BPI Leasing Corporation vs. Commissioner of Internal Revenue

DECISION

Petitioner BPI Leasing Corporation has filed this petition for reviev.J seeking for ti·Je refund of tile amount of P777, 117.05 allegedly representing overpaid gross receipts tax for 19(>6. I% borne out by tile pleadings, petitioner is a corporation duly or_ganized and existing under the lav.Js of tile Philippine::; engaged in the business as an equipment leasing and financing company .

. Petitioner alleged that for the calendar }rear ending December .31, 19[)6 it paid U1e 4% contractor's tax of Pl _. l-34,041.49 based on gross rentals of P27,78.3,725.42 on equipment. leasing and operating leases. 368

On the basis of Section es of Revenue Regulations No. 19- 86 (issued on November 10, 1986), petitioner filed on April 11, 1988 4 claim for refund or tax credit with the respondent alleging that it overpaid its gross receipts tax by P777,117.05 for the year 1946, computed as follows:

BPI LEASING CORPORATION

Recomputation of GRT for 1986.

on Equipment Leasing/Operating Lease

Rental Income Rate GRT

First quarter P7,547,996.99 4% P303519.88 Second quarter 6,694,280.28 4% 267,771.21 Third quarter 6,823.216.09 4% 272,928.65 Fourth quarter .

Income prior to 10-01-86 6,678,232.06 4% 267,129.28 Income after 10-01-86 within 2 years 200,246.15 53% 10,012.31 within 4 years 570,984.03 3% 17,129.52 within 7 years 55,063.67 1% 550.64 GRT paid on Equip. Leasing P1139,041.49 _ As Per Revenue Regulations No. 19-86:

Earned

Actual Income Rate GRT

within 2 years — © P4,549082.66 58 P 227,484.13 within 4 years 4,469,036.36 33 134,071.09 within 7 years 36,922.03 1% 369.22 GRT paid on Equp. Leasing Per Rev. Regs. 19-86 P_ 361,924.44 Alleged Overpaid GRT per Rev. Regs. 19-66 P 777,117.05 369

DECISIOB-

C.I.A. CASE BO. 42:)2 - 3 - Section 6.02 of Revenue Regulations No. 19-86 provides:

-PART B: GROSS RECEIPTS TAX

Section 6_ Basis of the gross receipts tax_ - 6.01 XXX

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6.02 The amount of interest, if t11e same is derived by a finance and leasing company registerecl under R.A. 59&0 shall be subject to the gross receipts tax prescribed in Sections 260 and 261 (as amended by P.D.

17 39) of the National Internal Revenue Code

based on the rernaining maturity of the lease. Amounts '.hlhich the lessee, under the agreement, pays to the lessor (in addition to a stipulated rental)· for certain otl1er expenses properly payat>le t>y the lessor (as described in Section 2.0 1) shall t)e exclucled for purposes of llie gross receipts tax determined under this subparagraph.- Relying on the above-mentioned Regulation, petitioner claims that it had erroneously paid the 4 % contractors tax for 1986 based on gross rentals amounting to P27,7&3,725.42 instead of a graduated rate of 5%-3%-1% on gross receipts derived from actual leasing income received from its clients based on llie remaining maturity of the leases pursuant to the provisions of Sections 260 and 261, as amended by P.D. 17.39, of the National Internal Revenue Code which '.AlaS later renumbered to Sections 220 and 221 of the 19&6 Tax Code.

'iNitlwu.t 'Na.iting for the decision of respondent, petitioner filed a Petition for Review ·witll this Court on April 15, 198& in order to toll the prescriptive period for claiming for a refund . or 370

DECISIOH-

C.LA. CASE HO_ 4252 - 4 - tax credit pursuant to the provisions of Sections 2 43 and 2 46 of the same Code.

