EN BANC
[G.R. No. 93901. February 11, 1992.]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE COURT OF TAX APPEALS, ET AL., respondents.
NOTICE
Gentlemen:
Quoted hereunder, for your information, is a resolution of the Court En Banc dated February 11, 1992:
Respondent Hawaiian-Philippines Co ("Hawaiian") is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines, with individual and corporate non-resident shareholders, primarily in the United States. For the second quarter of 1983, respondent Hawaiian declared cash dividends amounting to P137,422.80 and P7,632.80, respectively to its U.S. individual and U.S. corporate non-resident stockholders, from which amounts the sums of P41,226.84 (30% of P137,422.80) and P2,671.48 (35% of P7,632.80), totalling P43,898.32, were deducted as withholding tax on dividend income under Sections 22 (b) and 24 (b) of the National Internal Revenue. cd
On 15 May 1984, respondent Hawaiian filed a formal claim for refund with petitioner Commissioner of Internal revenue alleging that under Article 11 (2) (a) of the RP-US Tax Treaty, the deduction allowed as tax on dividends earned at the sources was fixed at twenty-five percent (25%) of said income and that it had thus overpaid the withholding tax due on dividends paid to its non-resident stockholders in the U.S. in the amount of P7,554.38, representing the difference between the amount of the withholding tax paid and the amount supposed to have been withheld under the mentioned tax covenant.
On 17 January 1985, or before the two (2) year reglementary period to judicially claim for refund had expires respondent Hawaiian went to respondent Court of Tax Appeals, in CTA Case No. 3387 praying that judgment be rendered ordering (the Commissioner) to refund . . . the total amount of P7,554.38 representing its 1983 overpaid withholding tax on dividends paid to non-resident stockholders (U.S. residents)
On 21 May 1988, respondent Court of Tax Appeals rendered a decision directing petitioner to refund to respondent Hawaiian the amount of P7,554.38 as overpaid withholding tax on dividends paid to its non-resident stockholders for the year 1983.
Petitioner came to us challenging the above decision by way of a petition for review on certiorari principally raising the following issue whether or not respondent Hawaiian has legal capacity to file a claim for refund of withholding tax on behalf of its non-resident U.S. stockholders.
1. Petitioner Commissioner urges that being a "mere withholding agent," respondent Hawaiian is not "the real party in interest" to prosecute an action for refund of tax overpayment the non-resident individual and corporate shareholders being the real parties-in-interest, neither could it maintain an action for refund in a representative capacity having failed to show proof that it was authorized by its non-resident stockholders to do so. Petitioner invokes in support of his argument, the ruling in Commissioner of Internal Revenue v. Procter and Gamble Corporation (160 SCRA 560 (1988)), where a non-resident stockholders was held to be the proper claimant in an action to recover allegedly overpaid withholding tax.
Respondent Hawaiian contends on the other hand, that the right of a withholding agent as a party-in-interest to claim for refund was recognized in Commissioner of Internal Revenue v. Wander Philippines, Inc., G.R. no. 68375, promulgated 15 April 1988, 160 SCRA 573 (1988), where a withholding agent was declared to be a proper entity to prosecute a claim for refund or credit of overpaid withholding tax on dividends paid of remitted to a non-resident foreign corporation. Respondent Hawaiian further contends that since it was Hawaiian which actually paid the withholding tax to the government, it is deemed to be the "taxpayer" under Section 204 of the National Internal Revenue Code and thus, a party with sufficient interest to file an action to recover tax overpayments.
The Court notes that this question of lack of capacity to bring a claim for refund was raised for the first time in the present petition the question was not raised by petitioner Commissioner either on the administrative level nor before respondent Court of tax Appeals, in the case cited by petitioner, Commissioner of Internal Revenue v. Procter and Gamble Corporation (supra), the Court in a resolution promulgated 2 December 1991 granting private respondent Procter and Gamble's Motion for reconsideration dealt with the same issue of lack of capacity raised by the Commissioner of Internal Revenue.
