CTA Case No. 4074 (Decision)

.. REPUB L I C OF THE PRILIPPIM�B COURT OF TAX APPEALS QUIZOM CITY ESTATE OF ANDRES M. SORIANO, JR. represented by A. SORIANO CORPORATI ON, A.K.A. ANSCOR Petitioner, - versus - C. T .A .. CASE NO. 4074 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - ---X DEC I I0 The case is about a claim f o r ref u nd of ... .) a 11 eged o verpaid income t a x I for t he t axa ble y e a r of 1984 . Petitioner a non-residen t ali e n h~d f d r his i n co me tax r e tur n s for the y ea r i h vol ved f i. led on I Ap ri l 15, 1985 as f o llows�: Gruss canpensat.ic:n incane P3, 116,~ l.E>Ss : E>:empti.cn � . _.._ _9..,_900 Ta :-:able canpensat i cn 3 , 110,5()) Tax t herecn (schedul a r rate) 1,035,800 To tal tax withheld ' !..~ 057 419.4~ A1n.nt refunda ble t. (P21 , 569.45)., I I ttan::h_2Q._thl:~'9b.- ~~ ~L-~au: � j . ! Gross compensaticn inc:Cll11! P6, 761,549.167 Tax due 2 ,028,465.00 Less: Tax withheld 2!1,277.~.41; Excess tax refLndable (P248,535.44) 1

r DECI S ION CTA CASE NO. 4074 - 2- Petitioner filed a cla im f o r r f nd o f the total a mount of P270,104.89 w.ith t he re pan en on I I June 2 7' 1986 and the pet i t 'ion for re v i ew on J ne l 30 ~ 1986. I The issues raised are wJ"let her 1) I fj~t right to the ref llmd has p~escribed . 'I� I c ompe n s ation in c ome of t!.he E t ata for ,, . Ma r-ch 2 0 to December 31~ 19S4 is u b j eo� t"I, jf ' I II I sc he dular rate under Section 11 ( a ) and not ~bX r ate un de r Section 22(b) o i the Ta x Cod...e � On the fj.r sJ ;_, respond e n t Commissioner c o ntends t h a t the income payments fro~ Ja nuary t o June, 1984 were made more than two yea r s p r io r to Jun e ::SO, ~ 1986 (date of filing of the petiti on) a nd the right to t he refund has already p~escri bed . Secti o n 292 I o f the Ta x Co d e pr o v i des , "In a n y c ase, n o such s ui t or- p r o ceeding s hall b e begun after the ex pira ti on of the fro m payment o f the tax and, ibid., states, "No . .) penalties shall files in writing credit or refund within two years afte~ I'' the tax or penalty." 2

DECISION CTA CASE NO. 4074 -- 3 - Adverting to the terms of the law, it appears clear that the date of payment of the ~lt �or QJ:mffi..!_.t_:t_, not the date when the taxable incom was paid to the taxpayer be deemed the reckoni~Q ~f the � I' two-year reglementary period for I� pt$;-;po e of ll I prescription. The emphasis is on th d "tax" � c ~se and "penal ties". ; In the at bar ~he i!)co tax was paid on April 15, l date- of ~ilif1g 0 the 198~, tax return, hence, petitioner has two y 1"1 or until April 15, 1987 ' for its which admittedly was filed in June 1996. Respondent's ... objection, therefore, is of no moment. The ~-~gnd and the more significant is�ue bears on the . applicable t~I x rate on the i nc ome ' of I the Estate of Andres Sori~no, Jr., cov ring March I to December, 1984, no dis~ute having been posed on the individual tax return for the period from ~Januar y to March 20, , 1984. The Est te ta x r turn applied the fl at rate of 30% provi ed ir1 22(b) of the Tax Cdde, whi~h readsa .. ! I " (b) Non-resident . alien not � eng in trade or business within Philippines. There sh 11 b 1�v collected and paid for each t~x upon the entire incoltle rec: ived sources within the Phi 1 i ppintfm by') every non-resident alien individual not eng,~ed in ~rade or business within ' the Philippines as interests, divideHds, 3

DECISION CTA CASE NO. 4074 - 4- ren ts, salaries, wages ~ premiUm ~ annuit ies, compensations, ren ume rat ions ~ emoluments, or other fixed or determinable annual or periodical or casual gains, pr(oefxictesp, 1t and income, ahd capital gains capl al gains realized from buying 1 and/or sellirig shares of stock of Phil~ppine corporations 1is ted in jthe dollar br tly acceptable foreign currency bo rd of anY stock ex chaf")qe ), a ta ~ equ 1 to thirty per centum (30X) of suchI income." t 1 Petitioner is of the vli.ew tha t th E tate o1 And r es Sor iano, Jr.~ not being an individual but a legal fiction, was not capable of performing the I ... acti v ity of engaging in business or t ra~e. Hence, the applica ble rate of 30X on non-resident alien I I .) not engaged in... trade or business in Section 22 (b) I. I ,I ~Je are not prep�ared to I 1 gal at tach si gnific a nce to such proposi~i on . Re s pondent Commis s i�oner could not have said it better when he noted that comp'en se~ tion , inc()me earned for services rendered by the deceased Andres . l' Soriano, Jr., during his lifbtime althot.\gh r~t:eived after his death is taxable ak the schedular rate of ,b~sines� income tax as non-resident t lien doing the Philippines pursuant to Section 21{a) rel a tion to Section 22(a) bo~h of Tax Code df respectively quoted as follo~s: I ~ I 'I 4 � !'t' I

