CTA Case No. 4720 (Decision)

REPUBLIC OF TIE PHILIPPINES COURT OF TAX RPPERLS QUEZON CITY ASIAN BANK CORPORATION, Petit i onet'1 C.T.A. CASE NO. ~720 COMM1 551 ONER OF 1 NTERNAL REVENUE, Respondent. X- - - - - ---- --- -- ------ X DECISION This is a judicial clai� for refund of alleged overpaid gross receipts and documentary stamp tax for the taxable year 198& in the total a�o\mt of P757, 99&. 8(). This clai� for refund was born out of an assess�ent issued by the respondent and received by the petitioner on January 10, 1990 de�anding the pay�ent of deficiency gross receipts tax <hereinafter called GRT for brevity> (hereinafter called DSTJ in the a�ount of P528,138.&8 for the taxable year 198&. Petitioner disagreed with the and consequently sent a letter of protest to respondent page 132

DECISION - C.T.A. CASE NO. 4720 - 2- 289, CTA Shortly thereafter, petit i onel~ 1990 covered by CB Confir�ation Receipts Nos. 18472298 and 18472299 <Exhibits "F" and "W">. Petitioner re�ained firm in its opposition to the assessed amount and subsequently filed a clai� for refund in 1990. Respondent did not act upon the clai� for refund so petitioner had to resort to elevating its case to this Court through a petition for review filed on March 3, 1992 so as to toll the running of the prescriptive period for fil~ng a claim for refund~ petitioner's tax deficiencies for 198G as co�pared to petitioner's own co�putation is enu�erated hereunder, thus: BIR's Co�putation A. Gr�oss Receipts Ta.K Gl~oss lnco�P subjPct to GRT ����������� P87,�5&,9l4.89 GRT DuP ������������������������������� 4,231,072.85 GRT Re�itted �������������������������� 3,439,88b.39 Oefi.ci.ency Tat~: p 791,186.46 Add: Surcharge ((22PaQ5ne,,CCdn..))aCltoy..l..l..e...c...t...i...b...l...e.............................. Total p 197,796.62 lnter~st 565,698.32 12.000.00 Co�pro�ise A�ount O�.ae p 1, 566,681. 40 133

DECISION - C.T.A. CASE NO. 4720 3- DST D\IP Total Loan Transactions Subjrct to DST ������������� J:� 52"2,955,56.9.85 p 522,955.57 Add: Cf!'J~ti f:icatf!' of 503,752.70 T:i�r Drposit ������������ 5()3, 752, &%. 75 220,&33.97 Pl, 247,342.24 6oYf!'J~n�rnt Src\IJ~:i t :i f!'S p 832,831.30 Purchasrd/Sold ���������� 220,&33,9&7.00 414,51().94 l03,&27.71t Total A�o\mt S11.1bjrct to DST Pl, 247,342,233. &() p 518,138.&8 Lrss: DST pa:id/affixf!'d � in 198& �~��������������� Drfici~ncy DSl �����������������������������.��������� Add: 25" SurchaJ~gp ���������������������������������� Total A�o\mt Duf!' and Co1lf!'ctiblf!' ��������������������� P~tition~r's Co�putation A. Gr�oss Receipts T<3x - 1986 Gross ~nco�e subject to GRT ����������� P81,857,8l5.Q6 GRT Due ������������������������������� 3,902,%6.'35 3,439,886� .1"9 GRT Re�itted � � �.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�.�. p 463,080.56 Deficiency TaK ................. Add: S1.1rcharge (25~) p 115, 770. 14 ................. lnte,�est (20~) .............. Co�pro�ise Penalty 3JJ,'388.92 ...... Total A�OI.lOt D1.1e and Collecti.ble 12,000.00 ........... Less: A�ount Pai.d on J./5/90 p 924,8.3"9. 62 ............... Total A�aunt Refundable (p l, 4ll,8t)l. 07) (P 4861961. 45) B. Docw�entf3r�y St<3111p T<3xes - 1986 Total Loan 1='52"Z,955,5b9.85 DST Dm!' 37, &00, ()(10. ()() P522,955.57 Transact :ions :in l98b ������� �� Lf!'ss: Rrcr:ivablP Discounting lt58,4&0.85 lt81J' 897. 11 ltBit, 897, Ht9. ()() (No PN> � � � � � � � � � � � � � � � � � � Df!'b:its: Rf!'tm~nrd Chrcks/ Rf!'classification and adjust�rnt ��������������� Total Loan Tf�ansact ions S\lbjrct to DST ��������������� 134

