CTA Case No. 4974 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ASIAN TRANSMISSION CORPORATION. - versus - C.T.A. CASE NO. 4974 COMMISSIONER OF INTERNAL tjJ;r- Promulgated: REVENUE, MAY 07 1996 Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION Petitioner :::eel(S to recover t)y Volay of tl1is petition for re'lieV�l its claim for refund or tax credit 'Nitll tile respondent in tile amount of P 1,067,732.15, representing overpaicl final 'h'itilllolding t:1x on royalties paid and remitte(J to IvUtsuNslli .f'.~iot.ors Corporation (Japan) for taxable year 1991. There is no dispute as t;) tJ1e material facts of tile case. respondent. having admitted tile same in tile ansT�Ner. Tlle facts as alleged in tile petition are as follov-ls: "1. PetiUoner is a private corporation duly- organized and existing under and by virtue of tile la~Ns of t11e Philippines v\lith office address at Canlu.l)ang, Calamba, Laguna; wllile 50~ '

-..... DECISIOH- C.T.A. CASE HO. 4974 - 2- 2. Respondent is the duly -appointed Comm1ss1oner of Internal Revenue mandated by law to implement and enforce the National Internal Revenue Code and otl1er related st1tutes v1itl1 office addrt?ss at BIR National Office, Diliman. Quezon City, where he may be served ~hith summons; ST.A.TE1v1ENT OF FACTS 3. Petitioner 1s engaged in the manufacture of transmission assembly, component parts and engine assembly under a 'Manufacturing, Patents, and Technical AssistatKe Agreement' witl1 Mitsubishi Motors (Japan) Corporation; 3.A. The Board of Inve'shnents ha.s determined petitioner's business as a preferred pwneer busmess; wh1le petitioner's agreement with lvlitsubishi Motors - Japan is registered witll the Bureau of Patents, Trademarks anti Technology Transfer of the Department of Trade and Industry; "'!:~ '"t::F" "!:!" A). .(& ..(�:.,.� .3.P.�. That under the manufacturing agreement (Annex 'A'), it is specificall)T provided that petitioner pays Mitsubishi Motors - Japan t'Y'v'O (2) t;..�pes of fees: (a) a fee (�45,000/40,000 per personnel dispatched) for t11e clispatc:h of MMC's technical personnel to provide technical assistance tt,:. ATC on the basis of number of days st-1y in the Philippines (minimum of one week but not to exceed an aggregate of six months in one taxal)le year); and (b) a fee 'in consideration of the technical assistance and otl1er benefits x x x granted or agreed to be granted by MMC to ATC on the basis of 5% FOB price of omission or 5% of net sales minus landed cost of imported component parts, v.,rhichever is lower. 4. In accordance witl1 the aforementioned provision of the agreement, for services, technical ass1stance extended by Mitsubishi lvlotors - Japan to

... - DECISIOB- C.T.A. CASE BO. 4974 -3- petitioner, petitioner remitted to Mitsubishi Motors - Japan technical assistance fees, as follo\..18: A. ApnllO, 1991 P l,oo 15.37.13 Tax Rate X .)0 'Nitilholding Tax Paid p 564,46 1.14 B. May 10, 1991 P3,42o, 130.47 Tax Rate X . -:)0 Withholding Tax Paid c. July 10, 1991 p 23,94.3.16 Tax Rate x .�~o Witilholding Tax Paid p 3,602.95 after payment and remittan(:e of the Vlithholding tax due to the Bureau of Internal Revenue.: ~-~XX XXX XXX." Petitioner invotes the provisions of tile RP-Japan Tax Treaty particularly paragraphs (3) and (4) of .8. ...rticle 12, V�rhich we quote: -ARTICLE 13 (3) Not-o:Nithstanding ti1e provisions of paragraph {2 ), the amount of tax imposed by the Philippines on the royalties-paid by a company, being a resident of the Philippines, registered witt1 the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentives laws of tt1e Philippines to a resident of Japan, \qho is the beneficial owner of the royalties, shall not exceed 10 per cent of the gross amount of the royalties. (4) The term 'royalties' as used in ti1is .e. .. rti(.:le means payments of any kind received as a consideratlon for ol" L-1 o,c:

DECISIOll- C_T_A_ CASE 110_ 4974 -4- the use of, or the right to use, any copyright of literary, artistic or scientific �work including cmematograph films and films or tapes for radio or television broadcasting, any patent, traclemark, design or model, plan, secret formula or process, or for the use of, or ti1e right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience... Petitioner contended that tile technical assistance fees paid to Mitsubishi Motors Corp. (Japan) is covered under tile term "royalties" subject onl)' to the 10% final V�lithholding tax rate. Therefore, petitioner realizing that there VMS an overpayment of withholding tax on royalties at the rate of 20% or in the amount of P 1,067,732.15 filed a claim for refund v/ith the respondent on April 12, 1993. Since the last day for filing a judicial claim for refund \�V111 expire on the same date, petitioner simultaneous!}' filed the instant petition V�lith this Court pursuant to the provision of Section 230 of the National Internal Revenue Code. Respondent generally admits ti1e allegations in the petition. Ho~Never, she takes exception to the averment that respondent has not approved nor denied the claim for refund and that tl1e petition V?as filed in compliance with Section 230 of the Tax Code. An examination of the BIR records -.:Nould reveal tl1at petitioner's letter claim for refund dated April 6, 1993 (Exhs. P and 1), filed on April 12, 1993 (Exhs. P-1 and 1-a), has been investigated upon by the Revenue District Office No. 56 of Calamba, Laguna. The First Indorsement Letter, dated July 1&, 1994 (Exh. 2), recommended a favorable action in line -.:,..rith the 10% rate as prescribed under Article 12(3) and (4) of the RP-

