RepublicofthePhilippines

SUPREMECOURT
Manila
THIRDDIVISION
G.R.No.103092July21,1994
BANKOFAMERICANT&SA,petitioner,
vs.
HONORABLECOURTOFAPPEALS,ANDTHECOMMISSIONEROFINTERNAL
REVENUE,respondents.
G.R.No.103106July21,1994
BANKOFAMERICANT&SA,petitioner,
vs.
THEHONORABLECOURTOFAPPEALSANDTHECOMMISSIONEROFINTERNAL
REVENUE,respondents.

VITUG,J.:
Section24(b)(2)(ii)oftheNationalInternalRevenueCode,inthelanguageitwaswordedin1982(the
taxableperiodrelevanttothecaseatbench),provided,inpart,thusly:
Sec.24.Ratesoftaxoncorporations....
(b)Taxonforeigncorporations....
(2)(ii)Taxonbranchprofitandremittances.
Anyprofitremittedabroadbyabranchtoitsheadofficeshallbesubjecttoataxof
fifteenpercent(15%)...."
PetitionerBankofAmericaNT&SAarguesthatthe15%branchprofitremittancetaxonthebasisofthe
aboveprovisionshouldbeassessedontheamountactuallyremittedabroad,whichistosaythatthe15%
profitremittancetaxitselfshouldnotformpartofthetaxbase.RespondentCommissionerofInternal
Revenue, contendingotherwise,holdsthepositionthat,incomputingthe15%remittance tax,thetax
shouldbeinclusiveofthesumdeemedremitted.
ThestatementoffactsmadebytheCourtofTaxAppeals,lateradoptedbytheCourtofAppeals,andnotin
anyseriousdisputebytheparties,canbequotedthusly:
PetitionerisaforeigncorporationdulylicensedtoengageinbusinessinthePhilippines
with Philippine branch office at BA Lepanto Bldg., Paseo de Roxas, Makati, Metro
Manila.OnJuly20,1982itpaid15%branchprofitremittancetaxintheamountof
P7,538,460.72onprofitfromitsregularbankingunitoperationsandP445,790.25on
profitfromitsforeigncurrencydepositunitoperationsoratotalofP7,984,250.97.The
tax was based on net profits after income tax without deducting the amount
correspondingtothe15%tax.

PetitionerfiledaclaimforrefundwiththeBureauofInternalRevenueofthatportionof
thepaymentwhichcorrespondstothe15%branchprofitremittancetax,ontheground
thatthetaxshouldhavebeencomputedonthebasisofprofitsactuallyremitted,whichis
P45,244,088.85, and not on the amount before profit remittance tax, which is
P53,228,339.82.Subsequently,withoutawaitingrespondent'sdecision,petitionerfileda
petitionforreviewonJune14,1984withthisHonorableCourtfortherecoveryofthe
amountofP1,041,424.03computedasfollows:
NetProfitsAfterProfitTaxDueAlleged
IncomeTaxButRemittanceAllegedbyOverpayment
BeforeProfitTaxPaidPetitionerItem12
RemittanceTax_____________________________
A.RegularBanking
UnitOperations
(P50,256,404.82)
1.ComputationofBIR
15%xP50,256,404.82P7,538,460.72
2.Computationof
Petitioner
P50,256,404.82x15%P6,555,183.24P983,277.48
1.15
B.ForeignCurrency
DepositUnit
Operations
(P2,971,935)
1.ComputationofBIR
15%xP2,971,935.00P445,790.25
2.Computationof
Petitioner
P2,971,935.00x15%P387,643.70P58,146.55
TOTAL..P7,984,250.97P6,942,286.94P1,041,424.02"1
TheCourtofTaxAppealsupheldpetitionerbankinitsclaimforrefund.TheCommissionerofInternal
RevenuefiledatimelyappealtotheSupremeCourt(docketedG.R.No.76512)whichreferredittothe
