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CIR vs Marubeni

The dividends received by Marubeni Corporation from Atlantic Gulf and Pacific
Co. are not income arising from the business activity in which Marubeni
Corporation is engaged. Accordingly, said dividends if remitted abroad are not
considered branch profits subject to ranch Profit !emittance Ta".
Marubeni Corporation is a Japanese corporation licensed to engage in business in
the Philippines. When the profits on Marubenis investments in tlantic !ulf and
Pacific Co. of Manila "ere declared# a $%& final dividend ta' "as "ithheld from
it# and another $(& profit remittance ta' based on the remittable amount after the
final $%& "ithholding ta' "ere paid to the )ureau of Internal Revenue. Marubeni
Corp. no" claims for a refund or ta' credit for the amount "hich it has allegedl*
overpaid the )IR.
Issues and Ruling:
$. Whether or not the dividends Marubeni Corporation received from tlantic !ulf
and Pacific Co. are effectivel* connected "ith its conduct or business in the
Philippines as to be considered branch profits sub+ect to $(& profit remittance ta'
imposed under ,ection -./b0/-0 of the 1ational Internal Revenue Code.
12. Pursuant to ,ection -./b0/-0 of the 3a' Code# as amended# onl* profits
remitted abroad b* a branch office to its head office "hich are effectivel*
connected "ith its trade or business in the Philippines are sub+ect to the $(& profit
remittance ta'. 3he dividends received b* Marubeni Corporation from tlantic
!ulf and Pacific Co. are not income arising from the business activit* in "hich
Marubeni Corporation is engaged. ccordingl*# said dividends if remitted abroad
are not considered branch profits for purposes of the $(& profit remittance ta'
imposed b* ,ection -./b0/-0 of the 3a' Code# as amended.
-. Whether Marubeni Corporation is a resident or non4resident foreign
Marubeni Corporation is a non4resident foreign corporation# "ith respect to the
transaction. Marubeni Corporations head office in Japan is a separate and distinct
income ta'pa*er from the branch in the Philippines. 3he investment on tlantic
!ulf and Pacific Co. "as made for purposes peculiarl* germane to the conduct of
the corporate affairs of Marubeni Corporation in Japan# but certainl* not of the
branch in the Philippines.
5. t "hat rate should Marubeni be ta'ed6
$(&. 3he applicable provision of the 3a' Code is ,ection -./b0/$0/iii0 in
con+unction "ith the Philippine4Japan 3a' 3reat* of $78%. s a general rule# it is
ta'ed 5(& of its gross income from all sources "ithin the Philippines. 9o"ever# a
discounted rate of $(& is given to Marubeni Corporation on dividends received
from tlantic !ulf and Pacific Co. on the condition that Japan# its domicile state#
e'tends in favor of Marubeni Corporation a ta' credit of not less than -%& of the
dividends received. 3his $(& ta' rate imposed on the dividends received under
,ection -./b0/$0/iii0 is easil* "ithin the ma'imum ceiling of -(& of the gross
amount of the dividends as decreed in rticle $%/-0/b0 of the 3a' 3reat*.
Note: Each tax has a different tax basis.:nder the Philippine4Japan 3a'
Convention# the -(& rate fi'ed is the ma'imum rate# as reflected in the phrase
;shall not e'ceed.< 3his means that an* ta' imposable b* the contracting state
concerned hould not e'ceed the -(& limitation and said rate "ould appl* onl* if
the ta' imposed b* our la"s e'ceeds the same.
)PI FMI=> ,?I1!, )1@# I1C.# ? C !.R. 1o. $--.8%# pril $-# -%%%
Monda*# Januar* -A# -%%7 Posted b* Coffeeholic Writes
=abels: Case Bigests# 3a'ation
Facts: Petitioner banCs annual corporate income ta' return for $787 sho"ed that
it suffered a loss of P8#-8A#7A%# and that it had a total refundable amount of
P-7D#.7- inclusive of P$$-#.7$ being claimed as ta' refund in the present case.
9o"ever# petitioner declared in its $787 income ta' return as a ta' credit in the
succeeding ta'able *ear.
2n 2ctober $$# $77$# petitioner banC filed a "ritten claim for refund of P$$-#.7$
"ith the )IR alleging that it did not appl* the $787 refundable amount of
P-7D#.7- as ta' credit to its $77% annual corporate income ta' return or either ta'
liabilities due to business losses it incurred for the same *ear. Without "aiting for
respondent CIRs action in its claim for refund# petitioner filed a petition for
revie" "ith the C3.
C3 dismissed the petition on the ground that petitioner banC failed to present as
evidence its $77% annual income ta' return to prove that it had not *et credited the
amount of P-7D#.--# inclusive of P$$-#.7$ "hich is the sub+ect of the present
controvers* to its $77% ta' liabilit*. ,ince petitioner declared in its $787 income
ta' return that it "ould appl* the e'cess "ithholding ta' as ta' credit for the
follo"ing *ear# the ta' court presumed that it did so. Petitioner failed to overcome
this presumption because it did not present its $77% ta' return "hich "ould have
sho"n that the amount "as not applied as a ta' credit. 9ence# it "as concluded
that petition "as not entitled to a ta' refund. 3he C affirmed said decision of the
Issue: Whether or not petitioner is entitled to a ta' refund of P$$-#.7$
representing creditable "ithholding ta' paid for $787.
Held: 3he petition is meritorious. s a rule# the factual findings on the appellate
court are binding on the ,C. 3his rule# ho"ever# does not appl* "here# inter alia#
the +udgment is premised on a misapprehension of facts or "hen the appellate
court failed to notice certain relevant facts "hich if considered "ould +ustif* a
different conclusion. 3his case is one such e'ception.
