SIXTH DIVISION

[CA-G.R. SP No. 22912. March 21, 1991.]

(CTA Case No. 4023)
ANSCOR CONTAINER CORP., petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE and COURT OF TAX APPEALS, respondents.
DECISION
ALDECOA, JR., J p:
This is a petition for review on certiorari originally filed with the Supreme Court, which has been
referred to Us for proper determination and disposition in its Resolution dated September 5,
1990, seeking a review of the decision dated June 5, 1989 rendered by the Court of Tax Appeals
in CTA Case No. 4023 entitled, "ANSCOR CONTAINER CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE," which denied petitioner's claim for tax credit
in the amount of P46,954.03, on the ground that petitioner was subject to the five per cent (5%)
contractor's tax as an independent contractor within the ambit of Section 205 of the Tax Code of
1977, as amended, and conformably with Section 1(b) of Revenue Regulations No. 13-78 and
Sections 2, 3 and 4 of Revenue Memorandum Circular No. 51-79.
The admitted and undisputed facts are as follows:
Petitioner Anscor Container Corporation is a domestic corporation organized and existing under
the laws of the Philippines and is engaged in the manufacture of steel drums for sale locally.
Pursuant to a management contract (Exhibit "C") executed sometime in 1976, A. Soriano
Corporation became the general manager of petitioner, for which it is paid an agreed
management fee based on petitioner's sales revenue.
For the year 1979, petitioner failed to withhold the five per cent (5%) tax on the payment of
management fees to its general manager, A. Soriano Corporation, in the amount of
P1,096,774.00 allegedly in violation of the Expanded Withholding Tax Regulations (Revenue
Regulations No. 13-78 dated September 7, 1978, as amended by Revenue Regulations No. 6-79
dated June 4, 1979 and Revenue Memorandum Circular No. 51-79 dated June 25, 1979). As a
result of such failure to withhold the tax, petitioner was assessed the amount of P46,954.03
representing penalty and interest, computed at five per cent (5%) based on the amount of
P1,096,774.00 paid as management fee. The assessed amount of P46,954.03 was paid on May
16, 1984 (Exhibits "A" and "E-1").
On May 21, 1984, petitioner filed with respondent Commissioner of Internal Revenue a claim for
refund of the amount of P46,954.03 which it paid under protest, as penalty and interest under the
Expanded Withholding Tax Regulations for failure to withhold the five per cent (5%) tax from
the P1,096,774.00 management fee paid to A. Soriano Corporation for the year 1979.
However, before the Commissioner of Internal Revenue could render its decision on petitioner's
claim for tax credit, on June 14, 1986, petitioner filed a petition for review with the Court of Tax
Appeals. At the trial of the case before the Court of Tax Appeals, respondent Commissioner of
Internal Revenue opposed the claim for refund of the amount of P46,954.03 imposed as penalty
and interest for petitioner's failure to withhold the five per cent (5%) withholding tax on its
payment of the management fee to A. Soriano Corporation in the amount of P1,096,744.00 for
the year 1979, invoking Revenue Regulations No. 6-79 and Revenue Memorandum Circular No.
51-79. As herein before stated, the Court of Tax Appeals denied the subject claim of petitioner
for tax credit, by finding in this wise:
"WHEREFORE, the claim for tax credit of petitioner Anscor Container Corporation in the
amount of P46,954.03 is hereby DENIED.
With costs against petitioner.
SO ORDERED."
From the above decision, petitioner assigns the following errors when it ruled that:
"1. Section 1(b) of Rev. Regulations No. 13-78 and Sections 2, 3, and 4 of Revenue
Memorandum Circular No. 51-79, supra, reiterates in very clear terms the respondent's intent to
subject income payments to withholding tax, which needless to state, includes management fees
thereby constituting petitioner's withholding agent of A. Soriano Corporation with the duty and
obligation to withhold and deduct the 5% withholding tax (p. 5, Decision, Annex "A") and,
2. A. Soriano Corporation as general manager of the petitioner is an independent contractor
within the meaning of Section 205 of the Tax Code of 1977, as amended and is thus subject to
5% contractor's tax (p. 6, Decision, Annex "A")."
The above assigned errors boil down to the singular issue of whether the imposition of a penalty
and interest in the sum of P46,954.03 for failure of the petitioner to withhold under the
provisions of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79, is
valid.
