Locsin v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 9094. July 2, 2019.] MARIA CARMELA LOCSIN, ET AL. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION FABON-VICTORINO , J p : Aggrieved, both petitioners and respondent challenge the Decision 1 dated February 4, 2019 disposing the present case as follows: WHEREFORE , the Petition for Review dated July 14, 2015 is PARTIALLY GRANTED . Respondent is hereby ORDERED TO REFUND or TO ISSUE TAX CREDIT CERTIFICATE in the total amount of P33,704,567.53, broken down, as follows: NAME OF PETITIONER Income Tax Paid For 2012 Ma. Carmela Locsin 3,022,590.18 Nerissa Loria 213,578.84 Krista Camille Lozada 490,048.48 Maria Isabelita Lozano 315,708.90 Heidee Lozari 703,092.43 Maria Criselda Lumba 148,453.68 Leah Jean Luna 177,330.16 Ma. Solita Mabaquiao 515,525.34 Marianne Macabingkil 163,459.79 Emerlinda Macalintal 162,336.80 Geovanna Maceda-Papa 36,856.67 Ritchelle Ann Madrigal 178,814.24 Maria Angela Malihan 100,872.84 Maureen Mamayson 234,414.86 Imelda Mampusti 299,155.00 Ma. Theresa Manahan 366,266.84 Ma. Rowena Manalansan 214,246.15 Nemrod Manalo 700,279.56 Buena Marie Manansala 224,483.44 Elnora Mangampat 371,725.82 Joelito Manigo 321,969.67 Madeline Manrique 251,495.00 Marirose Mapua 227,511.80 Roselyn Marantal 223,379.24 2 Liza Marasigan 253,091.09 Maritess Marcelino 166,027.00 Ruzette Mariano 176,142.51 Victoria Fe Mariano 594,514.68 Girard Pacifico Marin 452,387.38 Ma. Isabel Martin 152,005.48 Eloise Valerie Martinez 232,457.37 Balbina Grace Matullano 233,521.19 Ma. Lyn Theresa Medina 3 Joselito Mendez 704,088.68 Rachelle Mendinueto 156,118.83 Teresa Mendoza 451,398.60 Vivian Meneses 231,234.07 Kathrina Millan 135,160.40 Marichu Milward 305,446.00 Alvin Morales 611,181.80 Allison Grace Miravite 82,540.82 Marie Jessamine Mitra 264,959.94 Modesto Modesto 1,100,851.83 Caren Joy Mongcupa 170,322.70 Michael John Monreal 214,907.25 Jemellee Monzuela 269,538.10 Sara Mei Mora 294,866.40 Jackie Moreno 123,046.33 Wesam Mostadi 109,600.09 Edgardo Nacpil 557,670.42 Aldalyn Nada-Bere 473,213.38 Gilda Nanquil 372,471.94 Socorro Narvasa 261,758.68 Laarni Nasi 164,759.79 Jennifer Navarro 313,075.04 Ma. Agnes Navera 418,010.08 Suzanne Nazal 296,098.52 Belen Kim Ngwe 267,482.75 Maria Oliva Nuestro 566,741.61 Ma. Carmela Nuez 335,374.03 Lawrence Obias 129,515.90 May Oblefias 143,912.67 Athena Ocampo 267,524.61 Laura Ocampo 291,221.19 Joseph Ochoada 362,461.97 Marjorie Oliver 249,237.62 Ronald Mark Omana 215,062.18 Carol Onchangco 317,652.68 Dino Tante Ordonez 211,287.83 Maria Cynthia Orendain 629,320.00 Josephine Orense 301,729.90 Christina Orquiola 437,127.60 Maria Rosa Ortega 503,836.18 Lea Maria Ortiz 337,273.24 Cecille Pacheco 270,798.47 Madelyn Paclibar 221,760.19 Ruperto Padilla 552,920.28 Rino Paez 98,102.00 Maria Teresa Pagkalinawan 288,724.85 Zenaida Pangan 251,860.21 Corazon Panganiban 564,160.00 Aileen Pangalinan 209,744.01 Maria Virginia Panis 145,297.69 Socorro Panis 823,129.20 Melissa Pascua 363,318.57 Pia Angelica Pascual 167,019.52 Wilhelmina Paz 955,070.05 Santiago Raymond Pe-Aguirre 332,078.92 Ma. Agnes Pedro 153,650.18 Michelle Penalosa 155,411.54 Cecilia Peralta 143,091.88 Paulita Perez de Tagle 173,804.34 Roslyn Perez 271,525.06 Donabelle Pineda 202,487.10 Ma. Eloisa Pineda 262,236.49 Mitzi Gay Piol 210,035.91 Dario Ponciano 305,319.80 Lilibeth Poot 447,970.83 Mario Antonio Portugal 82,557.14 Grace Potente 327,102.08 Elenita Pura 152,567.14 TOTAL 33,704,567.53 SO ORDERED. In their Motion for Partial Reconsideration dated February 27, 2019, 4 petitioners claim that contrary to the finding of the Court, Ma. Lyn Theresa Medina was able to substantiate her 2012 income tax payment of P239,795.69 by presenting the BIR Revenue Official Receipt (OR) 2012 01672201. Admittedly, she