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119761. August 29, 1996]

Fortune Tobacco Corporation is engaged in the manufacture of different

brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation
separate certificates of trademark registration over "Champion," "Hope,"
and "More" cigarettes.

The CIR initially classified 'Champion,' 'Hope,' and 'More' as foreign brands
since they were listed in the World Tobacco Directory as belonging to
foreign companies. However, Fortune changed the names of 'Hope' to Hope
Luxury' and 'More' to 'Premium More,' thereby removing the said brands
from the foreign brand category. Fortune also submitted proof the BIR that
'Champion' was an original register and therefore a local brand. Ad
Valorem taxes were imposed on these brands.

RA 7654 was passed in it was provided that 55% ad valorem tax will be
imposed on local brands carrying a foreign name. Two days before the
effectivity of RA 7654, the BIR issued Revenue Memorandum Circular No.
37-93, in which Fortune was to be imposed 55% ad valorem tax on the three
brands classifying them as local brands carrying a foreign name.

Fortune filed a petition with the CTA which was granted finding the RMC as
defective. The CIR filed a motion for reconsideration with the CTA which
was denied, then to the CA, an appeal, which was also denied.

ISSUE: Whether the RMC was valid.


NO. The RMC was made to place the three brands as locally made cigarettes
bearing foreign brands and to thereby have them covered by RA 7654.
Specifically, the new law would have its amendatory provisions applied to
locally manufactured cigarettes which at the time of its effectivity were not
so classified as bearing foreign brands. Prior to the issuance of the RMC,
the brands were subjected to 45% ad valorem tax. In so doing, the BIR not
simply interpreted the law but it legislated under its quasi-legislative
authority. The due observance of the requirements of notice, of hearing,
and of publication should not have been then ignored.

The Court is convinced that the hastily promulgated RMC 37-93 has fallen
short of a valid and effective administrative issuance.
March 1979: The branch office of Burroughs Limited, a foreign
corporation, applied with the Central Bank for authority to remit to
its parent company abroad, branch profit. Amount Applied for: Php
7,647,058.0015% Branch Profit Remittance Tax: Php
1,147,048.70Amount Actually Remitted: Php 6,499,999.30On
December 24, 1980 Burroughs claims a tax refund/credit of Php
172,058.90. Branch Profit Remittance tax should be 15% of
Amount Actually Remitted. (based on Ruling of Acting Commissioner
of Internal Revenue). The CTA granted a tax credit however, the
CIR ruled that Burroughs is no longer entitled to refund because
Memorandum Circular No.8-82 dated 17 March 1982 had revoked
and/or repealed the BIR ruling of 21 Jan 1980.
Whether or not Memorandum Circular No. 8-82 (MC 8-82) dated
17 March 1982 can be given retroactive effect? (NO)
1. 21 Jan 1980: BIR ruling by Acting Commissioner of Internal
Revenue of NIRC Sec 24 (b)(2):Tax Base upon which 15% branch
profits remittance tax shall be imposed on Branch profits actually
remitted and not on the total branch profits out of which the
remittance is to be made.2. Applicable Ruling is Revenue Ruling of
21 Jan 1980 because Burroughs paid the branch profit remittance
tax on 14Mar 1979. MC No. 8-82 cannot be given retroactive
effect in light of Sec 327 of NIRC.3. The retroactive application
of MC No. 8-82 would prejudice Burroughs as it would be deprived
of the substantial amount of 172T++. Burroughs also does not fall
under any of the enumerated exceptions where retroactivity would
ABS-CBN Broadcasting Corp. vs. Court of Tax Appeals [G.R. No. L-52306.
October 12, 1981]
Post under case digests, Taxation at Thursday, March 29, 2012 Posted
by Schizophrenic Mind

Facts: During the period pertinent to this case, petitioner corporation was
engaged in the business of telecasting local as well as foreign films acquired
from foreign corporations not engaged in trade or business within the
Philippines. for which petitioner paid rentals after withholding income tax of
30%of one-half of the film rentals. In implementing Section 4(b) of the Tax Code,
the Commissioner issued General Circular V-334. Pursuant thereto, ABS-CBN
Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of of the
film rentals paid by it to foreign corporations not engaged in trade or business in
the Philippines. The last year that the company withheld taxes pursuant to the
Circular was in 1968. On 27 June 1908, RA 5431 amended Section 24 (b) of the
Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from
such amount referring to rents, etc. to gross income. In 1971, the
Commissioner issued a letter of assessment and demand for deficiency
withholding income tax for years 1965 to 1968. The company requested for
reconsideration; where the Commissioner did not act upon.

Issue: Whether Revenue Memorandum Circular 4-71, revoking General Circular V-

334, may be retroactively applied.

Held: Rulings or circulars promulgated by the Commissioner have no retroactive

application where to so apply them would be prejudicial to taxpayers. Herein ,the
prejudice the company of the retroactive application of Memorandum Circular 4-
71 is beyond question. It was issued only in 1971, or three years after 1968, the
last year that petitioner had withheld taxes under General Circular No. V-334. The
assessment and demand on petitioner to pay deficiency withholding income tax
was also made three years after 1968 for a period of time commencing in 1965.
The company was no longer in a position to withhold taxes due from foreign
corporations because it had already remitted all film rentals and had no longer
control over them when the new circular was issued. Insofar as the enumerated
exceptions are concerned, the company does not fall under any of them.