CTA Case No. 4972 (Decision)

./ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FAR EAST BANI< AND TRUST COMPANY., Petit i onPr, C.T.A. CASE NO. 4972 COMMISSIONER OF INTERNAL Promulgated: � REVENUE, JAN2419~ Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - X DECIS::r.o..J This is a claim for the rPfund of alleged unapplied crPditable withholding taxps on acquired assPts for taxablE' yPar 1990 and 1991 in thE' total amcn.tnt of P755., 715. 00. Pet i t i one r~ i s a dome s t 1 c bank i n g c tw p o ,-at :i on d �.11 y organized and existing under and by virtue of Philippine 1 aws. In thE' y eat~] par~t of 1992, the Cavit.e Devl?lopment Banh <CDB>, also a domr!stic ban~c i ng co1~pcwat ion was BH."J~ged with 1 at.~- Fl~ as its '~ the> PEJt i t i onel~ with the surviving entity. With the> merger, Petitioner being the survivlng entity, acquired all assets of CDB. 96

DECISION C.T.A. CASE NO. 4972 - 2- D\.wing the period from 1990 to 1991, CDB sold some acquired assets in the course of which, it allegedly withheld the creditable tax from the sales proceeds which amounted to P755,715.00. In said years, CDB filed income tax returns which reflected that CDB incurred negative taxable income Ol~ losses for both years. Since there was no tax against which to ct~edit or offset the taxes withheld by CDB, the result was that CDB, according to Petitioner had excess creditable withholding tax. Thus, Petitioner being the surviving entity of the filed this Petition for Review after its administrative claim for refund was not acted upon. I s P e t i t i c� n e ,~ legally entitled to its clain r~efund? We answer in the negative. 1 n its Petition for~ Review and in the l�lemorandum, Petitioner alleged that CDB withhE'ld the cn:-dit.:tble- withholding taxes from the sales proceeds of its acq\.lit�'ed assets. It W0\.1] d seem, therefore, fr~om the allegation that CDB "'~as the tax pa0t>t~ <,~ e c i p i en t of the income) and the withholding agent at the same time of its 01-1n tl~ansact ions. ln fine, they at~e one and the same. Although i t can, of cor.u~se, be ar~gued that the Tax Code does not specifically� thl? t .;oc payer~ 97

DECISION C.T.A. CASE NO. 4972 - 3- withholding its own tax, yet, this Co~..a~t find!;. ar.n15 i ng as i t i :; not 1 n accordance with the normal pt~act ice. Linde,~ the fact5 presented, CDB as seller of capital assets :i 5 ,~ e <:11 1 y t. h e o n e l i a b l e to pay the creditable withhold1ng tax. Thus, We see no reason why CDP. cannot tax 1 t. 1 s responsible to pay in the f .l r::.t. place undeJ~ the expanded withholding tax system. However, in the case at bar, petitioner did not pass the Court's scrutiny fts claim for refund. The documents pr~e sent ed by the Petitioner were not suffic1ent to warrant "that CDB w1thheld and remitted the withholding corresponding to :its own salE? of cap:itul assets. The various Central Bank confirmation and BlR official l~eceipts and payment pl~e sent ed by petitionet~ <E><h~.� "1" to "I -3S"), a 1 t h t:n.l g h a 1 1 i n t h e n am e o f CD B, e:u~ e n o t con c 1 �.1 ::. 1 v e ev1dence as to thF actuCil payment and remittance of the withholding taxf?s pertaining to the sale of COB's capital assets. The existing doubts are�due to the following; .,~ The amotmt of income payment~ received by 1. CDD cannot by the of confirmation rece1pts. The BIR Form 1743.1 i 5 needed, as requ1red under Svc. 10, Rev. Regs. 6-05 of the c >< pand ed withholding tax regulations, for the purpose the ,..,. �, 98

