Citytrust Banking Corp. v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [CA-G.R. SP No. 42437. July 18, 1997.] CITYTRUST BANKING CORPORATION, As Trustee of Various Retirement Funds , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N CALLEJO , SR. , J p : On appeal before this Court, by way of a " Petition for Review ", is the Decision and the Resolution promulgated by the Court of Tax Appeals, on June 5, 1996, and October 16, 1996, respectively, in CTA Case No. 4218, denying Petitioner's claim for refund of taxes, erroneously withheld and remitted in the years 1985 and 1986 to the Bureau of Internal Revenue (BIR), in the amounts of Ten Million One Hundred Eighty One Thousand Six Hundred Sixty Six & 90/100 (10,181,666.90) and Fourteen Million Nine Hundred Ninety Four Thousand Four Hundred Ninety Eight & 80/100 (14,994,498.80), respectively. cdll The Petition at bench arose from the following conglomeration of facts. Petitioner Citytrust Banking Corporation is a commercial banking corporation duly organized and existing under and by virtue of Philippine laws, authorized to perform trust functions and activities. As such, it was separately engaged by various employers to act as trustee and investment manager of the retirement or trust funds (collectively the "Funds") created pursuant to the employee retirement, provident, and profit sharing plans (collectively the "Plans") set up by the employers concerned, for the purpose of providing retirement, separation, death, and disability benefits to their respective employees (i.e., the members of the plans). Under each of the trusts, Petitioner was authorized to invest and re-invest the monies held in each retirement fund created by the above-mentioned employers in such assets or investments as it may deem fit. Pursuant to this authority, during the years 1985 and 1986, Petitioner deposited, invested and reinvested the assets of the Funds in savings and time deposits, money market placements, and in securities (including government securities, such as Treasury Bills) with various banking and financial institutions, from which the Funds earned income. From the interest income thus earned, the said institutions withheld a final tax of 15% pursuant to the provisions of Section 21(d), now Section 21(c), in relation to Section 53(d)(1), now Section 51(a) of the Tax Code. Asseverating that the withholding and collection of the 15% final tax from the income of the Funds was erroneous and/or illegal as the Funds were exempt from income tax, the Petitioner filed, on December 29, 1987, a claim for refund with the BIR in the total amount of P10,181,666.90, representing taxes withheld from the interest income of the retirement funds and remitted to the BIR for the year 1985; and, on January 12, 1988, a claim for refund with the BIR in the total amount of P14,994,498.80, representing taxes erroneously withheld from the income of the same retirement funds and remitted to the BIR for the year 1986. Considering that the two-year prescriptive period to commence proceedings for the recovery/refund of taxes erroneously and/or illegally collected was about to expire and that the claims for refund were still pending with the Commissioner, Petitioner was constrained to file, on December 29, 1987, a " Petition for Review (Annex "A" of the Petition) with the Court of Tax Appeals for the refund of taxes erroneously withheld for the year 1985. Subsequently, on January 14, 1988, Petitioner filed and " Amended petition for Review" (Annex "B" of the Petition) with the CTA, to include the claim for refund for the year 1986, consequently consolidating the claims for refund for taxes allegedly erroneously withheld in the year 1985 and 1986 in the total amount of P25,176,164.00. Pending the resolution of the Petitioner's Petition before the Court of Tax Appeals, the Supreme Court in Commissioner of Internal Revenue vs. Court of Appeals, G . R . No . 95022, March 23, 1992, 207 SCRA 487 , promulgated its Decision passing upon and resolving the legal issue posed by the Petitioner in its " Petitioner for Review " before the Court of Tax Appeals. Thus, cdll "The sole issue for determination is whether or not the GCL Plan is exempt from the final withholding tax on interest income from money placements and purchase of treasury bills required by Pres. Decree No. 1959. "We uphold the exemption. "To begin with, it is significant to note that the GCL Plan was qualified as exempt from income tax by the Commissioner of Internal Revenue in accordance with Rep. Act No. 4917 approved on 17 June 1967. This law specifically provided: SEC 1. Any provision of law to the contrary notwithstanding , the retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer shall be