CTA Case No. 4657

DECISION

This refers to the consolidated claims f ot' t··e Fund of Anscor Hagedorn Securities, lnc.

in the amounts of pI.' ;:::'3'3, J; 13. 93 (for CTA Case No. 4657> ~nd P752', lt 19. 49 (for CTA Case No. 47851 as erroneously paid value added taMes for the years 1989 and 19901 respectively. 0~ alleged in tts petitions for review, are as narrated hereinafter. Common to both cao:;es ar·e the allegations: (L) that rJet i. t; 1 oner· is l ucensed t:woket'/dealer· of secut'ities n~ndet··ing sey·v ices to resident and non-resident investors; pPf; 1t t•J'le-t· "'buys" shc"lt·es of o:;tocks in favor of its non- clt.ents, the latt;el" i nwal''d l y for·e tgn 167 . .

• • ~ ..

'·"-r

DECISION -

C.T.A. Case Nos. 4657 and 4785 - z- c ,_,,-,··enc y as payment the plwchased securities, t ogethet~ with commission;

and when pet i t i one,~ " s e 1 1 s " s h a,~ e s of stocks in favor of its non- client. s, petitioner remits the in equivalent foreign currency, net of its commissions; and (3) that. said services of petitioner being paid for in acceptable "inwardly" remitted to the Philippines and accounted for in accordance with Bank ,~u] es and regulations, the sa•e VAT In both cases, t.oo, petitioner regularly filed its years 1989 and 1990 and services.

RllPgedly., includPd in ~.aid sales.

.incomE' v:hich should bE' subjPct of VAT and not to which ~t had rFgularly paid. F ot·· the prepared hereundpr a in tabulated of the details of th!?

VAT t·etr.wns fi)E'd by petitione•~ fm~ the> years involve>d :!n the 168 , I

DECISION —

c.T.A. Case Nos. 4657 and 4785 - 3 - Details of VAT Returns filed for 1989 (CTA Case No. 4657) Quarter Gress. Sales 1% Commission Incose = #A) leged Date of Covered of Services VAT paid Inchuded in Erroneous }y Filsng Declared Bress Sales Paid val VAT return Jamary to Fe4, 355,965.03 PF 313,130.93 PI, 987,358.00 F 180,668.93 Apri} c0, 1989 March, 1989 April te 7, 747, 050. 78 665,079.40 1, 928, 067.86 175,278.) = July 15, 1989 June, 1989 July to 413,376,390.55 = 3,177,366.77 = 5, 428, 094.65 493,463.13 Oct. 20, 1989 Septesber, 1989 October to 9, 56, 707, 41 825,491.55 4,948,902.15 449,902.54 Jan. 19, 1990 Deceater, 1969 Teta) Asount being claised as refundable or tax creditable 1,299, 313.93 Details of VAT Returns filed for 1990 (CTA Case No. 4785) - Quarter Gross Sales 10% Cousission Incese Alleged Date of Covered of Services VAT paid lacluded in Erroneously Filing Declared Grass Sales Paid WaT VAT retura January to P 6,506,316.02 © 991,465.14 P2,697,835.60 265,439.69 April 20, 17%) Narch, 1990 Apri} te 4, 088, BBE. 75 332,109.06 2,050,663.79 186,423.57 July 20, 19%) June, 1990 July to 3, cb, Oe. 3) 284,000.34 =. 2, $89,405.95 «= erb, WI. B = Oct. ee, 19H Septesher, 1390 , Octeber to 2, 123, 589. 3e 186, 527,20 838, 709. 37 76,246.30 Jan. ci, 3991 Deceaber, (990 Total Aeount being claised as refundable or tax creditable P752, 419, 49 Having realized it committed an error in subjecting tts commission income to Lx VAT, petitroner Filed weitten claims for refund with the B.I.R. For CTA Case Ne. 4657 it filed its administrative claim on Septenber Computed by multiplying commission incame included in gross sales by *#7,,.

169 2 •• • . ·~

DECISION -

C.T.R. Case Nos. 4657 and 4785 - .It - 18, 1331.

For CTA Case No. 4785, its c] a:i m .,,as filed on September 25, 1991.

Not having been granted in the administrative level, petitioner appealed it. 5 two claim 5 to this Court on October 18, 1991 and Apt~il 13, 1992, t~espectively.

