CTA Case No. 4219 (Decision)

REPUBLIC OF THE PHILIPPINE S COURT OF TAX APPEALS QUEZON CITY ACCRA LAW PROVIDENT PLAN. represented by TEODORO D. REGALA, ROGELIO , A. VINLUAN, and VICTOR P. LAZATIN, as Trustees and Members of the Provident Plan Committee. Petitioner, ) -vers us C.T.A. CASE NO. 4219 COMMI SSIO NER OF INTERNAL REVENUE, Respondent. X- - - - - - - ------- X DEc I sI 0 N This is a c l aim for ref und involving al leged erro n eously withheld final tax of 16% on i ncome derived -- by P etitioner from its investments of t h e fund s in sa vings an d time deposits, money market p lac e me nt s and i n sec uritie s for taxable years 1 985 and 1986 in the a mount of P126, 049. 34 a nd P168,926.57, respectively. Petitio n er ACCRA Law Provident Plan is a n e mplo yee retireme nt and benefit plan created on \ July 2, 197 3 for the benefits� of all eli gible 98

DECISION CTA CASE NO. 4219 - 2- personnel of the Angara Abello Concepcion Regala & Cruz Law Offices. The Plan was registered with the Bureau of Internal Revenue under Republic Act No. 4917, as implemented by Revenue Regulations No. 1 -68 on August 31, 1973. The trustees. Teodoro D. Regala. Rogelio Vinluan and Victor Lazatin, were duly appointed as such in accordance with the Plan to ~old, manage, invest and reinvest the assets of the fund. For the calendar y ears 1985 and 1986, the trustees inves ted the assets of the fund in savi ng s and time deposits, money market placements l!nd in �i ecurities with various financial l!nd banking institutions from which it derived income of P840,331.96 and P3,168,535.18, respectively. How ever, the said institutions allegedly withheld erroneously t he 15% final tax provided under Secti on 21(d ). now Section 21(c) . in relation to Section S3 (d) (1) � now Section 51(a) of the National Internal Revenue Code in the amount of J P126,049.34 and P168,926. 57, respectively, for the year s 198 5 and 1986. Petitioner ~lleged that the withholding tax was erroneous be~ause the Plan is exempted from tax pursuant to .Republic Act No. 98 9

DE CISI ON CTA CA SE NO. 4219 - 3- 4917 am d Sectio n 56 (b) , now Sec tion 5 4(b) of t h e National Internal Rev e nue Code, as amended. ) Petition er cited the previous decision of this c o u r t i n GC L Re t i r e me n t P 1 an v s � Co mm 1 s s 1 one r of Inte rn a 1 Revenue ( CT A Case No . 3 8 8 8 , 0 e c ember �1 6 , 1986) holding that a trust f un d created pursua nt to a n ap prov ed a nd qualified e mploy e retirement o r benefit pl an i e~em pt from i n c ome tax . Hence, 19 8 7 and February 1 9 , 19 88, ' on December 29 , Peti lon r �filed s pa rate wri tten claims for refund in th~ to el a moun t of P294,976.91. Im medlete y. a he two - y ea~ p riod for claiming a r- efund i s about to ex p i re , Petitioner in sti tuted he Pot! ion fo,.. Review on Cl ce litb r 29, 19 8 7 end a mended h e a me on ebruary 26, 9 88 . Respondent for his part a l l ged that the c lairn for refund s: hould b e d eni ed for failure of the Petitioner to state when t he tax s o u ght to be refunded was paid. The a mount claimed to have been withheld mu st b e s h own to h ave been paid or r e mitted to the gov e rnm e nt. There is no legc!!ll ba s i s for the tax exemption because Presld e ntic!!ll Decr ee No . 19 69 whi c h t ook effe _pt on October 16, 1984, withd rew the exemption fr~m withhol d ing tax 980