exempt from all taxes and shall not be liable to attachment, levy or seizure by or under any legal or equitable process whatsoever except to pay a debt of the official or employee concerned to the private benefit plan or that arising from liability imposed in a criminal action; . . . "In so far as employees' trusts are concerned, the foregoing provision should be taken in relation to then Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No. 1983, supra , which took effect on 22 June 1957. This provision specifically exempted employees' trusts from income tax and is repeated hereunder for emphasis: "Sec. 56. Imposition of Tax . (a) Application of tax . The taxes imposed by this Title upon individual shall apply to the income of estates or of any kind of property held in trust. xxx xxx xxx " Exception The tax imposed by this Title shall not apply to employee's trust which forms of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees . . . "The tax-exemption privilege of employee's trusts, as distinguished from any other kind of property held in trust, springs from the foregoing provision. It is unambiguous. Manifest therefrom is that the tax law has singled out employees' trusts for tax exemption. "And rightly so, by virtue of the raison de'etre behind the creation of employees' trusts. Employees' trusts or benefit plans normally provided economic assistance to employees upon the occurrence of certain contingencies, particularly, old age retirement, death, sickness, or disability. It provides security against certain hazards to which members of the Plan may be exposed. It is an independent and additional source of protection for the working group. What is more, it is established for their exclusive benefit and for no other purpose. "The tax advantage in Rep. Act No. 1983, Section 56(b) was conceived in order to encourage the formation and establishment of such private Plans for the benefit of laborers and employees outside of the Social Security Act. Enlightening is a portion of the explanatory note to H.B. No. 6503, now R.A 1983, reading: "Considering that under Section 17 of the Social Security Act, all contributions collected and payments of sickness, unemployment, retirement, disability and death benefits made thereunder together with the income of the pension trust are exempt from any tax, assessment, fee, or charge, it is proposed that a similar system providing for retirement, etc. benefits for employees outside the Social Security Act be exempted from income taxes." (Congressional Record, House of Representatives, Vol. IV, Part 2, No. 57, p. 1859, May 3, 1957; cited in Commissioner of Internal Revenue v. Visayan Electric Co., et al., G.R. No. L-22611, 27 May 1968, 23 SCRA 715); emphasis supplied. " It is evident 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. . . " ( Pages 494-495, supra .) After trial of the issues, Petitioner filed its Memorandum ( Annex "D" of the Petition ) dated February 7, 1996. The Respondent, likewise, filed her Memorandum ( Annex " E " of the Petition ) on February 2, 1996. cdtech On June 5, 1996, the Court of Tax Appeals promulgated its assailed Decision ( Annex "F" of the Petition ), denying Petitioner's claim for refund in toto . On June 25, 1996, Petitioner filed a Motion for Reconsideration of the Decision ( Annex "G" of the Petition ) which was subsequently denied by the same Court in a Resolution dated October 16, 1996 ( Annex "H" of the Petition ). Hence, the instant Petition . Considering that Petitioner's substantive right to the refund claimed has been thoroughly passed upon by the Supreme Court in Commissioner of Internal Revenue vs . Court of Appeals, 207 SCRA 487, supra , "the only remaining issue to be resolved is the entitlement of the petitioner to its claim based on the evidences presented" ( Page 122, Rollo ) Petitioner catalogued the errors allegedly committed by the court a quo, to wit: A. The CTA erred in holding that petitioner's evidence did not sufficiently establish that the retirement funds subject of this case, through petitioner, as trustee, invested their funds in the various non-negotiable promissory notes (marked as Exhibits "NN" to "44 U-1") the income from which was subjected to the 15% final withholding tax. B. The CTA erred in holding that petitioner did not prove that the 15% withholding tax in the amounts of 10,181,666.90 and 14,994,498.80 for the years 1985 and 1986, respectively, were remitted to the BIR. C. The CTA erred in holding that claim for refund of taxes withheld and remitted to the BIR during the first three quarters of 1985 has prescribed. The assigned errors ascribed to the CTA may be synthesized as ' whether or not petitioner has satisfactorily shown, by competent evidence, that it is entitled to the amount sought to be refunded .' It bears stressing, at the outset, that We are one with the Court of Tax Appeals in its findings of fact, the same being adequately supported by the evidences on record. ( Commissioner of Internal Revenue versus Philippine American Life Insurance Co . , G . R . No . 