Commissioner of Internal Revenue v. Bank of America NT & SA

[CA-G.R. SP No. 22529. September 19, 1990.] (C.T.A Case No. 3799) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . BANK OF AMERICA NT & SA AND THE COURT OF TAX APPEALS , respondents . D E C I S I O N GUINGONA , J p : We have before Us a petition for review of the decision dated October 29, 1986 of the Court of Tax Appeals in C.T.A. Case No. 3799, entitled "Bank of America NT & SA vs. The Commissioner of Internal Revenue." The dispositive portion of the aforesaid decision reads as follows: "WHEREFORE, finding the petition for review to be well-taken, the same is granted and the refund/credit of the amount sought is hereby ordered. No pronouncement as to costs." In the petition for review, the petitioner submits for the consideration of this Court the following reasons warranting review: "The sole issue presented here is whether the 15% branch profit remittance tax imposed under the provisions of Section 24(b) (2) (ii) of the Tax Code, as amended, should be based upon the amount applied for remittance or upon profits actually remitted after deducting the 15% profit remittance tax. Emphasizing and reiterating the provisions of Section 24(b)(2)(ii) of the Tax Code, by way of clarification, Revenue Memorandum Circular No. 8-82 provides that the 15% branch profit remittance tax should be based upon the amount applied for remittance. Respondent Tax Court, however, finding that the basis of the Tax should be the profits actually remitted after deducting the 15% profit remittance tax, decided the case in a manner contrary to law." (Petition for Review, p. 5) ANTECEDENT FACTS This Court hereby adopts the following statement of facts contained in the challenged decision: "The material facts are not in dispute, petitioner having submitted, without objection of respondent Commissioner of Internal Revenue, the case for decision on the basis of the pleadings and the records. As borne by the pleadings and summarized by respondent: Petitioner is a foreign corporation duly licensed to engage in business in the Philippines with Philippine branch office at BA Lepanto Bldg., Paseo de Roxas, Makati, Metro Manila. On July 20, 1982 it paid 15% branch profit remittance tax in the amount of P7,538,460.72 on profit from its regular banking unit operations and P445,790.25 on profit from its foreign currency deposit unit operations or a total of P7,984,250.97. The tax was based on net profits after income tax without deducting the amount corresponding to the 15% tax. Petitioner filed a claim for refund with the Bureau of Internal Revenue of that portion of the payment of the payment which corresponds to the 15% branch profit remittance tax, on the ground that the tax should have been computed on the basis of profits actually remitted, which is P45,244,088.85, and not on the amount before profit remittance tax, which is P53,228,339.82. Subsequently, without awaiting respondent's decision, petitioner filed a petition for review on June 14, 1984 with this Honorable Court for the recovery of the amount of P1,041,424.03 computed as follows: Net Profits After Profit Tax Due Alleged Income Tax But Remittance Alleged by Overpayment Before Profit Tax Paid Petitioner Item 1-2 Remittance Tax A. Regular Banking Unit Operations (P50,256,404.82) 1. Computation of BIR 15% x P50,256,404.82 P7,538,460.72 2. Computation of Petitioner -P50,256,404.82 x 15% P6,555,183.24 P983,277.48 1.15 B. Foreign Currency Deposit Unit Operations (P2,971,935) 1. Computation of BIR 15% x P2,971,935.00 P445,790.25 2. Computation of Petitioner -P2,971,935.00 x 15% P387,643.70 P58,146.55 TOTAL P7,984,250.97 P6,942,286.94 P1,041,424.02 xxx xxx xxx In Burroughs Limited vs. Commissioner of Internal Revenue, CTA Case No. 3204, June 27, 1983, affirmed by the Supreme Court in Commissioner of Internal Revenue vs. Burroughs Limited and the Court of Tax Appeals , G.R. No. 66653, June 19, 1986, this Court observed that: "Without in the least attempting to express, in this proceeding, an opinion as to the proper tax base of the 15% branch profit remittance tax provided for under Section 24(b)(2) of the Revenue Code, it will be noted that in his ruling dated January 21, 1980, respondent clearly and specifically held that "the 15% branch profit remittance tax shall be imposed on the profit actually remitted and not on the total branch profit out of which the remittance is to be made". The accent is on the words "profit actually remitted". And the ruling even stressed that it is " not on the total branch profit out of which the remittance is to be made". We are not to indulge in statutory construction. Based on said ruling, petitioner has overpaid, as shown earlier, the amount of P172,058.90 and entitled, therefore, to the refund or tax credit thereof. If there was miscomprehension or misconception on the part of respondent as to the correct interpretation of Section 24(b)(2), the issuance of Revenue Memorandum Circular No. 8-82 on March 17, 1982 prescribing that the tax base of the 15% branch profit remittance tax should be the amount actually applied for by the branch with the Central Bank as profit to be remitted abroad should not be given retroactive application." It should