BIR Ruling [DA-066-02]

April 04, 2002 BIR RULING [DA-066-02] Hon. Jose Isidro N. Camacho Secretary of Finance Manila S i r : We are forwarding herewith for your approval the herein claim for informer's reward of Ms. Rose M. Gonzaga of #60 SM Homes, Novaliches, Quezon City, under Section 281(1) of the Tax Code, as amended, including some pertinent papers (certified photocopies only) bearing on the internal revenue tax case of Pacific Banking Corporation (PaBC, for brevity) for the years 1986 to 1991. The records show that on July 9, 1992, an affidavit which was recorded as Confidential Information No. 63-92 was filed by the above-named informer denouncing PaBC for some alleged tax evasion practices stated as follows: (1) that since the closure of PaBC in 1985, the Central Bank of the Philippines (CBP) as Receiver, and the Philippine Deposit Insurance Corporation (PDIC) as Liquidator, have been disposing the assets consisting of real estates (lands, buildings and condominiums) and personal properties (bank equipment and motor vehicles) of PaBC at current or present values; (2) that under a Purchase Agreement executed between PaBC, Far East Bank & Trust Company and CBP, certain real estate assets (branches of PaBC) were sold for P655,927,493.00 which amount was way above the acquisition cost of said properties; (3) that in the collection of loans and sale of the assets of PaBC, CBP as Receiver and PDIC as Liquidator, realized income but failed to file income tax returns on behalf of PaBC for the years 1985 to 1991. On the basis of said confidential information and documents submitted by the informer, Letter of Authority No. 002540 dated November 20, 1992 was issued by this Office to a group of Revenue Officers of the Intelligence & Investigation Office (now Tax Fraud Division) to investigate PaBC for income, business, withholding and documentary stamp tax liabilities for the years 1985, 1986, 1987, 1988, 1989, 1990 and 1991. It was ascertained in the investigation that PaBC; thru its Liquidator had, indeed, committed the violations as averred by the informer. Accordingly, and on the basis of the recommendation of the investigating examiners contained in their Memorandum-report dated September 24, 1993, this Office issued various assessment notices all dated December 15, 1993, requiring PaBC to pay the total amount of P407,157,980.53 representing deficiency income, percentage and expanded withholding taxes, inclusive of surcharge and interest, for the years 1985 to 1991, summarized as follows: Kind of Tax Year Involved Amount Deficiency Income Tax 1986-1990 P213,239,661.65 Deficiency Percentage Tax 1986-1991 188,317,311.85 Deficiency EWT 1986-1991 5,601,007.03 Total P407,157,980.53 Subsequently, the Regional Director of Revenue Region No. 8, Makati City, filed a Claim before the Regional Trial Court of Manila which rendered a Decision on March 19, 1996 sustaining the assessment of this Bureau and ordering PaBC/PDIC liquidator to pay the said amount of P407,157,980.00 without waiting for the final distribution plan of the assets of PaBC. On April 25, 1997, PaBC/PDIC liquidator paid the total amount of P193,918,318.88 representing the deficiency percentage and withholding taxes of which the informer received the informer's reward pursuant to the 1st Indorsement dated August 16, 2000 of that Office approving the recommendation of this Bureau. However, the Central Bank of the Philippines appealed partially the said decision with respect to the deficiency income tax involving the amount of P213,239,661.65. On August 31, 2001, the Court of Appeals confirmed the decision of the Regional Trial Court of Manila ordering PaBC/PDIC liquidator to pay the amount of P213,239,661.65 representing 1986 to 1990 deficiency income tax. PaBC/PDIC appealed the decision to the Supreme Court by filing a petition for review on certiorari . The Supreme Court in its resolution dated November 19, 2001 denied the petition for review on certiorari , filed by PDIC, of the decision rendered by the Court of Appeals dated August 31, 2001. Immediately thereafter, PDIC made a partial payment of P213,239,661.65 representing 1986 to 1990 deficiency income tax including interest therein as of March 16, 1993 under Payment Form (BIR Form No. 0605) on December 18, 2001 as acknowledged by Philippine Veterans Bank-Atrium Branch, Makati City. The Revenue Accounting Division, National Office has verified and certified on January 11, 2002 that the aforesaid amount of P213,239,661.65 have been remitted to the government. The records further show that Ms. Rose M. Gonzaga, as represented, is neither an internal revenue officer/employee nor a public officer or her relative within the sixth degree of consanguinity; that the information furnished by her was in writing and under oath; and that the same was not in the possession of the Bureau of Internal Revenue or the Department nor is the aforesaid tax liability pending or previously investigated or examined by an official or employee of this Office or by the Department of Finance. In view thereof, and it appearing that the information furnished by Ms. Rose M. Gonzaga was instrumental in the discovery of a violation of the internal revenue laws and in the recovery of taxes, it is respectfully recommended that she be paid the amount of P31,985,949.24 which is equivalent to 15% of P213,239,661.65, as informer's reward pursuant to Section 281(1) of the Tax Code, as amended. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue