Citytrust Banking Corp. v. Commissioner of Tax Appeals

TWELFTH DIVISION [CA-G.R. SP No. 40595. May 11, 1999.] CITYTRUST BANKING CORPORATION, as Trustee of various Retirement Funds , petitioner , vs . COMMISSIONER OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE , respondents . D E C I S I O N MABUTAS , JR. , J p : Before Us is a petition seeking to reverse and set aside the decision (promulgated on January 24, 1996) by the Court of Tax Appeals in C.T.A. Case No. 4314 (recovery of tax erroneously or illegally collected). The dispositive portion of the assailed decision is worded as follows: "WHEREFORE in view of all the foregoing respondent is hereby ordered to refund in favor of petitioner City Trust Banking Corporation, as Trustee of Various Retirement Funds, the amount of P7,327,038.97 as determined above to be refunded to each of the qualified retirement plan (page 221 of the Record). Tracking down the antecedent facts of the case. We discerned the following substantial developments. cdll On December 28, 1988, the petitioner herein filed a petition for review (recovery of tax erroneously or illegally collected with motion for suspension of collection of tax) against respondent Commissioner of Internal Revenue with the Court of Tax Appeals (pages 1-14 of the Record). On March 1, 1989, the respondent Commissioner of Internal Revenue filed her answer denying the material allegations in the petition and, at the same time, interposed special and affirmative defenses (pages 26-32, Id.). On March 31, 1989, the petitioner filed its reply (pages 39-44, id.). After a series of hearings, the Court of Tax Appeals promulgated on January 24, 1996 its assailed decision (dispositive portion of which was earlier quoted) with the following findings: "Is petitioner entitled to the refund of 20% final withholding taxes in the amount of P15,191,111.11 alleged to have been erroneously and/or illegally collected? "We answer in affirmative. "The issue having been settled by the Supreme Court. "A ruling was laid down by the High Court in a precedent-setting case entitled Commissioner of Internal Revenue vs. Court of Appeals, 207 SCRA 487 an en banc decision. . . . "It cannot be denied that based on the above authority, petitioner is entitled to the refund sought. Nevertheless, it is essential that the retirement plan should be qualified as exempt from income tax by the BIR in accordance with R.A. No. 4917 as implemented by Rev. Regs. No. 1-68. It is on this premise that the exemption from the final withholding tax of the income from investment in treasury bills of the retirement fund is anchored (Bank of the Philippine Islands as Trustee of the Employees Retirement Fund of IBM Philippines, Inc., et al. vs. Commissioner of Internal Revenue, CTA Case Nos. 4533 to 4566 & 4681 to 4685, July 1, 1994). "A perusal of the evidence on hand revealed, however, that Singapore Airlines, Inc. North Negros Mktg. Co., Inc., Caltex Phils., Inc., Phil. National Oil Company, Citibank Early Retirement Plan, BASF Phils., Inc., and Admiral Realty Co., Inc. have no BIR certifications on file while the certifications of Phil. Packing Corp., Dow Chemical Pacific Ltd., J. Walter Thompson Co., Cyanamid Phils., Inc. and Hemisphere Leo Burnett, Inc. were issued in the year 1988 or 1989 whereas the refund sought covers the year 1987. This Court also noted that Mondragon International Phils., Inc., Armco Marsteel Alloy Corporation, and Stal Astra Refrigeration, Inc.[s] purported certifications of tax-exemption are not valid. The said letters merely informs the preceding companies that their application for qualification under RA 4917 are still pending with the Government and Tax Exempt Corporation Division. Therefore, the refund of the final withholding taxes of these FUNDS cannot be granted. "As to the substantiation of the amounts claimed, we took note of certain discrepancies. The total final tax withheld in some of the FUNDS were less than the amount claimed while in others the opposite were true. In both instances, only the amount claimed as refund which are supported and tally with the evidence submitted can be allowed. . . . "This Court in its appreciation of petitioner's evidence found out that the numerous exhibits presented by the petitioner are sufficient to warrant its entitlement for the refund. The burden of proof was overturned by the petitioner. (pages 5-12 of the Assailed Decision). Not satisfied with the aforementioned decision, the petitioner herein filed a "Motion for Partial Reconsideration" with the Court of Tax Appeals (pages 224-230, id.), which move was denied in a resolution promulgated on March 18, 1996 which was worded thus. "This is a Motion for Partial Reconsideration on our decision dated January 24, 1996 filed by petitioner insofar as the income tax refund claims of the following FUNDS are concern, namely: Amount Singapore Airlines, Ltd. P 28,140.58 North Negros Marketing Co., Inc. 17,105.66 Caltex Phil. Inc. 539,233.09 Philippine National Oil Co. 3,052,627.49 BASF Phils. Inc. 3,130.64 Phil. Packing Corporation 2,813,051.91 Phil. Packing Corporation 302,722.45 Phil. Packing Corporation 86,751.07 TOTAL P6,842,762.89 =========== "In moving for partial reconsideration, petitioner requests that 'judicial notice