Bank of the Philippine Islands vs. Commissioner of Internal Revenue

DECISION

T he petition seeks for the cancellation and withdrawal of the allegedly erroneous deficiency documentary stamp tax assessment in the amow1t of P24,587,474.63 issued by the respondent covering the taxable years 1982 to 1986.

T he following arc the relevant facts as culled from the records of the case:

Petitioner, the surviving bank after its tncrgcr with Far East Bank ami T rust Company, is a corporation duly created ami existing under the laws of the Republic of the Philippines with principal office at J\.yala Avenue corner Paseo de Roxas Ave., Makati City (jJar. 1, SmJJJJ7ri~J' r!f / ldmilted FrJciJ).

C.T.A. CASE NO. 6593

Respondent thru then Re,-cnue Sen ·ice C:hief Cesar M. Valdez, issued a pre-assessment notice (P /\ N) dated NoYember 26, l 986 (par. 1, A dditional Fads .foi11tly Stip11luterl).

Petitioner, in a letter dated Nm-cmbcr 29, l 986, requested for the details of the amounts alleged as 1982 - 19H6 deficiency taxes mentioned in the November 26, 1986 pre-assessment notice (par. 2, / 1rlrlitional I'acls Jointfy St ijJIIltll'rl).

On

April

7, 1989, petitioner was issued by respondent assessment/ demand notices F /\S-1-82 to 86/ 89-t )( )( l and F J\S 5-82 to 86/ 89- UOO, for d e fi cicm-~· withholding tax at source (S,\·ap Transactions) and documentary stamp tax (DS'l) im·oh-ing the amounts of J> 190,752,860.82 and P24,587,174.63, rcspcctiYely, for the \Tars I 982 to 1986 (pm: 6, / 1rlrlitional Facts Jointfy StipllkJierl).

On i\pril 2tl, I 989, petitioner protested the demand / assessment notices (/Ja)!,eS I 70-176, HI/{ f{emrdr) and filed as well a supplemental protest (paj!p 153- 167, BTl\ H ecord~ on May 8, 1989.

On August 9, 2nn2, respondent issueJ a final decision on petitioner's protest ordering the withdrawal and cancellation o f the deficiency withholding tax assessment in the amount o f Pl 9ll,752,86! l.82 and considered the same as closed and terminated.

On the o ther hand, the deficiency DST assessment in the amount of J>24,5H7,174.6l was n·itcrall'd and thl' pt'titioncr was ordered to pa~· the said amount ,,·ithin thirt~ · (11 l) davs from receipt o f such order.

D •CISION-

C.T.A. CASE NO. 6593

PAGE3

Petitio ner received a copy o f the said decision on January 15, 2003 (pars. 5 ci')-' 6, .\'mmnary C?l / ldmiltrd hid'). Thereafter, on January 24, 2003, petitioner ft.led the mstant petttton.

On l\hrch 12, 21 H 13, respondent, 111 his Answer, alleged the following Special and Affirmative Defenses, to wit:

6. The assessment in lluestion was issued in accordance with law and pertinent regulations;

7. All presumpttons are 111 fa\·or of correctness of tax assessments;

H. T he period to assess the deftciency documentary stamp tax (DST) has not prescribed because during the taxable years tn question, there was no rcL1uirement to file a return for DST;

9. T he prescripti,-c period to collect the ta:x was suspended when petitioner requested a reim-cstigation of the assessment (CIR t'. lfl) flh S!l£1t'n l ,a/;nm/rm.t'J. /1/(:. :}():} .\'CR/1 !2'l);

10. A pre-assessment notice dated 1m-ember 2o, 19H6 and signed by Cesar l\ 1. Valdez, ReYenue Sen ·ice Chief of the Sector O perations Office on behalf o f the then BIR Commissioner Bienvenido /\. Tan, Jr., \\·as issued to, and received by, the petitioner on NoYembcr 26, I CJHG.

