CTA Case No. 4324 (Decision)

, Republ i c o f th e Ph ilippines COURT OF T~X ~PPE~LS Quezon City JARDINE DAVIES, INC., C.T. A. Case No. 4324 Petit i onet~, - v er sus - COMMISSIONER OF INTERNAL REVENUE, Res pondent . X ----------------- ---- X DE C I I0N Thi s i s a petition seekin g the refund of the a mount of P 2 44, 174.35 alleged o v et~ p a y ment of capital gains tax for taxable year ended D ece mbet~ 3 1, 1'387. Petitioner is a corporation organi zed and existing under and by virt u e ~f Philippine law s . Th e capital gains tax r efund arose on account of the f oll owing transaction s , t o wit: Dah of Total Cost Gain or Capital Gains Sale Shart!s of Stock Sold (lass) Tu Paid S!llinq Price (Including Expensrs of SaleJ 1. 05. 87 Et ~rn it Corporation P 3, 245, 130~ 00 p 1,974,258.27 p 1,270,871.73 p 24-4,114.35 .,! (90, 000 shares) 4.28.87 Aircon &Refr igeration P 1.00 p 6,143,965. 00 p 6,143,964.00 Industrie s, Inc. �� p 8,118,223.27 (p ..,873,092.27) p 2.._.,174.35 !2401649 shares) p 3,245,131.00 T 0 TALS .){ j.

- DE C I S I 0 N- C.T.A. Case No. 4324 L.:-:,. Pursuant to Section 45 Cd) of the Tax Code, as amended, petitioner filed with the Bureau of I nt et�'na 1 Revenue CBIR> Stock Transaction Cap ital Gains Tax f~etm�' n <BH~ Form No. 1701 -E-2 > for each of the above-tt�ansact ions on Januat�y 16, 1987 � and May 21 , 19 87, t�espectively <Exhibits "C" and "E"). The cap ital gain s tax pertaining to the sale of Eternit Corporation's shares was P244,174.35 and this was paid by petitioner per CBP Confirmation Receipt No. 810600587 and BIR Payment Order No. B959L~9 3 8, both dated Januat�y 19, 1987. <Exhib its "D" and "0-1") A final Adjustment Stock Transaction Capital Ga ins Tax Return for taxable year ended Oecembet� 3 1, 1987 was filed by petitioner� on Apt�il 1 ~5' showing a t�efundabl e amount of 0 n ,J a n 1.1at~ y l. 3 , 1 9 8 r:3 , p e t l. t i on e t"' f i 1 e d wi t h the BIR a claim for refund of the 1987 over paid capital gains tax of P244, 174.35. <Exh ibit "A") This petition for review wa s filed with this Court on Januat� y 17, 1989 to� protect petitioner's right to judicially claim the refund. Re spondent movei'for the dismissal/denial �of the petition interposing as reasons that it is incumbent upon petitioner to s how that the capita l

- DE C I S I 0 N- C.T.A. Case No. 4324 .... �.J losses did not arise or were sustained sales stocks; alleged capital loss sustained from the sale of its shares of stock s in allowed only to the extent of the gains from such , . ,t s c:'ll e ; the tran s action capital gains tax of 1/4 of 1% applies si nce no evidence was presented that the not listed and traded o n the local st OC~< exchanges and the t ax sought to be refunded not i l l e g a l l y o~~ er~ r~ oneou sl y collected. <"An swer~", CTA Recot~ ds, p. 19-21; "trlemor~andum", CTA Rec o t~ds, p. 115 - l~~c::.) Evi dence off er~ed by petitioner <Exhibit A - E, inclusive) were neither commented on nor objected to by respondent. f4ccot~d i ng 1 y reso lved to admit all of them without to the Cotwt' s evaluation of their value and purposes for whi c h they were off et��ed. <"Resolution", CTA Recor~d s, p.87 ) The of investigation on petitioner's claim was likewise not presented hence, respondent's counsel submitted this case solely on the basis of the pleadings. The sol e is s ue to b e resolved by this Court is 1-'lhether~ o r not petitioner is entitled to a I~

- DE C I S I 0 N- C.T.A. Case No. 4324 - L~ - refund/tax credit of the a mount of P24'+, l.7'+� 35, repre se nt _i ng alleged overpaid cap ital gains t ax for taxable year� ended December� 31, 1987. Subject of conte ntion by the parties in this case are the related provision s of the Tax Code, quoted below : S ction 24 <2 > C�~pit .". !l gains Fr�om sales oF sh�~ s o f stock. - Capital g ins reali~ed from the sa le, exchan ge or dispositio n of s hares of stocks in any domes ic c orporation shall b e taxed a!':> fo.llows: (~U bL~~t ~.E.P.Jj;a~ gai !l,?_ as defined in Sect itm 33 <a) <2 > ~-e_q]. i:ze.�! 9�.winq each ~-�J~..�J?.l..~ ~_g..�ll: f t' o m sa 1 e o t' exchange o t' othEll"' di spos i tio n o f s har�e s of stock not 'b� Cl\Q..f?..f!. t h t ' o 1.1 gh �. l...Q_~.l s t _Cl�.!:i e xc h an q_g_. Not over P100,000.00 lOK Over P1oo ,ooo.oo 20~ (8) Capita l gains pre sumed to h ave bef:m r� eal ized fr�om t h e sal e, exchan g e or� disposition of shares of stock li sted and traded through a loca l st ock exchange - 1/4 of 1~ based on the gro ss se lling pri ce of the share or shares of stocl-<. X XX XXX XXX Sec �tirH, 33 (a) OefinitiOT1 S. - As used in this Ti-tle )00( XXX >O< X <2> Ne �t capital .. ~ain. - The ter tn "n et capit.::~l ~F:\i n" me THi the ru:u:;_g_u pf the gain s f t ' 9...!!!. .f?...c2JJ'?...?~ 9.!.: !L>u;.b..~.!J.Sl Q. 9J:. ~...�.Q..tl~...!::ll asset s .9..Y..!U.: tlli.t l..9....E..:c!...f~~. f..r.:�!JV. ?-..!:!�?11 s a lti. .Qr.. e x c h a l'l.Q.ll� XXX XX X XXX / A

