Commissioner of Internal Revenue v. Bogo Medellin Milling Co.

THIRD DIVISION [CA-G.R. SP No. 41040. October 27, 1997.] COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . BOGO MEDELLIN MILLING CO., INC. EMPLOYEES RETIREMENT PLAN, PRIVATE DEVELOPMENT CORP. OF THE PHIL., TRUSTEE , respondents . D E C I S I O N PARAS , J p : The subject of the instant "PETITION FOR REVIEW" is the June 5, 1994 decision of the Court of Tax Appeals in CTA case No. 4861, arising from a claim for the refund of taxes withheld on interest income in the total amount of P226,595.73 covering the years 1990 and 1991. On September 24, 1992, herein private respondent Bogo Medellin Milling Co., Inc. Employees Retirement Plan ("Bogo Medellin", for short), as represented by its then agent, Jardine Davies Inc., filed with the Commissioner of Internal Revenue's Appellate Division a claim for refund on account of its status as a duly qualified retirement plan. On October 15, 1992, the said private respondent instituted a petition for review before the Court of Tax Appeals alleging that the Commissioner of Internal Revenue had not yet granted its claim for refund and that the said action was resorted to in order to preserve its right to judicially claim for such refund. Answer was filed by the Commissioner of Internal Revenue averring that in an action for refund, the taxpayer has the burden of showing that the taxes paid were erroneously or illegally paid and failure to do so in fatal to the action. On June 5, 1996, the respondent court rendered decision finding that the majority of evidence submitted by the herein private respondent was insufficient to prove the entire amount of said claim. Thus, the respondent court granted the petition partially, ordering the Commissioner of Internal Revenue to refund to the herein private respondent only the amount of P82,518.90, without cost. In the present Petition for Review, the Commissioner of Internal Revenue assails the respondent court's decision on the grounds that (1) the respondent court's decision is not in accordance with law, jurisprudence and the evidence; and that (2) the private respondent's claim for refund had not been duly established. Both parties readily concur with the ruling of the Supreme Court in the case of Commissioner of Internal Revenue v . Court of Appeals (207 SCRA 487, 495 ) that "tax exemption is likewise to be enjoyed by the income of the pension trust. Otherwise, taxation of those earnings would result in a diminution of accumulated income and reduce whatever the trust beneficiaries would receive out of the trust fund. This would run afoul of the very intendment of the law." cdtech The petitioner contends that the private respondent's evidence had not substantiated its claim that it actually used the funds of the retirement plans of Bogo Medellin in the purchase of securities; that the private respondent's evidence consisting mainly of Confirmations of Sale and outright sales without any recourse documents, does not indicate that the accounts refer to the retirement plan of Bogo Medellin Milling Co., Inc.; and that therefore, they are not sufficient proof of its claim because the subject Confirmations of Sale and outright sales may refer to the other accounts handled by PDCP and not necessarily to the retirement plan. In Commissioner of Internal Revenue v . Philippine American Life Insurance Co . (244 SCRA 446, 453 ), the Supreme Court held that since the petitioner had also raised the issue of whether or not private respondent had satisfactorily shown by competent evidence that it was entitled to the amount sought to be refunded, the same being a question of fact, the said Court (Supreme Court) was bound by the findings of the Court of Tax Appeals. Again, the Highest Tribunal of the land in Commissioner of Internal Revenue v . Court of Appeals (242 SCRA 289, 304 ), similarly stated that as a matter of practice and principle, the Supreme Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority on its part. Indeed, the respondent court has strong basis for its findings and conclusions as it observed. "For one, most of the Confirmation of Sale documents were sold to PDCP as 'Investment Manager for various accounts', which obviously may refer to accounts other than the account of herein petitioner. (Exhibits 'C', 'E', 'F', 'G', etc). xxx xxx xxx "Verily, the words 'various accounts' printed in the Confirmation of Sale documents may refer to individuals, corporations, retirement plans, foundations and schools, and may not necessarily include herein petitioner. Inasmuch as the said Confirmations are unsupported by other documents tending to prove the participation of the petitioner therein such as cash vouchers, purchase tickets, short-term placements, official receipts evidencing payment, and debit-credit entries, We are constrained not to give credit to said documents. "Secondly, some of the Confirmation of Sale documents do not tally with the Schedule of 20% Final Tax Withheld, more particularly on their value and maturity dates and selling prices. (Exhibits 'B-4', 'K' & 'AK'). "Lastly, all of the official receipts made for Manila Electric Co. by the trustee, Private Development Corporation of the Philippines, together with the corresponding accounting record of payment of first mortgage bond failed to specifically show any amount of tax so withheld and paid for by herein petitioner. (Exhibits 'CS', 'CS-1', 'CT', 'CT-1', 'CU', 'CU-1', 'CV', 'CV-1', 'CW', 'CW-1', 'CX' and 'CX-1'). "Although some of the claims are not accompanied by Confirmation of Sale documents, We have nevertheless allowed them because they are well supported by such other documents as abovementioned which when taken together establishes the existence of the alleged transactions, e.g. sale of treasury bills, their payment from the account of herein petitioner and the fact of corresponding withholding of the final tax." LLphil Needless to state, a taxpayer has the burden of proving entitlement to a claimed deduction ( Paper Industries Corporation of the Philippines v . Court of Appeals, 250 SCRA 434 ). This is consistent with the rule that tax exemptions must be strictly construed against the taxpayer and liberally in favor of the state ( Misamis Oriental Association of Coco Traders, Inc . , v . Department of Finance Secretary, Supra .). In the instant case, even though the private respondent has been able to show substantial proof for the amount refunded, its evidence is still insufficient to entitle it to a full refund. The questioned decision is thus found in order. WHEREFORE, THE PRESENT PETITION IS HEREBY DISMISSED FOR LACK OF MERIT. SO ORDERED. Tayao-Jaguros and Valdez, Jr . , JJ . , concur.