Equitable PCI Bank v. Commissioner of Internal Revenue

TENTH DIVISION [CA-G.R. SP No. 55803. March 22, 2001.] EQUITABLE PCI BANK (formerly EQUITABLE BANKING CORPORATION) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N GUEVARA-SALONGA , J p : This is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure to set aside (a) the August 6, 1999 Decision 1 of the Court of Tax Appeals denying Equitable PCI Bank's (EB) claim for tax refund or issuance of tax credit; and (b) the October 25, 1999 Resolution 2 of the same Court denying the Motion for Reconsideration. Associate Judge Amancio Q. Saga dissented to the majority opinion, voting for the denial of the entire claim for refund not because of insufficiency of evidence, but for lack of legal bases. The dispositive portion of the assailed Decision provides as follows: "WHEREFORE, in view of all the foregoing, the herein Petition for Review is hereby DISMISSED for insufficiency of evidence. "SO ORDERED." 3 The dispositive portion of the Resolution provides as follows: "WHEREFORE, in view of all the foregoing, the instant Motion for Reconsideration is hereby DENIED for LACK OF MERIT." "SO ORDERED." 4 The Facts The Court of Tax Appeals made the following findings of fact: "Petitioner Equitable Banking Corporation is a banking corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at 262 Juan Luna St., Binondo, Manila. "Records show that Petitioner filed with the Respondent Bureau of Internal Revenue its quarterly percentage of tax returns, covering those of its head office and branches, for the quarter ended December 31, 1994, and allegedly paid its Gross Receipts Tax due in the amount of P28, 130, 119.44 (Annex "A"). "Petitioner alleges that of the said amount of P28, 130, 119.44, P17,072,627.26 pertains to percentage tax paid by its head office and its Arranque, Magdalena, Ongpin, Reina Regente and Soler branches (Annexes "B", "B-1" and "B-2"). "On September 26, 1996, Petitioner filed an administrative claim for refund or issuance of a tax credit with the Bureau of Internal Revenue for its alleged overpaid gross tax paid for the quarter ended December 1994 in the amount of P1,231,671.92, computed as follows: acSECT "Gross Receipts Subjected to Tax P445,573,851.09 Less: 20% Portion of Tax 4,048,536.75 Paid Income (Annex B1 of 2 Investment Income subject to 20% final tax booked at gross (Annex B2 of 2) 20,584,901.89 Adjusted Gross Receipts Tax Base P420,940,421.45 Computation of Adjusted Gross Receipts Tax: Gross Receipts Tax Due 0% P67,358,042.92 P0.00 1% 32,479,385.55 324,793.86 3% 26,949,386.08 808,481.58 5% 294,153,597.90 14,707,679.90 P420,940,412.45 P15,840,955.34 Gross Receipts Tax Paid P17,072,627.26 Adjusted Gross Receipts Tax 15,840,955.34 Tax Refund 1,231,671.92 "Petitioner anchors its claim for refund mainly on the decision of this Court in the case of Asian Bank Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4720, January 30, 1996, where We categorically ruled that the 20% final tax on passive income should not form part of the taxable gross receipts for Gross Receipts Tax (GRT) purposes. "Unable to obtain an affirmative relief from the Respondent, Petitioner filed the instant Petition for Review on January 20, 1997 before this Court lest it be barred by the mandatory two-year prescriptive period under Section 230 of the Tax Code (now Section 229 of the NIRC of 1997). "In opposition thereto, Respondent filed its Answer and interposed the following Special and Affirmative Defenses, to wit: 11. The decision in As ian Ba nk Corporation vs. Commissioner of Internal Revenue (CTA Case No. 4720) being invoked by Petitioner under paragraph III (3) of the petition is pending appeal with the Honorable Court, hence, invocation thereof at this point in time is premature. 12. Revenue Regulatio ns No. 1 3-80, dated November 7, 1980, cited by Petitioner governs the taxation of minerals and mineral products and, therefore, it is not applicable to Petitioner's case considering that Petitioner is a banking institution. 13. The petition does not state a cause of action as there is no allegation that the tax sought to be refunded was actually paid and remitted to the Bureau of Internal Revenue in accordance with the provisions of the T ax Co de. 14. Standard procedure in any claim for tax refund requires sufficient time for Respondent to examine the records and business operations of claimant for the quarter/year involved, and Respondent is still investigating the claim. 