DECISION CTA CASE NO. 4219 -4 on interest from bank deposits and yield from deposit substitutes. The decision of this court on "GCL Retirement Plan" is still pending review by the Supreme Co urt . Take not that the issue on the legality of the tax ex mpt statue of the retirement pla n previous y r �sed by Responde n t as major objection w~ not rai s d anymore in his memor an dum dated Nov ember 26, 1992 as an issue pre s umably i n vi ew of the affirmation by the S upreme Court of the d ecision of this court in t he "GCL Retirement Plan" under G. R. No. 95022 promulgated on March 23, 19 92. Hence, the remaining issue s raised before thi court are c11 follows: ( 1) Whether or not Petitioner has sufficie ntly proven the p ayment and remittance of the taxes allegedly J withheld and subject of this claim; ( 2 ) Wh e her or not olaim fo r r fund of taxes allegedly w hheld during the first, secon d and th r d quarter s of 1986 is b a r ,.. e d by p r e s c r i p t i o n �.' I 1"he pertinent lew a ppli c:ab .l!e is Section 52 (now Sec ion 5 ) of the N RC, as amonded1 991

DECISION CT A CASE NO. 4219 - 5- s C. 5 'l. H � turn ond p<!iymwn t." f (.1 !:axe s wi t:hhel d i!J t: source. (a) ("luar terly re t:urn � a nd pa,vmen t: of t:axes t"it:hheld . - Taxes deducted a nd withheld und er Sect i on fifty - three (n ow 61 ) s hall be covered by a return and paid to th e Revenue Di rict Officer, Col le ct ion Agen t. or du l y aut hor ize d Treasurer of the city, o r municipality wh e re the wi thh olding agent h ae hi s le ga l residence or principal place of busine �s or where the withholding ag en t is a corporetio n, where t h e principl!ll office s loca te d . Th e taxes deducted a nd w� thh ld by , t h e with ho dit1t;;J agen t �hall bo held a e pecial . f und i n t u st for the go v ernment un ti l paid to the o o ll e c n g o f f 1 c . � � T h Co mm 1 i on e r of Inter n 1 lhl v o nue tttay, wi h the appro v 1 of t h e Secret ry of Finance, requ~ re th o withh d. n gen ts o pay ot� cl o i t t he taxe ~ d ducted or withheld at mor e frequent i nterval s whe n nec essR ry to prot ct he n e rest of the Go v e r nrn e n t . I.h. . .-. .-.~-~-Y!~---_f..-~.!_ _ f...!.~.~.!. wi t hho l dlng ax s h all be filed and the ������""''"'"'''''"""'''' ""''''"''"""" ''''''''''w:......,,,,,,.,.,,.., ...,u..............u���'"' '''''"�'-''""'"'""..""'""''"'''"'"''���"'""''"''"....",,.,,._...., ,...- ,....,.........,_ .P..~..Y...I.!!.! ..!:J. .~..........L'!......~.............-~-!.!:. f:l..!..O��-..-~. �.___~-~.Y.-~_..._.....:J:.!?J!.l��__~_.b..! ..9...!..~.-~-~�-�� .2..-�-�--~~�~�-~�-��-�-~..!_!...f!.s!. ~.!......_q.!::f._~_!...~-~_r. , wh i 1 e the re urn for cre d tabl e wit hh o lding ta xe s s hall be fi led a nd the payment made not later than t h e last day of the month f o llowi n g t he lo e of the quarter d ur ing wh ic h wi t hhold i ng was made. (c) St:etement: c.1f ncomw payment:s ma de a n d t:a xes t.!l t:hhwl d . .~ v e.r_y_ .~.}:..!:. ~. ':!.~. ~-~. ! '1. 9.......~-9. ~..':.!.�!:........r.:..~.9..':.l-!..!'_~..9...._!:. ~---�d e d,YJ?_!:......!I.!l.Q s. .. . !:!...~........b.!:!..9...~. ~.... ~ ~.~ ~����-~.D..~..~...!:........�. ~. s.:!:J. ~.!J.._!J.f.!...Y..::J:.D_.t.!.! ( n o w 5 1 ) -~..~..~.!.~......!_~..!.D.!.!.!]...-.~-~E..!:L...!..!..9 l...P.J~-n t .t. .LIJ.....r.. ~....P...?._!?...!. .. .......9........b...~..! ........9..t::.......1 ..~........r.. !:'..9..~...!.P...!;.!....~s!.~.~-�!..'J.9. .~. t!..~.. ...~.~..!..~. !J.~..~.r. . .._9.~.~!.:.!.~..~--. . -~.!'........Y...!.~L._!!!_ w r i _!=_~-~-!:!. .�..~..~ .!;.~..~~.~.r.!...!i......~..~. 9..~..+..~.9 ...........t..h.~...... .t~. s.g_.m. ~.. ......P...t:~....._C?...~.h.!'...r.. .P.. ~.Y..T...~. r.:!..!:..~.....~. ~. 9.. ~... ...~. Y.........~.h..~.........~.!..~.h. b. ~.7J:.g.!.D_!L...!?J1.~.n.~. .9.!!..!.!D. 9...- .....~.!::'.g.b.. ~...�LY.~.L---..r...... .9..�~............Y..~-~-!... � a n d � t h e a rn oun of t h e t~x d 0d u c ted � ~nd wit hheld

