CTA Case No. 4214 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY BANK OF THE PH I LIPPINE ISLANDS, Petitioner�, - vet�s u s - C.T.A. CASE NO. 4214 COMMIS S IONER OF INTERNAL REVENUE, He s pondent . - �- �- - -� �. X DECISION S ui t b r� ought by petitioner Bank of Philippine Islands (BPI) i s a c laim for r ef und of a n alleged ove r� p a id c r e di table ~-.~ithholding taxes of Family Ba nk a nd Tru s t Company (FBTC) i n the a mo unt of P174,065.77 for t h e six mo n t h pe r� i o d , Ja n u a r� y to June 19 8 5 . Th e right to pur s u e the claim arose when petitioner became t h e s u ccesso r�- in - inter� est of FBTC by virtue of a n Arti c l es of Merger duly ap pro ve d by the Sec urit y a nd Exchange Commi ss ion on July 1, 1 985 (E x h . "D"). Dur� 'lng t h e six month period e nded June 3 0, 1985, FBTC r eceived rental income from l eas ing offi ce spaces a nd int e re st income fr�o m treasury note s pur c ha se d from Ce n tra l Bank . On t h ese income, petitioner a ll e g e d that a 565

DECISION - C.T.A. CASE NO. 4214 - 2- 5% creditable withholding ta x was dedu cte d by vario u s l essees a nd a 15% wi t hh oldi ng tax by the Cent r al Bank. Petitioner further alleged t hat FBTC at the e nd of it s corporate existe nce on June 3 0, 19 85 filed its final income ta>< t- eturn wit h the Bureau of Internal Reve nu e on April 10, 1986 s h owing a net l oss of P6 4, 502 ,93 5. 00 and a r ef und able a mou n t of P1 74,065.77, represe n ting cre ditable income tax withheld at so ur ce for the period January to June 1985 (Exh. � "A") . On October 1 7 , 1986, p e titioner filed a letter claim for refund dated October 10, 1986 with respondent's Chi e f Appellate Divisio n a s ki ng for t h e r� ef und of P1 7 4,065 . 77 (E x h . cII II ) � Since respondent h as not acted on the matter, petitioner on Dece mb e r 29, 198 7 filed the insta nt case. Hence, thi s petition for review. Responde nt in h is a n swer a nd by way of s pe cial d e fen ses , a ll eges among others, t h at: a . petitioner ' s right to claim the refund / tax c r e d i t )1 a d a 1 t' e a d y p r e s c r i b e d ; b . it is incumbent upon petitioner to s ho w that it h as complied \.Jith t h e provi s ion of Sec. 292 of t h e Tax Code; and c . clai ms for� r�e fund are construed s trictly against c laimant s s inc e a c l ai m fot- r�e fund p artakes t h e nat u re of tax exe mption . 566

DECI S ION - C.T.A. CA SE NO . 4 21 4 - 3- The is s ues to be r esolved, b y this Court, are: 1 . Wh et h er or n ot the petition for�. review is barred by p rescriptio n ; a nd 2. Wh et h er or not petitioner i s entitled to the refund of P174,065.66. An e nt t h e first issue, the pro vis ioh of the law is very clear o n t h e matter. � I n fact, it i s a well settle d r- ul e that a clai m for r e fund of a tax alleged to have been erroneo u sly o r illegally co ll ecte d mu st be filed wit h th e Com missio n er of Internal Reve nu e wit hin two years from the date of pay ment of t h e tax and no s uit or pr ocee ding for refund s hall be begun after t h e expirati on of th e t\-Jo - year period. Thi s i s provided und er Sectio n 292 of t h e National Int e rnal Reve nu e Code, as amended, which r� ea d s: Sec. 292. Recovery of tax erroneously or illegally collected . No s uit or proceeding s llal.l be maintain e d in a ny co ur t for t h e reco v ery of any national internal re ve nue ta x h e r e a f t e r a 11 e g e d to h a v e b e e n e r r .o n e o u s 1 y o r i ll egally col lected , or of a ny p e nalty c laimed to h av e been col l ected witho ut aut hority, or of any s um allege d to h ave been excessive or i n a n y ma n n e r� wr o n g f u 11 y c o 11 e c t e d , u n t i 1 a c 1 a i rn for� ref und or cre d it h a s been duly filed with t h e Co mmi s s io n e r� ; but s u c h s uit o r� pr�ocee ding may be maintained, whether or n ot s uch tax, penalty, or s um h as been paid und er prot est or durf~ss. I n a n y c a s e , n,-'o"--....=s;..:u:;:...;c::..:...:h_...:::s:...:u:=-=.i....::t=---'o::....;..r_.s::;p...:.r�_o=-=c....::e:c..e=d-=-=i:...n:..:...::~.q s h all b e b e gun after the expirat i ~ n of two year s f r� om the d ate of payme n t of the tax or pen a lty regardle ss of any s up e r vening ca u se 567

