CTA Case No. 3089 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY HOLIDAY INN (PHILIPPINES), C.T.A. CASE NO. 3089 INCORPORATED AND HOLIDAY INN MANILA, Peti tioner�s, -- Vei'"S US - THE ACTING COMMISSIONER OF INTERNAL REVENUE , Respondent. X- - - - - - - - - - - - X DEC I s I0N Thi s i s a c 1 aim �fol'" r-e �fund o �f the sum of P3 1,939.00 representing the difference between the total amount elf P244,866.00 which petitioners allegedly paid in 1978, 1979 and 1980 a s 15% branch --------- pi"�o �f).t remittr..D..C.! ta :-: for profits realized by them in 1978 and 1979 and the s um of P212,927.00 whi c h allegedly s hould have been the correct c":Hnount of ta :-: due in accordance with a ruling of respondent Commissioner of Internal Revenue dated January 21, 1980. The backgr�ound fact s are not in contr�over-s y. As summarized by respondent: 1. Peti. tioner Holiday Inn (Philippines), Inc:. is a r-esident foreign cor-poration engaged in hotel business with office address in the Phi 1 ippines at 1700 Ro:�:as Boulevard, Pasay City, 5 2~ J

DECISION CTA CASE NO. 3089 - 2 -- Metro Man i 1a; whi 1e the other petitioner Ho 1 iday Inn Manila is a domestic corporation duly organized and existi ng under and by virtue of the laws of the Philippines, likewi se engaged in hotel business and with same principal office as the former; (F'ar. 1, Petition) 2. For profits rea 1 i zed in the years 1978 and 1979, petitioners paid the cor-responding 15/. branch profit remittance ta:�: thereon in the total amount of F'244,866.00, detailed as follows: Date Offic ia1/Ccn fir-ma tion Pmc:x.U'lt E:~.:i..q --�-�-----B-~g!R3:.... f\k::2.! ...___.__ _ .....f~~~.Q May 24, 1978 RTR 33(X)5593 (E:�:h. "C") F27 ,439 .(x) t I July 19, 1978 RTR 32712606 (E:�:h. "E") 7 ,61.2.(X) Ck:tober 16, 1978 RTR :-!6.308233 (E:�:h. "G") 27 ,032.(X) January :2:2!1 1979 RTR f�J25':Z;E6 (E:�:h. "!") January 23~ 1979 CR f�)959424 (Exh. "J") 33 , 9:28 �(X) July 19, 1979 RTR A215:.::..:.,/9 (E>:h. "L") 69,328.(X) July 19, 1979 CR A.::.""'844958 (E:�:h. "M") October 1.7, 1979 RTR A257B)59 (E:�:h. "0) 46,23 1.1)) October 19, 1979 CR A.3144661 (E:�:h. "N") January 17, 19B) RTR A2756263 (Exh. "Q") 33,296.(X) January 18, 19B) CR A.35667(X) (ENh. R") 525

DECISION CTA CASE NO. 3089 - 3- 3. Thru letter dated April 28~ 1980 and 'filed with the respondent's bureau on April 30~ 1980 ~ petitioners reqL1ested for-� the refund of the tota 1 amount of P31 ~ 939.00 a 11 eged 1y representing their overpaid branch profit remittance tax for the years 1978 and 1979 (E:<hs. "A"~ "A-1" to "A-4"); 4. Petitioners' claim for refund is anchored solely on their interpretation of respondent's ruling dated January 21, 1980 [hich states that "the 15/. branch profit remittance ta:< sha 11 be imposed on the profit actually remitted abroad and [lOt, on the total branch profit out of which �the remittance is to be made"; .' 5. Apparently wary of the 2-year prescriptive period under Section 292 (now Section 243) of the Tax Code for instituting the judicial action for the recovery of the a 11 eged overpaid branch profit remittance tax, petitioners filed the instant petition with this Court on May 5, 1980. The sole issue for resolution is whether or not petitioners overpaid their 15/. branch profit �( remittance ta:< for 1978 and 1979, hence, entitled rJ to the refund of P31~939.00. 1) We find petitioners' claim for refund meritorious. 526

DECISION CTA CASE NO. 3089 - 4- Four square with the case at bar on this point~ by reason of the exact or close identity of the factual settings~ provisions of law as well as BIR ruling and memorandum involved~ and issue litigated, is Co��issioner of Internal Revenue versus Burroughs Li�ited and the Court of Tax Appeals ,# G.R.. No. 66653,# ,7une 19 ,# 1986 ,# 142 SCR.A ___.) .3:24. Because of its con tro 11 ing ef fee ts on the instant case~ we wi 11 quote at length from the decision. We rule in the affirmative. The pertinent provision of the National Revenue Code is Sec. 24(b) (2) (ii) which s tates: "Sec. 24. Rates of ta >: on corporations. x x x Il (b) Ta:-: on foreign corporations. :-: x :-: ( 2) ( i i ) T a>: on branch profits remittances. Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15/.) >t >t �>t. 11 In a Bureau of Internal Revenue rul1ng dated January 21~ 1980 by then Ac ting Commissioner of Internal Revenue Hon. Efr~n I. Plana the aforequoted provision 1 had been interpreted to mean that "thfi ta:-: base upon which the 151. branch profit remittance ta:-: x :-: x shall be imposed x l�: l�: ( is ) the profit ~.!.;_1;u~j._.!.Y.. rem.J,J;j;_~g- abroad and not on the total branch profits out of which the remittance is to be made."

