CTA Case No. 4896 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PNB PROVIDENT FUND, C.T.A. CASE NO. 4896 Petitioner, Promulgated: - versus - MAY 0 5 1997 COMMISSIONER OF INTERNAL REVENUE, ---X Respondent. X--- DECISION This is a claim for refund of P68,088,425.08 representing 20% withholding taxes on treasury bi I Is and Central Bank (CB) Bills sold or purchased by the PhiIippine National Bank to herein petitioner on various dates covering the years 1990 and 1991 and the months of January to September 1992 <Amended Petition for Review, CTA records). Petitioner is an employees' trust established by the, PNB Board of Directors pursuant to Section 11(f}) of Executive Order No. 80, otherwise known as the 1986 Revised PNB Charter. As such, It has been duIy qua I ified and approved as a tax exempt organi z at in under Secti p1 , j' .. \ 53(b) [formerly Section 56(b)J of the Tax Code a provided in 'BIR Ruling No. 089-91, dated May 21, t !.- / r . �:; . ) �etters of the BIR dated June 28, 19 ... PI 1 <I> 19R9 {Exh. 0' and: ; u.g us t 30 �/':" : .:: ..... . r :! te,..ating ts tax exempt' status..

DECISION - C.T.A. CASE NO. 4896 -2- On October 29, 1992, petitioner fiIed with respondent a letter-claim for refund of the amount so aforestated on account of its tax exempt status (EX h. "E" ) . Two months Iater, on December 29, 1992, petitioner filed the instant petition for review, with an amended petition fiIed on February 22, 1993, alleging respondent's faiIure to grant the refund being sought and the need to preserve its right to judicially claim the same. In her answer to the amended petition for review, respondent raised, among others, the following specia.l, and affirmative defenses, to wit: "5. The petition does not state a cause there is no aIIegation when the of action as be recovered was paid. tax sought to 6. One who claims to be entitled to income tax exemption on the earnings of its employees' trust under Republic Act No. 4917 in relation to Section 53(b) of the National Internal Revenue Code <NIRC) can not claim exemption from the final tax imposed by ..� c �- 21(c)[ 24(e)[1] of the NIRC for e 1- � ' , >i ., d e r ' � d i n terest on ban k deposits and/dr de oc; t substitutes. T Lr0v � � s granting . exempt-on & r� r ' n ;. � a x o r: .- r- e r est o b a �n k .:; e p o s 1 t < 'I r .) p t 3 U b S t , 1: U t A S 0 h q $ _e , 'II : 0 Ci r -w �rGome taation Pond 'ln. :etlcs ""' 'c' of t�F N RC w re-'de1f cd ")' a P - , e e . 1 ::> 1 59 9 \ s 1 c ) , w f"l 1 . ---:; .s- 15, 984. 1-<ence c ") r. r ... "' i .. -- ... "" I) c e d b \I 0 � D. 1 . I R; ) 42( f

DECISION - C.T.A. CASE NO. 4896 -3- the exemption granted under Sections 21(d) and 24(c) (now Sections 21(c)[1J and 24(e)[1J, respectively) of the NIRC is considered revoked or withdrawn." The issues confronting Us may thus be summed up in this wise: 1. Whether or not the amendments introduced by P.O. 1959 have effectively revoked or withdrawn the tax exemption privi I ege granted by the Tax Code under Section 53(b) on employees' trusts or benefit plans; 2. Whether or not petitioner has proven the factual elements of its claim for refund. Anent the first issue, the legal disquisition posed by respondent had long been succinctly settled by the Honorable Supreme Court in the case of Commissioner of Internal Revenue vs. The Honorable Court of Appeals, The Court of Tax Appeals, GCL Retirement Plan, represented by its Trustee-Director, 207 SCRA 487, promulgated on March 23, 1992. It was held therein, thusly: "The deIetion in Pres. Decree No. 1959 of the provisos regarding tax exemption and .} preferential tax rates under the old law, therefore, can not be deemed to extend to em IO\'ees' trusts. Said Decree, being a gener::11 law, can not repeal by Implication a speciii ro�1S1 , Section 56(b) <riow, 53[bl) e ,::.��o.r (O . e . Act No. 4917' granting xwno�� ' 1 ""ro $ income t .Y to employees. truts. ep 1 " +: 8 :. w hic h e x c e pted e 111 s I oy e, e ' � �r r u s ,,., �s .:t Jn 56(b) W<;; effective d" . 2 2 June Ol)' " irJ. Act No 4 9 17 wa enat:te d on 7 ' I j n to i :.:. 6 1 i ' ,1 g be f 0 r e t h e I s s I a nc . 0 f pres . 1eG r � II' e �, 9 5 g n 15 0c t o ber 1 98 4 . A 420

