Commissioner of Internal Revenue v. Hawaiian-Philippine Co.

TENTH DIVISION [CA-G.R. SP No. 20453. June 19, 1990.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HAWAIIAN-PHILIPPINE COMPANY AND THE COURT OF TAX APPEALS , respondents . R E S O L U T I O N MAGSINO , J p : This has reference to the petition for review of the decision of the Court of the Tax Appeals directing the petitioner Commissioner of Internal Revenue to refund to private respondent Hawaiian-Philippine Company the overpaid withholding tax on dividends to its non-resident stockholders. The undisputed facts as found by the Court of Tax Appeals are as follows: "Petitioner is a domestic corporation with non-resident stockholders. For the second quarter of 1983, dividends amounting to P137,422.80 and P7,632.80 were paid to its non-resident individual and corporate stockholders, respectively. Of the amount paid, petitioner withheld 30% or the sum of P41,226.84, of the aggregate dividends remittable to its non-resident individual stockholders and 35% or P2,671.48 of the dividends remittable to its non-resident corporate stockholders, or a total of P43,898.32. Under Section 22 (b) in relation to Section 53 (e) (1) of the 1977 Tax Code, non-resident aliens are taxed at 30% on gross dividends received from a domestic corporation, for which reason P41,226.84 was withheld by petitioner from the total dividends of P137,422.80. Under Section 24 (b) (1) in relation to Section 53 (e) (2) of the same Tax Code, non-resident corporate stockholders are taxed at 35% on gross dividends received from domestic corporation, for which reason the amount of P2,671.48 was withheld by petitioner. Under the RP-US Tax Treaty, however, the tax collectable on such dividends remitted to U.S. citizens and corporation is fixed at the rate of 25%. Petitioner now claims for a refund of P7,554.38 representing the difference between the amount actually withheld and paid to the Bureau of Internal Revenue (Payment Order No. B-0815226 dated April 11, 1983 and CB Confirmation Receipt No. A-375651 dated April 13, 1983) and the amount due and payable under the said treaty. Since the filing of the claim for refund with the respondent's Office on May 17, 1984 to the date of the instant petitioner for review no action had been taken by the respondent." The issues presented before the public respondent Court are (1) whether or not the herein private respondent is the proper party to claim the refund and (2) whether or not the report of the herein petitioner's examiner is binding on petitioner. The public respondent sustained the position of the herein private respondent to the effect that "where one person pays the tax for another, the person so paying the tax may recover the tax if it represents as overpayment (Mertens, Law on Federal Income Taxation, 19 Ed. Vol. 10 s. 58.11)." This view is made more positive by a ruling that a "Party required to withholding tax imposed on all compensation paid to any non-resident alien and made liable for such tax in failing to so withhold should alien fail to pay tax, held , 'tax-payer' within the Revenue Act providing for application to Board of Tax Appeals to review determination . . . (Houston Street Corporation vs. Commissioner of Internal Revenue, 84 /F2d/821). The respondent Court concluded that under the circumstances and as a matter of law private respondent's position as a withholding agent comports with the statutory intendment of taxpayer, hence a party in interest. In support of its holding, the respondent Court cites the recent case of Commissioner of Internal Revenue vs. Wander Philippines Inc. and the Court of Tax Appeals, G.R. No. 68375, April 15, 1988; 160 SCRA 573. With regard to the second issue, the respondent Court held that the report of the Commissioner's examiners is binding, as it has ruled in Prima Business Machines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 2990, August 31, 1981, thus: "The report itself furnishes the best means of its exposition. The factual findings are not short of specific support in terms of tractable data and relevant records openly laid and fully disclosed by petitioner. As such, the report deserves the credence that should normally be accorded in the absence of contrary evidence. Respondent points to no factual errors and superfluities which need be abridged. And, not that the examiner's credentials are impeccable but to his favor must be conceded the presumption of regularity in the performance of official duties (Section m-5, Rule 131, Revised Rules of Court; U.S. v. Escalante, 36 Phil. 743; C.J.S. 799) which has not been disproved by any affirmative evidence of irregularity or unlawful conduct. Accordingly, We feel compelled to affirm the import and force of the report of findings which may not be suffered to petrify in futility." Claiming that the resolution of the instant case has far reaching effect on thousands of cases handled by the Bureau of Internal Revenue, petitioner Commissioner of Internal Revenue has interposed the instant petition before the Supreme Court for a review of the same issues, i.e., (1) whether private respondent is the real party in interest to claim the refund, and (2) whether the recommendations made by subordinate officials are binding upon the Commissioner of Internal Revenue. In its Resolution of October 19, 1988, the Supreme Court denied the instant petitioner for having been filed late on September 15, 1988, the due date being August 11, 1988 considering that through its Third Division petitioner's first motion for extension of time to file petition for review was granted on July 27, 1988 for a period of thirty (30) days from the expiration of the reglementary period with a warning that no furthered extension will be granted and petitioner's second and third motion for extensions of time to file said petitioner had accordingly been denied in the Court's resolution of