CTA Case No. 4376 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TRUSTEES OF THE EMPLOYEES NON - CONTRIBUTORY RETIREMENT FUND OF THE STANDARD CHARTERED BANK <Phi1ippine Branch), Petitioners, - versus - C.T.A �� CASE NO. 4376 THE COMMISSIONER OF INTERNAL REVENUE r Respondent. X- - - - - - - - - -x DEC I S I 0 N This is a claim �or re�und o� the taxes withhe1d on income received from bank savings deposits and money market placements. Petitioners are the trustees o� the Emp1oyees Non- Contributory Retirement Fund of the Standard Chartered Bank duly organized in accordance with Repub1ic Act <R. A. No. 4917, "An Act Providi ng that Retirement Benefits of Employees of Private Firms shall not be subject to Attachment, Le vy, Execution, or any Tax whatsoever , " which was promulgated on June 17, 1967. On various dates during the years 1986 and 1987, petitioners' income on deposits and placements with Standard Chartered Bank was subjected to vithho1ding

DECISION - C.T.A�� CASE NO. 4376 -2- tax in the total amounts of P952, 748. 17 .computed as follows: ?_~_:!Il9!!_~9_qo U_!'l t No.215024504 P---~�-�-�:t�--~- .!Jlterest Earned Withholding Tax 3-7-86 6-6-86 P14,916.45 P2,610.30 '3-5-86 12-5-86 6,802.71 1,1'30.53 3-6-87 6-5 - 87 5,550.63 1,110.20 .I '3-4-87 12-4-87 2,713.18 542.60 4,775.07 '355.00 10,265.62 2,053.20 2, 981. '32 596.40 6,8'30.33 1~378.00 P10,436.23 �.?VillQ.S Ac_g_o4nt__J~.9.� 215220281 !2..__~.-- :t--~- J..nt~_rest__ Earned Withholding Tax p 8,450.17 P1,6'30.03 7-14-87 8-14-87 16, 481. 37 3,296.27 '3-1-87 40,167.74 '3-14-87 200,838.68 4e'364.41 24,822.05 P_5o, 118.45 tlQ..D_~---~.ark~t P)-acements p___~......:t.-. ~ .~n.:t~~ et~_!::___i.:a r ned Withholding Tax P205,326.55 P31,732.2'3 12- 4 - 85 12-10-85 13,434~53 2,115.94 34,407.11 1-6 - 86 1'36,612.07 1 -9-86 14,235.36 2, 4'31. 1'3 2-5-86 36,150.78 2-5-86 206,575.8'3 2-11-86 27,866. 67 4,876.67 3-3 - 86 14,694.'36 2, 571. 62 7-7-86 6 ,000 .00 1,050.00 3-14-86 56,439.55 3-21-86 322, 511. 71 7,647.48 4-2 - 86 43,699.90 13,447.48 4 - 7-86 76.842.75 8,719.66 5-14-86 49,826.60 139,520.22 5-27- 86 5,815.47 6-19 - 86 791,38'3.36 2,9'3'3.70 7-1-86 32,322.87 9,540.6'3 7-8-86 16,486 .'36 6,896.'32 7-16-86 54,518. 24 115", 633. 5"9 35,'383. 96 5,808.25 8-25- 86 597,878.23 3,330.04 '3 - 15-86 30,107. 62 6,848.26 16,650.23 34, 241. 30