But e\'en aJJIIIIlillg ex rugtmtelllir that there was no pre-assessment notice gl\Tn by the respondent to the petitioner, such issue was no t raised by the petitioner in its protest letter dated 1\pril 2( l, 19H9, hence, canno t be raised befo re the f Iono rablc Court (/ lg!tillaldo lndNJirie.r Corp. T's. CJR, ! ! 2 SCR/ l 1 36);

11. T he basis of the deficiency assessment for the documentary stamp tax is the order o r instruction of the local bank to its correspondent foreign bank to remit a spcciftc sum o f fo rei6111 currency to the Central Bank's correspondent bank abroad for credit to the account of the ( :cntral Bank;

12. \Vhen a local bank sells a fo reign exchange (~ pot sale) in swap transactio n and said local bank orders its foreit,m

C.T.A. CASE NO. 6593 correspondent bank to remit a specific sum o f foreign currency to the foreign correspondent bank of the Central Bank of the Philippines, said order is considered as tclq...,r aphic transfer subject to the D ST under the then Section 195 o f the Tax Code, as amplified by Sections 51 and 50 o f Hcgulations No. 26, otherwise known as

the Documentary Stamp Tax

Regulations, pertinent provisions o f which read as follows: Sec 195. - Stamp Tax on Foreign Bills o f l·:xchange and J .etters o f Credit. - On all foreip1 bills o f exchange and letters o f credit (including orders, by telegraph or otherwise, for the payment o f money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in set o f three or more according to the custom o f the merchants and bankers, there shall be collected a documentary stamp tax of thirty centm·os on each two hundred pesos, or fractional part thereo f o f the face Yalue any such bill o f exchange or letter o f credit-, or the Philippine C<-juivalcnt o f such face ,·alue, if expressed in forei.!--,rn currency. (as amended by PD 1457 and PO 1589). (L nderscoring supplied.)

Sec. 51 . \\·l1at mav be considered as telegraphic transfer. - If a local bank cables to a certain bank in a foreign country with which bank said local bank has credit, and directs that foreign bank to pay another bank or person in same locality a certain sum o f money, the document for and in respect of such transaction will be regarded as a telct,traphic transfer, taxable under prm·isions of Section 1449(i) o f the Administrati\-c Code.

Sec. 50. - Basis o f a tax case of Telegraphic Transfers. - The basis o f a tax in case telegraphic transfers or orders for the payment o f money Jrawn in but payable out o f the Philippine l slands (now Philippines) should be the face ,·alue of such telegraphic transfers or orders computed, if expressed in a foreit:,m currency with the rate of exchange taken into consideration." (L nderscoring supplied.)

DECISION-

C.T .A. CASE NO. 6593

PAGE S

13. The flow of fund ~ abroad from the Philippin e~ i ~ irrelevant to the accrual o f the DST. The liabilitv o f :-tn instrument to the documen tary stamp tax and the amount o f the tax arc determined by the form and face thereof and c:-tnno t be affected by proofs o f facts outside the instrument itself (U. S. vs. I slam, 17 \\'all, 496, 84 L .S. 49o).

T he then Section 195 (now Section 1 H2) o f the Tax Code subjects to the D ST fo rc i~111 bills o f exchange and letters of credit (including o rders by telegraph o r o therwi ~ e) for the payment o f money drawn in but payable out o f the Philippines. Accordingly, the DST prescribed by Section I 95 o f the T ax Code, as amended, is due and p a ~ · ablc on the order coYering the fo rward tr:-tnsaction as well as o rder cmTring or leading to the spo t sale o f the foreign exchange and no t on the sale or purchase o f fo reign exchange \vhich arc no t subject to the DST In the case bar, the re:-tl parties to the tr:-tnsaction are the local bank as drawer which has a S\\'/\P arrangement with the

CB

and the fo rmer's fo reign correspondent bank as drawee/ accept·or.

