Far East Bank and Trust Co. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP NO. 49862. December 28, 2000.] FAR EAST BANK AND TRUST COMPANY, as trustee of various retirement funds , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N SANTOS , J p : This is an appeal by way of a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure assailing the Decision 1 dated July 31, 1998 of the Court of Tax Appeals in CTA Case No. 4848, denying petitioner's claim for refund of the alleged erroneously withheld income taxes in the total amount of P56,247,566.00 The Facts: Petitioner is a private commercial banking corporation duly organized and authorized to act as trustee and engage in trust and investment activities; and, in fact, it is the trustee of several retirement funds established by various private companies in accordance with their respective retirement benefit plans which provide benefit for the retirement, death, disability and separation of its members. The said plans allegedly complied with the requirements for a reasonable benefit plan prescribed by the Republic Act No. 4917, as implemented by Revenue Regulations No. 1-68 and were professedly certified by the Commissioner of Internal Revenue as qualified or tax exempt plans. Petitioner claimed that for the period starting from February 1, 1989 to December 1992, it invested assets of the funds in money market placements, bank deposit substitutes and government securities that earned net interest in the total amount of P144,330,419.56 as of December 26, 1991. Petitioner further averred that the interest income was erroneously and/or illegally subjected to 20% final withholding taxes in the amount of P56,247,566.21 for the period beginning February 1, 1989 to December 31, 1992. On September 23, 1991, petitioner, relying on the tax exempt status of the funds and its earnings, instituted a claim for tax refund 2 of the taxes withheld on interest income from said money market placements, bank deposits, deposit substitute instruments and government securities with the Bureau of Internal Revenue. On May 5, 1992 and May 23, 1993, petitioner lodged additional claims for refund to include additional amount of taxes erroneously withheld on the interest income of the trust fund. Petitioner therefore claims a total amount of P56,247,566.00 representing the amount of taxes withheld during the period beginning February 1, 1989 to December 31, 1992. On September 15, 1992, petitioner filed a Petition for Review 3 with the Court of Tax Appeals for refund of taxes erroneously withheld for the year 1989 to 1991. Thereafter, petitioner interposed an amended Petition for Review on April 29, 1994 to include the claim for refund covering the year 1992, thereby consolidating the claims for refund of taxes allegedly to have been erroneously withheld for the period beginning February 1, 1989 to December 31, 1992. On July 31, 1998, the Court of Tax Appeals rendered a decision denying petitioner's claim for refund or issuance of a tax credit certificate on the ground of insufficiency of evidence, the decretal portion of which, reads: "WHEREFORE, in view of the foregoing, petitioner's claim for refund or issuance of a tax credit certificate is hereby DENIED due to insufficiency of evidence. SO ORDERED." 4 On August 21, 1998, Petitioner filed a motion for reconsideration of the above-quoted decision, which was denied by the Court of Tax Appeals on November 19, 1998. ICASEH Hence, the instant Petition for Review anchored on the following grounds: "I THE CTA COMMITTED A REVERSIBLE ERROR WHEN IT DENIED THE CLAIM FOR REFUND FILED BY THE PETITIONER FOR TAXES ON INTERESTS INCOME WITHHELD AND PAID TO THE BIR FOR THE YEARS 1989 TO 1992 ARISING FROM INVESTMENT DERIVED FROM MONEY MARKET PLACEMENTS, BANK DEPOSITS, DEPOSIT SUBSTITUTE INSTRUMENTS AND GOVERNMENT SECURITIES MADE BY THE PETITIONER AS TRUSTEE OF VARIOUS RETIREMENT FUNDS. AND EVEN ASSUMING THAT THERE WAS INDEED INSUFFICIENT EVIDENCE IN SUPPORT OF THE PETITIONER'S CLAIM FOR REFUND, STILL II THE CTA COMMITTED A REVERSIBLE ERROR WHEN IT DID NOT ALLOW THE PETITIONER TO PRESENT ADDITIONAL EVIDENCE IN SUPPORT OF ITS CLAIM." 5 The petition is bereft of merit. Anent the first ground, petitioner believes that under the circumstances, substantial evidence has been presented to show its entitlement to refund. In claiming the sufficiency of its evidence, petitioner insists that the summarized computer list of investments showing the date, the instrument, the account number, the principal, the maturity value and the net interest concerning the investments, the testimony of petitioner's witness and the Certifications issued by the withholding agents are enough to substantiate its claim. We are not persuaded. HcDATC Well settled is the rule that the claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. To prove such claim, there must be evidence showing the inclusion of the income payments, which were the basis of the withholding taxes and the fact of withholding. 6 Absence of such proof is fatal considering that claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation 7 and as such, they are looked upon with disfavor. 