular No. 8-82 dated Marc h 17, 1982, providing, inter alia , 11 Co nsidering that the 15% bl'cln ch profit remittance tax is imposed and collected at source, necessarily the tax base should be the amount !~~~lly applied fo_~~ by the branch ,,'lith the Centra l Bank of the Philip pines as profit to be remi t ted." 215

DECISION-� CTA CASE NO. 3137 Suffice it to state that the argument agitated by the respondent was squ~rely met and rejected in a case simila r in many or so in t enor and circums- tances. It may be nece ssa ry to repeat what the Supreme Court said and what so plainly apply to the petitioner in the case at bar , that - 11 Petitioner 1 s aforesaid contention is without merit. What is applicable in the case at bar is st ill the Revenue R u li~g of January 21, 1980 because private respondent Burroughs Limited paid the branch profit remittance tax in question on March 14, . 1979. Memorandum Circular No. 8-82 dat e d March 17, 1902 cannot be given retroactive effect in the light of Section 327 (Non- n ~ t r 0 G c t .~.Y.i.lY__..!2X... r u..Li n 9. s ) 0 f t h e Na t i 0 a l Internal Revenue Codex x �. (Underscorin9 supplied) "The prejudice that would result to private r espo nd en t Burroughs Limited by a retroactive application of Memorandum Cir- cular No. 8-8 2 is beyond question for it would be deprived of the substantial amount of el72,058.90. And , insofar as the enume- rated exceptions are concerned, admittedly, Burroughs Li mited does not fal l under any of t.hem." (Commi ssi oner of Internal Revenue v. Burroughs Limited a nd CTA, G.R. No. L- 666 53 , Jun e 23 , 1986) Going by the said pronounc e ment, there can be no occ asion t? spec ulat e upon where to base the 15% branch profit remittance imposition before Mar c h 17, 198 2 or the issuance of the questioned Revenue 216

.. DECISION - CTA CASE NO. 3137 6 Circular. Otherwise, there would be a r ando m quirk in the equal tax treatment of cases similarly cir- cumstanced. We therefore hesitate to further fashion an issue into a satisfactorily sett led l e gal situation. Accordingly we view with ease petitioner's righteous indignation in prying loose from the legal constraint of retrospective application of the subject Circular, having stretched too far the effective range of ex pediency. Petitioner ha s prov ed entitl e - ment to a favorable determination as a matter of fact and law. WHEREFORE, finding the petit io n to be well taken, the same is granted and the refund/credit of the amount sought :i.s hereby ordered. No pronouncement as to costs . SO CJRDEnED . Quezon City, Metro Manila, September 30, 198 6. \~E CONCUR: 217