Bank of the Philippine Islands v. Commissioner of Internal Revenue

FIRST DIVISION [CA-G.R. SP No. 35383. August 14, 1998.] BANK OF THE PHILIPPINE ISLANDS , petitioner , vs .COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS , respondents . D E C I S I O N BUENA , J p : This is a Petition for Review of the decision of the Court of Tax Appeals promulgated on May 31, 1994 in C.T.A. Case No. 4481 entitled "Bank of the Philippine Islands, petitioner versus The Commissioner of Internal Revenue, respondent." prLL The antecedent facts of the case are as follows: In 1986, petitioner Bank of the Philippine Islands ( BPI ,for short) sold to the Central Bank of the Philippines U.S. dollars for P1,608,541,900.00. The dollars involved were deposited with the BPI's correspondent bank in the United States. The correspondent bank transferred the said dollars to the Federal Reserve Bank for credit to the account of the Central Bank. Upon the receipt of the confirmation that such funds had been credited to its account, the Central Bank then credited the petitioner with the corresponding amount in pesos. In 1988, respondent Commissioner of Internal Revenue caused an investigation to be made on the petitioner's sales of foreign exchange, and as a result thereof issued a pre-assessment notice informing the latter that under Section 195 (now Section 182) of the National Internal Revenue Code , as amended in 1986 ,petitioner was liable for documentary stamp tax at the rate of P0.30 per P200.00 on all foreign exchange sold to the Central Bank. Tax liability was assessed at P2,412,812.85 plus 25% surcharge of P603,203.21 and compromise penalty of P300.00 or a total of P3,016,316.06. Petitioner disputed the findings but despite this the respondent issued Assessment No. FAS-5-86-88-003022 dated September 30, 1988 for P3,016,316.06 (CA Rollo, p. 24),which was received by the petitioner on October 11, 1988. The petitioner formally protested the assessment on November 10, 1988. This was denied by the respondent on June 7, 1990 ( Ibid .,p. 27).Consequently a petition for review was filed with the Court of Tax Appeals (CTA, for short) on August 9, 1990. On May 31, 1994, the Court of Tax Appeals issued its decision, the dispositive portion of which reads as follows: "WHEREFORE, premises considered, Petitioner is hereby ordered to pay Respondent Commissioner of Internal Revenue, the amount of P690,030 inclusive of surcharge and compromise penalty, plus 20% annual interest until fully paid pursuant to Section 249 (cc) (sic) (3) of the Tax Code . "SO ORDERED." ( Ibid .,p. 64). Not satisfied with the decision, both petitioner BPI and respondent Commissioner of Internal Revenue filed their respective motions for reconsideration. Petitioner argued that no documentary stamp tax is due on the sale of foreign exchange and that there is no legal basis for delinquency interest. On the other hand, respondent contended, among other things, that the effective date of Presidential Decree No . 1994 is January 1, 1986. The CTA denied the motions for reconsideration in a resolution dated September 26, 1994, to wit: "In view of all the foregoing, We find no cogent reason to depart from Our decision in the herein case dated May 31, 1994. Petitioner is hereby ordered to pay respondent Commissioner of Internal Revenue the amount of P690,030.00, inclusive of surcharge and compromise penalty, plus 20% annual interest from August 10, 1990 until fully paid pursuant to Section 249(a) of the Tax Code . "SO ORDERED." ( Ibid .,p. 75). Hence, this petition. On November 23, 1994, this Court issued a resolution requiring the respondents to comment on the petition. On January 20, 1995, a comment was filed. The petition presents two issues: 1. ARE SALES OF FOREIGN EXCHANGE (SPOT CASH),AS DISTINGUISHED FROM SALES OF FOREIGN BILLS OF EXCHANGE, SUBJECT TO THE DOCUMENTARY STAMP TAX IMPOSED BY SEC. 182 OF THE TAX CODE? 2. WHEN A DEFICIENCY DOCUMENTARY STAMP TAX ASSESSMENT IS REDUCED BY THE COURT OF TAX APPEALS, BECAUSE THE ORIGINAL ASSESSMENT WAS ERRONEOUS, CAN THE COURT IMPOSE A DELINQUENCY INTEREST OF 20% ON THE ASSESSMENT? The petition is not meritorious. It is undisputed that petitioner bank sold to the Central Bank of the Philippines foreign exchange with a total peso equivalent of P1,608,541,900.00 and that it advised its foreign correspondent bank by cable to remit the dollar amount to the Federal Reserve Bank of New York for credit to the account of the Central Bank of the Philippines. The question which now needs to be resolved is whether the sale of foreign exchange made by telegraphic transfer is subject to the imposition of documentary stamp tax as provided for in Section 182 of the National Internal Revenue Code , as amended . prLL We hold in the affirmative. It is provided for in the said code that: "Sec. 182. Stamp tax on foreign bills of exchange and letters of credit . On all foreign bills of exchange and letters of credit including orders , by telegraph or otherwise , for the payment of money issued by express or steamship companies or by any person or persons , drawn in but payable out of the Philippines in a set of three or more according to the custom of merchants and bankers, there shall be collected a documentary stamp tax of thirty centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill or exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in a foreign currency." (Emphasis supplied). Corollarily, Section 51 of Revenue Regulation No . 