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RETROACTIVITY OF BIR CIRCULARS OR RULINGS; films distributors and exhibitors shall deduct and withhold 35% of

PRINCIPLE OF LEGISLATIVE APPROVAL OF AN the entire amount payable by them.

ENACTMENT In 1971, issued a letter of assessment against ABS-CBN and
demanded payment of withholding income tax deficiency. CTA
dismissed the petition for review filed by ABS-CBN


NO. L-52306. OCTOBER 12, 1981 HELD:

FACTS: No. Section 327 of the tax code provides that any revocation,
modification or reversal of any of the rules and regulations
ABS-CBN is engaged in telecasting local and foreign films promulgates shall not be given retroactive application if the
acquired from corporation not engaged in trade or business within revocation, modification, or reversal will be prejudicial to the
the Philippines. taxpayers (may exceptions to, pero di ko na ilagay, di naman
Income tax on non-resident corporations under section 24(b) pertinent sa case).
of RA. No. 2342 states that a 30% tax of income as rents (and etc. It is clear from the foregoing that rulings or circulars
hehe ) will be levied and collected. General Circular No. V-334 promulgated by the Commissioner of Internal Revenue have no
(issued to implement section 24 [b]) states that the local distributor retroactive application where to so apply them would be prejudicial
should withhold 30% of one-half of the film rentals paid to non- to taxpayers. The prejudice to petitioner of the retroactive application
resident foreign film distributor and pay the same. of Memorandum Circular No. 4-71 is beyond question. It was issued
only in 1971, or three years after 1968, the last year that petitioner
By virtue of the circular ABS-CBN withheld and turned over had withheld taxes under General Circular No. V-334. The
the amount of 30% of one-half of the film rentals. The last year that assessment and demand on petitioner to pay deficiency withholding
income tax was also made three years after 1968 for a period of time
ABS-CBN withheld taxes pursuant to the circular was in 1968
commencing in 1965. Petitioner was no longer in a position to
RA No. 5431 amended Section 249b0 of RA no. 2342, withhold taxes due from foreign corporations because it had already
remitted all film rentals and no longer had any control over them
increasing the tax rate to 35% and revising the tax basis from such when the new Circular was issued. And in so far as the enumerated
amount referring to rents, etc. to gross income received from all exceptions are concerned, admittedly, petitioner does not fall under
sources within the Philippines. Revenue Memorandum Circular No. any of them.
4-71, which revoked General Circular No. V-334, states that local
The principle of legislative approval of administrative interpretation
by re-enactment clearly obtains in this case. It provides that “the re-
enactment of a statute substantially unchanged is persuasive
indication of the adoption by Congress of a prior executive
construction.” Note should be taken of the fact that this case involves
not a mere opinion of the Commissioner or ruling rendered on a
mere query, but a Circular formally issued to “all internal revenue
officials” by the then Commissioner of Internal Revenue.