CTA Case No. 4813 (Decision)

� REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY RIZAL COMMERCIAL BANKING CORPORATION, Petitioner, - versus - C.T.A. CASE NO. 4813 Promulgated� , �i;; COMMISSIONER OF INTERNAL REVENUE, - Respondent. - - - - - ---D-E-C -0-1-19-97X: X- - - - ------- DECISION This Is a petition for review f I Ied by RIza I Commercial Banking Corporation In behalf of the PLOT Beneflolal Trust Fund <PLOT Fund for brevity), seeking to recover the amount of P6,585,408.71 representing alleged erroneously paid withholding taxes oovertng the period from October 15, 1984 to December 31, 1991. The antecedent facts of the case are as followsa Petitioner, a banking corporation organized and existing under Philippine laws, Ia engaged In the business of expanded oommerolal banking and Ia duty licensed to engage In trust operations. On October 22, 1970, by virtue of an Investment Management Agreement entered Into by and between petitioner and PLOT <Exh. �A"), petitioner was appointed trustee of the PLOT Beneficial Trust Fund, whloh Ia an employees' trust maintained by Its employer, Philippine Long Dlatanoe Telephone Company, to provide retirement, pension, disability and death benefits to Its employees. The Benefit Plan of the PLOT <Exh. "G") was approved and

� DECISION C.T.A. CASE NO. 4813 - 2- qualified as exempt from Income tax by the respondent's Bureau on January 30, 1969 <Exh. "E">. From October 15, 1984 to December 31, 1991 ' petitioner Invested the assets of PLOT fund In savings and time deposits and deposit substitutes, the Interest Income of whloh were subjected to withholding taxes. On December 2, 1991 and May 20, 1992, relying on the strength of this Court's ruling In CTA Case No. 3888 dated Deoe�ber 16, 1986 entitled "GCL RetireMent Plan va. Co��lsatoner of Internal Revenue," whloh wae affirmed by the Court of Appeals In CA-G.R. SP. No. 20426, dated August 27, 1990, and later on by the Supreme Court In the oase of the Co��lssloner of Internal Revenue vs. The Hon. court of Appeals, The Court of Tax Appeals and GCL Retlre�ent Plan (207 SCRA 487), holding that employees� trusts as well as the Income of the pension trust are tax-exempt, petitioner flied with herein respondent requests for the refund of the taxes withheld from the Interest earnings of the PLOT Fund <Exha. "E" and "F�). As no action was taken by respondent on petitioner's olalm for refund, the Instant petition was flied on May 29, 1992. In her Answer, resp~ndent adduced the following Speolal and Affirmative defenses, thuaa 1288'

� DECISION C.T.A. CASE NO. 4813 - 3- 1. Petitioner has failed to state any oause of aotlon under Section 204 of the Tax Code, under whloh the Commissioner of Internal Revenue allegedly may credit or refund taxes erroneously or Illegally received. In the Instant oaae, petitioner begs the Issue, as It has miserably tal led to show on the faoe of the petition that the oolleotion of the aforesaid tax I lability In the amount of P6,805,305.37 Ia Illegal and erroneous as against the legal presumption that the oolleotlon thereof Ia lawful and regular. 2. In addition, well-settled Ia the doctrine that provisions on the tax refund are oonatrued strictly against the taxpayer as they are In the nature of tax exemption. 3. Besides, In an aotlon for refund the taxpayer has the burden to show that the taxes paid were erroneously or Illegally paid and failure to do so Ia fatal to the aotlon for refund. 4. Moreover, and In this oase, the olalm for refund Ia stl II under Investigation. The question as to whether or not Interest Income derived by an employees' trust from Its Investments Is exempt from Income tax Ia settled In view of respondent'& oonoesalon In Ita Memorandum filed on September 20, 1996, that Indeed, retirement funds are exempt from the final withholding tax on Interest lnoome from money placements. Thus, the sole Issue left tor determination by this Court Ia whether or not petitioner Ia entitled to the refund being sought tor the period beginning October 15, l ~~s- J~

� DECISION C.T.A. CASE NO. 4813 - 4- 1984 to December 31, 1991 on the basis of the evidence presented. It Ia stgnlfloant to note that one of the requisites for a valid olalm for refund Is that It must be flied within two years from date of payment of the tax. Under Seotlon 230 of the Tax Code� SEC. 230. Recovery or tax erroneously or Illegally oolleoted. - No suit or proceeding shall be maintained In any court for the recovery of any national Internal revenue tax hereafter alleged to have been erroneously or Illegally assessed or collected, or of any penalty claimed to have been oolleoted without authority, or of any sum alleged to have been excessive or In any manner wrongfully collected, until a claim for refund or credit has been duly flied with the commissioner; but suoh suit or proceeding may be maintained, whether or not such ta~, penalty, or sum has been paid under protest or duress. In any case, no suoh suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty 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 faoe of the return upon which payment was made, such payment appears clearly to have been erroneously paid. It te olear fro� the aforeotted law that the counting of the two-year prescriptive period oo�Menoes to run fro� the date of payMent of the tax and the pay�ent of the final taxes on Interest Is considered to be Made on the 25th day of the following Month after the close of 1290

