Union Bank of the Philippines Trust and Investment Division v. Commissioner of Internal Revenue

SPECIAL FIFTH DIVISION [CA-G.R. SP No. 77629. June 14, 2004.] UNION BANK OF THE PHILIPPINES TRUST AND INVESTMENT DIVISION , petitioner , vs . THE COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N LABITORIA , J p : This is a petition for review of the decision dated June 2, 2003, of the Court of Tax Appeals, affirming the decision dated March 28, 2001 of the Bureau of Internal Revenue, the dispositive portion of which states: "IN VIEW OF THE FOREGOING, it is hereby recommended that the assessment for surcharge and interest in the total amount of P33,900.00 representing late payment of capital gains and documentary stamp taxes for the year 1990 be UPHELD. SO ORDERED." 1 The background of the case is as follows: On July 12, 1990 petitioner executed a Deed of Absolute Sale in its capacity as trustee for and on behalf of Carolyn Laserna, Conrad Laserna and Bruce Roy Laserna involving the real estate property covered by Transfer Certificate of Title (TCT) No. 164115 registered with the Registry of Deeds for Manila. The property was sold to Steelcraft Industrial and Development Corporation (the Buyer) for the sum of P2,260,000.00. Under the terms of the Deed of Absolute Sale, "all expenses incident to the registration of the sale and transfer of title to the Buyer, including but not limited to the capital gains tax, documentary stamp tax, transfer tax and registration fees shall be borne and paid for by the buyer." The Deed of Absolute Sale was originally intended for execution by the parties on March 9, 1990, the date appearing on the first page of the document. However, due to some delay in the negotiation between them as regards liability for capital gains tax. Documentary stamp tax, transfer tax and registration fees, the actual execution of the Deed of Absolute Sale took place only on July 12, 1990, the same date on which the representatives of the seller and the buyer signed the same before Notary Public Jose Luis P. Agcaoili. On January 13, 1992 petitioner received from the Commissioner of Internal Revenue a notice of assessment for surcharges and interest for the year 1990. The notice of assessment alleged late payment of capital gains and documentary stamp taxes on the sale transaction on the belief that the aforementioned Deed of Absolute Sale was consummated on March 9, 1990, the date appearing on the first page of the document, rather than on July 12, 1990, which was the date of its actual execution and notarization. On January 30, 1992, the petitioner wrote the Commissioner of Internal Revenue a letter requesting for a reconsideration of the assessment. It is the position of the petitioner that there was no late filing and/or payment of capital gains and documentary stamp taxes since the actual signing of the Deed of Absolute Sale took place on July 12, 1990 the date of notarization and not on March 9, 1990. On March 28, 2001, the Commissioner of Internal Revenue rendered a decision, the dispositive portion of which states: "WHEREFORE, predicated on all the foregoing, the instant request for reconsideration is hereby DENIED. Accordingly, UNION BANK OF THE PHILIPPINES, is hereby ordered to pay the total amount of P33,900.00 representing deficiency, surcharge and interest for failure to file/pay capital gains and documentary stamp taxes within the time prescribed by law to the Revenue District Officer Revenue District Office No. 50, Makati South, within fifteen (15) days from receipt hereof." 2 On May 2, 2001, petitioner filed a Petition for Review with the Court of Tax Appeals in order to set aside the aforementioned Decision of the Commissioner of Internal Revenue. On June 2, 2003 the Court of Tax Appeals ruled upholding the decision of CIR. Hence, the petition. Petitioner anchored its petition on the following ground, to wit: "1. WHETHER OR NOT THE COURT OF TAX APPEALS ERRED IN CONCLUDING THAT (1) NO EVIDENCE WAS SHOWN BY THE PETITIONER TO SUPPORT ITS CLAIM THAT THE DEED OF ABSOLUTE SALE INVOLVING THE REAL ESTATE PROPERTY COVERED BY TRANSFER CERTIFICATE OF TITLE No. 164115 WAS SIGNED, EXECUTED AND CONSUMMATED ON JULY 12, 1990 THE DATE OF IS NOTARIZATION, AND NOT ON 9 MARCH 1990, THE DATE APPEARING ON THE FIRST STAGE OF SAID DOCUMENT. 2. WHETHER OR NOT THE COURT OF TAX APPEALS ERRED IN SUSTAINING RESPONDENT COMMISSIONER'S ASSESSMENT FOR SURCHARGE AND INTEREST ON (1) THE CAPITAL GAINS TAX IN THE AMOUNT OF P28,250.00; AND (2) THE DOCUMENTARY STAMP TAX IN THE AMOUNT OF P5,650.00, OR THE AGGREGATE ASSESSMENT OF P33,900.00." 