CTA Case No. 6050 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FAR EAST BANK AND TRUST COMPANY, Petitioner, -versus- C.T.A. CASE NO. 6050 COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. AUG 08c2-0#01!fJr>tUct-~;--\ X-----------------------------------------------------------X DECISION The case at bar seeks the refund/tax credit of the amount of P3,291 ,996.40 alleged ly representing Petitioner's overpaid Capital Gains Tax and Documentary Stamp Tax for the taxable year 1998. As represented, Petitioner is a banking corporation duly organized and existing under and by virtue of Philippine laws, with principal office at the Far East Bank Center, Sen. Gil J. Puyat Avenue, Makati City. On 26 March 1998, Petitioner filed an application (Exhibit M) with the Clerk of Court and Ex-officio Provincial Sheriff of the Regional Trial Court of Tuguegarao- Cagayan, for extra-judicial forec losure of real estate mortgage of properties covered by eleven (11) Transfer Certificates of Title, in satisfaction of the loan incurred by Carlos 9' "3'' 1 \. {

DEC ISION- CTA CASE NO. 6050 PAGE 2 Chua Uy, Hobert Chua Uy and Hcmy Chua Uy, -.vhich, as of 8 May E)<))( stood at P71,596, 106.2..t. inclusive of intere st, penalties and fees. On "tvlay 8. 1998, the date of auction sale of the mortgaged properties (E:\.hibit N), Petition er submitted a formal bid of P27,703,000.00 (Exhibit 0) eventually emergin g as the highes t bidder therein vvith a bid price of P27,703,000.00 vvhich was only in partial satisfaction of the mortgagor's loan obligation amounting to P71,596,106. 24 inclusin: of interest and penalti es, filing fees, publi ca tion fees, appraisal fees and attorney':.; fee s (Exhibit P). On Tvlay 12. 1998, the sheriff issued the con esponding certificate of sale (COS) (Exhibit Q) wherein it was erroneously stated that Petitioner had submitted a bid pric0 of P7L596. 106.24 (Exhibit Q- 1), when, in Htct, Petitioner's official bid was onl v fo r P27 , 703 ,000.00 . On May 1.5, 1.998. Petitioner, relying i11 good faith on the Sheriff's C~rtificatc of Sale, paid thru its Tuguegarao-Cagayan Branch, tl1e S he1if~ s fee and judicia l Ct>st s. due from the sale. On Ivtay 18, 1998, on the basis of the Sherif-rs Certificate of Sale, P etition-.:r iiLd '' Capital Gains Tax (CGT) retum based on the erroneous sale price ofP 71 ,59G, l 00.2~ and paid the amount of P4,295 ,766.40 as capital gains tax for the account of the m ort g;~~o rs (Exhibits T, V, W, X, X-2). Likewise, on 1\1ay 18, 1998, P etitioner also fil ed a Documentary Stamp Tax (D~ T) declaration and paid the amount of Pl,073,955.00 based on the enoneous sale pri c~ of P71 ,59G,JOG.2..t. (Exhibits V, W-2, Y, Y-1 and Y-2). 930

DE CISION - CTA CASE NO. 6050 PAG C 3 On May 19, 1998, realizing the en:or in the sale price-tax base as st:.1ted in the Sheriff's Certificate of Sale and its error in the payment of the corresponding capital ga ins and documentary stamp ta xes. Petitioner immediately wrote Respondent's R~.:gional Director for Cagayan \ lalley to daim for reimbursement (Exhibit A). O n th e same dale, May 19, 1998. Respondent 's Regional Director r~.:pli~,;d that reimbursement was no longer feasibl e since the taxes, CGT and DST, have Jlrc;1dy been paid and the official receipts for such payment issued and that Petitioner should fik a Ia .� refunc.Vcredit certificate instead (Exhibit C). On I\1ay 26, 1998, Petitioner forthwi th fikd a written claim for a lax credit certificat e/refund in the amount ofP3,29 1,996. -t.O with the Regi onal Director of Region 2, Bureau of lntemal Revenue (Exhibit B). On June 17. 1998, the Sheriff issued an Amended Certificate of Sale (E:xbib it IZ) in RE:NI Case 1209 attesting to Petitioner's correct winning bid of P27, 703,000. 00. On the same elate, the Sheriff also executed an af.l.idavil allesting to the error he had made on the Certificate of Sale dated 12 f\.1ay 1998 (Exhibit S). or Due to lack of official action on the pari Res pondent and to hedge again st the running of the statutory limitations, Petitioner filed with this Court on April ..J., 2000 th~ instant petition for review. Respondent, while not disputing the relatively simple material facts alleged by Petitioner. raised the herein Special and Affumalive Defenses: (1) Petitioner's alleged claim for refund is subject to aclmin istrat ivc routinary inves tigation/examination by Respondent 's Bureau;

