Philippine Bank of Communications vs. Commissioner of Internal Revenue

DECISION

Fabon- Victorino, J. :

Before the Court En Bane are the Petitions for Review separately filed against each other by the Philippine Bank of

C.T.A. EB NOS. 555 & 556

Communications and t he Commissioner of Internal Revenue, assailing the Decision dated July 13, 2009 as well as the Resolution dated October 21, 2009, rendered by the Court in Division in the case entitled Philippine Bank of Communications vs. Commissioner of Internal Revenue docketed as CTA Case No. 7486. The decretal portion of the assailed Decision of July 13, 2009 and the denial of the Motion for Reconsideration in the Resolution of October 21, 2009 read, as follows:

WHEREFORE, all the foregoing considered, the instant Petition for Review is hereby PARTIALLY GRANTED . Accordingly, respondent is hereby ORDERED TO ISSUE A

TAX

CREDIT

CERTIFICATE

in favor of petitioner in the reduced amount of SEVEN

MILLION

FIVE

HUNDRED

SIXTY-ONE

THOUSAND THREE HUNDRED FIFTY- NINE

PESOS AND 60/ 100 (Php7,561,359.60), representing erroneously paid documentary stamp taxes for the period covering May 18, 2004 to December 23, 2004.

WHEREFORE, premises considered, the

Motions

for

Partial

Reconsideration

of petitioner and respondent are hereby DENIED for lack of merit.

THE FACTS AND THE CASE

AS FOUND BY THE COURT

IN DIVISION :

PBCom is a duly organized commercial bank, authorized to enter into repurchase agreements with BSP under the General

Banking

Law, Manual of Regulations for Banks, particularly Sections X388.4 and X601.2 thereof, and various BSP Circulars. On the other hand, t he CIR has the power, among others, to J

C.T.A. EB NOS. 555 & 556 decide, approve and grant refunds or tax credit certificates of erroneously or excessively paid taxes. By virtue of BIR Certificate No. 08-0434 issued on July 31, 2001 pursuant to

Revenue

Regulation

7-92,

PBCom

was authorized to operate and use On-Line Electronic Documentary Stamp Metering Machine (DS Imprinting Machine) with Serial No. SN363 1711.

On the following dates 1 , PBCom purchased from the BIR documentary stamps and loaded the same to its DS Imprinting

Machine:

Date

Amount

March 26,02004 p 3,000,000.00 April 14, 2004 4,000,000 .00 May 12, 2004 6,000,000.00 June 30, 2004 6,000,000.00 August 4, 2004 6,000,000.00 December 22, 2004 3,000,000.00

TOTAL

p 28,000,000.00 From March 23, 2004 to December 23, 2004, PBCom executed several repurchase agreements with the BSP. During the same period, it imprinted through its DS Imprinting Machine documentary stamps on the Confirmation Letters corresponding to the repurchase agreements entered into with the BSP. 1 See Assailed Decision, par. 4 under the heading "The Facts".

J

C.T.A. EB NOS. 555 & 556

On

May

12, 2006, petitioner filed with the

BIR an

administrative claim for issuance of tax credit certificate for the alleged erroneous payment of documentary stamp tax in the aggregate amount of P11,063,866.67. 2 On May 18, 2006, or barely six (6) days from the filing of its administrative claim, PBCom filed a Petition for Review docketed as CTA Case No. 7486, accusing the CIR of inaction on its application for tax credit certificate in the total amount of Php11,063,866.67, representing the erroneously paid documentary stamp tax on the several repurchase agreements it executed with BSP.

On July 10, 2006, the CIR filed his Answer arguing in the following manner, thus:

"4.

Petitioner's

repurchase agreements for the period 29 March 2004 to 23

December

2004 are subject to

DST

pursuant to Section

180 of the National

Internal Revenue Code of 1997 (1997 NIRC) in

relation to Section 22 (Y) of the same Code; 5.

Petitioner's

alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue;

6.

The amount of P11,063,866.67 being claimed by petitioner as alleged erroneous payment of documentary stamp tax 2 See Assailed Decision, par. 6 under the heading "The Facts ".

