CTA Case No. 4600 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY AMF SClEtiTIFIC DRILLING INTERNATIONAL, (PHILIPPINE BRANCH). C.T.A. CASE NO. 4600 THE COMMI SSIOflER OF Promulgated: - H~TERt.fAL REVENUE, JUN 05 111!ti ~ �r�l-�1�--r-, r� 1D\,~..�.-.:-,r-}I.) '�- ~.,. -�� X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ;~ DECISION r�- ,� t r ~'-<-. ~j .-i �~'-.�lti�~l� ,:--<-�:-:"�~'IJ-.�-,:-�. t.-l�1.~�. 1�'=�:'f. Ull�'-�.�1 '-~---' t" d.- lt;:-:-.-n;::.,-::-0'---j d �-') <�tT~�'1� po-:-1.�l-. T� 0 l�l t ll 1lQ 1��-�. 11' 11:n::-, J to t:Ix:&s in tlle. ;~~m�.)tJnt �-A L2_.939.7(H}00 for the year 19D9 _ t- t- t ,__ .. tl� -- -1-� -- -�1- -�1 .~-��"-�:-- lL,,-"---.-'1-11'=-�:�' l,-JU.- '-�''�.~' .-1"" 11~)~�:1.�-.111._o._;�.:.-.,. Tr~�)t-:-:'.L-1-r.-!llt::-:-:'t.� 1--�-:� --:-1 1-~----:.-.1-1-.t~::1'lt- ,'--,1_1-:':' rr--111_1,_ 1lr;--r'l--r-'�1;11t:;-;::--. .t_.-111 t�-'--�'t'�-�--:-~1. �-1 �:��. I:'-t��-:,_r.1' '��.--tl1 �-,t,�.l't11 rr.l-'----�'�-=-�t.-�:.�1. '.--''.-..�l''---�il�-�'=-.:'--:-.-::.. �-:'-.t.- [-i>�.:�:'�-:�'���-�'----' primary on is to pr(�'lide It::. !��"�-<=_-t_1--�,1:.--,l-�-~1-'-"-1lU'">::�'_. '1�1�!,:..._~ l.--1�(_-, !~-.'1r,:_,_l11'l;-_-l__ fundi �-:J.'-:� �_--, ~.11��~u.,-11--.:�Ai�<.l-.1~ o:".1!-1"111' 11.;.~... -f1.e. e.. P'-.A. n t.- ..:J.!H_.], 1)�a�,�.'1:'. �..�_.;!"!" .d- lh-.�1 1��..��Jg-g-.mg. ;~:.e' t.VI<'_.,.e..,:-. t::.. C�)mpa.ni<3-s -2ngaged in oll exploration ancl povrer de~.relopment �- {�-':~:.-->-:;;'=:' E-."-.�.il=.-�- ..~\. [.":..E~~-- (-'-��--~1�t.�-1�r�1-��--~-d--t-~ '-�.!t� p���"~".�=.--1:-:,�-..tr-a t.1'~�--_ln I�,T��-.�_-._ r---i.-::-. �",� ] �-:-,.!�1-'�-�j -Lr:�� [~P�(~)I ~ ~ 820 (

DtriSIOH- C.I.A. CAS� lW. 4600 -2 1 t<,.-�,t-� .~0.".�-~-.- f �i�;:�:-.::�'-\�.t~" 0 t,:;,;��l-11"11.,.-.. "'!" _.. :-1 1 H-1.:::, �:! (j ,1 lr', ; ":� : .ti ._.J. ,� J. .... !"A+lrlAt"A;�l .;-,-";�:':.1�-I ;rj,i,��,,�:�;,.�,�--~� �"4- '�" j, �� '�' '�' '�"' �' '�" '�' ;,..�1-,J. 1.1 "� J.,.l �" ��-���r��.:�:::..~r. :.-._=.-l-tl�,-�. n s 111 t1�,.::::.- .r..::�.l..-l1.11.-!r-�nr-1�t-lf=.>c-; l-l�t"I(-lr;-.t� .nt't-P<..::-l--(l;-::..t_�lt.l-:.:.--'<-'"�1 Df:-.c-t-Pf..=>- 1'~~'\-) . ,.!..=.;~,.. . I t.. - -- ..... -- �A its tc�c�l'3 an�:l o:?quipm>:>nt to Philippine Geothermal, Inc (PGO. a tllt- a.nwunt c.f P l4.602,2t�.3.00 (US$670,050.79 x P21.792.:)) for t.l1;::. 