Diapana, Harvey Marie I.

LLB/1-Manresa Legal Writing/ 6-7pm Monday July 11, 2011 Commissioner on Internal Revenue, petitioner, vs. British Overseas Airways Corporation and Court of Tax Appeals, respondents Facts; CIR seeks a review on the decision by the CTA of setting aside the

assessment deficiency income taxes of BOAC. BOAC is a British Airways Company engaged in the international airline business. During the disputed assessment periods BOAC had no landing rights and was not granted to operate in the Philippines. Technically, it did not carry passengers and/or cargo to or from the Philippines but maintained a general sales agent in the Philippines, which was responsible for selling BOAC tickets for passengers and cargoes. Legal Issue; Whether or not the revenue derived by BOAC, with no landing rights in the Philippines, constitutes taxable income in the Philippines? Held; The Court considered BOAC as a resident foreign corporation engaged in trade or business within the Philippines or having an office or place of business therein, under Section 20 of the 1977 Tax Code. As during the periods covered by the assessments, maintained a general sales agent in the Philippines, thus, engaged in selling and issuing tickets. In effect, BOAC was engaged in business during the period covered by the assessments and must be subject to tax upon its total net income received in the preceding taxable year from all sources within the Philippines. Reasoning; The court in BOAC in definite terms stated that in order for a foreign corporation to be regarded as a resident and doing business within the Philippines, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. The sale of tickets in the Philippines is the activity that produces the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. Policy; In this case, the court has jurisdiction in whatever currency of the subject may be. The court will just apply what the law states, and so, if the law does not exempt any; the court may not also exempt unless justified and with proper evidence.