CTA Case No. 4122 (Decision)

-\ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, -� ver~sus C.T.A. CASE NO. 4122 COMMISSIONER OF INTERNAL REVENUE, Respondent. x----�- ---------------X DECISION This case ot~iginally involves a claim for t~efund in the� amount of P2,501,263.07 excess creditable withholding taxes for the year 1984. Petitioner~ i s a ban~<ing cot~pot~ation organized and existing under the laws of the Philippines and is authorized to engage in commet~cial ban~<ing by vit~tue of Monetary Board Resolution No. 223 dated February 14, 1963. On J"anuat~y 25, 1985, the Monetat~y Boat~d issued trlB Resolution No. 75 ot~det~ing the closut~e of petitioner bank on the gt~o�.md that "the continuance in business of the bani-< would involve pr~obable loss to i t s depositot~s and �. t creditot~s" based on the examination conducted by the Central Ban~< on the financial condition of the ~.023

DECISION - C.T.A. CASE NO. 4122 2 pet it ioner. The aforesaid resolution designated Mrs. Carlota Valenzuela, the deputy Govet~not~ of the Central Bank, Latet~ on, she was appointed as liquidator upon another resolution issued by the Monetary Board declaring petitioner bank as insolvent and ordering its liquidation. It was d1..n~i ng the pt~ocess of 1 iquidat ion and undet~ the administt~ation of the liq�.lidatot~, that a claim for refund was filed by the petitionet~ bank on Decembet~ 21, 1986 with the BIR in the amount of P2,501,263.07 covering The said claim for refund was based on an amended income tax return for 1984 filed by petitioner bani-< tht~ough its 1 iquidat ot�� on Decem bet~ 22, 1986. This claim was hinged on the asset~tion that the 1'384 income tax return reflected a net loss of P501,326,838.00 therefore the taxes withheld by the withholding agents securities in the amount of P2,501,263.07 is refundable. On Decembet~ c~lt, 1'38C, the vet~y same day the Biri l�~eceived the claim fot~ t~efund, petitionet~ filed a petition for review with this Court covering the same refundable amount. In ans~Jet~ to the ot~iginal petition, t~e s pond ent .t proposed the f o 11 owing Spec i a 1 ;and Af fit~ mat i v f~ Defenses, thus: 1.024

DECISION - C.T.A. CASE NO. 4122 3 5. Petitioner's claim fot" t"efund is pending investigation; 6. The petition states no cause of action as the petition for t"efund does not allege the date when the tax was paid <Manufacturet"' s Bank and Tt"USt Co. as tt"ustee for Gem Tl~ust Plan v s. The Commissionet" of Internal Revenue CTA CASE NO. 165'3 Novembet" 2'3, 1'365; 7. The mere averment that petitioner suffet"ed a net loss of P501,326,838.00 dlwing the yeat" involved does not ipso facto met"it a refund; 8. The amount of Pc:,501,263.07 alle!;,led to have been withheld for 1'384 was collected in accordance with law and t"egulations, hence, not refundable; '3. It is incumbent upon the petit i onet" to show compliance with the provisions of Sections 2'32 and 2'35 (now Sections 243 and 246) of the National Intet"nal Revenue Code of 1'377, as amended; 10. A claim for t"efund is constt"ued stl""ictly against claimants, since a claim �fol"" ,, r�efund pat��t a~< e s of the nat ut"e of an exemption from taxation <Co 11. of Int. Hev. v s. Ledesma, !3. R. No. L-17509, 31 SCRA '35, Jan uat"Y 3C>, 1 '37(1). Sevet��al postponements caused by both pat"ties slowed the pace of this case and it was during its pendency that the Supreme Court came out with a decision entitled Banco Filipino Savings and lvJot"tgage Bani-< vs. IYionetc.H"Y Boat"d, Centl""al Bank of the Philippines dated Decembet" 11, 1'391, 204 SCRA 76~ declaring the closure of the petitioner Bank by the Central Bank as null and void as the closure was done in an at"bitt"at"Y mannet�� tantamowYt to a gt"ave abuse 1 025

