CTA Case No. 4068 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY CITIBANK, N. A., Petitioner, - versus - C.T.A. CASE No. 4068 THE COMMISSIONER OF INTERNAL REVENUE, )( - - - - Respondent. - - - - - - )( This is a claim for refund by petitioner, Citibank N.A., in the amount of P19,726,862. ~~ as alleged overpaid income tax for the first quarter ended March 31, 1984. It appears that pet it ioner, a resident foreign corporation engaged in banking business activities in the Philippines, is authorized by the Central Bank to operate a Foreign Currency Deposit Unit <FCDU>. Petitioner, for the years 1984 and 1985 computed its ten <10") percent final corporate income tax as follows: 435

DECISION C.T.A. CASE NO. 4068 - 2- Onshore Inco�e Other Inco�e Subj. to 10" Subj. to 25- final taM 35" taM .L'.;J8!t 1st Qtr. 3/31/84 P1,492,548. 00 P1 9, 725, 852. �:�o. 2nd Qtr. 6/30/84 P 1 y 572, 420. c:>C::> 3rd Qtr. 9/30/84 NIL 4th Qtr. 12/31/84 P2,751,947. ~ NIL NIL .t~~~ P2 ' 012 ' 702. -c:>-c:>� NIL 1st Qtr. 3/31/85 P2,235,217. ~ NIL 2nd Qtr. 5/30/85 NIL 3rd Qtr. 9/30/85 Pl, 800,945. c:>c:> NIL 4th Qtr. 12/31/85 P1,730,493. ~ P19,726,862. ~ ' - - P 594 948. c:>c:> -------------- T0 TAL 1984, petitioner For the first quarter of paid the quarterly income ta)( in the amount of ' 1=119 726 ' 826. -�::->�-::>�. However, for the second and year 1984, succeeding quarters of the ta)(able petitioner allegedly incurred losses in its foreign currency deposit unit operations. Said amount could have been applied as tax credit for 1985, but again petitioner incurred losses in its foreign currency deposit unit operations for 1985, thus resulting in an overpayment of the corporate income tax for the year 1984. On April 9, 1986, in a letter dated April 2, 1986, petitioner filed with respondent a claim for refund or credit for overpaid corporate 436

DECISION C.T.A. CASE NO. 4068 - 3- income tax for the taxable year 1984 in the amount of p 19, 726, 862. ~.~ � The claim for refund to this date has not been granted by respondent. Hence, this petition for review was instituted by petitioner to interrupt the running of the two-year prescriptive period. The sole issue presented in this case is whether or not petitioner has in fact overpaid its corporate income tax for the taxable year 1984. There is no quibble as to the applicable provisions o�f Sections 68 and 69 of the Tax Code which provides: Sec. 68. :f:>..~.~..t~r..~.t.:!. .QD. .Q_f. ~J!!:P..Q.C~..~- ~. Q11..~..r.J.~_r._!..Y. A~�0~~ ta~. Every corporation shall file in duplicate a quarterly summary declaration of its gross income and deductions on a cumulative basis for the preceding quarter or quarters upon which the income tax as provided in Title II of this code shall be levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid or assessed during the preceding quarters and shall be paid not later than sixty (60) days from the close of each of the first three (3) quarters of the taxable year, whether calendar or fiscal year <As amended by PD 1705). Sec. 69. E. !.n..~.1 ~.!U.112.t~!?_TI:!!.. :r f?.l .!-}..rn. Ever y corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due 437

DECISION C.T.A. CASE NO. 4068 - 4- on the entire taxable income of that year the corporation shall either: <a> Pay the excess tax still due; or Cb> Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year * <As amended by BP Blg. 41 and PO 1705) (see Sec. 24 EO 37> Under the foregoing provisions of the law, it is therefore mandated that the corporate income tax is computed and paid based on net income on a quarterly basis and the annual tax due is adjusted for taxes paid in the previous quarters. If the taxes paid for previous quarters are not equal to the tax due for the entire taxable income for the year, the excess tax paid should be refunded or credited against the quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. To p t OY "' t he e x cess corporate income tax i:J a yme nt . submitted the following ~ o cum e n td-v _v i derces . among others: 438

