COMMISSIONER OF INTERNAL REVENUE v. GIC PRIVATE LIMITED

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY EN BANC COMMISSIONER OF CTA EB No. 1477 (CTA Case No. 8749) INTERNAL REVENUE, Present: Petitioner, -versus- DEL ROSARIO I P.J.; CASTANEDA, JR., BAUTISTA, UY, CASANOVA, FABON-VICTORINO, MINDARO-GRULLA, RINGPIS-LIBAN, and MANAHAN I ]] � GIC PRIVATE LIMITED, Promulgated: Respondeht. 2 -# DEC 1 2017 fl.' 1~/- ~ � X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION Fabon-Victorino, .1.: Assailed in the present Petition for Review dated July 15, 2016 filed by the Commissioner of Internal Revenue (CIR), are the Decision and Resolution dated March 17, 2016 and June 14, 2016, respectively, both rendered by the Court in Division, granting resppndent GIC Private Limited's claim for refund or issuance of tax credit certificate (TCC) of erroneously withheld fin~l tax in the aggregate amount of P216,919,286.53. The facts are as follows.

DECISION CTA EB No. 1477 Petitioner is the Commissioner of the Bureau of Internal Revenue (BIR), with aut ority to grant or deny claims for refund or tax credit of ov rpaid or erroneously paid internal revenue taxes. He holds ffice at the sth Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. Respondent GIC Priv te Limited (Formerly, Government of Singapore Investment Corporation Private Limited) is a non-resident foreign corporation wholly-owned and controlled by the Govern ent of Singapore, organized and existing under the laws o Singapore. Its principal place of business is at 168 Robinson Road, #37-01 Capital Tower, Singapore 068912. R spondent is engaged in the management of Singa ore's foreign reserves and is authorized and mandate to open and operate the custody of current accounts, s may be necessary for the safekeeping of assets and cash under its management. On May 20, 1999, respondent entered into a Direct Custodial Services Agree ent (DCSA) with Citibank, N.A., Subsidiaries and Affilia es, whereby it appointed the subsidiaries and affiliat s of Citibank as its custodian; entitling the latter to hoi certain assets, as well as to open and maintain custody ac aunts and cash accounts for the purpose of holding the properties and funds received from time to time by Citibank ntities for its account. On March 23, 2009, respondent and Citibank, acting through its Singapore br nch, executed a Global Custodial Services Schedule (GCS ) as a supplement to the DCSA. Per GCSS, respondent endowed Citibank to open sub- custody accounts with other Citibank subsidiaries and affiliates as foreign su -custodians for the purpose of holding the securities i sued by foreign governments or foreign companies whose principal trading market is located outside of Singapore. y virtue of the GCSS, Citibank Singapore opened a s b-custody account with Citibank Philippine Branch. Respondent, throug Citibank, invested in various T- Bonds with maturities of ore than one year. As custodian, Citibank is accountable for settling respondent's investments / in T-Bonds and in safeke ping the T-Bonds it acquired. It is ,./