DECISION - C.T.A. CASE NO. 4122 of d i s ct~ e t i on. Pot~tions of the Supt~eme Cot.wt decision are quoted hereunder: "While we t~ecognize the actual clost.we of Banco Filipino and the consequent legal effects thet~eof on i t s opet~at ions, We cannot uphold the legality of its closm~e and thus, find the petitions in G. R. Nos. 70054, 7867 and 78894 impressed with met~it., We hold that the closm~e and t~eceivet~ship of petitionet~ bank which was ordered by respondent Monetary Board on January 25, 1985, is null and void." The aforecited Supreme Court decision changed the chat~actet~ of the instant petition pt~imat~ily because i t had the effect of stripping the liquidator's powers over the bank and it to the legj.timate officials. The b.:mk officials now at the helm of the administration of the petitioner bank, abandoned the allegations fot.md in the ot~iginal petition filed with this Co�.wt on Decembet~ 2'+, 1986 and G:laimed that this petition was based on a "sp�.wious" retut~n manufactt.n~ed by the liquidator to make it appear that petitioner bank was insolvent. The bank officials denied that the petitioner bank incurred a net loss of P501,326,838.00 in 1984. In fact the bank officials claim that they have a taxable income in the amount of P59,776,226.00 with a total income tax due of P20,911,679 based on the ITR filed by them on Apt~i 1 15, 1985 <Ex�hibit "A") � The bank officials furthel"~ alleged that they attempted to pay this amount less �a tax ct��edit of PC::,498,736.00 by authot~izing the .:_026

DECISION - C.T.A. CASE NO. 4122 - 5 -- Bank of the Philippine Islands to pay BIR the amount of P18, Lt12, 943. 00 <Exhibit "D"> but this payment nevet~ materialized as they were prevented from doing so by the liquidator, tvlt~s. C.:n~lota Valenzuela. The aforementioned new allegations adopted by the officials wet~e contained in petitionet~' s memot~andum filed on Mar~ch 30, 1995 which provided a totally different theor~et ical approach to this case. In answer to the new allegations, respondent avet~t~ed in her~ memot~andum that petit i onet~ has outstanding tax liabilities for :1.984 in the amount of P108, Lt69, 253. 25 deficiency income, withholding, expanded and business taxes covered by assessment notices all dated November 16, 1987. She further asset~ts that the existence of a deficiency assessment fot~ the same yeat~ covet~ed by the claim for refund serves to prevent the claim from being adjudicated in Cour~t as enlmciated by the Supt~eme Coln~t in the case entitled Commissioner~ of Inter~nal Revenue vs. Com~t of Appeals and Citytt~ust Ban~d.ng Cot~por~ation/ 234 SCRA 348 when it provided thus: "The gt~ant of r~efund is founded on the assumption that the :tax r~etun1 is valid, that is the facts stated therein are true and cot~rect. The deficiency assessment, although not yet final, created a doubt as to and .t aonstitutes a challenge against the tr~uth and accuracy of the facts stated in said return which, by itself and without unquestionable ~.027

DECISION -- C.T.A. CASE NO. 4122 - G -- evidence, cannot be the basis for the gt~ant of the re-Fund." Respondent also stressed that petitioner did not f i l e a claim for t~efund/tax ct~edit with the But~eau of Internal Revenue in contt~avention of the provision o-F Section 230 of the Tax Code. The only evidence offered by the respondent is the letter sent to petitioner by the BIR infot~ming the fot~met~ of i t s delinquency income tax for 1984 in the amount of P20,838,010.00. <Exhibit "1"> The occut~t~ence of a supet~vening event bt~ought about by a Supreme Court decision substantially altered the character of the case as the petition is no longer spearheaded by the 1 iquidat ot�� appointed by the Centr~al Bank but by the officials whose powet~s were temporarily suspended dut~ing the clostn~e of the bank. As a consequence, we ar~e faced with the issue cul J. ed ft~om the allegations contained in petitionet~'s memot~andum and not those which at~e embodied in the petition for t~eview filed with this Com~t on Decembet~ 2'+, 198G. The issue posed for determination is whether or not petitioner bank is entitled to a tax credit of P2,604,753.23 representing f?xcess ct~editable taxes withheld from petitionet~ dm��ing the taxable year of 1984. Petitioner~ admits that i t has unpaid taxes fot~ the yeat~ 1984 in the amount of P20,911,G79.00 based on the income tax t~etun�l filed by its bank officials on Apt~il ~.028

DECISION - C.T.A. CASE NO. 4122 - 7- �15, 1985 <Exhibit "A"). amount of tax c~~edit i t is entitled to .:n~ising f~~om the creditable taxes withheld from its income by the various withholding agents in 1984. The tax credit will serve to reduce the amount to be paid by the petitione~~ and it is t h e i r contention that the tax c~~edit alt~eady ~~ecognized by ~~espondent should be inc~~eased 'f~~om P2, 498,736.00 to Pi:::, E,OLt, 753. 23 because additional ce1�~t i ficat ions fa~~ creditable taxes withheld were gathered by the petitioner and these were formally offered in evidence. The recor~ds of this case belie the claim of the, petitioner. In a lette~~ dated June lit, 1985, the then Acting Commissione~~ of Inte~~nal Revenue, Ruben Ancheta iss�.1ed a letter addressed to petitioner informing them of its delinquency income tax for the taxable year 1984 detailed as follows: Gross revenue per return,,,,,,,,,,,,,,,,,,,,,, P642,188,701.00 Less: Deductions/Tax free inco1e ,,,,,,,,,,,,, 582,412,565.00 Net inco1e per return ......................... P 59,776,220.00 Inco1e tax due thereon ,,,,,,,,,,,,,,,,,,,,,,,, p 20,911,679.00 Less: Tax credit ���������.�������������.�.��� 2,498,736.00 Delinquency incoae tax ������������.����������� p 18,412,943.00 Add: 10~ Surcharge .������������.����.�������� 1,841,294.30 20~ Int. fr. 4/15/83-6/14/85 ,,,,,,,,,,,, 633,773.49 ., TOTAL AMOUNT DUE AND COLLECTIBLE ,,,,,,,,,,,,,, P 20,838,010.79 The delinquency income tax was based on the income tax ~��ettn~n filed by the petitione~~ on Ap~~il 15, 1985 !029

