Let's go to another airline. Still on the issue of SITUS in taxation. This is actually a reiteration of the decision promulgated in CIR vs. BOAC. The case previously posted.
I'm sure you know Japan Airlines right? Don't you turn Japanese on me... "I think I'm turning Japanesa think am turnin Japanesa.. tarararattattarat..." Sorry, got carried way.
Well JAL is also a foreign corporation likewise engaged in the business of International air carriage.
Well JAL is also a foreign corporation likewise engaged in the business of International air carriage.
Now if British Overseas Airways Corp. (BOAC) merely used ticket sales agent and stayed at bay. The Japs did it differently JAL maintained an office at the Filipinas Hotel, Roxas Boulevard Manila since mid-July of 1957.
The said office did not sell tickets but was merely for the promotion of the company.
But that's what they think. On July 17 1957, JAL constituted Philippine Airlines (PAL) as its ticket agent in the Philippines. PAL therefore sold tickets for and in behalf of JAL. Same as BOAC there was absence of flight operations to and from the Philippines in this case. Meaning JAL likewise had no landing rights. And so like BOAC what were talking about here are connecting flights.
So obviously this didn't escape the long 'nose'.. I mean claws of the BIR. On June 1972, JAL received deficiency income tax assessments notices and a demand letter from petitioner CIR for years 1959 through 1963.
Of course JAL protested as BOAC did, against said assessments alleging that as a non-resident foreign corporation, it is taxable only on income from Philippines sources as determined by section 37 of the Tax Code, there being no income on said years, JAL is not liable for taxes.
ISSUE:
Whether or not the proceeds from sales of JAL tickets sold in the Philippines by Philippine Airlines (PAL) are taxable as income from sources within the Philippines.
HELD:
YES. Court said the ticket sales are taxable.
Citing the case of CIR v BOAC, the court reiterated that the source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines.
The absence of flight operations to and from the Philippines is not determinative of the source of income or the situs of income taxation.
The test of taxability is the source, and the source of the income is that activity which produced the income. In this case, as JAL constituted PAL as its agent, the sales of JAL tickets made by PAL is taxable
JAL likewise lost this case.
