Equitable-PCI Bank v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [CA-G.R. SP No. 60786. July 31, 2001.] EQUITABLE-PCI BANK (formerly known as EQUITABLE BANKING CORPORATION) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N GUERRERO , J p : Before Us is a petition for review of the decision of the Court of Tax Appeals (hereafter, CTA), dated 07 June 2000 and its resolution, dated 24 August 2000, denying petitioner Equitable PCI Bank's claim for refund of percentage taxes in the amount of P2,237,924.46. The material antecedents: On 19 April 1996, petitioner Equitable PCI Bank filed its Quarterly Percentage Tax Return for the quarter ending 31 March 1996, which shows total gross receipts in the amount of P541,391,625.79 and payment of percentage taxes in the amount of P24,923,330.78. 1 The taxes were paid under Sec. 249 of Commonwealth Act (C.A.) No. 466, as amended by Republic Act (R.A.) No. 39, the then National Internal Revenue Code, to wit: "SECTION 249. Tax on banks . There shall be collected a tax of five per centum on the gross receipts derived by all banks doing business in the Philippines from interests, discounts, dividends, commissions, profits from exchange, royalties, rentals of property, real and personal, all other items treated as gross income under section twenty-nine of this code." On 30 January 1996, the CTA ruled in the case of Asian Bank Corp. v. Commissioner of Internal Revenue (CTA Case No. 4720) that the 20% final withholding tax on a bank's interest income should not form part of its gross receipts in computing the percentage tax. 2 By authority of this ruling, Equitable PCI Bank, on 26 September 1996, filed a claim for refund with the Commissioner of Internal Revenue of the amount of P2,237,924.46, which represents the difference between the P24,923,330.73 percentage taxes actually paid and the P22,685,406.32 adjusted taxes. The adjusted taxes were computed by petitioner by deducting from its gross receipts the 20% final tax on its income from the 3rd quarter of 1994 up to the 2nd quarter of 1996. 3 Petitioner's claim itemized as follows: "Gross Receipts Subjected to Tax P 541,891,625.79 Less: 20% Portion of Tax Paid Income (Annexes B1 of 2) 1,440,735.07 Investment Income subject to 20% final tax booked at Gross (Annex B2 of 2) 43,317,753.94 Adjusted Gross Receipts Tax Base P 497,133,136.78 Computation of Adjusted Gross Receipts Tax: Gross Receipts Tax Due 0% P 23,405,939.31 P 0.00 1% 10,563,889.92 105,638.90 3% 28,917,397.50 867,521.92 5% 434,244,910.05 21,712,245.50 P 497,133,136.78 P 22,685,406.32 Gross Receipts Tax Paid P 24,923,330.78 Adjusted Gross Receipts Tax 22,685,406.32 Tax Refund P 2,237,924.46" 4 ============ Due to the Commissioner's inaction on the claim for refund, Equitable PCI Bank, on 20 April 1998, filed a petition for review with the CTA to toll the running of the prescriptive period. 5 The CTA formulated the issues to be resolved, thus: "1. Whether or not the 20% final withholding tax on bank's interest income should form part of the taxable gross receipts for purposes of computing the gross receipts tax; and 2. Whether or not petitioner adduced sufficient evidence to support its cause." 6 On 07 July 2000, the CTA ruled that the 20% final tax on interest income of banks does not form part of the gross receipts 7 by citing its previous ruling in the Asian Bank Corp. case ( supra ) and the Supreme Court's ruling in Commissioner of Internal Revenue v. Manila Jockey Club. 8 However, the CTA nonetheless denied the refund because petitioner was not able to establish by competent evidence the fact of payment of the 20% final tax on income. 9 On 13 July 2000, petitioner moved to reconsider but the CTA, on 24 August 2000, denied the motion. 10 Hence, this petition, which invokes this lone ground: "THE CTA ERRED IN HOLDING THAT EPCIB'S EVIDENCE TO PROVE ITS CLAIM FOR REFUND OF EXCESS GROSS RECEIPTS TAX IS INSUFFICIENT." 11 We dismiss the petition. The burden of evidence lies with the party who asserts an affirmative allegation. Thus, the plaintiff or complainant has to prove the affirmative allegations in his complaint while the defendant or respondent has to prove the affirmative allegations in his affirmative defenses and counterclaims. 12 Considering that petitioner Equitable-PCI Bank claims a refund of alleged excess percentage taxes paid for the quarter ending 31 March 1996, it has the burden of establishing its right to the refund. The overpaid percentage taxes came about due to the inclusion of the 20% final withholding tax paid on petitioner's interest income in its gross receipts, which is the basis of the percentage taxes. Necessarily, petitioner must first establish payment of final taxes in its interest income before it could exclude such taxes from its gross receipts. The payment of the income tax on its interest income is an essential component of petitioner's claim for refund and so it must not only prove payment of the percentage taxes but payment of income tax as an indispensable prerequisite. Otherwise, the refund cannot be granted. In the instant case, petitioner has established payment of percentage taxes by means of duly accomplished Quarterly Percentage Tax Return. 