CTA Case No. 2088 (Decision)

Hr�:PH~i.iC 1 0F TU~ PIYTLTPP.i:--1E8 f ',, . Wr Uf TAX Af'.P.li: � LS QU!.'.ZU:\ Cll '/ ' EVERETT STEAMSHIP CORPORATION, Petitiiner, - versus - C. T. A. CASE NO . 2088 THE CO:t:vlMISSIONER OF INTERNAL REVENUE , Respondent . X- - - - - - - - - - - - - - - X DE C I S I 0 N Petitioner is seeking refund of the amount of �17,598 . 21 , representing income tax and interest allegedly erroneously paid on its income for the year 1968. It appears that petitioner, a corporation filing its income tax returns on the calendar year basis , was required by respondent to pay the amount of ~19 , 844 . ~8 as deficiency income tax and interest for the year 1968 . The deficiency stemmed from the disallowance of the sum of ~10 , 000 . 00 claimed by pet~tioner as bad debts and from the application , effective July 1 , 1968 , of the new corporate income tax rates of 25% and 35% prescribed in Republic J Act No . 5431 . Petitioner does not dispute the deficiency asses sment insofar as the disallowance of the deduction for bad debt is concerned . In fact, it paid on July 16, 1969 the sum of ~3 , 030 . 00 as deficiency in- come tax on the basis of said disallowance . However , in regard to the amount of the deficiency which arose

DECISION - CTA CASE NO . 2088 2 from the application of the increased rates of corporate income tax effective July 1 , 1968 , the same is contested by petitioner on the ground that , in the light of Section 10 of said Republic Act No o 5431 which provides that liThe provisions of this Act shall apply to income for taxable years beginning after June 30 , 1968" , its taxable year after...June 30 , 1968 , which is the calendar year , begins on January 1 , 1969 and not July 1, 1968 . On January 30 , 1970, in a letter addressed to, and received by, the petitioner on February 11 , 1970 , respondent reiterated the demand for payment of the deficiency i n the sum of 19 , 844. 48 , but petiti oner , in its reply of February 16 , 1970 , requested that said demand be countermanded and held in abeyance until final action on its protest of July 18 , 1969 shall have been decided . On February 20, 1970, in a letter to petitioner , respondent denied petitioner's protest contained in its letters of February 16 , 1970 and July 18 , 1969, which letter of denial was received by peti- tioner on March 5, 1970. On March 21 , 1970 , petitioner paid under .-pro- test the sum of i7 , 598o21 , representing the (t9)

DECISION - CTA CASE NO . 2088 3 balance of the amount or iginally assessed , inclusive of interest from April 16 , 1969 to March 23 , 1970 . This payment was made known to respondent in peti- tione r' s letter filed with the latter on March 25 , 1970 further contesting the legali ty of the assess- ment and , at the same time , seeking the refund of the amount of �17 , 598 . 21. The question posed for our consideration is whether the new corporate income tax rates provided in Republic Act No . 5431 are applicable to income of calendar year corporations, such as petitioner herei n , effective July 1 , 1968 or January 1 , 1969. The i s sue i n thi s case is not of first impress i on . In previ ous case s involving the same issue , thi s Court ruled that the increased corporate income tax r ate s prescribed in Republic Act No . 5431 are not appli cable to income of calendar year corpo- rations beginning July 1 , 1968 but on January 1 , 1969. Thus from July 1 , 1968 to December 31 , 1968 , the income of such corporations is still subject to the old rates prescribed under Section 24 of the Internal Revenue Code , before its amendment by Repu til.ic Act No . 5431 . (The Manila Times Pub. Co ., Inc. vs . Comm. of Int o Rev ., C. T. A. CASE No . 2263 , Dec . 17 , 1973 , eert . denied in G. R. No . L-38154 , May 10, 1974; Zamboanga Wood Products , Inc . vs .

DECISION CTA CASE NO . 2088 Comm. of Int . Rev ., C. T.A. Case No . 2053 , June 3, 1974; Colgate Palmolive Phil ., Inc o vs o Comm . of Int o Rev ., C. T. A. Case No . 2293 , June 10 , 1974; Phil . Aviation Corp . vs . Comm. -Of Int . Rev ., C. T. A. Case No . 2195 , Aug . 5, 1974; Rural Bank of Sariaya, Inc . vs . Comm. of Int . Rev ., C. T. A. Case No . 2068 , Sept . 24, 1974; Rural Bank of Talisay (Cebu) Inc . vs . Comm. of Int . Rev ., C. T. A. Case No . 2250 , Sept . 24, 1974. ) WHEREFORE , f inding no valid ground to deviate from the aforesaid ruling of this Court in said cases , judgment is hereby rendered ordering the r espondent Commissioner of Internal Revenue to refund to petitioner the aforesaid sum of ~17 , 598 . 21 , repre- senting erroneously paid income tax and interest for the year 1968 . No costs. SO ORDERED . Quezon City , November 12 , 1974. ~4~---) ROMAN M. UMALI Presiding Judge (JJ)