Pursuant to the then Section 222 (now Section 173) o f the T ax Code, the DST is payable indifferently by either party making, s i~111in g issuing, accepting or transferring the taxable document.

lienee, since the drawee 0ocal bank's foreit,m correspondent bank) is not within the Philippine G overnment's taxing jurisdiction, the drawer local bank is liable to pay the DST on the aforementioned o rders, market convention to the contrary not\\·ithstanding. \\'ith the amendment o f Section 222 o f the Tax Code by Presidential Decree No. 1994 effective J anuary 1, 1986, the liability o f the local bank, as drawer, to the D ST on the order/ cable instruction effected under the S\\'1\P agreement becomes m ore explicit.

T he factual question o f whether or not there was flow o f fu nd from one country to ano ther rc<.Juires proo f o f facts outside the instn1ment itself. Be th:-tt as it may, where there is no fund or credit at,'llinst which an o rder is Jrawn, the said order would no t be accepted or honored and there is no consummated transaction to speak o f subject documentary stamp tax (Comments on the B/\ P ~. Jcm o o f May 18, ·1 987 to the BIR by Jose J. Santos, Chief, Franchise and Miscellaneous Taxes Di\·ision).

Petitioner's reliance on the memo randum dated March 4, 1987 is misplaced to say the least. The

C.T.A. CASE NO. 6593 memorandum is, sad to say wrong interpretation of Section 195 of the Tax Code, as amenJeJ, which is the applicable law in this case. The memorandum h;n·ing been issued on wrong construction of the law, cannot t:,r-iYe rise to a \Tsted right that can be invoked by the petitioner.

The Supreme Court laiJ J own this in HilaJo v. Collector of Internal Revenue and the Court of Tax Appeals, G.R. No. L-9408, October 31, 1956, wherein stated that:

XXX

XXX

With regard to the contention that General Circular No. V- 139 cannot be given retroactive effectiYe because that \vould affect and obliterate the vested right acquired by petitioner under the previous circular, suffice it to say that General Circular No. V -123, having been issued on a wrong construction of the law, cannot give rise to a vested right that can be invoked by a taxpayer. The reason is obvious: a vested right cannot spring from a wrong interpretation. This is too clear to require elaboration.

"It seems to clear for serious argument that an administrative officer can not change the law enacted by Congress. A regulation that is merely an interpretation of the statute when once determined to have become erroneous becomes nullity. An erroneous construction on the law by the Treasury D epartment or the collector on internal reYenue does not preclude or estop the government from collecting a tax which is legally due." (Ben Stocker, et. al., B.T.A .. , 135 1.) "Art. 2254. -No vested or acquired right can rise from acts or omissions which are against the law or which infringe upon the rights of others". (Article 2254, New Civil Code) In sum, it is very clear that the said memorandum expands the language of Section 195 of the Tax Code, as amended. The same cannot be countenanced.

It is settled rule of statutory construction that the implementing rules and regulations cannot amend the act of Congress (Natiollaf Tobacco Administration t'S. COA, 311 SCRA 755) for administrative rules and regulation are intended to carry out, not supplant or modify, the law (Grego t'. COJ\JELEC, 27-f. SCIV-1 -/.81). Likewise it is axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of the enabling statute if such rule or regulations is to be valid (I_ina .Jr. m. Carino, 221 SCRA 515). And in case of discrepancy between the basic law and the rule or regulation issued to implement

C.T.A. CASE NO. 6593 the law, the basic law preYails (1 l[jo f>lrmtation, Inc., l'S. Central Bank, 16-1- SCIVl 192; Conte !'s. Co~trt ofAppeals 26-1- SCIVl I 9).

14. Finally, the government is not estopped by the mistake or errors of agents, erroneous application and enforcement o f law by public o fficers do not block the subsequent application of statutes (E. Rodrigmi_; lm: r. Col!edor ; L-230-I- I, J7t!J'3 1, 1969). During the July 17, 2003 hearing, counsel for the petitioner manifested that he is submitting the case based on the pleadings on a purely legal issue, to which the respondent on the August 28, 2003 hearing, likewise manifested that he would not submit any evidence. T hereafter, after both parties had filed their respective memorandum, this case was submitted for decision on January 22, 2004. D espite previous notice to the respondent, he failed to forward the BIR Records to the court, hence, in its resolution promulgated on May 19, 2004, this court ordered respondent's counsel to forward the 13JR records and to explain why he failed to deliver the Bill Records to this court despite repeated demands. The respondent ftled a manifestation on May 26, 2004 informing the court that on May 12, 2004 he already transmitted to the court's Records Section the BIR Records consisting of three hundred sixteen (31 6) pages (pages 113-114, CTA Records).

