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G.R. No. 179115 September 26, 2012ASIA INTERNATIONAL AUCTIONEERS, INC., Petitioner,vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.R E S O L U T I O N

PERLAS-BERNABE,J.:

Before the Court is a Petition for Review seeking to reverse and set aside the Decision dated August 3, 2007 of theCourt of Tax Appeals (CTA) En Banc,

1and the Resolutions dated November 20, 2006

2and February 22, 2007

3of

the CTA First Division dismissing Asia International Auctioneers, Inc.s (AIA) appeal due to its alleged failure to

timely protest the Commissioner of Internal Revenues (CIR) tax assessment.

The Factual AntecedentsAIA is a duly organized corporation operating within the Subic Special Economic Zone. It is engaged in the

importation of used motor vehicles and heavy equipment which it sells to the public through auction.4

On August 25, 2004, AIA received from the CIR a Formal Letter of Demand, dated July 9, 2004, containing an

assessment for deficiency value added tax (VAT) and excise tax in the amounts of P 102,535,520.00

and P4,334,715.00, respectively, or a total amount of P 106,870,235.00, inclusive of penalties and interest, for

auction sales conducted on February 5, 6, 7, and 8, 2004.5

AIA claimed that it filed a protest letter dated August 29, 2004 through registered mail on August 30, 2004.6It also

submitted additional supporting documents on September 24, 2004 and November 22, 2004.7

The CIR failed to act on the protest, prompting AIA to file a petition for review before the CTA on June 20, 2005,8to

which the CIR filed its Answer on July 26, 2005.9

On March 8, 2006, the CIR filed a motion to dismiss10

on the ground of lack of jurisdiction citing the alleged failure

of AIA to timely file its protest which thereby rendered the assessment final and executory. The CIR denied receipt

of the protest letter dated August 29, 2004 claiming that it only received the protest letter dated September 24,2004 on September 27, 2004, three days after the lapse of the 30-day period prescribed in Section 228

11of the Tax

Code.12

In opposition to the CIRs motion to dismiss, AIA submitted the following evidence to prove the filing and the

receipt of the protest letter dated August 29, 2004: (1) the protest letter dated August 29, 2004 with attachedRegistry Receipt No. 3824;

13(2) a Certification dated November 15, 2005 issued by Wilfredo R. De Guzman,

Postman III, of the Philippine Postal Corporation of Olongapo City, stating that Registered Letter No. 3824 dated

August 30, 2004 , addressed to the CIR, was dispatched under Bill No. 45 Page 1 Line 11 on September 1, 2004

from Olongapo City to Quezon City;14

(3) a Certification dated July 5, 2006 issued by Acting Postmaster, Josefina M.Hora, of the Philippine Postal Corporation-NCR, stating that Registered Letter No. 3824 was delivered to the BIR

Records Section and was duly received by the authorized personnel on September 8, 2004;15

and (4) a certified

photocopy of the Receipt of Important Communication Delivered issued by the BIR Chief of Records Division, FelisaU. Arrojado, showing that Registered Letter No. 3824 was received by the BIR.

16AIA also presented Josefina M.

Hora and Felisa U. Arrojado as witnesses to testify on the due execution and the contents of the foregoing

documents.

Ruling of the Court of Tax Appeals

After hearing both parties, the CTA First Division rendered the first assailed Resolution dated November 20, 2006

granting the CIRs motion to dismiss. CitingRepublic v. Court of Appeals,17

it ruled that "while a mailed letter is

deemed received by the addressee in the course of the mail, still, this is merely a disputable presumption, subject

to controversion, and a direct denial of the receipt thereof shifts the burden upon the party favored by the

presumption to prove that the mailed letter indeed was received by the addressee."18

The CTA First Division faulted AIA for failing to present the registry return card of the subject protest letter.Moreover, it noted that the text of the protest letter refers to a Formal Demand Letter dated June 9, 2004 and not

the subject Formal Demand Letter dated July 9, 2004. Furthermore, it rejected AIAs argument that the September

24, 2004 letter merely served as a cover letter to the submission of its supporting documents pointing out that

there was no mention therein of a prior separate protest letter.19

AIAs motion for reconsideration was subsequently denied by the CTA First Division in its second assailed

Resolution dated February 22, 2007. On appeal, the CTA En Banc in its Decision dated August 3, 2007 affirmed the

ruling of the CTA First Division holding that AIAs evidence was not sufficient to prove receipt by the CIR of the

protest letter dated August 24, 2004.Hence, the instant petition.