.) DECISION CTA CASE NO . 4074 - 5 ~� SEC. 21 Rates of tax on ci ti. zens or residents. (a) On taxabl compen sation income. A tii X is hereby imposed upon the taxable comp nsoiltion i ncome as determined in S ction 28( .) received during eac h taxa 1 year from all 50Lirces by every ' : nd vidual, wh thar a citizen of the Philippines or ~~ieh residing . in t he ' Phi 1ippines, ih accordance 'with the fbllo wing sc hedule 1 I Net over P2~500 I 0% XXX XX X XY,X Over P500,000 1 P122,175 plus 35% excess ~ver P500,000 SEC. 22 Ta>: or\ non-resident indi.vidua ls. (a) Non-re ident lin engaged in trade or ' business within the Ph i lippines. (1) In general. Non- resident aliens eng aged in trad~ or business in the Phil ippine ~shal be subjec t to tax in the same m n~ ~ a5 resident citizens a nd � aliens on t.-axabl compensation income and/or . other taxable1 n et income recei v ed from all sourc within � the Philippines, xxx. The report of examination updn which the respondent based his assessment of the E5tate o f Andres Soriano, Jr. 's income ta x returns, shows1 . Boci 1 flt Q __Qg;emQer-__!~ Gross canpensatic:n income P6, '591,926 Ta>: due ( schedul ~r rate) 2,30?.... 174 Income franc 1� Interest income 1 Gain fran sale of Valley Gal f property Ta>:able incc:me 1 Tax due (30"/. as na1+recsident not doing business) 50,eaz .) .Total tax due 1 2,3~,061 Less: Tax withheld 2,zniOOQ��"-4 ' Tax still due 81,060.

DECISION CTA CASE NO. 4074 - 6- Rest.llllE.":! : 1. January to March t x refLndable P21i, '561.45 2. April to Decembel-- tax due _..�. ' 060. 5Q Pm::ll.nt sti 11 due ':iT 491.11 Int.erest up to Jt..ne 15, 1987 ~5. 759_.!_1!!~ .) Total tax dLe I P85~25().76 I , mentloh~ No. 2 Tchoe mcpoumtapteinosnataiolnt~oinucgohmere aeiv ' d death of the deceden~ was earne d ~ his lifetime, and th~refore� ub;jeC:: schedular rate of iAcome tax resident doing b~siness Philippines. We find the gross cotrlpensa tion ihcome of the Estate of Andres Soriano, Jr., in the... totaJ a~ount ' of P6~591~926.39 for the period from March 20~ 1984 I to December 31, 1984 correttly made subject to the income tax pBrsuant to thto graduated rates under Section 21(a) of the 1977 Tax Code, vis I �a , tlis' I petitioner's bas.is of 301. flat rate prf!lscrfbed under Sec tion 22 (b) ' ibid. Stated otherwise, the .inc ome of the estate could not be treated di f ferently from the incdme during ' lpeti,tiioner�� s � , ' I lifetime insofar as the tax rate ' .II Moreover, respondent's application �bf . ~ ' is more in accord with Section 23(d) � reads: S.EC. 23 (d). Change of status. If the ta>:payer married or should n~ve additional dependents as defined' in i

DECISION - CTA CASE NO. 4074 - 7- subsection (c) above d t.1r i ng the ta ~1ilb1e ., year~ the ta>:payer may : c lairil th~i� ~ corresponding personal and C\dditional e>:empt.i on, as the case m.:\ y be, � in fu ll i, for such year. If the taxpayer � should die tduri:Og. the taxable year, his este~te m.ay t i l l claim the persoMal and a~dit~~nal e>:emptions for himse11f and hifi depen<J.ent111 as if he died at the 1f lose of su h ye~r. ~ de If sp~u~~1.1 or , Ill ,� de penden or penden t he uld dji~ wenty a n y 'f o:f '~ the; s sh t o if any 'of I 1. Ltc.;h -ofie y~ar ' ts become~ t.. old during the taxable y~ar, the taxpaye ' m~y1 still claim the same exemptions as if they died' or if such dependents becotne twenty-one years o ld at the close of such year. Upon the records befdre u s the r~ is nothing to take the case out of the operative effects ~f the statutory proscription as: understood ti:\nd applied. As was the rule during ~etitioner's U . fetime; �so . . '" t here with his estate, 'the rate applies � wJ.tn eqt.1al ' , I, a , I certainty. Certainly the law requires �ndi more and t �~ e Npects no less. We therefore the same c o n, clusion as the 1 ' I i � respondent Commissioner ofj Internal Revtfnue. Js WHEREFORE, petition dism.i;ssed fwit against the petitioner. \ �!. SO ORDERED. Quezon City, Metrd M~nil a, January 15, 1990. 1

.) DECISION CTA CASE NO. 4074 - 8- WE CONCUR: ~/:2_/ ~ . AMANTE . CBR.TIPIC ATIO .. I I hereby certify that this ~ecision was reached after due consult�tion among the ~~mbers bf .� the Court of Tax Appeals in accor anc~ with Section 13, Article VIII of the Con titution. ~~ F'residiru;) Judge Court of Ta� A~peals .) 8