BPI CAPITAL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY BPI CAPITAL CORPORATION, C.T.A. CASE NO. 5457 Petitioner, Pro�ulgated: versus MAR 0 11999 COMMISSIONER OF INTERNAL -X REVENUE, Respondent. X- - - - - - DECISION The issue which is presented for our consideration is whethet~ or not Petitioner is entitled to the refund/tax credit in the amount of P1,7E.3,523.84, allegedly representing its excess or erroneously paid gross receipts taxes for the fourth quarter of 1994 and the four quarters of 1995. Petitioner is a domestic investment house or non-bank financial intermediary duly organized and existing under the laws of the Philippines with head office at the BPI Bldg., Ayala Avenue corner Paseo de Roxas Streets, Makati City. For the calendar years 1994 and 1995, Petit i onet~ filed with Respondent its quarterly percentage tax returns for the particular quarter of each year 1 994/fom~ 1995) and paid the corresponding gross receipts tax <GRT> thereon, hereunder summarized, the tax base of which includes the passive

DECISION C.T.A. CASE NO. 5457 - 2- income which were subjected to twenty percent (20~) final taxes, already withheld and paid to Respondent by the various clients of Petitioner. 1994 Date Paid/ Period Covered GRT filed Ex h. 4th Quarter COct.-Dec.) p 975,995.88 01-20-95 B 1995 1st Quarter (Jan. -Mat'. ) P2,626,547.94 04-20- 95 D 2nd Quarter (April-June) 5,883,122.60 07-20-95 E 3rd Quarter <July-Sept.) 3,795, 004.82 10-20-95 F 4th Quarter <Oct.-Dec.) 5,269,616.43 01-22-96 G After taking into consideration the Decision of this Cotwt, dated Januat~y 30, 1'396, in the case of f:lsian Bank Co �rpora t ion vs. Co��i s s i oner o r I nt ernal Re v en u e, CTR Case No. 4720, which r~uled that the 20~ final withholding tax on interest income should not form part of the taxable gt~oss t~eceipts, P e t i t i one t~ filed with the Respondent on September 24, 1'3'36, a claim for refund in the am o unts of P559,033.00 a nd P1,'330, 187.00, totalling P2,48'3,220.00, allegedly representing its excess/overpaid tax fot~ the years 1'3'34 and 1'3'35, ;-~espect ively. The same was not acted upon by Respondent, hence, on Januat~y 17, 1'3'37, Petit i oner filed with this Court the instant Petition f or Review, with the claimed refund reduced to only P2,076,422.28.

DECISION C.T.A. CASE NO. 5457 - 3- Petitioner presents as t�ai son its Petition for Review that the gross receipts tax paid by it in the particular quarters pertaining to 1994 and 1995 were based on total gt"oss t'eceipts, inclusive of the passive income which were subjected to the 20% final with hol ding tax at source, thus, it stressed, that in the light of the aforementioned ruling of this Court in the Asian Bank case, supt-�a, which states that the 20% fina l withholding tax on interest income should not form part of the taxable gross r eceipts, Petitioner has actually overpaid the amount legally due from it insofat' as its GRT obligations are concerned, hence, a t'efund is, Respondent on the other hand, by way of special and affirmative defenses, alleged that (1.) Petitionet'' s claim for refund of alleged erroneously paid gross receipt taxes for the fourth quarter of 1994 and calendar year 1995 in the aggregate amount of P2,076,422.28 is still under administrative investigation by t h e BIR; (2) taxes paid are presumed collected in accordance with law and t"egulat ions, hence, not t'efundabl e; (3) it is incumbent upon Petitioner to show that it has complied with the provisions of Section 230 of the Tax Code; and (4) well- settled is the rule that claims for refund are construed strictly against claimants, since they partake of the nature of exemptions from taxation.

DECISION C.T.A. CASE NO. 5457 - 4- In its Memorandum, Petitioner pointed out that it is entitled to a refund of the amount of P1,763,523.84 its excess GRT payments for the fourth quarter of 1994 and the whole of 1995 <Exh. J) in lieu of the amounts previously mentioned in its claim for refund with Respondent and in the instant Petition for Review, on the ground it erroneously used the flat rate of 5~ in computing for excess GRT payments instead of using the applicable rates of 1~, 3~ and 5~ depending on the term of the investments on which the tax paid intet~est income was earned, thus, as adverted at the onset, the issue to be resolved by the Court is whether or not Petitioner is entitled to the refund/tax credit in the amount of P1,763,523.84, allegedly its excess ot~ erroneously paid gross receipts taxes for the fourth quarter of 1994 and the four quarters of 1995. There is no dispute as to the legal issue of this case as this is not the first time that this Court has been confronted with such issue. As correctly pointed out by the Petitioner, this Court has resolved the same issue in the case of f:lsian Bank Corpot~at ion vs. Internal Revenue, supt~a, which is anchored on similar factual circumstances and on all fours with the case at bar. Hence, we find no cogent justification to deviate from our Decision in said case, which states in part, to wit:

DECISION C.T.A. CASE NO. 5457 5- "The assessment for GRT is based on Section 119 of the Tax Code, qu o ted h er~e under~ thus: SEC. 119. Tax on banks and non- bank Financi al intermediari es. There shall be collected a tax on gross receipts derived fr~om sotn~ces within the Philippines by all banks and non-bank financial inter~mediar~ies in accordance with t h e following schedul e : (a) On interest, commissions and discounts from lending activities as we ll as inc o me fr o m fi na ncial leasing, on the basis of remaining maturities of instruments from which such receipts are derived. Short-term maturity not in excess of two (2) years 51- Medium-term maturity-over two years but not exceeding fom~ (4) years 31- Long-term maturity: ( i) Over~ fotw (4) years but not exceeding seven (7) year~s 11- ( i i ) Over~ seven (7) year~s 01- (b) On di v idends O'Yn (c) On r~oyalties , r~entals of pr~oper~ty, r~eal. or~ per~sonal, pr~ofits from exchange and all other ite ms treated as gross income under Section 28 of this Code 51- Pr~a vi ded, hot-ve ver~, That in case the maturity period referred to in pat~agr~aph (a) is sh or~t en ed t h r~u pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction as short, medium or long

DECISION C.T.A. CASE NO. 5457 - 6- term and the correct rate of tax shall be applied accordingly. Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking act i vi t i e s. The aforequoted provision of the law speaks of gross receipts as the basis of the 5~ bank tax or GRT, and it is Petitioner's contention that the interest income included as part of such gross receipts should be computed minus the final tax already withheld by various withholding agents for the reason that such amount did not actually go to its funds, hence was not actually received by them. We agree with the Petitioner that the 20~ final withholding tax on its interest income should not form part of its taxable gross t~eceipts. Revenue Regulations No. 12-80 dated Novembet~ 7, 1980 on Taxation of Cet~tain income Derived from Banking Activities provides that the rates of tax to be imposed on the gross receipts of such financial institution ; s hall be based on all items of income actually t~eceiv e d, thus: SEC. 4. XXX XXX XXX (e) Gr~oss r~eceipts ta,'(� on banks, non-bank ri n,:.~nci a 1 i nt er~med i c.1r��i e s, r.i nanci n g companies, and other non-bank -Financial intermediaries not per~ror�ming quasi-banking activities. The rates of taxes to be imposed on the gross receipts of such financial institutions shall be based on all items of income actually received . Mere accrual shall not be considered, but once payment is received on such accrual or in cases of prepayment, then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder. <Underscoring supplied) Ft~om the fot~egoing, i t is but logical to infet� that the final tax, not having been received by the Petitioner but instead went to the coffers of the government, should no longer form part of its gross receipts for the purpose

DECISION C.T.A. CASE NO. 5457 7 of computing the GRT. This conclusion is in accord with the interpretation of the Supreme Court in the case entitled Collector of Internal Revenue vs. Manila Jockey Club, 108 Phil. 821, as quoted by this Court in disposing of a similar issue in the case entitled Co�pania Mariti�a vs. Acting Co�missioner of Internal Revenue, CTA Case No. 1426 dated Novembet~ 14, 1966, thus: In the second place, the highest tribunal of the land intet~pt~eted the tet~m "gt~oss receipts: to mean all receipts of a taxpayer excluding those which have been especially earmarked by law or regulation for the government or some person other than the taxpayet~. Thus, it was held: "xx xx. The govet~nment could not have meant to tax as gross receipt of the Manila Jockey Club the 1/2 % which it directs same club to turn over to the Board of Races. The latter being a Government institution, there would be double taxation, which should be avoided unless the statute admits of no other interpretation. In the same manner, the Government could not have intended to consider as gross receipt the portion of the funds which it directed the Club to give, to winning horses and Jockeys-admitted 5%. It is true that the law says that out of the total wager funds 12 1/2 % shall be set aside as the 'Commission' of the track owners but the law itself takes official notice, and virtually approves or directs payment of the portion that goes to owners of horses as prizes and bonuses of jockeys, which portion is admittedly 5% out of the 12 1/2 Y. commission. As it did not at that time contemplate the application of gross receipts' revenue principle, the law in making a distribution of the total wager funds, took no trouble of separating one item from the other; and for convenience, grouped three items under one common denomination.