DECISION - C.T.A. CASE NO. 4720 - 4- Less: Transactions on which 28, 9""...t2, (10(). ()() DST were already sepat�ately affixed by clients not using Petitioner's stock of DSl �������������������. Total P4SS, '345, l0'3. 00 P4SS,'345. 11 Add: Certificate of TiDe DepDsit �� ����� ������� Gov't. Securities P~t03, 752,&%.&3 505,131.14 Purchased/Sold ������������ Total P'35'31 6'37,805.63 P'36l,076.25 Less: DST paid/affixed P830,<401J.05 in l98b ..........�..��.... 130,672.20 32.668.05 Deficiency DST ����������������.�����.���������������� P1631 340.2'5 Add: 2Slt Su..-.charge ..........................~-�������.�� Total Less: DST Affixed in 1'387 - P73,814.60 130, E�72. 20 1'388 - Pl21 t)L 7. 60 .32,668.05 1989 - PIJIJ,SIJO.OO (PJ30, 703. 4()) Total R�o�J.nt D�J.e (d�J.e to 25~ S�J.rcharge) �������������� (P27 L, OJS. JS) A�ount Pa.id on 3/5/'3<) .................................. . The discrepancies in the tax deficiencies of both versions as described above are rooted in diffe,�ent theortes adopted by both parties as regards the tax i�plications of several transactions of petitioner which transpired in 1986, and it is for this reason that it is best to tackle the assessed tax deficiencies individually so as to deter�ine whether or not the grant of the tax refund of P757,996.80 is proper. ASSESSMENT FOR GROSS RECEIPTS TAX <GRT> Respondent assessed petitioner for GRT in the su� of P1,566,681.40 for the year 1986 basing the said tax on 135

DECISION - C.T.A. CASE NO. 472.0 - 5- thP gross rPcPipts of pPtitionPr in the total a�ount of P87, G5E�, 914. 89. PPtitionPr disputPs thP basis uti 1 i ZPd by rPspondPnt in co�puting its GRT as it clai�s that thPir ,~PcPi pts in 198b to only P81,857,815.0G t ,~psul i ng in a dPficiPncy GRT of P4G3,080.5G. PPtitionpr opinPs that thP BlR exa�inPrs in including thP 20~ final withholding tax on CPJ~tai n pass i vP inco�P as part of fm~ l98G. It is thP pPtitionPr's thPory that since the 20~ withholding tax is a final tax, the amount withhPld should no longPr form part of its gross rPcPipts bPcausP this amount is not actually rPcPivPd by thPm. thP gross receipts should bP computed net of thP 20~ final withholding tax. In addition, petit i onel~ also disagrees with thP PxaminPr's inclusion of their income from the bonds/debPntures Guaranty Corporation <HIGC> as. of its rPcPipts, becausP the charter creating HlGC, particularly R. A. 580, exe�pts all bonds/debenturPs issued by HIGC fro� taxation, hPnCP ~uch inco�P should no longer be includPd in thP co�putation of its gross rPCPipts. Fro� thP thPoriPs thus prPsPntPd by the pPtitioner, ,~espondPnt asserts. hPr oft-rPpPatPd standard l i nP of dPfPTISPS, thus: 136

DECISION - C.T.A. CASE NO. 4720 - b- SPECIAL AND AFFIRMATIVE DEFENSES 5. The cl.ai� for refund is pending investigation by the B�..lre.a'..l of I nt ef~n.a 1 Reven,..le; 6. The a�ounts sought to be refunded were paid in accordance with law; 7. Petitioner has also failed to show that the taxes paid were erroneously or illegally collected; 8. ln addition, well-settled is the doctrine the provisions on the tax refund are construed strictly against the taxpayer as they aJ~e in the natm~e of tax exe�ptions <Raisin, lnc. (sic) vs. Auditor General, 25 SCRA 754>; 9. Petitioner has not likewise shown that the tax allegedly collected which it wants to be refunded was actually withheld and/or re�itted to herein respondent and even assu�ing that it was re�itted, the presumpt1on is that they were received by respondent in accordance with law; 10. 1 t is i nc11.u1bent upon petit i oneJ~ to show that it has co�plied with the provisions of Section 243 of the National Internal Revenue Code; 11. The tax sought to be refunded has already become final and executory. lt is obvious respondent did not propose any substantial issues as far as the GRT liability_ of petitionel~ is concel~ned. Moreover, the respondent chose not to assist this Court in the analysis of the facts which led to the formulation as can be seen from her the BlR records and her omission to 137

DECISION - C.T.A. CASE NO. 4720 - 7- offer any kind of evidence to support the government's stand. Nevertheless, we find that the issues for resolution as regards petitioner's GRT liabilities are purely legal and can be confined to two questions, thus: 1) WhetheJ~ ot~ not the gross receipts for pm~poses of computing the GRT shall be co�puted net of the 20" final withholding tax; and 2) Whether oJ~ not the inco111e derived bonds/debentures issued by HlGC shall be excluded from the computation of petitioner's gross receipts. The assessaent fol~ GRT is based on Section 119 of the Tax�Code, quoted hereunder thus: SEC. 119. Tax on banks and non-bank financial inter�ediaries. l Thel~e shall be collected a tax on gross receipts derived from so,wces within the Phi 1 i ppi nes by all banks and non-bank financial intermediaries in accordance with the following schedule: (a) On interest, co�aissions and discounts from lending activities as well as inco111e from financial leasing, on the basis of re111aining maturities of instruments from which such receipts are derived. Short-term ma~urity not in excess of two (20 Years 5" Mediua-terlll aa~\wity - over two years but not exceeding four <4> years 3" Long-ter� �aturity: (i) Over four C4J years but not exceeding seven (7) years 1" lAs amended by P.D. No. 1789. 138

