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    Pal v. Cir Taxrev

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    j guevarra
    This case involves a tax refund claim filed by Philippine Airlines (PAL) for final taxes withheld on interest income from bank deposits. PAL argued it was exempt from such taxes under its charter. The Court of Tax Appeals denied most of PAL's claim finding it did not prove taxes were remitted to the BIR. The Supreme Court ruled PAL only proved remittance for one bank, but that remittance proof was not required for PAL's exemption claim, so it was entitled to refunds from all banks where taxes were withheld. The Supreme Court granted PAL's petition and reversed the lower court's ruling.

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    Pal v. Cir Taxrev

    Uploaded by

    j guevarra
    1K views12 pages
    This case involves a tax refund claim filed by Philippine Airlines (PAL) for final taxes withheld on interest income from bank deposits. PAL argued it was exempt from such taxes under its charter. The Court of Tax Appeals denied most of PAL's claim finding it did not prove taxes were remitted to the BIR. The Supreme Court ruled PAL only proved remittance for one bank, but that remittance proof was not required for PAL's exemption claim, so it was entitled to refunds from all banks where taxes were withheld. The Supreme Court granted PAL's petition and reversed the lower court's ruling.

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    This case involves a tax refund claim filed by Philippine Airlines (PAL) for final taxes withheld on interest income from bank deposits. PAL argued it was exempt from such taxes under its charter. The Court of Tax Appeals denied most of PAL's claim finding it did not prove taxes were remitted to the BIR. The Supreme Court ruled PAL only proved remittance for one bank, but that remittance proof was not required for PAL's exemption claim, so it was entitled to refunds from all banks where taxes were withheld. The Supreme Court granted PAL's petition and reversed the lower court's ruling.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views12 pages

    Pal v. Cir Taxrev

    Uploaded by

    j guevarra
    This case involves a tax refund claim filed by Philippine Airlines (PAL) for final taxes withheld on interest income from bank deposits. PAL argued it was exempt from such taxes under its charter. The Court of Tax Appeals denied most of PAL's claim finding it did not prove taxes were remitted to the BIR. The Supreme Court ruled PAL only proved remittance for one bank, but that remittance proof was not required for PAL's exemption claim, so it was entitled to refunds from all banks where taxes were withheld. The Supreme Court granted PAL's petition and reversed the lower court's ruling.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 12

    PHILIPPINE AIRLINES, INC.

    V. COMISSIONER OF INTERNAL
    REVENUE
    G.R. NO. 206079-80
    (CONSOLIDATED)
     These consolidated cases stem from a refund claim by Philippine
    Airlines, Inc. (PAL) for final taxes withheld on its interest income from
    its peso and dollar deposits with China Banking Corporation
    (Chinabank), JP Morgan Chase Bank (JPMorgan}, Philippine Bank of
    Communications (PBCom), and Standard Chartered Bank (Standard
    Chartered) (collectively, Agent Banks)
     PAL asserts that it is entitled to a refund of the withheld taxes because
    it is exempted from paying the tax on interest income under its
    franchise, Presidential Decree No. 1590.6 However, the Commissioner
    refused to grant the claim, arguing that PAL failed to prove the
    remittance of the withheld taxes to the Bureau of Internal Revenue.
     From Chinabank, PAL claimed that it earned interest income net of
    withholding tax in the amount of US$480,688.76 in its US dollar time
    deposit for the year 2002. 12 Substantiating this claim was Chinabank's
    Certification dated October 24, 2003, 13 which stated that withholding
    taxes were deducted from PAL's interest income in the amount of
    US$38,974.75. These taxes were remitted to the Bureau of Internal
    Revenue on different dates from February 11, 2002 to January 10, 2003.
     From JPMorgan, PAL alleged that it earned interest income in its peso
    deposit in the amount of P6,188,232.17, from September 2002 to
    December 2002. JPMorgan deducted withholding tax totalling
    Pl,237,646.43.15
     From PBCom, PAL maintained that it earned interest income from its
    various dollar placements for the year 2002, with the following
    corresponding final taxes withheld.
     From Standard Chartered, PAL stated that it earned interest income in
    its dollar time deposit account from May 2002 to December 2002,
    amounting to US$86,107.55. The amount ofUS$6,458.14 was deducted
    and allegedly remitted to the Bureau of Internal Revenue as final
    withholding tax.
     Claiming that it was exempt from final withholding taxes under its franchise,
    Presidential Decree No. 1590, PAL filed with the Commissioner on
    November 3, 2003 a written request for a tax refund20 of the withheld
    amounts of Pl,747,869.59 and US$65,877.07.
     The Commissioner failed to act on the request. Thus, on February 24, 2004,
    PAL elevated the case to the Court of Tax Appeals in Division.
     Commissioner contended that PAL's claim was subject to administrative
    routinary investigation or examination by the Bureau of Internal Revenue.
    She also alleged that PAL's claim was not properly documented, and that it
    must show that it complied with the prescriptive period for filing refunds
    under Sections 204(C) and 229 of the National Internal Revenue Code. It
    likewise asserted that claims for refund are of the same nature as a tax
    exemption, and thus, are strictly construed against the claimant.
    CTA RULING (DIVISION AND EN BANC)

