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    Filipinas Synthetic Fiber Corporation V CA

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    Cedrick Tan
    The petitioner received a deficiency assessment from the Commissioner of Internal Revenue for alleged late payment of withholding taxes on interest, royalties, and guarantee fees paid to non-resident corporations. The petitioner protested the assessment. The Court of Appeals ruled that the petitioner should pay the deficiency tax plus surcharges and interest. The Supreme Court affirmed the Court of Appeals decision, finding that the petitioner had a duty to withhold and remit income taxes when the amounts were accrued as business expenses, not when payment was due. The Court also clarified that the withholding agent is personally liable for income taxes withheld and is the government's agent for tax collection and the taxpayer's agent for tax payment.

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    Filipinas Synthetic Fiber Corporation V CA

    Uploaded by

    Cedrick Tan
    104 views2 pages
    The petitioner received a deficiency assessment from the Commissioner of Internal Revenue for alleged late payment of withholding taxes on interest, royalties, and guarantee fees paid to non-resident corporations. The petitioner protested the assessment. The Court of Appeals ruled that the petitioner should pay the deficiency tax plus surcharges and interest. The Supreme Court affirmed the Court of Appeals decision, finding that the petitioner had a duty to withhold and remit income taxes when the amounts were accrued as business expenses, not when payment was due. The Court also clarified that the withholding agent is personally liable for income taxes withheld and is the government's agent for tax collection and the taxpayer's agent for tax payment.

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    Taxation

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    Filipinas Synthetic Fiber Corporation v CA

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    The petitioner received a deficiency assessment from the Commissioner of Internal Revenue for alleged late payment of withholding taxes on interest, royalties, and guarantee fees paid to non-resident corporations. The petitioner protested the assessment. The Court of Appeals ruled that the petitioner should pay the deficiency tax plus surcharges and interest. The Supreme Court affirmed the Court of Appeals decision, finding that the petitioner had a duty to withhold and remit income taxes when the amounts were accrued as business expenses, not when payment was due. The Court also clarified that the withholding agent is personally liable for income taxes withheld and is the government's agent for tax collection and the taxpayer's agent for tax payment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    104 views2 pages

    Filipinas Synthetic Fiber Corporation V CA

    Uploaded by

    Cedrick Tan
    The petitioner received a deficiency assessment from the Commissioner of Internal Revenue for alleged late payment of withholding taxes on interest, royalties, and guarantee fees paid to non-resident corporations. The petitioner protested the assessment. The Court of Appeals ruled that the petitioner should pay the deficiency tax plus surcharges and interest. The Supreme Court affirmed the Court of Appeals decision, finding that the petitioner had a duty to withhold and remit income taxes when the amounts were accrued as business expenses, not when payment was due. The Court also clarified that the withholding agent is personally liable for income taxes withheld and is the government's agent for tax collection and the taxpayer's agent for tax payment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    SYNOPSIS

    Filipinas Synthetic Fiber Corporation received from the Commissioner of Internal


    Revenue a deficiency withholding tax assessment consisting of interest and
    compromise penalties for alleged late payment of withholding taxes due on interest
    loan, royalties and guarantee fees paid by the petitioner to non-resident
    corporations. The petitioner, through its auditor, SGV and Company, seasonably
    protested the assessment. Petitioner brought a Petition for Review before the Court
    of Appeals. The said court came out with its decision ruling that petitioner should
    pay respondent the deficiency withholding tax plus surcharge and interest. With the
    denial of its motion for reconsideration, petitioner appealed the CTA disposition to
    the Court of Appeals, which affirmed in toto the appealed decision. Dissatisfied
    therewith, petitioner found its way to this Court via the present petition. The pivot of
    inquiry here is whether the liability to withhold tax at source on income payments to
    non-resident foreign corporations arises upon remittance of the amounts due to the
    foreign creditors or upon accrual thereof.
    The Supreme Court ruled that after a careful examination of pertinent records,
    the Court concurred in the findings of the Court of Appeals. Petitioner cannot claim
    that there was no duty to withhold and remit income taxes because the loan
    contract was not yet due and demandable. Having written-off the amounts as
    business expense in its books, it had taken advantage of the benefits provided in
    the law allowing for the deductions from gross income. The decision of the Court of
    Appeals was affirmed in toto.
    SYLLABUS
    1.

    TAXATION; NATIONAL INTERNAL REVENUE CODE; INCOME TAX;


    WITHHOLDING TAX AT SOURCE; NATURE THEREOF.- The method of
    withholding tax at source is a procedure of collecting income tax sanctioned by
    the National Internal Revenue Code. Section 53 (c) of which, provides: Return
    and Payment - Every person required to deduct and withhold any tax under this
    section shall make return thereof, x x x for the payment of the tax, shall pay the
    amount withheld to the officer of the Government of the Philippines authorized
    to receive it. Every such person is made personally liable for such tax, and is
    indemnified against the claims and demands of any person for the amount of
    any payments made in accordance with the provision of this section. In the
    aforecited provision of law, the withholding agent is explicitly made personally
    liable for the income tax withheld under Section 54. In Phil. Guaranty Co., Inc.
    vs. Commissioner of Internal Revenue, (15 SCRA 1) the Court, has ratiocinated:
    The law sets no condition for the personal liability of the withholding agent to
    attach. The reason is to compel the withholding agent to withhold the tax under
    all circumstances. In effect, the responsibility for the collection of the tax as well
    as the payment thereof is concentrated upon the person over whom the
    Government has jurisdiction. Thus, the withholding agent is constituted the
    agent both the government and the taxpayer. With respect to the collection
    and/or withholding of the tax, he is the Governments agent. In regard to the
    filing of the necessary income tax return and the payment of the tax to the
    Government, he is the agent of the taxpayer. The withholding agent, therefore,
    is no ordinary government agent especially because under Section 53(c) he is
    held personally liable for the tax he is duty bound to withhold; whereas, the

    Commissioner of Internal Revenue and his deputies are not made liable to law.
    2. ID.; ID.; ID.; INCLUSION/EXCLUSION FROM GROSS INCOME; ACCRUAL
    METHOD OF ACCOUNTING, CONSTRUED. - On the other hand, under the
    accrual basis method of accounting, income is reportable when all the events
    have occurred that fix the taxpayers right to receive the income, and the
    amount can be determined with reasonable accuracy. Thus, it is the right to
    receive income, and not the actual receipt, that determines when to include
    the amount in gross income. Gleanable from this notion are the following
    requisites of accrual method of accounting, to wit: (1) that the right to receive
    the amount must be valid, unconditional and enforceable, i.e., not contingent
    upon future time; (2) the amount must be reasonably susceptible of accurate
    estimate; and (3) there must be a reasonable expectation that the amount will
    be paid in due course.
    APPEARANCES OF COUNSEL
    Sycip Salazar Hernandez & Gatmaitan for petitioner.
    The Solicitor General for respondents.

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