13 However, petitioner failed to prove payment of the 20% final withholding taxes on its interest income because it did not present its Certificate of Final Income Tax Withheld. Instead, petitioner presented its income statement and subsidiary ledger transactions to prove payment of income tax but we need a more reliable evidence than that. Such evidence, though admissible because it is both relevant and competent, has weak probative value, as it was prepared solely and exclusively by petitioner. Admissibility refers to the question of whether or not the evidence is to be considered at all while probative value refers to the question of whether or not it proves the issue. 14 The probative value or weight of evidence is left to the appreciation of the court and no "iron-clad rules" restrict the court in this delicate task of weighing evidence. 15 In this case, We cannot give conclusive weight to petitioner's evidence because the details were unverified by independent documents. The most reliable evidence that We know of would be the Certificate of Final Income Tax Withheld, which is a document accomplished by the taxpayer and duly noted by the Bureau of Internal Revenue (BIR). Such document would leave no doubt as to the payment of subject income tax and all taxpayers who pay such taxes fill up and file such document. If petitioner had indeed paid the tax on its interest income, it would have no problem producing such certificate. When a party has the burden of proof and it has possession of the most satisfactory evidence there is to establish its claim but fails to present such evidence, the court has no alternative but to deny the claim. The fact that the BIR has in its files a copy of the subject certificate does not oblige it to present the document before the tax court. That duty belongs to petitioner and it alone is to blame for the denial of the refund. In denying petitioner's claim, We are not being overly obsessed with technicalities to the point of being unreasonable. Even if We were inclined to consider petitioner's evidence, the same is unreliable, as explained by the Court of Tax Appeals, thus: ". . . Petitioner failed to convince this Court that the difference between the gross receipts tax per quarterly percentage tax return in the amount of P24,923,330.78 and the adjusted gross receipts tax in the sum of P22,685,406.32 represents the final withholding tax of petitioner derived from its passive investments allegedly included in the payment of gross receipts tax. The subsidiary ledger transactions of petitioner failed to guide the Court in tracing the income figures reflected in the returns with that of the ledgers. It was also noted that there is a discrepancy in the amount of final taxes claimed to have been paid. Let Us take the example of petitioner's claim for '20% portion of tax-paid income', specifically, the interest deposit with local bank, which has the amount of P21,419.67 as final tax (see Exh. C-9). This amount is bigger than the final tax that can be derived from petitioner's subsidiary ledger transactions-income account. The total interest income reflected in the subsidiary ledger transactions-income account is P85,678.68 (Exhs. D-2 and G-2) which would have a final tax of only P17,185.74. "With this marked discrepancy, the Court can not rely solely on petitioner's own computation even with the aid of its subsidiary ledger transactions. We would like to emphasize that entries in the ledger merit very little weight and therefore are not the best evidence (Equitable Banking Corporation vs. Commissioner of Internal Revenue, C.T.A. Case No. 5661, March 30, 2000). Hence, We are not convinced that subsidiary ledgers should be given credence." 16 As petitioner failed to discharge its burden of proof, it would be pointless for Us to discuss the other legal issues raised. WHEREFORE, the instant petition is hereby DENIED and the decision of the CTA, dated 07 June 2000 and its resolution, dated 24 August 2000 are AFFIRMED. No costs. SO ORDERED. Rosario, Jr . and Cruz, JJ ., concur. Footnotes 1. Rollo , pp. 53-55. 2. Rollo , p. 24. 3. Id ., pp. 56-58. 4. Id ., p. 58. 5. Id ., p. 44. 6. Rollo , p. 26. 7. Id ., pp. 26-28. 8. 108 Phil. 821 [1960]. 9. Rollo , p. 31. 10. Id ., p. 43. 11. Id ., p. 12. 12. Jimenez v. NLRC, 256 SCRA 84, 89 [1996]. 13. Rollo , p. 79. 14. PNOC Shipping and Transport Corp. v. CA , 297 SCRA 402, 424 [1998]. 15. Moran, Manuel, Comments on the Rules of Court, Vol. V, 1980 Ed., p. 7. 16. Rollo , p. 30.