Asian Bank Corporation vs. Commissioner of Internal

DECISION

This is a judicial clai• for refund of alleged overpaid gross receipts and documentary stamp tax for the taxable year 198& in the total a•o\mt of P757, 99&. 8().

This clai• for refund was born out of an assess•ent issued by the respondent and received by the petitioner on January 10, 1990 de•anding the pay•ent of deficiency gross receipts tax <hereinafter called GRT for brevity> (hereinafter called DSTJ in the a•ount of P528,138.&8 for the taxable year 198&.

Petitioner disagreed with the and consequently sent a letter of protest to respondent page 132

DECISION -

C.T.A. CASE NO. 4720 - 2 - 289, CTA Shortly thereafter, petit i onel~ 1990 covered by CB Confir•ation Receipts Nos.

18472298 and 18472299 <Exhibits "F" and "W">. Petitioner re•ained firm in its opposition to the assessed amount and subsequently filed a clai• for refund in 1990.

Respondent did not act upon the clai• for refund so petitioner had to resort to elevating its case to this Court through a petition for review filed on March 3, 1992 so as to toll the running of the prescriptive period for fil~ng a claim for refund~ petitioner's tax deficiencies for 198G as co•pared to petitioner's own co•putation is enu•erated hereunder, thus:

BIR's Co•putation A.

Gr·oss Receipts Ta.K Gl~oss lnco•P subjPct to GRT ••••••••••• GRT DuP ••••••••••••••••••••••••••••••• GRT Re•itted •••••••••••••••••••••••••• Oefi.ci.ency Tat~:

Add:

Surcharge (25,C.) ................. lnter~st (2Q,C.) ................. Co•pro•ise Penalty .............. Total A•ount O•.ae and Collectible ...... 133 P87,£5&,9l4.89 4,231,072.85 3,439,88b.39 p 791,186.46 p 197,796.62 565,698.32 12.000.00 p 1, 566,681. 40

DECISION —-

C.T.A. CASE NO. 4720 B. Documentary Stamp Taxes Asount of Transaction Total Loan Transactions Subject to DST .ceccccereree FPO Sete, 955, 569.85 Add: Certificate of Time Deposit ccecccerercece HS, 732, 696. 75 Government Securities Purchased/Sold) -.pccrcceee 220, 633, 967. 00 Total Amount Subject to DST ... Pi,247, 34c, 233.60 Less: DST paid/affixed — In 1986 Lee eee eee reece ee - Deficiency DST Lp ccc ever er ec ence e er ce ere rece rrre coevee Add: cox Surcharge -ccecccccecccererreree ee ecco creree Total Asount Due and Collectible ..--.--ecccercccceree Petitioner’s Computation A. Gross Receipts fax — 1946 p Ft Rp a] DST Due sce, 995.57 303, 752. 70 220, 633. 97 1,247, 342.24 832, 831. 30 414,510. 94 103, 627.74 518, 1238. 68 Gross Income subject to GRT ........... P81, 857,815.06 GRT Due cc cece ec cece cece ccc cence eeeees 3, 202, 966. 95 GRT Remitted wc. cre cece cec cece cccess 3, 439, 686. 39 Deficiency Tak ..ccccceccereccccceeees. FP 465,080.56 Add: Surcharge (25%) ....2ce cece wees ee) FF 115, 770. 14 Interest (20%) ...c cece cece eens 333, 388. 32 Coaprogise Penalty ......-.....2- be, OK). O) Total Agount Due and Collectible ...... FP 924,839.62 Less: Amount Paid on 3/5/HW) .........-. (P_1, 411,801.07) Total Amount Refundable ............... (P 486, 961. 45) B. Decumentary Stamp Taxes — 1946 Asount of Transactian Total Loan .

Transactions in 1986 ..--eeeee = POete, 955, 569. 85 Less: Receivable Discounting (No PN) Jee eee eee ee ee ree ee 37, E00, COND, CN Debits: Returned Checks/ Reclassification and adjustment pp ceccccrccces 43:5, 460. AS Total Loan Transactions subject to DST ........ wrrceee 484, 897, 109. 00 134 Fe DST Due Leet pal J Sco, 955.57 37, GX), CH) 458. 46 484,897.11

DECISION -

C.T.A. CASE NO. 4720 - 4 - Less: Transactions on which Total DST were already sepat·ately affixed by clients not using Petitioner's stock of DSl •••••••••••••••••••.