DECISION - C .T. A. CASE NO. 4214 - 4- t h at 1na y a ri se a ft e r pa ym e n t; P rovi d e d, h ow eve 1� , t h at t h e Co mm i ss ion e r may, e v en wi t h o u t a wr�it t e n c l a i m th ere f or , re fund or c r e dit a n y t a x , wh e re o n f ace o f th e re turn u pon wh i c h p a ym e n t wa s ma,d e , s u c h p a ym e nt a pp ea t�s c l ear ly to h ave b ee n e rroneou s ly paid. (Und e rl i ning s uppli e d) . Re s p ond e n t con t e n d s t h a t t h e in s t a nt case i s barred b y pre sc riptio n . For t h e a ll e ge d a mo unt o f ta x wi thheld and paid wa s for t h e fi sc a l y ea r e nding Jun e 3 0, 1985. Th e p e titi o n fo I' I'BV i et..J wa s fi l e d wi t h t h is Co u r t only Dec e mb e r 2 9 ' 1 987, wh ic h i s c l ea rl y b e yond th e two ye a r period a ll o we d by law. Befo 1�e t hi s CO UI' t ca n rul e o n tt1 e i ss u e of p re s cr ip tion, it i s no tewo r t h y to p o int ou t that base d on t h e fin a n cial s tate me n t s o f FBT C a nd th e independent a ud itor ' s o p inio n ( Ex h s. " A- 7 " to "A - 17") , FBTC o p e r at es o n a ca l e nd ar year ba s i s . Its twel ve ( 1 2 ) months acc ounting p erio d wa s s h orte n ed at t he tim e it was me rged wi th BP I . T h ere b y, losi n g it s c o r po1�ate exi s te nc e on � J uly 1 , 1 985 wh e n t h e Articl es of Mer g e r wa s ap p roved by t h e Sec u rity a nd Ex c h a n g e Co mm i s s i o n . Th u s , re s pond e nt stand t h a t FBT C op e r a t es on a fi s ca l year b as i s , b a s ed o n i t s in co ~ e t ax ret urn, h o ld s no ground. Thi s Cour- t b e l i e v es t h at FBTC i s operati n g o n a ca l e nd ar yea r p e riod b ase d on t h e a udite d ' fina n c ial s ta t e me nt s a nd t t�1e opin i on th e r eo f. T h e fi sca l p e 1� iod e n di ng J un e 3 0, 1 985 o n the upp e r left c or n e r� of t h e in c om e tax re turn c an be 568

- DECISION C.T . A. CASE NO. 4 2 14 5- co nclud e d as a n e rt� ot" o n th e part of FBTC. It s hould h ave be e n for t h e s i x mo nth p er iod end ing J u ne 30 , 1985 . It s h o uld a l s o be e mph asized that " where one corporati on s u cceeds another b oth a r e se p arate e ntiti es an d t h e in c ome ea rn e d by th e p rece de cess or co rpor atio n b ef ore organization o f it s s u ccessor is not i n co me to t he s u ccessor " (M e rten s , Law of F e deral Income T a xa tion, Vol. 7 s 38.36 ) . Rul i ng now o n t h e issue of pr escriptio n, t hi s Court find s t h at t h e petitio n for r ev i e w i s fil e d out of time. FBTC, a ft e r t l1 e e nd of its cor porate life on June 3 0, 1985, s h o uld h ave fil e d it s inco me tax r et urn wit h in t h irty d ays after t h e cessa tio n of it s bu s ine ss or thirty day s after the a ppro va l o f t h e Article s of Merg er. This is bol ste r ed by Sec. 78 of t h e Tax Code a nd und er Sec. 2 44 of Reve nu e Re gulation s No. 2 . P ertine nt provisions of sai d l aws a re hereby quoted as: Sec. 78. Return of corporation contemplating dissolution . Ever y cor por atio n �:> h cll l , wi t 11 in thirty d.E._Y s af ter t h e adoptio n by t h e c o t" p o r a t i o n o f a ,. e s o 1 u t i o n o r ~ f o r t h e di sso lution of th e corporatio n or for t h e l..i.9..hLi d at ion of the who 1 e or a ny part of i t s ca pi ta l stock , rend er a co rr ec t retur n to the Cornmi_ss i o n er of Internal Revenue, veri fie d u n d e r o a t 11 , s e t t i n g f o ,. t h t h e t e r m s o f s u c h re s olution or plan a nd s u c h other infonnatio n as th e Mini s t er of Finance s hall by r e gulati ons , p resc rib e. Sec. 24 4. Ret u r n of corporation c on te mpl ati ng di sso lution or retiring from 56 9

