CTA Case No. 3081 (Decision)

REPUBL IC OF THK PHILlPPINES COURT OF TAX APPEALS QUEZON CITY WESTERN INTERNATIONAL HOTELS COMPANY Philippine Bran ch, Petitioner~ - versus - C.T.A. CASE NO. 3081 THE ACTING COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - X DEC I s I 0 N Th is is a claim for refund or tax credit of petitioner in the total amount of P150~666.41 representing ove rpai d branch profit remittance Petitioner is a foreign corporation duly licensed to engage i n business i n the Phi lippines. In the years 1978 and 1979~ peti tionet- mad e various payments of branc h profits r e mittance tax on r�emi ttance of profit s realized totalling P1~15 3 ~307.49 for the years 1977~ 1978 and 1979 . In a ruling date d Janu ar y 2 1~ 1980~ respon d ent Commissioner held that "the 15/. b r anch profi t remittance tax s hall be imposed o n the profit branch actually re mit ted �and Q9...t.. on the total pr�o fit out of wh ic h the remitta n ce is to be made." 117

DECISION CTA CASE NO. 3081 - 2- Based on this correct computation of the branch profit remittance tax, petitioner should have only paid the total amount of P1,002~641.08, instead of the amount of P1,153~307.49 actually paid, resulting in an overpayment in the total amount of P150~666.41. On April 1~ 1980, petitioner filed with respondent a claim for refund or tax credit in the total amount of . P150,666.41, representing its overpaid branch profit remittance tax liability. The only issue in this case is whether or not petitioner is entitled to the refund or tax credit in the amount of P150~666.41. We hold in the affirmative and we hold that this case is similar to the case of Exxon Chemical Eastern, Inc., vs. The Acting Commissioner of Internal Revenue~ CTA Case No. 3137~ September 30~ 1986, wherein we held that "the 15/. branch profit remittance tax shall be � imposed on the profit actually remitted and DQi in the total branch profit out of which the remittance is to be made." On January 21, 1980 the Acting Commissioner of Internal Revenue issued a ruling where he held as follows: relative to your query as to the tax base upon which the 15/. branch profit remittance tax provided for 118

DECISION CTA CASE NO. 3081 3 unde tr fl8ction 2-1 (b )(2) o �f the T a :-: Code c.; f-�ti:\ 11 be i rnposed ~ plea se bE:~ c1 d vise d tha.t t h e . ~':i Z. b r an c h profit remitta n ce tax she:~ 11 bE~� impo"',e d ort the pr� ot i t actually remitt e d abro ad an ~ O..CJ ~. on the t ota l br�anch pr�o�f i t out o f which the remit tance i s made." Se c: t :i. or l 2 '1� ( b ) ( 2 ) o �f t h r:? T .:.1 :: Co cl ~ insofar as pertinent provi de s. 11 F' r� ov :i. d e d �f u tr the r� ~ :-: :-: :-: That any profit remitted a broad by a hran c h office to its mother company s hall be s ubj ect to tax o f fift e en per cent ( 15/.) ( e:: c: E'P t t h os,P. ,�-egis-, te n ,? d with the Export Process ing Zon e Au thor� i ty ) :,::-: :: ." H ~::>we d c 1 os;e to tht'? con t r;?:�: t cJ f Section 2LJ-(b) ( 2) 2.1.-:.IP\ ~ as constr-u e d by the a�foresaid R.\-tJ ..tn.9 o �f J anuar�y 21 ~ 198(1 ~ pe tition e r claims that it should have p a id the branch prof it tax of only P212~7 2 6.09 in s tead of r 2 4~~63 5.00 an d P 3 14~243 . 61 instead of P3 6 1~380.15 of i t s ,;;~c tual pr�o �f i t r� emitt a nce <; for th e ye.-:\r~; .1Cf T7 and 1978~ r espective l y. As C.\ con sequence it o ver pa id t he bran c h profit r. t:,mi t t <:1 n CE� ta ::e o; in t h r.? t o-1::<:>. 1 arnDt...tn t of P 79 ~045.45, computed as fol l ows: Pa.Jgfa..i~ ~gt _Pr,(lfi..t. ~r._an~-~ . Re~J t - MJe r..I.r:1~t?ID!!Ja.x. t.~~-~.e.J ax (BRT) Corr,ec_t B.RT Overpay11ent ~.9.7? P.roJiJ Ta x co puted P244,635.00 and paid 151 of P1,630,900.00 Should be 151. of P1,418,174.91t P212,726. 09 P31, 908 .91 119

