Case Summary (G.R. No. L-66653)
Claim for Refund: Basis and Computation
Burroughs Limited thereafter claimed that the 15% tax should have been computed on the amount actually remitted (P6,499,999.30), not on the gross profit prior to deduction of the tax. On December 24, 1980, it filed a written claim for refund or tax credit for P172,058.90 (the decision reflects P172,058.90 as the refund ordered), computed by taking 15% of P6,499,999.30 (P974,999.89) as the due remittance tax and subtracting the P1,147,058.70 actually paid, producing an alleged overpayment of P172,058.90.
Procedural History
- Burroughs filed a petition for review with the Court of Tax Appeals (C.T.A.) on February 24, 1981 (C.T.A. Case No. 3204).
- The C.T.A. rendered a decision on June 27, 1983 ordering the Commissioner to grant a tax credit of P172,058.90 in favor of Burroughs Limited.
- The Commissioner sought certiorari review before the Supreme Court to overturn the C.T.A. decision.
Legal Issue Presented
Whether the tax base for the 15% branch profit remittance tax under Section 24(b)(2)(ii) is (a) the amount applied for remittance (i.e., the gross profit before deduction of the tax), or (b) the amount actually remitted (i.e., net of the remittance tax), and consequently whether Burroughs Limited is entitled to the asserted refund/credit.
Applicable Administrative Interpretation
A Bureau of Internal Revenue ruling dated January 21, 1980, interpreted Section 24(b)(2)(ii) to mean that the 15% tax shall be imposed on the profit actually remitted abroad and not on the total branch profits out of which the remittance is to be made. The Supreme Court applied that ruling as controlling for the taxpayer’s March 1979 payment.
Petitioner’s Counterargument and Its Rejection
The Commissioner contended that Memorandum Circular No. 8-82 (March 17, 1982) revoked the January 21, 1980 ruling and that the later memorandum established that the tax base should be the amount applied for remittance (the gross amount). The Court rejected this argument, reasoning that Memorandum Circular No. 8-82 could not be applied retroactively against Burroughs Limited’s March 1979 payment because Section 327 of the National Internal Revenue Code prohibits retroactive application of revocations, modifications, or reversals of rulings when such retroactivity would prejudice the taxpayer, except in specified narrow circumstances.
Non-retroactivity Under Section 327: Application of Exceptions
Section 327 provides that revocations or modifications of rulings shall not be given retroactive application if prejudicial to the taxpayer, except where (a) the taxpayer deliberately misstated or omitted material facts; (b) facts subsequently gathered are materially different from those on which the ruling was
...continue readingCase Syllabus (G.R. No. L-66653)
Citation and Procedural Posture
- Reported at 226 Phil. 236, Second Division, G.R. No. 66653, decided June 19, 1986.
- Petition for certiorari brought by the Commissioner of Internal Revenue to review and set aside the Decision dated June 27, 1983 of the Court of Tax Appeals in C.T.A. Case No. 3204, entitled "Burroughs Limited vs. Commissioner of Internal Revenue."
- The Court of Tax Appeals had ordered the Commissioner to grant a tax credit in favor of Burroughs Limited in the amount of P172,058.90, representing allegedly erroneously overpaid branch profit remittance tax.
- The Supreme Court, through Justice Paras, rendered the decision affirming the Court of Tax Appeals; Feria, Fernan, Alampay, and Gutierrez, Jr., JJ., concurred.
- The decision contains no pronouncement as to costs.
Parties and Corporate Background
- Petitioner: Commissioner of Internal Revenue (Bureau of Internal Revenue).
- Private respondent: 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.
- Respondent in the lower court proceeding: Court of Tax Appeals (respondent in the Supreme Court petition insofar as it rendered the assailed decision).
Operative Facts — Remittance and Tax Payment
- In March 1979, Burroughs Limited's branch applied with the Central Bank for authority to remit P7,647,058.00 in branch profits to its parent company abroad.
- On March 14, 1979, Burroughs paid the 15% branch profit remittance tax pursuant to Section 24(b)(2)(ii) of the Tax Code.
- The gross amount applied for remittance: P7,647,058.00.
- 15% branch profit remittance tax computed on that amount: P1,147,058.70.
- Net amount actually remitted after tax withholding: P6,499,999.30, computed as P7,647,058.00 less P1,147,058.70.
- Burroughs later claimed that the 15% tax should have been computed on the net amount actually remitted (P6,499,999.30) rather than on the gross amount applied for remittance (P7,647,058.00).
Claim for Refund / Tax Credit — Computation
- Burroughs filed a written claim for refund or tax credit on December 24, 1980, asserting an overpayment.
- Computation presented by Burroughs for the tax actually due:
- Profits actually remitted: P6,499,999.30.
- Remittance tax rate: 15%.
- Branch profit remittance tax due on the net amount: P974,999.89.
- Branch profit remittance tax paid on the gross amount: P1,147,058.70.
- Difference claimed as refundable: P172,058.81 (in the claim) — the source material also records the refund amount as P172,058.90 in other parts of the record; the Court of Tax Appeals ordered credit of P172,058.90.
- On February 24, 1981, Burroughs filed with the Court of Tax Appeals a petition for review (C.T.A. Case No. 3204) for recovery of the claimed amount.
Issue Presented
- Framed by the petitioner Supreme Court petition: whether the tax base upon which the 15% branch profit remittance tax shall be imposed under Section 24(b) of the Tax Code, as amended, is
- (a) the amount applied for remittance (the gross branch profits before withholding of the remittance tax) or
- (b) the profit actually remitted after deducting the 15% profit remittance tax (the net remittance).
- Restated: whether Burroughs Limited is legally entitled to a refund of the aforementioned amount of P172,058.90 (or, in some parts of the record, P172,058.81).
Relevant Statutory Provision Quoted
- The Court expressly cites the pertinent provision of the National Revenue Code:
- "Sec. 24. Rates of tax on corporations. x x x (b) Tax on foreign corporations. x x x (2) (ii) Tax on branch profits remittances. - Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15%) x x x ."
Administrative Interpretation — BIR Ruling (January 21, 1980)
- The Bureau of Internal Revenue, by a ruling dated January 21, 1980 (Acting Commissioner Efren I. Plana), had interpreted Section 24(b)(2) to mean:
- "the tax base upon which the 15% branch profit remittance tax x x x shall be imposed x x x (is) the profit actually remitted abroad and not on the total branch profits out of which the remittance is to be made."
- The Ruling (as