The parties agreed that the following are the issues for resolution in this case, to wit:

1. The validity of assessment notices for respondent's failure to issue any notice for informal conference with respect to the findings o f the alleged documentary stamp tax deficiency from 1982 to 1986 as required under Section of Revenue Regulation No. 12-85 dated November 27, 1985;

DECISION-

C.T.A. CASE NO. 6593

PAGES

2. \Vhether the failure o f the respondent to furnish petitioner of the details, nature and breakdown of the alleged findings of tax deficiency violates procedural due process and fair play;

3. T he validity o f the 1982 to 1986 demand/ assessment notices issued by then Assistant Commissioner for Collection - Mr. Aguillon on April 7, 1989 (after then Commissioner Tan made it official to set aside, disregard or reprobate the very same tax assessments), for failure of respondent to issue notice for informal conference and/ or pre-assessment notice (PAN) prior to the issuance of said assessment notices;

4. Whether or not the collection o f tax deficiency in question has prescribed;

5. Whether or not petitioner's cabled instruction to its foreign correspondent bank to remit specific sum of foreign currency to the foreign correspondent bank of the Central Bank of the Philippines is in the nature of a telegraphic transfer subject to documentary stamp tax under Section 195 of the Tax Code, as amended, and amplified by Sections 50 and 51 o f Regulations No. 26;

6. Whether or not petitioner is liable to pay the alleged 1982 and 1986 documentary stamp tax deficiency assessment. To sensibly put the issues into order, it is necessary to resolve the issues in the following sequence: Firs!, whether or not there was a valid assessment notice for the deficiency documentary stamp tax. Second, whether or not the collection of the documentary stamp tax deficiency in question has already prescribed. A11d third, whether or not petitioner is liable to pay documentary stamp tax for its swap transactions from 1982 to 1986. Anent the first issue, petitioner contends that respondent's penchant for procedural shortcuts - by not disclosing to the petitioner, the nature, details and

C.T.A. CASE NO. 6593 basis of the assessment and skjrting the issuance of the no tice for an informal conference as required by Revenue Regulation N o. 12-85, violated its right to due process and fllir play.

Pertinent provisions of Revenue Regulations No. 12-85, implementing Section 319 of then Tax Code are hereunder quoted for easy reference:

POST REPORT IN G NOTICE

Section 1.

Post-reporting notice - Upon receipt of findjngs, the Division Chief, Revenue District O fficer o f Chief Office Audit Section, as the case may be, shall send to the taxpayer a notice for an informal conference before forwarding the report to higher authorities for approval. The notice which is Annex "A" hereof shall be accompanied with a summary of findings as basis for informal conference. (Annex "A" deleted).

In cases where the taxpayer has agreed in wntmg to the proposed assessment, or where such proposed assessment has been paid, the required notice may be dispensed with.

PRE-ASSESSMENT NOTICE

Section 2.

Notice for Propo.red Asse.umml.

\Vhen the

Commjssioner or his duly authorized representative finds that taxes should be assessed, he shall first notify the taxpayer of his findings in the attached prescribed form as Annex "B" hereo f. T he notice shall be made in writing and sent to the taxpayer at the address indicated in his return or at his last known address as stated in his no tice of change of address. (Annex "B" deleted). In cases where the taxpayer has agreed in writing to the proposed assessment, or where such proposed assessment has been paid, the required notice may be dispensed with. Section 3. Time to HejJ()'. - I /emte for 1""7zling l\epb'· -

(a) Regional Office cases. - x x x x x

C.T.A. CASE NO. 6593

(b) National Office cases. - The taxpayer shall reply within a period of fifteen (15) days from receipt of the Pre- Assessment N otice.

