GR 138919; (May, 2006) (Digest)
G.R. No. 138919. May 2, 2006.
FAR EAST BANK AND TRUST COMPANY as Trustee of Various Retirement Funds, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE and THE COURT OF APPEALS, Respondents.
FACTS
Petitioner Far East Bank and Trust Company, as trustee of various private employee retirement funds, invested these funds in money market placements, bank deposits, and government securities. The interest income earned was subjected to final withholding tax for the four quarters of 1993, which petitioner sought to refund, citing the tax exemption for employees’ trusts. Petitioner filed its administrative claims for refund with the BIR on various dates in 1993 and 1994. To comply with the two-year prescriptive period for filing a judicial claim, petitioner attempted to include the 1993 claim via a Supplemental Petition in a pending CTA case involving a prior taxable period. The CTA denied the admission of this Supplemental Petition but advised petitioner to file a separate petition.
ISSUE
The primary issue is whether the Court of Tax Appeals correctly denied petitioner’s claim for refund of withholding taxes for 1993.
RULING
The Supreme Court affirmed the denial of the refund. Procedurally, the Court of Appeals correctly dismissed petitioner’s appeal for late filing. On the merits, the CTA’s denial was proper. First, the judicial claim for refund for the first three quarters of 1993 had prescribed. The two-year prescriptive period under the Tax Code runs from the date of tax payment. Petitioner filed its separate judicial petition (CTA Case No. 5292) only on October 9, 1995. Thus, only claims for taxes paid within two years prior to that date (from October 9, 1993, onward) were timely.
Second, for the claims within the prescriptive period (October 9 to December 31, 1993), petitioner failed to substantiate its claim. While employees’ trust income is generally exempt, a claim for refund requires strict proof of every factual basis. The CTA found petitioner’s evidence—consisting mainly of lists, schedules, and certifications—insufficient. Petitioner did not submit the best evidence, such as confirmation receipts, purchase orders, or individual bank account records, to concretely prove the retirement funds’ specific investments and the corresponding taxes withheld. A claim for tax refund, being in the nature of an exemption, is construed strictly against the claimant, who bears the burden of proof. Petitioner’s failure to present convincing evidence justified the denial of its claim.