28, 9""...t2, (10(). ()() P4SS, '345, l0'3. 00 Add:

Certificate of Total TiDe DepDsit •• ••••• ••••••• P~t03, 752,&%.&3 Gov't. Securities Purchased/Sold •••••••••••• P'35'31 6'37,805.63 Less: DST paid/affixed in l98b ..........•..••.... Deficiency DST ••••••••••••••••.•••••.•••••••••••••••• Add:

2Slt Su..-.charge .......................... ~-· ••••••.•• Total Less:

DST Affixed in 1'387 - P73,814.60 1'388 - Pl21 t)L 7. 60 1989 - PIJIJ,SIJO.OO Total R•o•J.nt D•J.e (d•J.e to 25~ S•J.rcharge) •••••••••••••• A•ount Pa.id on 3/5/'3<) .................................. . P4SS,'345. 11 505,131.14 P'36l,076.25 P830,<401J.05 130,672.20 32.668.05 P1631 340.2'5 130, E·72. 20 .32,668.05 (PJ30, 703. 4()) (P27 L, OJS. JS) The discrepancies in the tax deficiencies of both versions as described above are rooted in diffe,•ent theortes adopted by both parties as regards the tax i•plications of several transactions of petitioner which transpired in 1986, and it is for this reason that it is best to tackle the assessed tax deficiencies individually so as to deter•ine whether or not the grant of the tax refund of P757,996.80 is proper.

ASSESSMENT FOR GROSS RECEIPTS TAX

<GRT> Respondent assessed petitioner for GRT in the su• of P1,566,681.40 for the year 1986 basing the said tax on 135

DECISION -

C.T.A. CASE NO. 472.0 - 5 - thP gross rPcPipts of pPtitionPr in the total a•ount of P87, G5E•, 914. 89.

PPtitionPr disputPs thP basis uti 1 i ZPd by rPspondPnt in co•puting its GRT as it clai•s that thPir ,~PcPi pts in 198b to only P81,857,815.0G ,~psul t i ng in a dPficiPncy GRT of P4G3,080.5G.

PPtitionpr opinPs that thP BlR exa•inPrs in including thP 20~ final withholding tax on CPJ~tai n pass i vP inco•P as part of fm~ l98G.

It is thP pPtitionPr's thPory that since the 20~ withholding tax is a final tax, the amount withhPld should no longPr form part of its gross rPcPipts bPcausP this amount is not actually rPcPivPd by thPm. thP gross receipts should bP computed net of thP 20~ final withholding tax.

In addition, petit i onel~ also disagrees with thP PxaminPr's inclusion of their income from the bonds/debPntures Guaranty Corporation <HIGC> as.

of its rPcPipts, becausP the charter creating HlGC, particularly R. A.

580, exe•pts all bonds/debenturPs issued by HIGC fro• taxation, hPnCP ~uch inco•P should no longer be includPd in thP co•putation of its gross rPCPipts. Fro• thP thPoriPs thus prPsPntPd by the pPtitioner, ,~espondPnt asserts.

hPr oft-rPpPatPd standard l i nP of dPfPTISPS, thus:

136

DECISION -

C.T.A. CASE NO. 4720 - b -

SPECIAL AND AFFIRMATIVE DEFENSES

5.

The investigation Reven,..le;

cl.ai• for refund by the B•..lre.a'..l is of pending I nt ef~n.a 1 6.

The a•ounts sought to be refunded were paid in accordance with law; 7.

Petitioner has also failed to show that the taxes paid were erroneously or illegally collected;

8.

ln addition, well-settled is the doctrine the provisions on the tax refund are construed strictly against the taxpayer as they aJ~e in the natm~e of tax exe•ptions <Raisin, lnc. (sic) vs. Auditor General, 25 SCRA 754>; 9.

Petitioner has not likewise shown that the tax allegedly collected which it wants to be refunded was actually withheld and/or re•itted to herein respondent and even assu•ing that it was re•itted, the presumpt1on is that they were received by respondent in accordance with law;

10.

