Republic of the Philippines

COURT OF TAX APPEALS

Quezon City

EN BANC

COMMISSIONER OF INTERNAL CTA EB NO . 1753

REVENUE, (CTA Case No. 8965)
Petitioner,
Present:
DEL ROSARIO, P.J. I
-versus- CASTANEDA, JR.
UY
FABON-VICTORINO
GIC PRIVATE LIMITED MINDARO-GRULLA
(FORMERLY, GOVERNMENT OF RINGPIS-LIBAN, and
SINGAPORE INVESTMENT MANAHAN ,JJ.
CORPORATION PRIVATE
LIMITED), Promulgated:
Respondent. .IAN 1 8 20~ , ..
x--------------------------------- ------- -------------- : ~xl·~~· ~.

DECISION

MINDARO-GRULLA, J.:

Submitted for decision is a Petition for Review for the

Co urt En Bane under Rule 4, Section 2(a)(l), in relation to
Rule 8, Section 4(b) of the 2005 Revised Rules of the Court
of Tax Appeals (RRCTA) 1 , as amended, of the Decision 2 dated

1
Sec. 2. Cases within the jurisdiction of the Court en bane.- The Court en bane shall
exercise exclusive appellate jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the

Court in Division in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies- Bureau of Internal Revenue,

Bureau of Customs, Department of Finance, Department of Trade and
Industry, Department of Agriculture;
XXX XXX XXX

Sec. 4 . Where to appeal; mode of appea/.-

(a) XXX.
(b) An appeal from a decision or resolution of the Court in Division on a motion for
reconsideration or new trial shall be taken to the Court by petition for review
as provided in Rule 43 of the Rules of Court. The Court en bane shall act on
the appeal.
(c) XXX.

2 En Bane Docket, pp. 13-28.

Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 2 of 13

June 22, 2017, rendered by the Third Division of this Court in

CTA Case No. 8965, and its Resolution 3 dated November 27,
2017.

The Third Division of this Court granted the claim for

refund of the erroneously collected Final Withholding Tax
(FWT) on the interest income on Philippine Treasury Bonds
earned by respondent for the period January 2013 to July
2014 in the amount of P127,673,786.53.

Petitioner Commissioner of Internal Revenue (CIR)

assails both the aforesaid Decision and Resolution, the
dispositive portions of which, respectively, read as follows:

Decision dated June 22, 2017:

"WHEREFORE, premises considered, the instant

Petition for Review is GRANTED. Accordingly, respondent is
hereby ORDERED TO REFUND or TO ISSUE A TAX
CREDIT CERTIFICATE in favor of petitioner, the amount
of fl127,673,786.53 representing 20% FWT erroneously
collected on the interest income earned by petitioner on its
investments in Philippine T-Bonds for the period January
2013 to July 2014.

SO ORDERED."

Resolution dated November 27, 2017:

"Given the foregoing, respondent CIR 's Motion for

Reconsideration is DENIED for lack of merit.

SO ORDERED."

The pertinent facts as narrated by this Court in Division

in its Decision are undisputed, to wit:

"Petitioner GIC Private Limited 4 (Formerly,

Government of Singapore Investment Corporation Private
Limited) is a non-resident foreign corporation duly

3 En Bane Docket, pp. 29-32.

4
GIC Private Limited was the petitioner before the Court in Division and thereafter
the respondent before this Court En Bane.

t
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 3 of 13

organized and existing under the laws of the Republic of

Singapore, with principal place of business at 168
Robinson Road, #37-01 Capital Tower, Singapore 068912.
It is wholly owned by the Government of Singapore.
Petitioner is not registered as a corporation or partnership
with the Philippine Securities and Exchange Commission
(SEC) and is not engaged in trade or business in the
Philippines.

Petitioner's principal objective is to preserve and

enhance the international purchasing power of Singapore's
reserves; and it is authorized and mandated to open and
operate such custody and current accounts as may be
necessary for the safekeeping of assets and cash under its
management. The funds managed by petitioner which are
invested in the Philippines are beneficially owned by the
Republic of Singapore.

On the other hand, respondent is the duly appointed

Commissioner of the Bureau of Internal Revenue 5 (BIR)
who has the power to decide disputed assessments,
refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto or other matters
arising under the Tax Code or other laws or portions
thereof administered by the BIR. He holds office at 5th
Floor, BIR National Office Building, Agham Road, Diliman,
Quezon City.