DECISION C.T.A. CASE NO. 4068 - 5- a> Quarterly Corporate Income Tax Return, Schedule of Computation of Corporate Income Tax, Tax Payment Orde r and Confirmation Receipt for the first quarter of 1984 <Exh. A; A-1 - A3, pp. 9-11, CTA rec. >; b) Quarterly Corporate Income Tax Return, etc. for the succeeding quarters of 1984 <Exhs. B- B- 3, C- C- 3, D- D-3 , pp. 12-17, CTA rec.>; c) Annual Corporate Income Tax Ret urn, Schedule of Corporate Income Tax, Schedule of FCDU Tax <Exhs. D- 4 - D-6, pp. 18-2 0, CTA rec. >. Denial of the admission of said exhibits was reconsidered by the Court through a Resolution dated November 4, 1992 ( pp. 202 - 203, CTA rec. >. These facts were corroborated by the testimony of petitioner's witness, Ms. Julie Pua, and her statements were not challenged by respondent <see TSN, May 18, 1989). However, respondent in her memorandum stressed, among others, that petitioner has failed to produce the necessary evidence to substantiate its claim, more particularly a) the source documents showing the exact nature of the income from foreign exchange dealings on which the corporate income tax of P19,726,862. ~~ was paid for; b) the source documents showing the exact nature of the loss from foreign exchange dealing allegedly sustained during the second, third and fourth quarter of 1984; and c) the books of accounts on the Foreign Currency Deposit Unit <FCDU> showing, among othe rs, how the transactions from foreign 438

DECISION C.T.A. CASE NO. 4068 - 6- exch a nge dealing s we r e re corded and a r r i ved at during the year 1984. To our mind, the submission of such documents are no longer necessary in the light of the undisputed documentary and testimonial evidence which sufficiently established that for the first quarter of 1984, petitioner paid P 19, 726, 862. ~:~ as 25 - 35')(. tax derived from the Foreign Currency Deposit Unit <FCDU> operation in connection with other income and P1 ' 492 ' 548. -o--o- as 10')(. FCDU tax. For the succeeding quarters of 1984, evidenc e showed that petitioner sustained net losses. Furthermore, contrary to the allegations of respondent, the information sought for are shown in the duly audited Financial Statement and Accompanying Notes found on pages 94- 100 of the BIR records. Respondent therefore may be deemed not to have successfully defeated petitioner's claim for tax refund. More so, the evidence presented which were not controverted by respondent, sufficiently established petitioner's right to the refund (S ee Conu10nwealth Mgt. and Service Corp. v s . Co��ission e r of Internal Revenue, CTA Cas e No. 3232 , J un e 26 , 198 5 ; Ba nk of A�erica NT and SA <Phil . 440

DECISION C.T.A. CASE NO. 4068 - 7- Branch) vs. Co��issioner of Internal Revenue, CTA Case No. 3642, December 27, 1991). The circumstances obtaining in the case at bar compel us to sustain the tenability of petitioner's right to the refund based on the pleadings and evidence <Dataprep [Phils.l, Inc. vs. Co��issioner of Internal Revenue, CTA Case No. 3600, March 30, 1984). IN VIEW OF ALL THE FOREGOING, respondent, Commissioner of Internal Revenue, is hereby ordered to refund or grant a tax credit in the amount of P19,726,B62. ~ in favor of petitioner, Cit ibank, N. A., without pronouncement as to cost. SO ORDERED. Quezon City, Metro Manila, June 21, 1994. Jt--1 /'Pt.~~ RAMON 0. DE VE A Associate Jud e I 441

DECISION C.T.A. CASE NO. 4068 - B- WE CONCUR: ~Q.~ ERNESTO D. ACOSTA Presiding Judge GRUBA Judge I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals, in accordance with Section 13, Article VIII of the Constitution. ~\Qc~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 442