105208, May 29, 1995, 244 SCRA 446 ). Petitioner avers that the Court of Tax Appeals erred in finding that Petitioner "failed to establish the identity and participation of the assets of each of the funds involved herein to the specific investments made by its Trust and Investment Department for the years 1985 and 1986." The CTA, on the other hand, found and declared that: "Nowhere among the submitted exhibits and the contents of the transcript of stenographic notes of the hearings conducted in the case at bar could we find any mention of the particular trust or savings account number of each of the funds as having been engaged in an investment activity of herein trustee for and in their behalf. "At the very least, the trust account numbers listed in the various Fixed-Income Securities Placements (FISP), supra, could have taken care of the situation if indeed they truly represent the funds, but petitioner simply did not bother to identify and introduce(d) in evidence the trust or savings account number of each of the Funds and from there exerted vigilant effort to correlate them to those listed in the FISP in order to prove their indubitable participation therein." ( Annex "F, Decision, p . 7 .) During the proceeding in CTA Case No. 4218, Petitioner adduced in evidence the following: 1. The various trust agreements, the retirement plans, and BIR letters of approval of the retirement plans as complying with the requirements of R.A No. 4917 ( Exhibits " A " to " Z " and " AA " to " MM " , all inclusive of submarkings ); 2. Non-Negotiable Promissory Notes and the corresponding Fixed Income Securities Placements ( Exhibits " NN " to " 44 U-1 "); 3. List of investments in interest bearing loans made by petitioners. Trust and investment Department in behalf of the various Funds for the years 1985 and 1986 ( Exhibits " 45-B " to " 45-B24 "); 4. Summary of the Promissory Notes ( Exhibits " 45-C " to " 45-C-32 "); 5. Quarterly Returns of Taxes Withheld on Interest on Paid by Banks and Quasi-Banks prepared and filed by Petitioner's Trust and Investment Department ( Exhibits " 45-D " to " 45-M " , all inclusive of sub-markings ); and lastly, 6. The testimony of witness, Mrs. Remedios Abello, on the foregoing exhibits. ( Annex " F " , Decision, Page 6 .) Petitioner asseverates that, contrary to the Court a quo's findings, the trust account numbers already formed part of the evidence in the case, and this had the effect of adequately satisfying the Court a quo's requirement that such trust account numbers be identified, introduced in evidence and correlated to the trust account number appearing on each Fixed Income Securities Placement ( FISP ). Moreover, Petitioner pointed out that the trust agreements ( Exhibits "A" to "MM" ) show that the trust account number for each retirement fund was handwritten on the first page of each Agreement. The existence of this handwritten notations and the fact that Respondent BIR failed to raise, in her Memorandum and other pleadings filed with the Court a quo, the Petitioner's alleged failure to prove the trust account numbers was a clear indication that Respondent conformed to petitioner's evidence and that such evidence was sufficient to prove the trust account numbers. We are not swayed by Petitioner's pose . The barefaced fact that Respondent did not make any objection to Petitioner's referral, in its Memorandum, to the handwritten notations indicating the trust account numbers in the Trust Agreements cannot be admitted as proof of the existence of such evidence. This is because the proper time for objection to the admissibility of same said evidence was at the conclusion of Petitioner's evidence. The fact is that the handwritten notations were never formally offered; so that there was nothing to object to in the first place. And not having been formally offered, the Court of Tax Appeals cannot be faulted for not having considered them. In De Castro versus The Court of Appeals, No . 49158, January 31, 1946, 75 Phil . 824, page 834 , the Supreme Court held that any evidence which a party desires to submit for the consideration of the court must be formally offered by him. ( Rule 132, Section 34, Revised Rules of Court .) Furthermore, when a party offers a document or any instrument as evidence during the course of a trial, he must specify the purpose for which the document or instrument is offered ( ibid .); he must describe and identify the document, and he must offer it as an exhibit ( Ahag versus Cabiling, 18 Phil . 