J

C.T.A. EB NOS. 555 & 556

(DST) for the period 29 March 2004 to 23 December 2004 is not properly documented; 7.

In an action for refund/credit, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit; 8.

Petitioner must show that it has complied with the provisions of Section 204 (C) and 229 of the 1997 NIRC on the prescriptive period for claiming tax refund/credit. 9.

Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation

(Commissioner

of

Internal

Revenue

vs.

Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)."

To establish its purchases of documentary stamps for the DS Imprinting Machine, the execution of the alleged repurchase agreements with BSP from March to December 2004, the imprinting of documentary stamps on the corresponding confirmation letters, and the filing of the administrative claim for issuance of tax credit certificate with the BIR within the two-year period from the date of payment of the documentary stamp tax, PBCom presented the Head of its Tax Management Unit Percival Orlejon and other personnel in the Treasury Operations Division, namely, Rowena Ong Tan, Joe P. Ruivivar III, Noel V. Cortez and Francisco Capalar, all of whom identified their respective Judicial Affidavits as well as the other documents stated therein.

J

C.T.A. EB NOS. 555 & 556

The CIR opted not to present any evidence in support of his defense but filed a Memorandum simultaneously with PBCom. On July 13, 2009, the Court in Division promulgated the assailed Decision directing the CIR to issue a tax credit certificate in favor of PBCom but in the reduced amount of Php7,561,359.60, representing erroneously paid documentary stamp tax for the period covering May 18, 2004 to December 23, 2004. The DST paid earlier than May 18, 2004 was disallowed on ground of prescription.

On July 31, 2009, PBCom and the CIR filed their respective motions for partial reconsideration, both of which were however denied in the impugned Resolution of October 21, 2009, for lack of merit.

Hence, the present recourse docketed as C.T.A. EB No. 555 and C.T.A. EB No. 556, consolidated on December 4, 2009, pursuant to Section 1, Rule 31 of the Revised Rules of Court. On December 10, 2009, PBCom and the CIR were granted ten (10) days from notice within which to file their respective comments on the petitions.

J

C.T.A. EB NOS. 555 & 556

On January 13, 2010, the consolidated petitions were deemed submitted for decision by the Court En Bane with the following issues to resolve.

The Issues

In CTA EB No. 555:

WHETHER

THE

SECOND

DIVISION

ERRED IN RULING THAT THE REFUND OF DST

PAID

BY

PBCOM

IN

THE

AMOUNT

OF

PHP3,072,521.60

OUT

OF

A

TOTAL

PHP10,633,881.20

IS

BARRED

BY

PRESCRIPTION

FOR

PBCOM'S

FAILURE TO

CLEARLY ESTABLISH THE EXACT DATES WHEN

THE DST PAYMENTS WERE MADE. In C.T.A. EB No. 556:

WHETHER

OR

NOT

THE

SECOND

DIVISION

ERRED

IN

GRANTING

RESPONDENT'S CLAIM FOR REFUND IN THE

AMOUNT

OF

PHP7,561.359.60

ALLEGEDLY

REPRESENTING

ERRONEOUSLY

PAID

DOCUMENTARY

STAMP

TAXES

FOR

THE

PERIOD

COVERING

18 MAY 2004 TO

23 DECEMBER 2004.

The Court's Ruling

The petition is partly meritorious.

J

C.T.A. EB NOS. 555 & 556

However, to resolve the issue of prescription insofar as the refund of DST in the amount of Php3,072,521.60 is concerned, the commencement of the two-year prescriptive period in cases of documentary stamp loaded on DS Imprinting Machine must first be determined.

THE PRESCRIPTIVE PERIOD

FOR TAXPAYERS USING

DS IMPRINTING MACHINE

PBCom claims that under Section 200 (D) of the National Internal Revenue Code (NIRC), DST is deemed paid by actual affixture of or imprinting the documentary stamps on the taxable document through the DS Imprinting Machine. Its implementing rule Revenue Regulations No. 15-2001 dated October 16, 2001, similarly provides that the DST shall be deemed paid by the imprinting of stamps on the document evidencing the transaction sought to be taxed through a DS Imprinting Machine. Therefore, DST payment is deemed made on the date appearing on the documentary stamp thus imprinted through the DS Imprinting Machine.

