Commissioner v. Burroughs, 142 SCRA 324 (1986) PDF

SECOND DIVISION
[G.R. No. L-66653. June 19, 1986.]
COMMISSIONER OF INTERNAL REVENUE , petitioner, vs. BURROUGHS

LIMITED AND THE COURT OF TAX APPEALS , respondents.
Sycip, Salazar, Feliciano & Hernandez Law Office for private respondent.
SYLLABUS
1. TAXATION; TAX ON FOREIGN CORPORATION; 15% BRANCH REMITTANCE

TAX; SHALL BE IMPOSED ON THE PROFIT ACTUALLY REMITTED ABROAD. — As
correctly held by respondent Court in its assailed decision — "Respondent concedes at
least that in his ruling dated January 21, 1980 he held that under Section 24(b) (2) of
the Tax Code the 15% branch pro t remittance tax shall be imposed on the pro t
actually remitted abroad and not on the total branch pro t out of which the remittance
is to be made. Based on such ruling petitioner should have paid only the amount of
P974,999.89 in remittance tax computed by taking the 15% of the pro ts of P6,499.89
in remittance tax actually remitted to its head o ce in the United States, instead of
P1,147,058.70 on its net pro t of P7,647,058.00. Undoubtedly, petitioner has overpaid
its branch profit remittance tax in the amount of P172,058.90."
2. ID.; RULES AND REGULATIONS; ANY REVOCATION, MODIFICATION OR
REVERSAL THEREOF; CANNOT BE GIVEN RETROACTIVE EFFECT; EXCEPTION; CASE
AT BAR. — Petitioner's aforesaid contention is without merit. What is applicable in the
case at bar is still the Revenue Ruling of January 21, 1980 because private respondent
Burroughs Limited paid the branch pro t remittance tax in question on March 14, 1979.
Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive
effect in the light of Section 327 of the National Internal Revenue Code which provides
— "Sec. 327. Non-retroactivity of ruling . Any revocation, modi cation, or reversal of any
of the rules and regulations promulgated in accordance with the preceding Section or
any of the rulings or circulars promulgated by the Commissioner shall not be given
retroactive application if the revocation, modi cation, or reversal will be prejudicial to
the taxpayer except in the following cases (a) where the taxpayer deliberately mistakes
or omits material facts from his return or in any document required of him by the
Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which the ruling is based, or
(c) where the taxpayer acted in bad faith." (ABS CBN Broadcasting Corp. v. CTA, 108
SCRA 151-152).
DECISION
PARAS , J : p
Petition for certiorari to review and set aside the Decision dated June 27, 1983 of
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respondent Court of Tax Appeals in its C.T.A. Case No. 3204, entitled "Burroughs
Limited vs. Commissioner of Internal Revenue" which ordered petitioner Commissioner
of Internal Revenue to grant in favor of private respondent Burroughs Limited, tax credit
in the sum of P172,058.90, representing erroneously overpaid branch pro t remittance
tax.
Burroughs Limited is a foreign corporation authorized to engage in trade or
business in the Philippines through a branch o ce located at De la Rosa corner
Esteban Streets, Legaspi Village, Makati, Metro Manila.
Sometime in March 1979, said branch o ce applied with the Central Bank for
authority to remit to its parent company abroad, branch pro t amounting to
P7,647,058.00. Thus, on March 14, 1979, it paid the 15% branch pro t remittance tax,
pursuant to Sec. 24 (b) (2) (ii) and remitted to its head o ce the amount of
P6,499,999.30 computed as follows —
Amount applied for remittance P7,647,058.00
Deduct: 15% branch profit remittance tax 1,147,058.70
——————
Net amount actually remitted P6,499,999.30
Claiming that the 15% pro t remittance tax should have been computed on the
basis of the amount actually remitted (P6,499,999.30) and not on the amount before
pro t remittance tax (P7,647,058.00), private respondent led on December 24, 1980,
a written claim for the refund or tax credit of the amount of P172,058.90 representing
alleged overpaid branch profit remittance tax, computed as follows:
Profits actually remitted P6,499,999.30
Remittance tax rate 15%
—————
Branch profit remittance tax due thereon P974,999.89
Branch profit remittance tax paid P1,147,058.70
Less: Branch profit remittance tax as above computed 974,999.89
—————
Total amount refundable P172,058.81
On February 24, 1981, private respondent led with respondent court, a petition
for review, docketed as C.T.A. Case No. 3204 for the recovery of the above-mentioned
amount of P172,058.81. LibLex
On June 27, 1983, respondent court rendered its Decision, the dispositive portion
of which reads —
"ACCORDINGLY, respondent Commissioner of Internal Revenue is hereby
ordered to grant a tax credit in favor of petitioner Burroughs Limited the amount
of P172,058.90. Without pronouncement as to costs.
SO ORDERED."
Unable to obtain a reconsideration from the aforesaid decision, petitioner led

the instant petition before this Court with the prayers as herein earlier stated upon the
sole issue of whether the tax base upon which the 15% branch pro t remittance tax
shall be imposed under the provisions of section 24(b) of the Tax Code, as amended, is
the amount applied for remittance on the pro t actually remitted after deducting the
15% pro t remittance tax. Stated differently — is private respondent Burroughs Limited
legally entitled to a refund of the aforementioned amount of P172,058.90.
We rule in the affirmative. The pertinent provision of the National Internal Revenue
Code is Sec. 24 (b) (2) (ii) which states:
"Sec. 24. Rates of tax on corporations. . . .
(b) Tax on foreign corporations. . . .

