CTA Case No. 4426 (Decision)

_, REPUBL I C OF THE PHILIPPINE S COURT OF TAX APPEALS QUEZON CITY CALTEX (PHILIPPINES), INC., a nd HARIO DEL ROSARIO, Petitioners , - versus - � C.T.A. CASE NO . 4426 COHM ISS ~ONER OF INTERNAL REVE NUE, Respondent. X- - - - ------X DE cI s I 0 N r~ t. i tion fo r Revie\v \TBS f i led by petitioners 'cla!~i ng for refund of illega lly or erroneous ly paid by pet.itioner Cal te:< in tl:e nmoun t of I'<1 G: , 9.'l1 . 00 and aecompanied by �. h e t o llo\v ing p 0 r t i. n 2 n t a 11 e g a t i o n s o f .f a c t s vl h i c h ~~ e quo t e i n co n ~; i ' I �= ra t ion o f the nature o f the dec is i o u a rrived Rt h y t h e Colrt i n t hi s case. " On J une 11 and Oc tober 21, 198 5 , del P�)s ario , m o rtga q~ d three p arcel ;~ of land r: i t uated in Har iv eles, Ba taan , in fav o r o f r ~ ltex t o se c ure payment o f F 6 , 00 0 , 000 \!o rt h of petroleum prod u cts 4nd othe r ~ oc handise which he, as Ca l tex deal er , p t rc h ased on credit from Calt ex . Up o n the fdilure of del Rosa rio to ~ay h is �pG , 000 , 000 indebtedness, Ca lte>: _, e xtraju~ici a lly f or_ cl o sed the rea l esta te 672

DECISION C.T.A. CASE NO. 4426 - 2- mortgage. At the public au c tion sale c onducted by the Sheriff of Bataan on July 27 , 1987, the three parce ls of land were s old to Caltex for the total amount of P500 ,000. In order to e ffe c t the registration of the sale in its favor with the Register of Dee ds on February '29, 1988, Cal tex paid ca pital gains taxes amounting to P440 , 969.00 and documentary stamp taxes c-unounting to P60, 000 based on the mortgage obli g at.io n of P6 , 000,000 . (Copies of Co nfirmation Receipts Nos. 13532015 and 1352014 issued for such payments are hereto .:\t tached as Annexes "A" and "B" , respective ly.) In BIR Rul ing No. 2 122-88 dated May 20, 1988, respon~ent ruled that the capital g a ins tax on the extrajudicial foreclosure sa le of the lots mortgaged by del Rosario t o Caltex shou ld be based on the bid price o f P5 00, 000 or the zonal values of said p r operties, whichever was higher, and the rlocu mentar y stamp tax should be based on the bid price of P500,000." ( Cop y of said rul ing is hereto attach e d as Annex "C" and made an integra l part hereof .) Answer was filed by respondent and it states, am o ng others , that: _, "1. He ADHITS the material I, II, III, V, a llegations in paragraphs a nd VI of the petition ; 2. He SPECIFICALLY DENIES the a llegations on paragraph IV of the petition tor being false, the truth being that it was petitioner Mario del Rosario, not p etitioner Caltex (Philippines), Inc., v1ho pa id the cap ital g a ins tax and documentary s tamp tax 1 3.. He ADHITS the allegation in para gr a ph VIII of the petition that the 8apital gains tax and documentary stamp tax pa yments were in exc ess o f he correct a mounts payable, with the qu a lification 673

