CTA Case No. 2952 (Decision)

&IJl'OBUC o:r THB. cOH.lPPl"'f '� a>VRT OF TAX APPEAU - em ra.o.t>t Ol'T"l' WILL IAM N. SEMINOFF, Pet.i t .ioner, / - versus - C.T.A. CASE NO. 2952 COMMISSIONER OF INTERNAL REVENUE, Respond.enL x . - - - .- - - .X DE C I S I 0 N This act.ion involving, a claim for. a t'ax refund is nothing, more than a question of. the le:g al i ty of a de.f ic iency assessment. for. disallowe-d. ded�uctions. amount-ing, t �o ~6,400.00 in pe:t .it�.ione:r's income tax re.turn for the year 1975. As represented, petit.ioner, a Canadian, arrived in the Philippines on February 5, 1974. as a Procure~- ment. Consultant. in the Mar.copper Mining Corporation on a pre-arranged employment basis unde:t. Section 9 (g) of the Immig_ration Act, as amend.e~d., (Exh. "F") .for a minimum period of. thr.ee: (3) .yea:rs s.tay but exte�nd- ib.le eve~r. y ye~ar upon applicant's I'.eque:s-t. (Annex "E") '� which of la te was exte:nded to Mar:c:h 14, 1982 (Exh. "H") �. The employment. was author.ized under the Anti-Dummy Law by the Office of the Presiden t (Exh. "G") ~ 3G 7

DECISION - CTA CASE NO. 2952 - 2- On May 14, 1976, petitioner was audited and assesse:d. by the responde:nt. Commissioner of Inte�rnal Re�ve~nue for income t:.ax liabilities in the~ amount:. of ii33, 591.00, re.pre:sent:.ed as follows.: Balance of petitioner's income tax for 1975 ����� ii27,591.00 Deficiency assessment for disallowed deductions ��� 6),400.00 1!133,991.00 Respondent:.. maintains that:.. pet.it.ioner is a non- resident alien eng)aged in t.rade or. business in t:.he Philippines and may not. avail of the deductions. normally ac.cord,ed re:sidents and cit-izens. in their income tax _returns, thus the disallowance and sub-� -:-- sequent c1.efic iency of P6, 400.00 representing optional and standard deduction and the claimed personal and additional exempt-ions. And, stress.ing that peti- t.ioner' s int:.end.ed stay in the Philippines is te�mporary and the pertinent provisions of law and regulations provide that., "One who. comes to the Philippines for a definite purpose which in its nature may be promptly accomplished is a transient." (Sec. 5, Income Tax Regulat.ions) but., by having, stayed in the Philippine~ s tor an ag,g.regate per iod. of more than one hundred e ight.:.y days during, any calendar year shall be deemed a non-resident. alien doing business in the Philippines. (Sec. 22(a) ~Tax Code)~ 36 .-_

DECISION - CTA CASE NO. 2952 - 3- Peti t .ioner: of even date paid the full assessed amount. under Official Receipt No. 654654. (Exh. "B") but. submi tt.ed the necessary prot.e st relat.ive to the le.g,al i t:.y of the additional income t:.ax. asse:ssment of P6, 400.00 and soug,h t . the refund therefor in a letter date:d May 28, 1976 to the. respondent Commiss.ioner of ln t.ernal Revenue (Ex.h. "D") �. Peti tione:r holds him- self out as resident. al i en within the legal contem- plation of t he Income Tax. Regulations, which provides that., an alie.n actually pr.e:sent in the Philippines who is not. .a mere transient or sojourne:r. is a resident of the Phil�.ippines (Sec. 5) .and retains his. s.tatus as a :r.:-esident.. unt.il he abandons t:he same and actually d.eparts fr.om the Philippines (Sec. 6) �. And be:ing such, he is ent.ittled to claim personal and additional exemptions (Sec. 23) _and opt:.ional standard die�duc.tions (Sec. 30) _under the ra t:.e.s pr.escr ibed in Section 21, all of t:he Tax Code, which petitioner availed of in his income t:ax return for calenda:r.:-. year: 1975. Respondent. d.enied pet:.i tioner 's claim, henc:e this recourse. In t:he i ns.tant case, we are concerned only in the mat:.ter of the residency status of pe:ti tioner as it. a�ffects the quest.ion of his income tax. li ability. For purposes of income tax, alien individuals 3G 9 -

