Case Summary (G.R. No. 137377)
Petitioner
The Commissioner of Internal Revenue, seeking to enforce assessments for deficiency income tax, branch profit remittance tax, contractor’s tax, and commercial broker’s tax for fiscal year ending March 31, 1985.
Respondent
Marubeni Corporation, which completed two 1984 turn-key contracts in the Philippines:
• Construction of a wharf/port complex for the National Development Company (NDC) at Leyte Industrial Development Estate.
• Construction of an ammonia storage complex for Philippine Phosphate Fertilizer Corporation (Philphos) at the same site.
Key Dates
• August 22, 1986 – Effectivity of E.O. No. 41 (income tax amnesty).
• September 26, 1986 – Filing of CTA Case No. 4109 by Marubeni.
• October 30 & December 15, 1986 – Marubeni’s filing of amnesty returns under E.O. Nos. 41 and 64.
• July 29, 1996 – CTA decision granting amnesty and canceling deficiency assessments.
• January 15, 1999 – Court of Appeals affirms CTA decision.
• December 18, 2001 – Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution
• Executive Order No. 41 (Aug. 2, 1986), as amended by E.O. Nos. 54 and 95 – income tax amnesty (1981–1985).
• Executive Order No. 64 (Nov. 17, 1986) – expanded amnesty to estate, donor’s, and business taxes (1981–1985).
• National Internal Revenue Code (1984, 1986 Versions).
Facts – Assessments and Amnesty
In November 1985 the CIR examined Marubeni’s Manila branch and found undeclared gross income of P967,269,811.14 from the two 1984 contracts. By August 1986, deficiency assessments were issued for:
- Income tax (P290,583,972.40)
- Branch profit remittance tax (P83,036,965.16)
- Contractor’s tax (P85,563,625.46)
- Commercial broker’s tax (P3,600,535.68)
Marubeni filed CTA petitions (Nos. 4109 and 4110) on September 26, 1986. It then availed of the 10% net-worth tax amnesty under E.O. No. 41 (filed October 30, 1986; paid P2,891,273) and the supplementary 5% amnesty under E.O. No. 64 (filed December 15, 1986; paid P1,445,637).
Procedural History
• CTA: Held Marubeni properly availed amnesty; deficiency taxes deemed “cancelled and withdrawn.”
• Court of Appeals: Affirmed CTA decision (Jan. 15, 1999).
• Supreme Court: Petition for review by CIR.
Issue I – Extinguishment of Income Tax and Branch Profit Remittance Tax
Section 4(b) of E.O. No. 41 disqualified only those with income tax cases filed as of its effectivity (Aug. 22, 1986). Marubeni filed CTA Case No. 4109 on September 26, 1986—after effectivity—and thus qualified for amnesty. The branch profit remittance tax, being an income tax under Title II of the NIRC, likewise fell within the amnesty.
Issue II – Contractor’s Tax and Applicability of E.O. No. 64 Exceptions
E.O. No. 64 extended amnesty to business taxes (Title V of the NIRC), including contractor’s tax. By Section 8, exceptions in E.O. No. 41 (including Section 4(b)) apply to E.O. No. 64, but with reference to E.O. No. 64’s effectivity (Nov. 17, 1986). Marubeni’s CTA Case No. 4109 was pending as of that date; therefore Marubeni was disqualified from the business tax amnesty and remains liable for its contractor’s tax liability, except as to portions properly covered by the amnesty.
Issue III – Offshore Portion Exemption from Contractor’s Tax
Contractor’s tax is an excise privilege tax on services or labor performed within Philippine jurisdi
Case Syllabus (G.R. No. 137377)
Procedural History
- Petition for review filed by the Commissioner of Internal Revenue before the Supreme Court (G.R. No. 137377) challenging:
- Court of Appeals Decision dated January 15, 1999 in CA-G.R. SP No. 42518.
- Which had affirmed the Court of Tax Appeals Decision dated July 29, 1996 in CTA Case No. 4109.
- CTA Case No. 4109 involved Marubeni’s challenge to deficiency assessments for 1985 income, branch profit remittance and contractor’s taxes.
- CTA ordered the Commissioner to desist from collecting those deficiency taxes, deeming them cancelled by Marubeni’s valid amnesty under E.O. Nos. 41 and 64.
- Commissioner elevated the case to the Court of Appeals, which dismissed the petition and upheld the CTA ruling, leading to the present Supreme Court recourse.
Facts of the Case
- Marubeni Corporation:
- Foreign corporation organized under Japanese law.
- Engaged in import‐export trading, financing and construction.
- Maintains a registered branch office in Manila.
- Tax audit and assessment:
- November 1985: BIR issued letter of authority to examine Marubeni’s March 1985 fiscal year.
- Discovered undeclared gross income of ₱967,269,811.14 from two 1984 “turn-key” contracts:
- Wharf/port complex for the National Development Company (NDC) in Leyte.
- Ammonia storage complex for Philippine Phosphate Fertilizer Corporation (Philphos) in Leyte.
- March 1, 1986: Revenue examiners recommended assessments for deficiency income, branch profit remittance, contractor’s and commercial broker’s taxes.
- Respondent questioned the assessments on June 5, 1986.
- August 15, 1986: Commissioner issued final assessment letter totaling:
- ₱290,583,972.40 (deficiency income tax).
- ₱83,036,965.16 (deficiency branch profit remittance tax).
- ₱85,563,625.46 (deficiency contractor’s tax).
- ₱3,600,535.68 (deficiency commercial broker’s tax).
- September 26, 1986: Respondent filed:
- CTA Case No. 4109 (income, branch profit remittance, contractor’s taxes).
- CTA Case No. 4110 (commercial broker’s tax).
Legal Issues
- Whether the Court of Appeals erred in affirming the CTA’s ruling that Marubeni’s deficiency income, branch profit remittance, and contractor’s tax liabilities were extinguished by its valid amnesty under E.O. Nos. 41 and 64.
- Whether Marubeni remains liable for the 1985 deficiency income, branch profit remittance