Answer for CTA Case No. 4657 was filed by respondent 1992.

In it, t~espondent ad•itted ther filing of VAT re-turns by pe-titioner, ther payment of the net VAT thert~eon, to verification from BlR Accounting Division, ther filing by petitionet·· of a claim for refund with re-spondent, and that the latt!?t~ has not granted the former's claim for re-fund.

of ther alle-gations were specifically denied f Ol~ lack of knowledge sufficient to belief as to the truth By way of and affirmative defPnses, ~-espondent further stated that: 1.

Petitioner's claim is st i 11 pe-ndinq investigation and consideration; 2.

lt failed to substantiate by proper documents the alleged zero rated transaction upon which it anchors its claim for refund; 3.

lt has also failed to show that the ta)(PS paid were erroneously or illegally collected;

4.

It has not likewise shown that the taMes bering sought to ber refunded were actually remitted to respondent and even assuming they were remitted, the presu111ption is that they 170 ... ..:.

DECISION -

C.T.A. Case Nos. 4657 and 4785 - s - were t~ece i ved 1 aw; and by t~espondent in accot~dance with 5.

It failed to show that it had strictly complied with the provisions of Section 204 of the Tax Code in relation to Section 230 thereof.

A claim for refund is in the nature of an exemption which is construed strictly against the claimant <Raisin, Inc. vs.

Auditor General, 25 SCRA 254). For CTA No.

4785, answer was filed by respondent on September 18, 1992.

In it, respondent admitted only the allegations in paragraphs 1 and 2 of the petition, which perta1n to the legal capacity of petitioner to sue and that of respondent to be sued. He practically denied all the aliegations for lack of knowledge and information sufficient to form a belief as to the truth thereof.

The ~~1¥ allegation which he denied for being mere opinion and unfounded conclusion of fact and/or law, was that the commission income derived in buying and selling shares in the name of it5 non-resident clients, qualify as a zero- rated transaction pursuant to Section 102 (a) <2> of the> Tax Code.

As his special and affirmative defenses, respondent alleged the following: 1.

Petitionet~ has failed to state any cause of action under Section 204 of the Tax Code, that, is it failed to show on the face of its petition that the collection of the amount of P752,419.49 is illegal and erroneous as against the legal presumption that the co l 1 e c t i on t h e t~ e o f i s 1 a w f u 1 and t~ e g ttl a r ;

171 ~.·· I

DECISION -

C.T.A. Case Nos. 4657 and 4785 6- 2.

Provisions on tax refund construed strictly against the taxpayer as are in the nature of tax exemption; 3.

In an action for refund, the taxpayer has the burden to ~how that the taxes paid were erroneously or illegally paid and failure to do so is fatal to the action for refund; and 4.

The claim f ol~ l~efund is still undel~ investigation.

In one of the hearings conducted, specifically 1993, counsel for petitioner verbally moved on for the consolidation of the instant cases as they involve the same parties and issues.

The consolidation was granted and this was confirmed by the Co~-.wt in its l~esoll.tt.ion of July 5, 1993 ( pp.

152 and CTA recot·ds).

pendency of these cases~ the claim for~ r··efund covet·ed by CTA Case No.

4&57 was favorably acted upon by respondent.

The latter issued to petitionel~ twc• < .:::)

TaH Credit Certificates <TCC> with the following details:

SN No.

1.> 00197& <Exh. .. ~ ..

c;

' Resp.; p.

CTA rec. )

2. ) 001977 <Exh. "3"' Resp.; p.

Ibid. > 220, 221, Dat.e of Issuance Sept. 24, 1993 Sept. 24, 1993 Tot3l Amount TaK Credited 172 A•ottnt P&l3,187.08 P330,179.00 P'343,366.08 ' L

DECISION -

C.T.A. Case Nos. 4657 and 4785 - 7 - The total amount of tax credit granted to petitioner was only P943,3GG.08 as the amount of P355,947.85 representing payments for~ the first and second quarters of 1983 was denied on thE> ground of pt~esct~ i pt ion <E)(h.

"1-E," Resp.; p. 219, supt~a.>.