DECISION CTA EB No. 1477 also responsible for colle ting the coupons/interests due on respondent's T-Bond hold ngs when they fall due on coupon date and credit the arne into respondent's custody accounts. For the periods De ember 1, 2011 to December 31, 2012, respondent deri ed interest income from its investments in T-Bonds mounting to P1,084,596,432.68. The said interest income as subjected to Final Withholding Tax (FWT) at the rate o twenty percent (20�/o), or in the aggregate amount of P21 ,919,286.53, which the Bureau of Treasury (BTr) withheld a d remitted to the BIR. On December 16, 2 13, respondent filed with the BIR an administrative claim f r refund/TCC in the total amount of P216,919,283.53, orresponding to the alleged erroneously withheld and emitted FWT. Due to petitioner's inaction, respondent filed the instant petition with the Court in ivision on December 19, 2013. In his answer, pet tioner prayed for the denial of respondent's claim for re und/TCC arguing that respondent failed to prove that the amount of P216,919,283.53 was illegally or erroneously ollected tax as mandated under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC), as amend d. Respondent likewise failed to overcome the burden of stablishing its clear entitlement to refund/TCC. Moreover, t x refunds, being a derogation of sovereign authority, are onstrued strictly against taxpayer- claimant, like respondent. On March 17, 2016, the Court in Division rendered the assailed Decision, disposi g the case as follows: WHEREFORE, p emises considered, the present Petition for Review is hereby GRANTED. Accordingly, (petitioner) is hereby RDERED TO REFUND OR TO ISSUE A TAX CRE IT CERTIFICATE in favor of (respondent) in the am unt of TWO HUNDRED SIXTEEN MILLION NINE HU DRED NINETEEN THOUSAND TWO HUNDRED EIG TV-SIX PESOS AND 53/100 /

DECISION CTA EB No. 1477 (P216,919,286.53), representing (respondent's) erroneously withheld fin I tax. SO ORDERED .1 On April 6, 2016, petitioner moved for the reconsideration of the ad erse decision but it was denied by the Court in Division in he equally assailed Resolution of June 14, 2016. 2 Unfazed, petitioner 1led the instant petition3 anchored on the following grounds: 1. Respondent failed to prove that it is wholly-owned by the government o Singapore; II. Respondent cannot ely on BIR Ruling [DA 130- 02] in its action to c aim for refund or issuance of tax credit certificate; and III. Respondent's failure to present BIR Form No. 1602 renders the ad inistrative claim pro-forma. Petitioner contends hat the Letter dated January 9, 2014 presented by respondent failed to prove that it is a financial institution whol y-owned by the Government of Singapore. Petitioner considers the said Letter a private document that should be authenticated by one who participated in its prep ration or execution. However, neither the signatory, D rrick Wan, or Tan Jin Hwee, the person who notarized it, was presented to prove its due execution and authenticit required under Section 20, Rule 132 of the Rules of Court. For lack of proper authentication, the Letter dated January 9, 2014 is without any probative weight and should not ha e been considered by the Court in Division. Petitioner further claims that respondent cannot invoke in its favor BIR Ruling [DA 130-02] as it was issued not in its favor but of Reco Grandh mes Pte Ltd., who requested the 1 Rollo, p. 36. / 2 Ibid. at p. 43. 3 Id. at. pp. 5-13.

DECISION CTA EB No. 1477 same. Besides, the fact al milieu in respondent's case is different from that of Rec Grandhomes Pte Ltd. BIR Ruling [DA 130-02] is also de med automatically revoked when respondent filed the Peti ion for Review with the Court in Division, hence, inapplica le in the given controversy. Petitioner also com lains that he was deprived of the opportunity to fully ev luate the merit of respondent's administrative claim for efund/TCC as the latter failed to submit BIR Form 1602 o the Monthly Remittance Return of Final Income Taxes Wit held, which he considers a pre- requisite for the successf I prosecution of its administrative action. Hence, the Petiti n for Review lodged with the Court in Division was pro-for a and premature, depriving the Court of jurisdiction to en ertain it. Finally, taxes are th lifeblood of the government, thus, tax exemptions are stric ly construed against the claimant, like respondent, for b ing a derogation of sovereign authority. By way of comment, respondent counterargues that: A. It was able to p ove that it is a financing institution wholly-o ned by the Government of Singapore and that i s income from investments in T-Bonds is exempt f om income tax under Section 32(B)(7)(a), Tax Co e; B. There is sufficient egal basis for CTA-Division's conclusion that its i come from investments in T- Bonds is exempt fr tax under Section 32(B)(7)(a), Tax Co C. There is no basis r petitioner's argument that failure to present t e Monthly Remittance Return of Final Income Ta es Withheld (BIR Form No. 1602) at the administrative level renders the respondent's claim f r refund pro-forma. 4 Id. at pp. 56-74.

