Commissioner of Internal Revenue v. Hongkong and Shanghai Banking Corp.

SIXTEENTH DIVISION [CA-G.R. SP No. 23404. January 23, 1992.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HONGKONG AND SHANGHAI BANKING CORPORATION and COURT OF TAX APPEALS , respondents . D E C I S I O N FRANCISCO , J p : The only issue in this case is whether the 15% branch profit remittance tax imposed under Section 24(b) (2) (ii) of the Tax Code is to be computed on the basis of the profits actually remitted abroad or on the total branch profits out of which the remittance is to be made. Respondent Hongkong and Shanghai Banking Corporation, HSBC in short, as a branch of a foreign corporation duly licensed to engage in commercial banking in the Philippines, paid the Bureau of Internal Revenue (BIR) P13,052,543.67 representing the 15% branch profit remittance tax due on the P87,016,957.80 branch profits it actually remitted to its Head Office for the years 1976, 1977 and 1978. Respondent, however, was subsequently assessed for a deficiency of the 15% branch profit remittance tax based on the total profits without reduction for the profit remittance tax and not on the amount actually remitted abroad, amounting to P1,957,881.55 which it paid under protest. Thus, respondent HSBC filed an action before the Court of Tax Appeals (CTA) for refund or tax credit. Thereafter, the CTA rendered judgment, to wit: "WHEREFORE, respondent is hereby ordered to grant the refund or tax credit in favor of the petitioner for the amount sought." The issue at hand has been answered in no uncertain terms by the Supreme Court in the case of Commissioner of Internal Revenue vs. Burroughs Limited and the Court of Tax Appeals (142 SCRA 324), which involves almost identical factual antecedents and the legal question posed as in the instant case. The High Court in said case in effect declared that the 15% branch profit remittance tax should be imposed on the profit actually remitted abroad and not on the total branch profits out of which the remittance is to be made when it applied the BIR ruling dated January 21, 1980 issued by then Acting Commissioner of Internal Revenue Hon. Efren I. Plana to entitle private respondent therein (Burroughs) to a refund for excess payment of the branch profit remittance tax. BIR ruling dated January 21, 1980 states: "In reply to your letter of November 3, 1978, relative to your query as to the tax base upon which the 15% branch profits remittance tax provided for under Section 24(b) (2) of the 1977 Tax Code shall be imposed, please be advised that the 15% branch profit tax shall be imposed on the branch profits actually remitted abroad and not on the total branch profits out of which the remittance is to be made. Please be guided accordingly." In this connection, all other findings made by the CTA in its decision merits Our affirmance in its entirety, and is hereby adopted as Our own disposition on the matter: "The rule applied, the claimed overpayment is computed this wise: Total profits actually remitted abroad (1976, 1977 and 1978 profits P87,016,957.80 15% profit remittance tax paid thereon 13,052,543.67 Total profits for 1976, 1977 and 1978 before reductions for remittance tax P100,069,501.47 15% thereof (respondent's position 15,010,425.22 Less: Profit remittance tax previously paid 13,052,543.67 Overpayment 1,957,881.55 Respondent's unvarying assertion is that the BIR Ruling of January 21, 1980 was revoked or modified by Revenue Memorandum Circular No. 8-82 dated March 17, 1982, stating, among others, 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. Be that as it may, the question in this case is the same as the question raised in the case of Commissioner of Internal Revenue v. Burroughs Limited and the Court of Tax Appeals, G.R. No. L-66653, June 19, 1986 , where the Supreme Court held that 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 profit 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 . . . No facts or legal principles have been presented in this case that were not considered in the Burroughs case, and that case is stare decisis and governs the issue in this case." (Decision, pp. 2-4) WHEREFORE, premises considered, the decision under review is hereby AFFIRMED IN TOTO. SO ORDERED. Torres , Jr . and Ynares Santiago, JJ ., concur.