1 t is i nc11.u1bent upon petit i oneJ~ to show that it has co•plied with the provisions of Section 243 of the National Internal Revenue Code;

11.

The tax sought to be refunded has already become final and executory. lt is obvious respondent did not propose any substantial issues as far as the GRT liability_ of petitionel~ is concel~ned.

Moreover, the respondent chose not to assist this Court in the analysis of the facts which led to the formulation as can be seen from her the BlR records and her omission to 137

DECISION -

C.T.A. CASE NO. 4720 - 7 - offer any kind of evidence to support the government's stand.

Nevertheless, we find that the issues for resolution as regards petitioner's GRT liabilities are purely legal and can be confined to two questions, thus: 1) WhetheJ~ ot~ not the gross receipts for pm~poses of computing the GRT shall be co•puted net of the 20" final withholding tax; and 2) Whether oJ~ not the inco111e derived bonds/debentures issued by HlGC shall be excluded from the computation of petitioner's gross receipts. The assessaent fol~ GRT is based on Section 119 of the Tax·Code, quoted hereunder thus: SEC.

119.

Tax on banks and non-bank financial inter•ediaries. l Thel~e shall be collected a tax on gross receipts derived from so,wces within the Phi 1 i ppi nes by all banks and non-bank financial intermediaries in accordance with the following schedule: (a) On interest, co•aissions and discounts from lending activities as well as inco111e from financial leasing, on the basis of re111aining maturities of instruments from which such receipts are derived. Short-term ma~urity not in excess of two (20 Years 5" Mediua-terlll aa~\wity - over two years but not exceeding four <4> years 3" Long-ter• •aturity:

(i) Over four C4J years but not exceeding seven

(7) years 1" lAs amended by P.D. No. 1789. 138

DECISION -

C.T.A. CASE NO. 4720 - 8 (ii> Over seven (7) years (b) On dividends <c> On royalties, real or personal, profits other items treated as Section 28 of this Code rentals of property, fro• exchange and all gross inco•e under 51' A·ovided~ however~ That in case the aaturity pel· i od J•e f erred to in paragJ•aph (a) i s shortened thru preter•ination, then the maturity period shall be reckoned to end as of the date of preter•ination for purposes of classifying the transaction as short, •edium or long ter• and the correct rate of tax shall b~· applied accordingly.

Nothing in this Code shall preclude the Co•aissioner fro• iaposing the saae tax herein provided on persons performing si•ilar banking act i v i t i e s.

The aforequoted provision of the law speaks of gross receipts as the basis of the 5~ bank tax or GRT, and it is petitioner's contention that the income i nclr..tded as of such gross receipts should be coaputed ainus the final tax already withheld by various withholding agents for the reason that such amount did not actually go to its funds, hence was not actually received by them.

We agree with the petitioner that the 20~ final withholding tax on it's interest income should not part of its taxable gross receipts. Revenue Regulations No. 12-8() dated Nov. 7, 1980 on Taxation of income DeJ•i ved Banking Activities provides that the rates of tax to be :imposed 139

DECISION -

C.T.A. CASE NO. 4720 - 9 - on the g•~oss receipts of such financial institution;

shall be based on all items of income actually received, thus:

SEC. 4.

XXX XXX (e) Gross receipts tax on banks, non-bank ri nanci al i ntermedi a1~i es, ri nanci ng companies, and othet~ non-bank ri nancial i nt er•edi at~i es not perrcwming quasi-banking activities. The rates of taxes to be imposed on the .gross receipts of such financial institutions shall be based on all items of income actually received.

Mere accrual shall not be considered, but once payment is received on such accrual or in cases of prepayment, then the amount actually received shall be included in the tax base of such financial institutions, as provided hereunder. (Underscoring supplied> From the foregoing, it is but logical to infer that the final tax, not having been received by the petitioner but instead went to the coffers of the government, should no longer form part of its gross receipts fol~ the purpose of computing the GRT.

