Equitable PCI Bank v. Commissioner of Internal Revenue

NINTH DIVISION [CA-G.R. SP No. 59522. July 23, 2003.] EQUITABLE PCI BANK (formerly known as EQUITABLE BANKING CORPORATION) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ABDULWAHID , J p : This is a petition for review filed under Rule 43 of the 1997 Rules of Civil Procedure, assailing the following decision and resolution of the Court of Tax Appeals in CTA Case No. 5559, entitled Equitable Banking Corporation versus Commissioner of Internal Revenue: (1) Decision dated February 21, 2000, denying the petitioner Equitable Banking Corporation's prayer for tax refund in the amount of P2,092,248.52; and (2) Resolution dated June 16, 2000, denying the petitioners motion for reconsideration. The undisputed facts are summarized, as follows: Petitioner Equitable PCI Bank (EPCIB, for brevity), formerly known as Equitable Banking Corporation, is a domestic banking institution duly organized and existing under the laws of the Philippines. On October 20, 1995, it filed its quarterly percentage tax return for the quarter ending September 30, 1995. In the said return, it reflected a total amount of P449,303,178.96 as its gross receipts and the corresponding tax due in the amount of P20,844,915.53. 1 On January 30, 1996, the Court of Tax Appeals (CTA, for brevity) rendered a decision in CTA Case No. 4720, entitled "Asian Bank Corporation vs. Commissioner of Internal Revenue," where it ruled that the 20% final withholding tax on bank's interest income should not form part of its taxable gross receipts for the purpose of computing the tax on gross receipts. 2 Because of the CTA's decision in said Asian Bank case (CTA Case No. 4720), petitioner EPCIB filed on September 26, 1996, an administrative claim with the Commissioner of Internal Revenue (CIR, for brevity) for tax refund, alleging that in computing the gross receipts for the quarter ending September 30, 1995, it included the amounts P11,614,518.71 and P30,230,451.73, representing 20% portion of tax paid income and investment income subject to 20% final tax booked at gross. 3 However, due to the inaction of the CIR to act on the claim, the petitioner filed a petition for review with the CTA to beat the two-year deadline from October 20, 1995, to claim for the refund. 4 The CTA admitted all the evidence presented and offered by the petitioner per Resolution dated August 17, 1998. 5 However, on October 7, 1998, the petitioner filed an omnibus motion to hold the filing of its memorandum, to reopen the case and to allow it to present additional evidence. 6 On January 8, 1998, the CTA denied the petitioner's motion. 7 The petitioner's motion for reconsideration was likewise denied. 8 Instead of filing the required memorandum with the CTA, the petitioner filed a petition for certiorari with prayer for a temporary restraining order and writ of preliminary injunction with the Court of Appeals. 9 On February 21, 2000, the CTA rendered a decision, 10 with a dissenting opinion from among one of the Commissioners, 11 denying the petitioner's claim on the ground that it failed to prove that the amount sought to be refunded had been paid and remitted to the BIR. The CTA, likewise, denied petitioner's motion for reconsideration, hence, this petition before us. The petitioner claims the CTA erred as follows: 12 1. IN HOLDING, THAT EPCIB'S EVIDENCE TO PROVE IT'S CLAIM FOR REFUND OF EXCESS GROSS RECEIPTS TAX IS INSUFFICIENT; AND 2. IN NOT GRANTING EPCIB'S MOTION TO REOPEN THE CASE TO PRESENT ADDITIONAL EVIDENCE, ASSUMING ARGUENDO THAT EPCIB'S EVIDENCE IS INSUFFICIENT. The main issue raised in this petition is whether the petitioner is entitled to a tax refund? The CTA ruled in the negative because the petitioner failed to comply with the requisites to warrant a tax refund. It ruled thus: 13 What is now left for the petitioner to prove is its compliance with the following requisites: 1. that it paid the gross receipts tax; 2. that it erroneously overpaid its gross receipts by including the 20% final withholding tax on its passive income as part of the gross receipts declared in the quarterly percentage tax return for the quarter ended September 30, 1995; and 3. that the withholding agent certifies that there is 20% final withholding tax on such passive income which is tantamount to double taxation. . . . A careful examination of all the evidence at hand reveals that Petitioner only complied with requirements number one and two. Petitioner was able to show that it paid gross receipts tax for the quarter ended September 30, 1995 as evidence[d] by the quarterly percentage tax returns (Exhs. B, B-1 to B-6). The Petitioner's subsidiary ledgers show that the amounts of P11,614,518.71 and P30,230,451.73, representing 24% portion of tax paid income and investment income subject of 20% final tax booked at gross, respectively, were included in the gross receipts of Petitioner . . . However, Petitioner failed to comply with the third requirement. Nowhere in the evidence presented by Petitioner did it submit the Certificates of Final Income Tax Withheld issued by the withholding agents. These documents are indispensable for the Court to know and determine that the amounts excluded by Petitioner in its gross receipts represent the 20% final tax on passive income. We cannot rely solely on the recording and computation made by Petitioner. It should be emphasized that in order to be entitled to the refund sought, Petitioner must prove that there was payment of gross receipts tax and that the 20% final tax withheld on passive income