DECIS ION - C.T.A. . CASE NO. 4376 - 3- 9- 17-86 34, 307 .54 6,86 1.50 9-29- 86 28 ,481.43 5 ,696.29 1 0- 7 :- 86 366,039.94 73 , 207.99 1 0-24- 8 6 16 ,855.38 3, 371.08 10-29 -86 11 - 11 - 86 3 ,083 . 33 6 16.67 11- 17-86 32, 236.77 6, 447.35 11-28 - 86 27,334. 7 1 5 , 466.94 1 2-5- 86 32 ,689.1 4 6 , 53 7 . 83 12-23 -86 259, 38 4.95 51 , 8 76.99 1 - 12- 87 12,342.28 2,468. 46 1 - 16- 87 28,037.07 5 , 607.41 1 -27 - 87 24, 148. 84 4 ,829.76 2-3-87 28,609.89 5 , 721.97 3 - 13- 87 196,158.24 .39,' 231. 6 4 5 - 17 - 87 28, 270.48 5,654 . 09 3 - 20- 87 23, 944.05 4,788. 81 3 -31-87 225,524. 59 45, 524. 91 5 - 4 - 87 32, 460 .89 6 , 492. 17 5- 13-87 154 , 186 . 24 30,837 .25 5 - 15-87 14, 394. 41 2,878. 88 6 - 1 - 87 28,055.78 5, 61 1.15 372,107 . 24 74,421 . 44 P892,19 3 .49 T 0 TA L P952, 7 48 .17 Petitioner s filed on Fe bruary 10, 1989 a claim for refund wit h the respondent Commissioner of Inter nal Revenue on the ground of erroneous payment of the a bove taxes. To preserve the petitioners' right to appeal before t his Court as mandate d by Se ction 230 of the National Internal Revenue Code, as a mended <i n f ra>, they fil e d on J u ly 12, 1989, this i nstant pe tition for review. ~owever, in petiti o ners' memorandum, filed on Ju n e 1, 1993, the amo u nt being clai med as refu n ds was c h ange d to P442, 453. 68 <should be P51 6 , 876. 02 ) . The original amount of P952 , 748. 17 was r educed b y

- DECISIO~ C.T.A.. CASE NO. 4376 - 4- P593,250.07 representing claims which had already prescribed and was increased by P157,377.92 as additional claims, computed as follows: A�ount of refund previously claited P952,748.17 Leas: A�ount already prescribed Savings Deposit !S.A. Ko.215215041 P 5,453.63 Koney Karket Place.ents 587,796.44 593,250.07 P359,498.10 Add: Clai1s not included in petition Savings Deposit !S.A. Ho.255220281 157,;m.92 P516,876.02 The sole issue before this Court is whether or not petitioners are entitled to a refund in the amount of P952,748.17 (or P442,453.68 as prayed for in the petition ers' memorandum .) It is not in dispute that petitioners are entitled to tax exemption under Section 53<b> of the Tax Code in ~elation to R.A. No.4917. Section 53<b> prov'd~s~ "Exception The tax imposed by this Title shall not apply to employee's trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the ) earnings and principal of the fund accumulated by the trust in accordance with such plan, and <2> if under the trust instrument it is impossible at any time prior to satisfaction of all liabilities with r e s pect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used fbr, or� diverted to, purposes other than for the exclusive benefit of his employees: x x x."

DECI BION - C.T.A.. CASE NO. 4376 - 5- The Supreme Court, i n the case of Co��issioner of Internal Revenue vs. Court of Tax Appeals ( 207 SCRA 487> held that: ~The tax-exemption privilege of employees' rust, as distinguished from any other kind of property held in trust, springs from the foregoing provision. It is unambiguous. Manifest therefrom is that the tax law has singled out employees' trust for tax exemption And 'ghtly so, by the virtue of raison de'~tre behind th creation of employees ' trusts. Employees'trust or benefi t plans normally provide economic assistance t o employees upon the occurrence of certain contingencies, particularl y, old age retirement , death, sickness, or disability. It provides security against certain hazards to which memb ers of the Plan ~ay be exposed. It is an 'ndependent and addit ional source of protection for the working group. What is more, it is established for their exclusive benefit and for no other purpose." Respondent, however. denied the cl im based on the following reasons: 1. Section 53(b> of the Tax Code which grants tax exemption was deleted by Presidential Decree <P.D. > No.1959; 2. Petitioners' evidence are insufficient to be entitled to a refund; and 3. Th ight to cl im the refunds has lready prescribed. The tax exempt'on was originally granted under R. A. No.1983 for the purpose of encouraging the formation and establishment of private plane :for the

