Chronicle Broadcasting Network v. Court of Tax Appeals

NINTH DIVISION [CA-G.R. SP No. 25649. September 18, 1991.] (C.T.A. Case No. 2613) CHRONICLE BROADCASTING NETWORK , petitioner , vs . COURT OF TAX APPEALS AND COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N GUINGONA , J p : We have before Us a petition for review on certiorari of the Resolution of the Court of Tax Appeals in C.T.A. Case No. 2613 entitled Chronicle Broadcasting Network vs. Commissioner of Internal Revenue dated April 6, 1991 which granted the Motion for Issuance of a Writ of Execution filed by the Commissioner of Internal Revenue as well as the Resolution dated July 8, 1991 denying the herein petitioner's motion for reconsideration. The dispositive portion of the challenged Order of April 6, 1991 reads as follows: WHEREFORE, finding respondent's motion in order, the same is hereby GRANTED and the Clerk of Court is directed to issue a writ of execution against petitioner CHRONICLE BROADCASTING NETWORK for the satisfaction of the final and executory judgment in this case as well as the cost of suit prayed for. (Order, pp. 6-7) ANTECEDENT FACTS This Court hereby adopts the following statement of facts contained in the C.T.A. decision in Case No. 2613 (rendered on October 28, 1982), which decision served as the basis for the motion for the issuance of a writ of execution by the Commissioner of Internal Revenue (supra): Petitioner Chronicle Broadcasting Network interposed this appeal from the decision of respondent Commissioner of Internal Revenue dated February 12, 1974 demanding payment of the amount of P165,219.50 as deficiency income tax for the year 1969. The facts are not disputed, the parties having submitted this case for decision on the basis of the pleadings and the records of the Bureau of Internal Revenue pertaining to this proceeding. Petitioner is a corporation duly organized and existing under the laws of the Philippines with principal office at ABS-CBN Building, Bohol Avenue, Quezon City. In a letter dated May 15, 1973, respondent informed petitioner that upon investigation, there has been found due from it deficiency income tax for the year 1969 in the amount of P165,219.50, details of which are as follows: Net income per investigation P349,959.12 due thereon P112,486.00 Add: 25% surcharge 28,121.50 % mo. int. fr. 4-16-70 to 12-31-72 18,278.98 1.167% mo. int. fr. 1-1-73 to 5-15-73 5,883.02 Compromise for late filing of return 300.00 Compromise for late payment 150.00 TOTAL AMOUNT DUE & COLLECTIBLE P165,219.50 ========= Petitioner was therefore requested to present the enclosed assessment notices to the collection agent in the office of the regional director concerned for payment in order that the case may be considered closed. It appears that the deficiency income tax was arrived at by subjecting 25% of the dividend income of petitioner in that year to the ordinary corporate rate. In requesting reconsideration of the deficiency income tax assessment and eventual cancellation thereof, petitioner, in its letter of July 23, 1973, pointed out to respondent that its franchise grant provides that the franchise tax payable by its "shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is expressly exempted." Petitioner should not therefore be subjected to any other tax except the franchise tax. In a letter dated February 12, 1974, respondent, however, denied petitioner's request for reconsideration and demanded payment of the deficiency income tax, together with the delinquency penalties incident to late payment. Hence this petition for review. As special and affirmative defenses in his answer to the petition for review, respondent avers, among others, that: a. For the year 1969, petitioner received a total dividend income in the amount of P1,399,836.47; b. Pursuant to the provisions of Section 29(c) of the then in forced National Internal Revenue Code, as amended by Section 10, Republic Act No. 6110, petitioner's dividend income is returnable at twenty-five (25%) for purposes of the income tax imposed by Section 24 of the same Code; c. Petitioner is liable to the 25% surcharge on its deficiency income tax for 1969 in the amount of P28,121.50, in accordance with provisions of Section 72 of the Tax Code; d. In addition to the 1969 deficiency income tax liability and the 25% surcharge to pay the amount of P18,278.98 as 1% monthly interest on the said deficiency from April 16, 1970 to December 31, 1972 in accordance with the provisions of Section 51(d), as amended by Republic Act No. 2343, and P5,883.02 representing 1.167% monthly interest from January 1, 1973 to May 15, 1973, pursuant to Presidential Decree No. 69. (Decision, pp. 1-4) The petitioner submits for the consideration of this Court the following assignment of errors: 1. THE HONORABLE COURT OF TAX APPEALS ERRED IN FINDING THAT THE ACT OF SEQUESTRATION OF A PRIVATE PROPERTY BY THE GOVERNMENT DOES NOT NECESSARILY CREATE AN OBLIGATION FOR THE PAYMENT OF COMPENSATION ON ITS PART. 2. THE HONORABLE COURT OF TAX APPEALS ERRED IN FINDING THAT THE PETITIONER WAS NOT DEPRIVED BY THE GOVERNMENT OF ITS RIGHT TO OPERATE THE BROADCAST FACILITIES OF HEREIN PETITIONER, THEREBY CAUSING IT TO GO OUT OF BUSINESS AND DEPRIVING THE SAME TO EARN IN ORDER TO PAY ITS TAX LIABILITIES. 3. THE HONORABLE COURT OF TAX APPEALS ERRED IN NOT CONSIDERING THE FACTS AND CIRCUMSTANCES WHICH WOULD JUSTIFY THE STAY OF EXECUTION OF ITS DECISION REFERRING TO MATTERS WHICH TRANSPIRED OR DEVELOPED AFTER THE DECISION BECAME FINAL AND WHICH WERE NOT IN EXISTENCE PRIOR TO OR DURING THE TRIAL. 4. THE HONORABLE COURT OF TAX APPEALS ERRED IN NOT CONSIDERING THE EQUITABLE GROUNDS TO STAY THE EXECUTION OF ITS DECISION. 