CTA Case No. 5696 (Decision)

REPUBLIC OF T HE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY STANDARD CHART ERED BAN K - . PHILIPPI NE BRANC HES, Petiti oner, - versus - C.T.A . CASE NO. 5696 COMMISS IONER OF INTE RNA L Promul gated: REVENU E, AUG 16 200t#-' /""' ~- o......._./ Res pond ent. x - - --------- - ----- -- ----------- - -- --- -- - ---- - ---------- - ---- x DECI S IO N This case invo lves the dc1i cicncy doc um entary stamp tax assess ment of Petitioner for the years 1994 and 1995 in the amount or ONE M l LLION TWO HUN DRE D EIGHTY-ONE TIIOUSAND ON ! ~ IIUNDRED TWENTY- ri VE PESOS (P 1,28 1, 125.00). Petitioner is a res ide nt foreign bankin g insti tuti on dul y orga ni zed and registered under the laws of England and authorized by the Sec uriti es and Exchange Commission to engage in business in the Philippines, vvith of'J icc add ress at 6756 Ayala /\venue, Makati City. The facts of the case as cull ed from th e reco rds arc as fo ll ows: Petitioner purchased treas ury bill s fro m the lJa ngko Sentral ng Pilipinas (l3 SP) in the yea rs I994 and I995. On Ap ril 27, 1998, Petiti oner rece ived Formal Assess ment No ti ce (FAN) Nos.38 1- 00 1-98 and J g 1-002-98 dated April 14. 19n. fr om the 1\cs pondcnt lo r th e all eged f) �'1 ~ '- I u

DEC ISION- CTA CA SE NO. :l (>lJ6 PAG E2 defici ency doc um entary stamp taxes (DST) cove ring the years 1994 and 1995 in the total ,n amount of PI 1.1 25.00 inclusive of penalti es. and summ ari zed as fo llows; 1994 1995 P348,600.000.00 Pucha5c o n �-bill s from 13 SP Documentary stamp Tax due at 522.900.00 P0.30/ P200 per Secti on IXO, NIRC 0.00 Less: J>a ytllent Documentary Stamp Tax due P522 .900.00 P462 ,000. 00 Add : Surcharge ----~------~------~ 130.72) .00 115 ,5 00.00 Compromi se 25.000.00 25 .000.00 Total amount due and �co ll ectibl e P678 .62 5.00 P602.500.00 (Exhibit A, p. 8. CT/\ Records) On May 26. 1998, Petiti oner filed its protest aga inst the subj ect assess ment. (Exhibit D). It likewise submitted a letter from the Governm ent Sec urities Department of the BSP dated Se ptember 11 . 1997, confirmin g th e po licy that the DST on ori ginal issues of governm ent securiti es are fo r the acco unt of the issue! (Ex hi bit.! ) For failure o f' Respondent to decide on the said protest. Petiti oner fil ed the instant Petition fo r Re vievv with thi s Co urt on Dece mber 14. 1998 . On February 17. 1999. Responde nt fil ed hi s Answe r. and advanced the foll owing Special and Affi rm ati ve Defenses. viz: "4. The assessments in questi on we re made and issued 111 accordance with law and ex istin g rul es and reg ul ati ons:

DECISION- CTA CASE NO. 5696 PAGE 3 "5. The assessment has become finaL executory and demandable for failure of the Petitioner to submit all relevant documents to the Respondent within sixty (60) clays from filing of' the protest pursuant to Section 228 of' the Tax Code; "6 . All presumpti01~s are 111 favor of the correctness of the tax assessment (Interprovincial Autobus. Inc . vs. Co llector or Internal Revenue, 98 PHIL. 290)." During the hearing conducted on March 23. 1999, Respondent manifested that the court has no jurisdiction to decide on the Petition since the assessment in question has become final and executory. On March 30, 1999, Respondent filed his Motion to Dismiss and alleged that Petitioner failed to submit the rel evant records/documents to support its contentions within the six!y-clay period after the letter-protest was filed, thus, the deficiency tax assessments in question became finai pursuant to Section 228 of the 1997 Tax Code. On May 27, 1999, the Court issued its Resolution denying Respondent's Motion to Dismiss on the ground that the "relevant supporting documents" mentioned in Section 228 of the I997 Tax Code "rc!Crs to such documents which the taxpayer ICcls would be necessary to support hi s protest and not what Respondent Commissioner feels should be submitted." lf Petitioner believes that the letter of the 13SP is the only relevant document that would best support its protest then that is suffici ent co mpliance with the requirement set fotih in Section 228.