This conclusion is in accord with the i nt erpretat ion of the Supreme Court in the case entitled Collector of Internal Revenue vs. Manila Jockey Club, 108 Phil. 821, as quoted by this Court in disposing of a similar issue in the case entitled Coapania Maritiaa vs. Acting Coaaissioner of Internal Reven·ue, CTA Case No.

142& dated NoveMber 14, 19&&, thus: In the second place, the highest tribunal of the 1 and i nt el~pret ed the t el~m "gross receipts:

to mean all receipts of a taxpayer excluding those which have been especially 140 \

DECISION -

C.T.A. CRSE NO. 4720 eat~marked government tax paye•~.

by or Thus, - 10 law or regulation some person other it was held:

foJ~ than "xx nx.

The Government could not have meant to tax as gross receipt of the Manila Jockey Club the ~~ which it directs same Club to turn over to the Board of Races.

The latter being a Government institution, there would be double taxation, which should be avoided unless the statute admits of no other interpretation.

In the same manner, the Government could not have intended to consider as gross receipt the portion of the funds which it directed the Club to give, or know the Club would give, to winning horses and Jockeys - admitted 5~.

It is true that the law says that out of the total wager funds 12~~ shall be set aside as the 'coamission' of the track owners but the law itself takes official notice, and virtually approves or directs payment of the portion that goes to owners of horses as prizes and bonuses of jockeys, which portion is admittedly 5~ out of the 12~~ commission.

As it did not at that time contemplate the application of 'gross receipts' revenue principle, the law in making a d1stribution of the total wager funds, took no trouble of separating one item from the other;

and for convenience, grouped three iteas under one common denomination. "Need 1 ess· to say, gJ~oss receipts of the propt~ie_tor of the amusement place should not include any mDney which although delivered to the amusement place has been especially earmark•d by law or regulation for some person other than the proprietor."

<The Commissioner of lnt~rnal Revenue vs.

Manila Jockey 141 the the ( eh

DEITUSTON -

Ce i. f. CAE NU, 47 eu Club, Inc., GR. Nos. L-15890 & L- , 13887, June 30, 1960) ’ {tows to be noted that, under Secticn 2h af the Tax Cade, a race-track 15 subject te oan amusement tax af FOR af it5 grass receipts and the term “grass receipts’ embraces all the receipts sf the proprietor, lessee, ar oreratar of the arusement place.” Nateathstandince the broach and ali~enbracing definitian af the ter- "yreass wecerphs” found 3m our amusement tee faw, gur Gupreme Court did nat adopt » literal inheroretatbion oF the said term in the cone of tho Manila Jockey flub. Ine., supra.

The other thecey preposed by the petitions: os regards its GRE LiabLrlity concerns its earnings fron bondsvcdebentures issued by the Home Insurance Guerants Coroeration tHIGC). Tt is petitioner’ s atsertiron that auch bends and debentures tsagued by HIGOE are eéMemp! from taxatian by virtue af Republic Act Na. SAO, We Likewise uphold the argument of tte petitioner.

Rem glbic Ack Ha. Sea as amended by Republic Ac § provides the followings Sec. 14. Mm acess MM ve (dj The tGebentures +ssued ae cher this chapter to ary mortgagee with respect hes mort oages or loans insured under Chapters tT: and If] shall he executed in the neme wf thre Hame Fanancing Commission as eblieger, ang siemed for the Commisssen by the Charermar-- General Manage. by either his poo tten cr engraved signature, and shall be negotiable. exempt from taxvation, attachment, execution o- BEI ture, redeerable at the option of thio Commissian at. tre before maturity and Fully ‘Quaranteed as to principal and interest by the Republic of the "hHilippines.

142 Terr omhoce- quoted orosysapar of the bee 5 ergy Se nee yess orpems omg fusebhes goterceetabaon, Py wre Fn gt «. Loe. ane iephectuees ranupol by are exempt fern Rmeowtaen, be aoree with Lie prehrtraner heist bee tte , evomptoon Deavailepe pseterncdes to the earnmiros derived by tye Jenexsonm ipatahutiaon, fim this case, Oetitconer cgm bss BE BMF OS imtenmded te encovurane the narticanmabtiorn of Fanranciai anstatutians in the mortoape insuravie perunrant af the ocovernment for the end-purpose af peamoting mome- taliding and land awnershio ameng Filipinas.