DECISION C.T.A. CASE NO. 4813 - 5- each calendar quarter pursuant to Section 51 (a) of the Tax Code, thus. Sao. 61. Returns and pay�ent of taxes withheld at souroe.-<a> Quarterly returns and payment of taxes withheld. - Taxes deducted and withheld under Section 50 ahal I be covered by a return and paid to the Revenue District Ofttoer, Colleotlon Agent, or duly authorized Treasurer of the city, or municipality where the withholding agent has his legal residence or principal place of business, or where the withholding agent Ia a corporation, where the prtnolpal otftoe Is located. The taxes deducted and withheld by the withholding agent shalt be held as a apeolal fund In trust for the Government until paid to the collecting officers. The Commissioner of Internal Revenue may, with the approval of the Secretary of Finance, require these withholding agents to pay or deposit the taxes deducted or withheld at more frequent Intervals when necessary to protect the Interest of the Government. The return for final withholding tax shall be fll~ and the payment made within 25 days from the olose of eaoh calendar guarter; while the return for creditable withholding taxes shall be flied and the payment made not later than the last day of the month following the close of the quarter during whloh withholding was made. ( Undersoor I ng supp I led) Verily, the taxes withheld from October 15, 1984 to Maroh 31, 1990 are barred by prescription, the judlolal olalm for refund having been flied on May 29, 1992. We now dwell on the sufficiency of petitioner's evidence as to the rest of Its claims. To support Its claim, petitioner adduced In evidence the fotlowlnga l2fJ1

� DECISION C.T.A. CASE NO. 4813 - 6- a. Quarterly returns of final lnoome taxes withheld; b. Confirmation receipts and payment orders to show payment of taxes withheld on Interest; c. Financial reports to show the financial condition of subject trust aooount, d. Statements of aooount of petitioner from Central Bank and Authority to debit demand deposit aooount to show aotual payment to the government of withholding tax through the debit of petitioner's aooount; e. Statements of Special Savings Aooount to show the Interest earnings of the subject trust aooount on whtoh basis the withholding tax was computed and paid; and 1. Debit tlokets to show that Interest tnoome was paid by petitioner to various aooounts Including subject trust aooount. Subsequently, petitioner submitted as additional evidence the Income Statements of Trust Aooount No. 75- 044-1 In order to establish the amount of Income earned by the PLOT Beneficial Trust Fund. A cursory evaluation of the evidence submitted by petitioner would reveal that petitioner fat led to fully establish the Identity and participation of the assets of PLOT Fund to the Investments made by herein petitioner for the years 1990 and 1991. It Is to be noted that except for the Statements of Special Savings Aooount and the tnoome Statement& of Trust Aooount No. 75-044-1, there was no mention of Trust Aooount No. 75-044-1, purportedly the trust aooount number of PLOT Beneficial

� �� .: DECISION C.T.A. CASE NO. 4813 - 1- Trust Fund. The Court, however, oannot rely solely on the 1990 and 1991 lnoome Statements submitted by petitioner for the purpose of establishing the amount of lnoome earned by the PLOT Beneflolal Trust Fund for the said years. The 1990 lnoome Statement was unsigned, unaudited and not testified to by any of the alleged signatories. The 1991 Income Statement, on the other hand, was likewise unaudited and while signed by a oertaln Ramon L. Bautista, Assistant VIce-President of the Trust Investments Division, was also not testified to by the said person. At most, we oan only rely on the Statements of Speolal Savings Acoount whloh showed the list of petltloner�s ollents lnoludtng PLOT and refleoted the following amounts of taxes withheld from said aooounta !J?eo tal savIngs Aoo9un~ Date Tax Withheld Exhs. Nov. 1990 P 119,892.60 00000 85, 468. 68 .1?1::!..~369. 1~ EEEEE Total for 1990 �!eolal Savings Plaoements Tax Withheld� 01-25-91 p 156,333.33 LLLLL-3 LLLLL-4 72,333.33 LLLLL-4 23,508.33 _____...........---~~~��.. ~--�----�-

� DECISION C.T.A. CASE NO. 4813 - 8- the faot that petitioner failed to fully establish the participation of the PLOT Fund In Its Investment activities, We are left wtth no recourse but to grant only suoh amount as has been duly proven. Conslderlng, however, that from the lnoome Statements submitted by petitioner as well as from Its Memorandum flied on June 27, 1997, petitioner Is asking only for the lesser amount of P2,727,841.44 for the year 1991, We are constrained only to grant said amount. WHEREFORE, In view of al t the foregoing, respondent Commissioner of Internal Revenue Ia hereby ORDERED to REFUND to petitioner the amount of P2,903,200.60, computed as foltowsa Tax withheld for 1990 p 175 1 359 � 16 1991 ~.727,841.44 Total P2 903 !:2a0: 0:::.:6:a0=: 80 ORDERED. = n! ~Q~~ ERNESTO D ACOSTA Presiding Judge

I)ECISION (f. T. A~. CAS~ NO. 4813 - 10 - CERT�t F I CAT I. ON I he~eby. Qerttfy that this deotslon was retched atte~ due oon~ult~tion wtth the members of the Court Qf T~x. App���� In a~oor~a~oe with Seotton 13, Arttqle VI II of the Constitution. c.. .:;:;--(;);. ~ . E.RNESTO D. ACOSTA Presiding ~u(lge Court of Tax A~peals