Bank of America, et al. vs. The Commissioner of Internal Revenue

...

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

Quezon City

BANK OF AMERICA, NT & SA

<Manila Branch),

Petitioner,

----- ......

- versus -

C. T. A.

Case No. 4273

THE COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

)( - -

-

-

- - - - -

-

)(

This is

a claim

for refund

3

or

ta)(

credit

initiated by

petitioner for

its overpaid income

ta)( for

December 31, 1986 and 1987, arising from

e)(cess quarterly - income ta)( payments for the year

1986.

Petit i oner

Bank

of'

America

is

a

foreign

c o rpo r a t i ,on d u 1 y

licensed to

engage i .n

banking

business in

the Philippines

in accordance

with

Philippine Laws.

As

such, petitioner

has

the

status of'

a resident

foreign corporation

or

a

Philippin• Branch, for ta)(ation purposes.

It appears

that for

the calendar year ended

December 31,

1986, petitioner

filed its

Annual

)

- DECISION-

CTA Case No. 4273

-2-

Income

Ta>< Ret urn on Sept ember 4,

1987 [E><h.

A and

A-lJ

reflecting

the

following

income

ta><

payments:

a) Prior Year's (1985 )

Excess Credit <tax payment)

CExh. M & M-1 1

b) First Quarter 1986 Tax

Payment <May 30, 1986)

CExh. B & CJ

TOTnL INCOME TnXES PniD

p 12, 754, 949. 19

8, 259,314.81

p 2 1 ,014,264. 00

In th e

s ame 1986 corporate inco me ta>< return,

p etitioner declare d

a

ta>< l i ability in the total

a mount

of

P12, 10 1, 524

( for

both

the

regular

banking unit

for 1=110.234,915

and the . FCDU unit

for Pi, 866, 609).

Petitioner th erefor e c onsidered

itself to

h ave

o ver paid

it 5

1996

inco me

ta><

l iab ili t y in

the a 111o unt

of J.i)8 ,912,740

which is

likewise rerle~ted

·

in

1 986 ,

t hu s

represe nting

p etitioner's e ><cess ta>< credit for the year ended

December 3 1 ,

1986 ..

Fo r

the

succeeding

ta><a ble

year

1987,

petit io n er

filed

it s

Annual Income Ta>< Return

[Exh.

PJ and

only the

a mo unt of

Pl, 149,396

was

applied agai n s t petitioner's q u arterly income ta><

liabili ties during

th e ta><ab l e

quarter for that

year as

petitioner de c lare d

a

net

1 oss.

It

appear s th e n

that petitioner

h ad an

un uti lized

e><cess ta><

credit

or

overpai d

inco me

ta><

of

- DECISION-

eTA Case No. 4273

- 3 -

P7,7G3,344 <P8,912,740

less

P1,149,39G>

as

of

December 31,

1987 CE xh.

OJ.

This income ta><

return was

filed with

the

Bureau

of'

Internal

Revenue on Apri 1 15, 1988.

On May

19,

1988,

petitioner,

through

its

auditors, f'i led with the respondent a request for

refund

o r

the

issua nce

of'

a

ta><

credit

certificate in a letter, dated March 4, 1988 [Exh.

KJ.

A supplemental

letter, dated

May 24,

1988,

wa s filed

by the

auditors, for and in behalf' of'

the petitioner,

requesting

for

the

refund

o r

issuance o f'

ta><

credit

for

the

amo unt

of'

P7 , 7 G3,344 as

ove p id i ncome

cre d it as

of'

December

31'

1986,

n

t

o f

the

applic a t i on o f' P1, 1 49,395 CExh. LJ.

Respondent

fafl.ed

to

act

on

petitioner's

claim for refund.

In

respondent's

Answer

to

the

instant

petition, he

admitted all

averments relating to

the filing

and e><istenc e

of petitioner's income

ta><

return

for

the

calendar

year

ended

on

December

31'

1986,

but

specifically

denies

veracity of' the entries in said income ta>< on the

ground that

said

income

ta><

return

is

still

subject

to

the

"usual

verification

and

investigation."

