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This case involves an appeal filed by the Commissioner of Internal Revenue seeking to reverse resolutions that granted JP Morgan Chase Bank's claim for a tax refund of PHP2,845,654.02. JP Morgan had paid PeopleSupport Philippines to provide transmission facilities, and withheld taxes on the payment. PeopleSupport Philippines is a PEZA-registered company granted a tax holiday. The CTA initially denied the refund claim but later reversed itself, finding the transmission facilities were related to PeopleSupport's registered activities. The full CTA then ruled in favor of JP Morgan, finding the withheld taxes were erroneously paid based on PEZA laws and regulations that exempt income related to registered activities of PEZA enterprises.
This case involves an appeal filed by the Commissioner of Internal Revenue seeking to reverse resolutions that granted JP Morgan Chase Bank's claim for a tax refund of PHP2,845,654.02. JP Morgan had paid PeopleSupport Philippines to provide transmission facilities, and withheld taxes on the payment. PeopleSupport Philippines is a PEZA-registered company granted a tax holiday. The CTA initially denied the refund claim but later reversed itself, finding the transmission facilities were related to PeopleSupport's registered activities. The full CTA then ruled in favor of JP Morgan, finding the withheld taxes were erroneously paid based on PEZA laws and regulations that exempt income related to registered activities of PEZA enterprises.
This case involves an appeal filed by the Commissioner of Internal Revenue seeking to reverse resolutions that granted JP Morgan Chase Bank's claim for a tax refund of PHP2,845,654.02. JP Morgan had paid PeopleSupport Philippines to provide transmission facilities, and withheld taxes on the payment. PeopleSupport Philippines is a PEZA-registered company granted a tax holiday. The CTA initially denied the refund claim but later reversed itself, finding the transmission facilities were related to PeopleSupport's registered activities. The full CTA then ruled in favor of JP Morgan, finding the withheld taxes were erroneously paid based on PEZA laws and regulations that exempt income related to registered activities of PEZA enterprises.
1.What is the case all about? background and facts of the case?
An appeal filed by petitioner Commissioner of Internal Revenue (CIR) on March 9,
2012, seeking to reverse the (1) Resolution dated December 21, 2011, which granted respondent JP Morgan chase Bank, N.A. - Philippine Customer Care Center's claim for refund in the amount of Php2,845,654.02; as well as the (2) Resolution dated February 17, 2012, which denied her Motion for Reconsideration, both rendered by the Court in Division in CTA Case No. 7962. FACTS: 1.Petitioner is the head of the Bureau of Internal Revenue (BIR) with office address at the BIR National Office Building, Agham Road, Diliman, Quezon City 2.Respondent JP Morgan Chase Bank, N.A. - Philippine Customer Care Center, on the other hand, is the Philippine Branch of JP Morgan Chase Bank, N.A., an American corporation with offices at the 12th, 14th, 27th, and 31th Floors, Philamlife Tower, 8767 Paseo de Roxas St., Makati City. a. registered with the Securities and Exchange Commission (SEC) to engage in call center and business process services, information technology, information technology enabled services, call-center services, customer care and other customer care services. b. registered with the BIR with Certificate of Registration No. 9RC0000158857, dated August 10, 2005 and Taxpayer Identification No. 239-952-660-000. 3.In the pursuit of its business, respondent entered into a Master Service Provider Agreement, Task Order #2 with PeopleSupport (Philippines), Inc. (PPI) with head office at Asiatown I.T. Park, PeopleSupport Center, 6780 Ayala, Makati City. PPI is a Philippine Economic Zone Authority (PEZA) registered Ecozone IT (Export) Enterprise enjoying Tax Holiday (ITH) during the period May to July 2007. 4.Under the Agreement, PPI would provide and lease transmission facilities to respondent for a fee. 5.For the period May to July 2007, respondent paid PPI Php56,913,080.40 or US$1,255,251.00 detailed as follows: US$1,192,488 .. 45 on July 26, 2007 and US$62,762.55 on August 16, 2007, and withheld tax there from in the amount of Php2,845,654.02. 6.On August 10, 2007, respondent filed its Monthly Remittance Return of Creditable Income Taxes Withheld for the month of July and paid the amount of Php3,705,125.61,inclusive of the amount of Php2,845,654.02 withheld from PPI. 7.On August 7, 2008, respondent filed with the BIR's Revenue District Office No. 50 (South Makati) an application for refund of the amount of Php2,845,654.02, it allegedly erroneously withheld and remitted to the BIR on August 10, 2007. 8.On September 23, 2011, the Court in Division denied respondent's Petition for Review, for lack of merit. While it ruled that respondent is the proper party to file the instant claim for refund, it found the lease of transmission facilities subject of the Agreement outside the registered activities of PPI, hence, the income arising from such lease is subject to the regular corporate income tax and Creditable Withholding Tax. 9.On motion for reconsideration filed by respondent on October 14, 2011, the Court in Division reversed itself in the assailed Resolution of December 21, 2011,considered respondent's contention that the lease of transmission facilities is included in the PEZA- registered activities of PPI, thus enjoying the exemption from withholding taxes in accord with the ITH granted to it. 10.Unconvinced, petitioner sought a reconsideration 4 of the foregoing Resolution, but the same was denied for lack of merit in the assailed Resolution of February 17, 2012.
