G.R. No. 103092 - Bank of America NT and SA vs. Court of Appeals

Petitioner Bank of America NT & SA, a foreign corporation licensed to do business in the Philippines with a local branch office in Makati, remitted profits abroad from its local operations.
Respondents: Honorable Court of Appeals and the Commissioner of Internal Revenue.

Under Section 24(b)(2)(ii) of the National Internal Revenue Code (NIRC) as worded in 1982, “Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen percent (15%).”
Petitioner argued that the 15% branch profit remittance tax should be assessed on the actual amount remitted abroad, excluding the 15% tax itself from the tax base.
Commissioner of Internal Revenue contended that the tax base should be inclusive of the 15% tax, meaning the tax is computed on a grossed-up amount.

On July 20, 1982, Petitioner paid a total of P7,984,250.97 as the 15% remittance tax based on net profits without deducting the tax amount itself.
Petitioner filed a claim for refund for the portion corresponding to the 15% remittance tax on the grounds that the tax base should have been P45,244,088.85 (actual profit remitted) instead of P53,228,339.82 (profit before deducting the remittance tax).
Without awaiting the Bureau of Internal Revenue decision, petitioner filed a petition for review before the Court of Tax Appeals (CTA) for recovery of P1,041,424.03 alleged as overpayment.

The Court of Tax Appeals ruled in favor of Petitioner, granting the refund.
The Commissioner filed an appeal with the Supreme Court, later referred to the Court of Appeals (CA).
On September 19, 1990, the CA set aside the CTA decision, ruling that the tax base should include the remittance tax and not merely the amount actually remitted.
Petitioner bank filed petitions for review before the Supreme Court.

The Court discussed a prior ruling in Burroughs Limited vs. Commissioner of Internal Revenue where a similar issue arose but was decided based on non-retroactivity of a revenue rule.
The Solicitor General and the Court analyzed the nature of tax bases in ad valorem taxes (such as income tax, estate, gift, VAT, and withholding taxes) and contrasted these with the branch profit remittance tax.
Disputes involved interpretations of whether the 15% tax is imposed on the gross remittance amount that includes the tax itself or solely on the amount actually remitted abroad.

Whether the 15% branch profit remittance tax under Section 24(b)(2)(ii) of the NIRC should be computed on the grossed-up amount inclusive of the tax or only on the amount actually remitted abroad.

Whether the taxpayer can file a valid claim for refund for alleged overpayment when the tax was computed on a gross amount including the tax itself.

The proper interpretation of the phrase “any profit remitted abroad” in the statutory context of branch profit remittance tax.