presented and formally offered only a photo copy of her 2012 Annual Income Tax Return (AITR) reflecting such payment. However, in her Motion for Partial Reconsideration, she attached the original of the denied 2012 AITR. In view thereof, an additional amount of P239,795.69, representing the alleged 2012 income taxes paid by Ma. Lyn Theresa Medina should be refunded. CAIHTE Petitioners insist that they are excused from paying income taxes by virtue of the general tax-exemption provisions in Article 56 (2) of the ADB Charter. While they concede that the Philippine Government 5 reserved its right to tax Filipino citizens hired at the ADB, however, such reservation needs a specific statute to be effective. Sans any legislation expressly conferring respondent the authority to tax them, they remain to be tax-exempt individuals. For petitioner, the following incidents demonstrate the true intent of the ADB Charter to relieve them of Philippine income taxes: a) long-standing practice not taxing such individuals spanning more than four (4) decades; b) Opinion of Regional Director Antonio Ortega confirming their tax-exempt status; c) Executive Order (EO) No. 161, allegedly stating to respect privileges of the ADB; and d) Member Countries 6 of the ADB enacted their respective enabling laws to tax salaries and emoluments of employees/staff of the said international organization. In closing, petitioners state that they are as well entitled to refund the income taxes they paid on TY 2013. Despite directive, respondent failed to file comment/opposition to petitioner's Motion for Partial Reconsideration. 7 In his Motion for Reconsideration 8 dated March 5, 2019 with Supplement 9 thereto dated March 6, 2019 , respondent finds erroneous the prospective application RMC No. 31-2013. According to him, the imposition of taxes on income realized by petitioners covering TY 2012 is warranted since the government's right to impose income taxes is not dependent on the efficacy of RMC No. 31-2013, which merely clarifies existing revenue laws. He points out that petitioners' income tax liability arose from Sections 23 and 24 of the Tax Code which were already in effect in 1998, or way before the realization of their compensation income in TYs 2012 and 2013. In other words, the compensation received by petitioners from ADB in 2012 and 2013 are subject to Philippine income taxes. Reliance by petitioners on the general tax-exempt provision of the ADB Charter is also misplaced. Respondent explains that such absolution from income taxes under the foregoing international agreement only applies if the Philippine Government did not reserve its taxing power on the Filipino ADB Employees. Given that the Philippine government explicitly retained the right to its citizens by virtue of Senate Resolution No. 06, the general tax-exempt privileges accorded by the ADB Charter finds no application on petitioners. Finally, respondent asserts that the alleged long-standing practice of not taxing petitioners will not ripen into a valid right as the alleged customs are repugnant to with the provisions of the NIRC, as amended. Since there is no legal impediment to collect the income taxes against petitioners, respondent concludes that their refund claim for TYs 2012 and 2013 must be rejected. In the comment/opposition, petitioners reiterated that the reservation of taxing power by the Philippine government to be effective, there must first be a legislation to that effect which is wanting in the present case. Hence, the general tax-exemption privileges conferred to by the ADB Charter equally applies to them. DETACa They insist that their income tax-exempt status as regards their compensation income was enjoyed by them for more than four (4) decades, hence, it