Jaka Investments Corp. v. Commissioner of Internal Revenue

THIRTEENTH DIVISION [CA-G.R. SP No. 51834. August 22, 2000.] JAKA INVESTMENTS CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VIDALLON-MAGTOLIS , J p : This is a Petition for Review of the Decision of the Court of Tax Appeals (CTA) dated January 19, 1999 (not January 6, 1999 as alleged by the petitioner) dismissing the petitioner's petition to claim for a refund of documentary stamp taxes in the amount of Php410,367.00, and its resolution of March 1, 1999 denying the petitioner's motion for reconsideration of the said decision. The petitioner JAKA Investments Corporation is a domestic corporation duly organized and existing by virtue of the laws of the Philippines. It is engaged in making investments in other corporations for the benefit of its stockholders. Sometime in 1994, the petitioner sought to invest in Eurasia Match, Inc. (now JAKA Equities Corporation) which was then planning to undertake an Initial Public Offering (IPO) and listing of its shares of stock with the Philippine Stock Exchange. In connection therewith, JAKA Equities Corporation (formerly Eurasia Match, Inc.) increased its authorized capital stock from One Hundred Eighty Five Million Pesos (Php185,000,000.00) to Two Billion Pesos (Php2,000,000,000.00). On September 5, 1994, the petitioner and JAKA Equities Corporation executed an "Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription" 2 whereby the former would subscribe to the common shares of stocks of the latter with an equivalent total par value of Five Hundred Eight Million Eight Hundred Six Thousand Two Hundred Pesos (Php508,806,200.00) out of the increase in the authorized capital stock of JAKA Equities Corporation. For the subscription, the petitioner assigned and transferred 154,208,404 shares it owned in Republic Glass Holdings Corporation, 2,822,500 shares it owned in Philippine Global Communications, Inc., 7,495,488 shares it owned in United Coconut Planter's Bank and 1,313,176 shares it owned in Far East Bank and Trust Company to JAKA Equities Corporation. Although the petitioner originally intended to include its 1,313,176 shares of stock of Far East Bank among the shares to be transferred to JAKA Equities Corporation by virtue of a tax free exchange, the petitioner instead paid in cash the amount of Three Hundred Seventy Million Seven Hundred Sixty Six Thousand Pesos (Php370,766,000.00) in lieu of the FEBTC shares. On October 14, 1994, the petitioner paid the Commissioner of Internal of Internal Revenue (CIR) the amount of Php1,003,895.65 3 representing the documentary stamp tax and surcharges due on the execution of the Amended Subscription Agreement and Deed of Assignment dated September 5, 1994 which computation allegedly erroneously included the cash component of the subscription price, broken down as follows: Documentary Stamp Tax Php803,166.72 25% Surcharge 200,116.93 Total Php1,003,895.65 ============ The payment for the aforesaid tax liability is evidence by Authority to Accept Payment SN: 1511920. 4 On October 17, 1994, Atty. Sixto S. Esquivias IV, Revenue District Officer of Revenue District No. 48, West Makati, Revenue Region No. 8, Bureau of Internal Revenue (BIR) issued three (3) Certifications as follows: Cert. No. Shares of Stocks Documentary Stamps 94-10-17-07 7,495,488 UCPB shares Php23,423.14 (Exh. "C") 94-10-17-08 154,208,403 RGHC shares 481,901.88 (Exh. "D") 94-10-17-14 2,822,500 Philcom shares 88,203.13 (Exh."E") Php593,528.15 =========== On the basis of such certifications, the petitioner sent the BIR through its legal counsel a letter dated October 10, 1996 5 seeking a refund of the excess documentary stamp tax and surcharges paid on the execution of the Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription. On October 11, 1996, the petitioner filed an administrative claim for refund in the amount of Php410,367.00 which represents the difference between the aforementioned amount actually paid totalling Php1,003,895.65 6 and the petitioner's alleged amount due of Php593,528.15 7 on the execution of the Amended Subscription Agreement and Deed of Assignment of Property. Considering that the 2-year period within which an action for refund may be brought would expire on October 14, 1996, the petitioner was constrained to file a refund case before the Court of Tax Appeals (CTA). On January 6, 1999, the CTA rendered the questioned Decision. 8 The petitioner's Motion for Reconsideration was likewise denied. 