Roxas, Rafael

CLWTAXN K41

Case Digests

1. Commissioner of Internal Revenue v. SC Johnson and Son, Inc., G.R. No. 127105, 25
June 1999.

Facts:
In order to use the trademark, patents, and technology owned by SC Johnson & Son,
USA, a non-resident foreign corporation based in the USA, SC Johnson & Son, Inc., a domestic
corporation established and operating under Philippine law, entered into a license agreement
with SC Johnson & Son, USA. This included the right to manufacture, package, and distribute
the products covered by the Agreement as well as the ability to secure assistance in
management, marketing, and production from SC Johnson & Son, USA. SC Johnson & Son,
USA also mandated that the respondent in this case pay royalties based on a percentage of net
sales and subjected such payments to a 25% withholding tax.

SC Johnson & Son, Inc. subsequently submitted a claim for a refund of excess withholding tax
on royalties to the BIR's International Tax Affairs Division, arguing that the royalties it paid to SC
Johnson & Son, USA were only subject to a 10% withholding tax under the most-favorable
nation provision of the RP-US Tax in relation to the RP-West Germany Tax. Because the CIR
did not act on the company's request for a refund, the company brought its case before the CTA
for review. The CTA ruled in SC Johnson & Son's favor and commanded the CIR to issue a tax
credit certificate for P963,266.00, which represents the excess withholding tax on royalty
payments that had been paid.

Issue:
In relation to the RP-West Germany Tax Treaty, it is unclear if respondent SC Johnson
and Son, Inc. is eligible for the 10% royalty under the most favored nation provision.

Ruling:

SC Johnson & Son, Inc.

The treaties the Philippines has signed to prevent double taxation will be ineffective if a 10% tax
is enacted. When a resident of one contracting state receives income from another contracting
state or owns property there and both jurisdictions levy taxes on that income or property, this is
known as double taxation.

A tax treaty uses a variety of techniques to prevent double taxation. When tax treaties are
signed, the Philippines will forfeit some of its tax revenue in exchange for the other country not
taxing this specific investment.
2. People v. Gloria Kintanar CTA EB Crim. Case No. 006, 03 December 2010.

Facts:
Benjamin Kintanar and Gloria's spouses V. Kintanar were independent or distributors.
Forever Living Products Philscontractors's Inc. (FLPPI). Everything started when the
Investigations Division of the BIR received sensitive information regarding an alleged
technique used by the Kintanar spouses to evade taxes. As a result, BIR issued a Letter of
Authorization to look over the ledgers and other accounting records. documentation for the tax
years 1999 to 2002. It was a LOA. On April 3, 2003, Mr. Kintanar got the package. Gloria
Kintanar failed to turn in the necessary paperwork. Following that, multiple notices and a
subpoena sent to her by the BIR, but she refused to accept it uncompliant.

Gloria Kintanar's husband objected to the BIR's Letter of Demand and Assessment notifications
on August 31, 2004. The objection was accompanied by copies of the couple's combined
income tax filings from 2000 to 2002. In response, the BIR demanded that the spouses produce
more paperwork within 60 days. Once more, the spouses did not abide by the aforementioned
request, therefore the evaluation and the demand letter became final, executory, and binding.
demandable. The prosecution established Gloria Kintanar's failure to file her ITRs for the years
1999 through 2001, and as a result, the court found her liable for back taxes on income derived
from FLPPI. According to Gloria Kintanar's testimony, she submitted her ITRs for the tax years
2000 and 2001. She asserted that she had not intentionally, unlawfully, or knowingly neglected
to file her ITR for the relevant years because she had no personal knowledge of them.

The aforementioned taxes were not actually filed by her; instead, her spouse submitted the
ITRs. Her husband, on the other hand, asserted in court that he had turned in the ITRs for the
pertinent years. Through their professional accountant, who prepared and submitted their
returns, from 1997 through 2004. He simply skimmed the returns because he depended on his
accountant, therefore he is unaware of the amount indicated on them or the place where their
accountant submitted their taxes. Gloria Kintanar was judged by the Former Second Division to
have violated Section 255 of the NIRC of 1997 without a reasonable doubt. Gloria Kintanar
therefore submitted this immediate petition to the CTA En
Banc.

Issue:
Did Petitioner Gloria Kintanar's failure to make or file her returns constitute a violation of
Section 255 of the NIRC? Was it her intention to make or file a return but didn't?

Ruling:
Thus, the present petition for review is hereby denied, taking into account the
aforementioned factors. The contested Decision, dated August 26, 2009,
the Former's resolution from November 26, 2009 AFFIRMED hereby is the Second Division.

3. Gulf Air Company, Philippine Branch v. Commissioner of Internal Revenue, G.R. No.
182045, 19 September 2012.

Facts:
In accordance with Revenue Regulation 8-2001, GF utilized the Bureau of Internal
Revenue's (BIR) Voluntary Assessment Program for its 1999 and 2000 Income Tax,
Documentary Stamp Tax, and Percentage Tax for the third quarter of 2000. Additionally, GF
requested a percentage tax refund for the first, second, and fourth quarters of 2000. In relation
to this, the BIR issued a letter of authority allowing its revenue officials to look through GF's
books of accounts and other documents to confirm its claim.5GF also received the Formal
Letter of Demand for the payment of the full amount of P33,864,186.62. On December 29,
2003, it submitted a letter in protest of the assessment and a new request for reconsideration of
the denial of its refund claim. GF's written protest was rejected by the Deputy Commissioner,
Officer-in-Charge of the Large Taxpayers Service of the BIR, for lack of a factual and legal
foundation, and it was asked that the 33,864,186.62 deficiency percentage tax assessment be
paid right away.

GF petitioned the CTA for a review after becoming incensed. The CTA upheld the BIR's finding
and ordered the payment along with 20% delinquent interest. GF took the case before the CTA
En Banc, which issued a ruling dismissing the petition and upholding the CTA's decision in
Division. It was determined that Revenue Regulation No. 6-66 applied because period involved
in the assessment covered the first, second and fourth quarters of 2000 and the amended
percentage tax returns were filed on October 25, 2001. Since Revenue Regulation No. 15-2002,
which went into effect on October 26, 2002, offered a different method for calculating gross
receipts, it was declaratory of a new right and could not be given retroactive effect.

Issue:
Whether special commissions on passengers and special commissions on cargo based
on the rates established by the CAB should be included in the definition of "gross receipts" for
purposes of computing the 3% Percentage Tax under Section 118(A) of the 1997 National
Internal Revenue Code (NIRC).
Ruling:

The petition has no merit. the petitioner in the case at bench failed to unequivocally prove that it
is entitled to a refund.The Court must highlight that tax refunds have the same characteristics as
tax exemptions, which are a deviation from the State's right to tax. As a result, they are
generously construed in favor of the State and severely against taxpayers, respectively, such
that anyone claiming a refund or exemption must do so in words that are both too clear to be
misread and too categorical to be misunderstood.