In meritorious cases and upon written request of the taxpayer an extension exceed a total of ten (10) days.

The reply of the taxpayer shall be ft.lcd with the Section

Audit Review Division or the National Audit Review

Division, as the case may be, which has jurisdiction over the case.

X

X

X

X

X

X

X

ISSUANCE O F ASSESS_ME N'f

Section 5. Failme? to Rep!J to Pre-Assessment N otices. IssHaJtce rf Assessment. In the event the taxpayer fails to respond to the Pre- Assessment N otice within the above-prescribed period, or when the Commissioner or his duly authorized representative finds the response without merit, he should be informed of such fact and the report of investigation shall be given due course." The petitioner claims that the non-observance of the aforec1uoted sections ofRevenue Regulations N o. 12-85 violated its right to due process. We do no t agree.

Petitioner admitted that it received the pre-assessment notice on November 26, 1986 for deficiency income and business taxes in the amounts of P153,378,910.44 and P24,587,474.63, respectively, covering the years 1982 to 1986.

Petitioner, in a letter dated N ovember 29, 1986, protested the said preliminary assessment notice and requested for a reconsideration or reinvestigation thereof (page 135, BIR Recorr/4 On April 7, 1989, respondent issued assessment/demand notices FAS-1-82 to 86/ 89-000 and FAS 5-82 to

C.T.A. CASE NO. 6593

86/89-000 for deficiency withholding tax at source in the amount of P190,752,860.82 and deficiency documentary stamp tax in the amount of P24,587,174.63 for the years 1982-1986. It cannot be denied that on April 20, 1989, petitioner flied its protest to the demand/ assessment notices and on May 8, 1989, it flied a supplemental protest. Respondent took cognizance of said protests when in his decision dated August 9, 2002, he cancelled and withdrew the assessment for deficiency withholding taxes amounting to P190,752,860.82. It is noteworthy that petitioner is not aq=>111ing that its right to due process was violated as regards the said deficiency assessment for withholding taxes. It would be tantamount to admitting that Sections 1, 2, 3 and 5 of Revenue Regulations No. 12-85 were not disregarded where the assessment for deficiency withholding taxes is concerned.

But petitioner cannot claim denial of due process nor allege procedural defects with respect to the subject deficiency documentary stamp tax assessment and not with regard to the deficiency withholding tax assessment which was cancelled. It must be pointed out that both the deficiency withholding tax and documentary stamp tax assessments were contained in only one assessment notice and both assessments were the subject of petitioner's protests. In other words, both assessments underwent the same procedural process. Apparently, petitioner's arguments are bereft of merits.

Moreover, we are not persuaded by petitioner's argument that respondent's failure to issue notice for an informal conference invalidates the

C.T.A. CASE NO. 6593 assessments.

Revenue Regulations No. 12-85 does not provide so nor does Section 319 of the Tax Code which it implements. As regards the second issue of whether or not the period to collect deficiency documentary stamp taxes on the part of respondent has prescribed, we rule in the negative.

In the case of Commissioner if lntemal Ret'emte vs. Wyeth Suam Llboratories, Inc., 202 SCRA 125, the Supreme Court held that although the protest letters prepared by SGV & Co. for and in behalf of the private respondent did not categorically state or use the words "reinvestigation ami reconsideration", the same are to be treated as letters o f reinvestigation and reconsideration. In the case at bar, petitioner ftleJ a protest on April 20, 1989 (pages 170 to 116, BIR Records) and a supplemental protest on May 8, 1989 (pages 153 to 161, BIR Records). In its letter protest of April 20, 1989, petitioner wrote thus: In view of all the foregoing, we most respectfully request that this fundamental issue be resolved first, before anything else, because it affects the very validity and existence of the assessments themselves, not to mention the importance and far-reaching significance thereof. For this purpose, it is requested that this be referred to your Legal Department for study and resolution. (Underscoring ours) Likewise, in its supplemental protest dated May 8, 1989, petitioner requested: For the purpose of resolving the legal issues raised in this protest, we request that this be referred to your Law Division for study and reconunendation.