DECISION - C.T.A. CASE NO. 4720 -8 (ii> Over seven (7) years (b) On dividends <c> On royalties, rentals of property, real or personal, profits fro� exchange and all other items treated as gross inco�e under Section 28 of this Code 51' A�ovided~ however~ That in case the aaturity pel� i od J�e f erred to in paragJ�aph (a) i s shortened thru preter�ination, then the maturity period shall be reckoned to end as of the date of preter�ination for purposes of classifying the transaction as short, �edium or long ter� and the correct rate of tax shall b~� applied accordingly. Nothing in this Code shall preclude the Co�aissioner fro� iaposing the saae tax herein provided on persons performing si�ilar banking act i v i t i e s. The aforequoted provision of the law speaks of gross receipts as the basis of the 5~ bank tax or GRT, and it is petitioner's contention that the income i nclr..tded as of such gross receipts should be coaputed ainus the final tax already withheld by various withholding agents for the reason that such amount did not actually go to its funds, hence was not actually received by them. We agree with the petitioner that the 20~ final withholding tax on it's interest income should not part of its taxable gross receipts. Revenue Regulations No. 12-8() dated Nov. 7, 1980 on Taxation of income DeJ�i ved Banking Activities provides that the rates of tax to be :imposed 139

DECISION - C.T.A. CASE NO. 4720 - 9- on the g�~oss receipts of such financial institution; shall be based on all items of income actually received, thus: SEC. 4. XXX XXX (e) Gross receipts tax on banks, non-bank ri nanci al i ntermedi a1~i es, ri nanci ng companies, and othet~ non-bank ri nancial i nt er�edi at~i es not \ perrcwming quasi-banking activities. The rates of taxes to be imposed on the .gross receipts of such financial institutions shall be based on all items of income actually received. Mere accrual shall not be considered, but once payment is received on such accrual or in cases of prepayment, then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder. (Underscoring supplied> From the foregoing, it is but logical to infer that the final tax, not having been received by the petitioner but instead went to the coffers of the government, should no longer form part of its gross receipts fol~ the purpose of computing the GRT. This conclusion is in accord with the i nt erpretat ion of the Supreme Court in the case entitled Collector of Internal Revenue vs. Manila Jockey Club, 108 Phil. 821, as quoted by this Court in disposing of a similar issue in the case entitled Coapania Maritiaa vs. Acting Coaaissioner of Internal Reven�ue, CTA Case No. 142& dated NoveMber 14, 19&&, thus: In the second place, the highest tribunal of the 1and i nt el~pret ed the t el~m "gross receipts: to mean all receipts of a taxpayer excluding those which have been especially 140

DECISION - C.T.A. CRSE NO. 4720 - 10 eat~marked by law or regulation foJ~ the the government or some person other than tax paye�~. Thus, it was held: "xx nx. The Government could not have meant to tax as gross receipt of the Manila Jockey Club the ~~ which it directs same Club to turn over to the Board of Races. The latter being a Government institution, there would be double taxation, which should be avoided unless the statute admits of no other interpretation. In the same manner, the Government could not have intended to consider as gross receipt the portion of the funds which it directed the Club to give, or know the Club would give, to winning horses and Jockeys - admitted 5~. It is true that the law says that out of the total wager funds 12~~ shall be set aside as the 'coamission' of the track owners but the law itself takes official notice, and virtually approves or directs payment of the portion that goes to owners of horses as prizes and bonuses of jockeys, which portion is admittedly 5~ out of the 12~~ commission. As it did not at that time contemplate the application of 'gross receipts' revenue principle, the law in making a d1stribution of the total wager funds, took no trouble of separating one item from the other; and for convenience, grouped three iteas under one common denomination. "Need 1 ess� to say, gJ~oss receipts of the propt~ie_tor of the amusement place should not include any mDney which although delivered to the amusement place has been especially earmark�d by law or regulation for some person other than the proprietor." <The Commissioner of lnt~rnal Revenue vs. Manila Jockey 141

