G.R. No. L-29971 - Esso Standard Eastern, Inc. vs. Court of Appeals

Petitioner Gulf Air Company, Philippine Branch (GF) is a branch of Gulf Air Company, a foreign corporation organized under Bahraini law.
On October 25, 2001, GF availed itself of the BIR’s Voluntary Assessment Program under Revenue Regulations No. 8-2001 for its 1999 and 2000 Income Tax, Documentary Stamp Tax, and Percentage Tax for 3rd Quarter 2000, paying a total of P11,964,648.00.
GF filed a claim for refund of excess Percentage Tax for the 1st, 2nd, and 4th Quarters 2000.

A Letter of Authority was issued to examine GF’s books; after submissions and an informal conference, GF received on November 4, 2003 a Preliminary Assessment Notice for P32,745,141.93 deficiency and a letter denying its refund claim.
On December 10, 2003, GF received a Formal Letter of Demand for P33,864,186.62; it protested by letter on December 29, 2003 and reiterated its refund request.
On June 30, 2004, the Deputy Commissioner, OIC of the Large Taxpayers Service, denied GF’s protest for lack of factual and legal basis and demanded immediate payment.

GF filed a petition for review with the Court of Tax Appeals (CTA); on March 21, 2007, the Second Division dismissed the petition, applying Revenue Regulations No. 6-66, requiring inclusion of special commissions in gross receipts, and disallowing retroactive effect of RR 15-2002; it ordered payment of P41,117,734.01 plus interest.
On January 30, 2008, the CTA En Banc affirmed the Division’s decision, holding RR 6-66 applicable to the 2000 period and RR 15-2002 not retroactive; its March 12, 2008 Resolution denied reconsideration.
GF filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court.

Whether the definition of “gross receipts” for computing the 3% Percentage Tax under Section 118(A) of the 1997 NIRC should include special commissions on passengers and cargo based on rates approved by the Civil Aeronautics Board.