T hereafter, we request that the assessments be withdrawn and cancelled. (Underlining supplied)

C.T .A. CASE NO. 6593

Clearly from the foregoing letters, petitioner was asking for a reconsideration and/ or reinvestigation of the assessments so issueJ. In fact, in a letter dated June 13, 1994 (page 256, DIR Eecord.~, petitioner categorically stateJ and we quote:

"Further to our letter of April 2, 1993 relative to the submission of swap contracts in connection with the reinvestigation of the subject assessment, we are submitting the following:"

Under Section 320 [now 223] of then Tax CoJe, the runnmg of the statute of limitations on the making of assessment anJ the beginning of distraint or levy or proceeding in court for collection, in respect to any deficiency, shall be suspended for the period when the taxpayer reyucsts for a reinvestigation which is granted by the Commissioner.

We consider petitioner's protest letters as requests for reinvestigation and based on the evidence on record, the respondent granteJ the same. As early as May 29, 1989, petitioner's protest letters were forwardeJ to the Assistant Commissioner, Legal Office (page 115, DIR H.ecords). On October 22, 1991, the Assistant Commissioner for Special Operations Service issued a memorandum to Revenue Officer Aida N. Florencio of Banks, 1'inancing & Insurance Division to conduct a verification of the withholding tax on interest on foreign loans of petitioner and other commercial banks with swap transactions for the years 1982-1986 (page 149, BIR Records). On April 2, 1992, the Senior Assistant Cashier of petitioner submitted to Revenue Officer Florencio copies of swap

C.T.A. CASE NO. 6593 contracts in connection with the swap transactions under investigation (page 190, BIR Records).

Thereafter, Revenue Officer Florencio issued a 1st Indorsement dated April 30, 1992 (page 19 3, BIR Records) returning to the Chief of Banks, Financing and Insurance Division the entire docket on the tax case of petitioner [then Far East Bank and Trust Co.].

She recommended that the original assessment of P86,161,704.12, exclusive of penalties be given due course since the documents of petitioner failed to show that it is exempted from withholding tax at source.

The Chief of Banks, Financing and Insurance Division then issued a 2nd Indorsement dated February 17, 1993 forwarding to the Assistant Commissioner, Collection Service the said docket and concurring with the recommendation of Revenue Officer Aida Florencio (page 234, BIR Records). On March 8, 1993, petitioner thru SGV & Co., wrote the Bureau of Internal Revenue Attention: Chief, Banks, Financing and Insurance Division that:

"On behalf of our above-named client and in compliance with your requirement, we are submitting a duly executed copy of the Waiver of the Statute of Limitation relative to the subject assessments.

It would be appreciated if our client can be given the opportunity to present or submit additional documentation on its swap transactions with the Central Bank as agreed upon by the BIR and the BAP Tax Committee."

Then on April 2, 1993, petitioner submitted additional documents, particularly the swap contracts and the corresponding ticket advice (pages 228-230, BIR Records).

C.T.A. CASE NO. 6593

On November 25, 1993, Revenue Officer Florencio returned the docket of the case to the Revenue Service Chief, Special Operations Service (page 247, BIR Records). On February 17, 1994, the Regional Director of Revenue Region No. 6 forwarded the case to the Revenue District Officer of Revenue District Office No. 33 on the ground that petitioner "falls within the jurisdiction of that district" (page 246, BIR Records).

In an Indorsement dated June 6, 1994, the Revenue Officer of Revenue District No. 33 forwarded to the Revenue District Officer the docket bearing petitioner's case "with the information that the source of assessment is of legal question" and recommended that the same be referred to the Legal Division, National Office (page 272, BIR 1\ecorrls). On June 17, 1994, petitioner submitted to the Revenue District Office No. 33 swap contracts in connection with the reinvestigation of the subject assessment (page 256, BIR Records). On August 17, 1994, petitioner submitted the corresponding FCDU ticket advice for the swap contracts. Petitioner also submitted a copy of the Memorandum of Understanding on \Vithholding Tax Issue Relative to Swap Transactions of Commercial Banks entered into by the BIR and the Bankers Association of the Philippines (pages 268-269, BIR Records). In an Indorsement prepared by Revenue District Officer Jaime Q. Concepcion dated August 26, 1994, the protest case of petitioner was forwarded to the Chief, Legal Service with the ftndings that as per the documents submitted, the foreign exchange used as the object of the Spot Sale and Forward Purchase under the Swap Agreement fell under the exemption agreed upon in the Memorandum of

C.T.A. CASE NO. 6593

Understanding on WithholJing Tax Issue Relative to Swap Transactions of Commercial Banks, hence, not subject to 15°/o [now 20°/oj withholding tax. However, the issue of DST is not incluJcJ in the saiJ MemoranJum of Understanding, thus, recommenJing once more the Jcficiency tax assessment on DST.

On November 27, 2000, a Decision signeJ by Commissioner Rene Banez was rendered withdrawing anJ cancelling the Jcficiency withholding tax assessment in the amount of P190,752,860.82 but finding petitioner [then Far East Bank & Trust company] liable for Jeficiency Jocumentary stamp tax in the amount of P24,587,174.63 (pages 300-309, DJR Records). l3ut as aJmitted by the parties, it was the D ecision Jatcd August 9, 2002 which was received by the petitioner on January 15, 2003. Just the same, the contents arc the same. Indeed, based on the above incontrovertible facts, petitioner requested for a reinvestigation and reconsideration and the same was granted and acted upon by the respondent.

As discussed, the J e ficiency withholding tax assessment amounting to P190,752,860.82 was withdrawn and cancelled and only the deficiency documentary stamp tax assessment amounting to P24,587,174.63 remained.

Therefore, the prescriptive period proviJed by law to make a collection by distraint or levy or by proceeJing in court for collection relative to the deficiency documentary stamp tax subject of this case was suspended. It was only upon receipt by the petitioner of the Decision on the protest on January 13, 2003 that the perioJ to collect started to run again. It

C.T.A. CASE NO. 6593 follows that respondent's right to collect said deficiency tax assessment has not prescribed. In fact, on October 10, 2002, a Final Notice Before Seizure was already issued by the BIR's Chief of Large Taxpayers Collection and Enforcement Division (page 310, BIR Record~. H owever, this case was under judicial review as of January 24, 2003.

As to the final issue of whether or not petitioner is liable for documentary statnp ta.x on its swap transactions for the years 1982-1986, this court has ruled in a number of cases, the latest of which is the case of A1.etropo!itan Bank and Tmst Compmry vs. The Commission rf Intema! 1\er'enlle, C 1/ 1 Case No. 63 78, ./-lp1if 26, 2004, that petitioner's cabled instructions to its foreign correspondent bank to remit a specific sum in dollars to the Federal Reserve Bank to be crec.liteJ to the account of the Central Bank is in the nature of a tclet,'Laphic transfer subject to the DST under Section 19 5 (now 182) of the Tax Code.

In the cases of China Banking C01poration t'S. The Commissioner rf lntemal Revmue, CTA Case No. 4361, December 22, !993 anJ Consolidated Bank and Tmsl Compmry vs. The Commissiomr rf Intema! Rer·emte, CT/~ Case No. 4647, Nor;ember 21, 1994, this court declared that the liability of petitioner for the payment of documentary stamp tax for the transfer or sale of foreign bills of exchange fmJs support under Section 51 of Revenue Regulation No. 26. "A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but upon the privilege, opportunity or facility offered at exchanges C.T.A. CASE NO. 6593 / for the transaction of the business" (Commi.rsioner ~/ lntemal 1\er;enue vs. L leald / Lumber Co., GR No. L -16340, Fe!mtary 29, 196-1-). Significantly, our pronouncements in the aforesaid cases were affirmed in toto by the Court of Appeals in the cases of China Banking Corporation vs. Commissioner of Internal Revenue, CA-G.R SP No. 336Jl, September 23, 1994 and Consolidated Bank & Trust Company vs. The Comm,issioner of Internal Revenue and the Court of Tax Appeals, CA-G.R SP. No. 3J9JO, March 31, 199J, respectively, And again, in the case of Bank of the Philippine Islands vs. The Commissioner of Internal Revenue, CTA Case No. 4481, May 31, 1994, the court had the occasion to pass upon the same issue in this wise: "It has been shown above that by virtue o f Section 51 of Revenue Regulations No. 26, mere cabled instructions to a foreign correspondent to pay money wouJJ fall within the ambit of Section 182.