DECISION - C.T.A. CASE NO. 4122 - 8- which specifically reflected the amount of P2,Lt'38,736.00 as tax credit repr~esenting cr~editable taxes withheld in 1'384 <see Exhibit "(4", page 4-15, CTA r~ecor~ds>. This same amount was recognized by r~espondent when it issued the abovementioned letter~ as can be gleaned fr~om the details aforecited so petitioner by its admission embodied in the income tax r~ett.wn cannot now allege that a differ"'ent amoun�t should be gr~anted as tax credit. Section 2<a> of ,, Rule 131 of the Rules of Court provides, thus: Conclusive presumptions the following are instances of conclusive presumptions: <a> whenever a party has, by his own "declaration, act, or omission, intentionally and deliberately led another to believe a thing true, and to act �.1pon such belief, he cannot, in any litigation arising out of such declaration, act Ot"' omission, be pet~mitted to falsify it. I' XXX XXX XXX In the c<::tse entitled Paseo Realty and Development Corporation vs. Commissioner of -Internal Revenue, CTA Case No. Lt528, Apt~i 1 30, 1 '393, this Cour~t sets for~th the rationale behind upholding the c:leclar~ations made by the taxpayer in his income tax return over that of any allegations made by him that ar"'e inconsistent with the entries found therein, thus: \ It is noteworthy to point at this juncture that the declar~ations made by the taxpayer"' in his income tax r~etur"'n are for"' ;all intents and pur"'pose made in gclod faith and at"'e tr~ue and 1.030

- DECISION - C.T.A. CASE NO. 4122 9- correct to the best of his knowledge and belief. In fact the UP-Treasurer and the Chairman/Pt~esident, both t~ept~esentatives of the cot~pot~ation signed undet~ oath the income tax return of the corporation. Notice to the filer/taxpayel"~ is pt~inted just above the space provided for their signatures, to wit: "WE DECLARED UNDER THE PENALTIES OF PEFUURY THAT THIS RETURN HAS BEEN MADE IN GOOD FAITH, VERIFIED BY US AND TO THE BEST OF OUR KNOWLEDGE AND BELIEF IS TRUE AND CORRECT PURSU(~NT TO THE PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND THE REGUUHIONS ISSUED UNDER AUTHORITY THEHEOF." Sections 45(a) and 266 of the National Internal Revenue Code are clear on this matter. Thus, the law provides: "Sec. 45. Corporation returns. (a) Require�ents. Evet~y corpol"~ation, subject to thf:.� tax herein imposed, except foreign corpot~ation not engaged in tl"~ade ot~ business in the Philippines shall render, in duplicate, a tt~�.te and accu\"~c.\te qu.:n~tet~ly income ta>< l"~etut~n and final or adjustment return in accordance with the provisions of Chaptet~ IX of this Title. The t~ettwn shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer. "Sec. 266. Declaration under penalties or perjury. Any declaration, return and other statements t~eq�.dTed undet~ this Code, shall, in lieu of an oath, contain a written statement that they al~e made undet~ the penalties of pet~jm~y. Any . t. pel"~son who willfully files a declaration, return or statement containing infot~mation which is not true and correct as to every material ~-031

- DECISION - C.T.A. CASE NO. 4122 - 10 - mattet~ shall, upon conviction, be subject to the penalties pt~esct~ibed fot~ pet~jln~y undet~ the Revised Penal Code. " WHEREFORE, in view of the foregoing, this Court denies petitionet~' s claim for t~efund/tax credit. The instant petition for t~eview is het~eby DISMISSED for lack of merit. SO ORDERED. ~~Q.~~ ERNESTO D. ACOSTA Presiding Judge CERTIFICATION I hereby certify that. this decision was reached after due consultation among the members of the Court of Tax Appeals in accot~dance with Section 1:3, At~ticle VIII of the Constitution. ~V:ZQ..~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals J. 032