DECISION - C.T.A. CASE NO. 4896 -4- subsequent statute, general in character as to its terms and application, is not to be construed as repealing a special or specific enactment, unless the legislative purpose to do so is manifested. This is so even if the provisions of the latter are sufficiently comprehensive to include what was set forth in the special act (Villegas v. Subido, G.R. No. L-31711, 30 September 1971, 41 SCRA 190). Notably, too, all the tax provisions herein treated as income under Title II of the Tax Code on "Income Tax." Section 21(d), as amended by Rep. Act No. 1959, refers to the final tax on individuals and falls under Chapter II; Section 24(cc) to the final tax on corporations under Chapter III; Section 53 on withholding of final tax to Returns and Payment of Tax under Chapter VI; and Section 56(b) to tax on Estate and Trusts covered by Chapter VII, Section 56(b), taken in conjunction with Section 56(a), supra, explicitly excepts employees' trusts from 'the taxes imposed by this Title.' Since the final tax and the withholding thereof are embraced within the title on 'Income Tax,' it follows that said trust must be deemed exempt therefrom. Otherwise, the exception becomes meaningless." Veri I y, employees' trusts, such as herein petitioner, are tax exempt under Section 56(b) [now Section 53(b)J of the Tax Code. Although petitioner is not covered by R.A. No. 4917 An Act Providing that Retirement Benefits of Employees of tlvate Firms shal I not be subject to Attachment, Levy , Ex e. cut �1 o n , or '�. any Tax. its --; �_::... .- .� whatsoever], promulgated June 17' employer is I{ corporation . . . . ... ;� a overnment-owned or control id and not a private firm, We submit that . n the basis r? ;�c ' 0 r� as m uea ov M 4?!J /

DECISION - � C.T.A. CASE NO. 4896 - 5- 1983 , effective on June 22, 19531, petitioner is entitled to tax exemption. Section 53 (b) provides as follows: "SEC. 53 Imposition of tax. - (a) xxx. (b) Exception. - The tax imposed by this Title shal I not apply to employee's trust which forms part of a pension, stock bonus or profit sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) If under the trust instrument it is impossible, at any time prior to the satisfaction of alI llabi I ities with respect to employees under the trust, for any part. of the corpus or incorne to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: Provided, That any amount actually distributed to any emp I oyee or distributee shaII be taxabIe to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee." This view has been reiterated by the respondent in the person of former Commissioner Jose U. Ong in BIR Revenue Memorand 4 Order No. 9-93 , b ctober 15, 1992, <Exh. "A") which pa tinently provides: "Other employees" trust fund adyer t ;0- fri! 4 i in this Or er shal I refer to the tru of:� Pttgt employees other than those employers/ c ompanies, the , tax -. .� exhlpt which h d� a f!!ifil"atlon of : ,, bei;r, ). " � e r m r :� ad J u d i c at e d by t h e 13 I R }I nd �:- !V ' -.,:-� .- �{o) now Section 53(b)] of tT� ' o d � :. " l'l 11 ,.. ;': u !H e r R A � 4 9 1 -r o f :.:: e c i o r. {.' Tax Co_e, e. g . . 4J0