Even if such instructions were not covereJ, Petitioner's argument would still not stanJ.

Section 182 mentions "foreign bills of exchange and letters of creJit'' that arc "drawn in but payable out of the Philippines." Obviously, it is not money that is being drawn in the Philippines, as the Petitioner woulJ have it, but bills of exchange and letters of credit "being Jrawn from a place of deposit in the Philippines" in relation to J ocumentary stamp tax under Section 182.

It is more logical to consider that what the law means with "drawn in" is "executed in". ln fact, the Centennial 6 1 " E Jition of

Black's Law Dictionary Jefines "Jraw" as:

The act f!fa drmJier in tnating a draji. To dnm' a bill qf exchange, check, or draft, is to Jl'file (or ca11se it to be J1!1itten) and sign it; to make, aJ a note.

C.T.A. CASE NO. 6593

Thus to draw bills o f exchange and letters of credit in the Philippines is to write, sign, or otherwise execute such bills of exchange and letters of credit in the Philippines. T he Court o f Appeals likewise affirmed the above decision in the case of Bank of the Philippine Islands vs. Conunissioner of Internal Revenue and The Court ofTax Appeals, CA-G.R SP No. 3.!383, August 14, 1998, and elucidated further, thus:

"If petitioner would read the said provtston in its entirety and not merely rely on the caption, it is quite apparent that the imposition of documentary stamp tax in Section 182 is not limited only to foreign bills of exchange or letters of credit but to all the orders made by telegraph or by any other means for the payment of money made by any person or persons drawn in but payable out of the Philippines.

Was the advise sent by petttwner bank via cable to its foreign correspondent a telegraphic transfer and one which would fall within the provisions of Section 182? Perusing the provisions of Section f1 of Revenue Regulations No. 26, We have to say that it is.

All the elements for a telegraphic transfer are indeed present, thus: (1) Petitioner BPI cables its correspondent bank in the

United

States;

and (2)

Petitioner

bank directs that correspondent bank to remit the dollar amount to the Federal Reserve Bank of New York for credit to the account of the Central Bank of the Philippines.

Telegraphic

transfers being proper subjects for the imposition of documentary stamp tax, \Ve therefore uphold the findings of the court a quo."

In sum, petitioner is liable to pay the deficiency documentary stamp tax subject of the instant petition.

C.T.A. CASE NO. 6593

IN VIEW OF ALL THE FOREGOING, the petition ts hereby DENIED for lack of merit. Accoruingly, petitioner is ORDERED to PAY the respondent the amount of P24,587,174.G3 representing ueficiency documentary stamp tax for the periou 1982-1986, plus 2U% interest starting February 14, 2003 until the amount is fully paiu pursuant to Section 249 of the Tax Code.

WE CONCUR:

(On Official Leave)

ERNESTO D. ACOSTA

Presiding Justice

Associate Justice

54c~ ~. ~ot. );), .

jUANITO C. CASTANEDX,jR.

Associate Justice

CERTIFICATION

I hereby certify that the above decision was reacheu after due consultation with the members of the Court of Tax Appeals in accoruance with Section 13, Article VIII of the Constitution.

;;;l~rd;- <2 • ~ 9..

jtJANITO C. CASTANEDA,':JR . .

Associate Justice