DEC IS ION- CTA CA SE NO. 5696 PAG E4 '�'� In order to support its contenti on that it is not L1bl e to pay the defi ciency DST imposed by the Respondent, Petiti oner prese nted the fo ll owing doc uments, to wit: I. Department Order No. 14 1-95 Se ri es of 1995 (Ex hibit I) 2. Certifi cation da ted Septembe r II . 1997 from the Govern ment Securities Department of the Bangko Sentral ng Pili pinas (Ex hibit .1 ) 3. Certification dated Ma rch 30. 2000 issued by the Burea u of Treasury (Ex hibit L) The so le issue to be reso lved 111 the case at bar is WHETHER OR NOT STANDARD CHART ERED BANK -M ;\ NIU\ BR /\NC II SII OULD BE HELD LIABL E TO PAY T HE AMOUN T OF ONE MILLI ON TWO II UN DRED EIGHTY - ONE THOUSAND ONE HUN DR ED TWENTY-F IVE PESOS (Pl ,281 ,125.00) AS DEFICIENCY DOCUMENTARY STAM P TAX FOR ITS PURCHASE OF TREASURY BILLS f<'OR T HE YEA RS 1994 and 1995 . We find Petiti oner' s asserti ons tenab le. Quoted hereunder are the pertinent provisions of the 199 7 National Intern al Revenue Code (NIRC), vi z: "SEC .. 173 . Stamp Taxes Upo n Doc uments, Loa n Agreements, Instruments and Papers. - Upon doc um ents, instruments. loan agreements and papers, and upon acce ptances, ass ignments. sa les and transfers of the obligati on, ri ght or properly incident thereto, there shall be kv ied, co llected and paid fo r, and in res pect of the transac ti on so had or acco mpli shed, the corresponding doc umentary stamp taxes prescribed in the fo llo wing Sections of thi s Titl e, by the person makin g. signing, issuing, acce pting, or transferrin g the same whereve r the doc um ent is made. signed. issued, accepted or transfe rred when the obli gati on or ri ght ari ses !'rom Philippine fl ...... u" ,} !

DECISION- CTA CASE NO. 5696 PAGE 5 so urces or the property is situated in the Philippines, and at the same time such act is done or transaction had : Prov ided. That whenever one party to the taxable document enjoys exemption !"rom the tax herein imposed, the other party thereto who is not exempt shall be the one direc tl y liable for the tax ." ''SEC. ISO. Stamp Tax on All Bonds. Loan Agreements, Promi sso ry Notes. Bill s of Exchange. Drarts. Instruments and Securities Issued by the Government or Any or its In strumentalities. Deposit Substitute Debt Instruments. Certificates o r Depos its Bearing Interest and Others Not Payabl e on Sight or Demand . - On all bond s. loan agree ments, including those signed abroad, wherein the object or the contract is located or used in the Philippines, bills of exchange (between points within the Philippines), drafts, in struments and securities issued by the Gove rnment or any of its instrumentalities. deposit substitute debt instruments, certificates of deposits drawing interest. orders !o r the payment or any sum o r money otherwi se than at sight or on demand , on all promi sso ry notes, whether nego tiable or non-negotiabl e. except bank notes iss ued lo r circulation. and on each renewal or an y such note. there shall be co ll ec ted a doc umentary stamp tax of Thirt y centavos (P0 .3 0) on each Two hundred pesos (P200). or f'ractional part thereof. or the face value or any such agreeme.lt. bill o r exchange, draft, certiticate o f deposit. or note: Prov ided. Th at onl y one documentary stamp tax shall be imposed on either loan agreement. or promi sso ry notes issued to secure such loan. whichever will yield a hi gher tax: Prov id ed. however, That loan agreements or promi sso ry notes the agg regate o r which docs not exceed Two hundred fifty thousand pesos (P250.000) exec uted by an individual for hi s purchase on in stallment fo r his personal usc or that of hi s famil y and not fo r bu siness. resale, bar ter or hire or a house, lot, motor vehicle. appliance or rurniturc shall be exe mpt f'rom the payment of the documentary stamp tax pro vided under this Section." From the fore go ing prov isions o r law. it can be inf'crred that the ori ginal issuance of treasury bill s is subject to the DST. 1-l o\\CVC I'. it has been the policy or the BSJJ (Fiscal Agent o f the National Government). as the iss uer o r tl1c treasmy bills. to assume the liability for payment o r the DST on the original issuance of treasury bill s. Moreover. under Department Order No. 14 I-95 Series or 1995 . the Department of Finance (DOl :) ass umed the liability or pa yin g th e IJST. \Vhen the fi scal function of n ,.., .. ~ \,} {