may not be taken away by respondent through RMC No. 31-2013. Besides, the issuance is neither a law nor a treaty, hence, may not be a valid source of respondent's taxing power. Moreover, the RTC-Mandaluyong invalidated such circular, thereby upholding their income tax-exempt privileges. Petitioners conclude that the income taxes collected by respondent for TY 2013, similar to TY 2012, should also be returned to them. THE RULING OF THE COURT Petitioners' Motion for Partial Reconsideration and respondent's Motion for Reconsideration are denied. On whether petitioner Ma. Lyn Theresa Medina is entitled to the refund of income taxes she allegedly paid on TY 2012, the Court rules in the negative. It has been held that [s]ince tax refunds partake of the nature of tax exemptions, which are construed strictissimi juris against the taxpayer, evidence in support of a claim must likewise be strictissimi scrutinized and duly proven. 10 Very clearly indicated in the revenue official receipt issued in favor of petitioner Ma. Lyn Theresa Medina, that the income tax payment in the sum of P239,735.69 was for TY 2013 . 11 With the unexplained irreconcilable discrepancy between the taxable periods covered by the AITR for TY 2012 and the revenue official receipt and sans official receipt accurately reflecting petitioner Ma. Lyn Theresa Medina's payment of income taxes for TY 2012, her refund claim must be disallowed. Anent the remaining matters raised by both petitioners and respondent, suffice it to say that they were exhaustively discussed and passed upon by the Court in the impugned Decision of February 4, 2019. To repeat, Sections 23 and 24 of the National Internal Revenue Code (NIRC), as amended imposes taxes on the compensation income derived from sources within or outside the Philippines realized by resident citizens such as petitioners. The general tax-exempt provisions under the ADB Charter may not be applied to them as the Philippine government retained its right to tax its citizens working at the said international organization. Nevertheless, since retroactivity of revenue circulars is proscribed under Section 246 of the same Code, RMC No. 31-2013 should operate prospectively and may not be applied to their income realized in TY 2012, or prior to its effectivity. Thus, save for petitioner Ma. Lyn Theresa Medina, the 2012 income taxes paid by the other petitioners must be returned to them. However, refund of 2013 income taxes paid should be rejected. WHEREFORE , petitioner's Motion for Partial Reconsideration dated February 27, 2019 and respondent's Motion for Reconsideration dated March 5, 2019 with Supplement thereto dated March 6, 2019 are DENIED . The impugned Decision of February 4, 2019 is AFFIRMED . SO ORDERED. aDSIHc (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Ma. Belen M. Ringpis-Liban, J. , concurs. Footnotes 1. Id . at pp. 602-630. 2. Exhibit "P-5-11", docket, vol. 1, p. 318. 3. Exhibit "P-12-1", Annual Income Tax Return for 2012 was denied admission for failure to present originals for comparison. 4. Docket, pp. 631-646. 5. As attested to by the then Philippine Senate and former President Ferdinand E. Marcos per Senate Resolution No. 6 dated March 16, 1966. 6. Petitioners enumerated the list of ADB member-countries observing tax-exemption privileges of their nationals by legislative fiat after ratifying the ADB Charter, as follows: Canada, Australia, India, Papua New Guinea, and Singapore. See petitioners' Motion for Partial Reconsideration, pp. 9-11. 7. Records verification report dated April 5, 2019. 8. Ibid . at pp. 647-652. 9. Id . at 654-658. 10. Commissioner of Internal Revenue vs. Far East Bank & Trust Company (now Bank of the Philippine Islands) , G.R. No. 173854, March 15, 2010. 11. Docket, p. 646.