GR L 19157; (June, 1965) (Digest)
G.R. No. L-19157 June 30, 1965
INDIAN COMMERCIAL CO., plaintiff-appellant, vs. CENTRAL BANK OF THE PHILIPPINES, defendant-appellee.
FACTS
Plaintiff Indian Commercial Co., a mercantile partnership, sought a refund of P27,013.04 paid to defendant Central Bank of the Philippines through its agent, Bank of America (Manila), from January 9 to 23, 1956. This payment represented a 17% specific tax on foreign exchange remittances for importing goods from the United States. The letters of credit for these remittances were opened between June 3 and November 18, 1955, while Republic Act No. 601 (as amended), which imposed the tax, was in effect. However, the tax was collected after January 1, 1956, when Republic Act No. 1394 , abolishing the tax, took effect. The Court of First Instance of Manila dismissed the complaint, ruling that the refund depended on when the defendant’s agent bank paid the creditors abroad, not on when the plaintiff paid the agent bank. For twelve letters of credit (taxes aggregating P22,812.45), payment to foreign creditors occurred from October 19 to December 14, 1955, before the tax repeal. For the thirteenth letter of credit (tax of P4,200.59), payment abroad was on January 5, 1956, after repeal, but refund was not made due to plaintiff’s failure to present the pertinent documents.
ISSUE
Whether the right to a refund of the specific tax on foreign exchange hinges on the date of payment by the plaintiff to the defendant’s agent bank in the Philippines or on the date of payment by the defendant’s agent bank to the creditors abroad.
RULING
The Supreme Court affirmed the lower court’s decision, ruling that the right to a refund depends on the date of payment by the defendant’s agent bank to the creditors abroad. The Court reiterated its established doctrine from Belman Compañia, Inc. vs. Central Bank and Marsman Company, Inc. vs. Central Bank, holding that the sale of foreign exchange is consummated, and the tax liability is determined, upon payment or delivery of the foreign currency to the foreign creditor by the agent or correspondent bank, not upon the debtor’s payment to the local bank. Since the payments abroad for twelve letters of credit occurred before the tax was abolished, the tax was properly due and not refundable. The tax for the thirteenth letter, paid abroad after abolition, was subject to refund, but plaintiff failed to comply with the documentary requirements. Costs were imposed on the plaintiff.