lim this seare, Jase PArasas. Former Commisasianer ar tmternal Revenue, arm has bee entitled updated NMaktiomal Internal Revenue Code, 13588, Seventh Editioon, page 566. mreovoded an added rationale for excleding the interests derived fram tax-enenrot oavernment bonds anc secur hres tm thik manner, thus:

Far pornmoses of compubioo the EA bard: tae.

arherests frrom acverneent Bonds ar secu piphies, which fy snmecific mproavisian af law, are ‘exnemert from taxation” cr exempt fram all tanes, da not form part of the gross receqots an which said tae 15 amnosed, for ta wejude such tau-free imterest InMCARE Aas Part af the hasis of thee bregarade tay would, in effect, nublify bie haw preemption specrally craevided far in law, HH

ASSESSMENT FOR DOCUMENTARY STAMP TAX (DST)

Metrtianer cal is into question the BAIR s HOBBES Smee oF sty Ut biabriity fre the taxable year 1486. Tt oye the 7 143 | oh.

day we Farr stand oof the ometitiaener that at has meemerldy cel al ate GOT for (9h hence at has no EPSt deficsency eecenb For the 25% ssercharge that 1s ta be itneses fer the tate affixing of LOT on certain documents.

(inte again we are canfroanted with differences aty thearjes and ASSESament of facts adopted by the cebabaoaner and respondent with regard tea the GS! lrabpiiaty af petitianer.

Fetitraner contends that oa total amount at Pa7, 600, 000,00 was erroneously incinded as mark af its lean tramsactions an 19e6 subject to DST. Erroneous oan the sense that this amount represents trade receivable that are Eevicenced anly by mere invoices and not promissory nates which were sald oar assinned to the pekiritioner. Ma such, mere invoices are not grneluderj as ove oF those instruments subject ko DST porsuacnt ta Sembhion i76 af the Ta» Code.

We apree with toe petitioner that loan transgarbtions oT hak are evidenced hy mere invoices and nat backed wo by te NSF im) ag Sed 9 ag ‘orerespanding promissary nates are not su er ec ause an invoice is net one of those instruments wunder Section 176 of the Tax Code whose assignment, sale or teams Fer ops abject to DST. However, equally impor tant heoeonsizveder as the factual basis af the alleration of the 144

PLCISLON -

m.7T.8. CASE NOL 4720 petitianer that a total amount ay Pa?, BOG, OOO, too represents trade receivables hbached up by mere INV OYCES. In the instant case, petitioner presented as evidence a comparative commutation of DST for 1986 prepared and certified correct by its own vace president anc comptroller (Exhibit "“A") andicating the above stated amount which as at test self-serving and as auch does net convainee this Court of the veracity of the Ffagures contained therein. All presumptians are in favor of the correctness of tax assessments, The good Faith of tax assessors and the validity af their actians are presumed, They will be presumed to have taken into coansideratian all the Facts to which their attention was called. Ha pPresumotion can he indulged that all of the public of Ficials of the state in the various counties wha have ta da with the assessment af property for taeration Ce re knowingly violate the dtbies Imposed woon theom by law, {Commissioner of Internal Revenue vs. Construction Resources of fasza, Inc. and the Court of Tax Mppeals, i45 SURG BFL). mo at 15, a mere paper indicatinn Tigures net backed apt by the corresponding Dhatarcnpars af an INVOICES 168 nok sufficient te rebut sucnm presumotaan.

Pebytbanner alse takes issue ta the amount af Pot ge ooo ot abaech at claims was erranenuslys subyected 149

DECISION -

C.T.R. CASE NO. 4720 - 15 - by the BIR to DST in the sum of P28,952.00.

Petit i onet~ asserts that the DST due have already been affixed by its ..

clients pursuant to a prior agreement between petit i onet~ • and the clients hence to subject the same amount to DST would in effect be a double imposition of DST on the same To pt~ove this allegation, petit i onet~ its evidence, the copies of the notes upon which docu•entary stamps were already affixed <Exhibits "L", "L-1", "L-2", "L-3", "L-4" > and pt~esented a copy of petitioner's own documentary stamp as 50\.lrCE'd ft~om its own an effort to show the difference the "design" of the documentary stamp affixed by its clients and petitioner's own stamp its own stamp metering machine.

