CTA Case No. 4109 (Decision)

- ... REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY MARUBENI CORPORATION, C.T.A. CASE NO. 4109 Petitionet~, Pt~omulgated: - vet~sus JUL 29 19S6 COMMISSIONER OF INTERNAL REVENUE, Respondent. )( - - - - - - DECJ:SJ:ON Petitioner Marubeni Corporat~on appealed to this Co�.wt the decision of the Commis~ioner of Internal fie venue denying its protest on the assessments of deficiency income, t~emittance and contractor's taxes for the fiscal year ended March 31, 1985. The facts can be briefly stated as follows: Petitioner is a foreign corporation organized and existing under the laws of Japan. It is duly licensed to engage in trading and construction business in the Philippines through its Manila branch. On July 15, 1985, petitionet~ filed i t s cot~pot~ate annual income tax return covering the fiscal year ended l'llal�~ch 31, 1 ':385 1 � :~.Folder 10, BIR records, pp. 1911 to 1915. 842

DECISION - C.T.A. Case No. 4109. 2 On Novembet~ 7, 1 '385, a Letter of Authority No. 009270NA was issued by Deputy Commissioner Tomas C. Toledo authorizing Revenue Officers Mr. Gabriel Ma~alac, and Ms. Benedicta Du, to be supervised by Mr. Joaquin C. Arceo, to conduct an examination on petitioner1 s books of accounts~. The examination/audit calls for whatever internal revenue taxes petitioner might have for the fiscal yeat~ 1984-1985. As a result, petitioner was found to have undeclared income arising from two contracts. One with the National Development Company relative to its Leyte Industrial Estate Port Develop~ent Project 3 and the othei�~ was with the Philippine Phosphate Fertilizer Corporation relative to its Ammonia Storage Complex4 � Both projects were finished in 1985. On 1, 198G, a proposed assessment fot~ deficiency income, branch profit remittance, contractor's and commet~cial broker taxes were recommended by the These were questioned and protested to by the petitionet~ in a lettet~ dated J"une 5 7 19856 � its tax On August 27, 19BG, petit i onet~, counsel, received a copy of the demand lettet~ togethet~ , 2 Exh. o:� Respondent, Folder 10, BIR r~ecords p� 1927. 1952. Respondent, Folder 11, BIR r~ecords PP� 1945 to 3 Exh. ..7...J,,' 4 Exh. .-.:.:.. Respondent, Folder 4, BIR r~ecords. ::;Ex h. 1, Respondent, Folder 11, BIR recot~ds, pp. 1945 to 1952. 6 Exh. B, Petitioner, Folder 11, BIR records, pp. 2004 to 2030. 843

DECISION - C.T.A. Case No. 4109. - 3- with the assessment notices, all dated August 15, 1986, assessing petitioner for the following deficiency taxes8 : I. Deficiency Income Tax P967,269,811.14 483,634,905.57 Undeclared gross income IJL:-83, 634, 905.57 <Philphos & NDC Construction P169,272,217.00 pro.j ect s) 84,636,108.50 Less: Cost and Expenses (501-> Net undeclared income 36,675,646.90 Income tax due thereon P290,583,972.40 Add: 501- surcharge 201- int. p.a. from 7-15-85 to 8-15-86 Total amount due II. Deficiency Branch Profit Rernitt~nce Tax Undeclared net income from P483,634,905.57 169,272,217.00 Philphos & NDC Construction P314,362,688.57 pro.j ect s 47,154,403.00 Less: Income tax thereon 23,577,201.50 Amount subject to tax Tax due thereon 12,305,360.66 Add: 501- surcharge iJ 83,036,965.16 201- int. p.a. from 4-26-85 to 8-15-86 Total amount due III.,Deficiency Contractor's Tax Undeclared gross receipts/ gross income from Philphos & NDC Construction pr�oj ect s P967,269,811.1Lt Contractor's tax due the~eon (41-) p 38,690,792.00 Add: 501- surcharge for non-declaration 19,345,396.00 251- surcharge for late payment 9,672,698.00 Sub-total p 67,708,886.00 Add: 201- int. p.a. from 8 Exhs. C &C-1, Petitioner, Folder 11, BIR records, pp. 2072 to 2078. 844