l)F: r= 1_ ~:) EH�I - L. ! � 1-'l. IJ)':jF_ f\JU. 4ft::�Q 11 Club, Inc., G. R. Nos. 13887' J un;p 30, 1 3E,()) It: ts to bp noted that, undet- Sectl�:-n 2f,,�:� ~.1f t.h~:� T::n( Codr-, .a ,�-ac~?�-track is s�.�b.JFct to an amusement taM of 20~ of i t s ~ross recPipts and the ter-m g1-oss �-eceipts' embrace<:. all tho ��Fcelpts :,f the pt-ur:n-letor�, lessee, ot�� o::�;:-t-ato��� n f t h e �'~ :""' u s P m P n t p 1 a c e � " r'J o t ..., :i t h s t. a n d i P !:' t h '? t� ,. '' ;:1 d <.! n cl a 1 l -- p ., b ,- a c i n g d e f i n i t i o n o f t. h E t e r� �~ " !J ,. n r, s I" 1:> c I? i p t. s " f o �.1 n d :i r1 o '.lt- ;:1 m �.11::. r m F '' t t ;::, �' .1 ;,a~ , o �.u- : ; �.1 p ,.. f:' mF L c �.n- t. r_l i d n o t .~ d o p t ;-, l 1 t. e I" a : !n~.e~-~=~~-etat:ion :1f the sa.id t.et-m JT� th�:- c:����l? or c ;: h [' ,,., r"J n i 1 "' J 0 c 1-( E' )/ l �J b. 1 n \. � � ~.!d.P!.~.? � pr-oposed by pr�t 1 t ion<: ,.. e c1 ~� t � fl ;�. 1. t s G R T ' boncl�; 1 d~~beT~tut.. er.; l s <; '"' P. d by the- Home lnst;.\�.:~nr:c tHfGC>. I t i s p e t 1 t i. one r� ' s .::o, c: �;; " ~ � t 1 or> '3UCh l.JOT1(j S and debentut'"es is-:;ued by HlGC: ~~~-!? t.'\x.:;t:.ctn by vir�tue af Republic qct No. ::;.eo. uphold the ar�gument of tf1e petit 1 ()Tlf2<. b �; R e p u :. ' l 1 �~ Act Sec. 14. >< )( >< .H Y. H (dl The r'ebentut-es 1S!'.ued u�det- thl:- '#� c 1'1.3 pt. �' r� t o an �y� mo l" t g ,, q �' P ~~ i t h t� c �; p e ; t�. t� � � mr:>��tgages Ot" lo;:;ns lTlS'.tl"!?tl under� Cl-F�pt.r�r s 1 � and 1 I 1 ~ h a .l 1 be e H E' c �.1 t. e d i n the 11 e �n e : f t ! 1 �' Home Flrt.;:~ncing Commission as oblituw�. and s 1 t;" ~-. e d f o t" t. he- Com m 1 s r- J on by t h �' Ch ,._, 1 t" mar- � G~nf."t"ill t�18na~H"' by either hl!'� t�II'J"t.t.Pn c,- E' n g 'r- a v e d s i g n a t �,n" e , and s h a 1 1 b e n r; I] o +: 1 a b 1 E � E'HFmpt ft�. om ta�l>':utlllTl, attachment., e ..~rcc�ut.lon ()�~ ~. F ' -;: �.H- e � I" e de P ""';:~ l.ll P at. t. he opt i on o f t h r> C: r> :Tl ;n i s :, i on at rn- b e f o J" e mat u I" 1 t. y a P d f �.tl 1 v ~�~ ..,,�antPed ,:~<:.to pr-Incip-"l.l and Int:et"!:'::.t by tho. n'':C'lhl Jr of t.hP f'hi l ippinPs. 142

.1 (:.' -- t. h p p P t < t. l on P ,. t. ..., ..-. ,._ ~.+-~c. I t ,� {' r of th~ gov~rnm~nt Un t.h :i 5 of in h:is 1 r�: t IE' ,. n ;:~ ) R e v E' n �.1 E' CodP. 1 '388~ SFventh Edit>.on, page r:wov::ded an int=���p&~�:;:. boncl s <HH:::l For� r��.trr:>osPs of cc""P'.ltlnl) thE' ::~~�; b;::p�-1� ta,��. :t~�tet�p;;.t,.,, from U<l<Vf't"TH"!?Tit. bDnd::. Ot" ::.r��c��.l�'itie;:.� Nl:-11'-�t, bv SDe>cific 1:wovis:ion of la~>~. ::n-P '!">lPmr.�: f�� D"' t.a~�at 1on" ll'"' e>tE'mpt f.-�om a l l ta!lf:'~,. do no'- ~~~~ ~art of the gross receipts on wh1ch sa1d taw 1s J~oosed, for to include such taw-fr~~ i~��t.P!'l?:O.t :incol"!P a;:. p.:u.. t. of the b;:lSl!"� 1:�.;: thr t�-"'"'il ta" would. jn eff�>ct., null1fy ti�P ~-a�-� P"'E':l!L)t.ion ;:.percJal]v r:�r"'o���Jderj fot .. in l.::n��� >Dot ns~;FSSMENT FOR OOCtJMENlAHY STAMP lAX (UST) ;: � r: t t t 1 o n P ,.. c a l ~ ::. 1nto oue::.tion thf.' BJfrs ] t ~ ~. t b.., . ,. 143

ru�1 < ii~_:��J ., l 7' '"' 1 few 1 3[,f., hence i t has no L��3T thp 25"h c:onfr.. ont.ed w1tl, c !. I f F ��� e n c ,. :;. .i 'I ass~:s;:.~ent Gf fetcts bv th;� ~~esponde-nt to the [if:. l Petit. 1 oner� contends that a tot.=~1 �~mo1.1nt of P37 � �.()�). 000. 00 its E ,.. ,.. o n e o �.1 .,-. ln ln 19bS SUbJect to DST. that this ,. e c e 1 v "'� b 1 P s that. a��p e-v1denced only by invoicE's and not not.es wh.tch we-Te sold {l t.. a;:.S.l(JIIP!.'J t. It"' LJe t. 1 t. 1 onet-. 0 s s '�' c h � n e r- E' i n v o 1 c e s at" E' n o t. 1 T �c 2 '.I d r� r f of instruments subject t. (J DS r t ') S <: � ':. 1 on .1 7 f, o f t he T a ~� Co cJ e � t-i e a !.l ,- e !? 1-..r 1 t h h y mP.t- e 1 n v o 1 t: e s and no l�. b FH; ~~ e d t:e�:r"'USf:' an lTlVOlCE' are n o t =� ~~ b ) P c t to DST is not one of those 1 n =� r. ,.. �.t mP. n t s �.1 ~' t:' e ,. .i7E. of the Ta>< Code whose- assiqnT"'Fnt, sale: t �� ::;1 r \ ~, f F t, 1 '=� ::" '�' b 1 e c t. t u 11 ::; r . H o L�l r- v e r- � r:� q �., a .l l y ur .. ,"1.\!r;�p;lt:!Ort Ill'� 144