He

likewise

admitted

that

880

- nn-: JSJON

Cln Case No.

4 273

- 4 -

petitioner requested

from the

respondent a

ta><

credit

in

the

amount

of

P7,763,344

but

specifically denies

the reasons advanced in said

letter as being "erroneous conjectures."

As special

affirmative defenses,

respondent

averred, among others, that:

a)

The

petition

states

no

cause

oF action

as

it does not

allege when

the tax sought

to be credited was paid;

b)

The

amount

oF

P7, 763,344

petitioner as

overpaid net

the

year 1986 was

paid in

law and regulations;

claimed

by

income tax

For

accordance with

c)

Claims

For reFund

are

strictly construed

against

the taxpayer

and

in

the

instant

case the

same is

not

properly

documented

let

alone that the

same is

still

pending

"pre - audit" pursuant

to Revenue

Memorandum

Ot~der

No.

32- 76 , dated

June

11,

1976,

· implementing

the provisions

oF Sections 85

and 86 (now Sec. 69) oF the Tax Code.

During the

hearing of this case, respondent,

after a series of postponements, failed to submit

any evidence.

Instead, he submitted his case for

decision on

the "bases

of the pleadings and the

evidence

presented by

the petitioner" [Hearing on

Sept ember 7,

1992, p.

106, CTA

records].

He did n o t

even fi e

a Memorandum

to buttress, at the very

least,

the

lleg ~ tion s

i n

his

Answer

[Manifest a tion,

dated

J a nua ry

5 ,

1993,

p.

140,

CTA

records].

It

is

likewise

noted

that

the

respondent even

failed to transmit to this Court

881

- DECISION-

eTA Case No. 4273

- 5 -

the BIR

records

of

the

case

as

required

in

Section 2,

Rule 7

of the

Rules of

this

Court

which could

have aided

this Court

in making an

overall assessment

of the

evidence in

deciding

this case.

The sole

issue to

be resolved is whether or

not petitioner

is

entitled

to

the

refundable

amount for

the years ended December 31, 1986 and

1987 representing

unutilized overpaid income tax

in the

amount of P7,763,344, pursuant to Section

69 in

relation to

Section 230

of the

National

Internal Revenue Code.

The

evidence

presented

by

petitioner

is

uncontroverted.

As earlier

stated,

respondent

did not

present any

evidence in

support of his

case.

During

the

hearing

of

this

case,

respondent

did

not

even

cross-examine

the

solitary

witness,

Augusto

Monzon,

Senior

Administrative Clerk

of

the

Bank

of

America,

presented by petitioner [Hearing of

March 1, 1989].

As

ably

presented

by

petitioner

in

his

Memorandum, dated

November 6,

1992 [pp.

118- 133,

CTA record s ],

the following

is the

"sequence" of

vital documentary

evidence in

the form of year-

end and quarterly income tax returns and payments

made

by the petitioner to give a clearer picture

882

-DEC ISION-

eTA Case No. 4273

- 6 -

of the

overpaid income

ta~ or e~cess ta~ credit

which it now seek to be refunded:

Corporate Annual Inco•e Ta w Return

Filed on ApY'il 15, 1986

<YeaY' Ended DecembeY' 31, 1985>

Income

Less : Deductions

Net Income

Tax Rate

Inco me Tax Due

Less:PY'ior Year' s

Excess Credit

P

698,9 17 .19

Quarter ly Payments

Dur ing the Year

64,366,634.33

Excess Tax Cred it

Add : Creditable Taxes Withheld

TOTAL

Less: FCDU Pa ym e nts

Tota l Amount to be Applied a~

Tax Credit

o Suc ceeding Year

Gross Inco me

Less: Deduction s

Taxable Net Income

Tax Rate

Income Tax Due

Les s : Tax Credit for 1985

Income Tax paid for the Quarter

883

P1, 138,654,298.00

989,951,265.00

148,703,033.00

35"

