Commissioner of Internal Revenue v. Penn Phils., Inc.

EN BANC [C.T.A. EB CASE NO. 1002. July 30, 2014.] (C.T.A. Case No. 7686) COMMISSIONER OF INTERNAL REVENUE , petitioner, vs . PENN PHILIPPINES, INC. , respondent. RESOLUTION CASTAEDA, JR. , J p : For resolution are: a) petitioner's Motion for Reconsideration of the Decision dated February 12, 2014 dismissing the Petition for Review; and b) respondent's Opposition (To Petitioner's Motion for Reconsideration dated 11 March 2014). Petitioner's Motion for Reconsideration is anchored on the following grounds: 1. Respondent Penn Philippines failed to comply with the provision of RMO 1-2000. 2. Deustche Bank ruling dispensing the requirement of prior application for tax treaty relief was promulgated only on August 19, 2013. Judicial ruling must be given prospective application. 1 Respondent on the other hand, asserts that: cSaATC 1. The period of application for the availment of tax treaty relief required by Revenue Memorandum Order ("RMO") 1-2000 is not mandatory. 2. The Deutsche Bank case is applicable to the present case. 2 Petitioner's Motion for Reconsideration deserves scant consideration. The assailed Decision has exhaustively discussed the grounds raised in the Motion. The Court reiterates the following key points: 1. In the case of Deutsche Bank AG Manila Branch v. Commissioner of Internal Revenue , 3 the Supreme Court declared as unnecessary the (15)-day period of application for tax treaty relief under RMO No. 1-2000 as a requirement to enjoy the benefits of a tax treaty. A tax treaty takes precedence over an administrative issuance such as RMO No. 1-2000; 2. The Supreme Court's ruling dispensing compliance with RMO No. 1-2000 on tax treaty relief application before the BIR pursuant to the Deutsche case, is binding and must be duly observed. 3. The management and consultancy fee of P23,123,444 paid to Dogi International Fabrics, S.A. ("DIF") cannot be considered business profits because this was not earned through a permanent establishment situated here, hence, not taxable pursuant to the Agreement dated January 1, 2002 and Articles 5 & 7 of the RP-Spain Tax Treaty. HSaCcE 4. Clearly, the Court in Division correctly cancelled the final withholding tax deficiency assessment of P15,068,187.73 corresponding to the management and consultancy fee of P23,123,444 paid to DIF. WHEREFORE , premises considered, petitioner's Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Roman G. del Rosario, P.J., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-Grulla, Amelia R. Cotangco-Manalastas and Ma. Belen M. Ringpis-Liban, JJ., concur. Footnotes 1. Rollo , pp. 130 & 131. 2. Rollo , pp. 146 & 148. 3. G.R. No. 188550, August 19, 2013.