SECOND DIVISION
|
SECURITY BANK CORPORATION
(formerly SECURITY BANK AND TRUST COMPANY), Petitioner, - versus - THE
COMMISSIONER OF INTERNAL REVENUE, Respondent. |
|
G.R. No. 130838 Present: PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ, AZCUNA,
and GARCIA,
JJ. Promulgated: August
22, 2006 |
x-------------------------------------------------------------------------------------x
D E C I S I O
N
GARCIA, J.:
Before us is this petition
for review on certiorari to
reverse, annul and/or nullify the Decision[1]
dated August 29, 1997 of the Court of Appeals (CA) which affirmed the January
12, 1996 Decision[2]
and May 21, 1996 Resolution[3]
of the Court of Tax Appeals (CTA) in CTA Case No. 4784 adjudging herein petitioner
Security Bank Corporation (SBC) liable for deficiency documentary stamp tax (DST)
on its 1983 sales of securities under repurchase agreements.
The facts are undisputed:
Sometime before
1983
– Deficiency Documentary Stamp Tax[4]
A.
On Promissory Notes Issued
Promissory notes issued during the year P926,385,255.00
Documentary stamp tax due thereon:
P926,385,255.00 × P 0.65 P
3,010,752.08
P200.00
B.
On
Securities sold during the year P3,022,803,857.63
Documentary stamp tax due thereon:
P3,022,803,857.63 × P 0.25 P
3,778,504.82
P200.00
______________
T o t a l P6,789,256.90
Add: Compromise penalty 600.00
______________
TOTAL AMOUNT DUE AND
COLLECTIBLE P6,789,856.90.
In its letter
dated
(1)
promissory
notes issued by SBC prior to October 15, 1984 or specifically in 1983, were
non-negotiable and, therefore, not subject to documentary stamp tax; and
(2)
sale of
securities under Repurchase Agreement is not subject to DST.
Instead of
answering the letter-protest, the BIR sent SBC an assessment letter[5]
dated
On April 8, 1988,
the BIR, through former Commissioner Bienvenido A. Tan, Jr., entered into a general
compromise agreement[6]
with the BAP concerning the DST assessment of the various member banks relating
to non-negotiable promissory notes, whereby the BAP members agreed to pay THREE
AND ONE-FOURTH CENTAVOS (P0.0325) per P200 of the total issuances
of non-negotiable promissory notes issued prior to October 15, 1984.
Pursuant to said
compromise agreement, SBC signed its own compromise agreement[7]
with the BIR on P641,743.23 as full settlement of its 1983 deficiency DST,
computed as follows:
Promissory notes issued during the year
1983 P 926,385,255.00
Add:
Securities sold under Repurchase Agreement 3,022,803,857.63
_________________
P3,949,189,112.63
Compromise Base × P 0.0325
200
= P
3,949,189,112.63 × P 0.0325
200
= P641,743.23 ––
compromised amount paid under
P.O.
========= No. C3252171 and C.R. No. 814457384 both dated
Despite its availment of the compromise agreement, SBC
still received a letter from the BIR demanding payment of the amount of P3,287,399.20
as DST on securities sold under repurchase agreements in 1983, to wit:
1983
Deficiency
Documentary Stamp Tax
On
Securities Sold During the Year P3,022,803,857.63
Documentary Stamp Tax Due Thereon –
P3,022,803,857.63 × P 0.25 = P
3,778,604. 82
P200.00
Less:
Partial Payment –
P3,022,803,857.63 × P 0.0325 = P
491,205.62
P200.00 _______________
TOTAL AMOUNT STILL
DUE AND COLLECTIBLE
P3,287,399.20.
==============
Through a letter
dated
On
On
On
1.
The 1988
BIR-BAP DST Compromise Agreement covers only tax assessments involving
documentary stamp tax on all types of promissory notes issued prior to October
15, 1984;
2.
SBC’s sale of
securities under a Repurchase Agreement is not included or placed within the
scope of the Compromise Agreement. The
law is specific that the subject of a compromise comprises only those matters
which are definitely stated therein (Article 2036, New Civil Code);
3.
SBC, knowing fully
well that documentary stamp taxes on sales of securities under Repurchase
Agreement were not within the scope of the BIR-BAP DST Compromise Agreement,
induced the BIR to enter into a compromise settlement thereof. A compromise in which there is a mistake,
fraud, violence, intimidation, undue influence or falsity of documents may be
rescinded or invalidated (Article 2038 in relation to Article 1330 of the New
Civil Code); and
4.
The assessment is in accordance with law and
regulation.
Issues having been
joined, SBC presented documentary and testimonial evidence supportive of its
cause. After SBC rested its case, the BIR presented and offered only
documentary evidence consisting of BIR records.
No further testimonial evidence was presented by it.
On
WHEREFORE, in view of all the foregoing, instant
petition for review is found to be without merit and the same is hereby
DISMISSED. ACCORDINGLY, petitioner is
hereby ORDERED to PAY to respondent the amount of P3,287,399.82, without
any surcharge and interest thereon, as deficiency documentary stamp tax due on
petitioner’s sale of securities under repurchase agreement for the year 1983.
