G.R. No. 274922 - People vs. Teddy C. Tumang and William B. Colis

The case involves a petition for certiorari filed by the Commissioner of Internal Revenue (petitioner) against the Court of Tax Appeals and Burroughs Limited (respondents).
The petition challenges the Decision dated June 27, 1983, rendered by the Court of Tax Appeals in its C.T.A. Case No. 3204, which ordered the Commissioner to grant a tax credit of P172,058.90 to Burroughs Limited.

Burroughs Limited – a foreign corporation authorized to engage in trade or business in the Philippines through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro Manila.
The Court of Tax Appeals.

In March 1979, the branch office of Burroughs Limited applied with the Central Bank for the authority to remit branch profits to its head office abroad.
On March 14, 1979, the branch office transmitted a total amount of P7,647,058.00 with deductions as follows:

The branch profit remittance tax (15%) was computed on the total, amounting to P1,147,058.70.
The net amount remitted to the head office was P6,499,999.30.

Burroughs Limited filed a written claim on December 24, 1980, seeking a refund or tax credit over an alleged overpayment of branch profit remittance tax.
The contention was based on the computation that the tax should have been imposed on the net amount actually remitted (P6,499,999.30) rather than the gross remittance amount (P7,647,058.00).
The correct computation, as claimed by Burroughs Limited, was:

Tax due on net remittance (15% of P6,499,999.30) equals P974,999.89.
Given the tax actually paid was P1,147,058.70, there was an overpayment amounting to approximately P172,058.90.

A Bureau of Internal Revenue (BIR) ruling dated January 21, 1980, by then Acting Commissioner Hon. Efren I. Plana, clarified that the 15% branch profit remittance tax shall be imposed on the profit actually remitted abroad and not on the total branch profits.
The ruling was instrumental in supporting the claim that the tax base should be the net profit remitted, thereby justifying the refund claim.

The Commissioner of Internal Revenue argued that Memorandum Circular No. 8-82, dated March 17, 1982, which advocated that the tax base should be the gross amount applied for remittance, had revoked the earlier BIR ruling.
The Court held that because the branch profit remittance tax in question was paid on March 14, 1979, the January 21, 1980 ruling remained applicable.
The principle of non-retroactivity found in Section 327 of the National Internal Revenue Code prevented the retroactive application of Memorandum Circular No. 8-82, as it would prejudice the taxpayer.

Whether the tax base for imposing the 15% branch profit remittance tax under Section 24(b) (2)(ii) of the Tax Code should be the total amount before deducting the tax (gross remittance) or the net amount remitted (after deducting the tax).
Whether Burroughs Limited is legally entitled to a refund or tax credit of the overpaid amount (P172,058.90) on the basis that the tax should be computed on the net remittance amount.
Whether Memorandum Circular No. 8-82 dated March 17, 1982, which provides an alternative interpretation, can be applied retroactively in this case.