0f P�l oc,6 /:gA 00 ..,.r1li,��h it. , ...r;:-,~::; ~-�.rt.tl-111;::.1(1 :::t !�1�1-l:::tl t'J?:..~\.."a.o~', l�n :=-tl10llt1t ! " -�� "' ,f-"]; ,_. �,.� � oo � � 1I .&. , .&..&. t I -, - I1 , .. .&. � -� -� '� .}.. " -� '.J' '1. .a. .. 1 p-,::. ,,,..r;:-� '"'_., ':._..,rH.. n f, 1 ;��,nt�lt ;��, n} '::' c: r J�._=.~~,. .�.)i._-~; �' (._I..(..f~~' 1 �'-:�-�11�1~J.�~� �-�� (}7 f'l ') () r ~� -~�.&f. l-11�1~_-:}(f 8_-.11(_-~. ... . . . . . . .~ ~�~�~ ~...,. 1 ..., ..,. , 1 _} �~� _ ) . - �..,., , :;,.\ _ _ l�.::,p�ll�tt.:.,-1 tl�l;::. P.Trr' .-..-. +-,.-., o. �� ...1 �~��~�� �- 1..... �� ��� - ~ ,-,.-.,!�I-lf~llt;::.rl .=t 1�r��.��ll�'��,~~,.I.7I,...j.,_ 1..' ��� '� �� -� ����� �,. HtV3l In<:ome T'3X Amount or� Tex A-rnount or 'Qlithheld 3.~ Souro:::e In<:ome Pavm.ent R;3.te Tax '\ltithheld P.en\;:;1 of' e�.:J:Uipsent f' 11 ,'}t:2. '}t:1.18 p,:;_ym.ents to Non- P 4_.o4::::_.o:;:: 1.99 1,414. 707.71 F' 2. 26B. }a6 29 f.~es1�jent fcr~1gn 29. 116.91 Corpoi�a.tic�n Cre�Jit.-31�le In�...omt: T3x ~!ithh-:>1�:J ;3_t Seut��::e P:3.;lmetit2 to p 2,911,6:33.94 �Contrar.:ron~ TN;31 Fin81 e11�j P1e.�:::=6_092 11 Crr:�.EU:�.ble T;3)~ '~'�ltthheld at Sc�urce 82i

DECISION- C.T _;.__ CA.SE NO. 4600 -3- (1n i\[."'ril 11.. 1990, p~tit.ioner fil~d its Corporat>? l~~nnu.al Inc�::��nw Ta::: F:<?.tu.rn for the calendar year ending De�::mnber 3C in(:ome. ta.x of .P4,4f,0,300.00, '.3ro�:;::: ln.::c�r.ne: p �),-~__) ..7' 6~?�..�.. 16. �?--�. n. o- T~�:.:tmic:::1l Servio~::; ___ v.:u�i�.)tt:: ()ro::�::;:; Incom'? 1 -~. 16 q77.00 Le:::.:::. Deduction::: F 3~,.0(\5�. 14f).00 Net Ta.:D.ble Income -~. 1, q91,77:!. .(H) p ~.09.';) ..\6.~~.00 I 1i.C�)!1lE' T::t.i~ DFB F;. 1 ,.-., !:', .-.. �=-. '7 (_.J� �",.�-")"!')" ,l"w"i�w�"'-',1'�.� j Le::s: :3) Pri('r ys�:,.r�s E:~�:�<?.:::::: Cred1t P2 . 2 Of., 9f.f.. OO b"l ~~r>?dit;:jue- Ta:~ \lili.t.iil"!":'ld c:, C:.(:.2 q[q_t.)O ~.1.mou.nt Eeiu.nda.bl~ p 4.4.~\0, \00.00 T..:�1..<:�:�" �p.>:.::�:'.C' U;, �1.! 1���..!.! t.t.�!,..'�::.:' �l' .,... ;r.~-;:.;_..�c�'.l. .1-:.::'�1-11-. 111;:; r�,.,:.:_:..��.�.,.:.:.:..1"!"111.'.;.,.:.::1.. .'_)) 1, 1.�.:k�J~"t:".i�. ��=���t�1-(.'.' ,\�,:1,11-;::c:>r dr 1"1 ��1 ��1 r�I�l t"�>�::�"�I�I-I� fi��'�i�--.1:.L1'�li'::��:�' ....... t" ,I.'_o."1 ._-~)(_-�-..i , (_'_,._�_,_1,�-.r�!1r".i.lJI.t-.�.~.''.-(i ..;...,,_c-.: �:._ .. I"11���11��::�:'1-. .<-:1..1�1..1. '��-�-�'1-1�1�1t' r.._.. --') , 7t�.'