The contention is bereft of merit. For the payment of DST, Section 200 of the NIRC of 1997, as amended, provides:

j

C.T.A. EB NOS. 555 & 556

"SEC. 200.

Payment of Documentary

Stamp Tax.-

(A)

In General. - The prov1s1ons of Presidential Decree No. 1045 notwithstanding, any person liable to pay documentary stamp tax upon any document subject to tax under Title VII of this Code shall file a tax return and pay the tax in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.

(B)

Time for Filing and Payment of

the Tax. - Except as provided by rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, the tax return prescribed in this Section shall be filed within ten (10) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred, and the tax thereon shall be paid at the same time the aforesaid return is filed.

(C)

Where to File. - Except in cases where the Commissioner otherwise permits, the aforesaid tax return shall be filed with and the tax due shall be paid through the authorized agent bank within the territorial jurisdiction of the Revenue District Office which has jurisdiction over the residence or principal place of business of the taxpayer. In places where there is no authorized agent bank, the return shall be filed with the Revenue District Officer, collection agent, or his duly authorized treasurer of the city or municipality in which the taxpayer has his legal residence or principal place of business.

(D)

Exception.

In lieu of the foregoing provisions of this Section, the tax may be paid either through purchase and actual affixture, or by imprinting the stamps through a documentary stamp metering machine, on the taxable document, in the manner as may be prescribed by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

XXX

XXX

XXX

)

C.T.A. EB NOS. 555 & 556

A cursory reading of the provision clearly shows that any person liable to pay DST upon any document subject to tax under Title VII of the NIRC shall, pursuant to Subsection (A), file a tax return and pay the corresponding tax in accordance with the prescribed rules and regulations. Under Subsection (B), the required tax return shall be filed within ten (10) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred, and the tax thereon paid at the same time the aforesaid return is filed. Finally, Subsection (C) provides the venue or the place to file the required tax return. On the other hand, Section 200 (D) provides the exception to Subsections (A) (B) and (C) of Section 200 as to the manner, time and place of payment of DST. Under Subsection (D), DST may be paid either through purchase and actual affixture, or by imprinting the stamps through a DS Imprinting Machine, on the taxable document, as may be prescribed by the rules and regulations. Significantly, Section 5.3 of Revenue Regulations No. 05-97 prescribes the filing of DST Declaration under BIR Form 2000 for persons using DS Imprinting Machine, each time documentary stamps are purchased for loading or reloading, to wit: SEC. 5.3.

Any person duly authorized to use DST Metering Machine shall file a DST Declaration under BIR Form No. 2000 each time documentary stamps are purchased for

J

C.T.A. EB NOS. 555 & 556 loading or reloading on the said machine. This declaration shall be filed with any duly Authorized Agent Bank, Revenue Collection Officer, or duly authorized City or Municipal Treasurer in the Philippines. The amount of documentary stamps to be reloaded on the Metering Machine should be equal to the amount of documentary stamps consumed from previous purchase. The details of usage or consumption of documentary stamps should be indicated on the declaration. Clear from the above provision, that the DST, insofar as the taxpayers using DS Imprinting Machine are concerned, is deemed paid upon purchase for loading or reloading of documentary stamps on the DS Imprinting Machine, through the filing of DST Declaration under BIR Form No. 2000. It follows that for taxpayers using the DS Imprinting Machine, the DST Declaration under BIR Form No. 2000 is the return contemplated by law. And the two-year prescriptive period for taxpayers using DS Imprinting Machine starts to run from the date of filing of the DST Declaration under BIR Form No. 2000, and not on the date appearing on the documentary stamp thus imprinted through the DS Imprinting Machine. 3 THE AMOUNT OF PHP5,395,385.80

IS BARRED BY PRESCRIPTION

In its petition, PBCom is claiming entitlement for tax credit certificate in the amount of Phpll,063,866.67, allegedly 3 The Premier Insurance & Surety Corp. vs. Commissioner of Internal Revenue, C.T.A. Case No. 6707, December 24, 2008.