The issue posed is whether or not petitioner is entitled to the refund of P777J 117.05 as alleged overpaid gross receipts t.ax for 1936 pursuant to Revenue Regulations No. 19-t>6. Respondent denied the material allegations in the petition and alleged as special and affirmative defense that the petition states no cause of action considering the provision of Section 7 of Revenue Regulations No. 19-36 .. V?hich provides: -section 7 _ Effectivity - These regulations shall tate effect on October 1. 1 qu6 ancl shall be applicable to all leases v ... ·ritten on or after the said date.- (Underling supplied.)

There ~Nas no allegation nor was there any evidence presented regarding leases entered int{) on or after October C 1936 in order for it to be covered by said Regulations. ..A .. fortiori Section 6.02 cannot l)e applieo:j to rental income earned from January 1 to September 30~ 1986 or prior to the effectivity of said Revenue Regulat.ir.)n.

Petitioner pleads tJ1a.t the graduated rate of 5%~ 3% and 1% gross receipts tax under Section 6.02 of Revenue Regulations No. 19-86 should be applied to its rental income derived from equipment leasing and operating leases in 1986 and not t11e flat 4% contl·C1-c:tor's tax on gross receipts. We disagree with petitioner.

Section 7 of Revenue Regulations No. 19-86 issued on

November 1 OJ 1986

~~~,-·as subsequently amencjecl by Revenue 371

DECISIOB-

- -.

C.I.A. CASE BO. 4252 - 5 - Regulations No. 2 2 -&6, dated December 16, 19&6, said provision reads as follows:

·section 7 _ Effectivity - These regulations shall t:~.ke effect on Januarv 1. 193 7 and shall be applical:>le to all leases V·Tritten on or after tlle said date.· (As amended by Revenue Regulations No_ 22-66 dated December 16~ 1966) · The effectivity of Revenue Regulations No. 19-&6 providing for the graduated rate of 5%, .3% and 1% of gross receipts tax based on the rernaining maturity of t11e lease pursuant to Section 2 60 and 2 61 of the National Internal Revenue Code (as amended by P.D. 17 39) is on January 1 . 19&7. It is therefore clear that petitioner cannot invol~e the provisions of Revenue Regulations No. 19-06 for the period in question, t11at is 19&6, since at tllat time said Regulations still has no effect even if- the same ·was issued in November 10, 1986 by reason of its amendment as provided for by Revenue Regulations No. 22-86 dated December 1 (\ 1 9(36. Furthermore . Revenue Regulations No. 19-06 shall be applicable to all leases written on or after January 1, 1987. Since all the rental income received covers the period January 1, 1906 to December 31, 1986 it is crystal dear that tl1is covers leases prior to January 1, 1907.

1hThen the \o1!0rc1s ancl phrases of a st3.tute are clear and unequivocal, their mea.ning must l)e determined from the

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language employed and the st3.tu.t.e must be taken to mean exactly ~Nhat it says. (Fagel Tabin Agricultural Corporation v_

Jacinto~ 203 SCRA 169J

Petitioner cannot invoke tile provisions of Revenue Regulations No. 19-86 for it is clear from 372 -

DECISIOH -

LT_.A_ CASE HO_ 4252 - 6 - the aforecited Regulation that it shall take effect only on January 1, 19(37 and shall be applicable to leases written on or after l?[ ll . .,t--r.T 1 1 C• (•)7 - o. 1 --'='-

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WHEREFORE, the petition is dismissed and the claim for refund is hereby DENIED_ No pronouncement as to cost.

SO ORDERED_

Quezon City, lv1etro lvlanila_. lvlay 1.3_. 1994. E.~ 10_ .. ~

ERNESTO D_ A COST A

WE CONCUR:

~N

Associate Judge

(on leave)

RAMON 0 _ DE VEYRA

Associate Judge

CERTIFICATION

I herebv certifv tb;:-1t. this decision was react1ed after due

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consultation among tl1e members of the Court of Tax Appeals in accordance ·with Section 1.3_. Article VI I I of the Constitution.

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CA .. 4.iZ~ Q~

ERNESTO D_ ACOSTA

Presiding Judge

Court of Tax Appeals

373