Issue Before the CourtBoth parties discussed the legal bases for AIAs tax liability, unmindful of the fact that this case stemmed from the

CTAs dismissal of AIAs petition for review for failure to file a timely protest, without passing upon the substantivemerits of the case.

Relevantly, on January 30, 2008, AIA filed a Manifestation and Motion with Leave of the Honorable Court to Defer

or Suspend Further Proceedings20

on the ground that it availed of the Tax Amnesty Program under Republic Act

948021

(RA 9480), otherwise known as the Tax Amnesty Act of 2007. On February 13, 2008, it submitted to theCourt a Certification of Qualification

22issued by the BIR on February 5, 2008 stating that AIA "has availed and is

qualified for Tax Amnesty for the Taxable Year 2005 and Prior Years" pursuant to RA 9480.
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2/94


With AIAs availment of the Tax Amnesty Program under RA 9480, the Court is tasked to first determine its effects

on the instant petition.Ruling of the Court

A tax amnesty is a general pardon or the intentional overlooking by the State of its authority to impose penalties

on persons otherwise guilty of violating a tax law. It partakes of an absolute waiver by the government of its right

to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate.23

A tax amnesty, much like a tax exemption, is never favored or presumed in law. The grant of a tax amnesty, similarto a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority.

24

In 2007, RA 9480 took effect granting a tax amnesty to qualified taxpayers for all national internal revenue taxes

for the taxable year 2005 and prior years, with or without assessments duly issued therefor, that have remained

unpaid as of December 31, 2005.25

The Tax Amnesty Program under RA 9480 may be availed of by any person except those who are disqualified under

Section 8 thereof, to wit:

Section 8. Exceptions. The tax amnesty provided in Section 5 hereof shall not extend to the following persons or

cases existing as of the effectivity of this Act:

(a) Withholding agents with respect to their withholding tax liabilities;(b) Those with pending cases falling under the jurisdiction of the Presidential Commission on Good Government;

(c) Those with pending cases involving unexplained or unlawfully acquired wealth or under the Anti-Graft and

Corrupt Practices Act;

(d) Those with pending cases filed in court involving violation of the Anti-Money Laundering Law;(e) Those with pending criminal cases for tax evasion and other criminal offenses under Chapter II of Title X of the

National Internal Revenue Code of 1997, as amended, and the felonies of frauds, illegal exactions and transactions,

and malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code; and

(f) Tax cases subject of final and executory judgment by the courts.(Emphasis supplied)The CIR contends that AIA is disqualified under Section 8(a) of RA 9480 from availing itself of the Tax Amnesty

Program because it is "deemed" a withholding agent for the deficiency taxes. This argument is untenable.

The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency VAT and excise tax

to the BIR under relevant provisions of the Tax Code. Hence, the argument that AIA is "deemed" a withholdingagent for these deficiency taxes is fallacious.

Indirect taxes, like VAT and excise tax, are different from withholding taxes.1wphi1 To distinguish, in indirect

taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed on to another

person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it.26

Onthe other hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the

statutory taxpayer. The burden of taxation is not shifted to the withholding agent who merely collects, by

withholding, the tax due from income payments to entities arising from certain transactions27

and remits the sameto the government. Due to this difference, the deficiency VAT and excise tax cannot be "deemed" as withholding

taxes merely because they constitute indirect taxes. Moreover, records support the conclusion that AIA was

assessed not as a withholding agent but, as the one directly liable for the said deficiency taxes.28

The CIR also argues that AIA, being an accredited investor/taxpayer situated at the Subic Special Economic Zone,should have availed of the tax amnesty granted under RA 9399

29and not under RA 9480. This is also untenable.

RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers within its coverage

from availing of other tax amnesty programs available or enacted in futuro like RA 9480. More so, RA 9480 does

not exclude from its coverage taxpayers operating within special economic zones. As long as it is within the bounds

of the law, a taxpayer has the liberty to choose which tax amnesty program it wants to avail.

