RIZAL COMMERCIAL BANKING CORPORATION v.

CIR ISSUES:
G.R. No. 170257|September 7, 2011|MENDOZA, J. 1. W/N RCBC, by paying the other tax assessment covered by the waivers
of the statute of limitations, is rendered estopped from questioning the
 RCBC seasonably filed its Corporation Annual Income Tax Returns for Foreign validity of the said waivers with respect to the assessment of
Currency Deposit Unit for 1994 and 1995 deficiency onshore tax – RCBC is estopped from questioning the
 RCBC received a letter from CIR authorizing a special audit team to examine the validity of the waivers
books of accounts and other accounting records for all internal revenue taxes  RCBC assails the validity of the waivers of the statute of limitations on the
from January 1, 1994 to December 31, 1995 ground that the said waivers were merely attested to by Sixto Esquivias, then
 RCBC executed two Waivers of the Defense of Prescription Under the Statute of Coordinator for the CIR, and that he failed to indicate acceptance or agreement
Limitations of the National Internal Revenue Code covering the internal revenue of the CIR, as required under Section 223 (b) of the 1977 Tax Code.
taxes due for the years 1994 and 1995, effectively extending the period of the o further argues that the principle of estoppel cannot be applied against it
BIR to assess up to December 31, 2000 because its payment of the other tax assessments does not signify a
 RCBC received a Formal Letter of Demand together with Assessment Notices clear intention on its part to give up its right to question the validity of
from the BIR for deficiency tax assessments the waivers
 RCBC filed a protest then filed a petition for review before the CTA  Estoppel is clearly applicable to the case at bench. RCBC, through its partial
 The BIR reduced the amount of deficiency taxes payment of the revised assessments issued within the extended period as
 RCBC paid some of the deficiency taxes but refused to pay assessments for provided for in the questioned waivers, impliedly admitted the validity of those
deficiency onshore tax and documentary stamp tax waivers. Had petitioner truly believed that the waivers were invalid and that the
 In its petition for review before the CTA, RCBC contended that: assessments were issued beyond the prescriptive period, then it should not have
o the waivers of the Statute of Limitations which it executed on January paid the reduced amount of taxes in the revised assessment.
23, 1997 were not valid because the same were not signed or  RCBC’s subsequent action effectively belies its insistence that the waivers are
conformed to by the respondent CIR as required under Section 222(b) invalid. The records show that on December 6, 2000, upon receipt of the revised
of the Tax Code assessment, RCBC immediately made payment on the uncontested taxes. Thus,
o because the onshore tax was collected in the form of a final withholding RCBC is estopped from questioning the validity of the waivers. To hold otherwise
tax, it was the borrower, constituted by law as the withholding agent, and allow a party to gainsay its own act or deny rights which it had previously
that was primarily liable for the remittance of the said tax recognized would run counter to the principle of equity which this institution holds
dear
 CTA-First Division  partially granted the petition for review.
o considered as closed and terminated the assessments for deficiency
2. W/N RCBC, as payee-bank, can be held liable for deficiency onshore
income tax, deficiency gross receipts tax, deficiency final withholding
tax, which is mandated by law to be collected at source in the form of a
tax, deficiency expanded withholding tax, and deficiency documentary final withholding tax - RCBC cannot evade its liability for FCDU Onshore
stamp tax (not an industry issue) for 1994 and 1995
Tax by shifting the blame on the payor-borrower as the withholding agent.
o upheld the assessment for deficiency final tax on FCDU onshore As such, it is liable for payment of deficiency onshore tax on interest income
income and deficiency documentary stamp tax for 1994 and 1995 and derived from foreign currency loans
ordered RCBC to pay  RCBC argued it is the payor-borrower, as withholding agent, who is directly liable
 CTA-En Banc denied the petition for lack of merit. It ruled that: for the payment of onshore tax, citing Section 2.57(A) of Revenue Regulations
o by receiving, accepting and paying portions of the reduced assessment, No. 2-981
RCBC bound itself to the new assessment, implying that it recognized  RCBC erred in citing the abovementioned Revenue Regulations No. 2-98
the validity of the waivers. RCBC could not assail the validity of the because the same governs collection at source on income paid only on or
waivers after it had received and accepted certain benefits as a result of after January 1, 1998. The deficiency withholding tax subject of this petition was
the execution of the said waivers supposed to have been withheld on income paid during the taxable years of
o As to the deficiency onshore tax, it held that because the payor- 1994 and 1995. Hence, Revenue Regulations No. 2-98 obviously does not apply
borrower was merely designated by law to withhold and remit the said in this case.
tax, it would then follow that the tax should be imposed on RCBC as the  the purpose of the withholding tax system is three-fold:
payee-bank  to provide the taxpayer with a convenient way of paying his tax liability;
o Finally, in relation to the assessment of the deficiency documentary
stamp tax on petitioners special savings account, it held that petitioners
1
special savings account was a certificate of deposit and, as such, was (A) Final Withholding Tax. Under the final withholding tax system the amount of income tax withheld by the
subject to documentary stamp tax withholding agent is constituted as a full and final payment of the income tax due from the payee on the said
income. The liability for payment of the tax rests primarily on the payor as a withholding agent. Thus,
 RCBC appealed to the SC with respect to the FCDU Onshore Income in case of his failure to withhold the tax or in case of under withholding, the deficiency tax shall be
collected from the payor/withholding agent. The payee is not required to file an income tax return for the
particular income
 to ensure the collection of tax, and
 to improve the governments cashflow. 
 Under the withholding tax system, the payor is the taxpayer upon whom the tax
is imposed, while the withholding agent simply acts as an agent or a collector of
the government to ensure the collection of taxes.
 It is, therefore, indisputable that the withholding agent is merely a tax collector
and not a taxpayer
o Under the withholding system, however, the agent-payor becomes a
payee by fiction of law. His (agent) liability is direct and independent
from the taxpayer, because the income tax is still imposed on and
due from the latter. The agent is not liable for the tax as no wealth
flowed into him he earned no income. The Tax Code only makes the
agent personally liable for the tax arising from the breach of its legal
duty to withhold as distinguished from its duty to pay tax
 the liability of the withholding agent is independent from that of the taxpayer. The
former cannot be made liable for the tax due because it is the latter who earned
the income subject to withholding tax. The withholding agent is liable only insofar
as he failed to perform his duty to withhold the tax and remit the same to the
government. The liability for the tax, however, remains with the taxpayer because
the gain was realized and received by him.
 While the payor-borrower can be held accountable for its negligence in
performing its duty to withhold the amount of tax due on the transaction, RCBC,
as the taxpayer and the one which earned income on the transaction, remains
liable for the payment of tax as the taxpayer shares the responsibility of making
certain that the tax is properly withheld by the withholding agent, so as to avoid
any penalty that may arise from the non-payment of the withholding tax due.
 findings and conclusions of the CTA shall be accorded the highest respect and
shall be presumed valid, in the absence of any clear and convincing proof to the
contrary
o The CTA, as a specialized court dedicated exclusively to the study and
resolution of tax problems, has developed an expertise on the subject of
taxation.
o its decisions shall not be lightly set aside on appeal, unless the SC finds
that the questioned decision is not supported by substantial evidence or
there is a showing of abuse or improvident exercise of authority on the
part of the Tax Court

WHEREFORE, the petition is DENIED.