� DECISION - CTA CASE NO. 2952 - 4- are divided genexally into two classes, namely, resident aliens� and. _ non-re� si~lcent aliens. Res.ident aliens are t:a)~able in the same manner as citizens of the Philippines, i.e., taxable on income der ive:d trom all sources including sources without the Philippines and access to the benefits of allowable deductions as invoked by herein petitioner. Non- resident. aliens are those (1) .engaged in trade or ~ business who may avail of itemized but not optional standard derl�uctions pursuant to Section 30, as well as persona~ exemptions upon proof of reciprocity as provided in Section 23, and (2) .not engaged in � trade or business, taxed on a flat: rate basis on gross inco;me derived from Philippine sources unde:r Section 22 (a) .and (b) '� all of the Tax Code�. The governing Income Tax Regulations (Revenue Regulations No. 2) '� insofar as pert.inent, provides: "Sec. 5. Definition. - A 'non-resident individual' :means an individual (a) whose residence is not. within the Philippines; and (b~ ~ho is not a citizen of the Philippines. "An alien actually present. in t}:~ Philippines who is not a mere t~ansient or sojourner is a resident of the Philippines for Qyrposes of the; income tax. Whether he is a transient or not is. determined by his intentions with regard the length and nature of his stay. A mere floating intention in- definite as to time, to return to another country is not sufficient. to constitute ''.-_:>,~ f) .

DECISION - CTA CASE NO. 2952 - 5- him a transient. If he lives in the Philippines �and has no definite int.en- tion as to his , stay 1 he is a resident.� One who comes to the Philippines for a definite purpose which i n its nature may be promptly accomplished is a transient. But if his purpose is of such a nature that an extencled stay may be nec e ssar.y for its accomplishme~nt, and to that end the: alien makes his home temporarily in the Philippines he becomes a "'?~<:= s ide n t, though it may be his intention at. all times to return to his dom1cile abroad when the purpose for which he came has been consummated or abandoned." "Sec. 6. Loss of residence by alien. - An alien who has acquired residence in the Philippines re:tains his status as a resident until he abandons the same and .actually departs fr om the Philippines. An in ten t .ion to change his residence does not. change his status as a r.esidemt. alien to that. of a non-resident alie.n. Thus an alien who acquired a residence J...n the Phil ippiry_es is taxable as a resident for the rem-ainder of his stay in the, Philipp:imes." (Underscoring supplied) There is nothing ambiguous nor. obscure in the language of the afo.resaid reg,ulations insofar as the same is brought to bear upon the c i rcumstances of the petitioner . The facts as outlined above Rmply demonstrate that petitioner had a firm and continuing purpose to reside in the Philippines for such time required by the exige.nce of the� service as an expa- ta:ia.te of the Marcopper Mining Corporation. In point of fact, petitioner's tenure for an initial 37 1.

DECISION - CTA CASE NO. 2952 -6 - minimum period of three (3) .ye ars (Exh. "E") .which commenced in 1974 had been roll-ed over many a time up to March 14, 1982 (Exh. "H") ~ His stay could but. connote something different from and more than a mere transient or. sojourner. in the Philippines. And we do not regard it necessary that petitioner should have i ntended. to re:side permanently. It is enough that he made his temporary horne in the Philippines though it may be his intention at all times to return to his domicile abroad when the purpose fo~ which he carne .has been consummated. (Sec. 5, s~pra) �. This Court in a case of the mold as petitioner's did rule that, "As disclosed in the records, the conversion of the temporary visitor's visa issued on March 20, 1975, by the Philippine Embassy in Tokyo, Japan, into a category of a pre-arranged employ- ment under Section 9 (g), supra, granted by the Commission ori Immigration and Deportation on July 23, 1975, gave a more definite shape to petitioner's intended stay, so to speak . He had now that. involvement for. the specific pur- . pose of a continued employment and for such indefinite time as may be required by the exigency of his position as Assistant Manager for Maintenance in the Manila Office of the Japan Air Lines. The locus of the undertaking, e:stablished, pet.i tioner did take his horne and continued to reside and live with his family in the Philippines through the years 1975 to 1979 3 7 ~2