We find that the evidPnCP above-de set~ i bed has successfully rebutted of cort~ectness of the assessment and "'e hold that thp of P28~952,000.00 should not have been subjected to DST.

]n deciding this particular issue, gt~eat weight was placed on the petitioner's evidence pt~i mat~i I y due t:o respondent's apparent disinterest in pursuing this case.

No B Ir~ submitted nor was evidence made by t~espondent.

no 146 GEN PSilUuN ~ C.7.A. CASE MO. 4feu attempt ta dispute the specific allegations made by the petitioner was made by the respondent as she presented mere generalities as affirmative and specific defenses ain ner answer. Respandent having failed to overcome the canvincing evidence presented by petitioner, We sustain Petiatianer’s cantention with respect ta this particular 1Ssse.

Another significant objectian of the petaiticner is the DST imposed by the examiners oan the amount of 9,633,967.99 representing the value af government securities specifically Treasury Bills and Central Bank Bills, purchased and sold by petitioner bank in 19A8G. Petitioner contends that such government securities fall within the meaning of “deposit substitutes” ant that Pursuant to Rev. Reg. No. 17-84 such deposit aubstibutes are subject to BST only upan their issuance, edo omoboupen their subsequent transfer, assionment or canveyance.

We daisayree with the contemtian of pebrbrener and ie hoaid that the goverrrent securaties (treasury y bidie aoc Central Bank bills) are not Geposit substitutes bot are ciessified as "certificates of mdebtedne+ts sub ypeck aa) => DST pursuant to Seetian 274 af the Tax Code, thus:

Seekron 74. Stamp tan oon bands, dehentures, and cerbttifacates of indehk edness, - fin ald trands, debentures and certificetes of iifletstectness rvssued by any ABSOCiation, company 147 PRECISION C.T.A. CASE MD. 4720 or corporation, there shall be collected FY documentary staro tax of ane peso con each teen hundred pesos, or fractional part thereof, of the face value of such dacuments. (As amended by PO 1457 and FD 1959).

In the Case entitled BPI Family Bank VS.) Commissioner of Internal Revenue, CTA Case Wa. ace, August 7, lode, thas Court made a camprehensive analysis of the nature of the Treasury Bills and Central Bank Bilis that jgustifaied their being classified as certificates of indebtedness and not as deposit substitutes. Pertinent portions of the above-cited decision are quated hereunder, thus:

To resolve the issue we have to determine the nature of treasury or CB bills. Treasury Bills are evidence oF indebtedness issued by the National Government under authority of Republic Act No. e445, as amended. They are offered For sale either at aucbion on Cempebtitive ar non-competitive basis and at Fixed discount or interest rate. Th represents a direct, uncormdre ional and general obi rugatio: oF biye MHational Governmank (Section i. Roe, mea), “Centra! Rants briis" is similar te Lreagury bills except that uf; Po 1S 5tuert pyr to Republic Ac 265, AG amendec, Obfserwige lLarrowin ag the Mentral Rank Merb, moa bOriks are alse evidence of rndebteringss tsagte by the Uentral Rank against rts international ceserve or against other government “eo itLes Lf has amquired, or may be peagued without velabion to specific types of asgsetn of thes bank, (Section YS, R, fa. E65) Treasury brbis and + Bs bills are thre {wo mogt popular government securiréites being traded in the oper Rarvket operabion of the Central Bank.

From the sbuve concepts of treasury bhilis and UG bills, at may not be concjuded that they Fall under khe berm promissory notes, bril af 148 Be TS PEE f.7.f. CASE HO. 47&9 exchange Graft, certificate of deposit near debt instruments ised for deposit substitutes Et Te define above. oot The Caorurt of Appeals subsequently affarmed aferegquoted decision in the case entitled BP] Family VS. Commissioner of Internal Revenue and Court of the Baarsis Tan Appeals, CH GR SP No. e9BAS, September 19, 19o4.

