Tours specialist had derived income from its activities as a travel agency servicing the need of foreign tourists and travelers and Filipino during their stay in the country.
In order to ably supply these services to the foreign tourists, Tour specialist and its counterpart tourist agencies abroad have agreed to offer a package fee for the tourists. Although the fee to be paid by said tourist is quoted by the petitioner, the payment of the hotel accommodations food and other personal expenses, as a rule, are paid directly either by tourists themselves or by their foreign travel agencies to the local hotels.
In some cases the foreign agencies request local tour agencies such as respondent that the hotel room charges be paid through them. By this arrangement, the foreign tour agency entrust to respondent the fund for hotel room accommodation, which in turn is paid by respondent tour agency to the local hotel when billed because room charge is exempt from tax under PD 31.
Petitioner CIR assessed respondent for deficiency of 3% contractor's tax as independent contractor by including the entrusted hotel charges in its gross receipt from services for the year 1974 to 1976. Respondent formally protested the assessment made by CIR on the ground that the hotel room charges were not considered and have never been considered by it as part of its taxable gross receipt for purposes of computing and paying its contractor's tax.
ISSUE:
WON the amount received by a local tourist and travel agency included in a package fee from tourist or foreign tour agencies, intended or earmarked for hotel accommodation form part of gross recipt subject to 3% contractor's tax?
Held:
NO. Money entrusted to Tour Specialist, earmarked and paid for hotel room charges does not form part of its gross receipt subject to the 3% independent contractor's tax under NIRC.
GROSS RECEIPT do not include monies or receipt entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer's benefit; it is not necessary that there must be a law or regulation which would exempt such monies or receipt within the meaning of gross receipts under the Tax Code.
If the hotel room charges entrusted to petitioner will be subject to 3% contractor's tax as what CIR would want to do in this case, that would in effect do indirectly what PD 31 would not like hotel room charges of foreign tourist to be subject to hotel room tax.
In order to ably supply these services to the foreign tourists, Tour specialist and its counterpart tourist agencies abroad have agreed to offer a package fee for the tourists. Although the fee to be paid by said tourist is quoted by the petitioner, the payment of the hotel accommodations food and other personal expenses, as a rule, are paid directly either by tourists themselves or by their foreign travel agencies to the local hotels.
In some cases the foreign agencies request local tour agencies such as respondent that the hotel room charges be paid through them. By this arrangement, the foreign tour agency entrust to respondent the fund for hotel room accommodation, which in turn is paid by respondent tour agency to the local hotel when billed because room charge is exempt from tax under PD 31.
Petitioner CIR assessed respondent for deficiency of 3% contractor's tax as independent contractor by including the entrusted hotel charges in its gross receipt from services for the year 1974 to 1976. Respondent formally protested the assessment made by CIR on the ground that the hotel room charges were not considered and have never been considered by it as part of its taxable gross receipt for purposes of computing and paying its contractor's tax.
ISSUE:
WON the amount received by a local tourist and travel agency included in a package fee from tourist or foreign tour agencies, intended or earmarked for hotel accommodation form part of gross recipt subject to 3% contractor's tax?
Held:
NO. Money entrusted to Tour Specialist, earmarked and paid for hotel room charges does not form part of its gross receipt subject to the 3% independent contractor's tax under NIRC.
GROSS RECEIPT do not include monies or receipt entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer's benefit; it is not necessary that there must be a law or regulation which would exempt such monies or receipt within the meaning of gross receipts under the Tax Code.
If the hotel room charges entrusted to petitioner will be subject to 3% contractor's tax as what CIR would want to do in this case, that would in effect do indirectly what PD 31 would not like hotel room charges of foreign tourist to be subject to hotel room tax.
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