SO ORDERED.
In time, SBC
filed a motion for reconsideration, which the CTA denied in its Resolution of
Therefrom, SBC
went to the CA on a petition for review. In the herein assailed Decision[11]
dated
WHEREFORE, the instant petition for review is
hereby DISMISSED by this Court for lack of merit. The appealed decision of the Court of Tax
Appeals in C.T.A. Case No. 4784 is Affirmed. Costs against petitioner.
SO ORDERED.
Hence, SBC’s
present recourse on the following assigned errors:
I.
THE
HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THERE ARE FACTUAL AND LEGAL
BASES FOR THE HONORABLE COURT OF TAX APPEALS TO HAVE FOUND PETITIONER LIABLE TO
PAY RESPONDENT COMMISSIONER OF INTERNAL REVENUE THE AMOUNT OF P3,287,399.82,
WITHOUT ANY SURCHARGE AND INTEREST THEREON, AS DEFICIENCY DOCUMENTARY STAMP TAX
DUE ON PETITIONER’S SALE OF SECURITIES UNDER REPURCHASE AGREEMENT FOR THE YEAR
1983.
II.
THERE
WAS ERROR IN FINDING THAT THE TERMS AND CONDITIONS OF THE COMPROMISE AGREEMENT
(BETWEEN PETITIONER AND FORMER COMMISSIONER BIENVENIDO TAN), DID NOT
INCLUDE/COVER THE WHOLE DST ASSESSMENT ON THE DOCUMENTS OF SALES OF SECURITIES
IN 1983 OR THAT MISTAKE WAS COMMITTED BY THE BUREAU OF INTERNAL REVENUE WITH
REGARD TO THE OFFER AND ACCEPTANCE OF THE TAX BASE OF THE COMPROMISE
SETTLEMENT.
The recourse has
no merit.
Relative to the
first issue, SBC claims that the BIR’s DST assessment on its sales of
securities with repurchase agreements lacks factual and legal bases. While it
never disputed the amount of P3,022,803,857.63 used by the BIR as tax
base for its assessment, which constitutes as the factual basis for the DST
assessment on sales of securities under repurchase agreements, SBC claimed that
these conveyances are instruments covered under Section 229 (now Section 180)
of the National Internal Revenue Code (NIRC) that are not subject to DST
imposed by Section 225 (now 176) of the NIRC.
We do not agree.
The NIRC levies
DST upon documents, instruments and papers as follows:
SEC. 173.[12] Stamp
taxes upon documents, instruments, and papers – 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: Provided, That whenever one party to the
taxable document enjoys exemption from the tax herein imposed, the other party
to thereto who is not exempt shall be the one directly liable for the tax.
(Emphasis supplied.)
Particularly
covering sales of securities, which SBC has been assessed by the BIR in this
case, and the corresponding DST rates due thereon at the time the said tax
accrued, the former Section 225 (now Section 176) of the NIRC provides:
SEC. 225. Stamp tax on sales, agreements to sell, memorandum of sales, deliveries
or transfer of bonds, due-bills, certificates of obligations, or shares or
certificates of stocks – On all sales, or agreements to sell or memorandum
of sales, or deliveries, or transfer of bonds, due-bills, certificates of
obligation, or shares or certificates of stock in any association, company or
corporation, or transfer of such securities by assignment in blank, or by
delivery, or by any paper or agreement, or memorandum or other evidences of
transfer or sale whether entitling the holder in any manner to the benefit of
such bond, due-bills, certificates of obligation or stock, or to secure the future payment of money, or for the
future transfer of any bond,
due-bill, certificates of obligation or stock, there shall be collected
a documentary stamp tax of twenty-five centavos on each two hundred pesos, or
fractional part thereof, of the par value of such bond, due-bill, certificates
of obligation or stock; Provided, That
only one tax shall be collected of each sale or transfer of stock or securities
from one person to another, regardless of whether or not a certificate of stock
or obligation is issued, indorsed, or delivered in pursuance of such sale or
transfer; and provided, further, That
in case of stock without par value the amount of the documentary stamp tax
herein prescribed shall be equivalent to twenty-five percentum of the documentary stamp tax paid upon the original issue
of said stock.
It is clear from
the plain language of the law that all
sales of securities, without making any distinction as to the nature or
type of the sale, i.e., whether it be with a repurchase agreement or not, are
taxable. On the other hand, all
securities consisting of bonds, due-bills, certificates of obligation, or shares
or certificates of stock in any association, company or corporation, of
whatever type or nature are within the scope of this section.