(2) (ii) Tax on branch pro ts remittances. — Any pro t remitted
abroad by a branch to its head o ce shall be subject to a tax of fteen per
cent (15%) . . . ."
In a Bureau of Internal Revenue ruling dated January 21, 1980 by then Acting
Commissioner of Internal Revenue Hon. Efren I. Plana the aforequoted provision had
been interpreted to mean that "the tax base upon which the 15% branch pro t
remittance tax . . . shall be imposed . . . (is) the pro t actually remitted abroad and not
on the total branch pro ts out of which the remittance is to be made." The said ruling is
hereinbelow quoted as follows:
"In reply to your letter of November 3, 1978, relative to your query as to the
tax base upon which the 15% branch pro ts remittance tax provided for under
Section 24 (b) (2) of the 1977 Tax Code shall be imposed, please be advised that
the 15% branch pro t tax shall be imposed on the branch pro ts actually remitted
abroad and not on the total branch pro ts out of which the remittance is to be
made.
Please be guided accordingly."
Applying, therefore, the aforequoted ruling, the claim of private respondent that it
made an overpayment in the amount of P172,058.90 which is the difference between
the remittance tax actually paid of P1,147,058.70 and the remittance tax that should
have been paid of P974,999.89, computed as follows —
Profits actually remitted P6,499,999.30
Remittance tax rate 15%
—————
Remittance tax due P 974,999.89
is well-taken. As correctly held by respondent Court in its assailed decision —
"Respondent concedes at least that in his ruling dated January 21, 1980 he
held that under Section 24 (b) (2) of the Tax Code the 15% branch pro t
remittance tax shall be imposed on the pro t actually remitted abroad and not on
the total branch pro t out of which the remittance is to be made. Based on such
ruling petitioner should have paid only the amount of P974,999.89 in remittance
tax computed by taking the 15% of the pro ts of P6,499,999.89 in remittance tax
actually remitted to its head o ce in the United States, instead of P1,147,058.70,
on its net pro ts of P7,647,058.00. Undoubtedly, petitioner has overpaid its
branch profit remittance tax in the amount of P172,058.90."
Petitioner contends that respondent is no longer entitled to a refund because

Memorandum Circular No. 8-82 dated March 17, 1982 had revoked and/or repealed the
BIR ruling of January 21, 1980. The said memorandum circular states —
"Considering that the 15% branch pro t remittance tax is imposed and
collected at source, necessarily the tax base should be the amount actually
applied for by the branch with the Central Bank of the Philippines as pro t to be
remitted abroad." LLpr

Petitioner's aforesaid contention is without merit. What is applicable in the case
at bar is still the Revenue Ruling of January 21, 1980 because private respondent
Burroughs Limited paid the branch pro t remittance tax in question on March 14, 1979.
Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive
effect in the light of Section 327 of the National Internal Revenue Code which provides
—
"Sec. 327. Non-retroactivity of rulings. Any revocation, modi cation, or
reversal of any of the rules and regulations promulgated in accordance with the
preceding section or any of the rulings or circulars promulgated by the
Commissioner shall not be given retroactive application if the revocation,
modi cation, or reversal will be prejudicial to the taxpayer except in the following
cases (a) where the taxpayer deliberately misstates or omits material facts from
his return or in any document required of him by the Bureau of Internal Revenue;
(b) where the facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based, or (c) where the
taxpayer acted in bad faith." (ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 151-
152)
The prejudice that would result to private respondent Burroughs Limited by a

retroactive application of Memorandum Circular No. 8-82 is beyond question for it
would be deprived of the substantial amount of P172,058.90. And, insofar as the
enumerated exceptions are concerned, admittedly, Burroughs Limited does not fall
under any of them.
WHEREFORE, the assailed decision of respondent Court of Tax Appeals is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Feria, Fernan, Alampay and Gutierrez, Jr., JJ ., concur.

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SECOND DIVISION

[G.R. No. L-66653. June 19, 1986.]

COMMISSIONER OF INTERNAL REVENUE , petitioner, vs. BURROUGHS

1. TAXATION; TAX ON FOREIGN CORPORATION; 15% BRANCH REMITTANCE

Unable to obtain a reconsideration from the aforesaid decision, petitioner led

(b) Tax on foreign corporations. . . .

Please be guided accordingly."

Petitioner contends that respondent is no longer entitled to a refund because

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

The prejudice that would result to private respondent Burroughs Limited by a

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

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