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FIRST DIVISION 

COMMISSIONER OF G.R. No. 153793INTERNAL REVENUE,  Petitioner, Present:

 Panganiban, C.J. (Chairperson),

  - versus - nares-!antiago,  "ustria-#artine$,

  Ca%%e&o, !r., an'  Chio-Na$ario, JJ.

 JULIANE BAIER-NICKEL, asrepresented by Marna !" #$%&an Prou%gate':'Att(rney-n-)a*t+  Respon'ent. "ugust *9, *++

  ----------------------------------------------------------------------------------------  

DECISION 

 NARES-SANTIA#O, J.: 

Petitioner Coissioner o /nterna% Revenue (C/R) appea%s ro the 0anuar 12,*++* eision41 o the Court o "ppea%s in C"-G.R. !P No. 59796, hih grante' theta reun' o respon'ent 0u%iane 8aier-Nie% an' reverse' the 0une *2, *+++

eision4* o the Court o a "ppea%s (C") in C..". Case No. 533. Petitioner a%soassai%s the #a 2, *++* Reso%ution43 o the Court o "ppea%s 'ening its otion orreonsi'eration.

 he ats sho that respon'ent 0u%iane 8aier-Nie%, a non-resi'ent Geraniti$en, is the Presi'ent o 0;8"N/4anuaturing, areting on ho%esa%e on%, buing or otherise a?uiring,ho%'ing, iporting an' eporting, se%%ing an' 'isposing ebroi'ere' teti%epro'uts.@46  hrough 0;8"N/

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  he net 'a, "pri% 15, 1992, she F%e' a petition or revie ith the C"onten'ing that no ation as taen b the 8/R on her %ai or reun'. 47  En 0une *2,*+++, the C" ren'ere' a 'eision 'ening her %ai. /t he%' that the oissionsreeive' b respon'ent ere atua%% her reuneration in the perorane o her'uties as Presi'ent o 0;8"N/

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on taab%e inoe reeive' ro a%% soures ithin the Phi%ippines. "nonresi'ent a%ien in'ivi'ua% ho sha%% oe to the Phi%ippines an' statherein or an aggregate perio' o ore than one hun're' eight (12+)'as 'uring an a%en'ar ear sha%% be 'eee' a Lnonresi'ent a%ien'oing business in the Phi%ippines,A !etion **(G) o this Co'enotithstan'ing. 

 (8) Nonresi'ent "%ien /n'ivi'ua% Not

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 (3) !ervies. K Copensation or %abor or persona% servies

perore' in the Phi%ippines   (C) Gross /noe Iro !oures ithout the Phi%ippines.    (3) Copensation or %abor or persona% servies perore'

ithout the Phi%ippines 

 he o%%oing 'isussions on souring o inoe un'er the /nterna% RevenueCo'e o the ;.!., are instrutive:

  he !upree Court has sai', in a 'eFnition uh ?uote' but oten

'ebate', that inoe a be 'erive' ro three possib%e soures on%:

(1) apita% an'or (*) %abor an'or (3) the sa%e o apita% assets. hi%e thethree e%eents o this attept at 'eFnition nee' not be aepte' as a%%-in%usive, the serve as useu% gui'es in an in?uir into hether apartiu%ar ite is ro >soures ithin the ;nite' !tates@ an' suggest aninvestigation into the nature an' %oation o the ativities or properthih pro'ue the inoe.

 / the inoe is ro %abor the p%ae here the %abor is 'one shou%'

be 'eisive i it is 'one in this ountr, the inoe shou%' be ro>soures ithin the;nite' !tates.@ / the inoe is ro apita%, the p%aehere the apita% is ep%oe' shou%' be 'eisive i it is ep%oe' in thisountr, the inoe shou%' be ro >soures ithin the ;nite' !tates.@ / 

the inoe is ro the sa%e o apita% assets, the p%ae here the sa%e isa'e shou%' be %ieise 'eisive.

 #uh onusion i%% be avoi'e' b regar'ing the ter >soure@ in

this un'aenta% %ight. /t is not a p%ae, it is an ativit or propert. "ssuh, it has a situs or %oation, an' i that situs or %oation is ithinthe ;nite' !tates the resu%ting inoe is taab%e to nonresi'ent a%iensan' oreign orporations.

  he intention o Congress in the 191 an' subse?uent statutes as

to 'isar' the 19+9 an' 1913 basis o taing nonresi'ent a%iens an'oreign orporations an' to ae the test o taabi%it the >soure,@ orsitus o the ativities or propert hih pro'ue the inoe. he resu%t isthat, on the one han', nonresi'ent a%iens an' nonresi'ent oreignorporations are prevente' ro 'eriving inoe ro the ;nite'!tates ree ro ta, an', on the other han', there is no un'ue ipositiono a ta hen the ativities 'o not tae p%ae in, an' the propertpro'uing inoe is not ep%oe' in, this ountr. hus, i inoe is tobe tae', the reipient thereo ust be resi'ent ithin the &uris'ition, orthe propert or ativities out o hih the inoe issues or is 'erive'ust be situate' ithin the &uris'ition so that the soure o the inoea be sai' to have a situs in this ountr.