,trict procedural rules generall* fro"n up the submission of the return the trial.
R.. $$-(# the la" creating the C3# ho"ever# specificall* provides the
proceedings before it ;shall not be governed strictl* b* the technical rules of
evidence<. 3he paramount considerations remains the ascertainment of truth.
?eril*# the Euest for orderl* presentation of issues is not an absolute. It should not
bar courts from considering undisputed facts to arrive at a +ust determination of a
While ta' refunds are in the nature of the e'ceptions and are to the construct
strictissimi +uris against the claimant# under the facts of this case# petitioner has
established its claim.
,ubstantial +ustice eEuit*# and fair pla* are on the side of petitioner. 3echnicalities
and legalisms# ho"ever# e'alted# should not be misused b* the government to Ceep
mone* not belonging to it and thereb* enrich "ould be better b* allo"ing to
CIR v. BPIG.R. No. 1!"#$ %ul& ' ($$#Chico)Na*ario' J.
+octrine:#. The phrase $for that ta"able period% merely identifies the e"cess
income ta", subject of the option, by referring to the ta"able period when it was
ac&uired by the ta"payer.
'. (hen circumstances show that a choice has been made by the ta"payer to carry
over the e"cess income ta" as credit, it should be respected) but when indubitable
circumstances clearly show that another choice, a ta" refund, is in order, it should
be granted. As to which option the ta"payer chose is generally a matter of
$Technicalities and legalisms, however e"alted, should not be misused by the
government to *eep money not belonging to it and thereby enrich itself at the
e"pense of its law+abiding citi,ens.%
Facts:In filing its Corporate Income 3a' Return for the Calendar >ear -%%%# )PI
carried over the e'cess ta' credits from the previous *ears of $77D# $778 and
$777. 9o"ever# )PI failed to indicate in its I3R its choice of "hether to carr* over
its e'cess ta' credits or to claim the refund of or issuance of a ta' credit certificate.
)PI filed "ith the Commissioner of Internal Revenue /CIR0 an administrative
claim for refund. 3he CIR failed to act on the claim for ta' refund of )PI. 9ence#
)PI filed a Petition for Revie" before the C3# "hom denied the claim.
3he C3 relied on the irrevocabilit* rule laid do"n in ,ection DA of the 1ational
Internal Revenue Code /1IRC0 of $77D# "hich states that once the ta'pa*er opts
to carr* over and appl* its e'cess income ta' to succeeding ta'able *ears# its
option shall be irrevocable for that ta'able period and no application for ta' refund
or issuance of a ta' credit shall be allo"ed for the same.
3he Court of ppeals reversed the C3 decision stating that there "as no actual
carr*ing over of the e'cess ta' credit# given that )PI suffered a net loss in $777#
and "as not liable for an* income ta' for said ta'able period# against "hich the
$778 e'cess ta' credit could have been applied.
3he Court of ppeals further stated that even if ,ection DA "as to be construed
strictl* and literall*# the irrevocabilit* rule "ould still not bar )PI from seeCing a
ta' refund of its $778 e'cess ta' credit despite previousl* opting to carr* over the
same. 3he phrase ;for that ta'able period< Eualified the irrevocabilit* of the option
of )IR to carr* over its $778 e'cess ta' credit to onl* the $777 ta'able periodF
such that# "hen the $777 ta'able period e'pired# the irrevocabilit* of the option of
)PI to carr* over its e'cess ta' credit from $778 also e'pired.
Issue:$. What is the period captured b* the irrevocabilit* rule6-. Whether or not
the ta'pa*ers failure to marC the option chosen is fatal to "hatever claim
Held:$. 3he last sentence of ,ection DA of the 1IRC of $77D reads: ;2nce the
option to carr*4over and appl* the e'cess Euarterl* income ta' against income ta'
due for the ta'able Euarters of the succeeding ta'able *ears has been made# such
o,tion shall be considered irrevocable for that taxable ,eriod and no
a,,lication for tax refund or issuance of a tax credit certificate shall be
allo-ed therefor.< 3he phrase ;for that ta'able period< merel* identifies the
e'cess income ta'# sub+ect of the option# b* referring to the ta'able period "hen it
"as acEuired b* the ta'pa*er.
In the present case# the e'cess income ta' credit# "hich )PI opted to carr* over#
"as acEuired b* the said banC during the ta'able *ear $778. 3he option of )PI to
carr* over its $778 e'cess income ta' credit is irrevocableF it cannot later on opt to
appl* for a refund of the ver* same $778 e'cess income ta' credit.
-. 1o. Failure to signif* ones intention in the FR does not mean outright barring
of a valid reEuest for a refund# should one still choose this option later on. 3he
reason for reEuiring that a choice be made in the FR upon its filing is to ease ta'
administration /Philam Asset Management, -nc. v. C-! G.!. .o. #/0012 and .o.
#0'334, #4 5ecember '33/0. When circumstances sho" that a choice has been
made b* the ta'pa*er to carr* over the e'cess income ta' as credit# it should be
respectedF but "hen indubitable circumstances clearl* sho" that another choice G
a ta' refund G is in order# it should be granted. 3herefore# as to "hich option the
ta'pa*er chose is generall* a matter of evidence.
;3echnicalities and legalisms# ho"ever e'alted# should not be misused b* the
government to Ceep mone* not belonging to it and thereb* enrich itself at the
e'pense of its la"4abiding citiHens.<