Lastly, the Court takes judicial notice of the "Certification of Qualification"30issued by Eduardo A. Baluyut, BIRRevenue District Officer, stating that AlA "has availed and is qualified for Tax Amnesty for the Taxable Year 2005

and Prior Years" pursuant to RA 9480. In the absence of sufficient evidence proving that the certification was

issued in excess of authority, the presumption that it was issued in the regular performance of the revenue district

officer's official duty stands.31

WHEREFORE, the petition is DENIED for being MOOT and ACADEMIC in view of Asia International Auctioneers,Inc.'s (AlA) availment of the Tax Amnesty Program under RA 9480. Accordingly, the outstanding deficiency taxes of

AlA are deemed fully settled.
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3/94


ANGELES UNIVERSITY FOUNDATION,Petitioner,

- versus -

CITY OF ANGELES, JULIET G.QUINSAAT, in her capacity as

G.R. No. 189999

Present:

LEONARDO-DE CASTRO,J.,*

Acting Chairperson,BERSAMIN,

VILLARAMA, JR.,

PEREZ,**

and

PERLAS-BERNABE,***

JJ.

Treasurer of Angeles City and ENGR. DONATO N.DIZON, in his capacity as Acting Angeles CityBuilding Official,

Respondents.

Promulgated:

June 27, 2012

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION

VILLARAMA, JR., J.:Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,which seeks to reverse and set aside the Decision

[1]dated July 28, 2009 and Resolution

[2]dated October 12, 2009

of the Court of Appeals (CA) in CA-G.R. CV No. 90591. The CA reversed the Decision[3]

dated September 21, 2007

of the Regional Trial Court of Angeles City, Branch 57 in Civil Case No. 12995 declaring petitioner exempt from the

payment of building permit and other fees and ordering respondents to refund the same with interest at the legalrate.

The factual antecedents:

Petitioner Angeles University Foundation (AUF) is an educational institution established on May 25, 1962 and was

converted into a non-stock, non-profit education foundation under the provisions of Republic Act (R.A.) No.6055

[4]on December 4, 1975.

Sometime in August 2005, petitioner filed with the Office of the City Building Official an application for a building

permit for the construction of an 11-storey building of the Angeles University Foundation Medical Center in its

main campus located at MacArthur Highway, Angeles City, Pampanga. Said office issued a Building Permit FeeAssessment in the amount of P126,839.20. An Order of Payment was also issued by the City Planning and

Development Office, Zoning Administration Unit requiring petitioner to pay the sum of P238,741.64 as Locational

Clearance Fee.[5]

In separate letters dated November 15, 2005 addressed to respondents City Treasurer Juliet G. Quinsaat and

Acting City Building Official Donato N. Dizon, petitioner claimed that it is exempt from the payment of the building

permit and locational clearance fees, citing legal opinions rendered by the Department of Justice (DOJ). Petitioner

also reminded the respondents that they have previously issued building permits acknowledging such exemptionfrom payment of building permit fees on the construction of petitioners 4 -storey AUF Information Technology

Center building and the AUF Professional Schools building on July 27, 2000 and March 15, 2004, respectively.[6]

Respondent City Treasurer referred the matter to the Bureau of Local Government Finance (BLGF) of the Department

of Finance, which in turn endorsed the query to the DOJ. Then Justice Secretary Raul M. Gonzalez, in his letter-reply

dated December 6, 2005, cited previous issuances of his office (Opinion No. 157, s. 1981 and Opinion No. 147, s.

1982) declaring petitioner to be exempt from the payment of building permit fees. Under the 1st Indorsement datedJanuary 6, 2006, BLGF reiterated the aforesaid opinion of the DOJ stating further that xxx the Department of Finance,

thru this Bureau, has no authority to review the resolution or the decision of the DOJ.[7]

Petitioner wrote the respondents reiterating its request to reverse the disputed assessments and invoking the DOJ

legal opinions which have been affirmed by Secretary Gonzalez. Despite petitioners plea, however, respondents

refused to issue the building permits for the construction of the AUF Medical Center in the main campus and

renovation of a school building located at Marisol Village. Petitioner then appealed the matter to City Mayor Carmelo

F. Lazatin but no written response was received by petitioner.[8]

Consequently, petitioner paid under protest[9]

the following:Medical Center (new construction)

Building Permit and Electrical Fee P 217,475.20

Locational Clearance Fee 283,741.64Fire Code Fee 144,690.00

Total - P 645,906.84

School Building (renovation)

Building Permit and Electrical Fee P 37,857.20

Locational Clearance Fee 6,000.57
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Fire Code Fee 5,967.74

Total - P 49,825.51Petitioner likewise paid the following sums as required by the City Assessors Office:

Real Property Tax Basic Fee P 86,531.10

SEF 43,274.54

Locational Clearance Fee 1,125.00

Total P130,930.6410

[GRAND TOTAL - P 826,662.99]

By reason of the above payments, petitioner was issued the corresponding Building Permit, Wiring Permit,

Electrical Permit and Sanitary Building Permit. On June 9, 2006, petitioner formally requested the respondents to

refund the fees it paid under protest. Under letters dated June 15, 2006 and August 7, 2006, respondent City

Treasurer denied the claim for refund.[11]

On August 31, 2006, petitioner filed a Complaint[12]

before the trial court seeking the refund of P826,662.99

plus interest at the rate of 12% per annum, and also praying for the award of attorneys fees in the amount

of P300,000.00 and litigation expenses.