We shall quote lengthily the above-cited provisions of Revenue Regulations No. 13-78 which
reads as follows:
"SECTION 1. Income payments subject to withholding tax and rates prescribed therein. —
Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates
herein specified for each class of payee from the following items of income payments to persons
residing in the Philippines;
(a) Professional fees, talent fees, etc. paid to individuals. — On the gross professional,
promotional and talent fees paid to the following individuals:
(1) Those individuals engaged in the practice of professions: lawyers; certified public
accountants; medical practitioners; architects; civil, electrical, chemical, mechanical, structural,
industrial, mining and sanitary engineers; veterinarians; dentists, professional appraisers or
connoisseurs of tobacco and other domestic or foreign products; actuaries; interior decorators;
marine surveyors; and surveyors; customs and real estate brokers; registered electricians;
registered master plumbers; and other professions — ten per centum (10%).
(2) Professional entertainers such as actors and actresses, singers and emcees ten per centum
(10%).
The term actors and actresses shall not include 'bit players' and 'extras' whose roles or
performances in a movie, television program or stage presentation are subordinate to the actors
or actresses and to whom payment made per role or performance does not exceed five hundred
pesos (P500.00).
(3) Professional athletes including pelotaries and jockeys — ten per centum (10%).
(4) Professional movie, stage and television directors, musical directors and band leaders —
ten per centum (10%).
(5) Management and technical consultants — ten per centum (10%).
(6) Insurance agents — five per centum (5%).
The amount subject to withholding under this paragraph shall include not only the fees, but also
per diems, allowances and other remunerations paid including amounts paid to them in
consideration of the use of their names or pictures, or public appearances either on stage, in print
or broadcast media for purposes of advertisements or sale promotions.
(b) Professional fees, talent fees, etc., paid to taxable juridical persons. — On the gross
professional, promotional, talent fees or other remunerations enumerated in the preceding
subparagraph paid to taxable juridical persons — five per centum (5%). (Emphasis supplied).
(c) Rentals. — When the gross rental or payment required to be made as a condition to be
continued use or possession of property, whether real or personal, to which the payer or obligor
has not taken or is not taking title or in which he has no equity, exceeds five hundred pesos
(P500.00) — five per centum (5%).
(d) Cinematographic film rentals and other payments. — On the gross payments to resident
individuals and corporate cinematographic film owners, lessors or distributors — five per
centum (5%).
(e) Amounts paid to certain contractors. — On gross payments to the following contractors
whether individual or corporation — three per centum (3%):
(1) General engineering, general building and specialty contractors —
a) General Engineering Contractors. —
Those whose principal contracting business is in connection with fixed works requiring
specialized engineering knowledge and skill including the following divisions:
1) Reclamation works;
2) Railroads;
3) Highways, streets and roads;
4) Tunnels;
5) Airports and airways;
6) Waste reduction plants;
7) Bridges, overpasses, underpasses and other similar works;
8) Pipelines and other systems for the transmission of petroleum and other liquid or gaseous
substances;
9) Land levelling;
10) Excavating;
11) Trenching;
12) Paving; and
13) Surfacing work.
b) General Building Contractors. — Those whose principal contracting business is in
connection with any structure built, for the support, shelter and enclosure of persons, animals,
chattals or movable property of any kind, requiring its construction the use of more than two
unrelated building trades or crafts, or to do or superintend the whole or any part thereof. Such
structure includes sewers and sewerage disposal plants and systems, parks, playgrounds and
other recreational work, refineries, chemical plants, and similar industrial plants requiring
specialized engineering knowledge and skill, powerhouse, powerhouse, power plants and other
utility plants and installation, mines and metallurgical plants, cement and concrete works in
connection with the above-mentioned fixed works.
c) Specialty Contractors. — Those whose operations pertain to the performance of
construction work requiring special skill and whose principal contracting business involves the
use of specialized building trades or crafts.
(2) Filling, demolition and salvage work contractors and operators of mine drilling apparatus;
(3) Operator of dockyards;
(4) Persons engaged in the installation of water system, and gas or electric light, heat, or
power;
(5) Operators of arrastre and stevedoring, warehousing or forwarding establishments;
(6) Printers, bookbinders, lithographers and publishers except those engaged in the
publication or printing and publication or printing and publication of any newspaper, magazine,
review or bulletin which appears at regular intervals, which fixed prices for subscription and sale
and which is not devoted principally to the publication of advertisements;
(7) Messengerial, janitorial and private detective and/or security agencies and credit and
collection agencies;
(8) Advertising agencies;
(9) Producers of television and stage performances or shows;
(10) Producers of 'jingles'; and,
(11) Bookkeeping agencies.