5. THE HONORABLE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE ILLEGAL AND UNLAWFUL TAKING OVER AND USE OF PETITIONER'S BROADCAST EQUIPMENT AND FACILITIES BY THE GOVERNMENT RESULTS IN INVERSE EXPORTATION. 6. THE HONORABLE COURT OF TAX APPEALS ERRED IN NOT HOLDING THAT THE GOVERNMENT CAN NOT ENFORCE A JUDGMENT FOR COLLECTION OF TAXES FROM A TAXPAYER WHOSE PROPERTIES WERE ILLEGALLY TAKEN BY THE GOVERNMENT. (Petition, pp. 7-8) On the first alleged error Relative to the afore-mentioned error, the petitioner asserts as follows: Hence, the government in sequestering the "Properties" of petitioner, is "but a mere administrator" and not the owner thereof, absent the payment of just compensation. Applying this standard in the case at bar, the Honorable Court of Tax Appeals erred in its finding that the government's act of sequestration has not concomitant obligation to pay petitioner. xxx xxx xxx With all due respect, the ruling of the Honorable Court of Tax Appeals has no leg to stand on. It stated that because of the sequestration, no liability on the part of the government arose. With all the cases cited regarding the definition of sequestration and the facts proven during the trial, that the government, instead of just acting as a mere conservator or administrator, acted as if it was the owner of the "Properties", indeed the ruling has no leg to stand on. (Petition, pp. 10 and 12) It is not exactly accurate for the petitioner to assert that the Court of Tax Appeals had stated that, notwithstanding the alleged sequestration of the petitioner's properties, no liability on the part of the government arose. In the first place, the Court of Tax Appeals is not the proper forum in which the obligation of the government due to the sequestration of petitioner's properties should be litigated even if we were to grant that the present government has assumed the rights thereto as owner and not as mere administrator. And if this be so, there can certainly be no talk of "concomitant obligation" if one were to refer to accompanying or concurrent obligation on the part of the government to pay petitioner. This is not to say of course that the said petitioner is deprived of due recourse for the alleged act of the government of operating the "Properties" of the petitioner without paying just compensation. The issue of whether or not an act of sequestration of private property by the government created an obligation for the payment of compensation on its part is a matter beyond the jurisdiction of the Court of Tax Appeals. It must properly be threshed out in a court of competent jurisdiction. The Court of Tax Appeals is a court of special and limited jurisdiction and, as such, it can take cognizance only of such matters as are clearly spelled out in the law creating it as within its competence or jurisdiction. As to the second alleged error Considering this Court's observation anent the petitioner's first alleged error, it would appear that this particular assignment or error would have no bearing on its liability to pay the tax found to be due from it, even granting arguendo that the alleged deprivation by the government of petitioner's right to operate has caused it to go out of business. But even this averment is controverted by the Court of Tax Appeals in its Resolution of April 6, 1991, as follows: Moreover, petitioner's postulation that the government has unlawfully stopped its operations and thus deprived it of an opportunity to pay-off its deficiency income tax liability appears questionable. The record in the case of Chronicle Broadcasting Network vs. Commissioner of Internal Revenue, C.T.A. Case No. 2613, which was adopted in this case by petitioner, shows that at least a part of petitioner's (ABS-CBN) property is operated or used by it for business. (T.S.N., Hearing on June 27, 1990, pp. 218-219, CTA record). There is no proof that the government had indeed totally stopped the broadcast operations of petitioner, there causing it to go out of business and depriving it of the means to pay it tax liability to the government. In fact, title to these properties remain with petitioner (see p. 209, CTA record). There is no proof that the government had indeed totally stopped the broadcast operations of petitioner, thereby causing it to go out of business and depriving it to the means to pay its tax liability to the government. Even now, judicial notice can be taken of the fact that petitioner still maintains and operates a big portion of its Broadcasting and TV facilities. Nor had petitioner filed any bankruptcy or insolvency proceedings to support its claim that it had no capacity to pay its tax liability in this case. (Resolution, p.5) It would seem to this Court that, by making averments such as the second alleged error, the petitioner or its counsel would wish to vary the accepted legal precept or slogan of "No taxation without representation" to "No taxation without prior litigation". As to the third and fourth alleged errors The petitioner has opted to discuss the above-cited third and fourth assignment of errors simultaneously, they "bring interrelated". With regard to the above-cited alleged errors, this is what the petitioner has to say, With the use of the "Properties" of the past and present administrations without the payment of just compensation or at least for the rentals for its use, the government owes petitioner more than what it is claiming. xxx xxx xxx After the February Revolution, efforts were exerted by the government and the petitioner for the return of the "Properties" to its rightful owners. In fact both parties entered into an Agreement to arbitrate which would resolve the pending claims of petitioner as regards the return of all the "Properties" sequestered by Mr. Marcos and his cronies. xxx xxx xxx With all these circumstances and events which happened after the decision of the Honorable Court of Tax