j

C.T.A. EB NOS. 555 & 556 representing DST erroneously paid on the mistaken belief that the various repurchase agreements it executed with BSP were subject to it, to wit:

Confirmation

Repurchase Agreement4

Amount

Exhibit

Letter

Exhibit

DST

Serial No. 10293, dated 03-23-04 P969,000,000.00

F

03/23/04

C-1

P384945.30 Serial No. 10294, dated 03-24-04 75,000,000.00

G

03/24/04

C-2

33,904.20 Serial No. 10295, dated 03-25-04 105,000,000.00

H

03/25/04

C-3

17,260.30 Serial No. 10296, dated 03-29-04 93,000,000.00

I

03/29/04

C-5

39,493.20 Serial No. 1 0297, dated 03-29-04 1,827,000,000.00

J

03/29/04

C-4

350,383.60 Serial No. 10298, dated 04-05-04 150,000,000.00

K

04/05/04

C-9

61 ,643.90 Serial No. 10299, dated 04-06-04 205,000,000.00

L

04/06/04

C-6

39,315.10 Serial No. 10300, dated 04-26-04 1 ,821 ,000,000.00

M

04/12/04

C-7

349,232.90 Serial No. 10301, dated 04-12-04 164,000,000.00

N

04/12/04

C-11 &

67,397.30

C-67

Serial No. 10302, dated 04-16-04 475,000,000.00 0 04/16/04

C-12

201,712.40 Serial No. 10303, dated 04-20-04 174,000,000.00 p 04/20/04

C-8

33,369.90 Serial No. 10304, dated 04-23-04 969' 000' 000.00

Q

04/23/04

C-13

411,493.20 Serial No. 10306, dated 04-26-04 1 ,660,000,000.00

R

04/26/04

C-10

341 ,095.90 Serial No. 10307, dated 04-26-04 75,000,000.00 s 04/26/04

C-14

30,822.00 Serial No. 10308, dated 04-29-04 93,000,000.00

T

04/29/04

C-15

40,767.20 Serial No. 10309, dated 05-04-04 173,000,000.00 u 05/04/04

C-16

33,178.10 Serial No. 10311 , dated 05-11-04 1,527,000,000.00 v 05/11/04

C-18

292,849.40 Serial No. 10312, dated 05-12-04 164,000,000.00 w 05/12/04

C-19

74,137.00 Serial No. 10313, dated 05-17-04 475,000,000.00

X

05/17/04

C-20

201,712.40 Serial No. 10314, dated 05-18-04 166,000,000.00 y 05/18/04

C-21

31 ,835.70 Serial No. 10315, dated 05-24-04 969' 000' 000.00 z 05/24/04

C-22

411,493.20 Serial No. 10316, dated 05-25-04 1,527,000,000.00

AA

05/25/04

C-23

292,849.50 Serial No. 1 0317, dated 05-25-04 380,000,000.00

BB

05/25/04

C-24

161 ,369.90 Serial No. 10318, dated 05-31-04 93,000,000.00 cc 05/31/04

C-25

38,219.20 Serial No. 10319, dated 06-01-04 166,000,000.00

DO

06/01/04

C-26

31 ,835.70 Serial No. 10320, dated 06-07-04 150,000,000.00

EE

06/07/04

C-27

61,643.90 Serial No. 10321 , dated 06-08-04 1,527,000,000.00

FF

06/08/04

C-28

292,849.50 Serial No. 10322, dated 06-14-04 223,000,000.00

GG

06/14/04

C-29

91 ,643.90 Serial No. 10323, dated 06-15-04 166,000,000.00

HH

06/15/04

C-30

31 ,835.70 Serial No. 10325, dated 06-22-04 1,527,000,000.00

II

06/22/04

C-32

292 ,849.50 Serial No. 10334, dated 07-07-04 150,000,000.00

JJ

07/07/04

C-36

67,808.30 Serial No. 10352, dated 07-14-04 223,000,000.00

KK

07/14/04

C-37

100,808.30 Serial No. 10353, dated 07-16-04 139,000,000.00