415 ), so that the opposing counsel may have an opportunity of objecting to it or of cross-examining any witness called to prove or identify it ( 5 Encyclopedia of Evidence, 469 ; Veles versus Chavez, 50 Phil . 676 ). The rule is stated thus: " If a party . . . opens the particular view with which he offers any part of his evidence, or states the object to be attained by it he precludes himself from insisting on its operation in any other direction, or for any other object ; and the reason is, that the opposite party is prevented from objecting to its competency in any view different from the one proposed . "( Moran Manuel V . Comments on the Rules of Court . Manila : Pasicolan Book Service, 1980 , Page 123 ; citing Wolverton versus Commonwealth ( Sup . Ct . of Penn . , 7S & R . , 273 .) Thus, as correctly pointed out by the Court of Tax Appeals, in its assailed Resolution, dated October 16, 1996, ". . . It must be noted that the trust agreement above-mentioned were offered with the following purposes, namely: 1. Petitioner is the duly appointed trustee and investment manager of various trust funds (Funds"). 2. The Funds were created pursuant to the employee retirement, provident, and profit sharing plans ("Plans") set up the employers concerned, for the purpose of providing retirement, separation, death and disability benefits to their respective employees who qualify as and are deemed members of the Plans. 3. The Plans, pursuant to which the Funds were created, have been found by the Commissioner as having met the requirement of a reasonable benefit plan prescribed by Republic Act No. 4917, as implemented by Revenue Regulations 1-68, as amended and were accordingly certified as "qualified:" (i.e., tax-exempt) plans. 4. Petitioner as trustee of the Plans, has been empowered and authorized to hold, manage, invest and reinvest the assets of the Funds. "Verily, a close reading of the purposes for which the trust agreements were offered in evidence would show that no attempt whatsoever was made to specify and prove the trust account number of the Funds and from there correlate the same to their Fixed Income Securities Placements. We cannot thus appreciate in evidence the handwritten notations supposedly appertaining to the trust account number of each Fund in view of the clear wordings of Section 34, Rule 132 of the Revised Rules of Court that the purpose for which the evidence is offered must be specified. xxx xxx xxx "Petitioner's present thrust to have the trust agreements serve the purpose of establishing the trust account number of each Fund is therefore not acceptable under the rule. Sanctioning it would result in the denial of due process on the part of the respondent as it would deprive her of the opportunity to properly comment and object thereto." ( Annex " H " , CTA Resolution dated October 16, 1996, Pages 3-5 .) In the alternative, Petitioner posits that, even if it were assumed that the CTA had valid grounds to disregard the handwritten notations indicating the trust account numbers which appear on the face of the trust agreements, the CTA should have taken judicial notice of the trust account numbers of the retirement funds based on the records of CTA Case No. 4421 and the fact that it has already taken such judicial notice in consolidated CTA Cases Nos. 5284 and 5317, Petitioner makes particular reference to the incidents, in CTA consolidated Cases Nos. 5284 and 5317, wherein herein Petitioner, on March 18, 1996, filed a Motion and Request for Judicial Notice dated March 11, 1996 ( Annex " A " of Annex " G " of the Petition . Pages 144-150, Rollo .), and prayed the Court of Tax Appeals to take judicial notice of the tax-exempt status of the above-mentioned retirement funds, among others, and the records of CTA Case No. 4421, which motion was granted by the same Court in a Resolution dated April 22, 1996 ( Annex " B " of Annex " G " of the Petition . Pages 151-152, Rollo .) It must be borne in mind, however, that the matter sought by the Petitioner to be taken judicial notice of by the Court of Tax Appeals is not among those which the latter may do so mandatorily under Section 1, Rule 129, of the Revised Rules on Evidence. Rather, it is one envisaged in Section 3, Rule 129, of the Revised Rules on Evidence, to wit: SEC. 3. Judicial notice, when hearing necessary . During the trial, the court, on its own initiative, or on request of a party may announce its intention to take judicial notice of any matter thereon. "After the trial, and before judgment or on appeal, the proper court, on its own initiative or on request of a party, may take judicial notice of any matter and allow the parties to be heard thereon if such matter is decisive of a material issue in the case." As was held by the Supreme Court in the case of Occidental Land Transportation Co., Inc. versus Court of Appeals, G . R . No . 