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COMMISSIONER OF INTERNAL REVENUE v.

BURROUGHS LIMITED AND THE COURT OF TAX APPEALS PONENTE : PARAS LEGAL DOCTRINE: Memorandum Circular No. 8-82 cannot be given retroactive effect in light of Section 327 of the NIRC. 1 FACTS: 1. March 1979: The branch office of Burroughs Limited, a foreign corporation, applied with the Central Bank for authority to remit to its parent company abroad, branch profit. Amount Applied for: Amount Actually Remitted: Php 7,647,058.00 Php 6,499,999.30 15% Branch Profit Remittance Tax: Php 1,147,048.70 2. 24 December 1980: Burroughs claims a tax refund/credit of Php 172,058.90. Branch Profit Remittance tax should be 15% of Amount Actually Remitted. (based on Ruling of Acting Commissioner of Internal Revenue) 3. CTA: grants tax credit 4. CIR: Burroughs no longer entitled to refund because Memorandum Circular No. 8-82 dated 17 March 1982 had revoked and/or repealed the BIR ruling of 21 Jan 1980. ISSUE(S) WON Memorandum Circular No. 8-82 (MC 8-82) dated 17 March 1982 can be given retroactive effect? (NO) DISPOSITION

Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayer except in the following cases (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based, or (c) where the taxpayer acted in bad faith. (ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 151-152)

1.

21 Jan 1980: BIR ruling by Acting Commissioner of Internal Revenue of NIRC Sec 24 (b)(2) (ii)2: Tax Base upon which 15% branch profits remittance tax shall be imposed on Branch profits actually remitted and not on the total branch profits out of which the remittance is to be made.

2. Applicable Ruling is Revenue Ruling of 21 Jan 1980 because Burroughs paid the branch profit remittance tax on 14 Mar 1979. MC No. 8-82 cannot be given retroactive effect in light of Sec 327 of NIRC. 3. The retroactive application of MC No. 8-82 would prejudice Burroughs as it would be deprived of the substantial amount of 172T++. Burroughs also does not fall under any of the enumerated exceptions where retroactivity would apply. Case Digest by Lilian Dy

Sec. 24. Rates of tax on corporations.... (b) Tax on foreign corporations. ... (2) (ii) Tax on branch profits remittances. Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15 %) ...