(f) Awards and prizes. — On awards and prizes in the amount of, or the cash value of which,
exceeds five hundred pesos (P500.00) — fifteen per centum (15%).
(g) Income distribution of beneficiaries. — On income distributed to beneficiaries of estates
and trusts as determined under Section 57 of the National Internal Revenue Code — fifteen per
centum (15%).
xxx xxx xxx"
It is the contention of petitioner that nowhere in the above-enumeration are general managers
mentioned, although "management and technical consultants" are included (Sec. 1, par. [a], sub-
par. [5]). On the other hand, respondent contends that subject management fee is income
payment covered by Revenue Memorandum Circular No. 51-79, dated June 25, 1979, and
Revenue Regulations No. 6-79, dated June 4, 1979, amending Revenue Regulations No. 13-78,
otherwise known as the Expanded Withholding Tax Regulations, because it comes under income
payments made to persons residing in the Philippines as professional or talent fees paid to
taxable juridical persons. Aside from this, respondent claims that petitioner's general manager is
an independent contractor within the meaning of Section 205 of the National Internal Revenue
Code of 1977, as amended, and, as such, it is subject of the 5% contractor's tax.
We agree with the respondent that Revenue Memorandum Circular No. 51-79, dated June 25,
1979, and Revenue Regulations No. 6-79, dated June 4, 1979, amending Revenue Regulations
No. 13-78, otherwise known as the Expanded Withholding Tax Regulations, provide for the
withholding of creditable income, among other things, income payments made to persons,
natural or juridical, residing in the Philippines as professional or talent fees. Management fees
paid to a general manager is income of the latter, i.e., income payment to the manager for his
professional services. Management fees belong to and are of the same class or nature as
professional, promotional, and talent fees, which are income payments and which are subject to
the expanded withholding tax (Section 1, pars. [a] and [b] of Revenue Regulations No. 13-78).
To be sure, there are certain entities to whom are withholding tax prescribed under Revenue
Memorandum Circular No. 15-79 does not apply, as provided hereunder:
"Sec. 2. Persons required to deduct and withheld. — The following persons are hereby
constituted as withholding agents for purposes of the tax required to be withheld on income
payments enumerated in the preceding section:
(a) An individual with respect to payments made in connection with his trade or business;
(b) Any juridical person, whether or not engaged in trade or business; and
(c) All government offices including government-owned or controlled corporations as well
as provincial, city and municipal governments.
Section 3. Time of withholding. — the obligation of the payor to deduct and withhold under
these regulations arises at the time an income which is subject to withholding under Section 1
hereof is payable and paid.
Section 4. Exemption from withholding. — The withholding herein prescribed shall not
apply to income payments to the following:
(a) National government and its instrumentalities, including provincial city and municipal
governments, as well as government-owned or controlled corporations;
(b) Persons enjoying income tax exemptions; and
(c) Exempt organizations under Section 27 of the National Internal Revenue Code, as
amended, exempt income derived from real or personal property or from any activity conducted
for profit.
The exemption shall be allowed only if the payee above-mentioned in the subparagraphs (b) and
(c) shall have presented to the payor a certificate of exemption issued by the Commissioner of
Internal Revenue."
Clearly, petitioner is not among the entities and individuals enumerated under sub-paragraphs
(a), (b) and (c), Section 4 of Revenue Memorandum Circular No. 51-79, to whom the
withholding tax prescribed under Revenue Memorandum Circular No. 51-79 does not apply.
Consequently, subject management fees are within the ambit of Memorandum Circular No. 51-
79, hence, petitioner's income payments to A. Soriano Corporation for professional services as
its general manager are subject to the corresponding withholding tax, as well as, upon failure to
withhold and remit the same, to attendant penalty and interest.
The intendment of the law to include managerial fees as subject to the withholding tax is made
more clear and evident when it specifically provided that fees paid to management and technical
consultants are included among those subject to the withholding tax.
We are aware though of petitioner's claim that managers and consultants are not the same.