' The e)(am1ner who investigated petitioner's claim for t~efund, submitted a report on his findings.

portion of which is quoted hereunder: ")()()( With the foregoing it appears that the commissions earned by subjPct ta)(payer in the pursuit of its stock brokeragE> services to non- resident investor clients are subjPct to thE> VAT at zero pPrcPnt and, thprpfor£>, therE> was indPed an erronpous paymPnt of thE> VAT in so far as thesE> commissions are concerned. Be it noted though that the claim for tax credit with resoect to the undue payments for the ouarters ended March 31 and June 30, L989 were filed beyond the two-year reylementary period mandated by Section 230 of thE> Tax Code, as amended.

Accordingly, the amount of P355,947.B5, reprPsenting undue payments for thE> first and spcond quarters of 1989 must be deniPd on account of prescription, thereby leaving a creditable amount of only P343,3GG.08.

It may bE> noted, too, that the et~t~oneo>.~sly paid VRT was cha~ged to thE> Taxps and Licenses expensE> account and was dPpuct. Pd from income in t aMpayp}-' s 1383 incomE> taM t~ettn~ns.

Thus, a cot~rection of taxpayer's 1989 income tax liability is in order. All told, taHpayer may recover the nf only PG13,187.08, arrived at follows: r1 e t.

a m c1 u n t f-:lmount claimed Dech•ct - Claim filed beyond the two-year period 173 P1,23'3,313.'93 355,347.85

DECISION -

C.T.A. Case Nos. 4657 and 4785 Creditable amount - 8 - Less Income tax effect of the erroneous VAT payment Net tax credit 943,3&6.08 330,179.00 p 613,187.08 In the respectfully caused to be Inc.- light of the fot·egoing, it is recommended that the following be issued to Anscor-Hagedorn Securities, 1.

An Assessment Notice for P330, 179,00, representing 1989 deficiency income taM, with a notation that the sa•e will be paid by a tax credit certificate to be issued f or the p '-W p o s e ; 2.

Cet~tificate <TCC> A TaM Ct~edit P330,179.00 to be 1989 inco11e tax Item I above; and used in payment for deficiency described fot~ the in 3.

Another TCC in the amount of P613,187.08, representing net credit for erroneous VAT payments in 1989, all pursuant to Section 102 (a) <2> Section 230 of the National Internal as a•ended.'' (Undet~scot~ing CTA •~eco•~d s > suppliPd;

in ,~elation to R e v en ~· e Cod e , PP· c' 1 8, c.· 1 9, From the above, respondent's examiner rPckoned the two-year prescriptive period from the dates of payment, as mandated by Sect1on 230 of the Tax Code.

On th1s point, the Court begs to disagree.

Section 230 not apply to the instant case.

It should be Section 106 <b> of the Tax Code, which is the proper applicable law as the case involves claim fo~ refund of VAT based on or~ effect:ively zero-rated sa 1 e.

The law provides:

174 f ....

••

DECISION -

C.T.A. Case Nos. 4657 and 4785 - 9 - "Section input ta.~·.

tOG. Refunds of <a> E)(pOt"t Sales. - )( )( )(.

<b> Zero-rated or effectively z•ro-rated sales.

Any person, e)(cept those covered by paragraph <a> above, whose sales are zero-rated or are effectively zero-rated may, within two y_ga.rs after the close of the quarter· when such sales were made, apply for the issuance of a taM credit certificate or refund of the input ta:~es attt"ibt.tt.able to such sales to the eMteTlt that such input ta)( has not been appliPd against output ta)(.

)( )( )( " < Un d e t" s cor i n g s up p 1 i e d ) • Applying the foregoing to the case at bar, the two- year prescriptive period for payments made during the April 1, 1989 and end on March 30, 19'31.

The claim was filed with the B. I. R. on September~ 18, the petition for review was filed with this Court on Octobet· 18' 1 '3'31.

Both claims were filed obviously beyond the two-year prescriptive period, hence, prescribed. For payments covered during the second quarter of to June, 1 '38'3, the two-year prescriptive period, began on July l, Given the sa.•e dates of filing the claims as Septe111bet" 18, 19'31 and October· 18, 1 gg 1 , de f i n i t e l y, said claims for the sPcond o•Ja~·t.et' wer·e filed aftet~ the Pltpir~y date of the pr·escr·tptive period, and therefore, have also prescrtbed. 175 •

DECISION -

C.T.A. Case Nos. 4657 and 4785 - 10 - The two-year prescriptive pet~ i od fot~ the quarter payments was from October 1, 1989 to September 31, 1 gg 1.

