Case Summary (G.R. No.

L-65773-74)

Background and Parties Involved

 The case involves a dispute over the taxation of revenue from ticket sales in the
Philippines by British Overseas Airways Corporation (BOAC).
 The Commissioner of Internal Revenue (CIR) assessed BOAC for deficiency
income taxes for the fiscal years 1959 to 1967 and 1968-69 to 1970-71.
 BOAC protested the assessment and filed a claim for refund, which was denied by
the CIR.
 BOAC then filed a petition for review with the Court of Tax Appeals (CTA), which
set aside the assessment and ordered the CIR to credit BOAC and cancel the
deficiency income tax assessments.
 The CIR appealed the decision to the Supreme Court.

Main Issue: Taxation of Revenue from Ticket Sales

 The main issue in the case is whether the revenue from ticket sales in the
Philippines constitutes income from Philippine sources and is therefore taxable
under Philippine income tax laws.
 The CIR argues that BOAC, as a resident foreign corporation engaged in business
in the Philippines, is subject to tax on its total net income received from all
sources within the Philippines.
 BOAC argues that the income from ticket sales is not subject to Philippine income
tax because the services of transportation are performed outside the Philippines.

Supreme Court Decision: Revenue from Ticket Sales is Taxable

 The Supreme Court rules in favor of the CIR and holds that BOAC is a resident
foreign corporation engaged in business in the Philippines.
 The Court determines that the revenue from ticket sales in the Philippines
constitutes income from Philippine sources because the tickets were sold and
payments were made in the Philippines.
 The Court rejects BOAC's argument that the income is derived from services
performed outside the Philippines, stating that the absence of flight operations to
and from the Philippines is not determinative of the source of income.
 The Court concludes that BOAC is liable for Philippine income tax on its
Philippine gross income for the fiscal years in question.