_JI_�'_.1_1.�_.1i.l_. I ':::' Ted111k.a.1 Services 1 16 00 �:~ (J'7'7 II -i � I I .- - ~la.riou::: P20_.4.32 . t35�7.00 Ci�n::.:::s In.:::onw �����1.,::, 1c;f., } �:~ ,:;. nn L~-�:s: fle(l U('ti('�fr3 ��--,~~ Net TaxabiE> fn('<)fflE> p 2,_-:)2 f.. 62 .:.. 00 I n�::�orne T:::cr D1J.E> L<?-:::�::: :~)Prior y;;;.;::n�'::: Ezce:s Credit P l.4:;6515.(H) b) Crs-ditable Ta.K --~. 71:';4 c, 1r..oo Viitllllekl �:� �:� ((7 C:, ('( �:: (I (I _ , _ �. I I ( �J I.-��-� p 2.9.';i9.700.00 822

DECISION - C.T.A. CASE HO. -1600 -4- ~:-redit (Exh. H) in tlH amount c�i P2_.9.39. 700.00. representing tc� Section 204L}) of the Tax Code: Petitioner cl:3.ims that the illr->:)me rs<:eived from Alcorn �31lould have been excluded fr.:)m the V�lithheld therr?.fr<::rm sh�:)Uld therefore be excluded from tJN� f,...,t- Thus, tl1e t't�l,-.. ~.-.-�t�,-:~:-:-,..,.J-.ll�.t..�.:c..~u--.j1lt.:-.' -.1-- ��� -..-'-.-' Il'=:-' t-~~,-..i~�,:.:.:-.,.-.--~� ~��'\�'1..t1-.1-~1�1��~;�::tT ��t~lo -..� t.1.. 1c�-�. J-._.~urr�c.....r�lt'J' .i.,,.r-::.;-..:~...r- � incc�rw:- �:A :P 14_.6f)2_.2 .~\}00 received from Alcorn V�l3S deducted frc�m the Technkal Service Income of P3176&. 16.}00. The 1-. 1,.-i lf,C: r,n tl1A {I;t�r��.-�t ..,.l _(-.-.... l.~-.:.,1.!1�~---t�:.;..,. .-.----.r� rn �;.-) ._. _ () _.~,. (~ J!.)=~..n... -.. ..,. 1--.::~. l .... .... .... e.... . Tc...r...".L"lt"1l�-,..-..o. \,_',,:-.:.r.1-.n, t'r.'..C. ..... !lf'�.r.. '�,oJ ll lA �. , for 19�~�9 Like1,...7ise. the �original Creditable Income Tax Withheld for the .:::unent y~ar 0909) of P.3,.3::�3,991.00 slleould t:~ reduced . Therefor>?... �:::rnlv th~ oxpc�r:~te income tax as incc�rp�::-rrated in the Amended Incr:::�me Tax :Return of petitioner f.:-.r tlw year 19(19. R t1�1.::. "'-.~:-:._�_,:-rn��.�-��--�,1~l.-r�".i.:�:-.�t-1 t-� 1.1"1 1�1..:..:..1� :�l-!�"t�-�:-:>r..��.,.1..:..:..1- '--~�~llc..... a<.:t:�:-�.i._l t1-�1�=�-1-t... . �-� r~,-r�;::-:�. t..-.1. . tt',---.�,l-1 !--�~-~�t'lc...:,.r..�.l t,,_-...,, �::1r��r-�,c,�:-1!�1�na t"�:-,l'lr::.r! ,.-.,!- l�t r-t:7Jt~. ;, -�-� �- �- '':-'1� �����:1']�-�,:::. .... -~~~~-t1.n11 .. �-� .� - �-� :_._ i:) tl1�=-1t 1n�"c~.-tt.-�t!"-�r�.�..,.t}A.....l" �-�� �-� �- t-.�-��-��, .c_t. �~~";...l...t...A. . �-� -� �- '-� '-�;:. �-� '-� �-� - �-� burd~::-n i�;; >:::�n pe.titi�-:-on>?.r to �;hov? pro�:A that it is entitled to the refund �:la.im.::-d. ,�--.�,'r, A�-�t�nr-��:-,_,1_ � .�.--1 1..t."tr�.."��'-f�;!�l�lc�-�. t�=. � v 1-,....,.,1. 19f.9 due to _,_~JI. 823