DECISION C.T .A. CAS E NO. 4426 - 3- t.ha t the cor rect amount of e}:c e~;s payment i~ F460,065.45. He, however, SPECIFICALLY rP.JTIES th e al l egat i on in said par agra ph that the excess payment s hould be refunded fer bein g erroneous, the truth be ing th o se s~n te d in t he hereunder Sp ec ial and nffirmative Defenses; 4. He ADI1ITS the alleg at ion in rara graph VIII of the petition t ha t a c l a im far refund was made for the excess payment of capita l gains tax and documentary st a mp tax , with the qualification that it was p ;~ t i t i one r ! ! a r i o de 1 Ro s a r i o , that made the c l ai m for refund. He, however, sr CCI FICALLY DENIE S the al l egation in said p3ra graph that respondent has not acted upon said clai m for being fal s8, the truth ll e ing th a t said claim had been pro cess ed C"t lH1 investigated: In fact , responde nt cl�~ nied the claim in a let t er dat ed Harch 2, l<:J :Jl ; 5. He SPECIF ICALLY DENIES the <lllegation in p aragraph IX of th e petition f ,) r b e ing an erroneous concl us ion , the tr uth b ei ng those st at ed in the f ollowing - " As special an d affirmative defen ses , respondent �'�. ll �� 9 �: �= , e s sse n t i a 11 y , that : " 6. Petitioner Caltex (Phil ippinefts), :!.: nc. is not the real party in inter es t to ~laim the refund of the excess payment of c~ pita l g a ins t ax and documentary stamp tax s ince i t was petitioner Mario d e l Rosari o \Jho paid the same ; 7 . This Honorable Court has no j uri sdic ti on to take cd gnizance of th e cas e inas much as petitioner Haria del Rosario , Hllo pai.d the taxes sought to b e refunded�, did n o t file Hi th respondent a c laim for the refund thereof as requir e d un de r Sec tio n 243 (now Section 230) of the 1988 lL:tt io nal Internal Revenue Code ;" S~e m ingly finding some room f or t he applicat ion o f PuJ�: 34 of the Rules of Court , p et iti oners filed 674

DECIS I ON � C.T.A. CASE NO. 4426 - 4- l! o tion for Summary Judgment. The l!o tion for Summa r ~Tudgm en t was filed by petitioners on t: he main ground th at exc ept f or t'YTO items all the essen tial faets a lleg ed on the petition are admitted . Paragraph s ::I, III, IV , V, VI, VII , VIII , \'lere alleged to have b1 ~en a dmitt e d by respondent and t hat th e only r a ined issues as to petitioners' allegation that it uas Calt ex Hho paid the taxes by contending that it uas p e t i t i o n e r H a r i o de 1 Ro sa'r i o vl h o p a i cl them , a nd 1: he ot h er a l l egation that no action has been taken on the refund c laim by contending that such claim has been denied by lette r of respondent of March 2, 1990. For th e p e tit i o n ers 1 e v en with the deni al on the alleged non - a c t ion on the refund c l aim , the averment of r espon dent , is still an implied admi ss ion that the f ormer has not acted on the claim before the filing o f the Petition fo r Rev ievT on F e bru ary 23 , 1 990. Thi s acco rding to petitioners l eaves o nly one fa c tual issue , and that is , as to who paid th e taxes. Thus , petit i oners , i n answer to th i s question , point to the affid 3 v it of Mr. Pedro M. Carbonell II attach to the s ubj e c t mo t ion stating that : a ) He h andled for Calt.ex the e x tra - judicial forecl os u re of del Rosario 's lots; b) He bid in behalf of Caltex in th e auc ti o n sa le of said lots; c ) After t he Certifica te of Sale in favor of Calt ex Has issued by 675

DECISION C.T.A. CASE NO. 4426 - 5- the De pu ty Sheriff of Bataan, he requested the BIR Regional Distri c t Office (ROO) in Bal anga , Bataan to comput e the taxes t o be paid as required by the Regi s ter of Deeds of Bataan for the registration of the sa le and a h~ndwritten co mputation was given to him and it indicated Caltex because the Bataan RDO was awar e that Caltex was payin g th e taxes; d) He c aus e d the preparation by the Bat aan RDO of the c apital gain s tax return and signed it above the typewritten n ame "M ar io del Ros ario" and the handwritten words "For Caltex", and filed it on November 17, 1987; e ) He tendered to the Bataan RDO Calt e x Citibank � Check No. 0 20469 dated February 16, 1988 for P500,696.00 in payment of the capital g~ins a nd docu ment ary stamp taxes and copy of the cancelled c heck was attached as Annex "D" o f Mr. Carbonell's a ffid a vit. Peti ti oners argue against the first affirmative def e n s e of respondent that Caltex is not the real -� party in interest to claim the refund by citing cases th a t establish Caltex's right to the tax, which as asserted has been erroneously paid by it. On the second a ffirm ative defense of respondent that this Court has � no jurisdiction over the cas e since petitioner Mario del Rosario who allegedly paid for the tax did n ot file a c l ai m for refund, petitioners 676