DE C I S I O N - CTA CASE NO. 56% PAGE 6 issuing Treasury !~ills and .Bonds was transferred from the BSP to the DOF effective November 16, 19\).:\ . pursuant to R.A. No. 7653. otherwise known as the "New Central Bank Act. " As su ch. the BSP (then Central Bank) did not withhold nor remit any DST from the purchase or treasury bill s by Petiti oner, which was confirmed in the letter dated September II . 19()7 signed by Ms. Lagrimas R. Nuqui. O l'licer-ln- Chargc, Government Securities Departn lL' Ilt. stating: "x:-.:.\ the terms and feature s of the issuances of government securities. documentary stamp taxes on original issues arc lor the account of the issuer. These docum entary stamp ta xes on primary purchases of Treasury Bill s ha ve, therefore, not been withheld against the account of the primary purchascr/s.''. The DST on th e purchases of Treasury Bills issued by the BSP in behalf of the National Governn lL'Ill during the yea rs 1994 and 1995 we re paid/re mitted by the Bureau ofTreasury in compli~tncc with the 00f-D l3M Joint Circular No. 2-9 1 dated Nove mber 19, 1991 and DOl i)cpartment Order No. 14 1-95 Series of 1995. (Ex hibit L) Petitioner' s IHln-payment of the DST on its purchases or treasury bill s lor the years 1994 and 1995 \\~1s primarily due to its reliance on the letter co nfirmation issued by the Government SecLII�itics Department of the BSP that the DST on the original issuance of the treasury bill s sh~1 ll be lo r the account of the issuer. that is, the BSP. On the other h<tnd. Respondent's primary argument is that the assessment has become final ami C.\ L'cutory since Petitioner fa il ed to submit all the rele vant documents. within the prescrihL'd period. As di scussed earlier. the issue has already been settled by this Court in its I ~ L� :; ol uti o n elated May 27. 1999 . We thus. reiterate that the requirement stated in Section 22X o l' the NlRC, on the submi ss ion of all the relevant supporting

DECISION- CTA CASE N O. :\6% PAGE 7 do'cuments withill til l�. sixty-clay period rrom filin g o r the protest IS directory. In th e aforementioned Rc�s()!t Jtion . the Co urt ruled in thi s \vise: x\ \ that the "rele va nt supportin g doc uments'' menti oned in the law l'el'crs :o stJcil documents which the taxpayer !Ccls wo uld be necessary to support hi s protest and not what the Respondent Commissioner feel s should he sul'111itted. otherwise, Petiti oner taxpayer would always be at the merc y ol' tilL' I l l! ~ �which ma y require producti on o r such documents which taxp<~ yc r c1,uJd Jl\lt produce. xxx .. Morco\ cr. ,,!Je n the protest was filed or within the sixty-da y period to file the "relevant supportin g doc um ents," Respondent did not requ ire the particular documents which it needed i11 uJcieJ that the protest ma y be give n it:. prckrc11tial attention . It merely allowed the prL'sn ipti vc period of sixty (60) clays to lapse without taking any action on the protest. As stated L':trl ier. the determination or the " relevant supportin g doc uments" initially rests liJlOII til L� OJ lC who filed the protest, in thi s case. the Petiti oner. However, in cases where the 1 ~ 11 \ limls that additional documents mu st be submitted. it should have informed the I<I X J l~J\ L'r- protester to submit vvhatcver documents arc lack in g in order that a complete detcnni llCJtill n nf't hc propriety or th e assessment may be had . Thus. Respondent has been remi ss i1 1 ill limning the Petitioner of any other add iti onal supporting documents to be submitted which !'act should not undul y prejudice Petiti oner's protest. Lastl y. .; incc 1hc 13SP has ass um ed the liability o r paying the DST on the original issuance of th e I rcJ :.; ury 13ills. as in fact it has pai d/re mitted such DST wi th the BJR through the l3urc <~u Pl. Treasury (sec Ex hibit " L") . Pet iti oner should no lon ger be held liable for the JXI)'JilL'Ill ul ' such DST.

DEC ISION- CTA CAS E NO. 5696 PA G E S ',, WHEREFORE. in .V Iew of all the fo rego in g. Respondent Co mmi ssioner of Internal Revenue is hereby ORDERED to CANC EL ami WITHDRAW the Formal Assessment No ti ce Nos. 38 1-00 1-98 and 38 1-002 -98 both dated April 14, 1998 for deficienc y doc umentary stamp taxes lo r the yea rs 1994 and 1995 . SO ORDERED. sit!! MANCIO Q. Assoc iate Judge I CONCUR: ~o.C~ ERNESTO D. ACOSTA Pres idin g Jud ge CERTIFICATION I hereby ce rti fy that the above dec isio n was reached after du e co nsultation with the members of the Co urt of Tax Appea ls in acco rda nce with Secti on 13, Arti cle VIII of the Constituti on. ~~-~ ERNESTO D. ACOSTA Pres idi ng Judge ~)80