For this group of payments, the administrative claim was timely filed with the B.l.R. on September 18, 1991.

However, the claim was filed judicially on October 18, 1991 which was beyond September 31' 1991' the deadline of the prescriptive period.

similar to the first of payments, the succeeding payments for the third quarter also prescribed. Only the payments for the fourth quarter did not prescribe.

For the dates of filing the claims, were well within the two-year period from January 1' 1990 to DecembP.r 31, 1992.

On account of the Court's findings, the claim pet~t ai ni ng to the third quarter should have been denied dt..1e to However, for the reason that tax certificates have already been issued by the respondent, long before this case has been submitted for decision, the Court will not such findings of the respondent.

Respondent may voluntarily and legally pay the third quarter claim inasmuch as the administrative claim for refund was filed on time. !P v1ew of the fact, that petitioner's claim for tax crPrlit ~n rrA Case No. 4657, has been acted upon by thP 176

IJCCISION -

t:. T. n. Case Nos.

~'•6~il and ~'f785 - 11 - the merits of th~ said will be passed upon by this Court. The issues to be r~solved are: l.

Whether or not petitioner•s co~nissio~ inco~e qualify for the zero rate of VAl;

and Whether or not the for refund have petit i one•~ ..

require~ents for clai~s been co~pli~d with by The applicable law relative to the f i , .. s t i s s \1 e »section 102.

Value - added ta• on sale of services.

(aJ Rate and base taH There shall be levied~ assessed and collected., a value-added ~a• Pq•.ti· .. ale-nt to 10 pet~cpnt of gt~oss l~PcPipt.-:. derived' by any person engaged in the salE' of services.

~ " ~ Provided that the- following sales by ~4T­ registerPd persons shall be subjPct to 0%: C2J Sprv~ces other than tho5~ mention~d in the preceding sub-paragraph, th~ considPration for which is paid for in acce-ptable fore-ign currPncy which is ~e~itted irwla,~ct!y to the Philippines and acco'.mtl:"d fr_p-- in accordance with thP rules and re-gulations of the- Central Bank of thP Philippines. T r• o •.1 a J 1 f y for zero percent <OSJ r-iltP of VAT 2 of 102 177 is • . , 'I • •

DECISION —

&.T.A. Case Nos. 4657 and 4785 i The crmtideratiaon for the cervire 25 meid fer in acceptable foreign currency;

a. The foreign currency 15 rematted invardiy ta the Philippines; and ae The remittance wust be accounted far im accordance with the rules and regulatians of the Central Bank of the Philippines.

Barilar te what harpened ain CTA Case Ne. SER7, an investigation was alse canducted on petitianer’s claim. The investigating exarirer, likewise, submitted a written report oom ber fandings wherein she enumerated the different documents ar papers submitted te her. Thus:

"sawn In ayupmerk af its Claim, haxupayer eubemitted copies of the following -— arong ethers 1.3 VAT returns and proof of payrent af the taw for Po, ce} Central Hank licenses ari STC (Securities Transaction Division} appeased af foreign investments:

3? Bark credit advices foe IMRAN remittances af preceeds of foreign investrentss 4,3 Application te purchase dellars/fereign crxrrency with approval by the Fereign Operation and Investment Department af the Central Bark; and o- 2 Bank debit remos oan purchartes of fereign exchange far remittances ta non resp dernt imvestors, wwe” TExh. a= ae Reap. 5 ce Si, CTA wee. ?

The abevye report was confirmed by the investigating beumamipse hersnedf, Ms, MNarygena dela Frcre, whet ooh rth 178 e

DECISION -

C.T.A. Case Nos. 4657 and 4785 - 13 -

t. f'!:.t. if i ed in Cr:oa.wt.

l !'."•,.

1394 a:.

DPt it. :i onpr' !:· witness (pp.

7-9~ T.S.N. Hearing of 3-15-34). Thii.IS:

0.

Ma' an, 1"' 1 1 be- aore spe-cific now.