DECISION C.T.A. CASE NO. 4426 - 6- cou nt ~ r ed with its own elaboration of what th e y th i nk is th e underlying purpose of Section 230 of the Nati on u l Internal Revenue Code in requiring a c laim f o r re fund as a prerequisite to a suit or proceed i ng f o r th e recovery of any internal revenue tax. Respo nd ent file his opposition to the motion for s umm a ry judgment contending that summary judgment is un a vailin g under the circumstances of this case in vi e \T o f the genuine issues of material facts which allegedly are; _, a } Wh ether it '"as petitioner Caltex or p e titioner Haria del Rosario who paid 1:he s ubject tax; b) Whether petitioner Mario del Rosario fi~ed a claim for refund; c ) Whether the amoun t alleged to be eroneoun ly p a id is P461,940.00 or P460,065.45. Furthe r , that on a motion for summary judgment, the Co urt is not authorized to decide an issue of fa<!t, but i. s to determine whether the pleadings and record before the Court create an issue of fact wh i ch necess i tates a trial. And, this Court from a motion for Sllmmary .judgme nt is not au thor ized to dec i de wheth er it was petitioner Caltex or petitioner Mario del Ro sario who paid the tax , whether petitioner 677

DECISION C. T. A. CASE NO. 4426 - 7- IL:t r- i o del Rosario filed a claim for refund 1 and the c a rr e ~ t amount o f tax alleged to be err o neously paid. In their "Reply to Opposition (To l!otion � for �' S u mm :t1: y J u d g men t ) " 1 p e t i t i one r s note d t h a t r e s pond. en t r ~l i es only on hi s Answer to support his af o restited stan d and that he failed to present supp o r ting and opp o s ing affidavits as required by Sections 3 and 5, Rul e 34 of th e Rul es of Court. Pet iti oners contest t h t~ g enuineness and mat.eriality of t h e av err e d issu e s o f f a ct postulated by respondent by subm i tting that t h e y are not bona f ide or sub sta n t ial iss~e s . P et itioners point to the affidavit of llr. Pedr �) H. Car l;.:- nE! ll I I and i ts a nnexes for pr oo :E ::~ s t o v7ho :) aid th e taxes in contrast to n o proof shovm by For the petitioners , the d if ferenc! in t h e a mo unt of this suit is not a substantial issue. Ci Ung cases, petitioners contend t.hat the d e t 0 r mination o f such amount is mer e ly a ma them a tical pr o bl 0m and no t a substantial issue of a materia l .f ac t. are impressed by the lawfulness of and the l e gal p te~ t i tione r s ' claim. The . evidence auth n ri ties appear to us as supportive of this c on c lu s ion.� I�Je find that the aff id avit of l1r. Pedro H. Carb o n e ll II attached t o the tlo t i o n f or Summary 67 8