52,036,061.00

65,065,551.52

13,029,490.52

4,816.67

13,034,307.19

279,358.00

!;)

12,754,949.19

===~====:==== ====

p

264,901,163.00

204,831,836.00

60,069,327.00

35"

21,014,264.00

12,754,949.19

8,259,314.81

=================

-

- DECISION-

CTA Case No. 4273

-7-

Final Corporate Annual Inco•e Tax Return

Filed on September 4, 1987

<Year Ended December 31, 1986)

Income

Less : deductions

Net Income

Tax Rate

Income Tax Due

Less:Prior year's

exc~s cred it

P 12 , 754 , 949.1 9

Quarter ly P

yment~

durin

th

y e r

8,259. 314.8 1

Excess T x C ed t

Les s:

CDU

ym nt

Refundabl

Amount

p

708,043,119.00

678,800,505.00

p

29,242,614.00

35,C.

10,234,915.00

2 1,014,264.00

10, 779,349.00

1,866,609.00

8, 912, 7'•0. 00

=~============== =

Co por te Annua l lnco•

Tax Return

<Year End d December 3 1, 19 87>

Refundable Amount

s a t

Dece mber 31 ,

198G

Less: Amoun t Appli e d in

Taxable Year 1987

Refundable A•ount

<Exh.

0>

p

8,912,740.00

1' 149, 396. 00

p

7,763,344.00

-----------------

-----------------

Did Petitioner

file its administrative claim

for refund

within the time prescribed by Section

230

of

the

NIRC?

Based

on

the

evidence

presented,

petitioner

complied

with

that

requirement.

Section 230 of the NIRC provides thus:

"t?..~.c;.Jj_

.cm_?..30.

Rec;,overy of tax errq_!']e~usl y

Q.t:.. __ ,i l_l_l!..ll.~-~-cq_l_l_~_t;;_.'t~d. -

No suit or proceeding

shall

be

maintained

in

any

court

for

the

recovery

of any

national internal

revenue tax

hereafter alleged to

have been

erroneously or

884

•

- DECISION-

eTA Case No. 4273

-8-

illegally assessed

or collected,

or

oF

any

penalty claimed to

have been collected without

authority

or oF

any s um

alle ged to

have been

exces sive

or

in

any

ma nner

wrongFully

collected,

until a

c laim For

refund or credit

has

been Filed

with the Commissioner ; b u t such

refund

or credit

has b e n

dul y Filed with the

Commissioner;

but s uc h

suit or

pr oceeding ma y

be

maintained ,

whether

or

not

such

tax,

penalty,

or sum

h.a

b en paid under protest or

duress.

I n

any ca e,

no such

suit or

proceeding

sha l l

be begun

after

th•

expir~ti on of

two

years

ft"'om the

d t e o f

gay~~te n t of the tax or

penalt y

r@gardl

~s of

ny

u pervening

cause

that

m.ay

al"'iS e

aff:ttt"

paym11n t:

E!ro.Y. .. J .. f!..Ji'..f!..,

t!JJ.!:'!...fl..'>!. .. r?: .. r:..~

That

thfil

Commi ssi oner

may,

even

with ou t

a writ ten

claim

thereFor,

refund

or

credit

any tax, whtH"'e on the f ace of the ret urn

upon

which

payment

w.:as

made,

suc h

payment

appears

clearly to have b een erroneously paid."

(underscoring s upplied)

The general

rule is that the two-year period

is counted

from the

date of

payment.

However,

under

Sections

and

69

of

the

NIRC,

corporations

are

required

to

file

quarterly

income tax and a final adjustment return covering

the total

net incpme , from the preceding calendar

or fiscal

year and

the corresponding adjustment

has

likewise

to

be

made

in

filing

an

administrative

claim

for

refund

with

the

Commissioner of

Internal Revenue.

To quote the

pertinent provisions of law:

Section

68.