15. In an action for tax refund, the burden of proof is upon the claimant to establish its right to refund and failure to sustain the burden is fatal to the action. 16. The allegations regarding tax refundability do not ipso factor merit the refund claimed. 17. Any claim for tax refund is construed strictly against the claimant, the same being in the nature of exemption from taxation. "To prove its entitlement to a refund, Petitioner presented among others, the following evidence. 1.) EBC's Transmittal Sheet of Percentage Tax of the Head Office and Branches/Units of Large Taxpayers for the Quarter ended December 31, 1994 (Exh. "A"); 2.) EBC's Quarterly Percentage Tax Return for the quarter ended December 31, 1994 (Exhs. "B", "B-1" and "B-2); 3.) Written claim for tax refund dated September 26, 1996 by EBC thru its Senior Manager Maritess B. Antonio, with supporting documents, requesting the Commissioner of Internal Revenue for refund of, or issuance of credit certificate for, among other figures, the amount of P1,231,671.92 for the alleged excess GRT for the quarter paid on January 20, 1995 (Exhs. "C-1" to "C-10"); 4.) Various EBC's Income and Expense Account Subledgers. "In a Resolution promulgated on September 29,1998, after the parties submitted their respective memorandum, this case was considered submitted for decision. "Submitted for consideration before Us are the following issues: 1.) Whether or not the 20% final withholding tax on bank's passive income forms part of the gross receipts of a taxpayer for GRT purposes. 2.) Whether or not, on the basis of the evidence presented and submitted to this Court, Petitioner is entitled to a refund in the amount of P1,231,671.92 representing alleged overpaid gross receipts tax." 5 The Court of Tax Appeals denied the EB's claim for refund. It stated in its Decision 6 that while it has ruled in several cases before it that the 20% final withholding tax should not form part of the gross receipts of the taxpayer for purposes of the 5% gross receipts tax, including the Asian Bank case 7 (CTA Case No. 4720, January 30, 1996 which was also cited by the petitioner), in relation to Revenue Regulation No. 12-80 dated Nov. 7, 1980 on taxation of certain income derived from banking activities applicable provisions of the Tax Code, and the cases of Collector of Internal Revenue vs. Manila Jockey Club (108 Phil 821) and Compania Maritima vs. Acting Commissioner of Internal Revenue (CTA Case No. 1426), it found that "after a careful scrutiny of the evidence on record" the petitioner Equitable Bank failed to prove its entitlement for refund. Furthermore, the Court of Tax Appeals, held that anent the 20% portion of Tax Paid Income in the amount of P4,048,536.75, petitioner submitted subsidiary ledgers with the following passive interest income, with the exception of interest income, on Lime Loan Asahi: Interest Income 20% Exhibit (Net of FT) Exhibit Final Tax On deposits w/ local banks LL P125,745.33 C-3-a P31,436.33 Trading gains on Gov't Securities SS 14,067,614.16 C-3-a 3,516,903.54 On interbank loans KK 1,051,192.55 C-3-a 262,798.14 On time loan C-3-a 237,398.74 8 And that based on the subsidiary ledgers the bank submitted (Exhs. D, E, J to M, T to U, BB to DD, KK, LL, QQ to SS), it was able to show that the interest income was booked net of final withholding tax. And its computation of overpaid gross receipts tax would appear to be correct. The Court of Tax Appeals nevertheless found that the subsidiary ledgers submitted are not conclusive evidence since the petitioner failed to present the Statements of Certificate of Tax Withheld at Source issued by its withholding agents, accompanied by its Summary, which documents will prove the fact of withholding and remittance to the Bureau of Internal Revenue. The respondent Commissioner of Internal Revenue contends 9 that the finding of the Court of Tax Appeals that the subsidiary ledgers submitted by EB are not adequate evidence to support its claim for refund should be respected, consistent with a long line of cases which hold that the findings of fact of the Court of Tax Appeals are accorded to highest respect, in the absence of gross error or abuse on the part of the tax court. Regarding the issue of the applicability of