On May 20, 1999, petitioner entered into a Direct

Custodial Services Agreement (DCSA) with Citibank, N.A.,
Subsidiaries and Affiliates ('Citibank' for brevity). Under
the DCSA, petitioner appointed the designated subsidiaries
and affiliates of Citibank as its custodian, thereby
authorizing Citibank to hold certain assets of petitioner
pursuant to the terms and conditions of the DCSA, as well
as to open and maintain custody accounts and cash
accounts for the purpose of holding the properties and
funds from time to time received by Citibank for the
account of petitioner.

On March 23, 2009, petitioner and Citibank, acting

through its Singapore Branch, executed a Global Custodial
Services Schedule (GCSS) as a supplement to the DCSA.
Based on the GCSS, petitioner authorized Citibank to open
sub-custody accounts with other Citibank subsidiaries and
affiliates as 'foreign sub-custodians' for the purpose of
holding the securities issued by foreign governments or
foreign companies whose principal trading market is
located outside of Singapore. On the basis of the GCSS,

5
Commissioner of Internal Revenue (CIR) was the respondent before the Court in
Division and thereafter the petitioner before this Court En Bane.

t
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 4 of 13

Citibank, acting through its Singapore Branch, opened a

sub-custody account for petitioner with Citibank, N.A,
Philippine Branch (hereinafter referred to as 'Citibank-
Philippines').

Pursuant to the DCSA and GCSS, petitioner opened

three (3) safekeeping accounts with Citibank-Philippines,
designated as 'CBSG-GIC B-FI'. 'CBSGGIC C-FI~ and
'CBSG-GIC H-FI'. Each of these safekeeping accounts has
its own securities account where the interest is credited.

As custodian, Citibank-Philippines is responsible for

the safekeeping of petitioner's securities and other
properties that are held by it in Citibank-Philippines'
account with depositaries and the Bureau of Treasury (BTr).
Part of Citibank-Philippines' responsibilities is to
collect/receive dividends and interest income arising from
petitioner's securities investments. It is also responsible
for the collection of interest or coupons on petitioner's T-
Bond holdings and receive the coupon payments for and
on behalf of petitioner.

During the period covering January 2013 to July

2014, petitioner derived interest income from its
investments in T-Bonds amounting to P638,368,932.68,
which was subjected to FWT at the rate of twenty percent
(20°/o), equivalent to a total amount of P127,673,786.53,
xxx:
XXX XXX XXX.

The BTr withheld a 20°/o FWT on petitioner's

coupons/interest income for the period January 2013 to
July 2014 amounting to P127,673,786.53 and remitted the
same to the BIR.

On December 9, 2014, petitioner flied with the BIR

an administrative claim for refund of or issuance of TCC in
the amount of P127,673,786.53, representing the FWT
withheld on the interest income derived by petitioner
during the period January 2013 to July 2014 on its
investments in T-Bonds.

Due to the inaction of respondent to resolve its

administrative claim for refund, petitioner flied the instant
Petition for Review on January 7, 2015, well within the
two-year prescriptive period to file a judicial claim for
refund under Section 229 of the National Internal Revenue
Code (NIRC) of 1997, as amended.

Within the extended time granted by the Court,

respondent filed his Answer (To the Petition for Review
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 5 of 13

dated 29 December 2014) on March 5, 2015, interposing

the following special and affirmative defenses:

XXX XXX XXX.

The Pre-Trial Conference was set on April 28, 2015.

Respondent's Pre- Trial Brief was filed on April 22, 2015.

Upon petitioner's motion, the Pre- Trial Conference

was moved to June 9, 2015. However, petitioner's counsel
failed to appear during the Pre-Trial Conference. Thus, for
failure of petitioner's counsel to appear during the
scheduled hearing and for failure to submit the required
Pre- Trial Brief, the Court dismissed the case without
prejudice upon the motion of respondent.

On July 8, 2015, petitioner filed an Omnibus Motion

(I) For Reconsideration (Re: Resolution dated June 18,
2015); (II) For Leave of Court to Admit Attached Pre-Trial
Brief; and (III) To Set Case for Pre- Trial. This was granted
by the Court in the Resolution dated September 2, 2015
and the Petitioner's Pre- Trial Brief was admitted into
record and the Pre- Trial was set on October 13, 2015.

On October 23, 2015, the parties flied their Joint

Stipulation of Facts and Issues. This was adopted by the
Court in the Pre- Trial Order dated December 7, 2015,
which also terminated the Pre- Trial.