SBC contends,
however, that the sales of securities being levied upon are not covered by
Section 225 (now Section 176), but instead fall under Section 229 (now Section
180) of the Tax Code. In this respect, SBC invokes Revenue Memorandum Circulars
No. 13-87[13] and
No. 33-86[14]
and BIR Ruling No. 119-91.[15]
We are not
persuaded for the simple reason that the BIR circulars and ruling relied upon
were all issued after 1983, the
tax period involved in this case. Those circulars and ruling cannot prevail
over the clear and plain language of the Tax Code.[16]
Moreover, the
Court has no basis to rule in the present petition for review on certiorari, which by its very nature is
limited to questions of law and not of facts, whether the securities subject of
the tax assessment in this case in fact fall within the ambit of said revenue
memorandum circulars. This Court is
bound by the factual findings by the CTA, which did not rule that the subject
securities, because of what type these were, fall under Section 229 (now
Section 180) instead of 225 (now Section 176) of the NIRC. In Commissioner of Internal Revenue v. Court of
Appeals,[17] the Court ruled:
x x x the Court of Tax
Appeals is a highly specialized body specifically created for
the purpose of reviewing tax cases.
Through its expertise, it is undeniably competent to determine the issue
of whether. x x x Consequently, as a matter of principle, this Court will not
set aside the conclusion reached by the Court of
Tax Appeals which is, by the very nature of
its function, dedicated exclusively to the study and consideration of tax
problems and has necessarily developed an expertise on the subject unless there
has been an abuse or improvident exercise of authority. This point becomes more
evident in the case before us where the unanimous findings
and conclusions of both the Court of Tax Appeals and the Court of Appeals appear
untainted by any abuse of authority, much less grave abuse of discretion.
On this point, the
Court finds the decision of the CA affirming that of the CTA free from any
palpable or reversible error.
Relative to the
second issue, SBC claims that based on the terms and conditions of the
compromise agreement between it and then BIR Commissioner Tan, the whole DST
assessment for 1983, including that on sales of securities, is deemed included
thereunder. SBC further claims that the
contemporaneous and subsequent acts of revenue officials in accepting its offer
of payment, using the entire 1983 DST deficiency assessment, clearly including
the sales of securities with repurchase agreement for the year 1983 in the
amount of P3,022,803,857.63 as the tax base, were indicative of the fact
that the DST due on said sales of securities for the year 1983 has been duly
settled pursuant to the said compromise agreement of August 15, 1988.
Again, we
disagree.
There is nothing
clearer from the plain reading of the first paragraph of the subject compromise
agreement than the fact that the only subject matter thereof is the “assessment relating to Non-negotiable
Promissory Notes issued prior to
VI.
EXCLUSIONS:
Other
issues raised in the tax assessments or which may be raised for open and
assessed/pre-assessed years respectively, not
involving documentary stamp tax on all types of promissory notes issued prior to Oct. 15, 1984 are not
included in, nor affected by this compromise,[19]
(Emphasis supplied).
The issue of DST
assessment on sales of securities with repurchase agreement, which was the
subject of the reassessment being questioned in this case, is definitely not within
the scope of the compromise agreement, being limited as it is to DST on promissory notes issued prior to
Finally, as
regards SBC’s contention that the BIR, through its various officials, accepted
its offer to settle its entire DST deficiency assessment for 1983 which
included the DST assessment for securities with repurchase agreement in the tax
base for purposes of the computation of the DST due and collectible, suffice it
to say that such acceptance and approval were not made by the BIR Commissioner
himself, who, under Section 204 of the NIRC, has the sole power and authority
to compromise taxes. Neither was there
any showing that the BIR Commissioner specifically authorized those revenue
officials, who purportedly accepted and approved SBC’s offer of payment, to
compromise the DST on sale of securities, which, to stress, were not included
in the Compromise Agreement of August 15, 1988 by delegating his power to
compromise said DST assessment on securities.
This ultra vires act of those
revenue officials cannot have any valid and binding legal effect upon the BIR,
so as to proscribe the latter from issuing the assailed reassessment of unpaid
DST on the sales of securities under repurchase agreements for the year 1983.
WHEREFORE, the petition is DENIED and the assailed CA Decision dated
Costs against
petitioner.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
WE CONCUR:
REYNATO
S. PUNO
Associate Justice
Chairperson
|
ANGELINA
SANDOVAL-GUTIERREZ Associate Justice |
RENATO
C. CORONA Associate Justice |
ADOLFO
S. AZCUNA
Associate Justice
A
T T E S T A T I O N
I
attest that the conclusions in the above decision were reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
REYNATO
S. PUNO
Associate Justice
Chairperson, Second Division
C
E R T I F I C A T I O N
Pursuant
to Article VIII, Section 13 of the Constitution, and the Division Chairperson's
Attestation, it is hereby certified that the conclusions in the above decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1] Penned
by Associate Justice Lourdes Tayag-Jaguros, with then Associate Justice Antonio
M. Martinez (who became a member of this Court) and Associate Justice Salvador
J. Valdez, Jr., concurring; Rollo, pp. 38-50.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11] Supra note 1.
[12] Formerly
Section 222 of the Tax Code.
[13]
[14]
[15]
[16] See:
Republic v. Sunlife Assurance Company of
[17] G.R.
No. 115349,
[18] Annex
F-1, Rollo, p. 67.
[19]