strictissimi juris, the respondent maintains that the allegation of the petitioner that it has no application in the appreciation of evidence is "erroneous, unwarranted and without legal bases." Even granting that the bank can deduct the 20% final withholding tax from its gross receipts, it does not necessarily follow that there shall be an automatic refund of the alleged overpayment, in the absence of evidence that the EB is clearly entitled thereto. In addition, there is no legal basis because there is no provision in the tax code or special laws which provide that the 20% final withholding tax do not form part of the gross receipts under Section 119 of the Tax Code. Also, the case of CIR vs. Manila Jockey Club, Inc. (108 Phil 821) and Visayan Cebu Terminal Co., Inc. vs. CIR (13 SCRA 357) in relation to the Asian Bank case (CTA Case No. 4720) are not applicable since the factual setting of the petitioner is different from that of the cited cases. On the propriety of the reopening of the case, it is insisted that the grounds presented by the petitioner are not among those where the presentation of additional evidence may be allowed, and the denial of the motion to reopen was therefore proper and consistent with Supreme Court decided cases. SEDaAH The Issues The petitioner EB assigns the following errors 10 , quoted verbatim: THE COURT OF TAX APPEALS ERRED: 1. IN HOLDING THAT EB'S EVIDENCE TO PROVE ITS CLAIM FOR REFUND OF EXCESS GROSS RECEIPTS TAX IS INSUFFICIENT; AND 2. IN NOT GRANTING EB'S MOTION TO REOPEN THE CASE TO PRESENT ADDITIONAL EVIDENCE. ASSUMING ARGUENDO THAT EB'S EVIDENCE IS INSUFFICIENT. The petitioner contends 11 that it has sufficiently proved its claim for tax refund. It stresses that the doctrine of strictissimi juris is allegedly used only in interpreting a tax law in order to determine the legislative intention. It does not apply in the appreciation of evidence 12 and cites the cases of Commissioner of Internal Revenue vs. Rio Tuba Nickel Mining Corp. 207 SCRA 549 (1992) and Resins, Inc. vs. Auditor General 25 SCRA 754, 757 (1968). 13 It maintains that the when the Court of Tax Appeals said in its Decision that "it is but logical to infer that the final tax, not having been received by the Petitioner but instead went to the coffers of the government should no longer form part of its gross receipts for the purpose of computing the GRT," 14 and cites the case of CIR vs. Manila Jockey Club (108 Phil 821) and Compania Maritima vs. Acting CIR (CTA Case No. 1426 dated November 14, 1966. And following the CTA's ruling the aforementioned Asian Bank case, it is allegedly therefore entitled to refund, since its testimonial and documentary evidence prove that it did not receive the amounts of P4,048,536.75 and P20,584,901.89, representing the 20% portion of tax-paid income and investment income subjected to 20% final tax booked at gross, respectively. Its evidence consisting of ledgers composed of computer printouts from the files/records of EB's Accounting Department show entries of amounts which were recorded in the ordinary course of business made at or near the time of the transaction and therefore are allegedly admissible evidence under Section 43 of Rule 130 of the Rules of Court. In addition, the fact of withholding and remittance by the withholding agents is presumed under Section 3 of Rule 131 of the Rules of Court. Since the evidence already presented by the petitioner sufficiently show its entitlement to refund, the Commissioner of Internal Revenue has already the burden of evidence to prove that the amounts were received by the bank. The bank further contends that the motion to reopen was properly and seasonably filed because, first, there is no precedent regarding the manner of claiming GRT refund, and second, when the motion was filed there was allegedly no decision yet by the CTA on the case although it has been submitted for decision. Furthermore, it insists that it is allegedly entitled to present evidence to prove that its withholding agents withheld and remitted the appropriate final tax in the interest of substantial justice, and cites cases decided by the Supreme Court where the technicality of rules were disregarded. On the other hand, the respondent Commissioner of Internal Revenue contends 15 that the finding of the Court of Tax Appeals that the subsidiary ledgers submitted by EB are