Bank of America NT & SA v. Court of Appeals
CLARIFICATIONFacts
1. The Antecedents: Petitioner Bank of America NT & SA, a foreign corporation duly licensed to engage in business in the Philippines with a local branch office, paid 15% branch profit remittance tax on July 20, 1982, totaling P7,984,250.97. This tax was computed on its net profits after income tax without deducting the amount corresponding to the 15% tax itself. The petitioner's position was that the tax should have been computed on the basis of profits actually remitted, which was P45,244,088.85, and not on the amount before profit remittance tax, which was P53,228,339.82. 2. Procedural History: Petitioner filed a claim for refund with the Bureau of Internal Revenue (BIR) for the alleged overpayment. Subsequently, without awaiting the Commissioner of Internal Revenue's decision, petitioner filed a petition for review on June 14, 1984, with the Court of Tax Appeals (CTA) for the recovery of P1,041,424.03. The CTA upheld the petitioner bank in its claim for refund. The Commissioner of Internal Revenue filed a timely appeal to the Supreme Court (docketed G.R. No. 76512), which referred it to the Court of Appeals (CA) following the pronouncement in Development Bank of the Philippines vs. Court of Appeals, et al. On September 19, 1990, the CA set aside the decision of the CTA, reasoning that if the legislature intended to mitigate successive taxation, it would have simplified the rates rather than requiring a complex computation. 3. The Petition: Petitioner Bank of America NT & SA filed petitions for review (G.R. No. 103092 and G.R. No. 103106) with the Supreme Court, challenging the Court of Appeals' decision. The petitioner argues that the 15% branch profit remittance tax on the basis of Section 24(b)(2)(ii) of the National Internal Revenue Code should be assessed on the amount actually remitted abroad, which means the 15% profit remittance tax itself should not form part of the tax base.
Issue(s)
Whether the 15% branch profit remittance tax under Section 24(b)(2)(ii) of the National Internal Revenue Code should be assessed on the amount actually remitted abroad, excluding the tax itself from the tax base.
Ruling
The decision of the Court of Appeals appealed from is REVERSED and SET ASIDE, and that of the Court of Tax Appeals is REINSTATED.
Ratio Decidendi
On Whether the 15% branch profit remittance tax under Section 24(b)(2)(ii) of the National Internal Revenue Code should be assessed on the amount actually remitted abroad, excluding the tax itself from the tax base: The Supreme Court held that the 15% branch profit remittance tax should be assessed on the amount actually remitted abroad, and the tax itself should not form part of the tax base. The Court emphasized that Section 24(b)(2)(ii) of the National Internal Revenue Code, as worded in 1982, states that "Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15%)" without further qualification. Applying the basic rule of statutory construction, the Court stated that when the language of the law is clear and unambiguous, it should be applied as written, and the term "any profit remitted abroad" can only mean such profit as is "forwarded, sent, or transmitted abroad." The Court distinguished this from other ad valorem taxes or withholding tax systems, such as those on dividends or interest, where the law explicitly mandates that the tax is on the "total amount thereof" or on the "gross rental," a specificity absent in Section 24(b)(2)(ii). Furthermore, the Court clarified that Burroughs Limited vs. Commission of Internal Revenue was decided on the principle of non-retroactivity of rulings under Section 327 (now Section 246) of the National Internal Revenue Code, not on the interpretation of the tax base itself, thus making it inapplicable to the present issue. The Court also rejected the Solicitor General's suggestion to extend the analogy to the ordinary application of the withholding tax system and the constructive remittance concept, explaining that in withholding tax, the payee is the taxpayer and the payor is merely an agent, whereas in the 15% remittance tax, there is only one taxpayer using its own domestic funds for payment.
Main Doctrine
The 15% branch profit remittance tax imposed under Section 24(b)(2)(ii) of the National Internal Revenue Code (NIRC) is to be assessed on the amount of profit actually remitted abroad, meaning the tax itself should not form part of the tax base. This interpretation is based on the plain meaning rule of statutory construction, as the law explicitly states 'Any profit remitted abroad... shall be subject to a tax of fifteen per cent (15%)' without further qualification. The Court distinguishes this from other tax impositions, such as withholding taxes, where the law expressly mandates the tax on the 'total amount thereof' or 'gross rental,' a specificity absent in the branch profit remittance tax provision. This doctrine clarifies the scope of the tax base for foreign corporations' branch profit remittances, ensuring that only the amount actually sent abroad is subjected to the tax.