DECISION - 8- C.T.A. CASE NO. 4426 � Judgm~nt c redibly sho1-vs that i t \vas Ca l tex "'h o paid the t o t a l amount of P500,696.00 repres en ting capital gains tax a nd documentary s t a mp tax b a sed on the a mount o f the loan given by Caltex in f a vor of Mario del Ros~r io equal to PG,OOO,OOO.OO. Subsequently , Caltex rea lized the error in the amount it paid, v1hen, in answer to Caltex's own query, re s pondent r uled (Annex " C" , p. 7 CTA Records) that the capital gai n s t~x and d 6c umentary stamp tax i s computed on th e basis of the gross selling price or the fair market va lue prevailing at the time o f sa le, 11 b i c h e v e r i s h i g he r . The correct me asu r e of the ca pital gains tax a nd t he documentary s tamp t ax was therefore the bid price of P500,000.00 and not P6 ,000, 000.0 0 ( Ibid.). Respondent cont ests Caltex's right to claim refund of the excess amo unt paid on the positio n that it was Ma rio del Rosario who p a id the ta. es but since Mario del Rosario h as not filed a cla im for r e fund, this Court does not have jurisdiction on this case. Respondent thinks such an a nswer su fficiently creates a genuine issue a s to a material fact. But as Section 5, Rule 34 would . require jt, the adverse party or th e respondent �' s h ould su bmit� opposing affidavits and s uppo r ting document s contradicting movant's plea for summary ~I judgment to create the condition th a t th ere is suc h a 679

DECISION C.T. A . CASE NO. 4426 - 9- g e nuin e i s sue on a mate ri a l fact. As it is, respondent did not present an y documen t coun tering Calt ex ' s submitted affidavit and other supporting d oc um e n ts that would have ma de a genuin e issue on the matter of who erroneously paid the taxe s . Tf it wa s Caltex then who erroneously paid the taxes , re spondent cannot convince this Court to look to ll a ri.o del Rosa1�io for the requisite claim for refund un der .se c tion 230 of the Nati o n al Internal Rev e nue Code (NIRC} as h e did not p a y the t ax. vie Rre in <1cc ord with petitioners in its e l a borati o n of Section 230 of the NIRC to include that construction th a t Sectio n 230 doe s not s pe c ify th e person wh'o s hou l d file the c laim for refu n d . The deci si ons on .' th e mat ter are of the implication that it need n o t be the ta xpa yer who should file a claim f or refund as it c o uld be the pe r son who actually paid the tax provi de d that the payment was involuntary or in the wo rds o f our Na tional Internal Revenu e Cod e wh er e there is a s ituation where a tax was " e rrone ousl y or illeg a lly assessed or collected". The pertinent part o f Se c tion 230 provides: " Sec. 23 0 . No suit or proceeding s hall b e ma intain ed in a ny co u rt for the recover y of any . internal revenue tax hereafter a llege d to have been erroneously o r illegally assessed or collected . .. until a c J.aim for refund or cred it has been duly f i led with the Commi ssione r xxx. " 680

DECISION C. T .A. CASE NO . 4426 - 10 - I n deed , it was Caltex who filed the c laim for re fu n d because it paid for the tax. At this point, H e uo uld mention that we find the de c i s ional a u t ho ri ties cited by pet.itioners a s not only ~ pp ro p ri ate but noteworthy. Whether Calte x 's suit in �' t his Court s h ould be entertained or n o t on the basis of Se c tion 1 , Rule 5 of the this Court's rule s that t h e cas e s h all be brought or submitted by "the t a xpa y e r or the a ggrieved party", � \�l e deem that the s uit ca n be entertained as Caltex may be considered a " tax p ay0r " as th a t term is used in s aid Section. Co n s id e r this pronouncement in a ca s e on who is d ee med a "taxpaye r " in refund suits: " The 'vord " .~.?...~.P..?...�.1.=...!:." should not. be d ee med to includ e only a per so n a g a in s t 1�1h o m a tax ha s been a ssessed; on the c o n t rary, it should be co nstrued so as t o inc: 1 u de .?..~..Y....J?...t.=..E. :'?..<?..~.............~~'..h..<?........~D......... .~. ?.. ~..~.... J?. ?.. ~ 9. ... ~.h. ~. . .. : ;. .:t ~1 .~..~............. ~.t ~S..h.... .. J?...?...�..l!l..~..r.:t.~.......'1..?.: ::;. ........~.<?.. ~....... .. Y. S'. b.':l.P...~..~.E. ~ .b.�. ma de. In United States v. Updieke, 19 3 0, ~81 U .S . 489, at page 494, 50 S . Ct. 367, a t. page 36 9 . 7 4 L . Ed . 9 8 4 , t h e S up rem e Cour t said: " Indeed , when used to c onnote p a yment o f a tax, it puts no undue s train up o n the word 'taxpayer ' to bring within its meaning that person wh ose property, being i mpressed with a trust to that e n d , is subjecte d to the burden. Certainly it would be hard to co nvince such a per s on that he had n o t p a id a tax. " (McM a hon v. U. S. 172 F. Supp. 490; unders c oring supplied.) 681

