ABS-CBN V CTA (Oct 21, 1981) Doctrine: GR: Any revocation, modification etc of the rules and re ulations

s !romul ated "y the #$R shall not "e iven retroactive a!!lication if the revocation, modification %ill "e !re&udicial to the ta'!ayer( )'ce!tions to Rule: a) $f the ta'!ayer deli"erately misstates or omits material facts from any document re*uired of him "y the +$R ") $f the facts su"se*uently athered "y the +$R are materially different from the facts on %hich the rulin is "ased c) $f the ta'!ayer acted in "ad faith ,acts: -etitioner is en a ed in the "usiness of telecastin local as %ell as forei n films ac*uired from forei n cor!orations not en a ed in "usiness in the -.( ,or these transactions !etitioners !aid rentals after %ithholdin income ta' of /01 of 2 of the film rentals( On 3une 1949, RA 2/5/ amended 6ec 25("), 7$R#, !ertinent !rovision as follo%s: o (") 8a' on forei n cor!orations(9(1) 7on:resident cor!orations(9 8here shall "e levied, collected, and !aid for each ta'a"le year, in lieu of the ta' im!osed "y the !recedin !ara ra!h, u!on the amount received "y every forei n cor!oration not en a ed in trade or "usiness %ithin the -hili!!ines, from an sources %ithin the -hili!!ines, as interest, dividends, rents, salaries, %a es, !remiums, annuities, com!ensations, remunerations, emoluments, or other fi'ed or determina"le annual or !eriodical ains, !rofits, and income, a tax equal to thirty per centum of such amount. On A!ril 19;1, the #$R issued an $RR for RA 2/5/, General #ircular <://5, !ertinent !rovision as follo%s: o 6ince accordin to the findin s of the 6!ecial 8eam %ho in*uired into "usiness of the non:resident forei n film distri"utors, the distri"ution or e'hi"ition ri ht on a film is invaria"ly ac*uired for a consideration, either for a lum! sum or a !ercenta e of the film rentals, %hether from a !arent com!any or an inde!endent outside !roducer, a part of the receipts of a non-resident foreign film distributor derived from said film represents, therefore, a return of investment. 8hus, !etitioner dutifully %ithheld and turned over to the +$R /01 of 2 of the film rentals it !aid to the forei n cor!orations( 8he last year that !etitioner %ithheld ta'es !ursuant to G# <://5 %as in 19;8( On 3une 19;8, RA 45/1 amended 6ec 25("), 7$R#, !ertinent !rovision as follo%s: o (") 8a' on forei n cor!orations(9(1) 7on:resident cor!orations(9A forei n cor!oration not en a ed in trade or "usiness in the -hili!!ines includin a forei n life insurance com!any not en a ed in the life insurance "usiness in the -hili!!ines shall !ay a tax equal to thirty-five per cent of the gross income received durin each ta'a"le year from all sources %ithin the -hili!!ines, as interests, dividends, rents, royalties, salaries, %a es, !remiums, annuities, com!ensations, remunerations for technical services or other%ise, emoluments or other fi'ed or determina"le annual, !eriodical or casual ains, !rofits, and income, and ca!ital ains, -rovided ho%ever, 8hat !remiums shah not include reinsurance !remiums( On ,e" 19=1, the #$R issued an $RR for RA 45/1, Revenue >emo #ircular 5:=1, !ertinent !rovision as follo%s: o $n vie% thereof, General #ircular 7o( <://5, dated A!ril 12, 19;1, is here"y revo?ed and henceforth, local films distri"utors and e'hi"itors shall deduct and %ithhold 35% of the entire amount !aya"le "y them to non:resident forei n cor!orations, as film rental or royalty, or %hatever such !ayment may "e denominated, %ithout any deduction %hatever, !ursuant to 6ection 25 ("), and !ay the %ithheld ta'es in accordance %ith 6ection 45 of the 8a' #ode, as amended( On A!ril 19=1, on the "asis of this circular, #$R issued a letter of assessment re*uirin !etitioner to !ay deficiency %ithholdin income ta' on remitted film rental from 19;4:19;8, and film royalty as of the end of 19;8 in the total amount of -424, 89=(0;