Appeals became final and executory plus the citation of respondent Court of Tax Appeals of Lim vs . Jabalde , 172 SCRA 211, which ruled that if after a judgment has become final, facts and circumstances have transpired which would render execution of the judgment impossible or unjust, the interested party may ask the court to modify or alter the final judgment to harmonize the same with justice and the facts, gives us more reason to stay the execution of the questioned resolution of the Court of Tax Appeals. (Petition, pp. 16, 17 and 18) We find the petitioner's contention to be bereft of merit. The C.T.A. decision has long become final and executory. The Commissioner of Internal Revenue is therefore entitled to the writ of execution prayed for. The rule relied upon by the petitioner, citing Lim vs. Jabalde (supra) is not applicable to the case at bar. The rule refers to facts and circumstances that have supervened or transpired after judgment has become final and executory. It relates to new matters which developed after the judgment had acquired finality, or as pointed out in the same case of Lim vs. Jabalde, "matters which the parties were not aware of, and could not have been aware of, prior to or during the trial as they were not yet in existence at that time. And to warrant on this ground a reopening of an already closed case, the supervening facts and circumstances must either bear a direct effect upon the matters already litigated and settled or create a substantial change in the rights and relations of the parties therein which would render execution of the final judgment unjust or impossible" (at p. 220). As aptly stated by the Court of Tax Appeals in its Resolution of April 6, 1991, In this case, the facts and circumstances cited by petitioner as equitable grounds, such as the sequestration and closure of its Broadcasting and TV properties and the subsequent operation thereof by Roberto Benedicto and others during the Marcos martial law regime, were already in existence before this tax case was filed in this Court. (Resolution, p. 6) Although the petitioner alleges that the downfall of the Marcos regime was not in existence and regarding which the said petitioner was not aware of and could not have been aware of, prior to or during the pendency of the case with the Court of Tax Appeals, the fact is that such supervening event could not have had any direct effect upon the matters already litigated and settled nor does it create a substantial change in the rights and relations of the parties therein which would render the execution of the C.T.A. judgment unjust or impossible. While it is true that this Court is a court of law as well as equity, it must be remembered that equity looks in all directions it may be availed of for the benefit of not only one but both parties in a given litigation. With regard to the claim of the Commissioner of Internal Revenue it might be said that, in a manner of speaking, the collection of taxes may run pari passu with governmental expenditures. And as well stated in the case of Tennessee vs. Sneed, 6 Otto (96 U.S.) 69, 75, "No government can exist, that permitted the collection of its revenue to be delayed by every litigious man or every embarrassed man, to whom delay was more important than the payment of costs". On the fifth assigned error As in the first assigned error, the fifth assignment of error suffers the same flaw in that the argument thereby adduced is outside the jurisdiction or competence of the Court of Tax Appeals. There is however some kind of a variation with regard to the fifth assigned error in that here the petitioner posits that compensation is due from the government. Compensation being due, its tax liability may now be the subject of a set-off or legal compensation. This averment has been well controverted by the Court of Tax Appeals in its April 6, 1991 Resolution, thus: 2. Nevertheless, granting that a tax obligation may be the subject of compensation or setoff, the requisites of a valid compensation here are not complied with. For on the part of the Government there is no debt in the real sense to speak of. And if there is any, such debt is not due, demandable and liquidated. The alleged rental and damages due from it do not arise from any agreement but are simply assumed as such by the petitioner. In fact, it does not appear at all that an amount representing thereof has been ascertained or determined and that petitioner has made a demand that the same be paid by the Government. It might be worthwhile to stress that the act of sequestration of a private property by the government does not necessarily create an obligation for the payment of compensation on its part. (Resolution, pp. 3-4) On the sixth assigned error On this point, the petitioner asserts as follows: As previously discussed, it does violence to one's conscience to allow the government to enforce the collection of the tax liability of herein petitioner assessed only on May 15, 1973 after the "Properties" of petitioner were placed under sequestration by the Marcos Regime on September 21, 1972, when the petitioner was deprived of its proprietary rights over the said "Properties". (Petition, pp. 21-22) As far as this Court is concerned, what does violence to one's conscience is to allow a party, the tax liability of which has been clearly and finally established not to pay its due. As Justice Holmes once said, "Taxes are what we pay for civilized society". They are the lifeblood of government. As held in the case of McCullogh vs. Maryland, 4 Wheat, (17 U.S.) 316, 428, The power of taxing the people and their property is essential to the very existence of government. PREMISES CONSIDERED, the herein petition for review is hereby DISMISSED. SO ORDERED. Javellana and Imperial, JJ., concur.