DECISIO N - C.T.A.. CASE NO. 4376 -6- benefit of employees outside of the Social Security Act. In the same case of Commissioner of Internal Reven ue vs. Court of Appeals <sup ra >, it was ruled that P . D. No. 1959 dated October 10, 1984 <Amending Certain Sections of the NIRC, as Amended) can not repeal by implication the tax advantage granted under Sec. 53 <b> of the Tax Code. The Supreme Co u rt held: "The deletion in Pres. Decree No.1959 of the provisos regarding tax exemption and preferential tax rates under the old law, ) therefore, can not be dee med to extend to employees' trusts. Said Decree, being a general law, can not repeal b y implication a specific provision, Section 56 (b) (now 53[b)) in relation to Rep. Act No.4917 granting exemption fro m income tax to employees' trusts. Rep. Act 1983, which excepted employees' trusts in its Section 56( b > was effective on 22 June 1957 while Rep. Act No. 4917 was enacted on 17 June 1967, long before the issuance of Pres. Decree No. 1959 on 15 October 1984. A subsequent statute, genera in c h aracter aB" to its terms an.d application, is not to be construed as repealing a special or specific enactme nt, unless the legislative purpose to do so is ma n i f e s t e d . This is so even if the provisions of the latter are sufficiently comprehens � ve to include what was set :forth in the special act <Villegas v. Subido, G.R. No.L-31711, 30 September 1971, 41 SCRA 190>." With regard to petitioners' e vidence, respondent, in h is memorandum, claimed that no document has bee n presented by petitioners to show that the alleged

) DECISION - C.T.A . � CASE NO. 4376 -7 - amount withheld were remitted to the Bureau o� Internal Revenue. He alleged that: "In this case, petitioners marked several documents as its exhibits, however, no document has been presented to show that the alleged amount withheld were remitted to the respondent. The Confirmation receipts introduced by the petitioner as its evidence are payments made by the Bank to the BIR which represents withholding taxes �rom all the depositors o� the Bank. There has no proof whatsoever that portion and partial of these payments made by the Bank belongs to the herein petitioner. The fear of the respondent in allowing the refund of petitioner without evidence showing accurately and distinctively that part of the amount remitted by the bank are amount which petitioner is intending to refund, the government will be at the mercy of the taxpayer in granting a refund especially the amount being claimed." <Memorandum, p.3, CTA Records, p.174> Th is Cou o s not think so. Petitione.s p ese nt ed ~t t e rn nta an d cert ificates of withholding taxes accom plished by Standard Chartered Bank, the withholding agent. Exhibits "A" and "B" showed the amounts withheld by the bank from the income earned by the petitioners arising �rom their savings deposit s and money market placements. In the case of Commissioner of Internal Revenue vs. Citytrust Banking Corporation <C. A. G.R. )

DECISION - C.T.A .. CASE NO. 4376 -8- No. SP. 26839, July 31, 1992 >, the Court of Appeals in affirming the decision of this Court, held that: "Of greater significance also is the respondent Tax Court's observation that the remittance of tax withheld made by the withholding agents could have been easily verified by petitioner, considering that it is within their competence to know, to check and verify the regularity of performance o:f his subordinates. It underscored the :fact that the remittances of withholding taxes by producing the confirmation receipt . is not required by law and regulation as the withholding agent is not within the� control of the payee taxpayer but the tax agent of the Com missioner of Internal Revenue. It is on this account that the taxes deducted and withheld are considered special :fund in trust for the government until paid to the Bureau of Internal Revenue. The withholding agent merely hold the amount in trust for the government xxx. " In this particular case, petitioner also presented �' the corresponding quarterly and annual returns of taxes withhel d, conf irmation receipts and payment orders to support thei The petitioners' evidence consisting of the documents and testimonies of their witnesses, are more than enough to prove that the amount claimed as refunds was indeed withheld irom the petitioners' income. On the question of prescription, Section 230 of the Tax Code provides : "Recovery of tax &rroneously or illegally collE:'cted. - No suit or proceeding shell be maintained i n any court :for the recovery o:f any national internal revenue tax hereafter alleged to have been erroneously or

