CTA Case No. 3746 (Decision)

UJF't.mUC OW 'rBE ~ ~iUf'PI. N�r,. ~tJRT OF TAX {-\PPEA!..S �l\JE'ltON tl ~l: MENNEN PHILIPPINES, INC., ,Petitioner, - versus - C.T.A . CASE NO. 3746 THE COMMISSIONER OF J ,,,/t'l INTERNAL REVENUE, Hesponclent. X- - - - - - - - - - - - X DECI S I 0 N In its letter of November 11, 1982 to the Bureau of Internal Revenue, petitioner Mennen Philippine s , Inc., requested for the refund of the amo un t of 8120,189 representing alleged overpaid corporate development tax for fiscal year ended November 30, 198 1. Since no action was taken seasonably by res- pendent Commissioner of Internal Revenue on its claim for refund, petitioner filed the instant petition for review for recovery of the said amount of el20,189. The material facts are not in dispute, petitioner havin~ submitted, without objection of respondent, the case for decision on the basis of the pleadings. Petitioner is a domestic corporation ex i sting under and by virtue of Philippine laws with principal 89

DECISION - CTA CASE NO. 3746 - 2- office located at No. 36 Mai n Avenue , Cubao, Quezon City. . Respondent is the duly designated Commissioner of Internal Revenue, vested with aut hority to act as such, including, inter alia , the power to grant refunds of erroneously or illegally collected internal revenue taxes. Respondent Commissioner holds office at the National Office Building of the Bureau of I nternal Revenue, Diliman, Quezon City where he may be served with summons. On March )5, 1982, petitioner f iled its 1981 corporate annual income tax return with respondent's Bureau. In said return , it declared a net incom e of El , 375,204 and total tax due thereon in t he amount of E600,176 consisting of P-471,321 and P-128,355, representing income and corporate development taxes , respectively. After it credited the am ount s of 8193 and E6 4 ,396 totalling 864,589 , representing income tax payments for t h e first and third qu a rters of fiscal year ended November 30 , 1981, re spectively : the amounts of E535,587 was due and payable. Said amount of 8535,587 which include s the corporat e su

DECISION - CTA CASE NO . 3746 -- 3 - development t~x of El28,855 was paid on March 15, 1982 under Cent�ral Bank Confirmation Receipt No. 9089996 and Revenue Tax Receipt No. 8725866. I n computing its corporate development ta x liability for the year in que s ti on , petitioner made the following allocation of t ax rates on the basis of the effectivity date of Presidenlial Decree No . 1773: Prior to 1-16-81 (12-l-80 to 1-15-81) ~1,375,204 X 5% X 46/365 [~ 8 , 666 After l-16-�8J. (1-16-81 to 11-30-81) 81,375,204 X 10% X 319/365� Total Contend i ng that under Presidential Decr ee No. 1773 and BIH (Burea u of Internal Hevenue) Ruling No . 92-85 dated March 30, 1982, petitioner was not liable to pay the corporate development tax on it s net taxable income for the period January 16, 1981 to Nov~mber 30, 1981, petitioner filed with res- ponden t' s Bureau a cla.irn for th e refund of the amount of 8120, 189 , computed as follo ws : 91

DECISION - CTA CASE NO. 3 746 - 4- Corporat~ development tax paid 8128,855 Less: Corporate development tax ~--8~,6 66) due for the period 12-l-80 to 1-16-81 Overpayment Petitioner filed its petitio n for review wit h this Court on March 14, 1982 in accordance with Section 292 of the then in for ce National Internal Revenue Code . As stated earlier, respondent has not taken action on petitioner's cla im for refund althougl1 he has denied the same through his answer filed on May 2 , 1984. The lone question tendered for re so lution is whether or not petitioner is entitled to a refund o~ overp aid corporate de vel opme nt tax. Presidential Decree No. 1773 whi ch took effect on Ja nuary 14, 1981 increased the corporate develop- ment t ax from 5% to 10 % of the taxable ne t income . Petitioner, therefore , be ing a closely-held corpo- ratio~ continu ed in 1981 to b e s ubject to the corpo- rate development tax but at the increased rate of 10% of its taxable net in c om e . Thi s is not disputed by petitioner . Responden t

DECISION - CTA CASE NO. 3746 - 5- averred it as�a special and affirmative defense in his answer, and since petitioner submitted this case f o r j u d g me n t o n t he p 1 e ad i n g s v-1i t h o u t g i v i ng r e s - (~ pendent an opportunity to introduce evidence, peti- t i o n e r mus t b e u n de r s t o o d to a d mi t. t h e l:.r u t h o f t lli s material and relevant allegation of respondent. (8auerrnann vs. Casas, et �a l . , 10 Phil. 386; Evan ~~elista vs . De la nasa , 70 Phil. 115.) However, in BIR Ruling No . 95-82 dated March 30, 1982, respondent's Bureau held that - "x ~ x With respect to cor porations on a the fiscal year basis, the sai d increased r a t e 0 f l 0% c 0 r p 0 r 8 t e de v e 1 0 p rn e nt. t a�x--s h 11 aQl2 Jy_i:_9_~ h e.l.!:__J: a ~�EJ..E_,.X_~~~� h_ i c_~_2~..9..i6..~--o r~ t h e f i r s t ~a y_ ~-~~...Q._~t:;_- i n .J::.~~-~~-~-r 19 8J., e x c e p t '~-~~? r X 1 t-:1 9 81 � "In viev�l thereof, si nce you aro a E}2I.Q�.- r a t i .�I!-2.E!.:..E3 t i n 9..._2I.l a f :i. s c:~l._..Y_~n r J~l s :i s a n tJ y o u r f i ~..E.?.__Ly e a r l 9 6 l b e_g i ~.�.._Sl n_ _S e p t e~ b e !~.J;., 1981, the increased rate t~..f...J.~O?~ corporate .9 eve 12..�!.rl e n t tax s h a 11 on 1 'I a p p1..x__ to you. beginning that_9.E~.� 11 (Emphasis ours) Petitio ner is a corporation operating on a fiscal year ~asis and the ruling should also apply to it. Thus, as correctly stated by petitioner in paragraph 7 o f i t s p e t i t i o n f o r r e v i e Vi , " i n a '" mu c h a s p e t :i. t .i o n e r ' s 1981 fiscal year begun on December l, 1981, the

DECISION - CTA CASE NO. 3746 -� 6 - applicable to it on sa i d date, and not prior thereto." (Emphasis supplied . ) Consequently, since petitioner pcid the increased rate of 10% corporate development tox from January 10, 1981 to November 30 , 1981 , in s tead of starting from December 1, 1981, there is an overpayment in the amount of 860,095, computed as follows: Corpora t e development tax paid er2B,B55 Less: Cor porate development tax due for the fiscal year ended November 30 , 1981 ( e l , 3 7 5 , 2D4 x 5% = 868,760) Amount re fu ndable WHEREFORE , respondent Commissioner of Internal Revenue is hereby ordered to grant petitioner Mennen Philippi nes , I nc., the refund/credit of the amount of e60 , 095 representing overpaid corporate develop- ment tax for fiscal year ended Novemb e r 30 , 1981. No costs.

DECISION -� CTA CASE NO. 37q6 - 7- SO 0 RDEn ED. Qu e z o n Ci t y , t~ e t r o 1�1 a n i 1 a , Ma r c h 1 9 1 1 9 B7 � ~IE CONCUH: ~.�' \{/~~~,, CON )ANTE~. ROAOUIN Judge 95