During trial, petitioner presented the following

witnesses: Mr. Norman M. Lapid, Head of Securities
Services Operations of Citibank-Philippines; and Atty.
Mardomeo N. Raymundo, Jr., a Senior Associate at
Salvador Llanillo & Bernardo, the counsel of petitioner.

XXX XXX XXX.

During the hearing for the initial presentation of

evidence for respondent, counsel for respondent
manifested that no Report of Investigation was submitted
by Revenue Officers; hence, he would not present
evidence for respondent.

Thereafter, on July 7, 2016, respondent filed a

Manifestation that he is adopting the arguments he raised
in his Answer as his Memorandum. On the other hand,
petitioner filed its Memorandum on July 26, 2016. Thus, in
the Resolution dated July 28, 2016, the instant Petition for
Review was declared submitted for decision.

L
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 6 of 13

On June 22, 2017, this Court in Division granted

respondent's claim for refund of Final Withholding Tax (FWT)
on the interest income on Philippine Treasury Bonds for the
period January 2013 to July 2014 in the amount of
P127,673,786.53. The Court in Division found that
respondent is a financial institution wholly owned and
controlled by the Government of Singapore; that respondent
is exempt from payment of income tax and consequently of
FWT on interest income from Philippine Treasury Bonds
pursuant to Section 32(8) (7)(a) of the Tax Code; that said
FWT was erroneously collected and remitted to the Bureau of
Internal Revenue; and that the claim for refund was filed
within two years from date of payment.

Thereafter, on November 27, 2017, this Court in

Division denied the Motion for Reconsideration filed by
petitioner CIR. Hence, the instant petition was filed.

On February 26 2018, respondent filed a

"Comment/Opposition (Re: CIR's Petition for Review dated
December 12, 20 17)". Thereafter, in a Resolution dated
March 22, 2018, the parties were directed to file their
respective memoranda. Both parties complied. Thus, in a
Resolution dated June 4, 2018, the case was submitted for
decision.

The sole issue raised by Petitioner CIR in the petition is

that:

"THE HONORABLE COURT THIRD DIVISION

ERRED IN RULING THAT RESPONDENT WAS
ABLE TO PROVE ACTUAL PAYMENT AND
REMITTANCE OF THE ALLEGED FINAL
WITHHOLDING TAXES."

Petitioner asserts that the International Security

Identification Numbers of respondent's investments in
Treasury Bonds under Citibank's Custodian account that were
included in the list of securities from which the Bureau of
Treasury withheld the FWTs will not prove that the actual
income earned, the amount of taxes withheld from such
income and the withheld taxes were remitted to the BIR
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 7 of 13

pursuant to Revenue Regulations 2-98. Moreover, petitioner

insists that the claim was not supported by any documentary
evidence that will point to the fact that the amount of tax
being claimed was from interest income earned from
investment of respondent, considering that how much did
respondent invest for it to earn such income remains a
question.

We resolve.

The purpose of withholding tax system is to provide

convenience to the taxpayer in paying tax, to ensure tax
collection, and improve the government's cashflow. 6 Thus,
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. 7

In the case at bar, it is undisputed that respondent is a

financial institution wholly owned and controlled by the
Government of Singapore and it is exempt from payment of
income tax and consequently from final withholding tax on
income derived from its investments in Philippine T -Bonds,
pursuant to Section 32(B)(7)(a) of the NIRC of 1997. 8 The
Tax Code provides that income derived from investments in
the Philippines in loans, stocks, bonds or other domestic
securities, or from interest on deposits in banks in the
Philippines by (i) foreign governments, (ii) financing
institutions owned, controlled, or enjoying refinancing from
foreign governments, and (iii) international or regional
financial institutions established by foreign governments are
6Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue, G.R.
No. 170257, September 7, 2011, citing Chamber of Real Estate and Builders
Associations, Inc. v. The Executive Secretary, G.R. No. 160756, March 9, 2010, 614
SCRA 605, 632-633,
7 Section 2. 57(A) of Revenue Regulations No. 2-98
8 SEC. 32. Gross Income. -
XXX XXX XXX.
(B) Exclusions from Gross Income. - The following items shall not be included
in gross income and shall be exempt from taxation under this Title:
XXX XXX XXX.
(7) Miscellaneous Items. -

(a) Income Derived by Foreign Government. - Income derived from

investments in the Philippines in loans, stocks, bonds or other domestic securities, or
from interest on deposits in banks in the Philippines by (i) foreign governments, (ii)
financing institutions owned, controlled, or enjoying refinancing from foreign
governments, and (iii) international or regional financial institutions established by
foreign governments.

t
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 8 of 13

not to be included in gross income and shall be exempt

from taxation.

