Case Digest (G.R. No. L-65773-74)
Facts:
Commissioner of Internal Revenue v. British Overseas Airways Corporation, G.R. Nos. 65773-74, April 30, 1987, the Supreme Court En Banc, Melencio-Herrera, J., writing for the Court.Petitioner Commissioner of Internal Revenue (CIR) sought review of the joint Decision of the Court of Tax Appeals (CTA) in CTA Cases Nos. 2373 and 2561 (dated January 26, 1983) which set aside CIR's deficiency income tax assessments against respondent British Overseas Airways Corporation (BOAC) for the fiscal years 1959–1967 and 1968–69 to 1970–71, and of the CIR's denial of reconsideration.
BOAC was a 100% British Government-owned international airline, an IATA member, which during the assessment periods had no landing rights or CAB certificate to operate in the Philippines except for a temporary nine-month permit in part of 1961–62; it therefore did not operate flights to or from the Philippines. BOAC, however, maintained local general sales agents in the Philippines—first Warner Barnes & Co., Ltd., later Qantas—which sold BOAC passage documents (tickets) in the Philippines and received payment there in Philippine currency.
In G.R. No. 65773 (CTA Case No. 2373), the CIR originally assessed BOAC on May 7, 1968 an aggregate P2,498,358.56 for 1959–1963; after investigation a new assessment dated January 16, 1970 for 1959–1967 in the amount of P858,307.79 was issued and paid by BOAC under protest. BOAC filed a claim for refund (filed October 7, 1970) which the CIR denied (February 16, 1972); BOAC then filed a petition for review with the Tax Court (January 27, 1972).
In G.R. No. 65774 (CTA Case No. 2561), BOAC was assessed on November 17, 1971 for deficiency income tax, interest and penalties for 1968–69 to 1970–71 totaling about P549,327.43 plus compromise penalties. The CIR reissued a deficiency assessment (February 16, 1972) reduced to P534,132.08 plus a P1,000 compromise penalty; BOAC's requests for reconsideration were denied, and BOAC brought the matter before the Tax Court. The two cases were tried jointly.
The CTA (Tax Court) ruled on January 26, 1983 in favor of BOAC, holding that proceeds from sales of BOAC passage tickets in the Philippines were not Philippine-source inc...(Pro-only)
Issues:
- Whether the revenue derived by BOAC from sales of tickets in the Philippines constitutes income from Philippine sources and is taxable in the Philippines.
- Whether BOAC during the fiscal years in question was a resident foreign corporation "doing business" in the Philippines or had an office or place of business therein.
- If BOAC were a non-resident foreign corporation, whether it would be liable to Philippine income tax at the statutory rate (35%) on gros...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)