Commissioner vs.

Procter & Gamble Philippines

Facts:
Procter and Gamble Philippines is a wholly owned subsidiary of Procter and Gamble USA (PMCUSA), a non-resident
foreign corporation in the Philippines, not engaged in trade and business therein. PMCUSA is the sole shareholder of
PMC Philippines and is entitled to receive income from PMC Philippines in the form of dividends, if not rents or royalties.
For the taxable years 1974 and 1975, PMC Philippines filed its income tax return and also declared dividends in favor of
PMC-USA. In 1977, PMC Philippines, invoking the tax-sparing provision of Section 24 (b) as the withholding agent of the
Philippine Government with respect to dividend taxes paid by PMC-USA, filed a claim for the refund of 20 percentage
point portion of the 35 percentage whole tax paid with the Commissioner of Internal Revenue.

Issue:
Whether PMC Philippines is entitled to the 15% preferential tax rate on dividends declared and remitted to its parent
corporation.

Held:
The issue raised is one made for the first time before the Supreme Court. Under the same underlying principle of prior
exhaustion of administrative remedies, on the judicial level, issues not raised in the lower court cannot be generally
raised for the first time on appeal. Nonetheless, it is axiomatic that the state can never be allowed to jeopardize the
governments financial position. The submission of the Commissioner that PMC Philippines is but a withholding agent of
the government and therefore cannot claim reimbursement of alleged overpaid taxes, is completely meritorious. The
real party in interest is PMC-USA, which should prove that it is entitled under the US Tax Code to a US Foreign Tax Credit
equivalent to at least 20 percentage points spared or waived as otherwise considered or deemed paid by the
Government. Herein, the claimant failed to show or justify the tax return of the disputed 15% as it failed to show the
actual amount credited by the US Government against the income tax due from PMC-USA on the dividends received
from PMC Philippines; to present the income tax return of PMC-USA for 1975 when the dividends were received; and to
submit duly authenticated document showing that the US government credited the 20% tax deemed paid in the
Philippines.

Commissioner vs. Court of Tax Appeals

Facts:
On 22 August 1986, Executive Order 41 was promulgated declaring a one-time tax amnesty on unpaid income taxes, later
amended to include estate and donors taxes and taxes on business for the taxable years 1981 to 19985. Availing itself of
the amnesty, ROH Autoparts Philippines Inc. filed its Tax Amnesty Return and paid the corresponding amnesty taxes due.
The Company requested that the deficiency tax notice (13 August 1986) be cancelled and withdrawn as it has availed of
the tax amnesty. The Commissioner denied the request, construing that the amnesty coverage include only assessments
issued by the BIR after the promulgation of EO41 and not to assessments theretofore made.

Issue:
Whether the assessment can withstand effects of tax amnesty.

Held:
A tax amnesty, being a general pardon or intentional overlooking by the state its authority to impose penalties on
persons otherwise guilty of evasion or violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by
the government itself of its right to collect what otherwise would be due it, and in this sense, prejudicial thereto, to give
tax evaders, who wish to relent and are willing to reform a chance to for so and thereby become a part of the new
society with a clean slate. Section 4 of EO 41 enumerated, in no uncertain terms, taxpayers who may not avail to the
amnesty granted. The company does not fall under any of the exceptions. The added exception urged by the
Commissioner based on Revenue Memorandum Order 4-87, further restricting the scope of the amnesty, work against
the raison detre of EO 41 and clearly amounts to an alt of administrative legislation contrary to the mandate of the law
which the regulation ought to implement. The rule in the order that only assessments issued after 21 August 1986 shall
be abated is beyond the contemplation of the law.