Hence, it is incumbent for respondent to prove that it

earned income from investments in the Philippines in loans,
stocks, bonds or other domestic securities, or from interest
on deposits in banks in the Philippines; and that taxes were
collected thereon.

At the outset, proof of actual remittance of a final

withholding tax to the BIR is not a condition before a
taxpayer can claim an erroneously or illegally collected final
withholding tax. Proof of remittance is not even a condition
to claim for a refund of unutilized tax credits 9 or creditable
withholding tax. The final withholding tax is the full and
final payment of income tax due from the recipient of the
income and the obligation to withhold the tax is imposed by
°
law on withholding agent. 1 Concomitantly, taxpayer claimant
need not prove the remittance of the final withholding tax
since it is the withholding agent's obligation to withhold the
same.

Evidently, CIR's assertion that the International Security

Identification Number of respondent's investments in
Treasury Bonds under Citibank's Custodian account that were
included in the list of securities from which the Bureau of
Treasury withheld the final withholding tax will not prove that
the actual income earned, the amount of taxes withheld from
such income and the withheld taxes were remitted to the BIR,
is without merit.

Respondent through Direct Custodial Services

Agreement and Global Custodial Services Schedule opened
with Citibank-Philippines three (3) safekeeping accounts 11 •
9 Commissioner of Internal Revenue v. Philippine National Bank, G.R. 180290,
September 29, 2014, citing Commissioner of Internal Revenue v. Asian Transmission
Corporation, G.R. N. 179617, January 19, 2011.
10 Section 2.57(A) of Revenue Regulations No. 2-98.

(A) Final Withholding Tax. 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. The
liability for payment of the tax rests primarily on the payor as a
withholding agent. Thus, in case of his failure to withhold the tax or in
case of under withholding, the deficiency tax shall be collected from
the payor /withholding agent. The payee is not required to file an income
tax return for the particular income. (Emphasis supplied)

11 Exhibit "P-27", docket, vol. 1, p. 512.

Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 9 of 13

Through these accounts, specifically under "Safe keeping

account name: CBSG-GIC C-FI and Securities account:
1100217086", respondent derived interest income from its
investments for the period covering January 2013 to July
2014 in the total amount of P638,368,932.68, which was
subjected to 20°/o Final Withholding Tax (FWT) in the amount
of P127,673,786.53.

Respondent offered in evidence, the Entitlement

Report 12 and Swift MT566 Confirmation Advices 13 issued by
its custodian, Citibank-Philippines. Said certification as
authenticated by respondent's witness Mr. Norman M. Lapid,
Head of Securities Services Operations of Citibank-
Philippines14, proves that respondent earned interest income
here in the Philippines. The Entitlement Report as certified by
respondent's witness Mr. Norman M. Lapid, was collaborated
by the Confirmations of Sale/Trade Confirmations 15 and
relevant Bond Exchange Offer16 issued by various banks.

To prove the fact that taxes were collected on

respondent's earned income derived from its investments,
the Statements of Taxes Withheld 17 and BIR Forms No.
2306 18 issued by the Bureau of Treasury show the amounts
of FWT on the interest due on the government securities
recorded under the banks' custody accounts. The amount of
P1,019,819,612.62 represents the entire taxes withheld by
the Bureau of Treasury on coupon interest payments of
various clients under the Citibank's custody account,
including petitioner's holdings, thus, the withholding and
remittance of the P127,673,786.53 FWT. Concomitantly, We
find that this Court's Division correctly ruled as follows:

"Petitioner submitted the Confirmations of

Sale/Trade Confirmations and relevant Bond Exchange
Offer issued by various banks as proof of its Philippine T-
Bond Holdings.