LL

07/16/04

C-38

59,027.40 Serial No. 10354, dated 07-19-04 362 '000' 000.00

MM

07/19/04

C-39

153,726.10 Serial No. 10355, dated 07-26-04 1,345,000,000.00

NN

07/26/04

C-40

424,657.60 Serial No. 10356, dated 07-30-04 93,000,000.00 00 07/30/04

C-35

38,219.20 4 Pages 37-39 of the C.T. A. EB 555 case Docket. j

C.T.A. EB NOS. 555 & 556

Serial No. 10357, dated 08-09-04 Serial No. 10358, dated 08-09-04 Serial No. 10359, dated 08-16-04 Serial No. 10360, dated 08-19-04 Serial No. 1 0361 , dated 08-20-04 Serial No. 10362, dated 08-23-04 Serial No. 10364, dated 08-30-04 Serial No. 10310, dated 05-05-04 Serial No. 10326, dated 06-24-04 Serial No. 10327, dated 06-25-04 Serial No. 10328, dated 06-30-04 Serial No. 10363, dated 08-27-04 Serial No. 10365, dated 09-09-04 Serial No. 10366, dated 09-16-04 Serial No. 10367, dated 09-20-04 Serial No. 10368, dated 09-27-04 Serial No. 10369, dated 09-30-04 Serial No. 10371, dated 10-11-04 Serial No. 10372, dated 10-18-04 Serial No. 10373, dated 10-20-04 Serial No. 10374, dated 10-27-04 Serial No. 10375, dated 10-29-04 Serial No. 10376, dated 11-11-04 Serial No. 10377, dated 11-18-04 Serial No. 10378, dated 11-22-04 Serial No. 10379, dated 11-30-04 Serial No. 10381 , dated 12-22-04 Serial No. 10382, dated 12-23-04

TOTAL

150,000,000.00 188,000,000.00 362,000,000.00 362,000,000.00 81 ,000,000.00 188,000,000.00 93,000,000.00 150,000,000.00 969,000,000.00 376,000,000.00 93,000,000.00 1 ,341 ,000,000.00 150,000,000.00 359,000,000.00 442,000,000.00 1 ,341 ,000,000.00 93,000,000.00 150,000,000.00 359' 000' 000.00 442,000,000 00 1,341,000,000.00 93,000,000.00 150,000,000.00 306' 000' 000.00 411 ,000,000.00 1,434,000,000.00 406,000,000.00 153,000,000.00 P34,578,000,000.00 pp 08/09/04

C-42

63,698.70

QQ

08/09/04

C-43

79,835.70

RR

08/16/04

C-44

153,726.10 ss 08/19/04

C-45

158,685.00

TT

08/20/04

C-46

34,397.30 uu 08/23/04

C-47

36,054.80 w 08/30/04

C-49

39,493.20

WN

05/05/04

C-17

67,808.30

AAA

06/24/04

C-33

424,767.20

BBB

06/25/04

C-34

159,671 .30

CCC

07/30/04

C-41

39,493.20

DOD

08/27/04

C-48

569,465.90

EEE

09/09/04

C-50

65,753.50

FFF

09/16/04

C-51

157,369.90

GGG

09/20/04

C-52

193,753.50

HHH

09/27/04

C-53

551 ,096.00

Ill

09/30/04

C-54

24,835.70

JJJ

10/11/04

C-55

19,917.90

KKK

10/18/04

C-56

152,452.10

LLL

10/20/04

C-57

199,808.30

MMM

10/27/04

C-58

624,575.60

NNN

10/29/04

C-59

40,767.20 000 11/11/04

C-60

65,753.50 ppp 11/18/04

C-61

134,137.00

QQQ

11/22/04

C-62

168,904.20

RRR

11/30/04

C-63

569,671.40

TTT

12/22/04

C-65

183,534.30 uuu 12/23/04

C-66

67,068.50 P1 0,633,881.20 However, in the assailed Decision of July 13, 2009, the Court in Division ruled that the DST payments made earlier than May 18, 2004 are time barred.