DECI SIO N CTA CA SE NO . 42 19 - 6- t h a r e f rom .~.!..~ll. l.:l .~. ~.~.n. ~. ~. l.:I..~..~.Y.........l.:I..P.~D.......P....~.Y..'!!.~. ~J:. ..._~-�~ .1::. f.':1..'.3..........!::. ~. 9 ..~...~...~...~ f .......<.>... . . . . ~.-~. .~. . . . .P...~.Y.. ~~. � b u t n o t 1 a t e r t ha n 20th day following th e c lo s e of t h e quarter i n t he case of c orporate p ayee or not ater than March 1 of th e fo l lowing y ear in t h e c a s e o f i ndiv idu a l pa y ee for credi able withho ld ing taxes . E..9...~........ ......fJ..t:!.~..!._........~.!..~.b.h.9...!.~.!.!.!.9.......- ........1::..~..~.-~-~--.........!:..b..~. .~. ~.-~.......~.~.~.tL1::....-~b.. ~.H.!. 9... ..J?.._....IiL.Y~~~!.l-~~--~!--.eJ!Y_f!_~ ..<>.�.~!...............?...!:'...............~..!.f.2. t.:. ~..............;J...~..!.~.Y-~!....Y..................~L.___cz.!__..---E.b. ! .~..Y...9....9..~...~. 9J.n.9.......Y...~.~. r..� ( d) Annual returns . -~.Y~.!:'.Y. . .~.!...~. f.':l..h..9..! . 9...~. !:!...2...-~..9.~.!:!..~.........~..~...9..'::!..!. !.:�'.~..~........~..9......._~-~. 9..!-:!_C1...!=...__,~D. 9.. .~.!. !:.t!..h.9J:..~.. .. ~. ~-~~-~....'::!.D. ~...~.!..._~~-~-�~-!..9..'l_, f i f !.Y. - t h r -~-~ ( n ow 51 ) .~..b.-~..!. J.:. _,_,.....�..~...'?..!:fl i t-�---�~�~--~!:1-~. -~..9.~!.~.!...~. ~.!..5?.D. ~. .~.. ..........._(?,..f.................! . r.:!..!;.~..!:.!J...~-!... .. .... ~.!.Y~D-~. ~-�-..-..~. E. ~...~..~-IJ..�..L!_t~..!:..!..?..~---�-~.:!:2...~-~..!!!-~..!l!.._ P_.!.._ __9,.!:! a r t e r l_y .P.. ~.Y..~-~..r!...1::..~.... .....~.D.~..........!..! . ~.~-... .?.. f......P._~.Y...~..!!.~-�-...~.D.-9.._.!.n..c:.. ~. !!!. ~. P. ?..Y...~.~.!.!..1::..~. � n t h e c a s e o f ..f...!..!.!.~.!.. .~..! . !;. t~.b.. <.>.1..9..!..~.9......_!:.~-~-~.~. ,!. ___,!.~.!..........!:'..! . .!.!:!!..'J....._~_i!,ll____!?...~ :.f...!..!..~..9.........!2.~. --...E.! ..........~.~. . .t~..r..!!_ . .~.-~. r.:!.~�.~.�r~_....l.!._~-~f____t..!:!..~ ~..~_9_9...!l..2..2..!.!.!.9._.__,k"...~..~-.!: � a n d f o r e r e d 1 t a b 1 e wi hho l ding <!!Xe s, no la er th tt n Ma r c h 1 of t he y a r fol l owi ng t h e y e ar for wh ic h th e an nu al re p o rt is b e i n g s ubmitted. This ret u rn. if ma de a nd filed in acc ordanc e with regul at ion s a p prove d by th e Secretary of Fi nan ce. sh 1 be s u f c ie n t camp l anc e with the requi r em n s of Sec t io n fifty - s e v e n ( n ow 7 ) f th � T i le in res pe ct to th e i n c o nH~ p a y me n t . Th sioner may , by r qu o � Jo n , age t1 t a r 6l'l . o 8t'I Y w hhold i ng fur r,' s h n ex t1 i o n of t i me to ltt tid. th r e tur n requi r e d suppl ed .) (U n d er"o o n I n t h e fin~ t iss u e of' wh et h e r or n o t Petiti o ner hea su f ficie n tly estab l i s hed or p ro v en

