Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.
,
799 SCRA 489, G.R. No. 216130 August 3, 2016
PERLAS-BERNABE, J.
Doctrine:The primary purpose of filing an administrative claim was to serve as a notice of

warning to the CIR that court action would follow unless the tax or penalty alleged to have been
collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code — [then
Section 306 of the old Tax Code] — however does not mean that the taxpayer must await the
final resolution of its administrative claim for refund, since doing so would be tantamount to the
taxpayer’s forfeiture of its right to seek judicial recourse should the two (2)-year prescriptive
period expire without the appropriate judicial claim being filed.
Facts: Respondent is a domestic corporation duly organized and existing under the laws of the
Philippines, and registered with the Bureau of Internal Revenue (BIR) as a large taxpayer with
Taxpayer Identification Number 000-409-561-000. On August 19, 2003, the authorized capital
stock of respondent was increased from P400,000,000.00 divided into 4,000,000 shares with a
par value of P100.00 each, to P1,731,863,000.00 divided into 4,000,000 common shares and
13,318,630 preferred shares with a par value of P100.00 each. Consequently, all the preferred
shares were solely and exclusively subscribed by Goodyear Tire and Rubber Company
(GTRC), which was a foreign company organized and existing under the laws of the State of
Ohio, United States of America (US) and is unregistered in the Philippines.7
On May 30, 2008, the Board of Directors of respondent authorized the redemption of GTRC’s
3,729,216 preferred shares on October 15, 2008 at the redemption price of P470,653,914.00,
broken down as follows: P372,921,600.00 representing the aggregate par value and
P97,732,314.00, representing accrued and unpaid dividends.8
On October 15, 2008, respondent filed an application for relief from double taxation before the
International Tax Affairs Division of the BIR to confirm that the redemption was not subject to
Philippine income tax, pursuant to the Republic of the Philippines (RP)-US Tax Treaty.9 This
notwithstanding, respondent still took the conservative approach, and thus, withheld and
remitted the sum of P14,659,847.10 to the BIR on November 3, 2008, representing fifteen
percent (15%) FWT, computed based on the difference of the redemption price and aggregate
par value of the shares.10
On October 21, 2010, respondent filed an administrative claim for refund or issuance of TCC,
representing 15% FWT in the sum of P14,659,847.10 before the BIR. Thereafter, or on
November 3, 2010, it filed a judicial claim, by way of petition for review, before the CTA,
docketed as CTA Case No. 8188.11
For her part, petitioner maintained that respondent’s claim must be denied, considering that: (a)
it failed to exhaust administrative remedies by prematurely filing its petition before the CTA; and
(b) it failed to submit complete supporting documents before the BIR.
Issue: (a) whether or not the judicial claim of respondent should be dismissed for non-
exhaustion of administrative remedies; and
(b) whether or not the CTA En Banc correctly ruled that the gain derived by GTRC was not
subject to 15% FWT on dividends.
Held
(a) Section 229 of the Tax Code states that judicial claims for refund must be filed within two
(2) years from the date of payment of the tax or penalty, providing further that the same
may not be maintained until a claim for refund or credit has been duly filed with the
Commissioner of Internal Revenue (CIR).
The primary purpose of filing an administrative claim was to serve as a notice of warning
to the CIR that court action would follow unless the tax or penalty alleged to have been
collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code —
[then Section 306 of the old Tax Code] — however does not mean that the taxpayer
must await the final resolution of its administrative claim for refund, since doing so would
be tantamount to the taxpayer’s forfeiture of its right to seek judicial recourse should the
two (2)-year prescriptive period expire without the appropriate judicial claim being filed.
(b) Under Article 11(5) of the RP-US Tax Treaty, the term “dividends” should be understood
according to the taxation law of the State in which the corporation making the distribution
is a resident, which, in this case, pertains to respondent, a resident of the Philippines.
Accordingly, attention should be drawn to the statutory definition of what constitutes
“dividends,” pursuant to Section 73(A) of the Tax Code which provides that “[t]he term
‘dividends’ x x x means any distribution made by a corporation to its shareholders out of
its earnings or profits and payable to its shareholders, whether in money or in other
property.”

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

Uploaded by

Copyright:

Available Formats

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

Uploaded by

Copyright:

Available Formats

Commissioner of Internal Revenue vs. Goodyear Philippines, Inc.

Doctrine:The primary purpose of filing an administrative claim was to serve as a notice of

You might also like