GR 162175; (June, 2010) (Digest)
G.R. No. 162175; June 28, 2010
MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED, Petitioner, vs. COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE, Respondents.
FACTS
Petitioner Miguel J. Ossorio Pension Foundation, Inc. (MJOPFI) is a non-stock, non-profit corporation acting as trustee for the employees’ trust fund of Victorias Milling Company, Inc. (VMC). It invested a portion of the trust fund to purchase a 49.59% share in a lot in Madrigal Business Park. The title to the property, however, was registered solely in the name of VMC. On March 26, 1997, VMC sold the entire lot to Metropolitan Bank and Trust Company. The deed of absolute sale identified VMC as the sole vendor, and Metrobank, as the withholding agent, remitted the corresponding capital gains tax to the BIR.
MJOPFI, asserting its co-ownership of the property as trustee, filed a claim for refund of its proportionate share (₱3,037,500) of the withheld tax. It argued that the income of the employees’ trust fund is tax-exempt under Section 53(b) of the National Internal Revenue Code. The BIR denied the claim, prompting MJOPFI to file a petition for refund before the Court of Tax Appeals (CTA). The CTA denied the petition, a decision affirmed by the Court of Appeals. The appellate courts found that MJOPFI failed to substantiate its claim of co-ownership and that the sale was conducted by VMC as the sole and registered owner.
ISSUE
Whether petitioner MJOPFI is entitled to a tax refund representing its alleged share of the creditable withholding tax remitted on the sale of the real property.
RULING
No. The Supreme Court denied the petition and affirmed the decisions of the lower courts. The legal logic rests on two fundamental principles: the nature of tax exemptions and the requirement of clear proof of ownership for tax purposes. First, tax exemptions are construed strictly against the claimant, who bears the burden of proof. While the income of the employees’ trust fund may be exempt, MJOPFI failed to prove that the specific income from this sale belonged to the fund. Second, and decisively, MJOPFI could not establish its co-ownership of the sold property. The Certificate of Title was under VMC’s name alone, and the Deed of Absolute Sale unequivocally named VMC as the sole vendor. The notarized Memorandum of Agreement presented by MJOPFI to prove co-ownership was executed only after the sale and could not override the clear and public documents of title and sale. Since the sale was legally effected by VMC as the sole owner, the corresponding tax liability was correctly imposed on the entire proceeds. MJOPFI’s claim, being unsubstantiated by competent evidence of ownership at the time of the taxable transaction, was properly denied.