Pertinent portions are oguated, thus:

"Wittront any doubt, having the general tharacter of investment securities, T-by]1s and CB bills cannot he considered as mere peomissary nates. In fact, the primary function of CB bills and T-bailis are quate d3fferent From that of anstruments eviddenring cebts ary ordinary transactions hetweer iamdividuals (Article 19, U. G. Reu. Na. va Treasury Denartment, cated in Arava. rpdated WIRC, np. 77OQ3 Revised Decumentary Stamn Ren. , Department of Fanance, Sent. 16, (824; CXXX1]:i, O.G, {le op. 2 AAD Section 2). [Instruments Pyvyidencing detts in ardinaty transactions between individual s are more in the satire oF pramyssary nates which are treated Separately erd distinctly from government seouribties 2 are 2esued by authoryiy of the Central Bar, Cansegquentiy, Phe -snvance amid the cortege dh teransfer ard sale af government Securities should be subject ta the payment of documentary stamp taxes purstant toa Section t727, as amenied by PLD. No. 1995946 cf the NIRC xxurme' Pram the foregoing, we can cone tude thet a gervernment secarities can be classified as ‘certifia such of andebtedmess" under Gection 174 of the Tax Cove hence subject to DST.

The final abjgection of the petitianer to the mabe gament for 19Gb 25 the Inclusion of the amount 1493

DEL ISOM -

C.7. A. CASE NO.

BPE P4568, 460.85 which classified as new loan Claimed ta be merely books to cover rt asserts releases ‘yever to have subject sed entries” adjustments r returnedsbeuncing chechs and reclassified Furthermore, petitioner cantends that entries are not accampanied ny the pramrasary nobes or epxecutian of ner hence not subject DST. To bol petitioner presented as evidence Returned/Reelatsified Checks for 19868 wh carrect by ries. Cleofe C. Bonifaci Conmptraller and (Exhibit and photocapies wpe Teduyer (Exbibits tire checks that ren lassified.

(Exbibait "IT"? are alsa (Exhibrits "JI" to The fact that no bearing ta the chrechs 25 paid in heb mf orrbagas by Dry ment oof rhe TST of panes ta bounced reflected UST Vice President The amounts From "J-8B") andicatin and the amoaun indicated in the submitted by the check was already raid Ea ance upon the RT = Fram thee bars, aa On petitioner's cancelled been erraneaus iy ta PST het ar fowsk in the enulting exisking thie we TE YEE ,esvance of ne Jogar- rmgreomen loans y!

Eom stor rts stand, a Sohedule loh was cert:

0, petitioner’ s "T° and subs: diar:

ut GB the amon! s ‘ ks of the togdms in thie schedule aubGacaarmy ledges petihoaner.

gr fagumee foes rmngce the 55°F rity tebacisb amr oo F vee 4. Potep yy fa, thee fame much ack 35 A cig » thr te rigs Bi ai Fy ry Plech 4} mherme cf Pr bi e 4 r are re j 5.

art Seliver Sts bh Rie Pa Te Try mary € Teg * gy for cutann sain

2. on

: BERL & FEO

wie hrapegaction hed, or oom the date rf mF Tf & spmact fae check}, Tho 2 Seve been euhec mm tts 5 Ppwerye me y~aRnte re, free ae LE re eheri: E et Foaude alaou cadted to be “Umarttele s hat ae bee rs Canhromgreed bey a hs pate Sopeliate Lowet., L-& May 2 Urtaz ov. Board of Trarectoars, 465% Vadidar v. Cos a, og 4 that Free ine w aft emaughy a a Tiart. the acorn of tye nfo oma mament t has alreany her of a new ne sttacted to th or delivery.

ed chy” Tee be refunded.

eeoby tard oft persan there sts ree oy ey nhec es ai Bank and T wi z 9 fr were the payment af m1 Paid an t of check bookle e checks upen i Therefare, the D&S dishanored by Section 179 of ecks drawn sees ad] he cullected 151 advance ae

HY &

hty e boa He 1 hiye thre ge ~ os Rue -t e bt nei aren 3 GT yen oe] the chec rank ay {.

ued of a ao ms , nied _ a node .

he i rye ing that he, sannat my ary Hose rat y

DECISION -

C.T.A. CASE NO. 4720 - 21 - centavos.