DECISION - CTA CASE NO. 6050 PAGE4 (2) T he amount of P3,29 1,996.40 being claimed by Petition er representir1g alleged over-remittance of Capital Gains and Documentary Stamp Taxes for taxable ye ar 1998 was not properly documented ; (3) In an action for refuncVcredit, the burden of proof is on the t:1 xp ay~:r to establi sh its ri ght to refund and failure to adduce suffici ent proof is fatal to the claim for tax refundicredit; or (4) Petitioner must shO\v that it has complied \Vith the prov isJons Section s 204(c) and 229 of the Tax Code, as amended; (5) Petitioner miserably failed to demonstrate that the ta x subj ect of the case at bar \vas en oneously or ill egally collec ted; and (6) Claim s for refund are ~.:ons lru ed stri d ly against the claimant Cor th~..~ sam e partake the nature of exemption from ta xation (Conm1issioncr of Int emal R evenue v . Ledesma, 31 SCR A 95) and as such, they are looked upon with disfavor (Western Mino.lco Corp. v. Commissioner of Int crn.-JI Revenue, 124 SCR A 12 1). The issues presented by the parties may be summarized into one and that is \\ hdh~:r or not Petitioner is legally and factualJ y entitled to its claim for refund in the ;.nnouut o ( P3,291 ,996.40 representing alleged oveq)aid capital gains and documentary stamp Ia.�-:s. We resolve the legal issue of herein case in favor of Petitioner. Til ~ fact th;1t Petition er oveq)aid tluu elTOr or mi stake the Capital Gains Tax and D ocumentary .;ump Tax for 1998 as a consequence of an erroneous t:ax base and tht: fact that R~spo1Hknt accepted the pay ment gave rise to the appli cation of the legal prin ciple of qu~l si-cnntr:Kt or solutio indebiti under Articl e 2 154 of the New Civil Code, which provides tlw t �'ir something is received when there is no right to demand it, and it was unclu h - dl'li' �.'r�_�d through mi stake, the obli ga tion to return it ari ses." T he Supreme Court in the case of Ramie Textiles, Inc. v. ~1athay, Sr., R9 SCRA 586, mled that the quasi-contract of solutio indebiti is one of the concrete manifestation s 9 40

DE CISION- CTA CASE NO. 6050 PAGES of the time-honored doctrine that no person shall unjustl y emich himself at the expense of another. Hence, it would seem unedify ing for the government, that knowing it has no right at all to collec t or receive money for alleged taxes paid by mista ke, it \\ould be reluctant to return the same. Taxpayers owe honest-y� to the government just as govemment owes fairn ess to taxpayers (Commissioner of lntenwl Revenue v. Tokyo Shipping Co., Lid., N 4 SCRA 332). In any case, a taxpayer should not be held to suffer loss by his good intention to comply with what he believes is his legal obligation, where such obligat ion does not really exist. (Ramie Textiles, Inc. v. ~1athay Sr., supra). When money is paid to another under the influence of a mistake of fact, that is to say, on the mistaken supposition of the existence of a specific f~tct which would not have been known that the fact wa s otherwise, it .may be recovered. The ground upon which the right of r::-:ovcry rests is that money paid tlu�ough misapprehension of facts belong..;; in equity and in good conscience to the person who paid it (4 Am . Jur. 514). Since in the case at bar it was clearly establ ished by Petitioner that tbc corr~..'c l tax base for capital gains tax and documentary stamp tax for extra judicial ~;ak of the motigaged properties should only be P27,703,000.00 and not P7 J.5<)().JOG.24. Respondent is under obligation to retum the excess/overpaid capital ga ins !;1:-; and documentary stamp tax to herein Petitioner pursuant to the aforeci led ;.\rtick 21 S-l of the New Civil Code. 941

DE CISI O N - CTA CASE NO. 6050 PAGE6 Reconl<> show that Petitioner complied with the statutory requirements for the filing of the claim for refund. Thus, what is left for this Court to do is merely to ascertain vvhetber Petitioner has satisfied the evidentiary requirements of its claim for refund. ..'\:fkr a thorough and detailed examination of Petitioner's evidence (Exhibits ,\ to Y, inclusive of sub-markings) and considering that Respondent did not submit any evidence to controvert the evidence and allegations of Petitioner, the Court under til..: circumstances, is persuaded to extend the relief sought by Petitioner. Petition~r is cnti tkd to tlte refund of the amount ofP3,291,996.40, breakdown of which is shown in Exhibit B, representing its overpayment of capital gains tax and documentary stamp ta x for the ~�..:ar 1998, as a matter ofl3w. IN THE LlGHT OF ALL THE FOREGOING, the instant Petition for RcYiew 1s hereby GRANTED. Respondent is hereby ORDERED to REFUND or ISStrl;: ,\ T.\:\ CREDIT CERTIFICATE in favor of Petitioner in the amount of P3,291,99(>.--l-0. No costs. SO ORDERED. ~ OQ.SAi# Associate Judge I CONClJR: ~-tl). c~ KRNESTO D. ACOSTA Presiding Judge 94 '

DEC IS I O N - CTA CASE NO. 6050 PAliF 7 CERTIFICATION I hereby certify thal the above deci sion was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of th0 Constitution. ERNESTO D. ACOSTA Presiding Judge 940