not adequate evidence to support its claim for refund should be respected, consistent with a long line of cases which hold that the findings of fact of the Court of Appeals are accorded with the highest respect, in the absence of gross error or abuse on the part of the tax Court. Regarding the issue of the applicability of strictissimi juris , the respondent maintains that the contention of the petitioner that it has no application in the appreciation of evidence is "erroneous, unwarranted and without legal bases." Even granting that the bank can deduct the 20% final withholding tax from its gross receipts, it does not necessarily follow that there shall be an automatic refund of the alleged overpayment, in the absence of evidence that the EB is clearly entitled thereto. In addition, there is no legal basis because there is no provision in the tax code or special laws which provides that the 20% final withholding tax does not form part of the gross receipts under Section 119 of the Tax Code, Also, the cases of CIR vs. Manila Jockey Club, Inc. (108 Phil 821) and Visayan Cebu Terminal Co., Inc. vs. CIR (13 SCRA 357) in relation to the Asian Bank case (CTA Case No. 4720) are not applicable since the factual setting of the petitioner is different from that of the cited cases. On the propriety of the reopening of the case, it is posited that the grounds presented by the petitioner are not among those where the presentation of additional evidence may be allowed, and the denial of the motion to reopen was therefore proper and consistent with Supreme Court decided cases. It was also allegedly incorrect for the respondent Court of Tax Appeals to rule that allowing EB a chance to present additional evidence would result in unending litigation and undue delay. Besides, as aptly expressed in the Dissenting Opinion 16 , under Section 26 of the Tax Code, tax exemption can be availed of when the grant is clear and categorical. Taxation is the rule and exemption is the exception. And the non-inclusion of the 20% final withholding income tax from the gross exemption from tax which must be construed strictly not against the government but against the one who asserts the claim of exemption. The Ruling The petition deserves no merit. ANENT THE FIRST ISSUE, this Court finds that the Court of Tax Appeals did not err in holding that Equitable Bank is not entitled to a claim of refund. Settled is the doctrine that findings of facts of a special court (Court of Tax Appeals) exercising particular expertise on the subject of tax, generally binds the higher court. 17 Factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not be disturbed on appeal unless it is shown that the court committed gross error in the appreciation of facts. 18 As a matter of principle, the higher 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. 19 After a careful review of the records, this Court finds that the Court of Tax Appeals committed no gross error in the appreciation of the facts surrounding the petition, nor was there an abuse or improvident exercise of authority. Admittedly, it is the Court of Tax Appeals that possesses expertise on the matter of taxation and the intricacies in the appreciation of the details of each case, and the evidence before it. Be that as it may, the respondent Court of Tax Appeals rightly ruled that without the following documents: the Statements or Certificate of Tax Withheld at Source issued by the withholding agents, accompanied by its Summary 20 , there is no way by which it can know for certain that the withholding agents actually withheld and remitted the amount corresponding to the 20% final tax to the Bureau of Internal Revenue, which the petitioner EB alleges it did not receive from its withholding agents but were included in the first computation of the gross receipts tax it must pay and actually paid to the said Bureau of Internal Revenue. An examination of the records readily reveals that the evidence submitted by herein petitioner are as follows: 1. EBC's Transmittal Sheet of Percentage Tax of the Head Office and Branches/Units of Large taxpayers for the Quarter ended December 31, 1994 (Exh. "A"); 2. EBC's Quarterly Percentage Tax Return for the quarter ended December 31, 1994 (Exhs. "B", "B-1" and "B-2"); 3. Written claim for tax refund dated September 26, 1996 by EBC, thru its Senior Manager Maritess B. Antonio