26 provides: "Sec. 51. What may be regarded as telegraphic transfer . If a local bank cables to a certain bank in a foreign country with which bank said local bank has a credit, and directs that foreign bank to pay another bank or person in the same locality a certain sum of money, the document for and in respect of such transaction will be regarded as a telegraphic transfer, taxable under the provisions of Section 1449 (i) of the Administrative Code ." (Emphasis supplied). Petitioner BPI contends that the phrase in Section 182 "including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons" refers to documentary stamp tax imposed on foreign bills of exchange or letters of credit not to the sale of foreign exchange. We do not agree. If petitioner would read the said provision in its entirety and not merely rely on the caption, it is quite apparent that the imposition of documentary stamp tax in Section 182 is not limited only to foreign bills of exchange or letters of credit but to all the orders made by telegraph or by any other means for the payment of money made by any person or persons drawn in but payable out of the Philippines. prcd Was the advise sent by petitioner bank via cable to its foreign correspondent a telegraphic transfer and one which would fall within the provisions of Section 182 ? Perusing the provisions of Section 51 of Revenue Regulation No . 26 ,We have to say that it is. All the elements for a telegraphic transfer are indeed present, thus: (1) Petitioner BPI cables its correspondent bank in the United States; and (2) Petitioner bank directs that correspondent bank to remit the dollar amount to the Federal Reserve Bank of New York for credit to the account of the Central Bank of the Philippines. Telegraphic transfers being proper subjects for the imposition of documentary stamp tax, We therefore uphold the findings of the court a quo . Petitioner questions the imposition of delinquency interest of 20% on the reduced assessment made by the court a quo . Sections 248 and 249 of the NIRC enunciate: "Sec. 248. Civil Penalties . xxx xxx xxx "(d) In the case of failure to affix the proper documentary stamps to a document or instrument, there shall, for every violation, be imposed, in addition to the amount of documentary stamp tax required to be paid, an amount equivalent to twenty-five percent of such unpaid amount which shall be in lieu of the interest prescribed in Section 249 :Provided, That when the amount is not paid within the time prescribed in the notice and demand, there shall be collected on the total unpaid amount, including the surcharge, the interest prescribed in Section 249 (a) from the due date prescribed in the notice and demand until the amount is fully paid, which interest shall form part of the tax." llcd "Sec. 249. Interest . (a) In General . There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per annum, or such higher rate as may be prescribed by regulations, from the date prescribed for payment until the amount is fully paid . xxx xxx xxx "(c) Delinquency Interest . In case of failure to pay: "(1) The amount of the tax due on any return required to be filed, or "(2) The amount of the tax due for which no return is required, or "(3) A deficiency tax , or any surcharge or interest thereon , on the due date appearing in the notice and demand of the Commissioner . there shall be assessed and collected, on the unpaid amount, interest at the rate prescribed in paragraph (a) hereof until the amount is fully paid, which interest shall form part of the tax." (Emphasis supplied) xxx xxx xxx In the letter dated June 7, 1990 addressed to petitioner bank through its counsel, the Commissioner of Internal Revenue demanded payment of the deficiency documentary stamp tax in the amount of P3,016,316.06 within thirty (30) days from receipt thereof (Rollo, p. 28).This notice and demand for payment was received by petitioner on July 10, 1990 ( Ibid .,p. 73).Thus, it had until August 9, 1990 to pay the same. Petitioner bank's failure to pay the same within the due date warranted the imposition of the 20% delinquency interest ( Section 249 [c] (3) ),as well as the 25% surcharge provided for in Section 248 (d) of the NIRC . Petitioner asserts that the 25% surcharge "shall be in lieu of the interest prescribed in Section 249 ". We hold such assertion to be incorrect. The 25% surcharge shall be in lieu of the interest prescribed in Section 249 provided that the taxpayer paid the total unpaid amount within the time prescribed in the notice and demand. Petitioner bank failed to pay the same within the thirty (30) days from receipt set by respondent Commissioner in his letter dated June 7, 1990. Thus, petitioner could not avail of the privilege to pay only the 25% surcharge. In the case of Philippine Refining Company vs . Court of Appeals , 256 SCRA 667 ,it was held that: "(t)he fact that a taxpayer appealed the assessment to the CTA and that the same was modified does not relieve it of the penalties incident to delinquency." Moreover, it is worthwhile to reiterate that since taxes are the lifeblood of the government, it should be collected without unnecessary hindrance ( Commissioner of Internal Revenue vs . Algue , Inc ., 158 SCRA 9 ). In the comment filed by the Solicitor General on behalf of public respondent Commissioner of Internal Revenue, he contends that petitioner is liable for deficiency documentary stamp tax of P3,016,316.06 for the period covering February 28, 1986 to October 8, 1986, plus 25% surcharge and 20% interest per annum from September 30, 1988 until the same is fully paid pursuant to Sections 248 and 249 of the Tax Code , as amended .He maintains that "under the accepted business practices of the banks, in the case of sale of foreign exchange, it is usually the buyer who pays the documentary stamp tax, and in the instant case, it is the Central Bank of the Philippines. However, with the issuance of Presidential Decree No . 