PDCP Development Bank, Inc. v. Commissioner of Internal Revenue

FIRST DIVISION [CA-G.R. SP No. 57374. August 3, 2000.] PDCP DEVELOPMENT BANK, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF APPEALS , respondents . D E C I S I O N VILLARAMA, JR. , J p : Before Us is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure , as amended, seeking to reverse and set aside the Decision 1 the Court of Tax Appeals (CTA) dated November 16, 1999 and its Resolution 2 dated January 31, 2000 denying petitioner's motion for reconsideration thereof. The factual antecedents as stated in the assailed Decision are as follows: "On March 19, 1997, the Board of Directors of Petitioner declared the cash dividend to all stockholders of record holding convertible preferred shares, one of which is DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH or DEG-GERMAN Investment and Development Company, heretofore called "DEG", a non-resident German financing institution alleged to be totally owned and controlled by the Government of the Federal Republic of Germany. "Based on DEG's entitlement to a gross dividend of P88,609.57, Securities Transfer Services, Inc., the stock transfer and dividend disbursing agent of Petitioner, withheld and remitted to Respondent's Bureau on September 10, 1997 the amount of P132,721.44 representing 15% tax applicable to dividends received by a non-resident foreign corporation from a domestic corporation. "On April 30, 1998, Petitioner filed an application for refund of the aforesaid amount of tax withheld before Respondent's Bureau contending that pursuant to Section 28(b)(8)(A) of the Tax Code, as amended, and BIR Ruling dated January 13, 1076, addressed to the Embassy of the Federal Republic of Germany, the dividend received by DEG was exempt from the payment of income tax and consequently withholding tax, the latter being a financial institution totally owned and controlled by the Government of the Federal Republic of Germany. "Respondent, however, allegedly failed to act upon such application despite the near expiry of the two-year prescriptive period for the filing of a judicial claim for refund. In order to preserve its claim, Petitioner instituted the instant Petition for Review on June 26, 1998. cDAEIH "At bar, Petitioner reasserts its stance a quo . On the other hand, Respondent interposed, inter alia, the special and affirmative defense that DEG, allegedly being a German financial institution owned and controlled by the Government of the Federal Republic of Germany, was not supported by proper documentation. In his memorandum, Respondent further pointed out that the BIR Ruling cited by the Petitioner refers to a different company, namely, Deutsche Gesellschaft fuer wir'schaftilche Zuscrummonderbelt and not DEG- Deutsche Investitions und Entenicklungsgesellschaft mbH or DEG-German Investment and Development Company." After due proceedings, public respondent CIA rendered a Decision dated November 16, 1999, concurring with the contention of public respondent Commissioner of Internal Revenue, the dispositive portion which reads: "WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DISMISSED for lack of merit. "SO ORDERED." Dissatisfied with such ruling, petitioner filed a motion for reconsideration which was, however, denied in a Resolution dated January 31, 2000. Hence, this recourse. Petitioner posits that DEG is entitled to a refund pursuant to Section 28(b)(8)(A) 3 of the Tax Code, as amended, which provides that: "SEC. 28. Gross Income. (a) General definition. . . . . (b) Exclusions from gross income The following items shall not be included in gross income and shall be exempt from taxation under this Title: (1) . . . (2) . . . (3) . . . (4) . . . (5) . . . (6) . . . (7) . . . (8) Miscellaneous Items. (A) Income received from their investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on their deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from them, and (iii) international or regional financing institutions established by governments. (B) . . . (C) . . . (D) . . . (E) . . ." and BIR Ruling dated January 13, 1976, 4 addressed to the embassy of the Federal Republic of Germany, exempting from the payment of income tax and consequently withholding tax, financial institutions totally owned and controlled by the Government of the Federal Republic of Germany, specifically the Deutsche Gesellschaft fuer wir'schaftilche Zuscrummonderbelt or German Development Company, and BIR Ruling dated September 18, 1992 5 stating that Deutsche Gesellschaft fuer wir'schaftilche Zuscrummonderbelt or German Development Company is the former name of DEG. On the other hand, although admitting entitlement to a refund, public respondents aver that it is already too late for petitioner to seek refuge on BIR Ruling dated September 18, 1992 because it was presented only during petitioner's motion for reconsideration of the Decision of the CTA