was included in the computation of gross receipts upon which the gross receipts tax was based. Furthermore, Petitioner must show proof that the 20% final tax was indeed paid and remitted to the Bureau of Internal Revenue. In the absence of a vital document that will substantiate payment of final tax on passive income, the same deserves no inclusion from gross receipts ( Philam Savings Bank Inc. vs. The Commissioner of Internal Revenue, CTA Case No. 5407, August 8, 1998 ). Settled is the rule in this jurisdiction that a claim for refund is in the nature of a claim for exemption, hence, should be construed in strictissimi juris against the taxpayer ( Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd, 244 SCRA 332 ). WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DENIED due to insufficiency of evidence. We agree with the CTA. It should be emphasized that the burden of proof in this case rests on the petitioner to show that it is entitled to a tax refund. And the reason is apparent. Tax refunds are by nature tax exemptions. Hence, they are derogatory to the sovereign authority and are construed strictly against the taxpayer seeking for the exemption. 14 It is incumbent, therefore, upon the petitioner to prove by clear and convincing evidence to justify its claim for the exemption. A review of the records shows that the petitioner indeed failed to present evidence that its payment of the 20% final tax was withheld by the withholding agent, an essential requisite for the claim for refund or tax credit. The evidence presented by the petitioner consisted of the following: (1) transmittal sheets prepared by the petitioner; (2) the petitioner`s quarterly percentage tax return proving that it paid its tax on its gross receipts; (3) written claim for refund; and (4) subsidiary ledgers and statement of income and expenses, which were all prepared by the petitioner, hence, self-serving. 15 None of the evidence presented shows that the withholding agent of the petitioner withheld the amounts sought to be subject of the refund. As to the second issue, we find no factual and legal basis to reverse or set aside the CTA's denial of the petitioner's motion for the reopening of the case for the presentation of additional evidence. We see no reason, except for negligence, why the petitioner failed to present evidence that it paid the final tax through its withholding agent. As a rule, a motion to reopen the trial may be allowed after either or both parties have offered or closed their evidence but before judgment. 16 However, the presentation of additional evidence is allowed only in the following instances: (1) when it is a newly discovered evidence or where it has been omitted through inadvertence or mistake, or where the purpose of the evidence is to correct evidence previously offered; 17 and (2) for good reasons in the furtherance of justice. 18 Petitioner's motion to reopen the case is solely based on the previous CTA decisions in CTA Case No. 5411 and CTA Case No. 5416 involving the same parties and the same issues. But while it alleged mistake to justify the presentation of additional evidence, which were already in existence during the trial of the case, petitioner failed to state the facts surrounding the alleged mistake and excusable negligence. Apparently, the petitioner was given ample opportunity to prove its case during the trial. Thus, to allow the petitioner to present additional evidence after it had been given a chance to justify its cause would open a can of worms, so to speak, giving rise to a dangerous precedent where there would be no end to the litigation. On this, the Supreme Court in Commissioner of Internal Revenue v. A. Soriano, et. al. , 267 SCRA 313 (1997) has this to say: . . . For this act of negligence, the petitioner cannot be allowed to seek refuge in a liberal application of the Rules. For it should not be forgotten that the first and fundamental concern of the rules of procedure is to secure a just determination of every action. In the case at bench, a liberal application of the rules of procedure to suit the petitioner's purpose would clearly pave the way for injustice as it would be rewarding an act of negligence with undeserved tolerance. WHEREFORE, the petition is hereby DISMISSED and the assailed Decision dated February 21, 2000 and Resolution dated June 16, 2000, of the Court of Tax Appeals in CTA Case No. 5559 are AFFIRMED. SO ORDERED. Dela Cruz and Sabio, Jr . , JJ . , concur. Footnotes 1. Petition for Review (CTA). Rollo, p. 46. 2. Ibid. Rollo, p. 45. 3. Ibid. , p. 46. 4. Ibid., pp. 44 and 47. 5. Rollo, pp. 124125. 6. Rollo, pp. 126129. 7. Decision (CTA), p. 4. Rollo, p. 29. 8. Ibid. , p. 5. Rollo, p. 30. 9. Ibid. 10. Rollo, p. 2635. 11. Rollo, pp. 3739. 12. Note from the Publisher: No footnote text in the official copy obtained from the Court of Appeals. 13. Decision (CTA), pp. 810. Rollo, pp. 3335. 14. Commissioner of Internal Revenue v. S. C. Johnson and Son, Inc., 309 SCRA 87 ( 1999), citing Commissioner of Internal Revenue v. Tokyo Shipping Co., Ltd., 244 SCRA 332 ; Province of Tarlac v. Alcantara, 216 SCRA 790; Magsaysay Lines, Inc. v. Court of Appeals, 260 SCRA 513; and Wonder Mechanical Engineering Corporation v. CTA, 64 SCRA 555. 15. Rollo, pp. 65123. 16. Alegre v. Reyes, 161 SCRA 226 (1988), Agulto v. Court of Appeals, 181 SCRA 80 (1990). 17. 1 Moran's Comments on the Rules of Court, 2d ed., 545; C.J., 160163 cited in Alegre v. Reyes, supra., and Agulto v. Court of Appeals, supra. 18. Siuliong & Co. v. Ylagan, 43 Phil. 393, U.S. v. Alviar, 36 Phil. 804.