-- I'':~L 1 ~:1 1 UN C.T.A. CASE NO. 4720 that t ut al am o �.tn t of I" !? r:w e s P n t s t ,- ad e t" e c e 1 v a b l e s backed up by mere in\. D.it:t'S. In the instant case, petit.ionet' presented as PVldence comp�..ttat 1 on of DST for 138EJ c E' ,- t 1 f 1 E' d c ort" ect by its own vice ore�~�ident anr~ "B"> indicating the C\bove st.at!?d am ll u n t. wl1 i c h 1 s a t: be s t s e 1 f - c, e ,.. v 1 n g and a s COrtVlTlCP. thts Cout"t of the vet"acity of the f 1 q�.tt"e s contained ther�e>in. f.1Jl pt��es�.rmpt:tons ar�e 1n favor of the c o t" t" e> c t n e s s o f ta.~-l assessments. The good faith of ta>< assessors and the validity of their be pt"E>sumed to have taken into c o n s i d e t" a t 1 o n all the> facts to wh1ch their attention was called. No can inrJulge�d that al I of t:hp public thE' state 1n t.he hil ._.a::� t 0 d !,1 w1th the assessmEnt: uf p l � 0 J.H? t" t. y f 0 t t "1 �� ;~ t. i 0 Tl .1� 1mposed uuon k~owJngly v i o l a t e \: tl E' d 1.1 t. 1 p s Revenue vs. Wl, '� ] ""�. iCOIWIIIissionet~ of' Intrrnal Hesources. of As.J.a. Inc. and the Court of SL fJfj S 7 1 l � :ind1r::at.inu fiq�.,,�ps ror�l the c P t , .. f' ;o. p o 11 d 1 n g ph 0 t 0 I" D p ! < 1 r i v o 1 c E ~, 1 s r� o t s �-� f f 1 c i e r' t t co t" e but s u c ~-. p ,.. e s �,t :r. t:o t. l o r1. also j s ~) '�' E' tu t !1 e t ,:~ !'11 {1 1_1 �. (,) f 145

DECISION - C.T.R. CASE NO. 4720 - 15 - by the BIR to DST in the sum of P28,952.00. Petit i onet~ asserts that the DST due have already been affixed by its .. clients pursuant to a prior agreement between petit i onet~ � and the clients hence to subject the same amount to DST would in effect be a double imposition of DST on the same To pt~ove this allegation, petit i onet~ its evidence, the copies of the notes upon which docu�entary stamps were already affixed <Exhibits "L", "L-1", "L-2", "L-3", "L-4" > and pt~esented a copy of petitioner's own documentary stamp as 50\.lrCE'd ft~om i t s own an effort to show the difference the "design" of the documentary stamp affixed by its clients and petitioner's own stamp its own stamp metering machine. We find that the evidPnCP above-de set~ i bed has successfully rebutted of cort~ectness of the assessment and "'e hold that thp of P28~952,000.00 should not have been subjected to DST. ]n deciding this particular issue, gt~eat weight was placed on the petitioner's evidence y pt~i mat~i I due t:o respondent's apparent disinterest in pursuing this case. No B Ir~ submitted nor was evidence made by t~espondent. no 146

UEt. I ~j 1 UN C �., � H. CASE t!O. 4 72C� 1 f_. -- at t e fll pt t. o d1spute tn~ specific allegations made by the p e t. 1 t l D r�� e t" w a s madE' by the respondent as she J:WE? sent ed mere general1t1es as affirmat1ve and spec1f1c defen:es Jn an :;wet". Respondent hav1ng failed the co~v1nc1ng evidence pt"'i?Sented by s�.lc.ta 1 n p e t J t. 1 o n P t" ' s c (t n t e n t i o n to this pa ,- t 1 c r.t 1 a,. lSSI.IE'. nnothET significant objection of t. h P p e t. 1 t i o n !" t" l c;. the VST 1mposed by the on (lf P.:~2o, �,33, 9b7. ')') the value of securities specifically Bank B1lls, p ~u- c h a s e d a n d sold by p e t i t i o n e ,.. ban.tr in 198f.:�. P e t 1 t 1 o n e t" c o n t e n d s that s�.1ch gttver�nment. o�('CUtltlE~� fa 1 1 within the meanin~~ of "deposit subs t 1 t '.It f:' s .. anr_.t. p u ,- s �.1 ant t o Rev. Reg. No. 17-84 such depo::.it. a���p ::.�.tb)ect to DST on]y upon thejr� :i!:-5�.ti:lllCP, �� d n o ~ \1 p r n 1-J P ch s i.'llJ t' e e w 1 t. t � t h r co Tl t en I 1 on o f �:1 fld l1to l d that t I 1 e g o v e ,.. ro "n E' n t. SE'CUl"]iies (tt�<�,t�.�.tt / bi \\ '� C e r1 ~. ~- a 1 B .:nll~ b 1 1 1 s l a,- e n o t "c E' t' t .1 f ) ( ='~ t E' 5 0 f t rtd!?bt PdttF "'� ': "�'.I DJ' t:. [':C' p�..t��:.,�.ttolnt. to Sect.Jr.nt .17'� nf tl�e TaH Ccc~"'. t.!,,_,c,: !ipc�t lOTI 1 7't. Sta�p tax nn !JrnJdr., fh�hPnturrs"' .=unf Cf'1'tif.Jcater; of Jnclr/11: rdnrs �;. f l n -'! \ 1 t� 0 r�, c1 :. , d '-' t�, P n t �, 1 ,-. P :; r a n d c p ,.. t 1 1 c i;�� � r� s fl f 1 '1 ~ f " I .. t I? cl n e <; s 1 s c� '-' '=' cJ b y �"~ n y 147