DECIS I ON CTA CA SE NO. 4219 - 7- t he claim for refund, this court believes that Petitioner failed to prove its claim as req u ir ed by law. The records show th t the evidenc e presented by Petitioner consi t mainly of s avings passbook, certifict!!l � e f p&r cipation . oo t1t'irmat!ons of s<!'tle, bank adv ca conf rrne~ ons o'f investments and r ecnl pt how in prineip~l y the amount of investment � .l n ��e~ t ea l"n d and th e withholding tax oha od ther n p inted or ha ndwritten notes in the in trumen of nvest ment it elf. In some instances. the O<Hnputat!ons of interest Bnd wi hholding are co ntained only in adding machine tapes. These evidences te nd to prove that in fact thel"e were investments done by the Trustees, in t e rest s were cot"respondingly earne d a nd in the case of s avings passbooks, wih ho lding taxe s wer e charged but in case of the other co mm ercial papet"s, w thholding taxes were merely shown to h av e b ee n computed. No other evidences documentary or te st imon ia l were presented to corroborate t he fact of withho di ng and more so, the fac of payment and remitta nce of those withholding taxes to the BIR. The testi mo ny of

DECISION CTA CASE NO. 4219 - 8- Ms. Carina R. Fangonil merely identified the existence of the above documents but never as to t h e i r c.o n t e n t s � Moreover, the with h oldi n g agents or their representative who issued the aforementioned instruments can very well testify as to their contents but were never presented. Petitioner encountered difficulties in proving the fact of withholding, payment and remittance of the withholding taxes simply because it failed to observe the requirements laid down by the law itself. The aforequoted provisions of law require the following positive action on the part of the withholding agent: (1) The filing of a quarterly return with the BIR to contain the final withholding taxes; (2) To furnish the recipient state ment of income payments and taxes withheld . simultaneously upon payment at the request of the payee, or on or before January 31 of the succeeding year; (3) The filing of an annual return with the BIR containing the re'conciliat!on of 985