CourtofAppealsfollowingthisCourt'spronouncementinDevelopmentBankofthePhilippinesvs.Court
ofAppeals,etal.(180SCRA609).On19September1990,theCourtofAppealssetasidethedecisionof
theCourtofTaxAppeals.Explainingitsreversalofthetaxcourt'sdecision,theappellatecourtsaid:
TheCourtofTaxAppealssoughttodeducelegislativeintentvisavistheaforesaidlaw
throughananalysisofthewordingsthereof,whichtotheirmindsreveal anintentto
mitigateatleasttheharshnessofsuccessivetaxation.Theuseofthewordremittedmay
wellbeunderstoodasreferringtothatpartofthesaidtotalbranchprofitswhichwouldbe
senttotheheadofficeasdistinguishedfromthetotalprofitsofthebranch(notallof
whichneedbesentorwouldbeorderedremittedabroad).Ifthelegislatureindeedhad
wantedtomitigatetheharshnessofsuccessivetaxation,itwouldhavebeensimplerto
justlowertherateswithoutineffectrequiringtherelativelynovelandcomplicatedway
ofcomputingthetax,asenvisionedbythehereinprivaterespondent.Thesameresult
wouldhavebeenachieved.2

Hence, these petitions for review in G.R. No. 103092 and G.R. No. 103106 (filed separately due to
inadvertence) by the law firms of "Agcaoili and Associates" and of "Sycip, Salazar, Hernandez and
Gatmaitan"inrepresentationofpetitionerbank.
WeagreewiththeCourtofAppealsthatnotmuchreliancecanbemadeonourdecisioninBurroughs
Limited vs. Commission of Internal Revenue (142 SCRA 324), for there we ruled against the
CommissionermainlyonthebasisofwhattheCourtsothenperceivedashispositionina21January1980
rulingthereversalofwhich,byhissubsequentrulingof17March1982,couldnotapplyretroactively
againstBurroughsinconformitywithSection327(nowSection246,re:nonretroactivityofrulings)ofthe
NationalInternalRevenueCode.Hence,weheld:
Petitioner'saforesaidcontentioniswithoutmerit.Whatisapplicableinthecaseatbaris
still the Revenue Ruling of January 21, 1980 because private respondent Burroughs
Limited paid the branch profit remittance tax in question on March 14, 1979.
MemorandumCircularNo.882datedMarch17,1982cannotbegivenretroactiveeffect
in the light of Section 327 of the National Internal Revenue Code which
provides
Sec.327.Nonretroactivityofrulings.Anyrevocation,modification,or
reversalofanyoftherulesandregulationspromulgatedinaccordance
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
prejudicialtothetaxpayerexceptinthefollowingcases(a)wherethe
taxpayerdeliberatelymisstatesoromitsmaterialfactsfromhisreturn
orinanydocumentrequiredofhimbytheBureauofInternalRevenue;
(b)where thefactssubsequentlygathered bytheBureauofInternal
Revenuearemateriallydifferentfromthefactsonwhichtherulingis
based, or (c) where the taxpayer acted in bad faith. (ABSCBN
BroadcastingCorp.v.CTA,108SCRA151152)
TheprejudicethatwouldresulttoprivaterespondentBurroughsLimitedbyaretroactive
application of Memorandum Circular No. 882 is beyond question for it would be
deprived of the substantial amount of P172,058.90. And, insofar as the enumerated
exceptions are concerned, admittedly, Burroughs Limited does not fall under any of
them.
