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RIZAL COMMERCIAL BANKING

CORPORATION,

G.R. No. 170257

Petitioner,
Present:

VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
- versus -

VILLARAMA, JR.,* and
MENDOZA, JJ.

COMMISSIONER OF INTERNAL
REVENUE,

Promulgated:

Respondent.
September 7, 2011

x --------------------------------------------------------------------------------------- x

DECISION

MENDOZA, J.:

96 207.819.57 3. effectively extending the period of the Bureau of Internal Revenue (BIR) to assess up to December 31.[5] Subsequently. THE FACTS Petitioner Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in general banking operations. RCBC executed two Waivers of the Defense of Prescription Under the Statute of Limitations of the National Internal Revenue Code covering the internal revenue taxes due for the years 1994 and 1995.T.B.26 1. RCBC received Letter of Authority No.[4] On January 23.58 5. 1995.0 0 25. No.478. on January 27.A.90 ₱ 191.672.0 0 Total ₱ 443.496. 2005 Resolution [2] of the Court of Tax AppealsEn Banc (CTA-En Banc) in C. 1994 to December 31. 1996. authorizing a special audit team to examine the books of accounts and other accounting records for all internal revenue taxes from January 1.[3] On August 15. 1997. 2000. E.39 7.000. 2005 Decision [1] and October 26.This is a petition for review on certiorari under Rule 45 seeking to set aside the July 27.000.01 216. It seasonably filed its Corporation Annual Income Tax Returns for Foreign Currency Deposit Unit for the calendar years 1994 and 1995. 133959 issued by then Commissioner of Internal Revenue (CIR) Liwayway VinzonsChato.65 9. 83 entitled Rizal Commercial Banking Corporation v. 2000. RCBC received a Formal Letter of Demand together with Assessment Notices from the BIR for the following deficiency tax assessments:[6] Particulars Deficiency Income Tax 1995 (ST-INC95-01992000) 1994 (ST-INC94-02002000) Deficiency Gross Receipts Basic Tax Interest Compro mise Penalties ₱ 252.97 424.98 8.89 .99 ₱ 25.322. Commissioner of Internal Revenue.150.

640.207.365.84 4.000.506.000.65 367.748.29 331.610.Tax 1995 (ST-GRT95-02012000) 1994 (ST-GRT94-02022000) Deficiency Final Withholding Tax 1995 (ST-EWT95-02032000) 1994 (ST-EWT94-02042000) Deficiency Final Tax on FCDU Onshore Income 1995 (ST-OT95-02052000) 1994 (ST-OT94-02062000) Deficiency Expanded Withholding Tax 1995 (ST-EWT95-02072000) 1994 (ST-EWT94-02082000) Deficiency Documentary Stamp Tax 1995 (STDST1-950209-2000) 1995 (STDST2-950210-2000) 13.200. 21 2.000. 10 33.525. 00 9.757.0 0 143. 12 58.97 .53 9.6 6 351.52 25.052.48 5.755.462. 34 25. 20 61. 25 59.8 0 64. 98 25.94 9.000.72 34.94 6.0 0 123.15 53.52 28.055.945.26 250.963.130. 68 12.39 315.5 5 4.508. 00 699.804.415.322.716.3 3 113.566.047.535.2 2 4.628.59 81.503.042.696.68 1.083.901.3 1 78.900.740.058.000.482.3 8 2.000.3 5 4.428.096.000.4 2 25.866.718.10 5.148.68 300. 41 2.000.74 5. 78 25.051.429.0 0 5.0 0 112.697.435.067.583.178.819.47 7. 00 667.955.0 0 67.269.626.826. 08 5.488.075.17 1.0 0 8. .