96721, March 19, 1993, 220 SCRA 167, 175 . "As a general rule, ' courts are not authorized to take judicial notice, in the adjudication of cases 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 are actually pending before the same judge .' The general rule admits of exceptions as enumerated in Tabuena versus Court of Appeals, 196 SCRA 656 , the Court, citing U . S . versus Claveria, 29 Phil . 527 which We quote: '". . . in the absence of objection, and as a matter of convenience to all parties, a court may property treat all or any part of the original record of a 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 or 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.' It is clear, though, that this exception is applicable only when, 'in the absence of objection,' 'with the knowledge of the opposing party,' or 'at the request or with the consent of the parties,' the case is clearly referred to or 'the original or part of the records of the case are actually withdrawn from the archives' and 'admitted as part of the record of the case then pending ( Emphasis supplied ) In Prieto versus Arroyo, No . L-17885, June 30, 1965, 14 SCRA 549, page 552 , the Supreme Court held. ". . . Secondly, if appellant had really wanted the court to take judicial notice of such records, he should have presented the proper request or manifestation to that effect. . . " ( emphasis ours .) Corollarily, the Court a quo cannot be expected to take cognizance of a " Motion for Judicial Notice " filed by Petitioner in a case other than the one under consideration and/or resolution. If it was really Petitioner's intention to have the court take judicial notice of the records and procedural incidents in CTA Consolidated Cases Nos. 5284 & 5317, it should have filed the proper motion and/or manifestation before the Court a quo, so that the adverse party is accorded the chance to oppose the same and articulate its stance thereon. ' It is the duty of a litigant desiring the advantage of that knowledge to suggest it to the Court ( Ill . Woods versus Village of La Grange Park, 4N . E . 2d 764, 287 Ill . App . 201 .).' Unfortunately, it did not. And it is too late in the sunset of the case to raise the issue and a mere call of the Court's attention at that, in its Memorandum ( Annex "D" ), to the similarity of the retirement funds, "except for some minor differences", involved in both cases. Petitioner asseverates that, contrary to the Court of Tax Appeal's finding that Petitioner failed to prove the actual remittance of the taxes withheld from the income derived by the funds from their transactions with institutions other than the Petitioner, the fact of remittance and the amount of taxes withheld were, in fact, alleged with particularity in paragraph 4 of Petitioner's Amended Petition for Review, to which Respondent responded in her Answer in this wise, to wit: "3. He DENIES the allegations of paragraphs 1, 2, 3, 4 and 7 of the petitioner under the heading "The Facts" for lack of knowledge or information sufficient to form a belief as to the truth and falsity thereof. Whether or not the amount sought to be refunded/tax credited was actually withheld is subject to verification in the Accounting Division of the B.I.R.;" ( Annex "C", Answer, Pages 1-2 .) Petitioner insists that Respondent's denial constitutes an implied admission of its allegation because the fact of withholding is plainly within the Respondent's knowledge considering that it is the agency of the government tasked with the collection of taxes. It asseverates that "[t]he Supreme Court has consistently held that when the pleader states that he has no knowledge sufficient to form a belief when the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge that his averment of ignorance must be palpably untrue, such fact is deemed admitted", citing the cases of Philippine Advertising Counselors, Inc . vs . Revilla, 52 SCRA 246 (1973) and Warner Barnes & Co . , Ltd . vs . Reyes, et al . , 103 Phil . 