DECISION C.T.A. CASE NO. 4~72 - 4- the annual <i.e., l~econci 1 i at ion st.:~ter;,ent of quarterly payments and l i s t of payees and income payments>, S!?c. 51 (d) of the Ta>: Cod!?, t. o be s '�' b m 1 t t e d t o the Co mmi s s i on 1n~ of Revenue where1n the Court can check if the said payments of tax are inde!?d done by the CDB for 1ts own account by list1ng its own name as on!? of the recipients of the t ,;1): it paid. It can not be well said that the amount:::. paid -�.::.. lfB' BIR and r~emitted to the WE'l~E' fol~ s acco�.:nt and not. f Ol~ the t0 h �::'l~ possible payees of wi thhcd.d.i ng ta><�?!:, which CDB may also be liable to remit as a withholding agent. 3. Some confirmation receipts and payment payments of capital gains ta>< <E >< h s. " l _,, " to "I-7", incl'-�sive) while were not e .~eadabl <Exhs. "l-21", "1-35"). This contt~ad:icts the claim of Petit i one-J~ that the Wlthholding cl~editable withholding tax at source under the expanded withholding tax syst['m, Revenue Regulations No. E.-85. corporations are not ev~n required to pay in advance, by ,;.;,'~ way of w1thholding, tax on capJtal ga1ns. among the ,~ e q u i l~ e men t s s e t claiming the l"E' fund of excess creditable wH.hholding ta><es 99

DECISION C.T.R. CASE NO. 4972 - 5- 1 � t h a t i t ( p e t i t i o n e t- ) filed a claim for refund w1thin the two <2) y e a 1- p I? l- i o d a s prescr1bed under Section 292 (now 230) of the National Internal Revenue Code; 2. thc:-tt the income upon which the taxes were withheld were included in the return of the recipient; and 3. the fact of withholding is established by a copy of statement CBJR Form l 7 4 3. 1 ) d \.11 y i s s t.l e d by t h e pay c.n- ( w i t h h o 1 d i n g agent) to the payee, showing thE' amo�.mt paid and thE' amount of tax withheld therefrom. <Sec. 10, Rev. Regs. 6-05; City�trust Finance Corporation v. The Commissioner of Internal Revenue, CTA Case No. 4134~ November 11, 1991; Citytrust Finance Corporation (formerly Investors Finance Corpora~ion/FNCB Finance) v. Commissioner of Internal Reve~e, CTA Case No. 4046, February 24, 1993; and Paseo Realty and Development Corporation v. Commi~sioner of Internal Revenue, CTA Case No. 4254, August 10, 1993; Commissioner of Internal Revenue v. Court of'Tax Appeals and Paseo Realty and Development Corporation, CA-G.R. SP No. 32927, February 28, 1994). only t-eq�.ur-ement number one vJas satisfactm-ily met b;� the Thl? second and third requirements were not. Pet1tioner failed to show that the income (portion) �.1pon which the ta.><es {creditable) were withheld were i ncl '.lded in it s t- e t o.n-n. Thus, the Court cannot ascertain whether the' 1ncome pert.:\lflln.g. to the alleged 1-;ithholding taxes vJet-1? ,Jncluded in th~ 1990 and 1931 1ncome tax returns of CDB wh1ch the Petitioner s 1..1 b mi t t e d in evidence. Pet 1 t i one1- a 1 s o fell short in complying wi tt1 the when it did not present the BlR Form 1743.1 required by Revenue Regulat1ons No. G-85. 100

DECISION C.T.A. cnSE NO. 4972 - G- Hell-settled 1~ the rule that claim for refund, be1ng in the nature of an exemption from taxation, must be strictly construed against Petitioner <Insul~r Lumber Co. v. Court of Tax Appeals, 104 SCRA 710 [1981J) and failure to do so wou!d be fatal to its claim. Based on the foregoing, We therefore, cannot grant P e t. i t i o n e ,~ ' s c l a 1 m f o ,~ ~~ e f u n d a s 1t mlSETably failed to suff1c1ently support its alleged right to the refund s o�.1ght. claim/1or~ t~efund is het~eby WHEREFOHE, Petitioner~� s DENIED for lack of merit. SO ORDERED. ~(Q~~ ERNESTO D. ACOSTA Pt~e:siding Judgt> ~ P~J.~ HAJ'10N 0. DE VEY!.f' f-1 ::- ~. o c :i a t e 3 ,, d !J , 101

'' DECISION C.T.A. CASE NO. 4972 - 7- CEHT IF I CAT I 01'1 I hereby certtify that this decision was reached a f t e r� d 1.1 e c u n s 1.1 1 t a I; i on am on g I; h e me mb c r :; o f t he Co u r t o f Tax Rppeals in accordance with Section 13, Rrticle VIII of the Const1tut1on. ~Q.~ ERNESTO D. ACOSTA P>-e:Slding Judge Court of Tax Rppeals I 102