370.368.035.94 5. 2000. it filed a petition for review before the CTA.322.22 188. 63 138.491. pursuant to Section 228 of the 1997 Tax Code.605.02 300.807.037. 1.10 0.287.388.89 ₱ 4. 2000.392.93 362.738.32 300.335.52 ₱ 4.656.07 223.000.45 346.47 409. 00 463.050.971.495.690.553.70 6.000.46 0.1994 (STDST3-940211-2000) 1994 (STDST4-940212-2000) TOTALS 460.367. 63 Total ₱ 721.203.49 Disagreeing with the said deficiency tax assessment. which drastically reduced the original amount of deficiency taxes to the following:[8] Particulars Deficiency Income Tax 1995 (INC-95000003) 1994 (INC-94000002) Deficiency Gross Receipts Tax 1995 (GRT-95000004) 1994 (GRT-94000003) Deficiency Final Withholding Tax 1995 (FT-95000005) 1994 (FT-94000004) Basic Tax Interest Surcharge &/ Compromi se ₱ ₱ 374.6 34.960.67 5.89 240. 00 972.746.005.240.348. RCBC filed a protest on February 24. 96 3.193.47 351.75 713.90 .7 33.04 6.92 1. 2000 and later submitted the relevant documentary evidence to support it.568.130.058.05 512. following the reinvestigation it requested.09 300.[7] On December 6. 80 ₱ 1. RCBC received another Formal Letter of Demand with Assessment Notices dated October 20.83 ₱ 2.226.61 161.43 220.9 54.366.170. 2000.64 0.589.37 2.864.000. Much later on November 20.926. 28 52 2.222 .98 ₱ 2.38 1.872.

510.753 .00 671.052.965.890.46 905.174. 62 1. 46 1.38 160.701.802 .192.28 74.05 ₱ 303.869.80 297.94 7.Deficiency Final Tax on FCDU Onshore Income 1995 (OT-95000006) 1994 (OT-94000005) Deficiency Expanded Withholding Tax 1995 (EWT-95000004) 1994 (EWT-94000003) Deficiency Documentary Stamp Tax 1995 (DST-95000006) 1995 (DST2-95000002) 1994 (DST-94000005) 1994 (DST2-94000001) TOTALS 81.718 79. 32 .26 520.00 9.508.4 4 672.124.104 .74 17.64 3.236.72 505.194.58 149.863.36 25.000.300. 03 25. 01 1.549 .40 31.052.041.72 24.291.00 1.62 226. 55 7. 92 21.1 4 ₱ 722.949.17 714.266.051.863.291 .460 .707. RCBC paid the following deficiency taxes as assessed by the BIR:[9] Particulars Deficiency Income Tax Deficiency Gross Receipts Tax Deficiency Final Withholding Tax Deficiency Expanded Withholding Tax Deficiency Documentary Stamp 1994 1995 Total ₱ 2.972.000.561.842 .260.49 6.725.560.131 .695.0 2 1.1 8 4.155.8 4 410.6 8 6.4 0 1.040.238.682.856.20 .687.73 749.171.10 .84 ₱ ₱ 164.589.064.1 1 6.243.893 .953.131.55 On the same day.44 300.95 348.92 749.429.490.785.330 .160.131.503 40.026 .303 .90 126.277.330.08 1.48 ₱ 3.44 5.305 .881.08 34.63 599.712.21 ₱ 12.002.

31 2.34 ₱ 235.238. 1997 were not valid because the same were not signed or conformed to by the respondent CIR as required under Section 222(b) of the Tax Code.434.[12] .131 .09 3.503 .429.718.498.300.18 .77 RCBC argued that the waivers of the Statute of Limitations which it executed on January 23.052. 08 ₱ 160.303.561. 30 10. constituted by law as the withholding agent.36 ₱ 41.64 ₱ 17.753.508.84 4.026.421.30 119. it was the borrower. 46 6.260. 83 ₱ 52.28 ₱ 115.040. 08 ₱ 191.104 .947.78 ₱ ₱ 9. RCBC contended that because the onshore tax was collected in the form of a final withholding tax.192.74 8.993.41 ₱ 24.330.842.668 .428 15.007.6 2 ₱ 31.460.436 .96 RCBC.240 . 13 ₱ 287.486.Tax TOTALS ₱ 5.[11] As regards the deficiency FCDU onshore tax.31 4.305 .10 40.277.492.802 .707.268. that was primarily liable for the remittance of the said tax.00 9.760.953. 20 79. however.05 ₱ 96.26 ₱ 74.938. refused to pay the following assessments for deficiency onshore tax and documentary stamp tax which remained to be the subjects of its petition for review:[10] Particulars Deficiency Final Tax on FCDU Onshore Income Basic Interest Sub Total Deficiency Documentary Stamp Tax Basic Surcharge Sub Total TOTALS 1994 1995 Total ₱ 34.291.480.941.36 ₱ 81. 21 ₱ 21.22 1.