DECISION C.LA. C.ASI iW. 4600 -5- ye.;3_r prescriptive period fc�r filing a claim for refund or tax credit, lC: 1 r!~��,;':�:' .t-.i.tCl. .�''�t."._.l<='>�' t" -t"t"ll;':�:' ,;'��l t�1.~�1;:':�', rl��',;:'�:'.t't�"tt'��,.-.�.,,�r-1 fr��r� �'�11 r�;::.~-,l�A~IT .&A.&rj�."r�t"l .iJ 1(.".�!0:; � V I "�' '/'( 1..,. .1 '�' ���r� 1� � � tt� .t:�".�-���~ _ 1~.:-;:.:.1�1�1�10c�.--:.� '.�..�.�t� t.1.�11�r--~� �.~..r..:1...c_�.;.:.:,. rr-)r�!�;�;�.'�.�;.�.;..:.:.t�lt�;.:..:,..�...-.J.a. tt� 1-A.. t� t��l1- 1_1_1�<J. ! 1!r:1) t.1....1. t~:-! ..� ��..-' r�-�l,'��-�-'r�-��J_J_+J."I.l�-A� tlt."<.tJ". TiT �-:-1r.-:.. T'<z"Ta�'"~��l 1 C�;".-j�.:-i� tu.-.r:;.--.:�)t: t-"� t�I�l���..�..t. ll��:�::.:�..l A".t'' P��t"�r- }�A-� !}I...'. ~~ t~-, rr-.ir�r�,..T.. Tv,:.:.... >�-�=>t"-l�tl"t.1J.A.... !"I"!�A.r <!lt l �'�-� t .. ���r� tr-. "'1. !"A<flJl"l(l t�A t1�11�r-� �C� t.~.ll;~ ::�...� �.� f�t"�';jt"t � ... �.j tr.�:1.,.�.~;�._ '� ':;' '� 1,.. r.;:yr .,�}]jOCr"llt ..�'-...! ..� �-� t�,�-:�:,....r�-;)I~TA._<. t�;':J:t.j l.'..'1:/ i hVT\"�:,O:_.,T_;T' '..,/�:t pE>titir::rn f�::��r re-vi-?V�r Tl1e follOV�ling documents '�t?Tere presented and offered in E-Vi(!ence, to wit: 1) The �:)rigina1 Corporate Income Tax Return for 19f::.9 F.) fi1E>d c~n April 11 . 199CJ, together Vlith its 21.ttachments (_a) The Audited Fina.ncia.l Statements; (.b_i Sd1edule of Taxes and Licenses paid_; l'(� ., Sclwdular Deducticms; and t,�.-,1 .:::.---1-1"". ~� �-� .�._-jll-l�lA�� ,�.�-�.,Lf r�~.:�:�.:.r�-��t�;�:�:�..�--��~��i~-'..;.�t.l� ,..�..,1�1 � 2) Tlle .~.mended Corpr:)rate Income Tax Return f�:::rr 1909 �:::imilc:tr to:::� ths- iterrr; ;)br:)Ve-enumerated_; --.1 I Tr .�:)�>i (.�' ;.:-.,1-t.t"!.1. t;::. (.�.��-::i....... v���t� Fl"t�1�:< t�l (,'�..,�.�r�I.l-;:,:. r ���;::. .. �~!..".:T TIrI,(l" t�1� 11�1-;.:�:.}..�-j i~::l.t�. ,,)~r.�--']1-� '�-���� '\E".<.';u~l . � 824

D:tCISIOtt - C.LA. CaSE HO. �1600 -6- \.EX11. C); 6) Su.nmEtry c�f TftX Vlithheld at Source issued by PGI for the monttr:: of J:3.nu::tt-y (Exh. I>. r..~arch (Exll. L), June (Exh. 0), and Z} and :BIH J.>a;.