9 Hence, this appeal. ASSIGNMENT OF ERROR According to the petition, the CTA erred in holding that it (petitioner) is not entitled to a refund in the amount of Four Hundred Ten Thousand Three Hundred Sixty Seven Pesos (Php410,367.00) representing the documentary stamp tax erroneously computed and paid on the execution of the Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription since the documentary stamp paid by petitioner was not based on said document. THE ISSUE The sole issue in the case at bench is whether or not the petitioner is entitled to a refund of the allegedly excess amount of the documentary stamp tax and the surcharges it paid on the execution of the Amended Subscription Agreement and Deed of Assignment of Property. ARGUMENTS OF THE PETITIONER The petitioner claims that on the basis of the Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription, the documentary stamp taxes due thereon was only Php593,528.15; however, it actually paid a total of Php1,003,895.65 which represents the documentary stamp tax of Php803,116.72 and the 25% surcharge of Php200,116.93. Since it paid more than what was due, it is entitled to a refund. While there was indeed an earlier Subscription Agreement and Deed of Assignment of property which was to be the basis of the petitioner's investment in JAKA Equities Corporation, the same could not be the basis of the documentary stamp tax, for it was never effected. What was enforced was the Amended Subscription Agreement and Deed of Assignment of Property and therefore, the amended document should have been the basis of the tax payment. Therefore, the tax court was in error when it refused to make a refund after the Amended Subscription Agreement and Deed of Assignment of Property had been executed. ARGUMENTS OF THE RESPONDENT The respondent CIR moves for the dismissal of the petition preliminarily because of the petitioner's failure to comply with the rule on verification and certification of non-forum shopping under Administrative Circular No. 09-94. The petition herein appears to have been verified, and the certification of non-forum shopping signed, not by the petitioner through its duly authorized representative but by the petitioner's counsel in violation of the aforesaid rule. Moreover, the documentary stamp tax imposed in this particular case is on the original issue of certificates of stock of JAKA Equities Corporation, with its subscription of Php508,806,200.00 shares out of the increase in the authorized capital stock of the former pursuant to Section 175 of the National Internal Revenue Code, and not on the shares of stocks owned by the petitioner in Republic Glass Holdings Corporation, Philippine Global Communications, Inc. and United Coconut Planter's Bank which merely form part of the partial payment of the subscribed shares of JAKA Equities Corporation. Furthermore, the amount of documentary stamp taxes represented by the shares of stock in the aforementioned companies totaled only to Php593,528.15, while the basic documentary stamp tax for the entire subscription of Php508,806,200.00 was computed by the respondent's revenue officers to be Php803,116.72 exclusive of the penalties. A balance of Php209,588.57 remains, clearly indicating that the payment made with the shares of stock is insufficient. Likewise, the issuance of the certifications by RDO Sixto S. Esquivias IV was purposely to allow the transfer of the shares of stock used in payment of the subscribed shares in the name of JAKA Equities Corporation from the petitioner, and not as evidence of the payment of the documentary stamp tax indicated thereon. THE COURT'S RULING This petition must fail. As correctly pointed out by the respondent, the Verification and Certification of Non-Forum Shopping was not signed by the petitioner through its duly authorized representative but by the petitioner's counsel. The petitioner asseverates though it has duly authorized its counsel to execute the aforesaid Verification and Certification of Non-Forum Shopping. A close scrutiny of the records, however, would disclose that no such authority or any board resolution of the petitioner-corporation is appended to the petition. Likewise, in its Supplement to Reply which was accompanied by another Affidavit of Non-Forum Shopping executed by its Sr. Vice-President, there is no attached Board resolution showing the latter's authority. In any case, the execution of another affidavit by said officer is an indication that the counsel who originally verified the petition and executed the verification on non-forum shopping had indeed no authority. This being the case, Administrative Circular No. 04-94 has not been complied with. "It must be stressed that the certification against forum shopping ordained under the Rules is to be executed by the petitioner, and not by counsel. Obviously, it is the petitioner, and not always the counsel whose professional services have been retained for a particular case, who is in the best position to know whether he or it actually filed or caused the filing of a petition in that case. Hence, a certification against forum shopping by counsel is a defective certification. It is clearly equivalent to non-compliance with the requirement under Section 2, Rule 41 in relation to Section 4, Rule 45, and constitutes a valid cause for dismissal of the petition." 10 Anent the main issue, We concur with the findings of the tax court. A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used in the transaction of the business separate and apart from the business itself. With respect to stock certificates, it is levied upon the privilege of issuing them; not on the money or property received by the issuing company for such certificates. Neither is it imposed upon the share of stock. As Justice Learned Hand pointed out in one case, documentary stamp tax is levied on the document and not on the property which it described. 