DECISIOB- C.T.A. CASE HO. 4974 -5- Japan Tax Treaty. However, the refund amount vv-ras reduced, by reason of prescription, to P690,424.72, computed as follows: Total amount of Claim p 1,60 1,59&.23 Less: Remittances dated 4/ 10/91 564.461.14 Balance Less: Applicable Wit1111olding tax p 1,037,137.09 Final Amount for Refund 346.712.)7 p 690,424.72 Tlle reason being t11at tlle claim for refund \\13.S filed only on April 12. 1993, wllile t11e payment or remittances ..i.la.s made on April 10, 1991, whicll is beyond tlle tT+l0-;7ear prescriptive period from date of payment for filing a claim for refund. On Second Indorsement. dated July 19, 1994, t11e recommendation was forwarded to the Regional Director, Revenue Region No. 9, San Pablo City v111o in turn approved said recommendation on August 10, 1994 (Exl1. 3). Tlle real issue llas therefore been limited to 1Nl1ether or not petitioner is entitled to t.lle refund or issua.nce of a Tax Credit Certificate to the vv�llole amount of P 1,067,732.15, representing allegedly overpaid wit11holding tax at source on royalties paid to Mitsubishi Motors Corporation (Japan) for the year 1991 or to the reduced amount of P690,424.72 as computed t>y respondent's officers. Tlle corollary issue is whetl1er or not the claim for refund for t11e tax paid on April 10, 199111as prescribe(!. We fine! for t11e respondent. Sections 204(3) and 230 are the controlling provisions of the National Internal Revenue Code in determining V�lllether or not a (:laim for refund llas prescribed. They provide as follows: b03

DECISIOJI- C.I.A. CASE HO. 4974 - 6- "SEC. 204. Authority of �the Commissioner to compromise~ abate and refund/credit taxes. - The Commissioner may - XXX XXX XXX. (3) Credit or refund taxes erroneously or illegally received, or penalties imposed without authority; refund the value of internal revenue stamps T+lhen they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund tl1eir value upon proof of destruction. No credit or refund of taxes or penalties shall tJe allowed unless the taxpayer files in vv�riting with the Commissioner a claim for credit or refund within two years after the payment of the tax or penalty.� �sEC. 230. Recovery of tax erroneously or illegally collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue t-'lx hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed k1 have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected. until a claim for refund or credit has been duly filed witll tl1e Commissioner of Internal Revenue; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: .Pf(JVJd~i ht,~Vf.'.t:: That the Commissioner may, even without a vvritt.en claim therefor, refund or credit any tax, v.,here on the face of the return upon V�lhicll payment was made, such payment* appears clearly to have been erroneously paid. {* Should read "tax".)

DECISION- C.T.A. CASE HO. 4974 -7- .F'-..-~:r.l..t:Jllu.r& .of .r&fand. - A refund checlc or -.:,qarrant issued in accordance ,..,ith the pertinent prov1s10ns of this Code Which shall remam unclaimed . or uncashed -:mt11in iive (�'-)) vears from the date the said warrant or check 'v\Tas mailed or delivered shall 1)~ forf~it?d in favor of tlN government ancl t11e amount thereof shall revert to tlle General Fund. (Lis .:r<tded .b,rP.res: f;e~._-::ree 1l'i?. 1?'cz5)- It is the contention of respondent tl1at the claim for refund was filed on ~.A.pril 12, 1993 or two days late. Petitioner has only two years to claim for t11e refund of said overpaid t3.X counted from April 10, 1991 (the date of payment). Petitioner's counsel on the �)tiler hand argued that since April l 0, 1993 falls on a Saturclay, a non -worting day. the next working day, April 12, 1993 (a :Monday), should be deemed to be t.lle last day for filing a claim for refund. \Vhile it ma};r be true that the BIR has no office on a. Saturday, this Court n(metheless has office on Saturday as prescribed under Sections 2 and 3 of Rule .3 of the Rules of the Court of Tax .e..ppeals, to \ollit: PLACE OF OFFICE AND BUSINESS HOURS SEC. L .., 'II:,. 'II:,. ... , . '1:7' "r:.7 ....... ..:�ll. ~.... .IC:li. .t& ..::�-.. SEC. 2. The hearings before the Court of Tax Appeals shall be on such days and at such times as 1t may, by order and upon notice t) the parties con<;erned. fix. Hc)wever. the first hours of the tnorning session of the Court every Saturday of each weet shall be devoted to hearing motions, unless, for special reasons and upon motion of a party, tlle