DECISION - C.T.A .� CASE NO. 4376 -9- illegally assessed or collected, or o:f any penalty claimed to have been collected without authority or of any sum alleged to have been excessive or in any manner wr o ngfully collected, until a claim for refund or credit has been duly filed with the Commissioner ; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, D.Q sugh suit or proceeding �.b..~J),______b_~_ __Q_~g_y_Q____!,':l_:{_t,_~.:r...._t_h~-~~..P...i ration of two y_~..~.:r.-~_!.!:.9_"!!!___!ll_EE________<:f at e_ QLP.!Oi.L!!!.en t o :f the. tax or P.EE.D.?..J:::t:Y.. regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment a ppears clearly to have been erroneo ely paid. XXX XXX XXX <Underscoring supplied> Respondent, in supporting his denial o:f the petitioners' claim, advanced the argument that: "Pursuant to above � quoted Section of the Tax Code a claim for recovery of taxes illegally or erroneously collected shall be filed within two <2> years :from the date o� p ymen.t. Petitioner has filed its claim for refund only on Februa:t"Y lOt 1989. Consequently, the right of the petitioner for the recovery of final taxes paid for the year 1985 involving the sum of P593, 350. 07 has prescribed. The last day for the remittance of the final taxes withheld in the last quarter of 1985 was on January 25, 1987 <M e morandum, pp.4 -5, CTA Records, pp.175-176> It is worthy to note that petitioners reduced their claim by P593,250.07, conceding that some of their claims has already prescribed pursuant to Section 230 of the Tax Code. They admitted, thus:

DECISION - C.T.A.. CASE NO. 4376 - 10 - "However, considering the two-year prescriptive period to institute the claim for refund with the Commissioner of Internal Revenue from the date of payment and the limitation on the filing o� suit or proceeding within the same prescriptive period, the refundable amounts is P442, 453. 68, Q.!:. P212, 478. 07 and P229, 975. 61, for the Savings accounts money placements, respectively xxx. " <Memorandum, pp. 3-4, CTA Records, pp.187 - 188) As to the additional claim in the amount of P157, 377 . 92, this Court cannot pass judgment on the issue since the claim was never raised before the respondent in the petitioners' original claim for refunds nor was it included in the petition for review filed by the petitioners. In Section 7 o� Republic Act No.1125, this Court "shall exercise appellate jurisdiction to review by appeal xxx <d>ecisions o� the Commissioner of Internal Revenue in o aes i nvolving xxx refunds of integral revenue ta~es xxx. " Since th mount o P157,377.92 wae not included in the original c laim, the respondent is not expected to decide on the matter. In like manner, this Court has no jurisdiction since It can only decide on the matters previously br ought to the respondent :for the latter's decision. Finally, considering that the instant petition :for review was filed before this Court on July 12, 1989, it ') '.) .- '

.. DECISION - C.T.A .� CASE NO. 4376 - 11 - certainly follows that claims for re�und o� taxes paid before July 12, 1987 had already prescribed as provided under Section 230 o� the Tax Code <supra>. The total amou nt left is P52,092.85 representing claims which were filed be�ore the respondent and this Court within ' the two -year prescriptive period, computed as follows: ~~~~ng�_A gg ou~t No.215024504 Q___t=L~-~ Int~:[_est_~arned Withholding Tax 9-4-87 596.40 12 -4-87 2 , 981. 92 6,890.33 1,378.00 P1,974.40 ?av;!:...n.9.!'?__ Acgo_~!lt No. 215220281 Q___?.____~----~ J_p t,_~_!::_e f',3 t ___g~;-.n..e d Withholding Tax 7-14-87 Pl,690.03 8-14-87 p 8,450.17 9-1 -87 3,296.27 9-14-87 16, 481. 37 40,167.74 200,838.68 To t a 1 4,964.41. 2 4,822.68 P50,118.45 P52,092.85 WHEREFORE, in view of all the �oregoing, respondent is hereby ordered to re�und in �avor o� the petitioner the amount of P52,092.85 representing taxes on income arising from bank savings, deposit and money market placements erroneously withheld. SO ORDERED. Qu�zon Ci ty, Me tro Manila, December 24, 1993

.. DECISION - C.T.A .� CASE NO. 4376 - 12 - WE CONCUR: residing Juj�'e RAzMO~N~0J. JD/E7-~~A Associate Ju e I hereby certify that this decision was reached after due consul tat ion between the members of the Court o :f Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~~~~ ERHESTO D. ACOSTA Presiding Judge Court of Tax Appeals