1994 on November 5, 1985 which took effect on January 1, 1986, the responsibility was shifted to the party who is not exempt from payment of documentary stamp tax imposable under Section 32 of Presidential Decree No . 1994 ..." (Rollo, p. 108). Presidential Decree No . 1994 An Act Further Amending Certain Provisions of the National Internal Revenue Code was published in the Official Gazette on December 2, 1985. However it was released for circulation only on June 18, 1986 (CTA Decision, p. 11; Rollo, p. 62).To hold petitioner liable for the payment of documentary stamp taxes on all the transactions it had entered into prior to June 18, 1986 would be highly prejudicial, for it had no knowledge of the same. In the celebrated case of Taada vs . Tuvera , 146 SCRA 446 ,the Supreme Court stated that: "The term 'laws' should refer to all laws and not only to those of general application, for strictly speaking all laws relate to the people in general albeit there are some that do not apply to them directly. ...In fact, a law without any bearing on the public would be invalid as an intrusion of privacy or as class legislation or as an ultra vires act of the legislature. To be valid, the law must invariably affect the public interest even if it might be directly applicable only to one individual, or some of the people only, and not to the public as a whole. "We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication, unless a different effectivity date is fixed by the legislature. cdll "Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation." The Supreme Court likewise said in the case of People vs . Veridiano II , 132 SCRA 523 . "(i)t is, therefore, certain that the penal statute in question was made public only on June 14, 1979 and not on the printed date April 9, 1979. Differently stated, June 14, 1979 was the date of publication of Batas Pambansa Bilang 22. Before the public may be bound by its contents , especially its penal provisions , the law must be published and the people officially informed of its contents and/or its penalties . For , if a statute had not been published before its violation , then in the eyes of the law there was no such law to be violated and , consequently , the accused could not have committed the alleged crime ." In the same case, it was held that "the term 'publication' should be given the ordinary accepted meaning, that is, to make known to the people in general." In the case at bar, Presidential Decree No . 1994 was not published in the true sense of the word for it was not made known to the people in general when it was printed in the Official Gazette on December 2, 1985. It became effective only upon its release for circulation on June 18, 1986. It is therefore incongruous to say that the people, including herein petitioner, knew thereof before its circulation. It is our considered opinion therefore that Presidential Decree No . 1994 became effective only on June 18, 1986. In a number of cases, it was held that, publication is necessary to apprise the public of the contents of the regulations and make the said penalties binding on the persons affected thereby ( People vs . Que Po Lay , 94 Phil . 640 ; Lim Hoa Ting vs . Central Bank of the Phils ., 104 Phil . 573 ; Balbuna vs . Secretary of Education , 110 Phil . 150 ; all cited in Pesigan vs . Angeles , 129 SCRA 174 , 177 ). The requirement that statutes must be first published in the Official Gazette before they take effect, will not be satisfied by merely printing them in the Official Gazette. To publish is "to make known, announce or proclaim, divulge, print and offer for sale, put into circulation" (Webster's Dictionary).Until the Official Gazette is released for circulation to the public, it cannot be said that its contents have been published ( People of the Philippines vs . Del Rosario , AC-G . R . SP Nos . 01771 and 02033 ). Prior to the effectivity of Executive Order No . 200 , Article 2 of the New Civil Code provides that laws shall take effect after fifteen (15) days following the completion of their publication in the Official Gazette, unless it is otherwise provided. The enactment of the said law modified Article 2 and now provides that publication of laws in either the Official Gazette or a newspaper of general circulation as a requirement for effectivity. Considering that petitioner BPI was not apprised of Presidential Decree No . 1994 ,it should not be held accountable for the payment of documentary stamp tax for the period corresponding from February 28 to October 8, 1986 as argued by the Solicitor General. WHEREFORE, the decision of the court a quo is hereby AFFIRMED. Costs against the petitioner. SO ORDERED. Mabutas , Jr .and Aquino , JJ .,concur.