Income Tax

Topic:
Case Number : GR No. 76573
Case Name: Marubeni vs CIR

FACTS
Petitioner, Marubeni Corporation, representing itself as a foreign corporation
duly organized and existing under the laws of Japan and duly licensed to
engage in business under Philippine laws with branch office at the 4th Floor,
FEEMI Building, Aduana Street, Intramuros, Manila seeks the reversal of the
decision of the Court of Tax Appeals dated February 12, 1986 denying its claim
for refund or tax credit in the amount of P229,424.40 representing alleged
overpayment of branch profit remittance tax withheld from dividends by
Atlantic Gulf and Pacific Co. of Manila (AG&P). When the profits on Marubeni’s
investments in Atlantic Gulf and Pacific Co. of Manila were declared, a 10%
final dividend tax was withheld from it, and another 15% profit remittance tax
based on the remittable amount after the final 10% withholding tax were paid
to the Bureau of Internal Revenue. Marubeni Corp. now claims for a refund or
tax credit for the amount which it has allegedly overpaid the BIR.

ISSUE/S

Whether or not the dividends Marubeni Corporation received from Atlantic Gulf
and Pacific Co. are effectively connected with its conduct or business in the
Philippines as to be considered branch profits subject to 15% profit remittance
tax imposed under Section 24(b)(2) of the National Internal Revenue Code.

HELD

NO. Pursuant to Section 24(b)(2) of the Tax Code, as amended, only profits
remitted abroad by a branch office to its head office which are effectively
connected with its trade or business in the Philippines are subject to the 15%
profit remittance tax. The dividends received by Marubeni Corporation from
Atlantic Gulf and Pacific Co. are not income arising from the business activity
in which Marubeni Corporation is engaged. Accordingly, said dividends if
 remitted abroad are not considered branch profits for purposes of the 15%
profit remittance tax imposed by Section 24(b)(2) of the Tax Code, as amended.