 

 he un'er%ing theor is that the onsi'eration or taation isprotetion o %ie an' propert an' that the inoe right% to be %evie'upon to 'era the bur'ens o the ;nite' !tates Governent is that

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state' that soure o inoe is not the business ativit o 8E"C but the p%ae herethe person or entit 'isbursing the inoe is %oate' or here 8E"C phsia%%reeive' the sae. 8ut suh as not the iport o the ru%ing o the Court. /t evenep%aine' in 'etai% the b$sness a*tty un'ertaen b 8E"C in the Phi%ippines topinpoint the taab%e ativit an' to &usti its on%usion that 8E"C is sub&et toPhi%ippine inoe taation. hus K

 8E"C, 'uring the perio's overe' b the sub&et assessents,

aintaine' a genera% sa%es agent in the Phi%ippines. hat genera% sa%esagent, ro 1959 to 1971, >as engage' in (1) se%%ing an' issuing tiets(*) breaing 'on the ho%e trip into series o trips eah trip in theseries orrespon'ing to a 'iDerent air%ine opan (3) reeiving the arero the ho%e trip an' (6) onse?uent% a%%oating to the various air%ineopanies on the basis o their partiipation in the servies ren'ere'through the o'e o inter%ine sett%eent as presribe' b "rti%e J/ o theReso%ution No. 25+ o the /"" "greeent.@ hose ativities ere ineerise o the untions hih are nora%% ini'ent to, an' are inprogressive pursuit o, the purpose an' ob&et o its organi$ation as an

internationa% air arrier. /n at, the regu%ar sa%e o tiets, its ainativit, is the ver %ieb%oo' o the air%ine business, the generation o sa%es being the paraount ob&etive. here shou%' be no 'oubt then that8E"C as >engage' in@ business in the Phi%ippines through a %oa% agent'uring the perio' overe' b the assessents. 4*1

   

 he soure o an inoe is the propert, ativit or servie thatpro'ue' the inoe. Ior the soure o inoe to be onsi'ere' asoing ro thePhi%ippines, it is suOient that the inoe is 'erive' roativit ithin the Phi%ippines. /n 8E"CSs ase, the sa%e o tiets in

the Phi%ippines is the ativit that pro'ues the inoe. he tietsehange' han's here an' paents or ares ere a%so a'e here inPhi%ippine urren. he situs o the soure o paents is the Phi%ippines.

 he Qo o ea%th proee'e' ro, an' ourre' ithin, Phi%ippineterritor, en&oing the protetion aor'e' b the Phi%ippine governent./n onsi'eration o suh protetion, the Qo o ea%th shou%' share thebur'en o supporting the governent.

 " transportation tiet is not a ere piee o paper. hen issue'

b a oon arrier, it onstitutes the ontrat beteen the tiet-ho%'eran' the arrier. /t gives rise to the ob%igation o the purhaser o the tietto pa the are an' the orrespon'ing ob%igation o the arrier totransport the passenger upon the ters an' on'itions set orth thereon.

 he or'inar tiet issue' to ebers o the trave%ing pub%i in genera%ebraes ithin its ters a%% the e%eents to onstitute it a va%i'ontrat, bin'ing upon the parties entering into the re%ationship.4**

  he Court reiterates the ru%e that >soure o inoe@ re%ates to the propert,

ativit or servie that pro'ue' the inoe. ith respet to ren'ition o %abor orpersona% servie, as in the instant ase, it is the p%ae here the %abor or servie asperore' that 'eterines the soure o the inoe. here is thereore no erit inpetitionerAs interpretation hih e?uates soure o inoe in %abor or persona% servieith the resi'ene o the paor or the p%ae o paent o the inoe.