For the period covering January 2013 to July 2014,

petitioner derived interest income from its investments in
Philippine T-Bonds in the aggregate amount of

12 Exhibit "P-9", docket, vol. 1, p. 474.

13 Exhibits "P-15" to "P-26", docket, vol. 1, pp. 500-511.
14 Exhibit "P-32", Q & A Nos. 15, 37, and 38, docket, vol. 1, pp. 145-146 and 155-156.
15 Exhibits "P-10-a" to "P-13-c", docket, vol. 1, pp. 475-490.
16 Exhibit "P-14", docket, vol. 1, pp. 491-499.
17
Exhibits "P-4-a" to "P-4-c", inclusive of sub-markings, docket, vol. 1. pp. 418-427.
18 Exhibits "P-6-a" to "P-6-c", docket, vol. 1, pp. 439-441.
 Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 10 of 13

P638,368,932.68, which was subjected to 20% FWT in the

amount of P127,673,786.53, as evidenced by the
Entitlement Report and Swift MT566 Confirmation Advices
issued by its custodian, Citibank-Philippines. Below is the
detailed breakdown of the amount of P510,695,146.15
interest payments received by petitioner, net of the 20°/o
FWT of P127,673,786.53:

ISIN Loca/ISIN Coupon Exhibit Interest

Date No. Gross Amount 20%FWT Net Amount
PHY6972FKN96 PIBD0313A199 7-Jan-13 P-15 P84 000 000.00 P 16 BOO 000.00 P67 200 000.00
PHY6972FJC50 PIBD0514A673 28-Jan-13 P-16 352 187 500.00 70 437 500.00 281 750 000.00
PHY6972FFF28 PIBD1 018A451 31-Jan-13 P-17 2 482_L187.50 496 437.50 1 985 750.00
PHY6972FHT04 PIBD1019B485 19-Feb-13 P-18 37,406,250.00 7,481,250.00 29,295,000.00
PHY6972FMZ09 PIBD1020L525 17-Jun-13 P-19 45 802_L977.56 9 160 595.51 36 642 382.05
PHY6972FFF28 PIBD1018A451 31-Jul-13 P-20 2 482 187.50 496 437.50 1 985 750.00
PHY6972FHT04 PIBD1019B485 22-Au~-13 P-21 37 406 250.00 7 481 250.00 29 925 000.00
PHY6972FMZ09 PIBD1020L525 16-Dec-13 P-22 36 990 477.56 7398 095.51 29 592 382.05
PHY6972FFF28 PIBD1018A451 3-Feb-14 P-23 2 482,187.50 496,437.50 1 985,750.00
PHY6972FHT04 PIBD1019B485 19-Feb-14 P-24 19 687 500.00 3 937 500.00 15 750 000.00
PHY6972FMZ09 PIBD1020L525 16-Jun-14 P-25 14 959 227.56 2 991 845.51 11 967 382.05
PHY6972FFF28 PIBD1018A451 31-Jul-14 P-26 2 482187.50 496 437.50 1 985 750.00
P63B_L_36~932.68 P127,6731 786.53 P510,695,146.15

In his Judicial Affidavit, Mr. Norman M. Lapid, Head

of Securities Services Operations of Citibank-Philippines,
explained that the T-Bonds are scripless securities
represented by units of participation in the electronic
records of the Bureau of Treasury, otherwise known as the
Registry of Scripless Securities (ROSS). As a custodian,
Citibank-Philippines maintains an omnibus account with
ROSS, under which all of the T-Bills and T-Bond holdings of
its clients, including petitioner, are recorded.

On coupon payment date, the Bureau of Treasury

automatically withholds a 20°/o final tax on all of its coupon
payments, regardless of the status of the T-Bond holder.
The Bureau of Treasury remits the FWT to the Bureau of
Internal Revenue and remits the balance or the net
interest payments due on the government securities to
Citibank's Demand Deposit Account, which are later on
distributed by Citibank to the accounts of its clients.

Hence, the Bureau of Treasury, which is the

withholding agent for the FWT due on interest income
derived by petitioner from the T-Bonds, considers Citibank
as payee of the interest due on such securities.

To prove the fact of withholding and remittance of

the P127,673,786.53 FWT, petitioner presented the
following documents:

1. Bureau of Treasury's Statements of Taxes Withheld on

the Coupon Due on the T-Bond Holdings of Citibank as
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 {CTA Case No. 8965)
DECISION Page 11 of 13

Custodian for the period January 1, 2013 to July 31,

2014.
2. Bureau of Treasury Journal Entry Vouchers (JEVs)
covering the remittance of the FWTs to the BIR.
3. Certificates of Final Tax Withheld (BIR Forms No. 2306)
issued by the Bureau of Treasury in favor of Citibank
covering FWT for the period January 1, 2013 to July 31,
2014.
4. BIR Revenue Accounting Division (RAD) Certification No.
RAD-15-06-139-Cert. dated June 16, 2015 confirming
receipt of the FWTs on the Bureau of Treasury's coupon
payments to Citibank's ROSS Custodian Account for the
period January 2013 to July 2014.