DECISION C.T.A. CASE NO. 4426 - 11 - He have put emphas i s as well on th e co nditi o n t h at t o recover the tax a person wh o paid the tax s h o uld h a ve paid th e tax involuntarily bec a use the tax m ~y not be recovered in the instan c e, for ex<'l mp l e , where tn x es are volu ntaril y made by one per s on fo r another with donation as the underly ing mo tive fo r th e cas e (P arsons v. Anglim 143 F. 2d. 53 4). Here Calte x is c le ar on the inv o luntariness of i t s ac t. We recognize that it was co n s tra i ned by c i r ,~ um st.a nces to p ay t he taxes t o pr o tect its int erert on the prop e rty . Th a t is, in a f o r ec losure sa le t: lte only e viden c e of sale in fav o r o f the buyer is th ~ c ertificate of s h e riff ' s s a l e whi c h is n a t bi n ding on third persons n or d oes i t vest owners h~p on tlt r: buyer. The a ct of registrati o n as c o rrectly n o t e d by Caltex is the operative act that co nveys and a f f t: c t s the l a nd. Con sc ious of Sec t i o n 49(a ) t h at t he sa l e cannot b e registered with o ut payment of the c0r r2 s pond ing taxes , Caltex h a d to a nd d i~ p Ry f~r the c apita l gains ta x and the documentary stamp taK. l\ s it. is , the p ayment was made by Mr . Pedro '1. C3 rbo ne ll II with a notice "For Caltex" appear i ng und e r Carbo n ell ' s signature (Anne x " B " , p. 40, CT A R ec or d~:) . F ro m another viewpoint, it need not be the "t o :p G y~r " wh o initi a tes the suit und e r Sec . 1, Rule 68 2

DECISIO~T C.T.A. CASE NO. 4426 - 12 - 5 o f t his Court's rules, as said sect i on spe a k s o nly o f .:111 "aggrieved party ". Further, in relation to S e ction 11 of th e R.A. 11 2 5 it does n ot appear that sa id sec t i on restr icts the person wh o may bring or su bmi t a case to this Court to the taxpayer only as Sect i o n 11 of R . A. 1125 refers to " .~..11�... .P..~..:r..!.3...<?...11. . . - . a d verse ly affected by a decision or r uling "of the Commissio ner of Internal Revenue may file an a ppeal with t h is Co urt. When reference i s mad e on the " aggrieve d party" or " a ny person adversely affecte d" o ur 8t t e ntion ma y l ogica lly b e fo cu se d on the term " rea l party in interest" b ecause th e Rules o f Court whi c h ar e suppletory to t hi s Court' s rules , as long as t h r:> y are not in con fli ct, provided that " .~.Y..~:t::X ac ti o n mus t b e de f ended in the n a me of th e 1: �:: ;ll p a r t y in in t e r e s t " . And th e real party in interest is the party who cou ld b e ben e fited or inju re~ by the judgm Ant or who is en titled to the fruits o f the suit (Salonga v. Warner Barnes & Co., 8R Phil. 125). It is clear th at Caltex is the " aggrieve d party", the "person adversely affected " or a "r eal part y in interest " within the meaning of these t.e rms . There i s anot her p rinciple which militates aga i nst the side of respondent in thi s case . that as a matter of equity o r the principle of 683