DECISION CTA EB No. 1477 Respondent points o t that the Letter dated January 9, 2014 qualifies as a publ c document under Section 19(a), Rule 132 of the Rules of ourt for having been issued by the Ministry of Finance of Si gapore. As such, identification in Court by a witness h ving personal knowledge of its execution may be dispensed with. Moreover, it was notarized and certified by the Philippine Consul in Singapore Victoria Mario M. Dima iba, Jr., who confirmed the due execution of the conten of the Letter dated January 9, 2014. In fine, the authentication required for public documents under Sectio s 19, 24 and 30, Rule 132 of the ROC has been sufficiently complied with. Contrary to petitioner's claim, the aid Letter of January 9, 2014 established that respo dent is a financial institution exclusively owned by th Government of Singapore, thus, entitled to income tax ex mption under Section 32(B)(7)(a) of the NIRC, as amended. Respondent also u derscores petitioner's inability to timely question the admi sibility of the said letter as he did not file any comment/ pposition to its formal offer of exhibits as indicated in the Records Verification Report dated November 26, 2014. S ch failure is deemed a waiver to object to the subject letter's admissibility. Respondent likewi e states that its claim for refund/TCC is not solely anchored on BIR Ruling [DA 130- 02]. The Tax Code, 5 pertinent BIR rules and regulations6, and Decisions rendered b both the Court in Division7 and En BancB also support its s ance that interest income derived from its investments in hilippine T-Bonds is exempt from income tax. Respondent also opi es that its non-presentation of the monthly remittance retu ns of FWT (BIR Form No. 1602) is not fatal to its cause. It is allegedly akin to Expanded 5 Section 32(B)(7)(a), NIRC, as am nded. 6 Section 2.57.5, Revenue Regulati ns (RR) No. 2-98. 7 Government of Singapore Invest ent Corporation Pte. Ltd. vs. Commissioner of Internal Revenue, CTA Case No. 5568, February 10, 2000; and Government of Singapore Investment Corporatio Pte. Ltd. vs. Commissioner of Internal Revenue, CTA Case No. 6745, June 6, 2008 8 Commissioner of Internal Reve ue vs. Government of Singapore Investment / V Corporation Pte Ltd., CTA EB Nos. 689 and 958, promulgated on June 10, 2011 and March 31, 2014, respectively.

DECISION CTA EB No. 1477 Withholding Taxes (E Ts) whereby proof of actual remittance of the tax wit held is not required, and that the fact of withholding rna be established by showing the withholding tax certificat s issued by the payor-withholding agent. With its presentation of the Certificate of Final Tax Withheld at Source (BIR arm No. 2306) issued by the BTr, it has satisfactorily dem nstrated that the FWT subject of the present claim for ref nd/TCC was withheld and remitted to the BIR. Respondent also press significance on the Letter dated August 1, 2014 which all gedly belies petitioner's contention that the documents su mitted to him were insufficient thereby depriving him o the opportunity to ascertain the merits of respondent's a ministrative claim for refund/TCC. In the said letter, the BI considered the pieces of evidence it presented at the ad inistrative level and accordingly recommended for the ap roval of its claim for refund/TCC. Thus, having met II the conditions for the grant of refund/TCC, petitioner has no basis to deny the refund/TCC sought, lest, it will amou t to unjust enrichment on the part of the State. THE RULIN OF THE COURT EN BANC The instant Petition or Review must fail. It is evident from the record that petitioner merely reiterated the issues he a ready invoked and which the Court in Division squarely add essed in the assailed Decision of March 17, 2016, and affi med in the Resolution of June 14, 2016. Petitioner once again claims that respondent's reliance on BIR Ruling ( A130-02) as basis for its claim for refund/TCC is misplaced that respondent failed to submit BIR Form No. 1602 at he administrative level effectively depriving him of the opp rtunity to determine the merits of its claim, and for which eason, the filing of the Petition for Review before the Court i Division was premature. /

DECISION CTA EB No. 1477 Nevertheless, if onl to clear the cloud of doubt still hovering around petitione 's mind, the foregoing issues shall perforce be discussed. Contrary to petition r's claim, respondent, through the Letter dated January 9 2014, was able to sufficiently establish that it is a fina cing institution wholly-owned and controlled by the Govern ent of Singapore, hence, exempt from income taxation as expressly provided under Sections 32(B)(7)(a) of the NIRC, as amended and 2.57.5 of RR No. 2-98.9 Note that the Letter ated January 9, 2014 was not just an ordinary letter to be onsidered as a private document. The said Letter was a C rtification issued by the Reserves and Investment Office, Mmistry of Finance of the Singapore Government. It was sign d by the Director for Reserves and Investments Derrick Wa , who attested to the fact that respondent is wholly- wned and controlled by the Government of Singapor . Moreover, the said Certification was notarized by our ow Consul Victoria M. Dimagiba Jr. at the Philippine Consulate in Singapore10 as evidenced by a 9 Sec. 32. Gross Income. - XXX (B) Exclusions from ross Income. - The following items shall not be included in gross in orne and shall be exempt from taxation under this Title: XXX (7) Miscellaneous Ite (a) Income Derived y Foreign Government. - Income derived from investments in the Ph lippines in loans, stocks, bonds or other domestic securities, or fro interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoyi g refinancing from foreign governments; and (iii) international or re ional financial institutions established by foreign governments. XXX XXX XXX Sec. 2.57.5. Exempti n from withholding. -The withhold!ng of creditable withholding tax rescribed in these Regulations shall not apply to income payments ade to the following: XXX (B) Persons enjoying exemp ion from payment of income taxes pursuant to the provisions of any law, g neral or special xxx 10 Exhibit P-3.

DECISION CTA EB No. 1477 Certificate of Authentication which also indicates that original of the said Certifi ation was in the legal custody of Director Derrick Wan. 11 he action taken by the Philippine Consular Office was a ecognition on the part of the Philippine Government tha the Letter dated January 9, 2014 is a foreign official d cument issued by the proper government agency of the Singapore. Hence, under Section 24, Rule 13212 of the R les of Court, it is admissible in evidence without need of urther authentication. Further, Section 19(a), Rule 13213 of the Rules of Court provides inter alia that ins ruments or records of official acts of official bodies, tribun Is and public officers of foreign countries are public doc ments. Undeniably, the subject letter is a foreign public document as it is a certification originating from the Minis ry of Finance - Government of the Republic of Singapore. Finally, to establis the fact of withholding and remittance of the illegal/ rroneous final taxes, respondent presented the Certificate of Final Tax Withheld at Source 11 Ibid. 12 Section 24. Proof of official reco d. - The record of public documents ref-erred to in paragraph (a) of Section 19, whe admissible for any purpose, may be evidenced by an official publication thereof or y a copy attested by the officer having the legal custody of the record, or by his dep ty, and accompanied, if the record is not kept in the Philippines, with a certificate t at such officer has the custody. If the office in which the record is kept is in fore gn country, the certificate may be made by a secretary of the embassy or legatio , consul general, consul, vice consul, or consular agent or by any officer in the for ign service of the Philippines stationed in the foreign country in which the recor is kept, and authenticated by the seal of his office. 13 Section 19. Classes of Docu ents. - For the purpose of their presentation evidence, documents are either ublic or private. Public documents are: (a) The written official acts, o records of the official acts of the sovereign authority, official bodies and ribunals, and public officers, whether of the Philippines, or of a foreign count y; (b) Documents acknowledge efore a notary public except last wills and testaments; and (c) Public records, kept in the hilippines, of private documents required by law to the entered therein. / All other writings are private.