In its Answer,[13]

respondents asserted that the claim of petitioner cannot be granted because its structures

are not among those mentioned in Sec. 209 of the National Building Code as exempted from the building permit

fee. Respondents argued that R.A. No. 6055 should be considered repealed on the basis of Sec. 2104 of

the National Building Code. Since the disputed assessments are regulatory in nature, they are not taxes fromwhich petitioner is exempt. As to the real property taxes imposed on petitioners property located in Marisol

Village, respondents pointed out that said premises will be used as a school dormitory which cannot be considered

as a use exclusively for educational activities.

Petitioner countered that the subject building permit are being collected on the basis of Art. 244 ofthe Implementing Rules and Regulations of the Local Government Code, which impositions are really taxes

considering that they are provided under the chapter on Local Government Taxation in reference to the

revenue raising power of local government units (LGUs). Moreover, petitioner contended that, as held

in Philippine Airlines, Inc. v. Edu,[14]

fees may be regarded as taxes depending on the purpose of its exaction. Inany case, petitioner pointed out that the Local Government Code of 1991 provides in Sec. 193 that non-stock and

non-profit educational institutions like petitioner retained the tax exemptions or incentives which have been

granted to them. Under Sec. 8 of R.A. No. 6055 and applicable jurisprudence and DOJ rulings, petitioner is clearly

exempt from the payment of building permit fees.[15]

On September 21, 2007, the trial court rendered judgment in favor of the petitioner and against the

respondents. The dispositive portion of the trial courts decision[16]

reads:

WHEREFORE, premises considered, judgment is rendered as follows:a. Plaintiff is exempt from the payment of building permit and other fees Ordering the Defendants to refund the

total amount of Eight Hundred Twenty Six Thousand Six Hundred Sixty Two Pesos and 99/100 Centavos

(P826,662.99) plus legal interest thereon at the rate of twelve percent (12%) per annum commencing on the date

of extra-judicial demand or June 14, 2006, until the aforesaid amount is fully paid.b. Finding the Defendants liable for attorneys fees in the amount of Seventy Thousand Pesos (Php70,000.00), plus

litigation expenses.

c. Ordering the Defendants to pay the costs of the suit.

SO ORDERED.[17]

Respondents appealed to the CA which reversed the trial court, holding that while petitioner is a tax-free entity,it is not exempt from the payment of regulatory fees. The CA noted that under R.A. No. 6055, petitioner was granted

exemption only from income tax derived from its educational activities and real property used exclusively for

educational purposes. Regardless of the repealing clause in the National Building Code, the CA held that petitioner is

still not exempt because a building permit cannot be considered as the other charges mentioned in Sec. 8 of R.A.

No. 6055 which refers to impositions in the nature of tax, import duties, assessments and other collections for

revenue purposes, following the ejusdem generisrule. The CA further stated that petitioner has not shown that the

fees collected were excessive and more than the cost of surveillance, inspection and regulation. And while petitioner

may be exempt from the payment of real property tax, petitioner in this case merely alleged that the subjectproperty is to be used actually, directly and exclusively for educational purposes, declaring merely that such

premises is intended to house the sports and other facilities of the university but by reason of the occupancy of

informal settlers on the area, it cannot yet utilize the same for its intended use. Thus, the CA concluded that

petitioner is not entitled to the refund of building permit and related fees, as well as real property tax it paid underprotest.

Petitioner filed a motion for reconsideration which was denied by the CA.

Hence, this petition raising the following grounds:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF SUBSTANCE IN A WAYNOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT AND HAS

DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS NECESSITATING THE

HONORABLE COURTS EXERCISE OF ITS POWER OF SUPERVISION CONSIDERING THAT:
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I. IN REVERSING THE TRIAL COURTS DECISION DATED 21 SEPTEMBER 2007, THE COURT OF APPEALS

EFFECTIVELY WITHDREW THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT EDUCATIONALFOUNDATIONS BY VIRTUE OF RA 6055 WHICH WITHDRAWAL IS BEYOND THE AUTHORITY OF THE COURT OF

APPEALS TO DO.

