CTA Case No. 3502 (Decision)

... I ,' REPUBLIC OF THI PHILIPPIKIB .. COURT OF TAX APPEALS !' QUIZOK CITY KAWASAKI HEAVY INDUSTRIES, LTD., Petitioner, - versus - CTA CASE NO. 3~02 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - ------X D E C XS X0 N This case involves a claim for refund of the amount of P700.658.00 ~epresenting overpaid income ta :-: for the fiscal year ending March 31, 1981, arising from the balance of . erroneously withheld 35% withholding at source computed as follows� Inc ome ~( Corporate Dev. Ta>: dLie ta:�:able year ended Marc h 31, 1981 Br�anch Profit Remittance 64,640.00 (Exh. v-1) Ta>:-ta>:able year ended P-.>64,911.00 March 31, 1989 477,993.00 (Exhs. LI-1JV) Total Less: Overpaid income ta>: carried forward from ended March 31, 1980 Tax withheld (35%) by (P113,CS2.00) Petitioner's clients during FY ended March ( 587,576.00) (Exh. ,V) 31, 1981 P700,600.00 \ Ana.nt claimed 1 r� 215

- DECISION CTA CASE NO. 3502 - 2- F'eti tioner is a resident foreign corporation duly licensed to engage in business in the Philippines through its Manila Branch Office. (par. 1~ Petition; admitted par. 1~ AnsNer.) During the fiscal year ending March 31, 1980~ for royal ties and technical services rendered to Kawasaki Motor (Phi 1 i. ppines) Corporation (hereinafter called I<MPC for brevity) and Philippines Shipyard and Engineering Corporation (hereinafter called PHILSECO for brevity), on various occasions~ remitted to petitioner's home office in Japan service fees and royalties due the petitioner. In remitting the same~ PHILSECO erroneously withheld and remitted to respondent's BureaLI the 35/. ta:-: on said roya 1 ty fees imposable on non - resident foreign corporation in the total amount of P1~991~223.24 as shown below: R~_t� Q:L'f.!!;.!~LB.~�!P-t.J~!9..-'!. ~nt; ~~h;l,_b.!j; 11-24- 78 rn A-37610425 P113,::!47 .45C*J X 04-27-79 CR A-2555486 67~865.78 c RTR A-0784191 C-1 03-12- 79 rn A-1774319 20,447.66 w 11-20�-79 rn A-2896114 114~8B).43 D RTR A-2617.!.626 D-1 04-24-80 CA A-929t/X2. 70 ~ 16.3. 57 E RTR A-435.39::!4; E-1 Sub Total 216

DECISION CTA CASE NO. 3502 - 3- f.IY_Et!.H,~ P.~t~ Qffici~l R~-~:!:.P-~2.. ~nt ~':5..bibit 04- 29- B) CR A-::!6.35795 P1, 499, 125.31[ **] G RTR A-4648646 G-1 06- 17-B:l CR A-::!6.'!85.-:::~) 105,393.04 F RTR A-'Y.:R6.?:�fJ6 F-1 Sub Total f'.l ...~J4 . 1..~-t.e..!.~~ Grand Total Pl.. �.~l.!'. ~!24 On Ju 1y 15, 1980, petitioner filed with respondent ' s ROO 32, Maka ti, its corporate annual income tax return CExh. U) for the fiscal year ending In said return, it credited the erroneous withholding tax payment of P1,991,223.24, against its income tax liability of F'1,292,944.00. Accordingly, there resulted a refundable amount of P698,279.24 for said fiscal year 1980. When petitioner filed its return for its profit remittance (Exh. U-1), which tax amounted to P220,286.00, it applied its 1980 overpaid income tax in the sum of P698,279.24 against said ta>:. Consequent 1y, there remained a balance of F'477,993.24 which constitutes petitioner's 1980 adju~ted overpaid income tax . During . petitioner's fiscal year ended tl9...rch _~_.L_J....9~j_, KMF'C and PHILSECO 1 ikewise remitted royalty and techf1ical service fees to pe'ti tioner' s I 21 7

