CIR V. AIR INDIA (TAX)

Air India is a foreign corporation and an offline international carrier not engaged in the business or air transportation in the Philippines. air India sells airplane tickets in the Philippines through its general sales agent, Philippine airlines. Said tickets are serviced by Air India outside the Philippines. The Commissioner assessed against Air India an amount representing 2.55 income tax on its gross Philippine billings pursuant to Section24(b)(2) of the Tax Code, as amended, inclusive of the 50% surcharge and interest for willful neglect to file a return as provided under Section 72 of the Code. Air India appealed to the CTA.

Issue: Whether the revenue derived by an international air carrier from sales of tickets in the Philippines for air transportation while having no landing rights in the country, constitutes income of said carrier from Philippine sources, and thus, taxable.

Based on the doctrine enunciated in BOAC case, the revenue derived by Air India from the sales of airplane tickets, through its agent in the Philippines, must be considered as taxable income, as correctly assessed by the Commissioner.