with supporting documents, requesting the Commissioner of Internal Revenue for refund of, or issuance of credit certificate for, among other figures, the amount of P1,231,671.92 for the alleged excess GRT for the quarter paid on January 20, 1995 (Exhs. "C-1" to "C-10"), and 21 4. Various EBC's Income and Expense Account Subledgers. ANENT THE SECOND ISSUE, this Court finds that the Court of Tax Appeals did not err in not granting EB's motion to reopen the case to present additional evidence, assuming arguendo that EB's evidence already submitted is insufficient. In the assailed Resolution denying the petitioner's Motion For Reconsideration, the respondent Court of Tax Appeals held that "(i)n the alternative, Petitioner prays for the reopening of this case to present proof of payment of relevant final taxes by its withholding agent. Again, we deny. A motion to reopen the trial may be properly presented only after either or both parties have formally offered, and closed their evidence but before judgment (Alegre vs. Reyes, 161 SCRA 226, Agulto vs. Court of Appeals, 181 SCRA 80). Seemingly, the cause of the Petitioner is already late inasmuch as judgment in this case has already been rendered. Petitioner had (sic) given more than enough time to present evidence to prove its claim (sic). Furthermore, the evidence which Petitioner belatedly sought to present to Us were already to existence during the trial of this case but which were never presented and submitted during the entire proceedings by reason of Petitioner's inexcusable inadvertence and/or negligence." THCASc It may not be amiss to point out that a motion to reopen the trial is different and distinct from a motion for new trial. For one thing, a motion to reopen may properly be presented only after either or both parties have formally offered, and closed their evidence, but before judgment. On the other hand, a motion for new trial is proper only after rendition or promulgation of judgment. For another, a motion for reopening, unlike a motion for new trial, is not specifically mentioned and prescribed as a remedy by the Rules of Court. There is no specific provision in the Rules of Court governing motions to reopen. It is albeit a recognized procedural recourse or device, deriving validity and acceptance from long established usage. A motion for new trial in civil and criminal actions may be applied for and granted only upon specific, well-defined grounds, set forth respectively in Rules 37 (Section 1) and 121 (Section 2). On the other hand, the reopening of a case for the reception of additional evidence after a case has been submitted for decision but before judgment is actually rendered is, it has been said, controlled by no other rule than that of the paramount interests of justice, resting entirely in the sound judicial discretion of a Trial Court, and its concession, or denial, by said Court in the exercise of that discretion will not be reviewed on appeal unless a clear abuse there is shown. 22 In the case at bench, this Court finds that the denial by the Court of Tax Appeals of the motion to reopen was not tainted with any abuse of discretion. WHEREFORE, in the light of the foregoing, the assailed Decision and the Resolution of the Court of Tax Appeals are affirmed in toto and the instant Petition dismissed. No costs. SO ORDERED. EHTIcD Vidallon-Magtolis and Regino, JJ . , concur. Footnotes 1. Rollo , pp. 19-37 (Including Dissenting Opinion). 2. Id ., pp. 38-42 (Including Dissenting Opinion). 3. Decision, p. 10/ Rollo , p. 28. 4. Resolution, p. 4/ Rollo , p. 41. 5. Rollo , pp. 19-23. 6. Id . 7. It was held therein that the 20% final tax on passive income should not form part of the taxable gross receipt for purposes of the Gross Receipts Tax (CTA Case No. 4720, January 30, 1996). 8. Rollo , p. 26. 9. Rollo , pp. 45-51 & 52-59. 10. Rollo , p. 7. 11. Rollo , pp. 2-18. 12. Rollo , pp. 7-9. 13. Rollo , pp. 7-8. 14. Decision, p. 6 Rollo , p. 24. 15. Rollo , pp. 45-51 & 52-59. 16. Dissenting Opinion, p. 3/ Rollo , p. 31. 17. Commissioner of Internal Revenue vs . Court of Appeals , 301 SCRA 152. 18. Commissioner of Internal Revenue vs . Court of Appeals , 298 SCRA 83. 19. Commissioner of Internal Revenue vs . Court of Appeals , 303 SCRA 614. 20. Decision, p. 9, Rollo , p. 27. 21. Decision, p. 7-8; Rollo , pp. 22-23. 22. Alegre vs. Hon. Reyes , 161 SCRA 226.