DECISION C.T.A. CASE NO. 4720 17 - or� c o ~-� p o r~ at i o n � ther-e sha 11 be> co] lected documentary sta~p taM of one peso hc:Tldt"ed peso!:-. OJ" fr-c;~ct i onal pc;~�"t c n P << c h t ~�I D the face value of such documents. t h �? I" f:' 0 f � 0f by PD 1457 c;~nd PD 1959). <As t'lmPndl?d In the Pnt.itled BPI Bank vs. Comfli!>sioner of Internal Revenue. CTA IJo. th1s Cour�-t made a compr��phf'rtslve an<:llysl<=� of of t. h e v T I" e a s ll ,.. Bills and Ban~! Bi 1l s that J'-'St1f1ed their be1ng c l a ~. s :i f i e d and not deposit S!Jbstitutes. Per�t i nent pot� t ions of the ,'l b o v e �- c i t e d Llecrsiun ar�e q1;oted he,--eunder�, thus: To resolve the issue we have to determine t h e nat '-' r� e o f t r e a s tJ r� y or� C B b i l l �;, � T ,.. P a s tJ r� v Bills are evidence of indebtedness Issued bv ttH:? l\lat1onal Gover�nment t..tnder� author�ity of R"'publ1c Act t�lo. i.:?'�5, as amended. They ar�!'? o I f e ,.. F rJ f o ,. ~"3 l e e 1 the r� at a t.H: t i_ o q ':1 n c:emp!?titlve 01.. non��competiti.ve ba.:;Js ;>f"d cl: f :. H e d d 1 ~;count n �� 1 n I; P t � P <; t r� �'< t e � t ~- ~- ~' r' �- >.: s I? n t -:; a rj i ~-eel;, IH1CIH":: I. I; l Olh'll ,;~nd qr>ll('t'i,l} pl__1' J U�3t l !;:"� o r- I; h ~, f\!.3 t; 1 !J n ,, :. G r_, v !.:' r� n m'" ~. l: ( S e c !; 1 �J n 1� n�n . ;?�<:il. "Cent:t-,J' n,-ntl< hills" i�:; :;1'111--�t� t�:' I t s "' _,,_ I) l - y b l 1 I �-; r> '"-- p p t t; t 1 -3 t lt ' s s 1_1 p ' I p�H��;ua.nt to r7!?DIJIJI ic fk:t 255, ""' �r~c-nc!P�:I, ol.:h�:t-~�11 " " i<JIIH�IIl �clS !:ltP CPnl r�al p.Hif! n. I- c�� i.J ' l l. <; <~ ~- c- a 1 S t-' ,~ 'I 1 d , n �:: ,, q f 1 ll rj e b t P < 1 '1 "? -, -. : s c; tt r~ � I b ,,. t. he L P n I; r� .=;1\ P .~ n I< ,;~ q �'<l n s t; 1. t s i n 1: P ,.. n _, ! i on 0 1 1� {: �:; P. r� v e r: r� ~� q .3 1 11 s t; o t h!? t" go'-' e t" n mt> n t. �- '.? 1.: '�' 1 � i t 1 e �:; 1.!; has ,:; r.:: q I) 1 t � P d , 0 t. m�3 y b I? j_ �:; c; \1 P I l ~ I 1 I; h 1J II '- r� �:: L=t t 1 on to spt?cif'tc !:ypes of ~�s�.:et.�: nf th;:- .... lJ,Hl !--;. ('.'j~:>ct inn �:n1, P. n. ,:�t,5) lt�,~.~'=-'!l'V b1ll := << n rl C !J b 1 I I s ,H� ~~ t; 11 I? I;~�~ o mo �:; t ~'C'PIJ 1.::.-,� rlo.-et�rt~nent 5E'Ct.ll�ltie~, being tr�aded tn the opt:;on ;~'y,-f-.:.,t; op~>r�at i or� nf !:he Cent1�A-I 8-<tlf<. ,111\J Lf:' t_Jtlls, i t :'1 ''i not bP cone J tlr:l~:�d '1 l h."ll: t p '/ t� ,~ l. I u n d P r� t 11 P t; PI" m blll "' f 148