be taken of the fact that there are several other cases of the same nature between the parties to this case pending before this Court wherein the tax exempt status of the FUNDS, whose refund claims were denied in this case, were duly proven". Petitioner stated that the certifications needed in the above-mentioned FUNDS were in the records of CTA Case Nos. 4421, 4807 and 5080. Thus, petitioner requested that the Court take judicial notice of the contents thereof. "However, we cannot do that. "As a general rule, Courts are not authorized to take judicial notice in the adjudication of case pending before them of the contents of the records of other cases, even when such cases have been tried or are pending in the same court, and notwithstanding the fact that both cases may have been heard or actually pending before the same judge" (Tabuena vs. Court of Appeals, 196 SCRA 650). "The exemption to the above rules is that . . . in the absence of objection, and as a matter of convenience to all parties, a court may properly treat all or any part of the original record of the case filed in its archives as read into the record of a case pending before it, when with the knowledge of the opposing party reference is made to it for that purpose by name and number and in some other manner by which it is sufficiently designated, or when the original record of the former case or any part of it, is actually withdrawn from the archives by the court's direction at [the] request or with the consent of the parties, and admitted as a part of the record of the case then pending (US vs. Claveria, 29 Phil. 527; emphasis supplied). "It should be emphasized that petitioner did not make any purposeful attempt to adopt by reference or admit as part of the record of herein case, all or any part of the cited previous CTA cases, hence the impossibility of their being judicially noticed. It is only now, after the assailed decision was rendered, that the same was ever mentioned. "The failure made herein by petitioner's counsel in not presenting the much needed documents cannot be cured by compelling this Court to submit to (sic) the records of another case in order to salvage its own case. Such legal maneuver is bereft of honesty and fair play." (pages 232-235, id.). On May 17, 1996, this Court received the instant petition (pages 9-19 of the Rollo) wherein the petitioner contended that the Court of Tax Appeals erred in: "REFUSING TO TAKE JUDICIAL NOTICE OF THE RECORDS OF OTHER CASES PENDING BEFORE IT CONSIDERING THAT JURISPRUDENCE AND THE RULES CLEARLY ALLOWS COURTS TO DO SO WHEN A REQUEST OR MANIFESTATION IS MADE BY A PARTY AFTER TRIAL, BEFORE JUDGMENT OR ON APPEAL." (page 5 of the Petition). The petition is devoid of merit. A close review of the evidence presented-taking note also of the disputants arguments (in the petition and in the comment thereon) relative to the aforementioned error interposed by the petitioner-showed that the petition has no legal leg to stand on. Thus, petitioner's pretensions were wheedled by the afore-quoted resolution of the Court of Appeals, which resolution was promulgated on March 18, 1996 (pages 232-235 of the Record). Debilitated, the petition was junked by the Office of the Solicitor General for the respondent with the following disquisition: "1. In the decision appealed from the Court of Tax Appeals granted a refund to petitioner, as trustee of various retirement funds. In the amount of P7,327,038.37 allegedly representing erroneously and/or illegally collected final withholding taxes on income derived by various retirement plans from savings and time deposits, money market placements and government securities for the year 1987. "2. However, the Tax Court denied petitioner's claim for refund with respect to among others, the retirement plans of Singapore Airlines, Ltd., North Negros Marketing Co., Inc., Caltex Philippines, Inc., Philippine National Oil Co. and BASF Philippines, Inc. on the ground that the BIR certificates of tax exemption of such retirement plans were not presented in evidence; and with respect to the retirement plan of Philippine Packing Corporation, on the ground that the BIR certificate of tax exemption of said retirement plan was issued in 1988 or 1989 whereas the refund sought covers the year 1987. "3. In its petition, petitioner alleges that in C.T.A. Case No. 4421, entitled Citytrust Banking Corporation vs. Commissioner of Internal Revenue, January 3, 1996, the Tax Court declared the aforementioned retirement plans to be tax exempt and, therefore, entitled to a refund of the amounts withhold by respondent on the income earned by said plans. "4. Petitioner also alleges that in C.T.A. Cases Nos. 4807 and 5083, both entitled Citytrust Banking Corporation vs. Commissioner of Internal Revenue, which was pending decision by the Tax Court, it presented in evidence the BIR certificates of tax exemption of said retirement plans. "5. Petitioner, therefore, contends that the Tax Court erred in not taking judicial notice of the records in C.T.A. Cases Nos. 4421, 4807 and 5083, particularly, the BIR certificates of tax exemption of the retirement plans in question. "6. We submit petitioner's contention is devoid of merit. In the first place, it is not true, as claimed by petitioner, that