DECISION CTA CASE NO. 3089 - 5- App 1y ing ther-efor-e~ the afor-equoted r�uling, the claim of pr-ivate r-espondent (petitioner-s) that it made an over-payment in the amount of P172~058.90 (P31~939.00 in this case) which is the differ-ence between the r-emittance ta:-: ac tua 11 y paid of P1,147,058.70 (P244~866.00) and the r-emittance ta:-: that should have been paid of P974~999.89 (P212~927.00), i s well - taken. As cor-r-ectly held by r-espondent Cour-t in its assailed decision - "Respondent concedes at least that in his r�uling dated Januar-y 21, 1980 he held that under- Section 24(b) (2) of the Ta:-: Code the 15% br-anch pr-ofit r-emittance tax shall be imposed on the prof i t ~.~ t I,..\.a U ..'t.._r:.~.m.i.t.t..E'.d. ~..!:d.r.9.E..Q. and !J.Q_t;_ on the tot a 1 branch pr-ofit out of which the remittance is to be made. Based on such r-uling petitioner- �� � shou 1d have paid on 1y the amount of P974,999.89 in , remittance ta :-: c o mputed by taking the 15% of the profits of P6, 499,999.89 in r�emi t tance tax actually remitted to its head office in the United States, ins tead of P1,147,058.70, on its net pr-ofits of P7,647~058.00. Undoubtedly, petitioner has overpaid its branch profit r-emittance tax in the amount of P172,058.90." Petitioner- contends that respondent /I is no longer entitled to a refund because L ~emorandum Circular- No. 8 - 82 dated March 17. 1982 had revoked and/or rg_pealed the BIR r-uling of Januar-y 21, 1980~ The said memor-andum c ir-cular- states -

DECISION CTA CASE NO. 3089 - 6- "Consider-ing that the 15/. br-anch pr-ofit r-emittance tax is imposed and collected at sour-ce, necessar- i 1y the ta:-: base s hoLil d be the amount actually applied for- by the br-anch with the Centr-al Bank of the Philippines as pr-ofit to be r-emitted abr-oad." Petitioner-' afor-esaid contention is without mer-it. What is applicable in the case at bar- is sti 11 the Revenue Ruling of Januar-y 21 ~ 1980 because pr-ivate r-espondent Bur-r-oughs Limited (petitioner-s Holiday Inn [Phils.] Inc. and Holiday Inn Manila) paid the br-anch pr-ofit r-emittance t a:�: in question on __ t!.~..r~.!==.J:L_l.~_s _. t9..Z..~ ( f r-om May 24, 1978 to Januar-y 18~ 1980). Memor-andum Cir-cular- No. 8-82 dated Mar-ch 17, 1982 cannot be given r-etr-oactive effect in the light of Section J327 of the National Inter-nal Revenue Code. The pr-ejudice that would r-esult to pr-ivate r-espondent Bur-r-oughs Limited (petiti oner-s Holiday Inn [Phils.] Inc. and Holiday Inn Manila) by a r-etr-oactive application of Memor-andum Cir-cular- No. 8 - 82 is beyond question for- it would be deprived of the substantial amount of P172,058.90 (P31,939.00). And, insofar- as the enumer-ated e:-:ceptions ar-e concer-ned~ admit ted 1y, Bur-r-oughs Limited (petitioner-s Holiday Inn [Phils.] Inc. and Holiday Inn Manila) does not fall under- any of them. WHEREFORE, respondent Commissioner of Internal Revenue is hereby ordered to grant a refund and/or tax credit to petitioners Holiday Inn (Philippines), Incorporated and Holiday Inn Manila in the amount of P31,939.00 representing overpaid 52 ~

DECISION CTA CASE NO. 3089 - � 7 -- branch profit remittance tax . for profits realized in the years 1978 and 1979. SO ORDERED. Quezon City, Metro Manila, December 20, 1989. AMANTE F F'r�e s i d i n WE CONCUR: -~ Associate Judge CERTIFICATION I hereby certify that this decision was reached after due consultati6n among the members of the Court of Ta x Appeals in accordance with Section 13, Article VIII of the Constitution. AMANTE Presiding Judge Court of Tax Appeals 530