~ment Orders (Exlls. J, Ivl, P, s. V, and Y) as proof c�f remitt:uKe and ra.yment of the ta.xes v..rithheld to the .BIH by f.) BIF: Certifi-::::::t.tlon dated February 14, 1992 certifying that the C�)nfirmation Receipts presented by :petitioner -r.,qere The income received as a su.b-c:ontractor of i.Jcorn, a senrice c�:::ontradc�r eng:3.ged in petroleum operations under P.D. el7, f.)!"'';r)pl�l-r.l -r,,,,,r;r;;_:--ro,:_:; � �J:-��,� S--lT'l..-,�J��,:�:,�c�t0�..--...l teo t}}P p,�~ fl�t�l;~l t-=�Y IT�)-l�l�f-S-l�l:-1� t:lt t�o� t..}1~"' �.��� -� or ..� . . , � � .V.JJ..&.J rrovi:::ion C�f Secti�:on 1 c�f P.D. 1.354 !Imposing Final Incc�rne Ta.x Cm nr� In Petroleum ..... )~'�t��d-.t.l..�(�-�-'!"1-.:-~. In The Philippines Under .F're;idential Decree No. G71, effective i�~pril 2 1, Tax t?D SllbctJot.racto.rs:. - E'lerv; :::u!:)())!1tt�:=..J.. .-ct.o�. t�.. ~�.�.ll�l,:.:.:....t.l�l,:.:.:..l� (..l..(..�..,.t�r�l,.:_:. :._.�ct.�J.r...�. ,..�-..,!� e, 1�~-..�.�t�,:�:-:�.l�.-.-1-l�' entRrin!;:�-:� in t.c� :.1 contra.ct. V-lit.ll a service 0.)11tra.(tJ.)f ewda.!;:Bd in f-)t2t.r�.Aeu.m ~)r-)er.:1.tiom: in the Pllilif-)r:)ines �-� �-� J. ::.1la11 be liable tc) a final iw::ome tax equival~nt to P....t�cC,.:t�,.+.. 1-_. nI.�'P�-�t"(.�..;..o... rl��t-� {!:!s��i �. 1��) I ,_, .. nt� 1�t�=� (~;)�1�r�..,..c..-_:�.:._�, 1.11..(,�(-�'111'.".,' t��-l.':..f:>.t�1�'FI P�-�t"...l 1�f�r�rr1 .?J .&. ._; �-� :;:uch ccmtra.ct. :::;u.ch tax to be in lieu of all t::Gies, V�?hether tntic�nal or lc>c:t.l: that .J~f:ovi:i&tt ]~'-:n.;,.-~..::.vf'~~~ ;::mv mcc�n:w recewed from all other source ~..v1tl1in and' ~.vit.llout tne Philippines in tlw case oi dornestic 825

DECISlOH- C.T.A. C6.SI NO. 4600 -7- ,:�-.-l�lt.�''�����~.r_!�zL-tt.��.-;.~..r..�.t�(�_+�1�.�-�:�:0 �d-t1�.�.�1 T.,>, 71...tl11.11 t-1� 1A,. Pl11.111"_!r1n.. 1� !1._t:.:.-::r; �l�l-1 t.~L}.A_. t.,-c..-.1.-.�:,:��:-::�. o! tore-tgn sut,contrad(lfS shall be sul)JB-Ct to the �-� r&QU!ar incom.;:. tax under tlw National Internal Tl�l,::::. �:�11 t.r::�"�,~:�::,.~�,~�..,!.-I-I�~l�A (�-i-�)� l.i. A.... ._. t,_.:.:_:.:.r�r�r�l "o;r~�{�,.....:..�_�=,._-, t�l.li."_'..f..'.l�r�l"."�.' .. t�r�1,::�:-:.-�~:-1-1�1�=._1� r.,j_ iH(Otne ea.1 ns-d �.)f received as a result of the contract ent.::~red int..:. by the sulxont.rador ~hit.ll a. servh::e C(Hlt.ra.ctor enga.ged in petroleum operati(.ltlS in t.he F�hilippine::; under Pre~;idential DecreE:- No. &7." l�1S su.ch, the income received irom Alcorn should 1:)' The ta.x "':Nithheld t11er>:>frc;rn being a