11 This pronouncement is made clear in the following provisions of the tax code: "Sec. 173. Stamp taxes upon documents, instruments, and papers . Upon documents, instruments, and papers, upon acceptances, assignments, sales, and transfers of the obligation, right, or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same, wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines and at the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax." (as amended by R.A. No. 7660) "Sec. 175. Stamp tax on original issue of certificates of stock . On every original issue, whether on organization, reorganization, or for any unlawful purpose, of certificates of stock by any association, company, or corporation, there shall be collected a documentary stamp tax of two pesos (P2.00) on each two hundred pesos, or fractional part thereof, of the par value of such certifications: Provided, That in the case of the original issue of stock without par value the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration received by the association, company or corporation for the issuance of such stock, and in the case of stock dividends on the actual value represented by each share." (as amended by R.A. 7660). In the case at bench, it is uncontroverted that the petitioner subscribed to the common stocks of JAKA Equities Corporation with an equivalent total par value of Php508,806,200.00 out of the increase in the authorized capital stock of the latter from Php185,000,000.00 to Php2,000,000,000.00. As payment for such subscription, the petitioner assigned and transferred to JAKA Equities Corp. shares of stocks it owned in the following corporations: No. of Shares of Stock Transferred/Assigned Republic Glass Holdings Corp. 154,208,483 Philippine Global Comm. Inc. 2,822,500 United Coconut Planter's Bank 7,495,488 Petitioner originally intended to include in the transfer its 1,313,176 shares of stocks in Far East Bank and Trust Company (FEBTC); however, it opted to pay in cash the amount of Php370,766,000.00. Petitioner alleges, though, that considering that the assessment of payment of documentary stamp tax was made payable only to the aforesaid issuances of certificates of stocks exclusive of that FEBTC shares of stocks which were paid in cash, and that it has paid a total of Php1,003,895.65 inclusive of surcharges for late payment, the petitioner is entitled to a refund of Php410,367.00. This argument does not hold water. As discussed earlier, a documentary stamp is levied upon the privilege, the opportunity and the facility offered at exchanges for the transaction of the business. This being the case, and as correctly found by the tax court, the documentary stamp tax imposition is essentially addressed and directly brought to bear upon the document evidencing the transaction of the parties which establishes its rights and obligations, which in the case at bar, was established and enforceable upon the execution of the Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription. Moreover, the documentary stamp tax is imposed on the entire subscription (i.e., subscribed capital stock) which is the amount of the capital stock subscribed whether fully paid or not. It connotes an original subscription contract for the acquisition by a subscriber of unissued shares in a corporation, 12 which in this case is equivalent to a total par value of Php508,806,200.00. Besides, a tax cannot be imposed unless it is supported by the clear and express language of a statute; on the other hand, once the tax is unquestionably imposed, a claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. 13 And since a claim for refund is in the nature a claim for exemption the same is likewise construed in strictissimi juris against the taxpayer. 14 Furthermore, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of facts. 15 In this case, the tax court did not deviate from this rule. cDEHIC WHEREFORE, the petition is DENIED and is accordingly DISMISSED. The questioned decision is hereby AFFIRMED in toto . SO ORDERED. Bello, Jr. and Asuncion, JJ . 1 , concur. Footnotes 1. Acting Third Member. 2. Exhibit "A", Rollo , p. 58. 3. Exhibit "B", Id .. at p. 64. 4. Ibid . 5. Exhibit "F", Id. at p. 68. 6. Exhibit "H", supra . 7. Exhibit "F", "2", Id . at p. 70. 8. Id ., at pp. 8-15. 9. Id . p. 6. 10. Far Eastern Shipping Company vs. Court of Appeals , 297 SCRA 30, 53. 11. Commissioner of Internal Revenue vs. Heald Lumber Co ., 10 SCRA 372 citing Du Pont vs . U . S ., 300 U.S. 150; Thomas v . U . S . 192 U.S. 363; Nicol v . Ames , 173 U.S. 509 and Empire Trust Co ., vs . Hoey , 103 F. 2d., 430; Pls. see also Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc . 145 SCRA 671, 676-677. 12. The Corporation Code of the Phils. De Leon, 1997 ed., p. 63, citing Sections 60, 61. 13. Davao Gulf Lumber Corporation vs. Commissioner of Internal Revenue , 293 SCRA 76, 88. 14. Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd ., 244 SCRA 332, 336. 15. Commissioner of Internal Revenue vs. Court of Appeals , 298 SCRA 83, 91.