Case Digest (G.R. No. L-65773-74) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In G.R. Nos. 65773-74 decided on April 30, 1987, the Commissioner of Internal Revenue (CIR) petitioned for review on certiorari of the joint decision of the Court of Tax Appeals (CTA) in CTA Cases Nos. 2373 and 2561 dated January 26, 1983, and its November 18, 1983 resolution denying reconsideration. The respondent, British Overseas Airways Corporation (BOAC), a 100% British Government‐owned airline and member of the Interline Air Transport Association (IATA), had no landing rights in the Philippines for traffic purposes except for a temporary nine-month permit in 1961–62 and thus performed no actual carriage of passengers or cargo to or from Philippine territory. Nonetheless, during the fiscal years 1959–1967 and 1968–1971, BOAC maintained a local general sales agent (initially Warner Barnes and Company, later Qantas Airways) to sell and issue its tickets in the Philippines and to remit payments in Philippine currency. In CTA Case No. 2373 (First Case), the CIR initially assess... Case Digest (G.R. No. L-65773-74) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and background
- The Commissioner of Internal Revenue (CIR) filed a petition for certiorari seeking review of the CTA’s joint Decision in CTA Cases Nos. 2373 and 2561 (G.R. Nos. 65773-74), which set aside CIR’s deficiency income tax assessments against British Overseas Airways Corporation (BOAC) for fiscal years 1959–1967 and 1968–1971.
- BOAC is a 100% British government–owned airline, member of IATA, without Philippine landing rights (save a temporary nine-month permit in 1961–62). It sold tickets in the Philippines through a general sales agent: Warner Barnes & Co., Ltd., later Qantas Airways.
- Assessment history and proceedings
- First Case (G.R. No. 65773, CTA Case No. 2373):
- 7 May 1968 – CIR assessed BOAC ₱2,498,358.56 for FYs 1959–1963; protested.
- 16 January 1970 – CIR issued a new assessment of ₱858,307.79 for FYs 1959–1967; BOAC paid under protest, filed a refund claim and petition with the Tax Court.
- Second Case (G.R. No. 65774, CTA Case No. 2561):
- 17 November 1971 – CIR assessed BOAC ₱549,327.43 (plus compromise penalties) for FYs 1968–1971; BOAC’s request to set aside denied.
- 27 January 1972 – BOAC filed petition with the Tax Court; both cases were tried jointly.
- CTA decision
- The Court of Tax Appeals held that ticket-sale proceeds “do not constitute BOAC income from Philippine sources,” since no carriage service was performed in the Philippines.
- It ordered credit of ₱858,307.79 and cancellation of the ₱534,132.08 assessment for FYs 1968–1971.
Issues:
- Source and taxability of ticket-sales income
- Do revenues from BOAC ticket sales in the Philippines, absent landing rights, constitute Philippine-source income and are therefore taxable?
- Resident foreign corporation status and alternative liability
- Was BOAC a “resident foreign corporation” doing business or having an office/place of business in the Philippines during the years in question?
- Alternatively, if non-resident, is BOAC liable to Philippine income tax at 35% on its gross Philippine-source income?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)