DECISION CTA EB No. 1477 (BIR Form No. 2306), Le ter dated February 11, 2014, the statement of taxes with eld and journal entry vouchers (JEVs) all emanating from the withholding agent BTr. In Commissioner f Internal Revenue vs. Asian Transmission Corporation 14 the Supreme Court ruled that for claims for refund of ithholding taxes, the taxpayer is not required to establish ctual remittance of taxes withheld as the said duty pertain to the payor-withholding agent, thus: xxx proof of actu I remittance by the respondent is not needed in order to p ove withholding and remittance of taxes to petitioner. ection 2.58.3 (B) of Revenue Regulation No. 2-98 clearly provides that proof of remittance is the resp nsibility of the withholding agent and not of the taxpayer-refund claimant. xxx Contrary to petiti ner's claim, respondent is not required under the law t present the Monthly Remittance Return of Final Income T xes Withheld (BIR Form 1602) for the onus of demonstratin actual remittance of the final tax lies with BTr as payo -withholding agent pursuant to Sections 57 and 58 of t e 1997 National Internal Revenue Code, as amended .15 As to what docume t constitutes sufficient proof that the taxes were indeed ithheld by the payor-withholding agent, Section 58(8) of the NIRC, as amended, is instructive, thus: SEC. 58. Retu ns and Payment of Taxes Withheld at Source. - (B) Statement of ncome Payments made and Taxes Withheld. - Every wit holding agent required to deduct and withhold taxes un er Section 57 shall furnish each 14 G.R. No. 179617, January 19, 20 1. Philippine National Bank, G.R. No. 15 See Commissioner of Internal 180290, September 29, 2014.

DECISION CTA EB No. 1477 Clearly, respondent's presentation of the Certificate of Final Tax Withheld at Sou ce (BIR Form No. 2306) issued by the withholding agent BTr in favor of Citibank covering FWT in the total amount of P 42,816,565.56,16 the Certification dated February 11, 2014 7, confirming the amount of final taxes withheld from the c upons or interest income derived by the Philippine T-Bond recorded under Citibank N.A. 's Custodian Account, the S atements of Interest Payment of Coupon/Maturity due by government securities holders of Citibank, 18 and the journ I entry vouchers (JEVs) covering the withholding of final t x on coupons and remittance of FWTs to the BIR, 19 satisf the requirement of the law. The foregoing pieces of evidence show that for the periods December 1, 2011 to December 31, 2012, the amount of P242,816,565.56 pertaini g to final taxes on interest income from Philippine T-Bonds, to which respondent's claim is hinged, were indeed with eld and remitted by the BTr to the BIR. All said, respondent as complied with all the requisites to justify the grant of its claim for refund in the aggregate amount of P216,919,2 6.53, representing erroneously collected final taxes. WHEREFORE, the etition for Review dated July 15, 2016, filed by the Com issioner of Internal Revenue is DENIED, for lack of m rit. The assailed Decision dated March 17, 2016 and Re elution dated June 14, 2016 are AFFIRMED. SO ORDERED. 16 Exhibit P-8. 17 Exhibit P-5. 18 Exhibits P-6-1 and P-6-2. 19 Exhibits P-7-1 to P-7-9.

DECISION CTA EB No. 1477 We Concur: a~~ c.~~.Si. LOVEL~R. BAUTISTA Associate Justice JLfANITO c. CASTANEDK,' R. /- Associate Justice CAESAR A. CASANOVA ER~.UY Associate Justice Associate Justice tillJ:; l, M~~ _ c~ qy, ~.A~ CIELITO ~: MINDARO-GRULLA MA. BELEN M. RINGPIS-LIBAN Associate Justice Associate Justice Pursuant to Article V II, Section 13 of the Constitution, it is hereby certified th t the conclusions in the above Decision were reached in consultation before the case was assigned to the writer oft e opinion of the Court. Presiding Justice