A. INDEED, RA 6055 REMAINS VALID AND IS IN FULL FORCE AND EFFECT. HENCE, THE COURT OF APPEALS ERRED

WHEN IT RULED IN THE QUESTIONED DECISION THAT NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS ARE

NOT EXEMPT.B. THE COURT OF APPEALS APPLICATION OF THE PRINCIPLE OF EJUSDEM GENERIS IN RULING IN THE

QUESTIONED DECISION THAT THE TERM OTHER CHARGES IMPOSED BY THE GOVERNMENT UNDER SECTION 8 OF

RA 6055 DOES NOT INCLUDE BUILDING PERMIT AND OTHER RELATED FEES AND/OR CHARGES IS BASED ON ITS

ERRONEOUS AND UNWARRANTED ASSUMPTION THAT THE TAXES, IMPORT DUTIES AND ASSESSMENTS AS PART

OF THE PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS ARE

LIMITED TO COLLECTIONS FOR REVENUE PURPOSES.

C. EVEN ASSUMING THAT THE BUILDING PERMIT AND OTHER RELATED FEES AND/OR CHARGES ARE NOT

INCLUDED IN THE TERM OTHER CHARGES IMPOSED BY THE GOVERNMENT UNDER SECTION 8 OF RA 6055, ITS

IMPOSITION IS GENERALLY A TAX MEASURE AND THEREFORE, STILL COVERED UNDER THE PRIVILEGE OF

EXEMPTION.

II. THE COURT OF APPEALS DENIAL OF PETITIONER AUFS EXEMPTION FROM REAL PROPERTY TAXES CONTAINED

IN ITS QUESTIONED DECISION AND QUESTIONED RESOLUTION IS CONTRARY TO APPLICABLE LAW AND

JURISPRUDENCE.[18]

Petitioner stresses that the tax exemption granted to educational stock corporations which have converted

into non-profit foundations was broadened to include any other charges imposed by the Government as one of the

incentives for such conversion. These incentives necessarily included exemption from payment of building permitand related fees as otherwise there would have been no incentives for educational foundations if the privilege

were only limited to exemption from taxation, which is already provided under the Constitution.

Petitioner further contends that this Court has consistently held in several cases that the primary purpose of the

exaction determines its nature. Thus, a charge of a fixed sum which bears no relation to the cost of inspection andwhich is payable into the general revenue of the state is a tax rather than an exercise of the police power. The

standard set by law in the determination of the amount that may be imposed as license fees is such that is

commensurate with the cost of regulation, inspection and licensing. But in this case, the amount representing the

building permit and related fees and/or charges is such an exorbitant amount as to warrant a valid imposition;such amount exceeds the probable cost of regulation. Even with the alleged criteria submitted by the respondents

(e.g., character of occupancy or use of building/structure, cost of construction, floor area and height), and the

construction by petitioner of an 11-storey building, the costs of inspection will not amount to P645,906.84,presumably for the salary of inspectors or employees, the expenses of transportation for inspection and the

preparation and reproduction of documents. Petitioner thus concludes that the disputed fees are substantially

and mainly for purposes of revenue rather than regulation, so that even these fees cannot be deemed charges

mentioned in Sec. 8 of R.A. No. 6055, they should properly be treated as tax from which petitioner is exempt.In their Comment, respondents maintain that petitioner is not exempt from the payment of building permit

and related fees since the only exemptions provided in the National Building Code are public buildings and

traditional indigenous family dwellings. Inclusio unius est exclusio alterius. Because the law did not include

petitioners buildings from those structures exempt from the payment of building permit fee, it is therefore subject

to the regulatory fees imposed under the National Building Code.

Respondents assert that the CA correctly distinguished a building permit fee from those other charges

mentioned in Sec. 8 of R.A. No. 6055. As stated by petitioner itself, charges refer to pecuniary liability, as rents,

and fees against persons or property. Respondents point out that a building permit is classified under the term

fee. A fee is generally imposed to cover the cost of regulation as activity or privilege and is essentially derived

from the exercise of police power; on the other hand, impositions for services rendered by the local government

units or for conveniences furnished, are referred to as service charges.

