Commissioner of Internal Revenue v. Bank of America NA and SA, (Philippine Branch)

[CA-G.R. SP No. 27635. August 31, 1992.] (C.T.A. Case No. 3642) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . BANK OF AMERICA NI AND SA (PHILIPPINE BRANCH) and COURT OF TAX APPEALS , respondents . D E C I S I O N HERRERA , J p : The petitioner is questioning the decision of the Court of Tax Appeals dated December 27, 1991, granting the petition filed by private respondent for a tax refund or grant tax credit in the amount of P726,632.50 representing overpaid income tax for the taxable year 1981. The facts are summarized by the respondent Tax Court in its decision, to wit: "This case is a claim for refund by petitioner Bank of American NT & SA (Philippine Branch) in the amount of P729,738.00 as alleged overpaid income tax for the taxable year 1981. Said amount is computed as follows: Net Offshore Income P21,749.528 x 15/365 x 5% P44,691.00 Gross Onshore Income P221,894,457 x 10% 22,189,446.00 All Others P5,098,474 x (25%/35%) 1,774,466.00 Total P24,008,603.00 Less: Tax assumed by onshore borrowers (22,189,446.00) Net FCDU Tax Liability for 1981 P1,819,157.00 Deduct Quarterly payments 1st Qtr. P13,713.00 2nd Qtr. 275,507.00 3rd Qtr. 755,397.00 Total Payments P1,044,617.00 Credible Tax withheld on Government Securities P1,504,278.00 2,548,895.00 Refundable amount for 1981 P729,738.00 =========== Petitioner is a foreign banking corporation duly licensed to engage in regular commercial banking business in the Philippines. It is likewise duly authorized by the Central Bank of the Philippines to operate an expanded Foreign Currency Deposit (FCDU) pursuant to the provisions of Presidential Decree No. 1035 and Central Bank Circular 547. On May 31, 1983, petitioner through its external auditor SGV & Co., filed a formal claim for refund in a letter dated May 30, 1983 addressed to the Bureau of Internal Revenue and without waiting for respondent Commissioner's decision, petitioner filed on May 31, 1983 the instant petition for review regarding its 1981 claims for refund amounting to P729,738.00. (Exh. VV, p. 105-107, CTA records) To date, respondent has not yet granted petitioner's claim for refund of the said amount of P729,738.00. Hence, this petition for review was instituted to interrupt the running of the two (2) year prescriptive period. The sole issue presented in this case is whether or not petitioner has in fact overpaid its income tax for the taxable year 1981. For the taxable year 1981, petitioner filed two separate corporate income tax returns, one for its regular commercial banking operations and another for its Foreign Currency Deposit Unit (FCDU). Petitioner filed the following income tax returns for its regular commercial banking operations: a) Corporate quarterly income tax return for the period ending March 31, 1981 (Exh. A, p. 54, CTA rec.) b) Corporate quarterly income tax return for the period ending June 30, 1981 (Exh. D, p. 57, CTA rec.) c) Corporate quarterly income tax return for the period ending September 30, 1981 (Exh. G, p. 60, CTA rec.) d) Annual consolidated income tax return for the year 1981 (Exh. J, p. 63, CTA rec.). Under this return, petitioner declared a net loss and therefore had a zero income tax liability. Likewise, petitioner filed the following income tax returns for its Foreign Currency Deposit Unit (FCDU) operation: a.) For the first quarter ended March 31, 1981, petitioner filed its Quarterly Income Tax Return which showed a tax due in the amount of P13,713 (Exh. T, p. 77, CTA rec.). This amount was paid on June 1, 1981. (Exhs. X and Y, p. 81, CTA rec.) b.) For the first and second quarters ended June 30, 1981, petitioner filed its cumulative Quarterly Income Tax Returns (Exh. Z, p. 82, CTA rec.) which showed a tax due in the amount of P275,507.00. This amount was paid on August 31, 1981. Exhs. DD and EE, p. 86, CTA rec.) c.) For the first, second and third quarters ended September 30, 1981, petitioner filed its cumulative Quarterly Income Tax Return which showed a tax due in the amount of P755,397.00. This amount was paid on December 1, 1981. (Exhs. JJ and KK, p. 91, CTA rec.) d.) For the calendar ended December 31, 1981, petitioner filed its final adjustments income tax return on Foreign Currency Deposit Unit (FCDU), which return showed a tax liability of P1,819,157.00 (Exh. LL, p. 92, CTA rec.). Against said tax liability, the aforesaid quarterly tax payments aggregating P1,044,617.00 (Exh. LL, p. 92, CTA rec.) plus the sum of P1,504,278.00 (Exhs. WW to KKK, pp. 108-115, CTA rec.) representing creditable tax withheld on government securities were deducted, resulting to a refundable amount of P729,738.00. In a memorandum dated June 14, 1985, the BIR examiner who investigate petitioner's claim for refund rendered the following report: (Exh. LLL, p. 28, BIR rec.). A recomputation of the income tax withheld on government securities and based on the various BIR Forms 1743 submitted, the total creditable amount should be P1,450.537.50 instead of P1,504,278.00, or