DECISION - C.T.A. CASE NO. 4896 -6- Provident Fund, CB Provident Fund, Land Bank of the Phi I ippines Provident Fund, GS IS Provident Fund, NPC Enq:Yioyees' Savings & Welfare Plan, NHA Provident Fund, etc. xxx." (Emphasis supplied, Exh. "A-1".) From the above discussion, there is no denying the fact that, legally speaking, petitioner is exempt from income tax. We now go into the factual merit of petitioner's evidence. After a painstaking scrutiny of all the exhibits presented, We partly find for the petitioner. The refund of withholding taxes on treasury bi I Is as shown in the schedule suQmitted by the petitioner, with value date January 24, 1990 up to December 12, 1990 (Exhs. "E-1" and "E-2"), is hereby denied because the same have prescribed in view of the lapse of two year$ from the date of filing of the instant petition on December 29, 1992. Section 230 of the Tax Code precisely provides, thus: "SEC. 23p. Recovery of tax erroneously bg t or i Ilegally ppllected. - x x x. In any case., no such suit 9r proceeding shal I be f er :: p the xoiration of two years from_ t ti P- f J le 11 t .:!_"' . h e t a X o r p e n a Ity r ega r d C e � _ :_: r\'i.'� upe__::Jlr_ : �caus e that may arise after�,. a.,.�et.::t., !'H:: '1 () VI'S' v e r I T h at 'h ; -:-: --�- ' -': �: a w r ! t ten :) r 0 \1 i ;;; "' " he c 0 m lil i s s I,' .. . aim t ere f : ' _ ' , n ' I c �. � , 111, �ax, wherf' on t..- , fc 6' � � 1h i 0 h p a v ,, en t w" .,. :n a. :i - a\ u ciaR- to a ve e '-' "' t' '- ., " ,.. ' p ;:: c' ( u r d s 0 r i n (J I D p I i e ,.,. 431

DECISION - C.T.A. CASE NO. 4896 -7- Likewise, the refund of withholding taxes on treasury bilis with value date August 6, 1991, September 30, 1991, November 20, 1991, December 2, 1991, May 20, 1992, and August 31, 1992 (Exhs. "E-3" and "E-6") is correspondingly denied for lack of any proof whatsoever to substantiate such particular claims. In addition, confirmation of sale or documents submitted not conforming to the value dates of treasury bi I Is listed in the schedule and certificati5n of treasury bi I Is sold by PNB to the petitioner as contained In Annexes "G" to "K" of the amended petition or Exhibits "E-1" to "E-6" are excluded. They dG nGt support the factum probandum sought to be estab I Ished by the petitioner. As to the rest of the claims, this Court finds tMe to be evidenced by appropriate documents which consist of all or any of the following: confirmations of sale t:\!ld �.l confirmation of purchase; trading orders in the name of petitioner; PNB pank. statements tl�i::e-.�,.i ij on debit/credit t ::: JJ . entries of petitoner's savings and curre o b and q . -: . a c e rtifi c at i o n .;. wi t h schedu I e of the Ba!) tJ -Sntrat '78S � hAt . :.t�- �.=rom ;ts ;.� 432

DECISION - C.T.A. CASE NO. 4896 -8- remitted to the BIR <Exhs. "K-1" to "K-8-b", inclusive of submarkings). What can therefore be granted to the petitioner are the following: Value Date Confirmation WITHHOLDING TAX Exhibit of Sale (CS) or Confirmation of Purchase (CP) 20-Mar-91 CS121964 p 497,524.38 K-9-q 25-Jun-91 18-Sep-91 CP23524 ( 189,944.34) K-9-4 18-Sep-91 20-Sep-91 CS144212 291,251.51 K-9-sss 30-Sep-91 16-0ct-91 CS144213 2,799,247.72 K-9-ttt 18-0ct-91 08-Nov-91 CS144214 1,048.51 K-9-s 14-Nov-91 14-Nov-91 CS144936 285,379.36 K-9-aa 14-Nov-91 21-Nov-91 CS147547 691,542.40 K-9-uuu 21-Nov-91 29-Nov-91 CS147546 5,329.46 K-9-t 29-Nov-91 02-Dec-91 CS150151 142,414.86 K-9-u 17-Dec-91 6-Jan-92 CS151773 650,044.71 K-9-v 15-Jan-92 CS151714 1,936.39 K-9-w 20-Jan-92 20-Jan-92 CS151770 153,693.98 K-9-yyy 29-Jan-92 30-Jan-92 CS153160 128,272.32 K-9-x 13-Feb-92 13-Feb-92 CS153159 17,735.98 K-9-y 19-Feb-92 06-Mar-92 CS154276 26,188.16 K-9-vvv 06-Mar-92 06-Mar-92 CS154275 3,273,519.65 K-9-xxx n::- '� '? �r?":b.2 CS154274 5,440.11 K-9-z '.k �::,��a � . CS157163 5,994.64 K-9-bb C-M'-'r-8 Trading ... � 4- r- a Order A53906 169.87 K-12-ppp CS160298 867,104.45 K-9-cc CS160965 578,337.04 K-9-www CS160967 3,378.39 K-9-dd �' CS162295 7,973.87 K-9-ee CSlt)2634 4155,,23::6t., 4q""; .....5951 K-9-ff K-9-gg CSi 4848 CS1' 6: 4843 p 9 4 346,0�53.79 K-9-hh 3,a 7o. . .!<- 9-ii CS165376 188,147., -� CS167049 'k-9- �.' jj GS167047 331,596.;3 <e . l ' .,;,-kk .CS167050 1,031,700.;ff; -9- I I S1 577 $ 1,468,51o.b ,K-9-r-.., --. S 1 R 576 �.'\ -no. CS1h9i07 2,075,286 . .e4 58,922.37 K-9--p :S1l255e i 1 4. 164.77 K-9-qo 430