Respondents also disagreed with petitioners contention that the fees imposed and collected are exorbitan t

and exceeded the probable expenses of regulation. These fees are based on computations and assessments made

by the responsible officials of the City Engineers Office in accordance with the Schedule of Fees and criteria

provided in the National Building Code. The bases of assessment cited by petitioner (e.g. salary of employees,

expenses of transportation and preparation and reproduction of documents) refer to charges and fees on business

and occupation under Sec. 147 of the Local Government Code, which do not apply to building permit fees. The

parameters set by the National Building Code can be considered as complying with the reasonable cost ofregulation in the assessment and collection of building permit fees. Respondents likewise contend that the

presumption of regularity in the performance of official duty applies in this case. Petitioner should have presented

evidence to prove its allegations that the amounts collected are exorbitant or unreasonable.

For resolution are the following issues: (1) whether petitioner is exempt from the payment of building permitand related fees imposed under the National Building Code; and (2) whether the parcel of land owned by

petitioner which has been assessed for real property tax is likewise exempt.
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R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-

stock, non-profit educational foundations. Section 8 of said law provides:SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties, assessments, and othercharges imposed by the Government onall income derived from or property, real or personal, used exclusivelyfor the educational activities of the Foundation.(Emphasis supplied.)

On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting the National Building Code of the

Philippines. The said Code requires every person, firm or corporation, including any agency or instrumentality of thegovernment to obtain a building permit for any construction, alteration or repair of any building or structure.

[19]Building

permit refers to a document issued by the Building Official x x x to anowner/applicant to proceed with the construction,

installation, addition, alteration, renovation, conversion, repair, moving, demolition or other work activityof a

specific project/building/structure or portions thereof after the accompanying principal plans, specifications and

other pertinent documents with the duly notarized application are found satisfactory and substantially conforming

with the National Building Code of the Philippines x x x and its Implementing Rules and Regulations(IRR).

[20]Building permit fees refers to the basic permit fee and other charges imposed under the National

Building Code.

Exempted from the payment of building permit fees are: (1) public buildings and (2) traditional indigenous

family dwellings.[21]

Not being expressly included in the enumeration of structures to which the building permit

fees do not apply, petitioners claim for exemption rests solely on its interpretation of the term other charges

imposed by the National Government in the tax exemption clause of R.A. No. 6055.

A charge is broadly defined as the price of, or rate for, something, while the word fee pertains to a charge

fixed by law for services of public officers or for use of a privilege under control of government. [22]

As used in the

Local Government Code of 1991 (R.A. No. 7160),charges refers to pecuniary liability, as rents or fees against

persons or property, whilefee means a charge fixed by law or ordinance for the regulation or inspection of a

business or activity.[23]

That charges in its ordinary meaning appears to be a general term which could cover a specific fee does not

support petitioners position that building permit fees are among those other charges from which it was

expressly exempted. Note that the other charges mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words

imposed by the Government on all x x x propertyused exclusively for the educational activities of thefoundation. Building permit fees are not impositions on property but on the activity subject of government

regulation. While it may be argued that the fees relate to particular properties, i.e., buildings and structures, they are

actually imposed on certain activities the owner may conduct either to build such structures or to repair, alter,

renovate or demolish the same. This is evident from the following provisions of the National Building Code:Section 102. Declaration of PolicyIt is hereby declared to be the policy of the State to safeguard life, health, property, and public

welfare, consistent with theprinciples of sound environmental management and control; and tothis end, make itthe purpose of this Code to provide for allbuildings and structures, a framework of minimum standards and

requirements to regulate and controltheir location, site, design quality of materials, construction, use, occupancy,

and maintenance.

Section 103. Scope and Application(a) The provisions of this Code shall apply to the design,location, sitting, construction, alteration, repair,conversion,

use, occupancy, maintenance, moving, demolitionof, and addition to public and private buildings andstructures,

except traditional indigenous family dwellingsas defined herein.

x x x x

Section 301. Building Permits

No person, firm or corporation, including any agency orinstrumentality of the government shall erect, construct,

alter, repair, move, convert or demolish any building or structure or causethe same to be done without first

obtaining a building permittherefor from the Building Official assigned in the place where thesubject building is

located or the building work is to be done. (Italics supplied.)

That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application for a

building permit, the Building Official shall see to it that the applicant satisfies and conforms with approved standard

requirements on zoning and land use, lines and grades, structural design, sanitary and sewerage, environmental health,

electrical and mechanical safety as well as with other rules and regulations implementing the National Building

Code.[24]

Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured andthe corresponding fees paid before a building permit may be issued. And as can be gleaned from the implementing rules

and regulations of the National Building Code, clearances from various government authorities exercising and enforcing

regulatory functions affecting buildings/structures, like local government units, may be further required before a building

permit may be issued.[25]

Since building permit fees are not charges on property, they are not impositions from which petitioner is exempt.