DECISION - 17,854,739.46 C.T.A. Case No. 4109. p 85,563,625.46 -4 4-21-85 to 8-15-86 Total amount due IV. Deficiency Commercial Broker Tax 9 Undeclared share from commission income (denominated as "subsidy from Home Office") p 242683!114.50 Tax due thereon p 1,628,56'3.00 Add: 50~ surcharge fot' non-declaration 814,284.50 25i( sut�charge fot' late payment 470! 142.25 Sub-total p 2,849,'395.74 Add: 20~ int. P� a. from 4-21-85 to 8-15-86 7512539.'33 Total amount due p 3!601!535.68 The demand letter further stated that the same is the t'espondent' s final decision and _that, if Mat�uben i disagrees, it may file an appeal with the Court of Tax Appeals within thirty days from receipt thereof. Thus, on September 26, 19B6, petitioner filed the instant petition for review. Hence, this appea 1. On October 30, 19B6, while the case was pending trial, petitioner availed of the tax amnesty under Executive Order No. 41. The executive order which was promulgated on August 22, 1986 declared a one-time tax 9 A separate Petition for Review was filed by petitioner to this Court docketed as CTA Case No. 4110. A decision was rendered by this Court dated March 1, 1'3'33 finding petitioner liable for commercial broker's tax as assessed. On appeal, the Court of Appeals rendered a decision <C.A. G.R. SP-31047 dated May 22, 1986) reversing the CTA decision in view of petitioner's proper availment of tax amnesty under Executive Order Nos. 41 and 64. 845

DECISION - C.T.A. Case No. 4109. - 5- amnesty covering unpaid income taxes for the years 1981 to 1985. On November 17, 1986, Executive Order No. 64 was issued expanding the coverage of Executive Order No. 41 to include not only income tax but also estate and dono ..~' s taxes and taxes on business. Petit i onel"~, likewise, availed of the same on December 15, 1986. The issues to be resolved by this Court are~ 1. Whethel"~ o"r~ not petitioner's deficiency tax liabilities were extinguished upon. petitioner's availment of tax amnesty under Executive Order Nps. 41 and 64; and 2. If not, whether or not petitioner is liable to pay the income, profit . .~emittance, and contractor's taxes assessed by the respondent. The pivotal issue in this case lie on petitioner's availment of the tax amnesty under the provisions of Executive Order Nos. 41 and 64. Petitioner averred that it is not liable for the taxes being assessed by the respondent on the account of its availment of the amnesty under Executive Order No. 41' as amended. Petitioner relies on Section 6 of Executive Order No. 41 which provides: SEC. 6. Immunities and Pl"~ivileges. - Upon full compliance with the conditions of the tax amnesty and the rules and regulations issued pursuant to this Executive Order, the taxpayer 846

DECISION - C.T.A. Case No. 4109. - 6- shall enjoy the following immunities and privileges: a) The taxpayer shall be relieved of any income tax liability on any untaxed income from Januat~y 1, 1981 to December 31, 1985, including increments thereto and penalties on account of the non-payment of the said tax. Civil, criminal or administrative liability arising from the non-payment of the said tax, which are actionable under the National Intet~nal Revenue Code, as amended, are likewise deemed extinguished. b) The taxpayer's tax amnesty declaration shall be admissible in evidence in all proceeding before judicial, quas'i -judicial at~ administt~ative bodies, in which he is a defendant or respon~ent, and the same shall not be examined, i nquit~ed or looked into by any person, government official, bureau or office. c) The books of account and other records of the taxpayer for the pet~iod ft~om Januar~y 1, 1981 to December 31, 1'385 shall not be examined for income tax purposes: PJ-�ovided1 That the Commissionel�" of Internal Revenue may authorize in writing the examination of the said books of accounts and other records to verify the validity or correctness of a claim for grant of any tax refund, tax credit <other than refund on credit of withheld taxes on wages>, tax incentive, and/or exemptions under existing laws. (Underlining supplied). Respondent contends otherwise. 847

DECISION - C.T.A. Case No. 4109. - 7- Petitioner cannot validly avail of the tax amnesty because petitioner falls under one of the exceptions mentioned by Sec. 4 of Executive Order No. 41, to wit: Sec. 4. Exceptions. The following taxpayers may not avail themselves of the amnesty herein quoted. a) Those filing under the provisions of E. 0. 1, 2 and 14; b) Those with income tax cases already filed in Court as of effectivity hereof; c) Those with criminal cases involving violations of the income tax law already filed in court as of the effectivity hereof; d) Those that have withheld tax Internal Revenue liabilities under the National as the said Code, as amended, insofat~ liabilities are concurred; e) Those with tax cases pending investigation by the Bureau of Internal Revenue as of the effectivity hereof as a result of information furnished under Sec. 316 of the National Internal Revenue Code, as amended; f) Those with pending cases involving unexplained or unlawfully acquired wealth before the Sandigan; g) Those liable under Title Seven, Chaptet~ Three <Frauds, Illegal Actions and Transactions) and Chapter Four <Malversation of Public Funds and Property) of the Revised Penal Code, as am ended. " <Und et~scor~i ng s upp 1 i ed) Respondent pointed out that petitioner has a pending income tax case before this Court when it availed of the tax amnesty. Th et~e f ot'e, it cannot be gt'ant ed immunity by said law. 848

