### Facts:
Marubeni Corporation, a Japanese company with a Manila branch, faced a tax examination by the Philippine Bureau of Internal Revenue (BIR) for the fiscal year ending March 1985, revealing undeclared income from two construction contracts completed in 1984. Based on these findings, the BIR issued a deficiency tax assessment on August 15, 1986, for income, branch profit remittance, contractor’s, and commercial broker’s taxes amounting to over P460 million combined.
Following the issuance of Executive Orders (E.O.) Nos. 41 and 64, which declared a one-time tax amnesty for unpaid taxes from 1981 to 1985, Marubeni availed itself of the amnesty by filing returns and paying specific amounts. Despite these actions, the tax liabilities were contested, leading to petitions filed by Marubeni with the Court of Tax Appeals (CTA) in September 1986.
After nearly a decade, the CTA ruled in favor of Marubeni, finding that the company had correctly availed of the tax amnesty, thereby canceling and withdrawing the deficiency taxes assessed. The Commissioner of Internal Revenue appealed this decision to the Court of Appeals, which affirmed the CTA’s ruling. The case then escalated to the Philippine Supreme Court.
### Issues:
1. Whether Marubeni Corporation’s tax liabilities were extinguished upon availing of the tax amnesty under E.O. Nos. 41 and 64.
2. Whether Marubeni Corporation is liable for the assessed income, branch profit remittance, and contractor’s taxes.
### Court’s Decision:
The Supreme Court denied the petition, affirming the decision of the Court of Appeals. The Court ruled that Marubeni correctly availed of the tax amnesty for the income and branch profit remittance taxes, as the cases against it were not filed in court before the effectivity of E.O. No. 41. Regarding the contractor’s tax assessment under E.O. No. 64, however, Marubeni was found to have fallen under an exception due to a pending court case at the time of its amnesty application, yet the activities and earnings tied to this tax were conducted outside the Philippine taxing jurisdiction, hence, not subject to the contractor’s tax.
### Doctrine:
The case reinforced the principle that taxpayers who wish to avail of a tax amnesty must closely adhere to the conditions set forth by the relevant executive orders. Furthermore, it clarified that income generated and activities conducted outside the tax jurisdiction of the Philippines are not subjected to local taxes, emphasizing the territorial principle in tax law.
### Class Notes:
– Tax amnesty laws and executive orders must be followed strictly with regard to their eligibility criteria and deadlines.
– Taxpayers falling under specific exceptions enumerated in tax amnesty provisions are barred from availing of the amnesty.
– Income and activities conducted outside the Philippines’ tax jurisdiction are not subject to Philippine taxes, reinforcing the principle of territoriality in tax obligations.
### Historical Background:
The issuance of E.O. Nos. 41 and 64 by the Philippine government was aimed at improving tax collection and compliance by offering a one-time amnesty for unpaid taxes for certain years, influenced by the country’s fiscal needs and the broader goal of encouraging tax compliance among businesses and individuals.
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