CIR vs.

Marubeni Corporation (2001) those equipment, and merely bolted those that needed to be, and
those mobile equipment were just delivered.
Petitioner: Commissioner of Internal Revenue
Respondent: Marubeni Corporation 5. Marubeni claims that they had already paid their contractors taxes
Ponencia: Puno, J. with respect to the portion that was done in the Philippines. The CIR
did not contest that they did pay such. What the CIR is claiming is
DOCTRINE: Place of Rendering Service as Situs of Taxation their income for the services which they sub-contracted in Japan.

With regard to services rendered, it is the place where the service is done
that becomes the situs of taxation. Excise tax, which is a tax for doing a ISSUE: WoN the services of designing and engineering the equipment in
certain activity, may only be levied if the activity is actually done within the Japan form part of one contract which is taxable in the Philippines.
jurisdiction of the taxing authority.
RULING + RATIO: No, such services are not taxable.
Therefore, in an event where the contract is to design, engineering, supply
and delivery, erection and installation, etc., if the designing and engineering The services of designing and engineering were done in Japan, none of
was done in outside our taxing jurisdiction, while the rest of the erection and which was done in the Philippines. Therefore, whatever income they may
installation is done in our country, then the services which were rendered derive from such services, is not taxable in the Philippines, but in Japan,
outside our taxing jurisdiction is not taxable. Only those actually done here where the services were rendered. And since the agreement specifically
are taxable. separates the portions payable, it could be seen which part of the payment
for services rendered is not included.
FACTS:
To wit:
1. Marubeni was assessed deficiency income taxes, branch profit A contractors tax is a tax imposed upon the privilege of engaging in
remittance taxes, contractors tax, commercial brokers tax, for their business.[45] It is generally in the nature of an excise tax on the exercise of a
turn-key projects with National Development Corporation (NDC), privilege of selling services or labor rather than a sale on products;[46] and is
and Philippine Phosphate (Philphos) on building a complex for the directly collectible from the person exercising the privilege. [47] Being an
excise tax, it can be levied by the taxing authority only when the acts,
fertilizer industry.
privileges or business are done or performed within the jurisdiction of said
2. It availed of the tax amnesty provided by EO 41 by paying 10% of its authority.[48] Like property taxes, it cannot be imposed on an occupation or
total increase in net worth for the years 1981-1985. This got rid of privilege outside the taxing district
any deficiency in their income tax. (There was an issue on whether
they were covered by the tax amnesty or not, but thats not relevant DISPOSITION: Petition DENIED
to this topic.) They also paid another 5% to avail of the tax amnesty
of EO 64 for real estate and donors tax, as well as business tax.
3. However, the issue remains as to their contractors tax. Marubeni
said that their agreements with NDC and Philphos consisted of 3
Parts: Japan Portion 1 and 2, and Philippine Portion. The Japan
Portions were payable in yen, while the Philippine portion was
payable in Peso.
4. What happened was that for portions 1 and 2, Marubeni sub-
contracted Kawasaki and Yashima Co. & Ltd., who designed and
made the equipment to be used for the complex. Then Marubeni sent