662 . Petitioner, however, must harken to and take heed of: "The fundamental principle is that the burden of proof in any cause rests upon the party who, as determined by the pleadings or the nature of the case asserts the affirmative of an issue and remains there until the termination of the action. In other words, one alleging a fact which is denied has the burden of establishing it. Unless the party asserting the affirmative of an issue sustains the burden of proof of that issue by a preponderance of the evidence, he must fail. ( Vicente J . Francisco, The Revised Rules of Court in the Philippines, Evidence, Rules 128-134, Page 648 ; Citing 31 C . J . S . , 709 ; 20 Am . Jur . , 138-139 .) In the Petition at bench, Petitioner seeks the refund from Respondent of amounts corresponding to withholding taxes erroneously paid to the Government. This it must adequately prove. And this burden is even made more difficult, in the case under consideration, by the principle safely ensconced in case law in the jurisdiction of taxation that, "a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayers." ( Commissioner of Internal Revenue versus Tokyo Shipping Co., Ltd . , G . R . No . 68252, May 26, 1995, 244 SCRA 332 .) The rule concerning the inference arising from the non-production of evidence has been stated as follows: "Where evidence which would properly be part of a case is within the control of the party whose interest it would naturally be to produce it, and, without satisfactory explanation, he fails to do so, the jury may draw an inference that it would be unfavorable to him. . . . " ( Charles C . Moore, A Treatise on Facts or the Weight and Value of Evidence, Vol . I, 1908, Page 543 .) Starkie says: "The presumption that a man will do that which tends to his obvious advantage, if he possesses the means, supplies a most important test for judging of the comparative weight of evidence." . . . On principle, if the party against whom the presumption operates has the burden of proof in the cause or on a particular issue, the evidence necessary for him to produce should be that which is sufficient to overcome the evidence adduced by his adversary, and also the withheld evidence, as if the latter had been produced and was adverse to him. If he does not have the burden of proof, his evidence actually produced should at least equal in weight that which his adversary offers, as well as the withheld evidence, assuming that the latter would be adverse. ( Page 544, supra .) Although the amount actually withheld and which is sought to be refunded or tax credited may be verified in the Accounting Division, it would be malapropos for the Petitioner to assume that the Respondent would be the one to verify from its (BIR) Accounting Division the exact amount of withholding tax to which Petitioner is entitled by way of refund and which amount the Petitioner is burdened to prove in an action for refund. The burden of proof is lodged on the Petitioner to prove the factual allegations of its Petition. The Petitioner cannot and should not expect the Respondent to dig into and sort out the records to bridge the chasm of Petitioner's case. There is no denying that Petitioner could have easily verified the same from the BIR's Accounting Division. Or at the very least, it could have sought the certification of the various institutions or authorized withholding agents banks, to which it extended loans or made investments, on the amount of interest income on investments and the corresponding amount of taxes withheld. This was not difficult as, under existing regulations, every authorized agent bank is required to maintain records as well as all supporting data used in preparing the withholding tax returns and which must be readily available at its principal place of business. We cannot likewise lend credence to the Quarterly Returns of Taxes Withheld on interest paid by banks and quasi-banks prepared and filed by Petitioner's Trust and Investment Department ( Exhibits "45-D" to "45-M", all inclusive of sub-markings ). This list reflected Petitioner as the withholding agent and was prepared by Petitioner's Department itself. A copy of the withholding tax returns filed by the different banking institutions could have sufficed. But a list prepared by the Petitioner himself will be considered self-serving. And of the same category is the testimony of Mrs. Remedios Abello. We are in accord with the findings and disquisitions of the CTA, to wit : ". . . Firstly, it is not logical to say that since the promissory notes were issued to the petitioner as trustee of the retirement funds, the taxes withheld would be included in the returns under its name. "A basic understanding of the withholding tax system as provided under Section 50(a) of the Tax Code will show that the tax on specified items of income enumerated therein shall be withheld by the PAYOR-CORPORATION AND/OR PERSON. In the transactions entered into by the various Funds as represented by their trustee, herein petitioner, the latter acted as the lender of sums of money to different borrowers such as Alamag Processing Corp. Ayala Corp., Schering Co., Phil Packing Corp., C.C. Unson Co., Inc. Monterey Farms, etc. (Exhs. "NN" to "44U-1") which corporations in turn paid