The key here is issuance. Thus, regardless of whether the checks issued have been cleared or not is i•material to the payment of the DST.

The fact that the checks have been issued and delivered is enough for the DST to attach to said document. The same in the case of reclassified existing loans.

Section 180 of the Tax Code provides for .,.

the payment of DST on all pro•issory notes, whet he•~ negotiable or non-negotiable, and on each The existing loans that were reclassified did not entai 1 the issuance of new promissory notes but merely a reversing entry.

This however does not that the DST paid thereon should be refunded since the DST on promissory notes attaches on the document itself upon their issuance or execution. As a matter of fact, the mere renewal of said promissory notes is subject to the DST.

"'";.:.

A recomputation of the a•ounts involved particularly with regard to petitioner's DST liability would show that there is st1ll an unpaid portion as far as the taxable year of 198E.o is concerned, this notwithstanding the fact that this Court already reduced the amount to be paid.

The main t~eason f Ol~ thiS is rooted in petitioner's incomplete payment of its DST liability as originally 152 . ' .

. ' .

"" .. , ~ ....

DECISION -

C.T.A. CASE NO. 4720 - 22 - assessed by respondent.

Evidence shows that the BIR assessed petitioner for deficiency DST in the amotmt of P518,138.GB but petitioner only paid the sum of P303,703.40 <E>ehibit "W" >' so whatever deductions this co.:.wt finally granted to petitioner as reg.;u~ds its DST liability did not result in any overpayment of ta>ees, hence refund cannot be allowed. is the detailed recomputation of petitioner's final DST liability for the ta>eable year 1986, thus:

Total loan transactions in 198& Add/ Wedi.ICt) :

a.

Transaction on which DST wtn~e already separately affixed by clients b.

Govern•ent Sl'CUJ•itil'S purchasi'd/sold d.

Certificate of ti•e deposit Total Less: OST paid/affiKed in 1986 Basic deficiency DST Add: 25~ surchage Total deficiency DST Less: DST affiKed in 1987 1988 1989 A•out of Transaction p 522,955,5&9.85 (28,952,000.00) 220,&33,9&7.00 503.752.696.63 Pl 1 218 1 3~0 1 2JJ.OO P73,814.60 12,017.60 44,840.00 for' certain transact ion in 1986 Balance of deficiency DST Less: Pay•ent •ade on 3/5/90 Total a•ount payable 153 DST Due p 522,955.57 (28,952.001 220,633.97 503.752.70 Pl,218,390.24 830.404.05 p 387,986.19 96.996.55 p 484,982.74 130,672.20 p 354,310.54 303,703.40 p 50,607.14 • I, ., ,.

.., ' /1 ..

•

DECISION -

C.T.A. CASE NO. 4720 - 23 -

WHEREFORE, in view of the foregoing, petitione•~ is entitled to the refund of Gross Receipts Tax <GRT> in the sum of P486,961.45 computed as follows: Gross incoaP subjPct to GRT ppr BIR coaputation Add/ <Deduct> Adj\tstaent s: a) final taxes already withheld fro• petitioner's 198& passivP incoae b) incoae fro• HlGC bonds and debentures which are exeapt Gross inco•e subject to GRT GRT Due GRT Ruitted Deficiency GRT CP5,419,218.75) 392.544.38) P87,&5&,914.89 (5, 811' 763. 13) P81,857,815.06* p 3,902,966.95 3,439,886.39 p 463,080.56 Add:

Surcharge <25~) P 115,770. 14 333,988.92 12.000.00 Interest (20~) Co•proaise Penalty Total aaount due and collectible Less:

A•ount paid <Exhibit "F") Total a•ount refundable 461.759.06 p 924,839.62 1,411,801.07 p 486,961.45 With respect to petitioner's claim for refund of docUI•entary sta•p tax, it has been estab 1 i shed that no excess payment was made in the taxable year 1986, hence such claim for documentary stamp tax is hereby DENIED.

DECISION -

C.T.A. CASE NO. 4720 - 24 - Judge ~:-~~~ Associate Jud~=rtJ' CERTIFICATION I hereby certify that this decision was reached after due consultation among the •e•bers of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution.

155 Q~Q.. G4 ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals •