Case Digest (G.R. No. 204095)
Facts:
In N.V. Reederij “Amsterdam” and Royal Interocean Lines v. Commissioner of Internal Revenue, petitioners N.V. Reederij “Amsterdam,” a foreign shipping corporation organized under Dutch law with its principal office in Amsterdam and not licensed to do business in the Philippines, and its husbanding agent Royal Interocean Lines, challenged assessments by the Commissioner of Internal Revenue for deficiency income taxes on freight receipts earned when petitioners’ vessels, MV “Amstelmeer” (March 27–April 30, 1963) and MV “Amstelkroon” (September 24–October 28, 1964), loaded cargoes in Philippine ports for foreign destinations. Freight fees totaling US $98,175.00 in 1963 and US $137,193.00 in 1964 were paid abroad and converted by the Commissioner at the market rate of ₱3.90 to US $1.00, producing gross receipts of ₱382,882.50 and ₱535,052.00. On June 30, 1967, the Commissioner assessed N.V. Reederij “Amsterdam” for deficiency income taxes of ₱193,973.20 (1963) and ₱262,904.94 (1964)Case Digest (G.R. No. 204095)
Facts:
- Vessel operations and freight receipts
- MV “Amstelmeer” called on Philippine ports from March 27 to April 30, 1963 to load cargo for foreign destinations; freight fees of US $98,175.00 were paid abroad.
- MV “Amstelkroon” called on Philippine ports from September 24 to October 28, 1964; freight fees of US $137,193.00 were paid abroad. Royal Interocean Lines acted as husbanding agent earning a commission.
- Tax filings and deficiency assessments
- Commissioner’s examiners filed returns for N.V. Reederij “Amsterdam” under Section 15 of the National Internal Revenue Code, converting the foreign‐exchange receipts at P3.90/US$1.00, yielding gross receipts of P382,882.50 (1963) and P535,052.00 (1964).
- On June 30, 1967, the Commissioner assessed deficiency income tax of P193,973.20 (1963) and P262,904.94 (1964) against N.V. Reederij “Amsterdam” as a non-resident foreign corporation not engaged in trade or business in the Philippines under Section 24(b)(1).
- On August 28, 1967, Royal Interocean Lines filed income tax returns for the same vessels as if engaged in trade or business (Section 24(b)(2) in relation to Section 37(B)(e)), converting at P2.00/US$1.00 and paying P1,835.52 (1963) and P9,448.94 (1964).
- Protest and judicial review
- Petitioners protested the assessments; protest was denied on March 3, 1969.
- Petition to the Court of Tax Appeals resulted in a December 1, 1976 decision eliminating 50% fraud penalties; motion for reconsideration was denied.
- Petitioners elevated the case to the Supreme Court, raising classification under Section 24(b) and the conversion‐rate issue.
Issues:
- Whether N.V. Reederij “Amsterdam,” having no office or place of business and only two calls in 1963–1964, should be taxed as a non-resident foreign corporation not engaged in trade or business under Section 24(b)(1), or as a foreign corporation engaged in trade or business under Section 24(b)(2) in relation to Section 37(e).
- Whether the foreign‐exchange receipts should be converted into Philippine pesos at the official rate of P2.00/US$1.00 or at the prevailing free-market rate of P3.90/US$1.00 for income tax computation.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)