dated November 16, 1999. Further, public respondents claim that the said BIR Ruling is not subject to judicial notice it being a private document. We rule in favor of petitioner. To begin with, there is here no dispute as to the entitlement of petitioner to a tax refund. The cited BIR Rulings explicitly declare that its stockholder of record, Deutsche Gesellschaft fuer wir'schaftilche Zuscrummonderbelt or German Development Company is tax exempt. While it is true that the established rule in this jurisdiction is that a claim for tax refund is in the nature of a claim for tax exemption and should be construed in strictissimi juris against the taxpayer who has the burden of proof to establish the factual basis of such claim, the same will not apply in the present case because the only issue to be resolved here is whether or not BIR Ruling dated September 18, 1992 can be entertained to support petitioner's claim for a tax refund. ESTCHa In not giving credence to BIR Ruling dated September 18, 1992, public respondent CTA declared that the same cannot be considered on the ground that it is not mandatory for it to take judicial notice of such ruling as it was merely addressed to an individual taxpayer (SGV & Co., in behalf of its client Indo-Phil. Textile Mills, Inc.) seeking legal interpretation from public respondent CIR over certain facts and issues and therefore private in nature. We do not subscribe to such reasoning. Rule 129 Section 2 of the Rules of Court , as amended, provides: "Sec. 2. Judicial Notice when discretionary . A court may take judicial notice of matters which are of public knowledge, or are capable of unquestionable demonstration, or ought to be known to judges because of their judicial functions." Thus, a court may take judicial notice of a matter if the same is capable of unquestionable demonstration. In this case, there is no dispute that the said BIR Ruling was issued by the Bureau of Internal Revenue. Being an official act of the Executive Department, public respondent CTA should have taken judicial notice of the said ruling as it is capable of immediate and accurate demonstration. Public respondent CTA could very well verify the authenticity and truthfulness of the same from available sources of indisputable information. Furthermore, it is highly unthinkable for petitioner to raise such ruling if the same is a falsity in view of the fact that the issuing authority is no other than public respondent CIR. Even granting arguendo that the same is not subject to judicial notice, public respondent CTA should have considered the subject BIR Ruling as petitioner already raised and even annexed the same to its motion for reconsideration. With such information on hand, public respondent CTA should have resolved petitioner's motion for reconsideration in favor of the latter, there being more than substantial evidence to show that petitioner is indeed without doubt entitled to tax refund. We likewise hold that there was no need for petitioner to inform the Bureau of Internal Revenue of its Ruling dated September 18, 1992 when it filed an application for refund as the latter should have taken judicial notice of its own ruling that DEG and Deutsche Gesellschaft Fuer wir'schaftilche Zuscrummonderbelt or German Development Company are one and the same corporation. At any rate, public respondents cannot raise at this stage the fact that the subject BIR Ruling was raised merely in petitioner's motion for reconsideration as this was not mentioned in the Resolution dated January 31, 2000 issued by public respondent CTA. SDEHCc There being more than substantial evidence to prove that petitioner is entitled to a tax refund, the same should be granted. Furthermore, as held in the case of Citibank, N.A. vs. Court of Appeals . 6 "Hence, under the principle of solutio indebiti provided in Art. 2154, Civil Code, the BIR received something when 'there [was] no right to demand it, and thus 'the obligation to return arises.' Heavily militating against Respondent Commissioner is the ancient principle that no one, not even the state, shall enrich oneself at the expense of another. Indeed, simple justice requires the speedy refund of the wrongly held taxes." WHEREFORE, premises considered, the instant petition is hereby GIVEN DUE COURSE. Consequently, the assailed Decision dated November 16, 1999 and Resolution dated January 31, 2000 issued by public respondent Court of Tax Appeals are hereby both REVERSED and SET ASIDE. Public respondent Commissioner of Internal Revenue is hereby directed to REFUND to petitioner PDCP Development Bank, Inc. the sum of P132,721.44 No costs. SO ORDERED. Montoya and Callejo, Sr . , JJ . , concur. Footnotes 1. Annex "A" of Petition, Rollo , p. 16. 2. Annex "B" of Petition, Rollo , p. 21. 3. Now Section 32(B)7(a) of the National Internal Revenue Code of 1997. 4. Rollo, p. 34. 5. Annex "G" of Petition, Rollo , p. 58. 6. 280 SCRA 459.