651.52 9.434.69 and not ₱171.947.093 .654.86 15.30 .08 13 ₱62.527. upheld the assessment for deficiency final tax on FCDU onshore income and deficiency documentary stamp tax for 1994 and 1995 and ordered RCBC to pay the following amounts plus 20% delinquency tax:[15] Particulars Deficiency Final Tax on FCDU Onshore Income Basic Interest Sub Total Deficiency Documentary Stamp Tax (Industry Issue) Basic Surcharge Sub Total TOTALS 1994 1995 Total ₱ 22.84 4. 16. the First Division of the Court of Tax Appeals (CTA-First Division) promulgated its Decision[13] which partially granted the petition for review.583.153.837 .510.261.040.356.96 ₱171.47 Unsatisfied.492.47. . 21 21. however.330.810.238.666 119.303 52.05 .330.192. [14] It.843.34 31.842 41.56 ₱ ₱ 24.51 ₱ ₱ 115. (2) the CTA erred in holding that RCBC was .026.822.29 2. It considered as closed and terminated the assessments for deficiency income tax.486. deficiency expanded withholding tax.05 ₱69. deficiency gross receipts tax. and deficiency documentary stamp tax (not an industry issue) for 1994 and 1995.324 .On December 15.161 .713 119.19 .131 .300.953. arguing that: (1) the CTA erred in its addition of the total amount of deficiency taxes and the correct amount should only be ₱132.822.13 7.104 . 2005. 2004.08 48.46 30 6. RCBC filed its Motion for Reconsideration on January 21. 62 83 31.993. .34 ₱ 17.952 221.938.093 .460. deficiency final withholding tax.498.260.067.43 26. 10.

denied the petition for lack of merit.[18] RCBC elevated the case to the CTA-En Banc where it raised the following issues: I. who was liable to pay the final tax on FCDU. and not RCBC. it would then follow that the tax should be imposed on RCBC as the payee-bank.69 plus 20% delinquency tax. [21] As to the deficiency onshore tax. It ruled that by receiving. As such. in relation to the assessment . except for its inadvertence in the addition of the total amount of deficiency taxes. Whether or not the right of the respondent to assess deficiency onshore tax and documentary stamp tax for taxable year 1994 and 1995 had already prescribed when it issued the formal letter of demand and assessment notices for the said taxable years. it held that because the payor-borrower was merely designated by law to withhold and remit the said tax. Whether or not petitioner is liable for deficiency onshore tax for taxable year 1994 and 1995. [22] Finally. implying that it recognized the validity of the waivers. it modified its earlier decision and ordered RCBC to pay the amount of ₱132. accepting and paying portions of the reduced assessment.[16] In its Resolution[17] dated April 11. and (4) RCBCs special savings account was not subject to documentary stamp tax. the CTA-First Division substantially upheld its earlier ruling.654. II. [20] RCBC could not assail the validity of the waivers after it had received and accepted certain benefits as a result of the execution of the said waivers.estopped from questioning the validity of the waivers. (3) it was the payorborrower as withholding tax agent. RCBC bound itself to the new assessment.261. 2005.[19] The CTA-En Banc. III. in its assailed Decision. Whether or not petitioners special savings account is subject to documentary stamp tax under then Section 180 of the 1993 Tax Code.