In counting the two-year prescriptive period for filing an application for refund or tax credit certificate, the date of the Confirmation Letter of the Repurchase Agreement was deemed as the reckoning point.

Thus, out of the substantiated claim of Php10,633,881.20, the Court in Division

J

C.T.A. EB NOS. 555 & 556 considered the total amount of Php3,072,521.60 barred by prescription.

But as earlier stated, the two-year prescriptive period for taxpayers using OS Imprinting Machine starts to run from the date of filing of the DST Declaration under BIR Form No. 2000, and not upon the date appearing on the documentary stamp thus imprinted through the OS Imprinting Machine or the date of the Confirmation letter.

Based on the evidence presented, PBCom purchased from the BIR documentary stamps and loaded the same to the OS Imprinting Machine on the following dates5 :

Date

Amount

March 26,02004 p 3,000,000.00 April 14, 2004 4,000,000.00 May 12, 2004 6,000,000 .00 June 30, 2004 6,000,000.00 August 4, 2004 6,000,000.00 December 22, 2004 3,000,000 .00

TOTAL

p 28,000,000.00 PBCom also offered Exhibits B and B-1 to B-17, to show that it filed BIR Form 2000 and paid the corresponding taxes on its 5 Page 30 ofthe C.T.A. EB 555 case Docket.

Gi

J

C.T.A. EB NOS. 555 & 556 purchases of documentary stamps from March 26, 2004 to December 23, 2004. 6 Considering that PBCom filed its administrative claim for issuance of tax credit on May 12, 2006, and the instant Petition for Review on May 18, 2006, its application for tax credit certificate for documentary stamp purchases and payments prior to May 18, 2004 could not possibly prosper as they were made beyond the two-year reglementary period pursuant to Section 229 of the NIRC. Thus, the purchases made by PBCom on March 26, 2004 in the amount of Php3,000,000.00, April 14, 2004 in the amount of Php4,000,000.00 and

May

12, 2004 in the amount of Php6,000,000.00 are already time-barred. Stated otherwise, PBCom can claim for tax refund or credit only on purchases made on June 30, 2004 onwards as these purchases were made within the two-year reglementary period hence, have not prescribed. Consequently, out of the substantiated claim of Php10,633,881.20, the total amount of Php5,395,385.80 is barred by prescription and only the amount of Php5,238,495.40 may be allowed for refund or tax credit, computed as follows: 6 See Note 5, Supra.

J

C.T.A. EB NOS. 555 & 556

Confirmation Letters with documentary stamps imprinted p 10,633,881 .20 Less: Amounts barred by prescription:

Confirmation

Repurchase Agreement

Letter

DST

Serial No. 10293, dated 03-23-04 3/23/2004 384,945.30 Serial No. 10294, dated 03-24-04 3/24/2004 33,904.20 Serial No. 10295, dated 03-25-04 3/25/2004 17,260.30 Serial No. 10296, dated 03-29-04 3/29/2004 39,493.20 Serial No. 10297, dated 03-29-04 3/29/2004 350,383.60 Serial No. 10298, dated 04-05-04 4/5/2004 61 ,643.90 Serial No. 10299, dated 04-06-04 4/6/2004 39,315.10 Serial No. 10300, dated 04-26-04 4/12/2004 349,232.90 Serial No. 10301 , dated 04-12-04 4/12/2004 67,397.30 Serial No. 10302, dated 04-16-04 4/16/2004 201 ,712.40 Serial No. 10303, dated 04-20-04 4/20/2004 33,369.90 Serial No. 10304, dated 04-23-04 4/23/2004 411,493.20 Serial No. 10306, dated 04-26-04 4/26/2004 341 ,095.90 Serial No. 10307, dated 04-26-04 4/26/2004 30,822.00 Serial No. 10308, dated 04-29-04 4/29/2004 40,767.20 Serial No. 10309, dated 05-04-04 5/4/2004 33,178.10 Serial No. 10311 , dated 05-11-04 5/11/2004 292,849.40 Serial No. 10312, dated 05-12-04 5/12/2004 74,137.00 Serial No. 10313, dated 05-17-04 5/17/2004 201 ,712.40 Serial No. 10310, dated 05-05-04 5/5/2004 67,808.30 Serial No. 10314, dated 05-18-04 5/18/2004 31 ,835.70 Serial No. 10315, dated 05-24-04 5/24/2004 411 ,493.20 Serial No. 10316, dated 05-25-04 5/25/2004 292,849.50 Serial No. 10317, dated 05-25-04 5/25/2004 161 ,369.90 Serial No. 10318, dated 05-31-04 5/31/2004 38,219.20 Serial No. 10319, dated 06-01-04 6/1/2004 31 ,835.70 Serial No. 10320, dated 06-07-04 6/7/2004 61 ,643.90 Serial No. 10321 , dated 06-08-04 6/8/2004 292,849.50 Serial No. 10322, dated 06-14-04 6/14/2004 91 ,643.90 Serial No. 10323, dated 06-15-04 6/1 5/2004 31,835.70 Serial No. 10325, dated 06-22-04 6/22/2004 292,849.50 Serial No. 10326, dated 06-24-04 6/24/2004 424,767.20 Serial No. 10327, dated 06-25-04 6/25/2004 159,671 .30 5,395,385.80

