Case Digest (G.R. No. 216130) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Commissioner of Internal Revenue v. Goodyear Philippines, Inc. (G.R. No. 216130, August 3, 2016), the respondent, Goodyear Philippines, Inc., a domestic corporation registered as a large taxpayer with the Bureau of Internal Revenue (BIR), increased its authorized capital stock on August 19, 2003 to include 13,318,630 preferred shares at ₱100 par value each. All preferred shares were subscribed by Goodyear Tire and Rubber Company (GTRC), a non-resident foreign corporation organized under Ohio law and unregistered in the Philippines. On May 30, 2008, the Board of Directors authorized the redemption of 3,729,216 preferred shares on October 15, 2008 for a total redemption price of ₱470,653,914.00 (₱372,921,600.00 par value plus ₱97,732,314.00 accrued dividends). Although Goodyear Philippines sought prior relief under the RP-US Tax Treaty, it conservatively withheld and remitted ₱14,659,847.10 (15% of the dividend component) as final withholding tax (FWT) on November 3, 2008. On O Case Digest (G.R. No. 216130) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Corporate Structure
- Respondent Goodyear Philippines, Inc. is a domestic corporation, registered with the BIR as a large taxpayer.
- On August 19, 2003, Goodyear increased its authorized capital stock to ₱1,731,863,000 divided into 4,000,000 common shares and 13,318,630 preferred shares; all preferred shares were subscribed by Goodyear Tire and Rubber Company (GTRC), a U.S. resident foreign corporation.
- Redemption Transaction and Tax Withholding
- On May 30, 2008, the Board authorized redemption of GTRC’s 3,729,216 preferred shares on October 15, 2008 at a total redemption price of ₱470,653,914 (₱372,921,600 par value + ₱97,732,314 accrued dividends).
- Respondent applied for relief under the RP-US Tax Treaty on October 15, 2008, but conservatively withheld and remitted ₱14,659,847.10 (15%) as final withholding tax (FWT) on November 3, 2008.
- Administrative and Judicial Proceedings
- Respondent filed an administrative claim for refund or tax credit certificate (TCC) on October 21, 2010, and a judicial claim before the CTA on November 3, 2010 (C.T.A. Case No. 8188).
- The Commissioner of Internal Revenue (petitioner) opposed on grounds of non-exhaustion of remedies and incomplete documentation.
- CTA Second Division (March 25, 2013) and CTA En Banc (August 14, 2014) granted the refund; both bodies held the redemption gain was not subject to Philippine income tax or FWT on dividends. Reconsideration petitions were denied (June 26, 2013; January 5, 2015).
- Petitioner elevated the case to the Supreme Court (G.R. No. 216130), arguing procedural and substantive error.
Issues:
- Non-exhaustion of Administrative Remedies
- Whether respondent’s judicial claim must be dismissed for premature filing before the CTA.
- Tax Treatment of Redemption Gain
- Whether the gain derived by GTRC from redemption of preferred shares is subject to 15% FWT on dividends under Section 28(B)(5)(b) of the Tax Code and the RP-US Tax Treaty.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)