2009 Comment to the Manifestation. relative to the DST deficiency assessment.161. this petition. The CIR prayed that RCBC be considered to have withdrawn its appeal with respect to the CTA-En Banc ruling on its DST on SSA deficiency for taxable years 1994 and 1995 and that the questioned CTA decision regarding RCBCs deficiency tax on FCDU Onshore Income for the same period be affirmed. by paying the other tax assessment covered by the waivers of the statute of limitations. it held that petitioners special savings account was a certificate of deposit and. only the following issues remain to be resolved by this Court: Whether petitioner.56 plus 20% delinquency interest per annum.[25] THE ISSUES Thus. as such.of the deficiency documentary stamp tax on petitioners special savings account. 2009. informing the Court that this petition.[24] In its November 17. While awaiting the decision of this Court.827. [27] .[26] and Whether petitioner. the CIR pointed out that the only remaining issues raised in the present petition were those pertaining to RCBCs deficiency tax on FCDU Onshore Income for taxable years 1994 and 1995 in the aggregate amount of ₱80. is rendered estopped from questioning the validity of the said waivers with respect to the assessment of deficiency onshore tax. which is mandated by law to be collected at source in the form of a final withholding tax.[23] Hence. had been rendered moot and academic by its payment of the tax deficiencies on Documentary Stamp Tax (DST) on Special Savings Account (SSA) for taxable years 1994 and 1995 after the BIR approved its applications for tax abatement. was subject to documentary stamp tax. as payee-bank. RCBC filed its Manifestation dated July 22. can be held liable for deficiency onshore tax.

the doctrine of estoppel is anchored on the rule that an admission or representation is rendered conclusive upon the person making it. 2000. To hold otherwise and allow a party to gainsay its own act or deny rights which it had previously recognized would run counter to the principle of equity which this institution holds dear. then Coordinator for the CIR. RCBC immediately made payment on the uncontested taxes. as required under Section 223 (b) of the 1977 Tax Code.[30] Estoppel is clearly applicable to the case at bench. impliedly admitted the validity of those waivers.[29] The Court disagrees. and cannot be denied or disproved as against the person relying thereon. and that he failed to indicate acceptance or agreement of the CIR.[28] RCBC further argues that the principle of estoppel cannot be applied against it because its payment of the other tax assessments does not signify a clear intention on its part to give up its right to question the validity of the waivers. upon receipt of the revised assessment. A party is precluded from denying his own acts. Under Article 1431 of the Civil Code. RCBC. RCBCs subsequent action effectively belies its insistence that the waivers are invalid. RCBC is estopped from questioning the validity of the waivers. Had petitioner truly believed that the waivers were invalid and that the assessments were issued beyond the prescriptive period. admissions or representations to the prejudice of the other party in order to prevent fraud and falsehood. through its partial payment of the revised assessments issued within the extended period as provided for in the questioned waivers.[31] .THE COURTS RULING Petitioner is estopped from questioning the validity of the waivers RCBC assails the validity of the waivers of the statute of limitations on the ground that the said waivers were merely attested to by Sixto Esquivias. The records show that on December 6. Thus. then it should not have paid the reduced amount of taxes in the revised assessment.

Inc. in case of his failure to withhold the tax or in case of under withholding. 2-98 which states: (A) Final Withholding Tax. 2-98 obviously does not apply in this case. and (3) to improve the governments cashflow. 2-98 because the same governs collection at source on income paid only on or after January 1. the deficiency tax shall be collected from the payor/withholding agent. The liability for payment of the tax rests primarily on the payor as a withholding agent. citing Section 2. Thus. (2) to ensure the collection of tax. v. 1998. who is directly liable for the payment of onshore tax. Before any further discussion. The deficiency withholding tax subject of this petition was supposed to have been withheld on income paid during the taxable years of 1994 and 1995. The Executive Secretary. In Chamber of Real Estate and Builders Associations. Hence. Revenue Regulations No. Under the withholding tax system. The payee is not required to file an income tax return for the particular income. the payor is the taxpayer upon whom the tax is imposed. (Emphasis supplied) The petitioner is mistaken.[33] . it should be pointed out that RCBC erred in citing the abovementioned Revenue Regulations No. while the withholding agent simply acts as an agent or a collector of the government to ensure the collection of taxes. as withholding agent. Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income.Liability for Deficiency Onshore Withholding Tax RCBC is convinced that it is the payor-borrower.[32] the Court has explained that the purpose of the withholding tax system is three-fold: (1) to provide the taxpayer with a convenient way of paying his tax liability.57(A) of Revenue Regulations No.