REFUNDABLE AMOUNT

p 5,238,495.40 In fine, PBCom is entitled to the issuance of tax credit certificate for erroneously paid DST, but only in the reduced amount of Php5,238,495.40.

C.T.A. EB NOS. 555 & 556

THE DOCTRINE OF EXHAUSTION

OF ADMINISTRATIVE REMEDIES

ADMITS EXCEPTIONS

The CIR on the other hand complains that PBCom failed to comply with the conditions for administrative claim as it did not submit relevant documents pertaining to the various repurchase agreements it executed with the BSP as well as its purchases of documentary stamps for the DS Imprinting Machine. And if the inaction in the administrative claim was due to the cited procedural lapses on the part of PBCom, then its petition filed with the Court in Division should have been denied for failure to exhaust administrative remedies.

The argument is untenable.

Note that the CIR opted not to present any evidence in support of his defense in his Answer filed on July 10, 2006. In fine, his contention that

PBCom's

administrative claim for tax refund/credit was not properly documented was unsubstantiated if not self-serving.

Such being the case, he could not validly conclude that PBCom's "purchases for the period 26 March 2004 to 23 December 2004 are subject to DST pursuant to Section 180 of the National Internal Revenue Code of 1997 (1997 NIRC) in relation to Section 22 (Y) of the same Code". Granting in gratia argumenti that PBCom was unable to fully substantiate its (ci j

C.T.A. EB NOS. 555 & 556 administrative claim for tax credit, it was within his authority to require submission of additional relevant evidence, if warranted. But he did not.

It is beyond question that an aggrieved taxpayer must first exhaust available administrative remedies before seeking redress in the courts of justice.

It is a condition sine qua non in any application for tax refund or credit before court action may be taken by a taxpayer.

Section 229 of the NIRC is clear on the matter, thus:

"SEC. 229.

Recovery

of

Tax

Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor; refund or credit any tax, where on the face of the return upon which payment was made, such payment appears to have been erroneously paid."

(Underscoring

supplied)

J

C.T.A. EB NOS. 555 & 556

And PBCom duly complied with this condition when it filed its application for issuance of tax credit certificate for the amount of Php 11,063,866.67 with the BIR on May 12, 2006.

Under the

obtaining circumstances, it was not necessary for PBCom to wait for the final action or adverse decision of the CIR before seeking judicial redress, otherwise it would have lost, to its prejudice, the right to claim refund or credit for the DST it erroneously paid to the BIR. 7 In this regard, the second paragraph of the immediately foregoing provision is directive as to the period within which a judicial claim for tax refund or credit should be instituted. To repeat for emphasis - "no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment." Hence, the aggrieved taxpayer must file its judicial claim for tax refund or credit within the two-year prescriptive period to commence from the date of payment of the tax erroneously or illegally collected, lest it loses the right to avail of judicial intervention.