interest to the sums they borrowed. In such a situation, the duly authorized withholding agents on the interest income earned would be the payor/borrower-corporations and not the petitioner, as trustee of the various Funds. "Indeed, it is rather revealing for us to learn, at this juncture, that as admitted by the petitioner and upon our verification, the record of this case shows that all the non-negotiable promissory notes were issued to it as trustee of the retirement funds. Under the circumstances, petitioner is clearly acting as lender and not a borrower. pred "By so stating that it is one among those which withheld the final tax provided under Section 21(c) in relation to Section 51(a) of the Tax Code, as amended, this Court had the earlier impression that petitioner's submissions of its Quarterly Returns of Taxes Withheld on Interest paid by Bank and Quasi-Banks (BIR Forms 1745) undoubtedly reflected its desire to prove the portion of the amount of final taxes withheld by it. "With this evidence on record, however, showing that petitioner was not a borrower of the assets of the various funds and correspondingly no duty to withhold tax on interest income developed upon it, this Court is constrained to put little probative value on said quarterly returns. "As to the insistence of petitioner that the unproven allegation on the withholding taxes by different banking and financial institutions should not have taken precedence over the evidence on record. We find the same not worthy of consideration any more because of the fact that petitioner is not the rightful withholding agent with respect to the transactions enumerated above. Besides, the citation of Section 59, Rule 10 of the Revised Rules of Court, supra, to support its view is not well-taken. The section pertains to amendment to pleadings when issues NOT raised by the pleadings are tried by the parties. In here, the issue of the unproven allegation is one that is raise in the pleadings, and therefore, the section does not apply. "Even assuming arguendo that petitioner withheld taxes and included them in its quarterly returns, still We find the quarterly returns submitted in evidence useless to prove herein claim for refund. It is a requirement under Section 51(d) of the Tax Code that a list of the payees and income payments together with a reconciliation statement of quarterly payments be submitted to the Commissioner of Internal Revenue and that in case of final withholding taxes, The return shall be filed on or before January 31 of the succeeding year. It is apparent from the requirement that in order for the Commissioner to know exactly the payees from which the taxes were withheld, a list thereof must be submitted. Unfortunately, petitioner only presented its quarterly returns sans the list of payees. They cannot thus determine with exactitude the amount of taxes withheld corresponding to the interest income earned by the Funds. ( CTA Resolution dated October 16, 1996 Pages 11-14 ; Pages 163-164 , Rollo .) Although no longer decisive of the outcome of the Petition, We are in accord with Petitioner's claim that the CTA erred in holding that Petitioner's claim for refund of taxes withheld and remitted to the BIR during the first three quarters of 1985 has prescribed. The ruling of the Supreme Court in Gibbs versus Commissioner of Internal Revenue, No . L-17406, November 29, 1965, 15 SCRA 318 , is squarely in point. Thus, "A taxpayer resident or non-resident, who contribute to the withholding tax system, does not really deposit an amount to the Commissioner of Internal Revenue, but, in truth, to perform and extinguish his tax obligation for the year concerned. In other words, he is paying his tax liabilities for the year. Consequently, a taxpayer whose income is withheld at the source will be deemed to have paid his tax liability when the same falls due at the end of the tax year. It is from this latter date then, or when the tax liability falls due, that the two-year prescriptive period under Section 306 (now Section 230) of the Revenue Code starts to run with respect to payments effected through the withholding tax system ." ( Page 325, supra .) Thus, when Petitioner filed a claim for refund with the Respondent on December 27, 1987 for taxes erroneously withheld for the year 1985, the action had not yet prescribed considering that the prescriptive period for taxes withheld and remitted to the BIR for petitioner within the year 1985 only commenced to run on December 31, 1986, the date the Petitioner's tax liability fell due. llcd IN THE LIGHT OF THE FOREGOING, the Petition at bench is hereby DENIED DUE COURSE and is DISMISSED. SO ORDERED. Austria-Martinez and * Agcaoili, JJ . , concur. Footnotes * Vice J. Buena.