-- DECISION - C.T.A. CASE NO . 4 2 14 - 6- b u s j 11 e s s . D..l.L.__�QI_P....9_ I' a .t.LQJJ..?.J._ _Q_S!J'_t.'l~.E-?.l:LL.J2...2.. J..Sl.J.r..U:,. . . . i~..~..<:::SL~U.Lt..2_____iLU..9__~l.?.3 u -~J u t i Q. n s , c o n t e rn p 1 a t i n g di sso luU.o rr , _�.ll�)._L_ wit ll in 3 0 d .e_y.2____a_f_~e 1� t h e JlP_� r� o v ~, 1 o f s u c 11 r e s o 1 u t i o n a u t h o r i Qrr.g_ t h e i r di sr-;o lution, a t1 d wit hin t h e sa me period after ..tb-~L_r� __.!.:..Q t 1.I...~..!!l.?J...Lt_�_..fL<:?..!.!l.___Q_u s i n e s s '� �f i J._g____!Jl.� i r l..D c..Q.!ll~:.._..l.f.l..~L.....!.::�.Q_t..!::U.J::L.....J::C..Q~:_..!:lJ.L9____j;_b_�.......12 r� o f i t e a I' n e d _....Q.L b u_!:? i ll�..�..L.9..QJ:l�..__j~_y_J;JJs m___f.L~...!I!.__ t ~'-!..e b e g..i n n in 9.......Q f t h e y_e a_r:____!::!f!___!;_Q___!;;_b.Q..___g a t_e_____Q..L........::"U:l c h dis s o l u t ion o t' L.~!::.i.L?..!!.!.Qll t __fl_~lY__p_:J.L...J:J:u~__g_ o r r....�.2..P.....QI!_d i 11 g i n c o me t a x du e _lli~~Q..!.L_.~JLO_r_r --~.:!.�J1.!.9..!..L<i.....I2.L.J;.ll e Co rnm i s? ion e 1� o t 1J.!J;_�':..L.!.l9....l.. . He v_g_r ru e . x >< >< � ( lJ rr d e t' s c o r� i 11 g s up p 1 i e d ) Ba se d 0 11 t h e r�eco rd, f" BTC fil e d i t s income tax 1� e t u r� n o 11 Ap r i 1 1 0 , 1 9 8 6 wh e r e a s t h e 1 a \-J p r o v i d e s t h a t t h e sa rn e s h o uld b e fil e d '.Ji.t: hin t hi r� ty day s after t h e a IJ p 1� ova J of t h e 1'1 r tic 1 e s of ~1 e ,. g e r� or f r� o 111 J u 1 y 2 , 19 8 5 to July :J J, 1985. And t ir e c l ai m fo r� r�e fur1d s h o uld b e fil e d with :l 11 t ',-JO ye a r '('~ f r� o rn t h e dat e of p ay me nt of t h e lax o r� f 1� u rn J u 1 y 3 1 , 1 9 8 5 to J u 1 y 3 0 , 1 9 8 7 p u 1� s ua n t to r SE)C. 292 () t h e 1 a>< CodG' i.l S tl ll! G tld e d .. Howe\/ fl t' , thi s case wa s filed on De ce mb er 29, 1987 w11i c !1 i. s 1 5 2 d a y s .l a t: e 1 r� o rn J u 1 y 3 0 , 1 9 8 7 , t h e 1 a s t d a y a ll ov.,�P d by l aw �r- o r- p e ti.t:io n e r� to �fil e judi cial c laim for T h fJ 1� c f o ( e ; r� e s p o n d e n t ' s c o n t e n t .i o n t h a t t h e p e t i t 1 o n i s barr e d b y pr esc ription i s h ere by uph e ld . No t on g1� ound tl 1n t: 1-BTC .i. s o n fi sca l p er iod rath e r FB TC cease d to oper�a t c .:~~~a jur � id .Lc: a l p e 1�so t1 o n July 1, 1 985. r I n \1 i C! ~-.' 0 f () l.ll' i n d i. I I g I. h u t t II e p e r i 0 d t 0 f i l e t h e r c l.:llill r 0 , . I (0 ll n d II d '~ 5. i l d p e d !) r e c~ c ,. i be d ' t h e qu es t i 0 n 0 f 570

- �-- DECI SIO N - C.T.A. CASE NO. 4214 - 7- w11 e t h e r o t� n o t p e t i t i o n e ,. i s e n t i t 1 e d t o t h e r e f u n d o f t h e a mo unt of P1 74,065 .6 6 becomes mo ot a nd aca d e mi c. WH EREFORE , finding t h e p etitio n for review without me rit, th e case is o rs r~I SS ED a nd t h e refund so ught: i s h e t�e by DENIED . Wit h cos t s against p e tition er . SO ORDERED. Qu ez on City, Met ro Ma nil a, J uly 19, 1994. ~Q .. ~ ERNESTO D. ACO S TA Presiding Judg e WE CO NCUR : ' t..i.~~~ A sso c i 0. e DJE u~U'M at 571

- w ........... DECISION - C.T.A. CASE NO . 4 2 14 -8 CE RT I F I C AT I 0 N I h ereby certify t h a t t h e d ec i si on was r ea ch e d afte r du e co n s ul tat i o n a mo n g t h e rn e rnb e r s of th e Co ur t of Tax App ea l s in acco rd a n ce with Sec tion 1 3 , Arti c l e VIII of t h e Con s t itutio n . ~Q.~ ' � ERNESTO 0. ACOSTA Presiding Judge Court of Tax Appeals 572