Commissioner of Internal Revenue v. Citibank

[CA-G.R. SP No. 26555. May 27, 1992.] (C.T.A. Case No. 3378) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . CITIBANK, N.A. PHILIPPINE BRANCHES and THE COURT OF TAX APPEALS , respondents . D E C I S I O N PURISIMA , J p : Brought on February 5, 1992, this "Petition for Review on Certiorari" seeks the reversal of the decision, dated August 30, 1991, of the Court of Tax Appeals, allowing the refund of P568,989.85 prayed for by Citibank, N.A. Philippine Branches in C.T.A Case No. 3378. On March 11, 1992, without necessarily giving due course to the Petition, We gave the private respondent ten (10) days from notice to comment, the Comment to serve as respondents' answer should the petition be given due course. The comment called for was received on April 2, 1992. From the pleading and supporting papers on hand, it can be gathered that Citibank N.A. Philippine Branches (CITIBANK) is a foreign corporation doing business in the Philippines. In 1979 and 1980, its tenants withheld and paid to the Bureau of Internal Revenue the following taxes on rents due to Citibank, pursuant to Section 1(c) of the Expanded Withholding Tax Regulations (BIR Revenue Regulations No. 13-78, as amended), to wit: 1979 First quarter P60,690.97 Second quarter 69,897.08 Third quarter 69,160.89 Fourth quarter 70,160.56 P270,160.56 1980 First quarter P78,370.22 Second quarter 69,049.37 Third quarter 79,139.60 Fourth quarter 72,270.10 P298,829.29 On April 15, 1980, Citibank filed its corporate income tax returns for the year ended December 31, 1979 (Exh. "E"), showing a net loss of P74,854,916.00 and its tax credits totalled P6,257,780.00, even without including the amounts withheld on rental income under the Expanded Withholding Tax System, the same not having been utilized or applied for the reason that the year's operation resulted in a loss. (Exhs. "E-1& E-2"). The taxes thus withheld by the tenants from rentals paid to Citibank in 1979 were not included as tax credits although a rental income amounting to P7,796,811.00 was included in its income declared for the year ended December 31, 1979 (Exhs. "E-3" & "E-4"). For the year ended December 31, 1980, Citibank's corporate income tax returns (Exh. "EC"), filed on April 15, 1981, showed a net loss of P77,071,790.00 for income tax purposes. Its available tax credit (refundable) at the end of 1980 amounting to P11,532,855.00 (Exh. "BC-1" & "BC-2") was not utilized or applied. The said available tax credits did not include the amounts withheld by Citibank's tenants from rental payments in 1980 but the rental payments for that year were declared as part of its gross income included in its annual income tax returns (Exh. "BC-3"). On October 31, 1981, Citibank submitted its claim for refund of the aforesaid amounts of P270, 160.56 and P298,829.29, respectively, or a total of P568,989.85; and on October 12, 1981 and filed a petition for review with the Court of Tax Appeals concerning subject claim for tax refund, docketed as CTA Case No. 3378. On August 30, 1981, the Court of Tax Appeals adjudged Citibank's entitlement to the tax refund sought for, representing the 5% tax withheld and paid on Citibank's rental income for 1979 and 1980. Hence, this petition; the Commissioner of Internal Revenue, posing as main issue: "WHETHER OR NOT PRIVATE RESPONDENT IS ENTITLED TO TAX REFUND OF p568,989.85, ALLEGEDLY REPRESENTING 5% WITHHELD TAX ON RENTAL INCOME FOR TAXABLE YEARS 1979 AND 1980." Petitioner maintains that in an action for tax refund, such as the one under consideration, the tax-payer has the burden of showing that the taxes in question were erroneously or illegally collected. Here, Citibank failed to convincingly show any erroneous or illegal collection. Under Section 1(c) of Revenue Regulations 13-78 (Expanded Withholding Tax Regulations), Citibank is required to pay the taxes in dispute. And what is more, the claim for tax refund under scrutiny has not been substantiated; pointed out the petitioner who also theorized that the petition for review before the Court of Tax Appeals, and subject claim for tax refund were not seasonably filed. In short, it is petitioner's submission that subject claim for tax refund is barred by prescription. The petition is impressed with merit. It is decisively clear that the instant claim for tax refund under scrutiny does not involve illegally or erroneously collected taxes. It involves the 5% tax withheld by tenants from the rental income of Citibank for the years 1979 and 1980, in accordance with Section 1(c) of the Expanded Withholding Tax Regulations (BIR Revenue Regulation No. 13-78 as amended), which reads: "Sec. 1. Income payments subject to withholding tax and rates prescribed therein . Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: a) . . . b) . . . c) Rentals . When the gross rental or other payment required to be made as a condition to the continued use or possession of property, whether real or personal, to which the payor or obligor has not taken or not taking title or in which he has no equity, exceeds five hundred pesos (P500.00) five per centum (5%)." It is thus evident that the tenants or lessee of Citibank were required by law to withhold and pay to BIR 5% of their rental and, therefore, such withholding taxes were not illegally or erroneously collected. It was the burden of Citibank to prove that the taxes it asked to be refunded were illegally or erroneously collected; an onus probandi Citibank utterly failed to discharge. As can be gleaned from the records of the case, the evidence for Citibank consisted merely of its corporate income tax returns for 1979 and 1980, respectively, reflecting the alleged net loss therein indicated and various certificates of withholding attached thereto pursuant to law. In its income tax return for 1979, Citibank reported a net loss of P74,954,916.00; while its income tax return for 1980 showed a net loss of P77,071,790.00. And on August 13, 1981, Citibank filed its present claim for refund of the aforestated amounts of taxes withheld on its rental income forming part of the gross income declared in said income tax returns. Obviously, then, Citibank presented no indubitable proof of illegal or erroneous collection of the taxes sought to be refunded. And the alleged loss and overpayment of taxes, upon which its claim for refund of taxes is predicated, were not duly established. In view of the foregoing finding and conclusion, We deem it unnecessary to still dwell on the other issue of prescription of action raised by petitioner. Whether or not the present petition for tax refund was seasonably presented has become of no moment, it appearing that the claim for tax refund in dispute is anemic of evidentiary support and cannot, after all, prosper. WHEREFORE, the appealed judgment of August 30, 1991, adjudging Citibank, N.A., Philippine Branches, entitled to a tax refund/credit in the amount of P568,989.85, representing the 5% withheld tax on Citibank's rental income for the taxable years 1979 and 1980 is hereby REVERSED. No pronouncement as to costs. SO ORDERED. Gonzaga-Reyes and Martin, * JJ ., concur. Footnotes * In lieu of Justice Consuelo Ynares-Santiago who is on leave.