DECISION C.T.A. CASE NO. 5457 8- "Needless to say, !;p~oss t~eceipts of the proprietor of the amusement place should not include any money which although delivered to the amusement place has been especially earmarked by law or regulation for some person other than the pt~opt~ietOt�~." <The Commissionet~ of Intet~nal Revenue vs. Manila Jockey Club, Inc., G. R. Nos. L-138'30 & L- 13887, June 30, 1960) It is to be noted that, undet~ Section 260 of the Tax Code, a race-track is subject to an amusement tax of 20~ of its gross receipts and the term gross receipts' embraces all the receipts of the pt~opt~ietot~, lessee, ot' opet~atot~ of the amusement place." Notwithstanding the broad and all-embracing definition of the tet~m "gt~oss t~eceipts" found in otw amusement tax law, our Supreme Court did not adopt a literal interpretation of the said term in the case of the Manila Jockey C1ub, Inc. , supra. " The legal issue having been settled, what t~emains to be resolved are factual particularly as to whether or not Petitioner has established by evidence its claim for refund. After a careful examination of the Petitioner's evidence, the Court finds that Petitioner did not clearly establish with exactitude the amount of its claim for The Court was not properly guided by the Petition et~ as to how much of sales/ receipts/earnings were subjected to 5~ tax rate, how much were subjected to 3~ tax rate and how much were subjected to 1~ and zero percent rate. Even though there was an auditor's report <Exh. J) which states that Petitioner

DECIS I ON C.T.A. CASE NO. 5457 - 9- erroneously used the flat rate of 5%, thus, finds a lesser amount as excess GRT for the said period after applying the correct rates of 1%, 3% and 5%, the Court nevertheless disregarded the same as it failed to show to this Court how the amount was arrived at and for its failure to present the source documents as basis thereof. In other words, there was no way by which this Court can determine how much Petitioner is legally entitled to. to be entitled to the refund sought, Petitioner~ is bound to pr~ove to this Com~t that (1) i t paid GRT to the Respondent; <E~> that the same is over~ or~ in excess of the GRT required by law; and (3) that it complied with Section 230 (now 229) of the Tax Code on the filing of the claim for refund. it is also the responsibility of Petitioner to show to this Court that the total amount of the 20% final withholding taxes on inter~est income (which were allegedly deducted from gross receipts/sales/earnings of Petitioner for the period in question as a result of the Asian Bank ruling to arrive at the corre c t GRT and the claimed , refundable amount) wer~e withheld and r~emitted by its withholding agents, i.e. the Bangko Sentral ng Pilipinas <BSP), to the herein Respondent. To comply with these evidentiary requirements, Petitioner must present the Statements or Certificates of Tax Withheld at Source issued by its withholding agents, together with a summary of the same,

DECISION C.T.A. CASE NO. 5457 - 10 - as these documents will clearly show how � much final taxes were withheld and remitted by the withholding agents to the Respondent, for the account of the Petitioner. The total of these 20% final taxes withheld from Petitioner's income will be the basis of the amount which will be deducted from the total gross receipts of the Petitioner for the period in question, before the same will be subjected to the 5%, 3%, 1'1-, 01- GRT t~ate as required by Sec. 119, supra, and as discussed in the ~~sian Bank case. In the case at bar Petitioner presented no evidence to this effect. this Cotwt finds that Petitioner failed to prove to this Court how much of the total gross receipts derived from passive income were subjected to final withholding tax at at the rate of 20%. While it is true that Petitioner submitted some documents to substantiate its claim for refund, the Court finds the same insufficient to grant the desired relief. Plainly stated, Petitioner falls short in its obligation to submit the evidence desired to prove its case. Settled is the t~ule in this jurisdiction that a claim for refund is in the nature of a claim for exemption, hence should be construed in s t~-~ i ct iss i mi juris against the taxpayer, ( Co111111i ssi onet~ o"F Intet~nal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRR 332>. We rule therefore against the Petitioner.

DECISION C.T.A. CASE NO. 5457 - 11 - I N THE LIGHT OF ALL THE FOREGOI NG, the instant petiti o n is DISMISSED for insufficiency of evidence, with costs against Petitioner. SO ORDERED. ~� P~~~ WE CONCUR: R ON 0. DE VEY Associate Judg / G- c. o~ ERNESTO D. ACOSTA Pt~es id i ng Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Secti on VIII of the Constituti on. L-6),~ ERNESTO D. ACOSTA Pt~ e siding Judge