TheCourtofTaxAppealsitselfcommentedsimilarlywhenitobservedthuslyinitsdecision:
InfindingtheCommissioner'scontentionwithoutmerit,thisCourthoweverruledagainst
theapplicabilityofRevenueMemorandumCircularNo.882datedMarch17,1982to
theBurroughsLimitedcasebecausethetaxpayerpaidthebranchprofitremittancetax
involvedthereinonMarch14,1979inaccordancewiththerulingoftheCommissioner
ofInternalRevenuedatedJanuary21,1980.InviewofSection327ofthetheninforce
NationalInternalRevenueCode,RevenueMemorandumCircularNo.882datedMarch
17,1982cannotbegivenretroactiveeffectbecauseanyrevocationormodificationofany
ruling or circular of the Bureau ofInternal Revenue should not be given retroactive
application if such revocation or modification will, subject to certain exceptions not
pertinentthereto,prejudicetaxpayers.3
TheSolicitorGeneral correctlypointsoutthatalmostinvariablyinanadvaloremtax,thetaxpaidor
withheldisnotdeductedfromthetaxbase.Suchimpositionsastheordinaryincometax,estateandgift
taxes,andthevalueaddedtaxaregenerallycomputedinlikemanner.Inthesecases,however,itisso

becausethelaw,indefiningthetaxbaseandinprovidingfortaxwithholding,clearlyspellsitouttobe
such.AssowellexpoundedbytheTaxCourt
...Inallthesituations...wherethemechanismofwithholdingoftaxesatsource
operatestoensurecollectionofthetax,andwhichrespondentclaimsthebaseonwhich
thetaxiscomputedistheamounttobepaidorremitted,thelawapplicableexpressly,
specificallyandunequivocallymandatesthatthetaxisonthetotalamountthereofwhich
shallbecollectedandpaidasprovidedinSections53and54oftheTaxCode.Thus:
Dividendsreceivedbyanindividualwhoisacitizenorresidentofthe
Philippinesfromadomesticcorporation,shallbesubjecttoafinaltax
attherateoffifteen(15%)percentonthetotalamountthereof,which
shallbecollectedandpaidasprovidedinSections53and54ofthis
Code.(Emphasissupplied;Sec.21,TaxCode)
InterestfromPhilippineCurrencybankdepositsandyieldfromdeposit
substitutes whether received by citizens of the Philippines or by
residentalienindividuals,shallbesubjecttoafinaltaxasfollows:(a)
15%oftheinterestorsavingsdeposits,and(b)20%oftheintereston
time deposits and yield from deposits substitutes,which shall be
collectedandpaidasprovidedinSections53and54ofthisCode:...
(Emphasissupplied;Sec.21,TaxCodeapplicable.)
And on rental payments payable by the lessee to the lessor (at 5%), also cited by
respondent,Section1,paragraph(C),ofRevenueRegulationsNo.1378,November1,
1978,providesthat:
Section 1. Income payments subject to withholding tax and rates
prescribedtherein.Exceptasthereinotherwiseprovided,thereshall
bewithheldacreditableincometaxattherateshereinspecifiedfor
eachclassofpayeefromthefollowingitemsofincomepaymentsto
personsresidinginthePhilippines.
xxxxxxxxx
(C) RentalsWhenthegrossrentalorthepayment required tobe
madeasaconditiontothecontinueduseorpossessionofproperty,
whetherrealorpersonal,towhichthepayororobligorhasnottakenor
isnottakingtitleorinwhichhehasnoequity,exceedsfivehundred
pesos(P500.00)percontractorpaymentwhicheverisgreaterfive
percentum(5%).
Notethatthebasisofthe5%withholdingtax,asexpresslyandunambiguouslyprovided
therein,isonthegrossrental.RevenueRegulationsNo.1378waspromulgatedpursuant
toSection53(f)ofthetheninforceNationalInternalRevenueCodewhichauthorizedthe
MinisterofFinance,uponrecommendationoftheCommissionerofInternalRevenue,to
requirethewithholdingofincometaxonthesameitemsofincomepayabletopersons
(naturalorjudicial)residinginthePhilippinesbythepersonsmakingsuchpaymentsat
therateofnotlessthan21/2%butnotmorethan35%whicharetobecreditedagainst
theincometaxliabilityofthetaxpayerforthetaxableyear.
