National Development Company v CIR (1987)

National Development Company v CIR GR No L-53961, June 30, 1987

FACTS:
The National Development Company (NDC) entered into contracts in Tokyo with several Japanese shipbuilding
companies for the construction of 12 ocean-going vessels. Initial payments were made in cash and through
irrevocable letters of credit. When the vessels were completed and delivered to the NDC in Tokyo, the latter remitted
to the shipbuilders the amount of US$ 4,066,580.70 as interest on the balance of the purchase price. No tax was
withheld. The Commissioner then held the NDC liable on such tax in the total sum of P5,115,234.74. Negotiations
followed but failed. NDC went to CTA. BIR was sustained by CTA. BIR was sustained by CTA. Hence, this petition for
certiorari.
ISSUE:
Is NDC liable for the tax?
RULING:
Yes.
Although NDC is not the one taxed since it was the Japanese shipbuilders who were liable on the interest remitted to
them under Section 37 of the Tax Code, still, the imposition is valid.
The imposition of the deficiency taxes on NDC is a penalty for its failure to withhold the same from the Japanese
shipbuilders. Such liability is imposed by Section 53c of the Tax Code. NDC was remiss in the discharge of its
obligation as the withholding agent of the government and so should be liable for the omission.