!!!!..c;..L~r.:i!' t i Dt!...._fi..L_.f;;_l!..t:::.PP...r. ... ~.J

.. e Ouart er -!.~

Irrc;g•~---[ax.-

Every c orpora tion

sh.:dl File in

duplicate

a quarterly

summary

declaration

of

its

gross income and deductions on a cumulative

885

- DECISION-

eTA Case No. 4273

- 9 -

basis

for the

preceding

quarter

or

quarters

upon

which the income tax, as provided in Title

II · oF this

Code shall be levied, collected and

paid.

The

tax so

comptlted shall be dect~ease d

by

the

amount

oF

tax

previously

paid

or

assessed

during

th e

pt~eceding quarters

and

s h a 11

be pa i d

not 1 a t e t~

than s i x t y

( 6 0) d a y s

From

the cl o se

oF each

oF the First

tht ~ee (3)

quarters

oF the

taxable

yeat~,

whethet ~ calendar

or Fi seal year.

Section

69.

F...i.TJ.aL .. .f.!d.i..f:l!>t•~nt ....... B~t..ur..IJ. ~.- -

Evt?ry

corpor~tinn li •b l t?

to

t~x

under

SPct inn

P 4

shall

File a

Final adjustment

re tu r n coverin g

the

total net income For the preceding calendar

or

Fi seal year.

IF

the sum

oF the quart er } y

t ax

payments ma de

during th e year is not equal

to

the total

due on

the

e nti re

taxable

net

income

oF

that

year

the

c orporation

shall

either:

(a)

Pay the excess t ax sti ll due; or

(b)

Be

refunded

the excess amount paid,

as the case may be.

In

case the

corporation is

entitled to a

reFund

of the excess estimated quarterly income

taxes

paid, the

reFundable amount shown on its

Final

adjustment return may be credited against

the

estimated q~arterly income tax liabilities

for

the taxable

·1 i abi 1 it i es

for

the

taxable

quarters

of the

succeeding

taxable

year.

(underscoring supplied)

The time

for filing the administrative claim

for refund

or tax credit and the judicial action

I

taken thereon was never raised by the respondent.

In

fact,

respondent

unqualifiedly

admitted

Exhibits K and L of the petitioner which were the

letters of

the auditors of the petitioner, dated

March 4,

1988 and

May 24,

1988,

respectively,

requesting for refund in the amount of P7,763,344

( p. 76,

CTA records).

Be

that as

it may, the

88G

- DECISION-

CTA Case No. 4273

-10-

reckoning date

in the

determination of the two-

year prescriptive

period to

institute the claim

for refund

of this nature should be the last day

for filing

of the

final adjustment

income

tax

return covering

the total

net

income

for

the

preceding calendar

or fiscal year as provided by

Section 69 of the NIRC.

In this case, therefore,

petitioner filed

its final adjustment income tax

return for

the year

1986 on

September 4, 1987.

Its administrative

claim was

filed on

May

19.,

1988 and

the judicial

suit., i.e • .,

petition for

review before

this Court.,

was initiated

on May

27.,

1988.,

all

within

the

prescribed

period

mandated by Section 230 of the NIRC.

The Supreme

Court has

in fact already ruled

and interpreted

this matter in the case of ACCRA

Investments

Corporation

v s.

Commissioner

of

Internal

Revenue.,

G.

R.

No.

96322,

December 20.,

1991., when it pointedly stated that:

"Clearly,

ther~ e is

the

need

to

'File

a

r~ettlrn

'First beFore

a

clai m

'For

reFund

can

prosper

inasmuch as the respondent Commi ssioner

by his own

rules and regulations mandates that

the

corporate taxpayer~ opting

to

ask

'For

a

reFund

must show in its 'Final adjustment return

the

income it received 'From all sources and the

amount

or withholding

taxes

remitted

by

its

withholding

agents to

the Bureau

or

Internal

Revenue.

The

petitioner corporation 'Filed its

'Final

adjustment return

'For its

1981

taxable

year

on npr~il

15, 1982.

In

our