The Statements of Taxes Withheld and BIR Forms No.

2306 issued by the Bureau of Treasury show the amounts
of FWT on the interest due on the government securities
recorded under the banks' custody accounts, to wit:

Period Final Taxes Withheld

January 1, 2013 to December 31 2013 p 643 360 620.66
January 1, 2014 to March 31, 2014 210,340,452.49
Apri/1, 2014 to July 31 2014 166 118 539.47
Total P1.,01.9,81.9,61.2.62

The amount of P1,019,819,612.62 represents the

entire taxes withheld by the Bureau of Treasury on coupon
interest payments of various clients under the Citibank's
custody account, including petitioner's holdings. Verily, the
International Security Identification Numbers (!SINs) of
petitioner's investments in T-Bonds under the custody
account of Citibank were included in the list of securities
from which the Bureau of Treasury withheld the said FWTs.
Xxx.
Hence, the P127,673,786.53 FWT on petitioner's
income derived from such securities formed part of the
amount withheld by the Bureau of Treasury and
subsequently remitted to the BIR.

XXX XXX XXX.

In sum, the amount of P127,673,786.53

representing 20°/o FWT on the interest income earned by
petitioner from January 2013 to July 2014 on its
investments in Philippine T-Bonds was erroneously
collected, petitioner being exempt from paying income tax
and consequently from FWT thereon pursuant to Section
32 (B) (7) (a) of the NIRC of 1997, as amended."
Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 12 of 13

In the case of Compagnie Financiere Sucres Et Denrees

vs. Commissioner of Internal Revenue 19 , the Supreme Court
instructively held that:

"Along with police power and eminent domain,

taxation is one of the three basic and necessary attributes
of sovereignty. Thus, the State cannot be deprived of this
most essential power and attribute of sovereignty by
vague implications of law. Rather, being derogatory of
sovereignty, the governing principle is that tax exemptions
are to be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority; and
he who claims an exemption must be able to justify his
claim by the clearest grant of statute.

In the instant case, petitioner seeks a refund. Tax

refunds are a derogation of the State's taxing power.
Hence, like tax exemptions, they are construed strictly
against the taxpayer and liberally in favor of the State.
Consequently, he who claims a refund or exemption from
taxes has the burden of justifying the exemption by words
too plain to be mistaken and too categorical to be
misinterpreted. xxx "

Thus, settled rule is that tax refunds are in the nature of

tax exemptions and are to be construed strictissimi
juris against the taxpayer. To those therefore, who claim a
refund rest the burden of proving that the transaction
subjected to tax is actually exempt from taxation. 20 This case
originates from respondent's claim for refund. It must be
construed strictly against respondent. The burden of proof to
establish the factual basis of its claim for refund lies with
respondent. In this regard, respondent sufficiently discharged
the burden of proof of its entitlement to refund.

Accordingly, finding no reversible error, the Court En

Bane finds no cogent reason or justification to disturb the
conclusions reached by the CTA Third Division.

WHEREFORE, the Petition for Review is DENIED, for

lack of merit. Accordingly, the Decision dated June 22, 2017,
rendered by the Third Division of this Court in CTA Case No.

19
G.R. No. 133834, August 28, 2006
2
° Commissioner of Internal Revenue vs. Juliane Baier-Nickel, as represented by
Marina Q. Guzman (Attorney-in fact), G.R. No. 153793, August 29, 2006.
 Commissioner of Internal Revenue v. GIC Private Limited
CTA EB No. 1753 (CTA Case No. 8965)
DECISION Page 13 of 13

8965, and its Resolution dated November 27, 2017 are

AFFIRMED. No pronouncement as to costs.

SO ORDERED.

CJx N. l\11~·~ ~ C~
CIELITO N. MINDARO-GRULLA
Associate Justice

WE CONCUR:

Presiding Justice

,
~~C~~~~·
JU~NITO C. CASTANEDA, JR. ER~P.UY
Associate Justice Associate Justice

~-
. FABON-VICTORINO MA. BELEN M. RINGPIS-LIBAN
Associate Justice

C'~. /. ~....,_...At..__ _
CATHERINE T. MANAHAN
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution,

it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court.

Presiding Justice