Petitioner tried to explain to Us why these two terms are different, particularly in the matter of
functions. But this case is not purely a matter of functions. We find difficulty in seeing our way
clearly through petitioner's submission that while fees given to management and technical
consultants are included among those subject to the withholding tax, professional fees paid to
managers should be excluded, merely because the exact literal term nomenclature, or position of
general manager is not found among those subject to withholding tax. Besides, no reason has
been advanced by petitioner as to why fees paid to management consultants should be subject to
the withholding tax, while those paid to persons who exercise managerial functions should not
be. The explanation of why these two are different is too tenuous to inspire belief. On the other
hand, on the basis of the above discussion, We are persuasively drawn to the conclusion that a
concatenation and syncretism of the above observations produce the inescapable result that fees
paid to general managers for their professional services as such are subject to the withholding
tax.
Finally, We also agree with respondents that petitioner comes within the ambit of an independent
contractor, thus subject to the withholding tax under Section 25 of the Tax Code of 1977, as held
by this Court in the similar case of Anscor Insurance Brokers, Inc. vs. Commissioner of Internal
Revenue, CA-G.R. No. 15559, in this wise:
"Suffice it to state that until 1973 (before the P.D. 69 amendment) Section 191 (now Section
205) of the Tax Code, the term 'Independent contractor' was given restrictive denotation posing a
niggling barrier to a broader connotation. As then ruled by this Court on July 29, 1971, 'Other
independent contractor' was construed as to include only those who are enumerated (Stock
transfer service case, supra). Presidential Decree No. 69 amendment (effective January, 1973)
has broadened the scope of the term. Thus, the present Section 205 differs from its predecessor
(Section 191) primarily in the incorporation of the definition, thus —
"The term 'independent contractor' includes persons (juridical or natural) not enumerated above
(but not including individuals subject to the occupation tax under Section 12 of the Local Tax
Code) whose activity consist essentially of the sale of all kinds of services for a fee regardless of
whether or not the performance of the service calls for the exercise or use of the physical or
mental faculties of such contractors of their employees (as added by Presidential Decree No. 69,
January, 1973).
"Construed in its plain and ordinary meaning, it appears clear that the manifest presidential intent
is to broaden the scope of the law to include other activities of the nature which is essentially
sales of services and heretofore enjoying exemption from tax in view of the deficiencies of the
law. No facade of resounding legal rhetorics can obscure the fact that there is nothing ambiguous
in the language of the provision insofar as the same is sought to bear upon the circumstances of
the petitioner in the case at bar, which, as a licensed insurance broker 'performs services of
soliciting, procuring and placing,' for a fee or commission life or non-life insurance, acting
through insurance agents duly licensed by the Insurance Commission, who are directly under its
employ (Exh. "V", for petitioner). The nature and character of the undertaking/activity are more
than sufficient to conclude that petitioner can readily slip into the warm cubbyhole of an
'independent contractor' so to speak.
"Moreover, this may not be a case where perforce we must attempt to apply the doctrine of
ejusdem generis as would circumscribe the meaning of 'independent contractor' only those class
of business enumerated in Section 205 of the Tax Code. Petitioner would have the coverage of
the term limited to those activities or services belonging to the same 'genera' as those listed in
Section 191 (now Section 205) of the Tax Code. But the doctrine of ejusdem generis is a rule of
construction adopted as an aid to ascertain and give effect to legislative intent when the intent is
uncertain or ambiguous; it should not be applied to defeat the purpose of the law. In other words,
the doctrine is not of universal application. Its application must yield to the manifest intent of
Congress (case cited) — Singh v. Commissioner of Internal Revenue, CTA Case No. 1167, July
30, 1965). The language of the definition is much too clear, making unnecessary any such
application of an extrinsic statutory crutch. Likewise, the pellucidity of the intendment requires
no further exegesis.
"Neither shall we attempt to be labor the authority relied upon by the petitioner more than to say
that the animating principles enunciated in the cited Stock Transfer Service case, could no longer
portray the true meaning and intendment of the term 'independent contractor' as defined in
Section 205 (16) of the Tax Code, as amended. The prevailing pronouncements in there, then
controlling, had been eviscerated by the Presidential Decree No. 69 amendment and are largely
nostalgic illusions. We do not think that the amendment was intended to simply serve as a piece
of idle sentimentality."
CONFORMABLY TO THE FOREGOING, the instant petition is hereby DISMISSED for lack
of merit.
SO ORDERED.
Campos, Jr. and Mendoza, JJ., concur.