UCPB Savings Bank vs. ' the Commissioner of Internal Revenue

DECISION

Presented before Us, by way of a petition for review, Is a claim for tax refund in the amount of P2,281,4f35.71 allegedly representing over-paid income and cr-editable withholding taxes for' the year ended December' 3 1 ' 1990.

Petitioner is a domestic corporation, organized and existing under the I aws of the Phi I I pp I nes.

It is pr'imar'i ly engaged In the general business of savings and mortgage banking.

Pursuant to a "Plan of Merger" executed on June 21, 1988, between and among tile United Savings Bank, Inc.

<now UCPB Savings Bank), the absorbed United Blcol Savings Bank, Inc ..

United Eastern Savings Bank, I no., U n i t e d M i n do r· o sa v i n g s B a n I< , Inc., and Domestic Savings and Loan Association, Inc., herein petitioner being the surviving corporation shal I acquire and absorb alI assets and operating facilities of the four absorbed 860 ' ....

DECISION C.f.A. CASE NO. 4650 - 2 - corporations In exchange for Its <United Savings Bank) share of stocks as wei I as the assumption of alI the llabi llties of the latter.

Said Plan was duly approved by the Securities and Exchange Commission on September 25, 1989.

Petitioner r 1 1 ed its corporate annual Income tax return (Form 1702) for the year ended December 31, 1989 on Apri 10, 1990.

However', on Sept ember 20, 1991 , It filed an amended return, declaring a net taxable income of P7,980,551.00 and a co r t' e s p o n d I n g tax due of P2,793,193.00.

The said return reflected quarterly payments for a total amount of P3,763,708.00 and tax credits of P378,927.82 ( E X h . " E " ) .

Thus, showing a returnable amount of P1 ,349,442.82. On April 12, 1991, petitioner filed with the Bureau of Internal nevenue its Form 1702 for the year 1990, which was subsequently Amended. This amended Form was flied on September 20, 1991, reflecting a net loss for the year 1990 In the amount of P2,844,609.00.

It also showecl the following de•iucttnns, to wit! the prior year's e x o e s s ct' e d 1 t o f P 1 , 3 4 9 . 4 4 2 . 8 2 (from the year 1989), a quarterly paymer1t amounting to P533,022.80 (paid during the 1st quarter of 1990) and a creditable withheld tax of P400,000.00.

861

- 3 - The petitioner a I I eged that the P400,000.00 creditable tax withheld arose out of a sale of one real property acquired by the petitioner in the course of its business.

On May l, 1991, the petitioner' filed a claim with the Appe I I ate U I vIsion of the Bureau of I nter'na I Revenue for a tax cr'ed It In the amount of P2,287,465.71 representing the above-mentioned accumulated overpaid taxes.

And on September' 6, 1991, pet it loner flied another- I etter'-request advising the B I Fl of the for-mer's intention to shift fi'Otn a.utomatlr: tax or'edlt to a t'efund ther-eof. Uue to the Bur-eau's inaction on the t'equest, petitioner' filed tl1is petition for r-eview on September' 2 7, 1991 to suspend the running or the prescriptive period for' judicially cla.iming r·efunds pursuant to sec.

2ao of tile lax Code. I h e s o I e i s s u e p I' e s e n t e d be f o r e U s i s w h e t h e r or n o t the petitioner Is entitled to the tax refund being sought'l llle l'esponctent r-efuted the claim u"f petitioner· on the initial tax credit of P318,927.82 on the ground that It represented the alleged tax credit of the absor-bed COI'POI'at Ions, name I y UnIted B I co I SavIngs Bank, I no.

and 862

- 4 - United Mindoro Savings Bank, Inc.

for the year ended December 31, 1989.

In a mer·ger, Sec.

80(4) of B.P.

68 provides, that the surviving corporation shal I possess all the rights, privl leges, immunities and franchises of each of the constituent corporations, and a I I pr'operty, real or persona I, and all r· e c e I v a b I e s d u e on w h a t eve r· account, WIt:

be As amplified by the "Plan of Merger-", Exh. "A"> to a) lhe ABSORBED CORPORATIONS wl I I transfer alI their assets and operating facilities consisting of, where applicable, the following: 1 • All cash, checks and other cash Items due from the banks;

2.

A I I loans Rlld discounts; ~L

A I I

Investments in bonds and other debt instruments;

4.

Bank pr-emises, leasehold rights and improvements;

5.

AI I furniture, fixture and equipment; 6.

All transportation equipment miscellaneous equipment; 863 and other DECISION <.:.T.A. CASE NO. 4650 7.

A I I

rea I including premises;

- 5 - and other Improvements properties made on owned leased 8.

AI I sales contract receivable; 9.

A I I assets due from a I I I ed undertakings; 1 u.

All other assets that wi II t he R p p r· ova I o f t h e Exchange Commission of Merger·".

he included Securities this "Plan In and of bl un the dRte of the mer-ger, the ABSORBED Thus.

CORPORATIONS shal I assign to the SURVIVING CORPORATION all his rights AIH.t interests under reAl estA.te And chattel mortgages, pledges, surety and fidelity bonds, guarantees, deposits and other- security ar·rangernent, contracts of I eases and insurance poI i c i es." the tax credit that may he received by the a b so I' bed cor· p or· a t i on w o u I d r· e do u n cl to t I 1 e bene f I t of t he sur v I v i n \-1 c c• r· p or R t i on w 11 i c t1 .

in this CASe, is the petitioner.

