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Tax Case Digest: Filipinas Synthentic Fiber v. CA (1999)

Filipinas Synthentic Fiber v. CA (1999)
G.R. Nos. 118498 & 124377  October 12, 1999

Lessons Applicable: Apply accrual method equally for both deduction and income, estoppel applies in CTA tax disputes

Laws Applicable:

  • Filipinas Synthetic Fiber Corp. received a letter of demand for deficiency withholding tax on interest loans, royalties and guarantee fees paid by it non-resident corporations.
  • It filed a protest on the ground that: "For Philippine Internal Revenue Tax purposes, the liability to withhold is from the time of accrual or remittance citing BIR ruling No. 71-3003 and 24-71-003-154-84.  
  • It then filed a Petition for Review at the CTA and CA who denied its petition that it can be paid upon remittance.
ISSUE: W/N liability to withhold tax at source on income payments to non-resident foreign corporations arises upon remittance of the amount due rather than upon accrual.

HELD: No. CA AFFIRMED in toto.
  • Section 53 (c) he is held personally liable for the tax he is duty bound to withhold; whereas, the Commissioner of Internal Revenue and his deputies are not made liable to law.
  • Since there was a definite clear liability and imminent certainty that it was going to earn income it should already be taxable. 
  • Moreover, petitioner is estopped for he has already claimed deductions as there were incurred as a business expense in the form of interest and royalties paid.