Onthe otherhand, there isabsolutely nothinginSection24(b) (2) (ii),supra,which
indicatesthatthe15%taxonbranchprofitremittanceisonthetotalamountofprofitto
be remitted abroad which shall be collected and paid in accordance with the tax
withholdingdeviceprovidedinSections53and54oftheTaxCode.Thestatuteemploys

"Anyprofitremittedabroadbyabranchtoitsheadofficeshallbesubjecttoataxof
fifteenpercent(15%)"withoutmore.Nowhereistheresaidof"baseonthetotal
amountactuallyappliedforbythebranchwiththeCentralBankofthePhilippinesas
profittoberemittedabroad,whichshallbecollectedandpaidasprovidedinSections53
and 54 of this Code." Where the law does not qualify that the tax is imposed and
collectedatsourcebasedonprofittoberemittedabroad,thatqualificationshouldnotbe
readintothelaw.Itisabasicruleofstatutoryconstructionthatthereisnosafernor
better canon of interpretation than that when the language of the law is clear and
unambiguous,itshouldbeappliedaswritten.Andtoourmind,theterm"anyprofit
remittedabroad"canonlymeansuchprofitasis"forwarded,sent,ortransmittedabroad"
as the word"remitted" iscommonlyand popularly accepted andunderstood. Tosay
thereforethatthetaxonbranchprofitremittanceisimposedandcollectedatsourceand
necessarilythetaxbaseshouldbetheamountactuallyappliedforthebranchwiththe
CentralBankasprofittoberemittedabroadistoignoretheunmistakablemeaningof
plainwords.4
Inthe15%remittancetax,thelawspecifiesitsowntaxbasetobeonthe"profitremittedabroad."Thereis
absolutelynothingequivocaloruncertainaboutthelanguageoftheprovision.Thetaxisimposedonthe
amountsentabroad,andthelaw(theninforce)callsfornothingfurther.Thetaxpayerisasingleentity,and
itshouldbeunderstandableif,suchasinthiscase,itisthelocalbranchofthecorporation,usingitsown
localfunds,whichremitsthetaxtothePhilippineGovernment.
Theremittancetaxwasconceivedinanattempttoequalizetheincometaxburdenonforeigncorporations
maintaining,ontheonehand,localbranchofficesandorganizing,ontheotherhand,subsidiarydomestic
corporations where at least a majority of all the latter's shares of stock are owned by such foreign
corporations.PriortotheamendatoryprovisionsoftheRevenueCode,localbranchesweremadetopay
only the usual corporate income tax of 25%35% on net income (now a uniform 35%) applicable to
residentforeigncorporations(foreigncorporationsdoingbusinessinthePhilippines).WhilePhilippine
subsidiariesofforeigncorporationsweresubjecttothesamerateof25%35%(nowalsoauniform35%)
ontheirnetincome,dividendpayments,however,wereadditionallysubjectedtoa15%(withholding)tax
(reducedconditionallyfrom35%).Inordertoavertwhatwouldotherwiseappeartobeanunequaltax
treatmentonsuchsubsidiariesvisavislocalbranchoffices,a20%,laterreducedto15%,profitremittance
taxwasimposedonlocalbranchesontheirremittancesofprofitsabroad.Butthisiswherethetaxpari
passuendsbetweendomesticbranchesandsubsidiariesofforeigncorporations.
The Solicitor General suggests that the analogy should extend to the ordinary application of the
withholdingtaxsystemandsowiththeruleonconstructiveremittanceconceptaswell.Itisdifficultto
accepttheproposition.Intheoperationofthewithholdingtaxsystem,thepayeeisthetaxpayer,theperson
on whom the tax is imposed, while the payor, a separate entity, acts no more than an agent of the
governmentforthecollectionofthetaxinordertoensureitspayment.Obviously,theamounttherebyused
tosettlethetaxliabilityisdeemedsourcedfromtheproceedsconstitutiveofthetaxbase.Sincethepayee,
notthepayor,istherealtaxpayer,theruleonconstructiveremittance(orreceipt)canbeeasilyrationalized,
ifnotindeed,madeclearlymanifest.Itishardlythecase,however,intheimpositionofthe15%remittance
taxwherethereisbutonetaxpayerusingitsowndomesticfundsinthepaymentofthetax.Tosaythat
thereisconstructiveremittanceevenofsuchfundswouldbestretchingfartoomuchthatimaginaryrule.
Soundlogicdoesnotdefybutmustconcedetofacts.
Wehold,accordingly,thatthewrittenclaimforrefundoftheexcesstaxpaymentfiled,withinthetwoyear
prescriptiveperiod,withtheCourtofTaxAppealshasbeenlawfullymade.
WHEREFORE,thedecisionoftheCourtofAppealsappealedfromisREVERSEDandSETASIDE,
andthatoftheCourtofTaxAppealsisREINSTATED.
SOORDERED.