Do yo .. , . o•~ have you ena1111ined thp claim for refund of petitioner corporation Anscor Hagedorn Se-curities,. Inc. for value-added

t. an in 19'90? A.

Yes.

0.

Now, in the ena•ination of petitioner's clai• for refund, has it co•p1ied with the docu•Pntary require•ents of the Bm··pau?

n.

Yes.

0.

And in their co•pJiance with the docu•entary require•ents, they have sub•itted the necPssary docu•ents?

far as •Y report :is they have sub•itted require~e-nts.

Only one unsub•:it.ted which docu~entary sta•p increase on capital lt.he yPar 1390.

COT:l:'PJ''OPd, all t.hs:

!s still i=· the" t.;;\>1 on st. e•= k f lP"· 0.

For 1990 c1ai• for refund, would it be accur·atP to state th~t they have sub•itted thPir value-added t.a" ,~et. urn?

A.

Yes.

D.

(.J.

For the four quarter of 1930~ Would ~t be also accurate that thPy also have 179 t~· st.at.e =·•.•b~ itt ed

DECISION --

C.T.A. Ease Nas. 4657 and 4785 their application for tay credit for the period 19o A. Wes.

a. Would 31% be alse accurate te state that they have alsa submitted the confirmation receipgt and proof af payments of value-added tax for 19907 AL Feu, 3% was all attached on the retirn.

S Have they alse submitted te yoru, Madam, the Central Bank Licenses and Securities Transaction Divasian approval of foreign tnvest memt * A. Wes.

To suppeart is clair, petitioner submitted and formally affered the to wats:

Eshibits apgas : "Hey ” and "8-7" "Q-3" Nature Menmorandun Report dated 3 Noveaber 19935 Signatures of BIR YAT Examiner M. deta Torre and Supervisar G. 8.

Javier 180 following enbibits as its evidence, Purpose To prove that the BIR has approved petitioner’s claiea for VAT refund for 1 oo im the sue af FE7 9, OC, BO To prove thet after ewmaninat ton of petitierer’s claim and subriss bem ge all deceneants, the aszigned BIR af ficers recamneods the ararees § of petrbroaner* 3 clate Fer ra Food in the sam of Po73, O87, BO ede Be

DECISION —

C.T.A. Case Mas.

Exhibits PB to ypaoe "0" te ud Gene aad id Sid "Dp” ver ad ad

” G6”

"4a" sr wager 4657 and 4785 Nature BIR Revenue Of ficer’s VAT Audit Report BIR Authority to issue VAT credit/refiund VAT returns ist quarter, 1990 {CTA Record, p. &) Conf irsation No. BH19390177 Record, p. 7) Receipt {CTA VAT Return cv? quarter 1990 (CTA Record,

p. 8) Confirmation Receipt Ne. 70319341 (CTA Recerd, p. 9) VAT Return 2°? quarter 19%) {CTA Record,

p. itt:

Confirrsatian Receipt No, cOA7a9 (CTA Record, p. $4) VAT Retaurre 4°*> guarter 193% {CTA Record,

p. ics Cenfirration Receipt Ne. BelsodIaas {CTA Record, p. 13) Claim for Refund dated 2& Septerber 1991 {3 pages? iCTA records, pp. 15-16) 18° Purpose - came as Enhbibits "A” to A-3 ee - same as Exhibits “A” and "B" and subrearkings To prove that petitioner filed its VAT return for 1** quarter of 19950 To prove that petitioner paid the VAT input tax for 1** quarter 1590 To prove that petitioner filed its VAT) return fer zc’? guarter 1990 To prove that petitioner paid the VAT input tax for 2°? quarter 1300 Te prove that petitioner filed its VAT return for 2°? quarter 19 Ta orave that cetitioner paid that VAT input tan for 2°" quarter P90 Te prave that petitioner Filed ats VAT return for 4*” ouarter 2950 Te prove that petitioner paid the VAT input tax fer 4*” quarter 1950 Te prave that claim for refund om petitioner VAT for 1990 was filed with the BIR on Septerber cf, eS

DECISION -

C.T.A. Case Nos. 4657 and 4785 Nature 16 - Purpose "l~-l'' Att~ch•Pnt of K (zpro nttP - sahs) tCTA Rt>cord., p. J ~) To ~how pFtitiooPr's zf:'ro-,~atP sal p~ fo•~ 1'990 (p. 39-40., CTA ,~pcords) 1-Jith all the foregoing docu•entary and testi•onial evidE"nce., petit i ont:T has s1.•bstant i ally r:wove·n that its coll!'lllission inco~e qualified for the zero rate of VAT.

