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Cyanamid Phil Vs CA

- Cyanamid Philippines, Inc. protested tax assessments by the Commissioner of Internal Revenue (CIR) for the 1981 tax year totaling over P3.9 million, including a 25% surtax on accumulated profits. - The parties later agreed to reduce the deficiency income tax to P26,577 but Cyanamid continued to dispute the surtax assessment. - Cyanamid argued it accumulated earnings to meet working capital needs and debt obligations as a wholly owned subsidiary of a US corporation, so no individual could avoid taxes. - However, the Court of Tax Appeals and the Court of Appeals affirmed the CIR's ruling, as Cyanamid failed to prove it was exempt from

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187 views2 pages

Cyanamid Phil Vs CA

- Cyanamid Philippines, Inc. protested tax assessments by the Commissioner of Internal Revenue (CIR) for the 1981 tax year totaling over P3.9 million, including a 25% surtax on accumulated profits. - The parties later agreed to reduce the deficiency income tax to P26,577 but Cyanamid continued to dispute the surtax assessment. - Cyanamid argued it accumulated earnings to meet working capital needs and debt obligations as a wholly owned subsidiary of a US corporation, so no individual could avoid taxes. - However, the Court of Tax Appeals and the Court of Appeals affirmed the CIR's ruling, as Cyanamid failed to prove it was exempt from

Uploaded by

Marife Minor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Cyanamid Phil vs CA

Facts:
-Petitioner, Cyanamid Philippines, Inc., a corporation organized under Philippine laws,
is a wholly owned subsidiary of American Cyanamid Co. based in Maine, USA. It is
engaged in the manufacture of pharmaceutical products and chemicals, a wholesaler
of imported finished goods, and an importer/indenter.

-February 7, 1985, the CIR sent an assessment letter to petitioner and demanded the
payment of deficiency income tax of P119,817 for taxable year 1981 which the
petitioner on March 4, 1985, protested particularly (1) 25% surtax assessment of
P3,774,867.50; (2) 1981 deficiency income tax assessment of P119,817; (3)
1981 deficiency percentage assessment of P3,346.72. CIR refused to allow the
cancellation of the assessment notices.

-During the pendency of the case on appeal to the CTA, both parties agreed to
compromise the 1981 deficiency income assessment of P119,817 and reduced to
P26,577 as compromise settlement. But the surtax on improperly accumulated profits
remained unresolved. Petitioner claimed that the assessment representing the 25%
surtax had no legal basis for the following reasons: (a) petitioner accumulated its
earnings and profits for reasonable business requirements to meet working capital
needs and retirement of indebtedness, (b) petitioner is wholly owned subsidiary of
American Cyanamid Co., a corporation organized under the laws of the State of Maine,
in the USA, whose shares of stock are listed and traded in New York Stock Exchange.
This being the case, no individual shareholder of petitioner could have evaded or
prevented the imposition of individual income taxes by petitioner’s accumulation of
earnings and profits, instead contribution of the same.

CTA denied said petition.

Issue: Whether petitioner is liable for the accumulated earnings tax for the year 1981.

Held:
Petitioner failed to prove that CIR is incorrect hence this court affirms CA’s ruling of
affirming tax court’s ruling.
The amendatory provision of Sec. 25 of the 1977 NIRC, which was PD1739,
enumerated the corporations exempt from the imposition of improperly accumulated
tax: (a) banks, (b) non-bank financial intermediaries; (c) insurance companies; and (d)
corporations organized primarily and authorized by the Central Bank to hold shares of
stocks of banks. Petitioner does not fall among those exempt classes. Besides, the laws
granting exemption form tax are construed strictissimi juris against the taxpayer and
liberally in favor of the taxing power. Taxation is the rule and exemption is the
exception. The burden of proof rests upon the party claiming the exemption to prove
that it is, in fact, covered by theexemption so claimed; a burden which petitioner here
has failed to discharge.

Unless rebutted, all presumptions generally are indulged in favor of the correctness of
the CIR’s assessment against the taxpayer.

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