DECISION _, C.T.A . CASE NO. 4426 - 13 - so lu tio indebiti , th e sov~ reign c r the taxing �"- u Ut <: t LL y c ann o t i n go o d c o n s c i en c e h o 1 c1 o n to what l' �r-�� ) i -:1 !1t f u 11 y n �) t h i s . Onc e a gain ue pi c k fr o m the r:� i t .:t t i on s o f au tho r i 1: a t i v e c as e s ma cl e by p e t i t i on e r s j n t:hi :;: case Hhich states: "In r eco gniti o n of the fact that �:: r ro ne o us de t e rmi n a t i o n s and assessments .1 il l in ev i tably occur, �the statutes, in a 2r irit of fairnes , invari a bly a ff ord th e ta ~payer an opportunity at some stage to ' 1 .:> v e m i s t a Jl e s r ect i fied. 0f t en an .:t d min i s t rat i v e h e a r i n g i s a f f o r <l e d be f o 1- e th2 asse ssment becomes fi n a l; or ~dM ini s trative machinery is p rov ide d �.1Jv;r eby an errone0us c ollectj_c n may be 1 �= fu nd E!d ; in some in stan ,: e s both :t dministrative relief an d redre ss by an :t�~ tion aga in st the sovereign i n o ne 0f i t s ~ou rts a re permitted methods o f restitution o f excessive or il le g al exa ction . Th us t h e 11_s ua l procedure the r ecove ry of deb ts i~: [l= versed in the fi eld of t a:<a ti oll . r .:<yment :_;c ~ce cl es def e nse , an d the burd en of proof, �1 �) 1:ma 11 y on t h e c 1 a i man t , i s s h i f t e d to t he t ,' :.: p a y e r . T h e a s ~> e s s me n t s up e r r" P r e ~;; t h e ~ l e ading , proof and judgment n ~cessar y in �� n ac t: ion at l a iV , <=~nd ha s th e f orce of s uch :t judgment . The ordinary defe n rlant stands i n j u c1 g me n t on 1 y a f t e r a h e a r i n g . T !1 E: ! ' ~ payer o ften is a ff o rded h is h~aring -� ft:er judgm e nt and after payr1c nt , and his �nl y redr es s for un j us t a d min ist ra tive _�:� t ion i s the ri g h t 1: o c 1 aim res t i t u t _ion . r111t these reversals o f the no rma l proces s } E colle c ting a claiM cannot obscure the E~ct that after all what is b ~ ing ~ �~��-;<:- mp1i s hed is the recovery of th0 just :l ,:o bt oHed the sovereign. If th a t vr hi ~; h the ro ve reig n ret a ins was unjustly tAken in -- i o lation of its o>~n statute, the ;: it hholding i s \vrongful. Re stitution is �:' \Je d the taxpaye r . " (Bull v. U.S ., 295 TJ. S . 2 4 7 , 7 9 L. e cl. 14 2 1 , 1 9 2 7 . ) 68 4

DECISION C.T.A. CASE NO. 4426 - 14 - ~s to the proper amount , it sh oul d then be ~ he amount a ll eged b y petitioners , a gain in vi ew of ~ he su pp ort ing do c u me nt (Ann ex "D" , p . 9, CTA Rec ords ) submitte d by them as against none by respondent . A s mal l di fferen ce in the amount claim h as a lr ea dy been held as not sufficient to t~nder a genuine issue p ar ti c ular ly in the absence of counter affidavi ts opp osi ng the c l a imed amount ( Phil. National Bank v . Phl. Leather Co., 105 Phil 404). WHEREFORE, judgment is rendered ordering the respondent Commissioner of Internal Reve nue to refund to petitioner Caltex (Philippines) , Inc. t he total amou nt of P461,941.00 erroneously paid capital gains tax and documentary stamp tax. SO ORDERED. Quez on City, Metro Manila, November 9, 1992. I t~~~ ERNESTO D. ACOSTA Presiding Judge I CONCUR: (On Leave) MANUEL K. GRUBA ciate Judge ~ llc.~lf RAMON 0. DE V..YRA .n_ssoc iate Ju ge 685

DECISION C.T.A . CASE NO. 4426 - 15 - CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ce~Q'"~ ~� ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 68 6