final t:J.X should a.lso be exduded in the With re�;pect to the iW>:)me ea.rned ff(ltn PG I. petitioner being a resident foreign corporation T...v"itll an established P.ranch in th<:-� Philippines should be taxed under Section 25�(a )( 1) ,:)f the NatiN1al Internal Eevenue Code, v1hich provides: �sec. 25. Rates of tax on foreign corporation. - (a) Tax on resident foreign corporations. {1) In general. - Unless otherv�lise provided, a corpora.t.ic. n orga.nize(l, autllort:ed or existing under the t:J.vV':; of a.ny foreign country, engaged in t.rade or businfi'ss ,,qithin the :Philippines, shall be subject to a t::G�i equn~alent to �~-�c:-�);1: of the taxable mcome c!enved "' in t1w' prE>cE:-ding taxabir? yE>ar from all sources V�litl1in the Ftlilippine;:; �� Thus, a.s cotre�::tly p�.::.inted out lJy petitioner.. the- rental in.:.onk i.)fl equipment and t�.)Ols and the oU1er servh::e income 826

lYECISIO:h C.T..i. CASE NO. 4600 -8 - t1�1.::. rL-- ,J-���r-c-��JJ-���:-J�!"...��t-� t�-t���-�, -� �-� .�_=..i1-�� ,�;-��,~I 7.�-:�:.-r-.�..I�t-.--:..:� .�,-..l1��J~~. .I�.' T� After having �)-:,:re.rcome the burden of proof in claims for !�,.:.:.~f1-''1� "!<..} i.�..��t" t-c."J."~"�,T (..�.t��.:..:...;.ll't.,, 'lIfI,::.,... t.}� �1-A.�!"A.. fr�...,t"A.�. ~.:;". ".,�A,A. 11;.�'., !"A.�.'-::.'1.�-.:;..;,".;!"l '.�,.',11i''' 1n�..:.:...t�1.�t1, �,.-��.;1"1.A.. t�'.:-:>. ,:l3.im f(��r rt>fu.nd ()r issuance of a tax credit in the amou.nt of J::>2,9.Y~_.7CH).0(\ ;:.ls appearing in� its Amended Corporate Iner::mw Ta1~ Eeturn for the ca.lendar ;.:re;:.lr ending December 31, 1909 should not be granted. WHEREFORE, finding the petition meritorious and in cv::o:::on:hu:tc:e 'i�lith hv�.r, the sarne is hereby GRANTED. :Respondent is ordered to refund in favc�r of petitioner t11e amount of F�2,9.39,700.C:n:), representing excessively paid income tax for 19<)9 SO ORDERED. <(~'<'-~ WE CONCUR: ERNESTO D. ACOSTA Presiding Judge I t.::. CAJ..�_:��-�::t�t1�..-� l�l.'rl..::::1>. ....... ll_lfj��-ci.Av I �. �-� ,/' ,),. . . , 8 ~-..;(

DtCISIOH- C.T.A. CASE HO. 4600 -9- CERTIFICATION I hereby c:ertlf)r that t1us decision v~ras reached aiter due ,�:onsultation among the meml:)ers of the Court of Tax Appeals in ac(:ordance �1'\~lth Sec:hon 13.. ArtKle VI II of the Constitution. ~~(2-~ ERNESTO D. ACOSTA Presiding Judge .,,, Court of Tax Appeals 828