be stated that in response to a query of Sycip, Gorres, Velayo & Co. dated November 3, 1978, the Bureau of Internal Revenue rendered a ruling, contained in a letter dated January 21, 1980, on the tax base upon which the 15% profit remittance tax should be imposed . . . xxx xxx xxx The said ruling makes reference to Section 24(b)(2) of the 1977 Tax Code, but Section 24(b)(2) and Section 24(b)(2)(ii) of the applicable National Internal Revenue Code both contain similar provisions as quoted above. In Burroughs Limited vs . Commissioner of Internal Revenue , supra , respondent Commissioner of Internal Revenue contended that the taxpayer is no longer entitled to the refund involved therein because Revenue Memorandum Circular No. 8-82 dated March 17, 1982 had revoked and/or repealed Bureau of Internal Revenue ruling of January 21, 1980. The said memorandum circular enjoins that: "Considering that the 15% branch profit 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 profit to be remitted abroad." In finding the Commissioner's contention without merit, this Court however ruled against the applicability of Revenue Memorandum Circular No. 8-82 dated March 17, 1982 to the Burroughs Limited case because the taxpayer paid the branch profit remittance tax involved therein on March 14, 1979 in accordance with the ruling of the Commissioner of Internal Revenue dated January 21, 1980. In view of Section 327 of the then in force National Internal Revenue Code, Revenue Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive effect because any revocation or modification or any ruling or circular of the Bureau of Internal Revenue should not be given retroactive application if such revocation or modification will, subject to certain exceptions not pertinent thereto, prejudice taxpayers. As stated above, the Supreme Court upheld the decision of this Court in Burroughs Limited . (C.T.A. Decision, pp. 1-6 Emphasis supplied) The pertinent statute in the case at bar is Section 24(b)(2)(ii) of the 1977 National Internal Revenue Code, as amended, which provides: "(ii) Tax on branch profits remittance : Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen percent (15%) . . . As might be noted from the above-quoted narration, there are two Bureau of Internal Revenue Rulings which are sought to be applied to the case at bar. As far as the petitioner is concerned, the applicable ruling should be that issued on March 17, 1982 (Revenue Memorandum No. 8-82) which is as follows: "SUBJECT: Clarification as to proper tax base in the computation of 15% branch profit remittance tax. xxx xxx xxx In BIR Ruling No. 016-79 dated April 18, 1979, . . . this Office ruled that '. . . the 15% branch profit remittance tax should be based on the amount of P1,504,330.43 representing profit derived from the disposition of the shares, 15% of which is P225,649.57. It will be noted that the basis of computation in accordance with the ruling is profit without deduction for the 15% tax . On January 21, 1980, this Office, is another ruling . . . held that 'the 15% branch profit remittance tax shall be imposed on the profit actually remitted abroad and not on the total branch profit out of which the remittance is to be made.' As the latter ruling seems to have given rise to some misconception that it modified BIR Ruling No. 016-79 with respect to the manner of computation of the 15% branch profit remittance tax , this Office issued a clarification ruling on October 23, 1981 explaining (Emphasis supplied) 'The above ruling of January 21, 1980 merely emphasized the distinction between the total branch profit which is remittable and that portion of the branch profit actually remitted without deduction on account of the tax to be paid. 'The phrase 'any profit remitted abroad' should be construed to mean the profit to be remitted. Hence, there must be an actual remittance, as distinguished from profit which is remittable. xxx xxx xxx "Considering that the 15% branch profit 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 profit to be remitted abroad." ( Rollo , pp. 18-19) On the other hand, the herein private respondent asserts that it should be the then Acting Commissioner of Internal Revenue Hon. Efren I. Plana's ruling (issued in reply to a query) that should govern the instant case. The said ruling reads as follows: "January 21, 1980 In reply to your letter of November 3, 1978, relative to your query as to the tax base upon which the 15% branch profit remittance tax shall be imposed on the profit actually remitted abroad and not on the total branch profit out of which the remittance is to be made. Please be guided accordingly. Very truly yours, EFREN I. PLANA Acting Commissioner Internal Revenue" ( Rollo , p. 25) This Court notes that the private respondent admits the authority of the Commissioner of Internal Revenue to make rulings, thus: "Undersigned Counsel does not dispute the authority of the Commissioner of Internal Revenue Code (sic) to make rulings or render opinions in connection with the implementation of the provisions of internal revenue laws and that his issuance of Revenue Memorandum Circular No. 8-82 was made pursuant to such authority." (Private Respondent's Comment, dated May 4, 1987, p. 