- DE C I S I 0 N- C.T.A. Case No. 4324 - 5- S e ction 45 (d) Return on capital gains r�e e"' .lized f'~�om sale of' shat�es of' stocJ<. Every cor poration deriving capital gain s from the sale or exchange of shares of s tocl < not traded thru a local stoc~< exchange as prescribed under Sections 24 <e> <2 > <A>, 25 (a) (E,) <C> <i > and 25 <b> <5> (C) (i), shall file a t�et ur�n within ~.tt.!.L'\!_'i. ~.t�l.Y.�.�. �tfJ:_!?_t.: .~ h_ t r ~n~otc t i Q.D. an d a � f.!.nE' 1_ g_Q..!l!!..PJ...i�\.~:L~s! t� e t m� n pf a 11 tD~L'U!t~.~ t i o_!l�.. Q.!:!,t' i n q :t h e_ t ~ b ~ y ear .QD. 01�.::. gefot"_g, the fifteenth�!~. of the .f....9...!.,\rt '1. !!1....9Jl:t!:l fgllowinq the close of. the :t~'"li?M. ~� <Undt:.n�scot�i ng sr.1ppl ied. > XXX XXX XXX As born~ out by the re cords of the ca se , this involv es th ~ s ale of shares of stocks not traded t ht�o r��\gh a loc.,l Respondent's counsel was not haard t~ obje ct when pet iti oner vid nee tho Stock Transaction. Cap ital Gain s Ta>< He �tt..wnt� <Exhibits "B", " C" , and "E " >, part of which whe re the De eds of Sa le ( CHC! Recot�ds, pag es 37-38 and pages 76-77 >, c learly showing that the transaction were treated i n accordance with of the Tax Code. The contt�ary view of t� espondent that Section 2'+<2 > <B> applies is without any factual or legal basis. In view of th e foregoing , the capi~al gains tax was computed ba s ed on the net cap it al gains "Net -' (lo ss> realized during tax ab l e year 1987. capital gain" is defined by Section 33 (a) as the

- DE C I S I 0 N- C.T.A. Case No. 4324 �- 6 - excess of the gains over the losses from such sales or~ exchanues. As illustrated in this case, there was a gain in the sale of Eterni t Corporation shares of stocks of P1,207,871.73, but a loss in the sale of Aircon and Refrigeratio n Inc. shares of stock$ cf P6, 143,964.00, resulting in a net capital loss for 1987 of P4,873,092.27. Since a return is filed after each transaction pursuant to Section 45 (d) of the Tax Code, p e t i �\:; i o n e r~ pc:dd the c a p i t a l gains tax of <E><hibits "D" & "D-1" ) on the sale of Eternit Corporation's shares of stocks. Howe vet~ when the final consoli dated return of all for 1987 was filed, ther~e was a refundable amount of P244,174.35 . The Court had occas sion to rule in a similar case involving the same parties and the same nature of evidence pt'ese nted in C.T.A. Case No. 403C:~ decided on August G, 1992, whereby refund of the overpaid capital gains tax on stock transa~tions for tha entire year was ordered. We find tha t petit i onet~ has clearly proven entit~ement .to the refund being sought. /< A net capital loss of P4 , 873,964.00 on all I

- DE C 1 S I 0 N- C. l .n. Ca s e No . 4 324 ,) �- 7 - o f i t ~.; ~; t o c ~< t t'' a 11 s a c: t i o n s f o r~ 1 9 8 "7 wa s i n c tw r~ e d by pt?t i t ion f?t" . Cap i tal ga i n s tax of P2 44, 174. 35 was undisputedly paid in 19 8 7 . Th e re i s no find i ng of deficiency capital gains tax a~} C:\i nst pet i tioner' for~ the year under re vi ew. Claim for refund was seasonably fi l ed an d amply substantiated. WHEREFORE, re s pond t?nt Commissio n er~ of IS Internal Re v e nu e os he reby orde r e d to refund / issue tax cr� edit; to petitione r' Jardin e Dt..wies, Inc. the amount of P ~ 44, 174.35 r epres n t ing overpaid ca pital ga i n s t a>( fen" t axab 1 e yea t' eT1th~ d De t~ a mbet~ 31, 1 '387 . SO RDEREO. / Gl t.t nz tln C ity, lvJett' o Manilc:~ , June 2 2 , 1993 . GRUBA / WE CONCUR: 1/~~ ~� I RAMON 0 . DE VE A' Ar,E; o ciate Jud .. e ,)

- DE C I S I 0 N- C.T.A. Case No. 4324 -- 8 - I h e reby c ertify th a t this deci si on was reached after due consult a tion a mong the mem b er s o f Cotwt of Tax Appeal s in accord anc e with Section 13, Articke VIII of the Constitution. cet.--~:c=_ o ~c~;;t~~~ ERNESTO D. ACOSTA Pt'f?siding Judg e Court of Tax Appeals -.