DECISION - C.T.A. Case No. 4109. - 8- We disagree with the respondent. This controversy has already been settled by the Court of Appeals in the case of Marubeni Corporation v. Court of Tax Appeals & Commissioner of Internal Revenue, CA-6. R. SP-31047, May 22, 1996, which involves the same parties and issue. Pertinent portion of it reads as follows: Essentially, the resolution of the issue of whether or not petitioner comes within the ambit of the excepted taxpayers under E.O. 41 and E.O. 64 hinges on the understanding of the two laws involved. E.O. 41 became effective qn August 22, 1986 granting a one-time tax amnesty covering unpaid income taxes for the years 1981-1985. E.O. 64, which is an amendment of E.O. 41, took effect on Novembet" 17, 1986. Notably, there is nothing significantly drastic in the amendment infused by E.O. 64 on E.O. 41 except for the widening of the coverage of the tax amnesty to include estate and donor's taxes and the tax on business. The provisions of E.O. 41 which were not amended by E.O. 64 remained in full force and effect. One of said provisions is Section 4 of E.O. 41. This pt"ovision, specifically pat". (b) thet"eof, is the bone of contention of the instant contt"oversy. Sec. 4, pat". (b) reads: "Sec. 4. Exceptions. The following taxpayers may not avai 1 themselves of the amnesty het"ein gt"ant ed: XXX b) Those with income tax cases already filed in court�at the time (sic) as of the effectivity hereof; 849

DECISION - C.T.A. Case No. 4109. - 9- X X ><II Petitioner contend (sic) that it does not come within the purview of the aforecited exception because the case filed against it is not an income tax case and the same was filed on September 26, 1986 while the effectivity of E.O. 41 was on August 22, 1986. Petitioner's contention is meritorious. It is clear that neither petitioner nor its availment of tax amnesty for its broker's tax assessment fall under Section 4(b) of E.O. 41. As of the effectivity of E.O. 41 which was on August 22, 1986, no tax case either income tax case or otherwise has been filed against petitioner. It was only on Septembel~ ;::o6., 1986 when a tax case was filed against petitioner for deficiency in commercial broker's tax which is a business tax. Notably, since section 4 of E.O. 41 specifically mentions the exceptions from the coverage of the tax amnesty, it necessat"ily follows that those not expressly mentioned such as taxpayers who have no pending income tax cases as of August 2i:~, 1':~86, as petitioner in the instant case, are qualified to avail of the tax amnesty undet" the principle of "Expt-"essio !.tnius est exclusio altet-"ius. 11 It goes without saying that under the terms of E.O. 64 availment of the expanded tax amnesty thereunder, results in the taxpayer being entitled to the same benefits, immunities and privileges <Under E.O. 41> with respect to business, estate and donor's tax liabilities. Since the timely availment of herein petitioner of the tax amnesty under E.O. 41 and E.O. 64 extinguish whatever business tax liability it has including that of the com met"C i a 1 bt"ok e1�"' s tax, We see no ftwth er need, in this pt"esent case, to dwell on the issue of whether or not it can be considered a commercial broker. <Underscoring supplied) 850

DECISION - C.T.A. Case No. 4109. - 10 - The above decision i~ clear. That Sec. 4(b) of EO 41 is not an obstacle for herein petitioner to avail of the tax amnesty granted by law even if petitioner has a pending income tax case before this Court. It should be noted thc;tt the phr~ase "(T.Jhose wii~h income tax cases alreadv Filed in court as oF the e Ft"ect .i v.i tv her~eo F" does not mean pr~ospective application, rather, a retrospective one. In fine, what Sec. 4(b) of Executive Order No. 41 excepted to avail are those taxpayers who have income tax case already filed in Cour~t as of August 22, 1986, the effectivity datf? of E.O. 41, and the dates preceding it. Hence, when petitioner seasonably filed its amnesty return on October 30, 1986 and paid the corresponding 10~ its networth from 1981 to 1985, petitioner~ was relieved of its income tax liability for fiscal year 1985. With respect to petitioner's deficiency branch profit remittance tax, the same was also extinguished for being under Sec. ;;~L} Chapter~ III (2)(ii) of Title I I on Income Tax. The immunities and privileges under Section G of E. 0. No. 41' likewise apply to petitioner's pr'oper availment of the tax amnesty under Executive Order No. 64 as regards to contractor's tax which is a business tax. 851

DECISION - C.T.A. Case No. 4109. - 11 - Anent the second issue, the same need no further discussion for being moot and academic. WHEREFORE, the respondent Commissioner of Internal Revenue is hereby ORDERED to DESIST from collecting the 1985 deficiency taxes it had assessed against petitioner and the same are deemed considered CANCELLED and WITHDRAWN by reason of the proper availment by petitioner of the amnesty under Executive Order No. 41, as amended. SO ORDERED. ~~~� RAMON 0. DE VEV. Associate Jud e I I I CONCUR: L - \Q ~ Ow-.A- ERNEsTo D. ACOSTA Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultation with the member of the Court of Tax Appeals in accordance ~ith Section 13, Article VIII of the Constitution. ~.~ ERNESTO D. ACOSTA Presiding J�udge Court of Tax Appeals 852