a difference of P53,740.50. The total amount refundable is therefore P675,997.50 However, respondent in his memorandum contends that the amount of P755,397.00 as alleged payment for the third quarter (Exhs. JJ and KK) was not actually received by the government per certification of the Revenue Accounting Division of the Bureau of Internal Revenue (p. 95 BIR rec.) Thereafter, on the basis of the pleadings and evidence submitted by the parties, the case was submitted for decision. Thus, on December 27, 1991 the respondent Tax Court ruled in favor of herein private respondent, the decretal portion of which reads as follows: "WHEREFORE, respondent Commissioner of Internal Revenue is hereby ordered to refund or grant tax credit in the amount of P726,632.50 to petitioner Bank of America NT & SA representing overpaid income tax for the taxable year 1981. Without pronouncement as to costs. SO ORDERED." (Decision, Rollo, p. 39) Hence, the petition at bar, filed by the Commissioner of Internal Revenue impugning the said decision. The focal point of the petitioner's argument is that the amount sought to be refunded was not actually paid and received by the government per certification of the Revenue Accounting Division of the BIR. The petition is not impressed with merit. It is inaccurate for the petitioner to simply alleged the non-payment of the private respondent's tax liability for the taxable year 1981 based on the certification of the Revenue Accounting Division of the BIR which merely states that the said division has no record of the other confirmation receipt (C.R.) requested for verification, namely the C.R. No. 7980411 dated December 1, 1981 for P755,397.00. Quite clearly, such certification standing alone cannot be interpreted that the BIR did not actually receive the payment of the private respondent's income tax. At the very least, what is being implied in that statement is that the said division does not have the record of the confirmation receipt sought by the petitioner. Nonetheless, aware of this fact, it would have been a lot easier on the part of the petitioner to determine exactly the veracity of the documents presented by private respondent and submit such proofs necessary and proper to controvert the claim for a refund. On the contrary, it would seem to appear that, other than the argument of the petitioner for non-payment of income tax, there was no instance when petitioner challenged the veracity of the documents or exhibits nor has it shown any irregularity in the same which will taint their reliability or sufficiency as proofs of the private respondent's claim despite the fact that petitioner is well within his competence to do so. Given the above antecedents, the respondent Tax Court is practically left without any solid piece of evidence upon which petitioner's objection may be validly concluded. A portion of the respondent Tax Court decision is worth mentioning: ". . . The government must set an example of fairness and honest dealing. In prove these excess income tax payments, petitioner presented in evidence its income tax returns for the year involved, the corresponding official receipts for its income tax payments. No controverting evidence was presented by respondent to disprove the existence of the official receipts of tax payment particularly Revenue Receipt No. 7084746 and CB Confirmation Receipt No. 980411 dated December 1, 1981 showing payment of the amount of P755,397.00 . As a matter of fact, as above stated, respondent submitted this case for decision on the basis of the pleadings and the records after petitioner has presented and offered its evidence. Since one who prays for judgment on the pleadings without offering proof as to the truth of his allegations, must be understood to have admitted the truth of all the material and relevant allegations taken together with such of his own as are admitted (Bavermann vs. Casas, 10 Phil. 386; Evangelista vs. De la Rosa, et al., 76 Phil. 115)." (Decision, Rollo, pp. 37-38, Emphasis supplied) Of greater significance also is the memorandum dated June 14, 1985 of the BIR examiner who investigated private respondent's claim for tax refund, even recommended that there is indeed a refundable amount in favor of the private respondent (Exh. LLL, p. 28, BIR rec.). This only confirms the fact that private respondent has paid the income tax during the year in question. We again reiterate the rule in this jurisdiction that findings of fact of the Court of Tax Appeals are entitled to the highest respect and can only be disturbed on appeal if they are not supported by substantial evidence or if there is a showing of gross error or abuse on the part of the tax court (Commissioner of Internal Revenue vs. Court of Tax Appeals, 181 SCRA 214; Commissioner of Internal Revenue vs. Court of Tax Appeals, 183 SCRA 402). WHEREFORE, in view of the foregoing, the petition is hereby DENIED for lack of merit and the questioned decision is AFFIRMED. No pronouncement as to costs. SO ORDERED. Torres, Jr . and Caizares-Nye, JJ ., concur.