2. Who are the parties in this case? what is their points of contention? Petitioner is the head of the Bureau of Internal Revenue (BIR) points of contention: Petition for Review must be dismissed on the ground that respondent, being a mere withholding agent, is not the proper party to ask for refund. Even assuming that respondent is allowed to file a claim for refund, it should be in the name of PPI and with its express authority. the lease of transmission facilities was an activity not necessarily related to the registered activities of PPI. She claims that the lease of transmission facilities was essentially a contract of lease of facility and not one of the registered activities of PPI - the establishment of a contact center or outsourced customer care services and business outsourcing services considering that the leased facility was not manned by PPI personnel but by those of respondent who performed the inbound telemarketing activities themselves.
Respondent JP Morgan Chase Bank, N.A. - Philippine Customer Care Center, on the other hand, is the Philippine Branch of JP Morgan Chase Bank, N.A., an American corporation points of contention: respondent filed with the BIR's Revenue District Office No. 50 (South Makati) an application for refund of the amount of Php2,845,654.02 On August 7, 2008 it allegedly erroneously withheld and remitted to the BIR on August 10, 2007.
3. How was the case decided? What tax laws were referred and discussed here? In a decision promulgated on July 15, the CTA, in full court session, ruled in favor of the 2.846-million refund claim of J.P. Morgan Chase Bank, N.A.-Philippine Customer Care Center, comprising taxes withheld from the payment for services of The People Support (Philippines), Inc. (PPI), which was hired to provide transmission facilities in May to July 200. In view of the recent administrative rulings issued interpreting the provisions of the Implementing Rules and Regulations of Republic Act (RA) No. 7916 and Revenue Regulations (RR) No. 20-02, as well as RR No. 2-98, as amended by RR No. 14-02, the Court in Division declared that the lease of the transmission facilities is an activity necessarily related to the registered activities of PPI. Hence, the rental income from lease of transmission facilities is exempt from withholding tax. tax laws were referred and discussed here Under Republic Act No. 7916 or the Special Economic Zone Act of 1995 (PEZA law), establishments operating within ecozones enjoy fiscal incentives under Presidential Decree No. 66, the law that created the Export Processing Zone Authority.
4. Was the CTA correct in the decision? Why or why not? 1.was the claims for refund filed on time? Petitioner filed its Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601-E) for the month of July 2007 and paid the taxes reflected thereon on August 10, 2007.16 It filed its administrative claim for refund on August 7, 200817 and its subsequent appeal via Petition for Review before this Court on August 10, 2009. Thus, both its administrative and judicial claims for refund were filed within the two year prescriptive period provided under the law. 2.we shall now determine whether the creditable withholding tax of Php2,845,654.02, which is the subject of the present claim for refund, was erroneously withheld and remitted 3.Does the lease of the transmission facilities is an activity necessarily related to the registered activities of Based on the PEZA law and its implementing rules and regulations, only transactions that are related to its registered activities are covered by tax incentives, in my opinion PPIs services to J.P. Morgan Chase Bank are covered by the formers registration with PEZA as an enterprise engaged in providing outsourced customer care services and business process outsourcing services.
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