DECISION CTA CASE NO. 4 2 19 ) quarterly payments, list of pay ees and income payments. This return shall be filed on or before January 31 of the .succeedi ng year. The above requirements are mandatory obligations on the part of the withhold~ng agent. While it may be arg u e d that he above obliga tions pe rtai n to the . with hold ing age nt , nevertheless, the taxpayer pur s uant to Section 52(c) may dema nd that it be furni s hed a written s tatement of inco me payments made a nd taxes withheld. This one is a stat utory obligation of the withholding agent to the taxpaye r. To this requirement, t he Petitione r failed to comply. Not a si ngle statement from the withholding agent was presented during the hearing. Furtheremore, not one return, q uarterly or final, even a ph otoc opy was either presented to suppor t the fa ct of payme nt or remittan c e. As a clien t , Petitioner could eec u e photocopies of the returns from the withholding age nt � On the se cond i ss ue, purs uan t to Sectio n 292 (now Se c. 23 0) in relation t o � Section 295 (now S e c t 1 o n 2 0 4 ) o f t h e T a x C o d e ,1 r e c o v e r y o f t a x ' erron eously or ille g all y co llec ted must be don e 996

DECI S ION CTA CA S E NO . 4 2 19 - 10 - wi t h in two yel'lt's from the dl'lte o f p .!!y me n t o "f t he tax in q u estion b y filing a ti mely c laim for t'efu n d wit h t h e Com mi sioner of In te t'n al Re ve nue e nd i n stituti n g a s u it or pt'oc eeding i n co urt wit h in t h e s a me p riod of time. In t he c a se o f fi n a l withho l di n g tax as in the i n s t a nt case pursuant to Sectio n S2(a) ( now Sec t i on 51) o f the National n tet'na l R~v n u e Code, th e fi lin g of t h e return a nd h ~ pa ym e n t of th cor ,...e po nd i n g taxes ;,Ji hl1eld hou.l.d m de w 111n 2 5 da ys fr om h e close of SQ 11 Cti le n dal" qu ar ter. T h e rec ord s s how t h ~t the P etit io ne r f iled its claim fo refund and h ~ !nsta nt P eti tion f o r Review on Dece mber 2 l :1987 co v er ! n 9 i ts 1 985 c l a im . Ina s much a the pa y men of with ho l d i ng taxe s ha s to be d one o n a quarter ly b asis, o n l y the claim for refund of Petitioner for the per i od s tarting th e la s t q uarter of 1985 remains val i d and s ub s i s ting. Hence, all c laims invol v ing withholding of tax es f rom November 1984 t o September 30, 1985 s hown in the bank pas s books and other commercial papers have alr e ady pres c ribed. The amount ne e d not be stated in vi~w of the fir s t f inding of t h is court that Pet iti oner failed t o

DECISION CTA CASE NO. 4219 - 11 - prov e i t s claim a bl e a mo un t as re quir e d by law. As correctly ei gd by the Responde n t, the cas e o f Ban i~ of the Philippine Isla nd s, e t al. vs. Comm issi oner of Internal Revenue, C .T.A. Case No. 4217, Oc to ber 22 , 1992 is a si milar case ver y mu c h a p plica b le to the in sta n e�se. WH EREF OR - , in vi w o f t he foregoin g . the he rei n claim for ~ - f un d s denie d and t he ins tant S O ORDERE D. Quezon City, Metro Manila, Se p tt! mber 23, 1993. c~ -:-T'O<,D~ . ACO STA P r esi d i ng J udge WE CONCUR: GRUBA ' 986

DECISION CTA CASE NO. 421 9 - 12 - CE RT I F I CAT I 0 N I her e by ce r ti f y tha t t h is dec i sion was reac h e d af te r due co n s u ltatio n among the mem b e r s o f t h e Cow'" of � T ilx Appeels i n ac c o rdan c e wit h � Section 13, Art l e Vl o f t h Con s t itu t io n . ~..�;;;.Q.~ ERN STO D. ACOST A Pr s id in g Judg e Co u rt o f Tax Ap pea ls 999