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Tuesday, September 05, 2006
SC tells BIR to refund bank
MANILA - The Supreme Court (SC) has ordered the Bureau of Internal Revenue (BIR) to refund Manila Banking Corp. (MBC) the amount of P33.8 million representing its minimum corporate income tax, which the bank prematurely paid in 1999.
In a decision penned by Associate Justice Angelina Sandoval-Gutierrez, the SC Second Division ruled that MBC, which started operating as a thrift bank in 1999, is entitled to a four-year suspension of tax payment provided under Revenue Regulation 4-95, which states the guidelines for the implementation of Republic Act 7906, otherwise known as the “Thrift Banks of 1995.”
The SC reversed the May 11, 2005 decision of the Court of Appeals, which affirmed the ruling of the Court of Tax Appeals (CTA) finding that MBC’s payment of its minimum corporate income tax in 1999 is in order.
Regulations
“Clearly then, Revenue Regulations 4-95, not Revenue Regulations 9-98, applies to petitioner, being a thrift bank. It is therefore, entitled to a grace period of four years counted from June 23, 1999 when it was authorized by the Bangko Sentral ng Pilipinas (BSP) to operate as a thrift bank. Consequently, it should pay its minimum corporate income tax after four years from 1999,” the SC said.
Records showed that MBC was registered with the revenue bureau in 1961 and since then had engaged in the commercial banking industry until 1987 when it was found insolvent by the Monetary Board of the BSP.
Prescribe
After 12 years, the BSP issued to MBC a certificate of authority to operate as a thrift bank. On April 7, 2000, it filed with the revenue bureau its annual corporate income tax return and paid P33,816,164 for taxable year 1999.
Prior to the filing of its income tax return, the petitioner sought the revenue bureau’s ruling on whether it is entitled to the four-year suspension of tax payment citing Revenue Regulations 9-98, which prescribes the guidelines for the implementation of Republic Act 8424, otherwise known as the Comprehensive Tax Reform Act of 1997.
On February 2001, the revenue bureau issued a ruling declaring that MBC is entitled to the four-year suspension of tax payment, which became the bank’s basis to claim for a tax refund.
Review
However, due to the failure of the revenue bureau to act on its petition for a refund, the bank elevated the case before the CTA through a petition for review.
On April 21, 2003, the CTA denied the petition of MBC saying that it is not entitled to the four-year grace period since it is now
a new corporation.
The CTA noted that it has continued to be the same corporation registered with the Securities and Exchange Commission and the Bureau of Internal Revenue. The appellate court affirmed the CTA ruling.
In its petition for review filed before the High Court, the MBC argued that the CTA erred in its decision holding that it is not entitled to a four-year suspension of tax payment.
In its comment to the petition, the revenue bureau stressed that under the Comprehensive Tax Reform Act of 1997, the petitioner should pay its minimum corporate income tax beginning January 1, 1998 as it did not close its business operations in 1987 but merely suspended it.
The BIR said under Revenue Regulation 9-98, “the taxable year in which business operations commenced shall be the year in which domestic corporation registered with the revenue bureau.” (Sunnex)
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