However-, as correctly pointed out by the respondent:

A tax credit may ~e assiuned provided only after· an investi!Jation/exanrination was conducted on the said clAim for t a x r: I' e d i t:

and tile corr-esponding tax credit Cf'ttificate as dulv appr·oved and issued; ergo, if no s~.tch tflx credit cer·t:lfleAte was issued in favor of the taxpayfH' clairninq the same, no such tax cr·edlt may be assiqned to AllY other per·son. and, in this case, herein petItioner·.

It is a fa I I acy that once a taxpayer opts either for a refund or· automatIc tax ored It scheme and signify his 8()1

- 6 - option In accordance with the regulation It will~ facto confer on him the right to avail of the same immediately.

An Investigation, as a matter of procedure, Is necessary to enable the Commissioner to determine the correctness of the petitioner's returns and the tax amount to be credited. As aptly pointed out by the Supreme Court In San Carlos Mi I I ing Co., I no. vs. C I R,

( 228 SCRA

135), "Prior approval by the Commissioner of Internal Revenue of the tax cr·ed it under then Sec.

86 (now Sec.

69) of the Tax Code would appear to be the most I' e a so n a b I e lnterpretat Inn to be given to said action.

An o p poI' t u n i t y must be g I v en t he I n t e r n a I nw e rl u e branch of the government to investigate and confirm the veracity of the claims of the taxpayer·.

The desolute freedom that petitioner seeks to automatically credit tax payments against tax liabilities for' a succeeding taxable year, can easily give rise to confusion and abuse, depr-iving the gover-nment of a u t h o r i t y a n d co 11 t r· o I o v e r t h e m a n n e r by which the taxpayers credit and offset their tax llabi I itles, not to mention the r-esultartt I oss of r·evenue to the government under such a scheme." We also agree with the respondent that the amount of P40U,OOO.UU should not form part of the tax credit refund being claimed by the petitioner pursuant to rev•nue 865 - 7 - regulation 6-85 (10) which states that "It will be given due oourse only when It is shown on the return that the Income payment received was declared as part of the gross Income and the fact of withholding Is establIshed by a copy of the statement duly Issued by the payor to the payee <BIH Form No. 1743.1), showing the' amount paid and the amount of tax withheld therefrom." Petitioner's return <Exh. G-1) reflecting the amount of P400,000.00 does not show that the income received from the alleged sale of real property was shown nor any oonfirmatlon/official receipts CCR/ORI as covered by BIR Form No.

1743 Wand 1743-B reflected on section c(5.c) of the retur-n.

Hence, petitioner not having fu I I y subscr' i bed to the provisIon of the I aw to warrant the granting o1' a tax credit. the aforesaid amount should be denied.

However, We disagree with respondent when she said that Petitioner was not able to substantiate by positive proof Its claim for refund representing the overpaid Income tax for the year 1990.

Petitioner submitted the following documents to substantiate its claim to wit: 1 • 1989 corporate "0") together of:

annual Income tax return <Exh.

with its attachments, consisting a ) audited financial and 86G statement (Exh.

01-012) ·m-· ~.·

- 8 - b) schedule of tax credits claimed for the year' 1989; <Exh. E2) 2.

1989 amended corporate annual Income tax return (Exh. E> and correspond attachments CExh. E-1); 3.

Quarterly f..luarter' Income of 1989 confirmation receipt and payment order reflecting an amount tax returns for the 1st <Exh.

H> with attached no. B-1 3248689 (EX h.

H-1 )

no.

C-5248083 <Exh.

H-2> of P1,021,015.28;

4.

Quarterly Income tax return for the 2nd Quarter of 1989 CExt1.

ll, with attached confirmation r:ecP.Ipt no.

B-17737635 <Exh. 1-1), and payment order No. C-598437 (Exh. 1-1) showing an amount of P1,120,352.21;

5.

Quarterly Income tax return for the third quarter of 1989 <Exh.

J), with attached confirmation receipt No. B 18319f363 (Exh. J-1) and payment order no. C 6290985 <Exh. J-2) with an amount of PI ,622,340.88; 6.

1990 corporate annual income tax return <Exh.

Fl with accompanying audited financial statement (FI + F12); 7.

1990 amended Income tax return <Exh.

Gl and accompanying list of attachments <Exh. G-1); 8.

Quarterly income tax return for the 1st Quarter of calendar year 1990 <Exh.

K) with attached confirmation receipt no.

B 188009 (Exh.

K-1) and payment order no. C 7963436 <Exh. K-2) for P538,022.49;

9.

letter request the BIR for P2,287,465.71 dated May a tax 7, 1991 addressed credit amounting (Annex E); or to to 10.

letter request dated September 6, 1991 to the BIR shifting its former request from auto tax c I' e d i t t o a t a x r e f u n d < A n n e x E - 1 ) • Haviny established its entitlement to the refund In accordance will! law and evidence, the amount which may be

- 9 - refunded to petitioner with regard to Its 1990 claim may thus be computed as fol tows: a.

Prior year's excess tax credit 970,515.00 b.

1st quarter payment for 1990 Total 538,022.89 P1,508,537.89 WHHlEFORE, judgment is hereby rendered directing respondent Commissioner of Internal Revenue to refund to petitioner UCPB Savings Bank the amount of P1,508,537.89 representing overpaid withholding SO ORDHH:O.

~~~ RAMON 0. OE VEY ~ Associate Judg CONCUFl:

L&~-o~ ERNESl·o 0. ACOSJA Pres i d i nq ,J uc.lge GEFlT IF I C~\.·r I ON hereby certify that this decision was reached after· due consultation with the member of the Court of Tax Appeals in accordance with Section 13, Article

VI I I

of the Constitution.

868 ~--o-~ EHNESlO 0. ACOSTA Presiding Judge Gourt of Tax Appeals