DECISION CTA CASE NO. 3502 - 4- home o �f f ice in Japan. As in the previous year 1980~ the former erroneously subjected said income of petitioner to the 35/. withholding tax imposable on non-resident foreign corporations~ which tax amounted to P587~576.11 as shown in the schedule of withholding tax at source (Exhibit H) as follows: ~Y._.f::::t_e:; Q~i~ Q.ffj._c;_iaLR~eipj:. 1\b. ~jl"'lt ~pibii; 10-C-80 CR A-54()..:....::-~-7 p 37' 731.50 I RTR A-4781190 I-1 03-::!.Cl-81 CR A-7143::!41 31,587.07 J RTR A-bC6200 / Sub Total p 69~318.57 Exhibit K BY FHIL~ K-1 L R~.t~ !Jft!~A~.l.~~.!P-~_1\b_.~. ~j; L-1 07-28-9) CR A-::!.642690 p 73' ::!82. 40 M Rm A-:'5096~ M-1 07-28-9) CR A-::!.642693 ':s7,243.70 r<TR A-5096005 N 09-::!0- 80 CR A-5670107 102,212.26 N-1 r<TR A-~)96995 0 D-1 10- 29-9) CR A-5156Cl32 41,441.10 Rm A-!:'()97(5 p 11-24-9) CR A-5782114 41 '961. ::!0 P-1 12-29-80 Rm A-5097152 40,982.15 Q CR A-565.~002 Q-1 r<TR A-:::..:197244 R R-1 01-23-81 CR A-6.311718 49,787 .6(1 r<TR A-:::..:197404 02-24-81 CR A-571B"!.CI9 42,035.40 Rm A-0016572 218

DECISION CTA CASE NO. 3502 - 5- 03-23-81 rn A-70::!4422 RTR A-6556127 45,484.56 s 04- 27-81 rn A-7524450 41~727.07 T R'TR A-6559718 ----1~.L~.!!.~ T-1 81...1b Total E.~~L~~:z.~.-~ Grand Total ~-~-!.!.~.!~-~-~~ When petitioner filed its amended corporate annual income ta>: return on August 26~ 1981 for fiscal year ending March 31~ 1981 (f.,fh. VJ, i t showed a refundable amount of P765,298.00 computed as follows: Net Income P795 '846. 00 TaN Due Less: P3t"X), 271 �00 1) 35/. withhold- ~7,576.00 ing t.a:�: ~111t of Ta:�: RefL~ndable When peti t.ioner f i 1ed its amended return for the branch profit remittance tax (�xh. V-U, it credited its 1981 income tax refund of P765~298.00 (�xh. V-1 - a) against its branch profit remittance tax liability of P64,640.00. Consequently, there remained balance of P700~658.00, which constitutes petitioner's adjusted income tax refund for 1981. On July 9 ~ 1982~ petitioner through its auditors SGV & Cp.~ filed with responden't's office 219

DECISION CTA CASE NO. 3502 - 6- a claim for refund (Exh. AJ in the amount of F'700,658.00. The only issue posed for determination is whether or not petitioner is entitled to the refund claim of P700,658.00. We agree with the c 1aim for refund of the amount of P700,658.00. This amount represent erroneously withheld 35% withholding tax at sourc~ computed as follows: Income & rnrporate Dev. TaN due ta:�:able year ended March 31, 1981 P~~),271.00 (Exh. V) Branch Pro�fi t Remittance TaH- t.a>:ab1e year� ended March 31, 1989 _,_ 64,61:9.00 (Exh. V-1) Total F-::!.64,911.00 Less: Overpaid income taH carried forward �from FY ended March 31' 198() _4ffi993.0Q (Exhs. lJ-1;V) <P113, em.ex:>> Ta>: withreld (35%) by F'etiticner' s clients during FY ended March 31, 1981 h"'e7 .~.~9..!.QQJ. (E>th. V) Ara..tnt claimed ~!C~_.~~~~ It is apparent � that the refundable amount of P700,658.00 is composed of the 35% withholding tax paid in the amount of P587,576.00 and a portion of the overpaid income tax carried forward for fiscal year ended March 31, 1980 in the amount of P477,993.00, thus: 22 0

DECISION CTA CASE NO. 3502 - 7- Fr�om 1981 withholding ta>: P587,576.00 Fr-om F'477 ,993.00 car-r-ied for-war-d fr-om FY ended Mar-c h 31 ~ 19B) To t a 1 WHEREFORE, the claim for refund of petitioner Kawasaki Heavy Industries, Ltd., in the ~um of P700,658.00 is hereby granted. No pronouncement as to costs. SO ORDERED. Que zon City, Metr-o Manila, June 1, 89. "'---.._ ROAGUIN Judge WE CONCUR: Pr-esid' ~Z.REV Associate J 221

DECISION - CTA CASE NO. 3502 - 8- CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of the Court of Ta x Appeals in accordance with Section 13~ Article VIII of the Constitution. Presid.i: g Judge Court of Tax Appeals 222