Jardine Davies, Inc., et al. vs. Case No. 4324 Commissioner of Internal Revenue

Republic of the Fhilippines

COURT GF TAX APPEALS

Quezon City JARDINE DAVIES, INC., Fetitioner, ~ versus - Case No. 4324

COMMISSIONER OF INTERNAL

REVENUE, Respondent. ,/x9192 Db F&F @e iI & Ft oO ™ This is a petition seeking the refund of the amount of P244,174. 35 representing alleged overpayment of capital gains tax for taxable year ended December 31, 1987.

Fetitioner is a corporation organized and existing under and by virtue of Philippine laws.

sere ennai neem ee ete The capital gains tax refund arose on account of the following transactions, to wit:

Date of Total Cost Gain or Capital Gains Sale Shares of Stock Sold Selling Price (Including Expenses iLess) Tax Paid of Sale) 1.05.87 Eternit Corporation P 3,245,130.00 P 1,974,258.27 P 1,270,871.73 P 2h4, 174.35 F (90,000 shares) 4.26.87 flircon & Refrigeration P 1.00 BP 6,143, 965.00 P 6,143, 964, 00 - Industries, Inc.

(240,649 shares) “* TOTALS P 3,245,131.00 P 8,118,223.27 (P 4,873, 092.27) P 264, 174.35 244,174.55 SG SS=SSTSuSSS —————————— * A - D E C I S I 0 N - C.T.A. Case No. 4324 .-, L::.

Pursuant to Section 45 Cd) of the Tax Code, as amended, petitioner filed with the Bureau of I nt et·'na 1 Revenue CBIR> Stock Transaction Cap ital Gains Tax f~etm·' n <BH~ Form No.

1701 -E-2 > for each of the above-tt•ansact ions on Januat•y 16, 1987 · and May 21 , 1987, t•espectively <Exhibits "C" and "E"). The cap ital gain s tax pertaining to the sale of Eternit Corporation's shares was P244,174.35 and this was paid by petitioner per CBP Confirmation Receipt No.

810600587 and BIR Payment Order No.

B959L~9 3 8, both dated Januat•y 19, 1987. <Exhib its "D" and "0-1") A final Adjustment Stock Transaction Capital Ga ins Tax Return for taxable year ended Oecembet• 3 1, 1987 was filed by petitioner· on Apt•il 1 ~5' showing a t·efundabl e amount of 0 n ,J a n 1.1 at~ y

l. 3 , 1 9 8 r:3 , p e t l. t i on e t"' f i 1 e d w i t h the BIR a claim for refund of the 1987 overpaid capital gains tax of P244, 174.35.

<Exh ibit "A") This petition for review wa s filed with this Court on Januat· y 17, 1989 to· protect petitioner's right to judicially claim the refund. Re spondent movei'for the dismissal/denial ·of the petition interposing as reasons that it is incumbent upon petitioner to s how that the capita l - D E C I S I 0 N - C.T.A. Case No. 4324 ....

•.J losses did not arise or were sustained sales stocks;

alleged capital loss sustained from the sale of its shares of stock s in allowed only to the extent of the gains from such s c:'ll e ;

the tran s action capital gains tax of 1/4 of 1% applies si nce no evidence was presented that the not listed and traded o n the local st OC~< exchanges and the t ax sought to be refunded not illegally o~~ er~ r~ oneou sl y collected. <"An swer~", CTA Recot~ ds, p. 19-21;

"trlemor~andum", CTA Rec o t~ds,

p. 115 - l~~c::.) Evi dence off er~ed by petitioner <Exhibit

A -

E, inclusive) were neither commented on nor objected to by respondent. f4ccot~d i ng 1 y reso lved to admit all of them without to the Cotwt' s evaluation of their value and purposes for whi c h they were off et··ed.

<"Resolution", CTA Recor~d s, p.87 ) The of investigation on petitioner's claim was likewise not presented hence, respondent's counsel submitted this case solely on the basis of the pleadings.

The sol e is s ue to b e resolved by this Court is 1-'lhether~ or not petitioner is entitled to a , .

,t

I ~

- DEC IS TON -

C.T.A. Case Now 4324 refund/tax credit of the amount of F244,174. 35, representing alleged overpaid capital gains tax for taxable year ended December 31, 1987.

Subject of contention by the parties in this case are the related provisions of the Tax Code, quoted below:

Section 24 (2) Capital gains from sales of shares of stock.~ Capital qains realized from the sale, exchange or disposition of shares of stocks in any domestic corporation shall be taxed as followss (AD Net capital gains as defined in Section 33 (a) (2) realized during each taxable year from sale or exchange or other disposition of shares of stock not traded threugh a local stock exchange.