DECISIOH- C_T _.A_ CASE HO_ 4974 -8- Court shall fix another day for the hearing of any particular tnotion. SEC_ 3- The office of the Clerk of Court of the Court of Tax Appeals shall be open for the purpose of re(:eiving petitions, pleadings, motions, and the like during the hours of eight to tV�lelve ..e...M. and one t:> four P.1'v1. on Mondays to Fridays and from eight lUvL to one P.M. on Saturdays, except on such days as may tie designated by lmq or executive proclamation as l)emg official holidays ... Similarly, in the case of Maersk-Tabacalera Shipping Agency (Filipinast Inc_ v _The Commissioner of Internal Revenue~ CTA Case No_ 5006~ February 20~ 1996~ this Court has ruled that in like manner, ii the last day for issuing an assessment (wtthin the three-year prescnptive period) falls due on a. Saturday, the respondent should hm:re mailed it on the last �dav even tl1ough the san1e ialls due on a Saturdav as ruled by theu� Supreme Court tl1at Saturday is considered an ordinary day, to Wlt: .. x x x. In t11e case of Bank of America NT and SA vs. Gerochi, Jr., 230 SCRA 9, t11e Supreme Court ruled, thus: 'Tlw prevailing rule even then V�las that if tl1e last clay to appeal fell on a Saturday, the act was still due on that dav� and not t11e next succeedinQu� business day.' In Lu�~ero vs. NLRC, 20~) SCRi�.. 210, it \o\ras similarly ruled, thus: 'Ho~..lever v,�e noted in these cases the fact that Saturday u.nles::; declared a holiday, is considered a business da;..�

DECISIOH- C.T.A.. CASE HO. 4974 -9- and therefore, if tl1e last day to appeal falls on a Saturday, the act is due on t11at day and not on the ne}..'t succeeding busmess dav.' ' In Ola(;a.:' vs, NLRC. 177 SCRA .)(), tlH Supreme Court again declared, t11us: 'It may be t11at private respondent's appeal ~.vas filed on the 12th day contrary to �ll.rticle 223 of t11e Labor Code prescribing ten (10) calendar days as t11e reglamenta.ry period of appeal. Private respondent's claim tllat tllis 1Otl1 day fell on a Saturday when the offices of tl1e NLRC were allegedly closed so t11at their last day to appeal falls on a Saturday. the act is still due on t11at day."� It is therefore clear t11at petitioner has from &:00 A.M. to 1:00 P.M. of the Saturday of April 10, 1993 to file the petition wtth this Court. In the administrative level, petitioner could have sent its claim for retune! witll tl1e Bureau of Internal Revenue by registered mall on April 10, 1993 instead of v..raiting for Monday, Apnl 12, 1993 in order to coincide ~Nith the timely filing of its JUdicial claim for reiuncl. Taxpayers are warned that this Court is open every Saturday except on Regular or Special Holidays. Our rules is clear on tllis point. Thus, petitioner's claim for reiund in the amount of P564,461.14 has already prescribed as correctly pomted by respondent. J=:�etitioner 1s only entitled t::> the refund of P691,424.72 and not P690,424.72 as computed by respondent's revenue ofiicers. The amount of refund of P691,424.72 per tlle Court's computatior; v.ms arrived at as foll(>'~,...JS:

DECISIOB- C.I.A. CASE BO. 4974 - 10 - Total amount of Claim p 1,601,598.2 .3 Less: Remittances dated 4i 1Oi9 1 ')64 461.14 Balance nr l ,u��~->:��,71?J7�0�-:Q; Less: Applicable witllllolding tax May 10, 1991 P3,42(), 1()0.47 x 10% =P342l, 1.3.05 July 10, 1991 P 2(),943.16 X lO:t = 2.894. ~.2 )4),712. \7 Refundable Amount p 691.424.72 WHEREFORE, respondent is hereby ordered to refund or issue a Tax Credit Certificate in favor of petitioner in the amount of P691,424.72, representing erroneously an�j overpaid v.litllholding taxes at source on royalties paid and remitted to Mitsubishi 1viotors Corporation (Japan) for t11e t:nm.ble year 1991. No pronouncement as to cost. SO ORDERED. WE CONCUR: .. Q~ Pr siding Judge ~p ); Vll(� . 'RAMON_ 0. DE Assooate Judge

DECISIOH- C.I.A. CASE HO. 4974 - 11 - CERTIFICATION I hereby certif'{ that this decision vva.s reached after due consultation among the members of t11e Court of Tax Appeals in accordance Tv\litll Section 13, Article VI II of the Constitution. ~Q_'-~ .ERNESTO D. ACOSTA Presiding Judge Court of Tax ,_a,_ppeals t .. ulJ..