"We believe that the Bureau of Internal Revenue ("BIR") should not be allowed to defeat an otherwise valid claim for refund by raising this question of alleged incapacity for the first time on appeal before this Court. This is clearly a matter of procedure. Petitioner does not pretend that P&G-Phil., should it succeed in the claim for refund is likely to run away, as it were, with the refund instead of transmitting such refund or tax credit to its parent and sole stockholder . . . .
"More importantly, there arise here a question of fairness should the BIR unlike any other litigant be allowed to raise for the first time on appeal questions which had not been litigated either in the lower court of on the administrative level. For if petitioner had at the earliest possible opportunity i.e., at the administrative level demanded that P&G-Phil. produce an express authorization from its parent corporation to bring the claim for refund, then P&G-Phil. would have been able forthwith to secure and produce such authorization before filing the action in the instant case. . . . "
In the same resolution the Court in holding that a withholding agent has sufficient legal interest to bring an action to recover tax overpayment, said: cd i
". . . It thus becomes important to note that under Section 53 (c) of the NIRC, the withholding agent who is "required to deduct and withhold any tax" is made " personal liable for such tax" and indeed is indemnified against any claims and demands which the stockholder might wish to make in questioning the amount of payments effected by the withholding agent in accordance with the provisions of the NIRC. The withholding agent, P&G-Phil., is directly and independently liable for the correct amount of the tax that should be withheld from the dividend remittances. The withholding agent is moreover subject to and liable for deficiency assessments surcharges and penalties should the amount of the tax withheld be finally found to be less than the amount that should have been withheld under the law.
A "person liable for tax" has been held to be a "person subject to tax" and properly considered a "taxpayer." The terms "liable for tax" and "subject to tax" both connote legal obligation or duty to pay a tax. It is very difficult indeed conceptually impossible to consider a person who is statutorily made "liable for tax" as not "subject to tax." By any reasonable standard, such as person should be regarded as a party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes he believes, were illegally collected from him.
In Philippine Guaranty Company, Inc., v. Commissioner of Internal Revenue, this Court pointed out that a withholding agent is in fact the agent both of the government and of the taxpayer, and that the withholding agent is not ordinary government agent.
xxx xxx xxx
If as pointed out in Philippine Guaranty, the withholding agent is also an agent of the beneficial owner of the dividends with respect to the filing of the necessary income tax return and with respect to actual payment of the tax to the government, such authority may reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such claim. . . .
We believe that, even now, there is nothing to preclude the BIR from requiring P&G-Phil. to show some written or telexed confirmation by P&G-USA of the subsidiary's authority to claim the refund or tax credit and to remit the proceeds of the refund or to apply the tax credit to some Philippine tax obligation of P&G-USA, before actual payment of the refund or issuance of a tax credit certificate. What appears to be vitiated by basic unfairness is petitioner's position that, although P&G-Phil. is directly and personally liable to the Government for the taxes and any deficiency assessments to be collected the Government is not legally liable for a refund simply because it did not demand a written confirmation of P&G-Phil., is implied authority from the very beginning. A sovereign government should act honorably and fairly at all times, even vis-avis taxpayers. (Citations omitted; emphasis in the original)"
ACCORDINGLY, the Court resolved to DENY the Petition for review on certiorari for lack of merit and to AFFIRM the decision of the Court of Tax Appeals dated 31 May 1988 in CTA Case No. 3887.
Very truly yours,
DANIEL T. MARTINEZClerk of Court
By:
LUZVIMINDA D. PUNOAsst. Clerk of Court
NOTE : Herrera, Paras, Padilla, Regalado and Davide, Jr., JJ., dissented on the ground set out in the dissenting opinion of Paras, J., in G.R. No. 66838. Commissioner of Internal Revenue v. Procter and Gamble Phil. Manufacturing Corporation, et al., 2 December 1991.