 

http://sc.judiciary.gov.ph/jurisprudence/2006/august2006/G.R.%20No.%20153793.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2006/august2006/G.R.%20No.%20153793.htm#_ftn22http://sc.judiciary.gov.ph/jurisprudence/2006/august2006/G.R.%20No.%20153793.htm#_ftn21http://sc.judiciary.gov.ph/jurisprudence/2006/august2006/G.R.%20No.%20153793.htm#_ftn22

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Having 'ispose' o the 'otrine app%iab%e in this ase, e i%% no 'eterinehether respon'ent as ab%e to estab%ish the atua% irustanes shoing that herinoe is eept ro Phi%ippine inoe taation.

  he 'eisive atua% onsi'eration here is not the apait in hih respon'ent

reeive' the inoe, but the suOien o evi'ene to prove that the servies sheren'ere' ere perore' in Geran. hough not raise' as an issue, the Court is%othe' ith authorit to a''ress the sae beause the reso%ution thereo i%% sett%ethe vita% ?uestion pose' in this ontrovers. 4*3

  he sett%e' ru%e is that ta reun's are in the nature o ta eeptions an' are

to be onstrue' strictissii %uris against the tapaer.4*6  o those thereore, ho %aia reun' rest the bur'en o proving that the transation sub&ete' to ta is atua%%eept ro taation.

 /n the instant ase, the appointent %etter o respon'ent as agent o 0;8"N/sa%es atua%% on%u'e' an' o%%ete' through 4her eDorts.@4*5  hat

she presente' as evi'ene to prove that she perore' inoe pro'uing ativitiesabroa', ere opies o 'ouents she a%%ege'% ae' to 0;8"N/J,@ >@, an'>=,@4*2 or being se% serving.4*9  he onern raise' b petitionerAs ounse% as to theabsene o substantia% evi'ene that ou%' onstitute proo that the sa%e transationsor hih respon'ent as pai' oission atua%% transpire' outsi'e the Phi%ippines,is re%evant beause respon'ent stae' in the Phi%ippines or 29 'as in 1995.

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  he Court notes that in Coissioner of Internal Revenue v. !aier'ic(el,43* a

previous ase or reun' o inoe ithhe%' ro respon'entAs reunerations orservies ren'ere' abroa', the Court in a #inute Reso%ution 'ate' Iebruar 17, *++3,433 sustaine' the ru%ing o the Court o "ppea%s that respon'ent is entit%e' to reun'the su ithhe%' ro her sa%es oission inoe or the ear 0112. his ru%inghas no bearing in the instant ontrovers beause the sub&et atter thereo is theinoe o respon'ent or the ear 1996 hi%e, the instant ase 'ea%s ith her inoein 0113. Etherise, state', res %udicata has no app%iation here. /ts e%eents are:(1) there ust be a Fna% &u'gent or or'er (*) the ourt that ren'ere' the &u'gentust have &uris'ition over the sub&et atter an' the parties (3) it ust be a

 &u'gent on the erits (6) there ust be beteen the to ases i'entit o parties,o sub&et atter, an' o auses o ation. 436  he instant ase, hoever, 'i' notsatis the ourth re?uisite beause there is no i'entit as to the sub&et atter o theprevious an' present ase o respon'ent hih 'ea%s ith inoe earne' an'ativities perore' or 'iDerent taab%e ears.

 45EREFORE, the petition is #RANTED an' the 0anuar 12, *++* eision an'

#a 2, *++* Reso%ution o the Court o "ppea%s in C"-G.R. !P No. 59796,are REVERSED an' SET ASIDE. he 0une *2, *+++ eision o the Court o a"ppea%s in C..". Case No. 533, hih 'enie' respon'entAs %ai or reun' o inoeta pai' or the ear 1995 is REINSTATED.

 SO ORDERED.

 CONSUELO NARES-SANTIA#O

  "ssoiate 0ustie 4E CONCUR:

ARTEMIO V" 6AN#ANIBANChie 0ustieChairperson

 

MA" ALICIA AUSTRIA-MARTINE7 ROMEO J" CALLEJO, SR"  "ssoiate 0ustie "ssoiate 0ustie 

MINITA V" C5ICO-NA7ARIO"ssoiate 0ustie

 

CERTIFICATION 

Pursuant to !etion 13, "rti%e J/// o the Constitution, it is hereb ertiFe' thatthe on%usions in the above eision ere reahe' in onsu%tation beore the aseas assigne' to the riter o the opinion o the CourtAs ivision.

ARTEMIO V" 6AN#ANIBAN  Chie 0ustie 

41 Penne' b "ssoiate 0ustie !a%va'or 0. Ja%'e$, 0r. an' onurre' in b "ssoiate

 0usties #ere'es Go$o-a'o%e an' 0uan B.

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43 Rollo, pp. 59-1.46 Genera% /noration !heet o 0;8"N/