On A!ril 19=;, %ithout actin on !etitioner@s re*uest for reconsideration, #$R issued a %arrant of distraint and levy over !etitioner@s !ersonal as %ell as real !ro!erties( #8A ruled in favor of #$R(

$ssuesA .eld: BO7 the #$R can a!!ly R># 5:=1 retroactively and issue a deficiency assessment a ainst !etitioner as %ell as deficiency %ithholdin income ta'C 7o Ratio: 6ec //8:A, 7$R# as inserted "y RA ;110 on Au ust 19;9 !rovides the ff: o GR: Any revocation, modification etc of the rules and re ulations !romul ated "y the #$R shall not "e iven retroactive a!!lication if the revocation, modification %ill "e !re&udicial to the ta'!ayer( o )'ce!tions to Rule: a) $f the ta'!ayer deli"erately misstates or omits material facts from any document re*uired of him "y the +$R ") $f the facts su"se*uently athered "y the +$R are materially different from the facts on %hich the rulin is "ased c) $f the ta'!ayer acted in "ad faith $t is thus clear that the rules and re ulations !romul ated "y the #$R have no retroactive a!!lication if there a!!lication %ould "e !re&udicial to ta'!ayers( A!!lyin R># 5:=1 retroactively %ould "e !re&udicial to !etitioner since it %as no lon er in a !osition to %ithhold ta'es from forei n cor!orations as it had already remitted the same amount to the forei n cor!orations %hen the ne% circular %as issued( Res!ondent claims that the retroactivity !rovision does not a!!ly since G# <://5 is a nullity, "ecause in effect, it chan ed the la% on the matter( #8A affirmed this stand and concluded that !etitioner could not ac*uire any vested ri ht since G# <://5 %as a nullity( 8he rationale "ehind G# <://5 %as clearly stated( 8he #ircular fi'ed the return of ca!ital at /01 to sim!lify the administrative chore of determinin the !ortion of the rentals coverin the return of ca!ital( Bere the D ross incomeD "ase %as clear from 6ec( 25 ("), !erha!s, the ratiocination of the 8a' #ourt could "e u!held( $t should "e noted, ho%ever, that said 6ection %as not too !lain and sim!le to understand( 8he issuance of the #ircular %as !roof that it %as not easy to com!rehend and could "e su"&ected to different inter!retations( $n fact, RA 2/5/ (1949) %as follo%ed "y RA /824 (19;/) and RA /851 (19;/), all of %hich formed the series of enactments re ardin 6ec 25 ("), 7$R#( 8he re:enactment of a statute su"stantially unchan ed is !ersuasive indication of the ado!tion "y #on ress of a !rior e'ecutive construction, a le islative a!!roval of administrative inter!retation( $t %as on 3une 19;8 under RA 45/1, %hich "ecame the "asis of R># 5:=1, that 6ec( 25 (") %as amended to refer s!ecifically to /41 of the D ross income(D 8his #ourt is not una%are of the %ell:entrenched !rinci!le that the Government is never esto!!ed from collectin ta'es "ecause of mista?es or errors on the !art of its a ents( 8his #ourt held in Tuason v Lingad that 6ec //8:A, 7$R# is indicative of le islative intent to su!!ort the !rinci!le of ood faith( $n the E6, %here 6ec 25 (") %as !atterned, it has "een held that the #$R is not !ermitted to ado!t a !osition inconsistent %ith one !reviously ta?en %here in&ustice %ould result therefrom, or %here there has "een a misre!resentation to the ta'!ayer( 8he #8A rulin is here"y reversed and the *uestioned assessment is set aside(