8 Relying on the above, petitioner's claim for refund cannot be established by a bare computer generated listing of the alleged investments considering that the contents thereof are not verifiable as there are no other supporting documents to consider in evaluating the veracity of the entries made therein. Moreover, the transcript of stenographic notes revealed that the testimony of petitioner's witness simply refers to the contents of the said computer list and therefore a mere reiteration of the same. 9 In this wise, the Court of Tax Appeals ruled, and We agree: "(A)s to the rest of the claims that fall within the two-year prescriptive period, this Court finds that the petitioner failed to prove by competent evidence its allegation that it invested the funds of these retirement plans in money market placements, other deposit substitute instruments and government securities during the period claimed. A scrutiny of the evidence presented by the petitioner further revealed that the following account names lack supporting documents like BIR certifications of income tax exemptions, and/or trust agreements, and/or retirement plan: . . . The only evidence petitioner presented to show that it had invested money from the various retirement funds is a computer list which detailed the breakdown of net interest income earned per month and year in money market placements, government securities, etc. (see Exhibit "E"). A mere computerized list is not sufficient to enable this Court to check the accuracy of the amounts indicated therein . Additional evidence should have been presented by petitioner to prove purchase of government securities such as confirmations of sale . It is also significant to point out that petitioner did not engage the services of an independent CPA to certify the correctness of its computation of the final taxes being claimed in the present petition . A claim for refund is in the nature of tax exemption and should be construed in strictissimi juris against the taxpayer (Commissioner of Internal Revenue vs. Tokyo Shipping Company, Ltd., 244 SCRA 332). In the instant case, petitioner failed to fully convince this Court that it is entitled to the amount being claimed." 10 (Emphasis supplied) The above-quoted decision was restated and further discussed by the Court of Appeals in a Resolution dated November 19, 1998, to wit: "It is the contention of the Petitioner that sufficient evidence was presented to establish that the money of the various retirement funds were invested in money market placements, other deposit substitute instruments and government securities. These are in the form of computer generated listings (Exh. E, I to I-34, L to L-2, M to M-6, N to N-3, O-1 to O-3) detailing the date, the instrument, the account number, the principal, the maturity value, and the net interest concerning the investments. Likewise, the certifications issued by the withholding agents (Exhs. A to A-27, B to B-18, C to C-81, Y to Y-25 and R to R-56) and the testimonies of Petitioner's witnesses prove that investments were made. The above allegations of Petitioner are untenable and We still hold that the computer generated listings of the investments made by the Petitioner in behalf of the various retirement funds, are unverifiable and self-serving . There should be a source document to support every entry made therein and for the Court to evaluate the accuracy of the contents thereof . We are also not convinced that the certifications issued by the withholding agents, together with the monthly remittance of taxes withheld and testimonies of petitioner's witnesses, are sufficient to prove that the money of the funds were used in various investments . It should be stressed that the certifications issued by different withholding agents were general in nature . There are no details as to how much each of the various retirement funds, subject herein, earned in each kind of investment . Thus, it cannot be verified if the taxes withheld really pertain to the funds of the exempt retirement plans ." 11 (Emphasis supplied) Records also disclosed that the petitioner has not shown that the tax sought to be refunded was actually withheld and remitted to the Bureau of Internal Revenue. As the certifications issued by the withholding agents cannot be verified and since it is general in nature, there are no details as to how much was earned by each kind of various investment funds and therefore it cannot be ascertained if the taxes withheld actually pertain to the funds of the exempt retirement plans. SCaDAE Prescinding therefrom, We find no cogent reason warranting disturbance of CTA's findings of fact. Inasmuch as such findings are supported by evidence on record, the same is binding upon the appellate court and deserves highest respect under existing jurisprudence. At this point, the pronouncement of the Supreme Court in the case of Philippine Refining Company vs. Court of Appeals 12 is worth recalling, thus: "The Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Through its expertise, it is undeniably competent to determine the issue whether or not the debt is deductible through the evidence presented before it. Because of this recognized expertise, the findings of the CTA will not ordinarily be reviewed absent a showing of gross error or abuse on its part. The findings of fact of the CTA are binding on this Court and in the absence of strong reasons for this Court to delve into facts, only questions of law are open for determination ." In the same vein, We vehemently reject the contention of the petitioner that the proof of every purchase and use of the funds need not be presented because the main issue in the instant case is the erroneous withholding of taxes. In addressing this argument, the Court of Tax Appeals aptly states: Petitioner went on to reason that the proof of every purchase and use of the funds need not be presented because the main issue at hand is the erroneous payment of withholding taxes . To the Court's mind, such statement is incredulous . Of course, the issue here is the erroneous payment of withholding taxes of various retirement funds which were categorized by law as exempt from its payment . But how can Petitioner prove that there was an erroneous payment of withholding tax if it will not submit evidence that will show that the money of the funds were used and were subjected to withholding tax? " 13 (Emphasis supplied) Anent the second ground, petitioner asserts that it should have been