DECISION - C.T.A. CASE NO. 4896 -9- Value Date Confirmation WITHHOLDING TAX Exhibit of Sale (CS) or Confirmation K-9-rr of Purchase (CP) K-9-ss K-9-tt 29-Apr-92 CS172925 88,183.43 K-9-uu 29-Apr-92 CS173006 9,422.09 K-9-vv 06-May-92 CS173828 K-9-ww 06-May-92 CS173829 315,203.71 K-9-yy 20-May-92 CS175939 3,068.35 K-9-zz 03-Jun-92 CS177442 683.52 K-9-aaa 03-Jun-92 CS177453 K-9-bbb 25-Jun-92 CS180543 3,680,653.42 K-9-ddd 25-Jun-92 CS180544 20,691.12 K-9-ppp 25-Jun-92 CS180542 K-9-fff 25-Jun-92 CS180541 163,180.71 K-9-qqq 21-Aug-92 CS186833 163,180.71 K-9-hhh 21-Aug-92 CS186835 636' 182.10 K-9-rrr 21-Aug-92 CS186834 3,669,006.99 K-9-iii 26-Aug-92 CS187447 177,947.49 K-9-oo 26-Aug-92 CS187917 337,659.79 K-9-xx 26-Aug-92 CS187918 1 '491 ' 111.03 K-9-ccc 31-Aug-92 CP28102 K-9-eee 31-Aug-92 CP28104 87,018.50 31-Aug-92 CP28052 107,305.55 K-9-ggg 31-Aug-92 CP28101 31-Aug-92 9,150.75 K-9-jjj 31-Aug-92 CP28051 358,258.25) 02-Sep-92 CS188129 (2,575,705.41) K-9-kkk 02-Sep-92 CS188131 ( 121,479.85) K-9- I I I 02-Sep-92 CS188130 (2,390,343.38) K-9-mmm 02-Sep-92 CS188672 ( 166,506.28) K-9-nnn 16-Sep-92 CS190641 ( 327,315.55) K-9-ooo 16-Sep-92 CS190623 2,603.59 176,125.50 115,936.53 5,819.80 229,536.31 162,872.79 P21 ,995,350.84 It must be stressed at this point that a refund of taxes partakes the nature of a tax exemption and are construed in strictissimi juris against the taxpayer and in favor of the taxing authority (Insular Lumber Co. vs. CTA, 104 SCRA 721 and CIR vs. Rio Tuba Nickel Mining Corp., 207 SCRA 549).

' DECISION - C.T.A. CASE NO. 4896 - 10 - WHEREFORE, in view of the foregoing premises, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby directed to REFUND in favor of petitioner the amount of P21 ,995,350.84 representing erroneously withheld final (20%) tax for the years 1991 to 1992. SO ORDERED. oz..C: ERNESTO D. ACOSTA Presiding Judge WE -- P-i{ RAMON 0. DE VEY Associate Judg �' . CERTIFICATION hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VI I I of the Constitution. lQ, ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 43Li