in C.T.A. Case No. 4421, that Tax Court has declared the retirement plans in question to be tax exempt and, therefore, entitled to a refund of the amounts withheld by respondent on the income earned by said plans. A copy of the decision in C.T.A. Case No. 4421 dated January 3, 1996 is hereto attached as Annex 'A' and made an integral part hereof. Note that the retirement plans in question are not even mentioned in the decision. "7. Furthermore, since C.T.A. Cases Nos. 4807 and 5083 are still pending decision, the Tax Court has yet to make a ruling as to whether the retirement plans in question are tax exempt. In other words, the evidence on the tax-exempt status of said retirement plans is still under evaluation in said cases. Hence, it would be improper for the Tax Court to declare the retirement plans in question as tax exempt in the instant case where there is no evidence of their tax-exempt status on the basis of evidence presented but still subject to evaluation in C.T.A. Cases Nos. 4807 and 5083." (pages 1-4 of the Comment). We agree with the foregoing posture of the government's counsel. In its petition, the petitioner contended that the Court of Tax Appeals should have taken judicial notice of the records of the other cases adverted to. Such contention collides with the rule that courts will only consider as evidence that which has been formally offered-with specification as to the purpose(s) for which it was being offered (Section 34, Rule 132 of the New Rule on Evidence). There being no showing that the contents (particularly the evidence therein) of said records were formally offered by the herein petitioner during the hearings before the Court of Tax Appeals, they (records or matters therein) could not be considered as evidence-much less could they be given any evidentiary value. The rationale behind such rule was explained by chief Justice Moran thus: ". . . the offer is necessary because it is the duty of a judge to rest his findings of facts and his judgment only and strictly upon evidence offered by the parties at the trial." (Moran, Comments on the Rules of Court, Vol. 6, 1970 Ed., p. 21). To make the Court of Tax Appeals do what the petitioner wanted may draw unwarranted consequences. The opposing party (the Commissioner of Internal Revenue) will be deprived of the chance/opportunity to examine those matters (evidence) in the records and object to their admissibility. The appellate court then will have the difficulty of reviewing documents not previously scrutinized by the court below. Certainly, the pertinent provisions of the Rules of Court on the inclusion on appeal of documentary evidence or exhibits in the records cannot be stretched as to include the records of the other cases not offered at the hearing of the case at bench. Moreover, petitioner's insistence that the Court of Tax Appeals take judicial notice of the records of the other cases adverted to appears futile, since they are not among the matters which the law mandatorily requires to be taken judicial notice of (Section 1, Rule 129 of the New Rules on Evidence). Neither can we consider them (records) of public knowledge, or capable of unquestionable demonstration, or ought to be known to judges because of their judicial functions (Sec. 2, id.) Parenthetically, the taking of judicial notice of any matter requires a hearing where the parties are given the chance to be heard (Section 3, Id.). On this score, We take note with emphasis of the following statement of the Court of Tax Appeals in its afore-quoted resolution denying petitioner's partial motion for reconsideration: ". . . that petitioner did not make any purposeful attempt to adopt by reference or admit as part of the record of herein case, all or any part of the cited previous CTA cases, hence the impossibility of their being judicially noticed. It is only now, after the assailed decision was rendered, that the same was ever mentioned." In coming to the finis , We wish to state that a claim for refund is in the nature of a claim for tax exemption-hence, it should be construed in strictissimi juris against the taxpayer and liberally in favor of the State (Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332; Magsaysay Lines, Inc. vs. Court of Appeals, 260 SCRA 513; Mactan Cebu International Airport Authority vs. Marcos, 261 SCRA 667). Anyway, the factual findings of the Court of Tax Appeals in the case at bench appear to be supported by substantial evidence-hence, its assailed decision should be accorded not only respect but even finality. As held in Philippine Refining Company vs . Court of Appeals (256 SCRA 667), the findings of the Court of Tax Appeals will not ordinarily be reviewed absent a showing of gross error or abuse on its part, which circumstances do not appear in the record. As a matter of practice and principle, even the Supreme Court will not set aside the conclusion reached by an agency, such as the Court of Tax Appeals (Commissioner of Internal Revenue vs. Court of Tax Appeals, 242 SCRA 289). We adopt the same posture. LLjur WHEREFORE, premises considered, the petition is DISMISSED, hereby AFFIRMING the assailed decision (promulgated on January 24, 1996) of respondent Court of Tax Appeals. SO ORDERED. Aquino and Regino, JJ . , concur.