a separate entity acting no more than an agent of the government for the collection of the tax in order to ensure its payments. however.[34] to wit: In the operation of the withholding tax system. remains with the taxpayer because the gain was realized and received by him. but for the enforcement of the withholding provision of Section 53 of the Tax Code. however. and the payee is the taxing authority. RCBC. The agent is not liable for the tax as no wealth flowed into him he earned no income. The liability for the tax. Court of Appeals. the withholding agent is merely a tax collector. His (agent) liability is direct and independent from the taxpayer. the withholding agent is the payor. compliance with which is imposed on the withholding agent and not upon the taxpayer. the agent-payor becomes a payee by fiction of law. The Tax Code only makes the agent personally liable for the tax arising from the breach of its legal duty to withhold as distinguished from its duty to pay tax since: the governments cause of action against the withholding agent is not for the collection of income tax. as the taxpayer and the one which earned income on the transaction. In other words. the liability of the withholding agent is independent from that of the taxpayer. [35] (Emphases supplied) Based on the foregoing. because the income tax is still imposed on and due from the latter. remains liable for the payment of tax as the taxpayer shares the responsibility of making certain that the tax is properly withheld by the . Under the withholding system. The former cannot be made liable for the tax due because it is the latter who earned the income subject to withholding tax. The withholding agent is liable only insofar as he failed to perform his duty to withhold the tax and remit the same to the government. as elucidated by this Court in the case of Commissioner of Internal Revenue v. indisputable that the withholding agent is merely a tax collector and not a taxpayer. not a taxpayer. the payer is the taxpayer he is the person subject to tax imposed by law. While the payor-borrower can be held accountable for its negligence in performing its duty to withhold the amount of tax due on the transaction. therefore.It is.

RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the payor-borrower as the withholding agent. Rates of tax on domestic corporations. as a specialized court dedicated exclusively to the study and resolution of tax problems. so as to avoid any penalty that may arise from the nonpayment of the withholding tax due. unless this Court finds that the questioned decision is not supported by substantial evidence or there is a showing of abuse or improvident exercise of authority on the part of the Tax Court. in the absence of any clear and convincing proof to the contrary.[38] . As such.[36] The CTA. pursuant to Section 24(e)(3) of the National Internal Revenue Code of 1993: Sec. xxxx (e) Tax on certain incomes derived by domestic corporations xxxx (3) Tax on income derived under the Expanded Foreign Currency Deposit System. local commercial banks including branches of foreign banks that may be authorized by the Central Bank to transact business with foreign currency depository system units and other depository banks under the expanded foreign currency deposit system shall be exempt from all taxes. (Emphasis supplied) As a final note. it is liable for payment of deficiency onshore tax on interest income derived from foreign currency loans. upon recommendation of the Monetary Board to be subject to the usual income tax payable by banks: Provided. 24. except taxable income from such transactions as may be specified by the Secretary of Finance.[37] As such. That interest income from foreign currency loans granted by such depository banks under said expanded system to residents (other than offshore banking units in the Philippines or other depository banks under the expanded system) shall be subject to a 10% tax. this Court has consistently held that findings and conclusions of the CTA shall be accorded the highest respect and shall be presumed valid. its decisions shall not be lightly set aside on appeal.withholding agent. Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents. has developed an expertise on the subject of taxation. offshore banking units in the Philippines.

.WHEREFORE. SO ORDERED. the petition is DENIED.