The t.tweP (3) Section 102{a) of the lax Code~ have bPen net satisfactorily by petitioner. i !:· !:·\I e de a 1 s on prescription~ applying Section lO&CbJ of the TaM Code, the reckoning of thP two- period starts after the close of the quarter when such sales were ~ade. For the first quarter of 1990 payments~ the two-year period began on April 1, 1390 and ended The clai~ was filed with the B. [.R. on September 25, 1391, while the petition was filed with this Court on Apri 1 13, 19'92.

The filing .,,ith the B.J.R.

wa~.

well ..,ith:in the two the filing of the judicial claim was clearly beyond March 30, 1332.

thP amount of 182 • •

DECISION —

EC. T.A. Case Nas. 4657 and 4785 The two-year prescriptive pericd for the second quarter paysents, was from July 1, 1990 to June AO, 1992. Chvicusly, hath the filing of the administrative claim and the judicial Claim were not outside the tea-year ovescriptive period.

Payments made during the third quarter did nat alsa Prescribe, The start af the two-year prescrictive cericd was oom October 1, 1090 and the end was on Sentember 31, £°3'22. september 25, L99L, date cf Filing with the BLILR.. and Aipa-il 13, We, date of filing with this Court, were definitely within the two-year pericd.

For payments dated during the fourth quarter, their tee-year powescriptive period was from January 1, 197) te December Jf. 1334. September 15, LPL and April La, Legs were also within the cscmid trae-year period, hence, said payments similarly did not prescribe.

For the reason that payments far the farst Quarter af 199% have already prescribed, the amount of Po, 897,825.60 representing commission earned from ron- residemts far the first quarter of 1996), will be excluded ano 6 the) 6 6cemputation af the amount to be refunded te petitioner, Thas, folliawing the compattation fp. 42, CTA records) done by respondent? s examiner, at Incarcerated tm her memorandum report dated Navemher 3, 1994 {Embibit 183

DECISION —

E.T.A. Case Noes. 4657 and 4785 “H", Petitioner), emly the amount Qranted ta petitianer, 35 dane at follows:

Commission income from sale of services Less: zero-rated COMRMIESION IncORE ert quarter ace quarter 4°" quarter Caanisszion incase subject to 10k VAT Multiply by (VAT is not billed separately im the invoice) Po, O50, 663. 79 2, 409, 405. 95 A829, 709. 37 VAT due Less: VAT Payments I** guarter Po 34, 465. 14 ees gquarter Jcte’, 109. OF are quarter CAS, OOD. 34 ATM gear ew 186, Sect7. oy Fatal amount of refundable autpout tax

WHEREFORE, in view oF all the petition covered by CTA Case No. DESMISSED. The claim has already upon by respandenk, by issuing certificates in the total ameunt of amounk of FGSS5,947.985 was disallowed oregririphian, The claim covered by CTA Case Ne.

GRANTED but only ian the reduced amount 184 of PSiS, e493 may The rrcomputat i or B57 Ls been favorably P9443, 766.08.

of Pe, 647.1, of such PIG, 031, 845. 00 st, 378,779.11 P10, 653, O65. 89 A/yy e 965, 460. 34 Ft $15,641.23 Faregaing, the Eo petitioner tax credit an account ar

4785 15

be Fame Cee TD t hereby acted The herehy as DEClSION - C.T.R. Case Nos. 4657 and 4785

WE CONCUR:

- 19 - :in said (~tg.

.. Q~ ERNESTO D. ACOSTA p,··eo =· l tl! i ng _l Hdge I CERTIFICATION 1 hereby ceortify that this deocisiDn was reachPd ln accordance with SPction 13~ Rrticle of thF Constitution.

185 e,,__c:;· U). ~ ERNESTO D. ACOSTA p,~p!;. i ding _lm1yP Co~t.wt of T a"» A;:tpE';rt 1 ?:· V1l 1