7 Commissioner of Internal Revenue vs. Hitachi Computed Products (Asia) Corporation, CA-G.R. SP No. 63340, February 7, 2002 citing Gibbs vs. Collector oflnternal Revenue and Court of Tax Appeals, 107 Phil 232, Johnson Lumber Co. vs. CTA, I 01 Phil 151.

J

C.T.A. EB NOS. 555 & 556

In any event, the doctrine of exhaustion of administrative remedies admits some exceptions. Among these exceptions allowing immediate j ud icial recourse are (1) when there is an urgent need for judicial intervention, and (2) when irreparable damage will be sustained by the aggrieved party if judicial redress is not seasonably taken8 .

On this point, the ruling in College of Oral & Dental Surgery

v. Court of Tax Appeals, eta!, 9 is enlightening: This Court, construing the aforequoted provision of law (referring to then Section 306 of the old NIRC, now Section 229 of the NIRC of 1997) in an identical case, made the pronouncement that although the filing of the claim with the Collector of Internal Revenue is intended as a notice to said official that unless the tax or penalty alleged to have been erroneously or illegally collected is refunded court action will follow, this does not imply that the taxpayer must await for the action of the Collector before bringing the matter to court (P.J. Kiener Co., Ltd. V. David, 92 Phil., 945, penned by Mr. Justice Pedro Tuason).

Indeed, it must be observed that under said provisions, the taxpayer's failure to comply with the requirement regarding the institution of the action or proceeding in court within 2 years after the payment of the taxes bars him from the recovery of the same, irrespective of whether a claim for the refund of such taxes filed with the Collector of Internal Revenue is still pending action of the latter." (Underscoring and emphasis supplied). 8 Aquino, et al. v. Lontok, et al.,G.R. No. 84324, April 5, 1990 and De lara, et al. v. Cloribel, et., G.R. No. L-2 1653, both cited in CTA EB Nos. 469 and 494). 9 G.R. No. L-10446, January 28, 1958

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C.T.A. EB NOS. 555 & 556

Verily, a taxpayer such as PBCom cannot be faulted in faithfully complying with the law and taking advantage of the period set therein for filing its claim for refund. In the first place, there is no provision in the NIRC requiring that the claim for refund be filed at the earliest instance in order to give the Commissioner an opportunity to rule on it and the Court to review the ruling of the Commissioner of Internal Revenue on appeal. 10

WHEREFORE, the Petition for Review filed by Philippine Bank of Communications docketed as CTA EB No. 555 is PARTLY GRANTED. Accordingly, the Decision dated July 13, 2009 is modified directing the Commissioner of Internal Revenue to issue a tax credit certificate in favor of Philippine Bank of Communications in the reduced amount of FIVE MILLION TWO HUNDRED

THIRTY- EIGHT THOUSAN D FOUR HUNDRED NINETY- FIVE

PESOS AND 40/100 {Php5,238,495.40), representing the erroneously paid documentary stamp tax for the period June 30, 2004 to December 23, 2004.

1° Commissioner oflntemal Revenue v. Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.), C.T.A. EB No. 25 1 (C.T.A. Case Nos. 6628 & 6732), May 30, 2007, citing BIR Ruling [DA-489-03] dated December I 0, 2003 , signed by Deputy Commissioner (Legal and Enforcement Group) Jose Mario C. Buftag.

J

C.T.A. EB NOS. 555 & 556

On the other hand, the Petition for Review filed by the Commissioner of Internal Revenue is hereby DENIED, for lack of merit.

WE CONCUR:

D--- ~ . CL___ ERNESTO D. ACOSTA

Presiding Justice

SZt~ L?.~~d-./';.

fUANITO C. CASTANEDA

Associate Justice

ER~ . UY Ass~stice

~~UEZ

Associate Justice

TISTA

(on wellness leave) CAESAR A. CASANOVA

Associate Justice

(on official travel) CIELITO N. MINDARO-GRULLA

Associate Justice

(on official travel) AMELIA R. COTANGCO-MANALASTAS

Associate Justice

C.T.A. EB NOS. 555 & 556

CER T IFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. L.--&. ~ ERNESTO D. ACOSTA

Presiding Justice