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    NDC Vs CIR

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    Tenet Manzano
    This case discusses whether interest payments made by the National Development Company (NDC) of the Philippines to Japanese shipbuilders are subject to Philippine income tax. The Supreme Court ruled that the residence of the obligor (NDC) determines the source of the interest income, not the location or nationality of the recipient. As NDC is a Philippine resident, the interest payments have their source within the Philippines and are thus subject to Philippine income tax. While the activities related to the shipbuilding contracts occurred in Japan, the tax law considers the source of income, not location of activities. The Court affirmed the tax liability against NDC for failing to withhold taxes on the interest payments to the Japanese companies.

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    NDC Vs CIR

    Uploaded by

    Tenet Manzano
    48 views1 page
    This case discusses whether interest payments made by the National Development Company (NDC) of the Philippines to Japanese shipbuilders are subject to Philippine income tax. The Supreme Court ruled that the residence of the obligor (NDC) determines the source of the interest income, not the location or nationality of the recipient. As NDC is a Philippine resident, the interest payments have their source within the Philippines and are thus subject to Philippine income tax. While the activities related to the shipbuilding contracts occurred in Japan, the tax law considers the source of income, not location of activities. The Court affirmed the tax liability against NDC for failing to withhold taxes on the interest payments to the Japanese companies.

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    NDC vs CIR

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    This case discusses whether interest payments made by the National Development Company (NDC) of the Philippines to Japanese shipbuilders are subject to Philippine income tax. The Supreme Court ruled that the residence of the obligor (NDC) determines the source of the interest income, not the location or nationality of the recipient. As NDC is a Philippine resident, the interest payments have their source within the Philippines and are thus subject to Philippine income tax. While the activities related to the shipbuilding contracts occurred in Japan, the tax law considers the source of income, not location of activities. The Court affirmed the tax liability against NDC for failing to withhold taxes on the interest payments to the Japanese companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    48 views1 page

    NDC Vs CIR

    Uploaded by

    Tenet Manzano
    This case discusses whether interest payments made by the National Development Company (NDC) of the Philippines to Japanese shipbuilders are subject to Philippine income tax. The Supreme Court ruled that the residence of the obligor (NDC) determines the source of the interest income, not the location or nationality of the recipient. As NDC is a Philippine resident, the interest payments have their source within the Philippines and are thus subject to Philippine income tax. While the activities related to the shipbuilding contracts occurred in Japan, the tax law considers the source of income, not location of activities. The Court affirmed the tax liability against NDC for failing to withhold taxes on the interest payments to the Japanese companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    NDC vs.

    CIR
    G.R. No. L-53961 June 30, 1987
    Cruz, J.

    Facts:
    - National Development Company entered into contracts with several Japanese shipbuilding companies for the
    construction of 12 ocean-going vessels.
    o In total, there were 14 promissory notes that were guaranteed by the Republic of the Philippines.
    - No tax was withheld on the amount remitted by NDC to Tokyo as interest on the balance of the purchase price.
    Because of this, the Commissioner held NDC liable on such tax in the total sum of more or less P5M. The BIR
    thereupon served on the NDC a warrant of distraint and levy to enforce collection of the claimed amount.
    o CTA sustained the BIR.
    Hence, this petition.
    Held:
    - The residence of the obligor who pays the interest, rather than the physical location of the securities, bonds,
    or notes or the place of payment, is the determining factor of the source of interest income.
    o Tax Code Section 37:
    Section 37: Income from sources within the Philippines(a) gross income from sources within the
    Philippinesthe following items of gross income shall be treated as gross income from sources within
    the Philippines:
    (1) Interest Interest derived from sources within the Philippines, and interest on bonds, notes, or other
    interest-bearing obligations of residents, corporate or otherwise;
    o Pet: Japanese shipbuilders not subject to tax because all the related activities (the signing of the contract,
    the construction of the vessels, the payment of the price, and the delivery to the NDC) were all done in
    Tokyo.
    o SC: the law does not speak of activity, but of source, which in this case is the NDC. The Governments
    right to levy and collect income tax on interest received by foreign corporations not engaged in trade or
    business within the Philippines is not planted upon the condition that the sale or labor (upon which the
    interest income flowed) had its situs in the Philippines. It is in fact the residence of the obligor who pays
    the interest that is the determining factor of the source of interest income.
    Accordingly, if the obligor is a resident of the Philippinesas is NDCthen the interest payment
    paid by him can have no other source than within the Philippines.
    In other words, the interest remitted to the Japanese shipbuilders from the purchase price is interest
    derived from sources within the Philippines, and is therefore subject to income tax.
    - Petitioner also forgets that it is not the NDC that is being taxed; the tax was due on the interests earned by the
    Japanese shipbuilders. It was the income of these companies that was subject to the tax.
    o Since NDC failed to withhold such, it is rightfully punished with deficiency taxes.
    Decision Affirmed.

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