allowed by the Court of Tax Appeals to present additional evidence to support its claim for refund pursuant to Section 1, Rule 37 of the 1997 Rules of Civil Procedure. Petitioner went on further by reasoning: "At the time the original petition was filed in 1992 and amended in 1994 the Petitioner was holding its office in Intramuros, Manila. In 1995 or at the time the case was being tried by the CTA, Petitioner transferred to its new headquarters in Makati. In the course of the relocation, certain documents material to this case were unavoidably misplaced and/or commingled with other bank documents and therefore were not presented during the course of the trial despite reasonable diligence and effort to locate them. Recently, or after the case was submitted for resolution by the CTA, these documents which include, among others, BIR certificates of tax exemption and proof of purchase of commercial instruments have been located and found by the Petitioner. If presented, these documents could affect and alter the decision of the CTA in favor of the petitioner." 14 We find the assertion untenable. DSATCI Firstly, if the petitioner is really determined that it can readily substantiate its claim for refund through presentation of the alleged BIR certificates of tax exemption and proof of purchase of commercial instruments as claimed to have been found recently, the instant petition with alternative prayer for new trial should have been accompanied by affidavits of merits showing the facts constituting the ground therefore and the newly discovered evidence. 15 However, petitioner did not bother to attach in its petition a copy of said evidence. Even assuming that the instant petition is accompanied by affidavits of merits and the averred newly discovered evidence, still, Section 1, Rule 37 of the Revised Rules of Court explicitly states: "Section 1. Grounds of and period for filing motion for new trial or reconsideration . Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of said party: a) Fraud, accident, mistake or excusable negligence which ordinarily prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or b) Newly discovered evidence, which he could not, with reasonable diligence, have discovered and produced at the trial, and which if presented would probably alter the result ." In judiciously applying the above provision, the Court of Tax Appeals ruled: "Petitioner claims that it transferred its office to Makati in 1995 and in the course of such relocation, certain documents material to the case were misplaced and/or co-mingled with their bank documents thus preventing the presentation of said documents as evidence. The relocation mentioned in the motion occurred in 1995 and considering that this case was submitted for decision in August of 1997, petitioner had ample time to sort out these so-called 'co-mingled' documents and pick out which of them are necessary to present in evidence . To our mind, if one already has an idea as to what documents are to be presented beforehand, due diligence should have been exercised to locate every one of them because the success or failure of the petition depends upon how well one proves his case. It is also too far-fetched to consider these documents as newly-discovered as jurisprudence has settled that for a new trial to be granted, the 'newly discovered evidence' must meet the following conditions: 1) that such evidence has been discovered after trial; 2) that even with the exercise of reasonable diligence, it could not have been discovered and produced at the trial ; 3) that such evidence is of such a nature as to probably alter the result, if properly admitted. (Bernardo vs. Court of Appeals, 216 SCRA 224). In summary, we see no convincing reason the motion for new trial." 16 (Emphasis supplied) Time and again, the Highest Tribunal has consistently upheld that one of the requisites of newly discovered evidence, as a ground for new trial is that such new and material evidence could not have been discovered and produced at the trial even with the exercise of reasonable diligence. 17 Circumstances in the case at bar will tell us that petitioner did not exercise reasonable diligence to locate the said "newly discovered evidence." Such being the case, the Court of Tax Appeals is justified in denying the motion for new trial. Additionally, this Court is left with no recourse but to conclude that this is a simple case of negligence on the part of the petitioner. For this act of negligence, the petitioner cannot be allowed to seek refuge by way of a motion for new trial. 18 WHEREFORE, premises considered, the petition for review is DENIED and is accordingly DISMISSED. The Decision of the Court of Tax Appeals dated July 31, 1998 in CTA Case no. 4848 denying petitioner's claim for a refund of the allegedly erroneously withheld income taxes in the total amount of P56,247,566.00 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. Abesamis and Guevara-Salonga, JJ., concur . Footnotes 1. pp. 24-34, Rollo . 2. pp. 335-336, Original Record (Folder II). 3. pp. 1-4, Original Record (Folder I). 4. p. 33, Rollo . 5. p. 7-8, Rollo . 6. Citibank N.A. vs. Court of Appeals, 280 SCRA 459. 7. Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332; Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95. 8. Western Minolco Corp. vs. Commissioner of Internal Revenue. 9. p. 13-17, TSN dated December 8, 1995. 10. p. 28-33, Rollo . 11. p. 36-38, Rollo . 12. 256 SCRA 214. 13. p. 38, Rollo . 14. p. 14-15, Rollo . 15. Sec. 1, Rule 53, 1997 Rules of Civil Procedure. 16. p. 40-41, Rollo . 17. People vs. Leangsiri, 252 SCRA 213; Amper vs. Sandiganbayan, 279 SCRA 434; People vs. Dalabajan, 280 SCRA 696; People vs. Tirona, 300 SCRA 431. 18. Commissioner of Internal Revenue vs. A. Soriano Corporation, et al. [G.R. No. 113703, January 31, 1997.]