� DECISION - CTA CASE NO. 2952 - 7 ':'"' until transferred to another foreign station. We� think such circumstances found for petitioner an appropriate legal cubby-hole fit for a resident status vis a vis a mere t .ransient or sojourner within the cont emplation of Section 5 and 6 of the Regulations, supra, aptly ensconced in a holding that, 'As used in the statute and as interpreted by regulations, 'residence' means broadly, presence as an inhabitant in a given place, not as a mere tLansient, but either indefinite as t.o time or for a purpose that is such a nature that an extended stay may be necessary . for its accomplishment.' (Jones v. Kyle, 10 Circuit 191, 190 F 2d 353). We see no treat of ambiguity arising "from peti- tioner's intention which appears amply sufficient to dispel any pall of uncer.;.. tainty cast over his status as a resident alien. ~Petitioner'~ status as a resident alien need not possibly result in an inconclusive dithering yet loose to run the g.auntlet of respondent's rulings fashioned for non-resident. aliens engaged in trade or business. It does not need to be . It. is beyond the reach of the issue in the instant case, which as earlier stated, i s nothing but simply a question of distinguishing a resident alien from a mere transient or sojourner for income tax purposes as conceived and defined in the Income Tax Regulations. Significantly noted, moreover, is the fact that 'petitioner has consistently filed his income tax returns in 1976, 1977, 1978 and 1979, as a resident alien, availing of the optional standard deduction as well as personal and additional exemptions and until now the same have never been questioned.' (Memorandum for Petitioner, p �. 7). The situation where petitioner stood �during the calendar year 1975 remained obtaining through the subsequent taxable years 1976-1979. We see no r eason and none 37 3

DECISION - CTA CASE NO. 2952 - .8 - is offered for such a quirk of a variance in the treatment of petitioner's income tax return for the year 1975. - we hold that petitioner stands reLieved of the tax liabilities for the calendar year 1975 consequenced by the deficiency assess- ment, a contradiction by fiat with the unquestioned income tax returns for the taxable years 1976 through 1979." (Ota v. Commissioner of Internal Revenue, CTA Case No. 3161, March 31, 1982) ~ We do not think any different conclusion ought be reached in the case at bar. Even more significant is the fact that "for the year 1974, Mr. Seminoff (pet.i tioner) _has been treated by the BIR, as a resident. for income tax purposes when he filed his return and paid his income for the same ye�ar as such. Mr. Seminoff therefore has already acquired the status of a resident alien for income tax purposes. An a l ien who has acquired residence in the Philippines retains his status as a resident until he abandons the same and actually departs from the Philippines. An intention to change nis residence does not change his status as a resident to that of a non-resident alien. Thus, an alien who has acquired a residence in the Philippines is taxable as a resident for the remainder of his stay in the Philippines. (Sec. 6, Rev. Reg. No. 2, underscoring supplied) �." (Exh. "D") Respondent has not shmvn any exceptional syndrome of change in the petitioner's

DECISION - CTA CAS E NO. 2952 - 9- circumstances as to warrant a volte-face on a status then obtaining. We distrust the logic that leads to such a quick shuttle in respondent's posture. WHEREFORE, finding the petition to be well taken, t he same is granted, and t he refund of the amount sought is hereby ordered. No pronouncement as to costs. SO ORDERED. Quezon City, MetLo Manila, August 30, 1982. ~:-?/�~~? Associate Judge WE CONCUR: ~::ti2V Presiding Judge Judge 37 5