[> r� 1 � l r; f r:J t l �- C.l.A. CASE NO. 4720 18 - e f' change d r a f t , c e ,, t. i f i cat e o f deposJ t. new debt. 1nstrumFnts used for depos1t 5 '.1 b ,, ~� 1 t 'J t. E' s "' ':- d "' f 1 n ~,� c' a b o v e � ;� H >( The Co,_,,--t of nppeals 5 u b s e q '-' en t 1 v a f f 1 t"m :c tl the v s. .;:~nd Co ut't D f TaH Appeals. Gr-< No. 298!:t3, September 19, .. J:' f' ,. ~� 1 11 P n t p o ,. t. l on s a,.. e au o t !? d , t. h �.1 !:� : �' l>! i t. t w �.1 t. an y do u b t , h a v 1 n q t. h e ::- P n en .-1 1 c h at' a c t. e ,-. o f i n �,; e 5 t me n t 5 e c u ,.. i t i e 5 � T .._ b i I 1 5 i:l n d ..~ _ CB b1lls cannot be considered as meve D,. D m 1 5 ~. fl , .. y n o t f.' s � In f act , t tl"� ,::w i ma ' 1 f '�' n c t i on o f C B b 1 l 1 5 and T- b 1 1 1 s an? q u 1 I. n d 3 f f e ,.. P n t. f ,.. r� m t h t:�d.. o f 1 n s t ,.. u mF n t ~. e v 1 U en c 1 n q c'<.:�bts lfl tH��din;::n-y t1';::4n~.act1r.-�r><::. betw��<r� :1 nd 1 v 1 d u a 1 s (At�� t i c 1 e l 9, U. S. Re q. ! Io. ! I Tt-easu,��y Der:ta>.. tmefll:, c1ted in A��aY';f.l"�� '!pdi'\t.<:J n. n. I J I C , p � 7 7 E� ; P. v 1 s e d D o c u me n t a ,- y 5 t. '' mr:o R e u � , De p r.w t me n t o f F .i n a n c e , 5 e p t; � 1 b , l "! 2 If ; [ X X X I : , CI.G. llc'p. 233~�. SPct.ion2J>. lr�c.'.����-�mp:d�, Pvtdenc1ng dP.bt'!:'. in or�d1nar�y tJ,ITl''.i:':Ctlf'''':. 1 n +. h P e --, ,.... t. �.t>" nr p��oml;;.~;or-v not.~,�s ~--Jlt1ch i.:n--e tr"eate~j 'O.P!��:on--at.>:� .. ,. e.~�d dist1nct.Iy f1�nm go�,er-nment SP':..n��ti""' tJ�.::t ,=;,- E' 1 s ;:. 1J E' d by 8 I_! f: h 0 l" 1 t y 0 f t h {' r. �' n ~ , .. c1 1 B 8 Trl' � Lonseq�.�ently, t.hF lt:.!'.�.:,-,:~nce an-.l \.ltP ~.��tt~.i!"qu,���L transfer and sale of governnent secu-iltr~ sho�.�ld be s�,tb)"�ct to thf' pa)tment !'If duL�'-'""''r�t.<�,�y s t a mp t a >-< e s p �.o- ~� �.t t=t q t. t o S e c t. i o n 1 7 :' � .-:~ s a me rH i " 'J b v P � D � l ~ o � 1 9 ':-l 4 e: f t h e I'H RC x >-< 1001 � " tl"'Dm th'.? can co nc 1 �.!L! r.:� th;:>l s�.och go~ernment s e c u r i t l e 5 c:� 8 n b e c 1 a s s i f i e d ;1 s " c e t" t. 1 f t c e i. ;. �. l' I 1 fl c! E' b t e d P P 5 S " �.ITH i E' , .. Sect i on 1 7 4 o f t. h P T ;1 ��t Cor.ic ht'ncE lfli=ll DlJJeCtlUTl of the pe-t 1 t i on e ,.. t.D the DS1 inc1usJon of t.h'2 amoqnt of 14fl

DEC l ~;I C�1�l - c. r. n. cnsE NO. '+7~::\) 19 - ~��h i ch to have been c.. P. l~ ,~ 0 f) p () 1.1 C~i'l.lrTlPd tu new .lCJan releases subJect to a' e Y e v F ,- s e d en t t" 1 e s " fr_,,_,.,,_� in t h (' l ,. to cover a d J �.1 ~- t m e n t. s r; ,, 1 '� t :i n g : o �~ n �:.� F \t , .. t h e ,.. mo ,.. E' , pet 1 t i ::net contends that t.} IF�.~ a,.. e not FIC'CDITI{Janl elf by p�� '-' m1 s ''� o ,-. y not.es t 0 t" E' ~( !? C 1.1 1 0 Tl of n E'~>J hence not subJect to To bol stc:-r � t ancl, p!? t. i t 1 on P , .. r:w e sent r: cl as f.'Vldence ~' r~ ~-~ f.' d IJ l F \f RPt�.tr"rJed/f'(ec.l<-l".siflPtJ ChFcks fat~ 198& whiclt l.-J'l':� ce��\�1f1t�d co��-rect by JYit~ s . c. Bonifacio, petit 1 nnE'��' :. V1 c e Pr� F s 1 dent <E>(hibits "1 " I - 1 .l and photocopies 1 f' d q P r ( F 'i h 1 b 1 t. :. " J " t. o " J -- 8" ) 1 nell cat 1 n!] �. h c c~ mCHt r� ' ~ . ' bo '.JTJLF'.J and thf! am o�J n t: " u f t h e 1ocir.-: r�rc l<:ts;;ified. ThP arnu�.�nt s inr:iicatFd in (E}(hit-.nts "J" to "J-B"> submitted by the Pf'~~!:1oner�. The fact that. ;; chPck vJCIS can c E' 1 1 e rJ ':tl" t �o u n c� <- '�' I:,.-. 11(.1 b e :n~ i n g t o the l u::.~T a t"e ,::.dy paid :;:. 1 nc p \ �-," r. l1 1s paid 1n advanc~ upnn the fr�o"" ' -.t ::- 15{}