3 Petitioner insists that there was no late payment of capital gains and documentary stamp taxes because the subject Deed was actually signed and notarized on July 12, 1990. Although the said Deed reflects the date of execution as March 9, 1990, the originally intended date of execution, the contract was consummated only on July 12, 1990 due to a disagreement between the parties as to who would assume liability for taxes, fees and other expenses. The petition is without merit. Under Section 51 (C)(2)(b) of the Tax Code, as amended, the capital gains tax return shall be filed within thirty days following each sale or disposition. Revenue Memorandum Circular (RMC) No. 80-89 provides: "Only sales of real property classified as ordinary assets consummated on or after January 1, 1990, are subject to the creditable withholding tax. For purposes of this circular, the date of notarization appearing on the Deed of Sale shall be considered prima facie the date of consummation of the contract of sale. . . ." 4 Furthermore, Revenue Regulations No. 13-85 sets forth the period within which the capital gains tax return shall be filed and the corresponding tax due thereon be paid. Accordingly, the capital gains tax return shall be filed and paid within 30 days following the sale and disposition of real property considered as capital asset. Under Sec. 200 of the Tax Code, as amended, the documentary stamp tax return shall be filed within ten (10) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred and the tax thereon shall be paid at the same time the aforesaid return is filed. In the case at bench, it is on record that the Deed of Absolute Sale was executed on March 9, 1990 but belatedly notarized on July 12, 1990 due to a disagreement between the parties as to who would assume liability for taxes, fees and other expenses. No evidence, however, was shown to support petitioner's claim that the sale was consummated only on July 12, 1990. Further, the receipt of the sum of P2,260,000.00 was acknowledged by the seller on the face of the Deed on March 9, 1990. 5 As correctly found by the court a quo , notarization does not make a contract complete and if the Deed had not been notarized, the same would have been fully effective as between the parties under Article 1261 of the old Civil Code in force at the time of the conveyance. All the elements of a valid contract were present subject matter, capacity and consent of the parties and lawful consideration. 6 Although Revenue Memorandum Circular No. 80-89 provides that "the date of notarization appearing on the Deed of Sale shall be considered prima facie the date of consummation of the contract of sale", this presumption does not apply if there are other dates appearing on the document. Since it is clear from Section 44(c)(2)(ii) of the 1990 Tax Code that individuals subject to tax on capital gains from the sale or disposition of real property under Section 21(e) shall file a return within 30 days following each sale or disposition, it follows that the capital gains tax should have been paid within thirty (30) days from March 9, 1990 the date of sale as it appears on the Deed. 7 Section 173 of the 1990 Tax Code provides: "Upon documents, instruments, and papers, and upon documents, instruments, and papers and 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, and at the same time such act is done or transaction had . . . ." Furthermore, Revenue Memorandum Circular No. 45-88 provides, viz : "Documentary stamps should therefore be bought and/or affixed on the documents at the time such ACT IS DONE OR TRANSACTION HAD (meaning the date of execution or signing of the document). The time of execution is not extended to the time of the notarization of the Deed of Sale as this subsequent act of the Notary Public merely attests to the authenticity of the signatures of the parties to a Deed of Sale but does not confer validity or completion to the contract ." 8 This Court will not set aside lightly the conclusion reached by the Court of Tax Appeals which, by the very nature of its function, is dedicated exclusively to the consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority. Unless rebutted, all presumptions generally are in favor of the correctness of the CIR's assessment against the taxpayer. With petitioner's failure to prove the CIR incorrect, clearly and conclusively, this Court is constrained to uphold the correctness of tax court's ruling. Finding that the date of execution of the Deed of Sale was March 9, 1990, we therefore hold that there was late payment of the capital gains and documentary stamp taxes. The assessment for deficiency surcharge and interest in the amounts of P28,250.00 and P5,650.00 for alleged payment of capital gains tax and documentary stamp tax, respectively is valid. WHEREFORE, the instant petition is DENIED for lack of merit and the Decision dated June 2, 2003 of the Court of Tax Appeals is hereby AFFIRMED. SO ORDERED. HICSTa Sabio, Jr. * and Mendoza, JJ . , concur. Footnotes * Vice J. EDGARDO P. CRUZ, Sr. Member, who is on leave. 1. Rollo, p. 47. 2. Rollo , p. 109. 3. Rollo , p. 27. 4. Rollo , p. 41. 5. CTA Decision, p. 44. 6. Soriano vs. Latono , 87 Phil., 757. 7. CTA Decision, Rollo , p. 46. 8. Rollo , p. 46