3) The aforesaid private respondent however adds correctly that such rulings are subject to the power of judicial review. Belatedly, in its Rejoinder to Reply Memorandum (dated June 30, 1990), the private respondent, in an apparent effort to clutch at whatever legal straw might appear to be available, asserts that Revenue Memorandum 8-82 is invalid because it was issued solely by the petitioner Commissioner. If this is so, then Honorable Plana's ruling, which is a principal factor in the decision of the case of Commissioner of Internal Revenue vs. Burroughs Limited , 142 SCRA 324 (which ruling was specifically adduced by the aforesaid private respondent in its Petition for Review filed with the Court of Tax Appeals in the instant case) should also be invalid for the same reason. This Court therefore is not persuaded by the afore-cited belated assertion of the private respondent. We are of the opinion, and so hold, that Revenue Memorandum No. 8-82 is valid and, being a subsequent ruling, should be the applicable ruling as far as the case now before us is concerned. The Court of Tax Appeals had expressed the same view when it ruled: "Since the branch profit remittance tax involved in this appeal was paid by petitioner Bank of America on July 20, 1982, after the effectivity of Revenue Memorandum Circular dated March 17, 1982, we see no significance therefore in the argument of petitioner that the case should be decided in the light of Burroughs Limited.' (C.T.A. Decision, pp. 6-7) Private respondent Bank of America makes the following averments in its Comment of May 4, 1987: "Private Respondent submits that the law is clear and unequivocal. Hence, it should be enforced, as written. Considering that the law is plain and unambiguous in its terms, it merely calls for its application as worded. Petitioner should no longer interpret it, otherwise the constitutional injunction against delegation of legislative power arises." (Comment, pp. 4-5) This Court is disposed to agree with the statement that the pertinent law Section 24 (b)(2)(ii) of the Tax Code is clear and convincing. Therefore, there could be no construction where there is nothing to construe. As held in the case of West Coast Hotel Co. vs. Parrish , 300 U.S. 379, 404, "The judicial function is that of interpretation; it does not include the power of amendment under the guise of interpretation." However, since the law applicable in the case at bar is a tax law, then We should apply the law having in mind the dictum "This is a tax language and should be read in its tax sense" (United States vs. Ogilvie Hardware Co., 330 U.S. 709, 721). This Court will now proceed to read the tax sense in the above-mentioned provision of the Tax Code. Although it is true that, as private respondent contends, "Nowhere is there any mention of "based on the total amount actually applied for by the branch with the Central Bank of the Philippines, as profit to be remitted abroad". Since there is no qualification, no qualification should be made or read into the law, as the Petitioner would want it." (Comment, p. 5) it is likewise true that Section 24(b)(2)(ii) does not contain the following underlined proviso: "Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15%) after deducting the 15% branch profit remittance tax . The Court of Tax Appeals sought to deduce legislative intent vis-a-vis the aforesaid law through an analysis of the wordings thereof, which to their minds reveal an intent "to mitigate at least the harshness of successive taxation". The use of the word remitted may well be understood as referring to that part of the said total branch profits which would be sent to the head office as distinguished from the total profits of the branch (not all of which need be sent or would be ordered remitted abroad). If the legislature indeed had wanted to mitigate the harshness of successive taxation, it would have been simpler to just lower the rates without in effect requiring the relatively novel and complicated way of computing the tax, as envisioned by the herein private respondent. The same result would have been achieved. The attempt to deduce legislative intent with regard to Section 24(b)(2)(ii) of the Tax Code would only serve to allow a captious and strained intendment of the law. NIMIA SUBTILITAS IN JURE REPROBATUR, ET TALIS CERTITUDO CERTITUDINEM CONFUNDIT (The law does not allow of a captious and strained intendment, for such nice pretence of certainty confounds true and legal certainty). As held in the case of United States vs. Wurzbach , 280 U.S. 396, 398: "There is no warrant for seeking refined arguments to show that the statute does not mean what it says. In view of the foregoing, this Court finds that the clear import of Section 24(b)(2)(ii) of the Tax Code mandates the imposition of the fifteen per cent (15%) tax on the branch profits remittance, which is tax parlance is alluded to as the "tax handle", with the total amount remitted (not the total amount of the branch profits) as base for the tax. PREMISES CONSIDERED, the herein petition for review is GRANTED and the decision of the Court of Tax Appeals (dated October 29, 1986) sought to be reversed is hereby SET ASIDE. SO ORDERED. Paras and Cacdac, JJ ., concur.