...... ~-- . �.:,T ! ~:.1 t-' ] ,. � i ...-) 9 ~~' , .. ,_, L,., t:. r ;..., . l, r��' r,_.. ;-_ ::-;- -�� ':~ C: � l 37 "< ' V l ] .l f"W fact. t.hat ::heck ha!'- : ~. 5 �..! E �::i + �� -?~��Eo� r:r��� W!? r�� F !'_4 l d r. I l () TI '� 1 ! .. !? t�, l t.o thP paympnt or 1.1-te !''3T t h p Ii'-_, T hi'\ t.,. ~1 f ")5T Is to t. he c he c ~r s upon n 1 ' c hE'{. ~~ r, t h �::1 t: '1C.t�IT1L''2ri [I,., cJ 1 ShOII(H''E'd �o'lnnc11 173 of ... 1 !::� f"l�, e,:,c�t, h-'ln:- ct~c:cJ<<; 'j��Fl~"n �.1 p fin f1 �� r1c:' ,, tl n t 11 ,. 1� e ,, f, .-, 1 1 h P 151

DECISION - C.T.A. CASE NO. 4720 - 21 - centavos. The key here is issuance. Thus, regardless of whether the checks issued have been cleared or not is i�material to the payment of the DST. The fact that the checks have been issued and delivered is enough for the DST to attach to said document. The same in the case of reclassified .,. existing loans. Section 180 of the Tax Code provides for the payment of DST on all pro�issory notes, whet he�~ negotiable or non-negotiable, and on each The existing loans that were reclassified did not entai 1 the issuance of new promissory notes but merely a reversing entry. This however does not that the DST paid thereon should be refunded since the DST on promissory notes attaches on the document itself upon their issuance or execution. As a matter of fact, the mere renewal of said promissory notes is subject to the DST. "'";.:. A recomputation of the a�ounts involved particularly with regard to petitioner's DST liability would show that there is st1ll an unpaid portion as far as the taxable year of 198E.o is concerned, this notwithstanding the fact that this Court already reduced the amount to be paid. The main t~eason f Ol~ thiS is rooted in petitioner's incomplete payment of its DST liability as originally 152 .' .

DECISION - � C.T.A. CASE NO. 4720 I, .. ' - 22 - .,,. "".., ~ assessed by respondent. Evidence shows that the BIR .., .... assessed petitioner for deficiency DST in the amotmt of ' P518,138.GB but petitioner only paid the sum of /1 . P303,703.40 <E>ehibit "W" >' so whatever deductions this � co.:.wt finally granted to petitioner as reg.;u~ds its DST liability did not result in any overpayment of ta>ees, hence refund cannot be allowed. is the detailed recomputation of petitioner's final DST liability for the ta>eable year 1986, thus: A�out of DST Due Transaction p 522,955.57 Total loan (28,952.001 transactions in 198& p 522,955,5&9.85 220,633.97 503.752.70 Add/ Wedi.ICt) : Pl,218,390.24 830.404.05 a. Transaction on which p 387,986.19 DST wtn~e already 96.996.55 p 484,982.74 separately affixed 130,672.20 by clients (28,952,000.00) p 354,310.54 b. Govern�ent Sl'CUJ�itil'S 303,703.40 p 50,607.14 purchasi'd/sold 220,&33,9&7.00 d. Certificate of ti�e deposit 503.752.696.63 Total Pl 1 218 1 3~0 1 2JJ.OO Less: OST paid/affiKed in 1986 Basic deficiency DST Add: 25~ surchage Total deficiency DST Less: DST affiKed in 1987 P73,814.60 1988 12,017.60 1989 44,840.00 for' certain transact ion in 1986 Balance of deficiency DST Less: Pay�ent �ade on 3/5/90 Total a�ount payable 153

� . .�, DECISION - C.T.A. CASE NO. 4720 - 23 - WHEREFORE, in view of the foregoing, petitione�~ is � entitled to the refund of Gross Receipts Tax <GRT> in the sum of P486,961.45 computed as follows: "�� Gross incoaP subjPct to GRT ... ppr BIR coaputation P87,&5&,914.89 .... Add/ <Deduct> Adj\tstaent s: (5, 811' 763. 13) P81,857,815.06* a) final taxes already p 3,902,966.95 withheld fro� 3,439,886.39 p 463,080.56 petitioner's 198& 461.759.06 passivP incoae CP5,419,218.75) p 924,839.62 b) incoae fro� HlGC 1,411,801.07 p 486,961.45 bonds and debentures which are exeapt 392.544.38) Gross inco�e subject to GRT GRT Due GRT Ruitted Deficiency GRT Add: Surcharge <25~) P 115,770. 14 Interest (20~) 333,988.92 Co�proaise Penalty 12.000.00 Total aaount due and collectible Less: A�ount paid <Exhibit "F") Total a�ount refundable With respect to petitioner's claim for refund of docUI�entary sta�p tax, it has been estab 1 i shed that no excess payment was made in the taxable year 1986, hence such claim for documentary stamp tax is hereby DENIED. SO ORDERED. ~Q,~ ERNESTO D. ACOSTA Presiding Judge 154

- ...:.u... - - � DECISION - C.T.A. CASE NO. 4720 - 24 - Judge ~:-~~~ Associate Jud~=rtJ' I / CERTIFICATION I hereby certify that this decision was reached after due consultation among the �e�bers of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. Q~Q.. G4 ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 155