DECISION CTA CASE NO. 3081 - 4- Ta x computed P361,380.1S and paid 15% of P2,409,201.00 Should be 15% of P2,049,457.39t P31 4,243.61 P.Jz,n~.~~ Amount claimed for refund or credit P79,045 .4S t(ReMit ted aMount) On August 26~ 1980 petitioner� filed with the respondent's Of fice a c l aim for the refund or tax credit of the amount of P79~045.45 representing its alleged overpaid bt- anch pr� of i t ta:: 1 iabi 1 i ties. On Sept.embet- 2!' 198c) in ot-�del- to toll the two-year st.atutot-y p er� iod of 1 i nH taticlft . had this petition filed ~<Jit.h Respondent takes no issue as to the clear and unambiquous language of the n .tling o�f Januat- y :?.1.~ 1980~ ?.L.U,11::- !~ ~ th a t the 15% branch profit remittance tax sha 11 be imposed on thE' pl"'of i t 0C:..:~u<:\],]y r�emtt..:t.!?d..... �'.l::l.r:.9.a9 and n.Pt on ttH~~ br� anc h pl"'ofit out of which the remittance is to b e made. Rather~ he invokes the right to r-ec ti�fy any erTor co mmi tted in the .i.rnplernentat.ion of thf? ta:-: l a �IS and r� eg ul ,:;, tions on the g ,~oun d th,::\ t the <::JOVel"'nment is not bound by th E? mi stakes o f i t s agents ( Pineda v. CFI Tayabas~ 52 Phil. 803)~ and accol"'dingly cite s Re ve nue Memol"'andum Cil"'culal"' No. 8 - 82 dated Mal"'c h 17~ 19~2~ providing~ inter a li a~ "Considel"' ing that the 15% bl"'anc h pl"'of it l"'emittance ta:.: is imposed and collected at souJ"'c e ~ nece ssar� .i 1 y the ta :: b ase should be the amount actually applied fol"' by the bl"'anch vlith t he Centl"'al Bank of the � Philippines as p l"'ofit to be r� emi t ted." S u �ff ice it to state that the al"'gument agitated by the respondent \�Jas s qual"'ely met and rejected in a case 120

DECI S ION CTA CASE NO. 3081 - 5- similar in many or so in t e nor- Clnd circumstances. It m.:.\y be necessc:u,- y to t'��epea t 11-1ha t t h e St_\premc? CDut~t s;;;,id r.:md \!Jhat so plainly .:-\pply to the pPt.i. tiDner- in the ca se at bar~ that "F'et i tion er-' s afores aid contention is without merit. l!-Jhat is applic.::~ble in th e c.:il!:::,f:? at b ar is sti ll the Reve nue Ru 1 ing of January 2.1 ~ .t 980 hecause private respondent Burroughs Limi t e d paid the branch prof it remittance tax in question on March 14~ .1 9 7 9. Me morandum Circular No. 8 - 82 cia ted March .1 7 ~ 1 982 cannot b e gi ven retroactive effect in the l:i.ght of Section 327 <t:�f.qo ~::: .t r.:r:?.t.r.9�1.~ _iy.J.. .t.Y....._..9f. ..J~ q .lJ n.g.~) of the Nation a l Intern al Revenue Code xxx. (Underscoring su pplied) "The pr-ejudice that \.'JDU 1 d result to private respondent Burroughs Lim ited by a retroactive app lication of Me mor a ndum Circular No. 8 - 82 is beyond quest ion for it would be deprived o �f th e substantic.d amount of Pl7 2~058.90. And ~ insofar as the enumerated e :-: c e p t i o n s are conc erned~ admitte d ly~ Bur-roughs Limited doe~::; n ot fall un d er any of them . " ( Commissioner of Inter-n a l Rf:?venue v. Bu rn::Jug hs Limited and CTA . G.R. No. L- June 23 ~ 1 986 ) Going by the said p ronouncement~ .� there can be no occasion to s pecu l ate upon where to bas e the 15% branch profit remitt a nce irnpo sito n befor e March 1 7~ 1.982 or- the issuance o�f the question ed Re v enue Cir c ular. Oth e rwise~ ther e would be a random qu irk in the equal t ax treatment of cases s imilarly c .i rcumstanced. l!-Jf.�? therefore he si t;:?. te to futher fashion an issue into a satisfactori l y sett led leg a l situa t i on. 121

DEC I SION CTA CASE NO . 3 081 - 6- Accordingly~ we view with ease petitioner's righteous indignation in prying l oose from the legal con straint of retrospective application of the subject Circular~ having stretched too far the effective range of expediency. Petitioner has proved entitlement to a favorable determination as a matter of fact and law. WHEREFORE~ finding the petition to .� be well taken~ the same is granted and the refund/cred it of the amount sought is hereby ordered. No pronouncement as to costs. This decision in the case of Exxon Chemical Eastern, Inc . case finds stren gt h in the decision in the case of Ma r ube ni Cor p o ra t i on v s . Commi s s i one r of Inte r n a l Reven ue~ 177 SCRA 500 and also the case of Commissioner of In t ernal Revenue vs. Burrou ghs Li mited , 142 SCRA 324 . WHEREFORE, find i ng t h e petit i on to b e well ta ken, t he same i s granted and the r e fund /c r edi t i n the amount of P1 50,66 6.41 sought is he re by ord ered . No pronounceme nt as to c o s t s . SO ORDERED. Quezon City~ Metro Manila~ March 7~ 1992. ?-J 1 Lj " - - ANTE/C. ROAQUI N Judge I CONCUR: ~~\Q~~ ERNESTO D. ACOS TA Presiding Judge 122

DECISION CTA CASE NO. 3 081 - 7- I her-eby cer-ti �fy that this dec i sior1 r-eached after- due consultation between the me mbers o f the Cour-t of Tax Appe a l s in ac c ordanc e with Section 1 3~ Ar-tic l e VIII of the Co nsti t ut io n. ((., .. i:VO'-Gl-J.._ ERNESTO D. ACOSTA Pr-esid i ng cJudge Cour-t o f Tax nppeals 123