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Commissioner
of Internal Revenue
G.R. No. 192024 July 1, 2015
Facts: Fortune is the manufacturer/producer of
cigarette brands. Immediately prior to January 1,
1997, the cigarette brands were subject to ad valorem
tax pursuant to then Sec. 142 of the Tax Code of
1977, as amended. However, on January 1, 1997,
R.A. No. 8240 took effect causing a shift from the ad
valorem tax (AVT) system to the specific tax system.
As a result of such shift, the aforesaid cigarette
brands were subjected to specific tax under Section
142 thereof, now renumbered as Section 145 of the
Tax Code of 1997.
Held: No
Procedural Issue
to FWT?
Held: No
The nature of the payments by FDIP to FII is for
business support services. A plain reading of the
Licensing Contract shows that the use of the software
is free and that FDIP will only pay FII a fee to shoulder
its share in the maintenance of the software. The
contract also shows that FII does not transfer all its
substantial rights in the software. The contract deals
with the know-how for the use of the suite of
software, which FII did not receive income payment,
and services for maintenance of the software.
As to the service contract, the business profits of FII
shall be taxable only in the US unless it has a PE in