September 26, 1988. On November 21, 1988, counsel for petitioner filed a Motion to Admit Petitioner for Review on Certiorari, which in effect was a motion for reconsideration of the resolution of October 19, 1988. In said motion, petitioner alleged that the issues presented in the petition are important and that there are numerous case of the same nature which are pending with the Commissioner of Internal Revenue. In a resolution dated December 5, 1988, the Third Division of the Supreme Court resolved to refer the case to the Court en banc for consulta. In view of the character of the issues involved in the case, the Court en banc resolved to accept the case and to grant the motion for reconsideration filed by the office of the Solicitor General. The Court directed the respondents to file their comment on the Petition for Review on Certiorari within ten (10) days from notice. On January 11, 1989, the private respondent filed its comments. On January 24, 1989, the Court required the petitioner to file his reply to the comments of private respondent. After having been granted several extensions, petitioner filed his reply on April 24, 1989. On March 21, 1990, the Third Division of the Supreme Court referred the instant case to this Court for disposition pursuant to the ruling in Development Bank of the Philippines v. Court of Appeals and the Commissioner of Customs, GR No. 86625, December 22, 1989, holding that final judgment and decrees of the Court of Tax Appeals are within the exclusive appellate jurisdiction of the Court of Appeals under Section 9 of B.P. Blg. 129. While it is conceded that under Section 9 of B.P. Blg. 129, appeals from final judgment and decrees of the Court of Tax Appeals are within the exclusive appellate jurisdiction of the Court of Appeals, it is our considered opinion that after a careful study of the issues raised in the instant petition in the light of the undisputed facts, said issues are purely questions of law, which apparently have been resolved at the same time by two Divisions of the Supreme Court. While the petitioner invokes and relies on Commissioner of Internal Revenue vs. Protect & Gamble Philippines Manufacturing Corporation and Court of Tax Appeals, GR No. 66838, April 15, 1988; 160 SCRA 590, decided by the Second Division of the Supreme Court, wherein it was held: "The submission of the Commissioner of Internal Revenue that PMC-Phil. is but a withholding agent of the government and therefore cannot claim reimbursement of the alleged over paid taxes, is completely meritorious. The real party in interest being the mother corporation 1 in the United States, it follows that American entity is the real party in interest, and should have been the claimant in this case." the private respondent in defending the ruling of the Court of Tax Appeals cites and relies on Commissioner of Internal Revenue vs. Wander Philippines, Inc. and the Court of Tax Appeals, GR No. 68375, April 15, 1988; 160 SCRA 573, decided by the Third Division of the Supreme Court, holding: In any event, the submission of petitioner that Wander is but a withholding agent of the government and therefore cannot claim reimbursement of the alleged over paid taxes, is untenable. It will be recalled that said corporation is first and foremost a wholly owned subsidiary of Glaro. The fact that it became a withholding agent of the government which was not by choice but by compulsion under Section 53 (b) of Tax Code, cannot by any stretch of imagination be considered as an abdication of its responsibility to its mother company. Thus, this Court construing Section 53 (b) of the Internal Revenue Code held that obligation imposed thereunder upon the withholding agent is compulsory. It is a device to insure the collection by the Philippine Government of tax on incomes, derived from sources in the Philippines, by aliens who are outside the taxing jurisdiction of this Court (Commissioner of Internal Revenue vs. Malayan Insurance Co., Inc., 21 SCRA 944). In fact, Wander may be assessed for deficiency withholding tax at source, plus penalties consisting of surcharge and interest (Section 54, NIRC). Therefore, as the Philippine counterpart, Wander is the proper entity who should claim for the refund or credit of overpaid withholding tax on dividends paid or remitted by Glaro." In view of the fact that both decisions were promulgated on the same date, the principle that the later decision is deemed to have abandoned the earlier one can not be availed of. Moreover, we are not certain whether that principle will apply in view of the proviso in the 1987 Constitution, Article VIII, Section 4 (3) which states that no doctrine or principle of law laid down by the Court in a decision rendered en banc or in division may be modified or reversed except by the Court sitting en banc . Furthermore, the issues to be resolved in the instant petitioner for review on certiorari are purely questions of law, which do not call for an examination of the probative value of the evidence presented by the parties litigants, but they arise because there is doubt as to what is the ruling to be applied on the undisputed set of facts. (Crisolo v. Court of Appeals, 68 SCRA 435, 440). Section 9 of B.P. Blg. 129, provides: "SEC. 9 Jurisdiction . The Intermediate Appellate Court shall exercise: xxx xxx xxx (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards, or commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. xxx xxx xxx." Subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948, as amended by RA 5540, refers to cases in which only errors of questions of law are involved. PREMISES CONSIDERED, the Court resolved to refer the instant case to the Supreme Court. SO ORDERED. De Pano, Jr . and Francisco, JJ ., concur. Footnotes 1. PMC-U.S.A is the sole shareholder or stockholder of PMC-Phil., as PMC-U.S.A. owns wholly or by 100% the voting stock of PMC-Phil.