Not over F100, O00, OO ~ 10% Over F1Od, O00. 00 ~ 20% (BA) Capital gains presumed to have been realized from the sale, exchange or disposition of shares of stock listed and traded through a local stock exchange ~— 1/4 of 1% based on the gross selling price of the share or shares of stock.

xXx xxx KXX Section 33 (a) Definitions. -—- As used in this Title - xxx xxx xKX

(2) Net capital”hain. - The term "net capital gain” means the excess of the gains from sales or exchange of capital assets over the losses from such sales or exchanges.

KKM xR xxx J8o 4 - D E C I S I 0 N - C.T.A. Case No. 4324 - 5 - S ection 45 (d) Return on capital gains r·e e"' .lized f'~·om sale of' shat•es of' stocJ<. Every corporation deriving capital gain s from the sale or exchange of shares of s tocl< not traded thru a local stoc~< exchange as prescribed under Sections 24 <e> <2 > <A>, 25

(a) (E,) <C> <i > and 25 <b> <5> (C) (i), shall file a t•et ur•n within ~.tt.!.L'\!_'i.

~.t§l .Y. • .§. §tfJ:_!?_t.: .~ h_ t r ~n~otc t i Q.D. an d a · f.!.nE' 1_ g_Q..!l!!..PJ...i£\.~:L~s! t• e t m· n p f a 1 1 tD~L'U!t~.~ t i o_!l§.. Q.!:!,t' i n q :t h e_ t ~ b ~ y ear .QD.

01·.::.

gefot"_g, the fifteenth£!~.

of the .f....9...!.,\rt '1. !!1....9Jl:t!:l fgllowinq the close of. the :t~'"li?M. ~· <Undt:.n•scot•i ng sr.1ppl ied. > XXX XXX XXX As born~ out by the records of the case , this involv es th ~ s ale of shares of stocks not traded t ht•o r •• \gh a loc.,l Respondent's counsel was not haard t~ object when pet iti oner vid nee tho Stock Transaction. Cap ital Gain s Ta>< He ·tt..wnt· <Exhibits "B", " C" , and "E " >, part of which whe re the De eds of Sa le ( CHC!

Recot•ds, pag es 37-38 and pages 76-77 >, c learly showing that the transaction were treated i n accordance with of the Tax Code.

The contt•ary view of t•espondent that Section 2'+<2 > <B> applies is without any factual or legal basis. In view of th e foregoing , the capi~al gains tax was computed ba s ed on the net capit al gains -' (lo ss> realized during tax ab l e year 1987.

"Net capital gain" is defined by Section 33 (a) as the - D E C I S I 0 N - C.T.A. Case No. 4324 ·- 6 - excess of the gains over the losses from such sales or~ exchanues.

As illustrated in this case, there was a gain in the sale of Eterni t Corporation shares of stocks of P1,207,871.73, but a loss in the sale of Aircon and Refrigeratio n Inc.

shares of stock$ cf P6, 143,964.00, resulting in a net capital loss for 1987 of P4,873,092.27.

Since a return is filed after each transaction pursuant to Section 45 (d) of the Tax Code, p e t i ·\:; i o n e r~ pc:dd the capital gains tax of <E><hibits "D" & "D-1" ) on the sale of Eternit Corporation's shares of stocks.

Howe vet~ when the final consoli dated return of all for 1987 was filed, ther~e was a refundable amount of P244,174.35 . The Court had occas sion to rule in a similar case involving the same parties and the same nature of evidence pt'esented in C.T.A.

Case No.

403C:~ decided on August G, 1992, whereby refund of the overpaid capital gains tax on stock transa~tions for tha entire year was ordered. We find that petit i onet~ has clearly proven entit~ement .to the refund being sought.

A net capital loss of P4 , 873,964.00 on all /< I

~ DECISION -

C.T.A. Case No. 4324 of its stock transactions for 1987 was incurred by petitioner. Capital gains tax of FP244,174.35 was undisputedly paid in 1987. There is no finding of | deficiency capital gains tax against petitioner for the year under review, Claim for refund was seasonably filed and amply substantiated.

WHEREFORE, respondent Commissioner of Internal Revenue as hereby ordered 2g refund/issue tax credit to petitioner Jardine Davies, Inc. the amount of F244,174. 35 representing overpaid capital gains tax for taxable year ended December 31, 1987.

SOQ ORDERED.

Quezon City, Metro Manila, June #e&, 1993.

MAN Assoc e Jugde

WE CONCUR:

WD Genk ERNESTO D. ACOSTA Présiding Judge # Vp RAMON QO.

Associate Judie - D E C I S I 0 N - C.T.A. Case No. 4324 -- 8 - I h e reby c ertify th a t this deci si on was reached after due consult a tion a mong the mem ber s o f Cotwt of Tax Appeal s in accord anc e with Section 13, Articke VIII of the Constitution. -.

cet.--~:c=_ o ~c~;;t~~~ ERNESTO D. ACOSTA Pt'f?siding Judg e Court of Tax Appeals