     The Court of Tax Appeals Special First Division found that PAL was exempted from
    final withholding tax on interest on bank deposits. However, it ruled that PAL failed
    to adequately substantiate its claim because it did not prove that the Agent Banks,
    with the exception of JPMorgan, remitted the withheld amounts to the Bureau of
    Internal Revenue. PAL only presented documents which showed the total amount of
    final taxes withheld for all branches of the banks. As such, the amount of tax
    withheld from and to be refunded to PAL could not be ascertained with particularity.
    It ruled that the Certificates of Final Tax Withheld at Source are not sufficient to
    prove remittance.
     In the case at bar, both the Court of Tax Appeals Special First Division and En Banc
    ruled that PAL failed to sufficiently prove that Chinabank, PBCom, and Standard
    Chartered had remitted the withheld taxes. It found that the presented documents
    only showed the total amount of final taxes withheld for all branches of these Agent
    Banks. It did not show that the amounts remitted by these Agent Banks pertained to
    the taxes withheld from PAL’s interest income.
     In GR. Nos. 206079-80, PAL questions the denial of its refund claim for the taxes
    withheld by Chinabank, PBCom, and Standard Chartered. PAL argues that it
    adequately established the withholding and remittance of final taxes through the
    Certificates of Final Taxes Withheld issued to it by these Agent Banks. It contends
    that these Certificates are prima facie evidence of actual remittance, and if they are
    uncontroverted, as in this case, they are sufficient proof of remittance.
     The Commissioner argues in her Memorandum that PAL needed to prove, but did
    not prove, that the withheld taxes were remitted to the Bureau of Internal Revenue.
     She points out that PAL only showed the withheld amounts remitted by branches of
    Chinabank, PBCom, and Standard Chartered, but there is no indication that the
    remitted amounts are the taxes withheld from PAL's interest income. She argues that
    PAL must first prove that the money remitted to the Bureau of Internal Revenue is
    attributable to it because tax refunds are strictly construed against the taxpayer.
    ISSUES
     Whether or not Philippine Airlines, Inc. was able to prove remittance of
    its final taxes withheld to the Bureau of Internal Revenue

     Whether or not proof of remittance is necessary for Philippine Airlines,


    Inc. to claim a refund under its charter, Presidential Decree No. 1590.
    SC RULING (1ST ISSUE)
     A careful scrutiny of the evidence presented reveals that only documents pertaining
    to the amount of taxes withheld and actually remitted to the BIR by depositary bank
    JP Morgan Chase, in the amount of Pl,237,646.43, represents petitioner's valid claim

     This Court cannot give credence to the other certifications and Certificates of Final
    Tax Withheld at Source issued by the various depositary banks because proof on the
    fact of remittance was not aptly complied with; thus, the amount of taxes to be
    refunded cannot be ascertained. The amount of final withholding taxes as reflected
    on the Summary of Monthly Final Income Taxes Withheld on Philippine Savings
    Deposit and Foreign Currency Deposit and the Monthly Remittance Return of Final
    Income Taxes (BIR Form No. 1602) provided by withholding agents China Banking
    Corporation, Philippine Bank of Communication, and Standard Chartered Bank were
    based on the total amount of final withholding taxes per branch of each depositary
    banks; while the total amount appearing on the documents of Monthly Remittance
    Return of Final Income Taxes (BIR Form No. 1602) was based on the total amount of
    final withholding taxes for all branches of the depositary banks.
    SC RULING (1ST ISSUE)
     Therefore, the amount of final income tax withheld from petitioner
    cannot be ascertained with particularity from the total amount of final
    withholding taxes that were remitted to the BIR by China Banking
    Corporation, Philippine Bank of Communication[s], and Standard
    Chartered Bank.
    SC RULING (2ND ISSUE)
     To claim a refund, this Court rules that PAL needs only to prove that
    taxes were withheld. Taxes withheld by the withholding agent are
    deemed to be the full and final payment of the income tax due from the
    income earner or payee.

     These Certificates are sufficient evidence to establish the withholding of


    the taxes. The taxes withheld from PAL are considered its full and final
    payment of taxes. Necessarily, when taxes were withheld and deducted
    from its income, PAL is deemed to have paid them. Considering that
    PAL is exempted from paying the withholding tax, it is rightfully entitled
    to a refund.
    DISPOSITIVE PORTION
     WHEREFORE, premises considered, the Petition of Philippine Airlines,
    Inc. in G.R. Nos. 206079-80 is GRANTED. The Petition of the
    Commissioner of Internal Revenue in G.R. No. 206309 is DENIED. The
    August 14, 2012 Decision and February 25, 2013 Resolution of the
    Court of Tax Appeals En Banc in CTA CASE No. 6877 are PARTIALLY
    REVERSED. Philippine Airlines, Inc. is entitled to its claim for refund of
    PSl0,223.16 and US$65,877.07, representing the final income taxes
    withheld by China Banking Corporation, Philippine Bank of
    Communications, and Standard Chartered Bank.
     SO ORDERED.

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