As to petitioners argument that the building permit fees collected by respondents are in reality taxes because the

primary purpose is to raise revenues for the local government unit, the same does not hold water.

A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be atax rather than an exercise of the police power.

[26] In this case, the Secretary of Public Works and Highways who is

mandated to prescribe and fix the amount of fees and other charges that the Building Official shall collect in
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connection with the performance of regulatory functions,[27]

has promulgated and issued the Implementing Rules

and Regulations[28]

which provide for the bases of assessment of such fees, as follows:1. Character of occupancy or use of building

2. Cost of construction 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J)

3. Floor area

4. Height

Petitioner failed to demonstrate that the above bases of assessment were arbitrarily determined or unrelated tothe activity being regulated. Neither has petitioner adduced evidence to show that the rates of building permit

fees imposed and collected by the respondents were unreasonable or in excess of the cost of regulation and

inspection.

In Chevron Philippines, Inc. v. Bases Conversion Development Authority,[29]

this Court explained:

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the

implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the

measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it isdeemed a regulation and an exercise of the police power of the state, even though incidentally, revenue isgenerated. Thus, in Gerochi v. Department of Energy, the Court stated:The conservative and pivotal distinction between these two (2) powers rests in the purpose for which the charge

is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a

tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the

imposition a tax.[30] (Emphasis supplied.)Concededly, in the case of building permit fees imposed by the National Government under the National Building

Code, revenue is incidentally generated for the benefit of local government units. Thus:

Section 208. FeesEvery Building Official shall keep a permanent record and accurate account of all fees and other charges fixed andauthorized by the Secretary to be collected and received under this Code.

Subject to existing budgetary, accounting and auditing rules and regulations, the Building Official is hereby

authorized to retain not more than twenty percent of his collection for the operating expenses of his office.

The remaining eighty percent shall be deposited with the provincial, city or municipal treasurer and shall accrue tothe General Fund of the province, city or municipality concerned.

Petitioners reliance on Sec. 193 of the Local Government Code of 1991 is likewise misplaced. Said provision

states:

SECTION 193. Withdrawal of Tax Exemption Privileges. -- Unless otherwise provided in this Code, tax exemptionsor incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-

owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No.

6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivityof this Code. (Emphasis supplied.)

Considering that exemption from payment of regulatory fees was not among those incentives granted to

petitioner under R.A. No. 6055, there is no such incentive that is retained under the Local Government Code of

1991. Consequently, no reversible error was committed by the CA in ruling that petitioner is liable to pay thesubject building permit and related fees.

Now, on petitioners claim that it is exempted from the payment of real property tax assessed against its real

property presently occupied by informal settlers.

Section 28(3), Article VI of the 1987 Constitution provides:

x x x x

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profitcemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for religious,charitable or educational purposes shall be exempt from taxation.x x x x (Emphasis supplied.)

Section 234(b) of the Local Government Code of 1991 implements the foregoing constitutional provision by

declaring that --

SECTION 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property

tax:

x x x x(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non -profit or religious

cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious,charitable or educational purposes;

x x x x (Emphasis supplied.)In Lung Center of the Philippines v. Quezon City,

[31]this Court held that only portions of the hospital actually,

directly and exclusively used for charitable purposes are exempt from real property taxes, while those portions

leased to private entities and individuals are not exempt from such taxes. We explained the condition for the tax

exemption privilege of charitable and educational institutions, as follows:Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the

petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real

properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.Exclusive is defined as
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possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and exclusively is

defined, in a manner to exclude; as enjoying a privilege exclusively. If real property is used for one or morecommercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. The words

dominant use or principal use cannot be substituted for the words used exclusively without doing violence

to the Constitutions and the law. Solely is synonymous with exclusively.

What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and

immediate and actual application of the property itself to the purposes for which the charitable institution isorganized. It is not the use of the income from the real property that is determinative of whether the property is

used for tax-exempt purposes.[32]

(Emphasis and underscoring supplied.)

Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively

used for educational purposes. While there is no allegation or proof that petitioner leases the land to its present

occupants, still there is no compliance with the constitutional and statutory requirement that said real property is

actually, directly and exclusively used for educational purposes. The respondents correctly assessed the land forreal property taxes for the taxable period during which the land is not being devoted solely to petitioners

educational activities. Accordingly, the CA did not err in ruling that petitioner is likewise not entitled to a refund of

the real property tax it paid under protest.

WHEREFORE, the petition is DENIED. The Decision dated July 28, 2009 and Resolution dated October 12,2009 of the Court of Appeals in CA-G.R. CV No. 90591 are AFFIRMED.
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THIRD DIVISION

RIZAL COMMERCIAL BANKING CORPORATION,Petitioner,

- versus -

COMMISSIONER OF INTERNAL REVENUE,Respondent.

G.R. No. 170257Present:

VELASCO, JR.,J.,Chairperson,

PERALTA,

ABAD,VILLARAMA, JR.,

*and

MENDOZA,JJ.

Promulgated:

September 7, 2011

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

D E C I S I O N

MENDOZA,J.:

Thisisa petition for review on certiorariunder Rule 45 seeking to set aside the July 27, 2005 Decision[1]

and

October 26, 2005 Resolution[2]

of the Court of Tax Appeals En Banc (CTA-En Banc) in C.T.A. E.B. No. 83

entitled Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue.

THE FACTS

Petitioner Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in general banking operations. It

seasonably filed its Corporation Annual Income Tax Returns for Foreign Currency Deposit Unit for the calendar

years 1994 and 1995.[3]

On August 15, 1996, RCBC received Letter of Authority No. 133959 issued by then Commissioner of Internal

Revenue (CIR)Liwayway Vinzons-Chato, authorizing a special audit team to examine the books of accounts and

other accounting records for all internal revenue taxes from January 1, 1994 to December 31, 1995.[4]

On January 23, 1997, 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,effectively extending the period of the Bureau of Internal Revenue (BIR) to assess up to December 31, 2000.

[5]

Subsequently, on January 27, 2000, RCBC received a Formal Letter of Demand together with Assessment Notices

from the BIR for the following deficiency tax assessments:[6]

Particulars Basic Tax InterestCompromise

Penalties Total

Deficiency Income Tax1995 (ST-INC-95-0199-2000) 252,150,988.01 191,496,585.96 25,000.00 443,672,573.97

1994 (ST-INC-94-0200-2000) 216,478,397.90 207,819,261.99 25,000.00 424,322,659.89Deficiency Gross Receipts Tax1995 (ST-GRT-95-0201-2000) 13,697,083.68 12,428,696.21 2,819,745.52 28,945,525.411994 (ST-GRT-94-0202-2000) 2,488,462.38 2,755,716.42 25,000.00 5,269,178.80Deficiency Final WithholdingTax1995 (ST-EWT-95-0203-2000) 64,365,610.12 58,757,866.78 25,000.00 123,148,477.151994 (ST-EWT-94-0204-2000) 53,058,075.25 59,047,096.34 25,000.00 112,130,171.59

Deficiency Final Tax on FCDUOnshore Income1995 (ST-OT-95-0205-2000) 81,508,718.20 61,901,963,.52 25,000.00 143,435,681.721994 (ST-OT-94-0206-2000) 34,429,503.10 33,052,322.98 25,000.00 67,506,826.08Deficiency Expanded

Withholding Tax

1995 (ST-EWT-95-0207-2000) 5,051,415.22 4,583,640.33 113,000.00 9,748,055.551994 (ST-EWT-94-0208-2000) 4,482,740.35 4,067,626.31 78,200.00 8,628,566.66Deficiency Documentary Stamp

Tax1995 (ST-DST1-95-0209-2000) 351,900,539.39 315,804,946.26 250,000.00 667,955,485.651995 (ST-DST2-95-0210-2000) 367,207,105.29 331,535,844.68 300,000.00 699,042,949.97

1994 (ST-DST3-94-0211-2000) 460,370,640.05 512,193,460.02 300,000.00 972,864,100.071994 (ST-DST4-94-0212-2000) 223,037,675.89 240,050,706.09 300,000.00 463,388,381.98

TOTALS 4,335,945.52
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2,130,226,954.83 2,035,495,733.89 4,170,058,634.49

Disagreeing with the said deficiency tax assessment, RCBC filed a protest on February 24, 2000 and later submitted

the relevant documentary evidence to support it. Much later on November 20, 2000, it filed a petition for reviewbefore the CTA, pursuant to Section 228 of the 1997 Tax Code.

[7]

On December 6, 2000, RCBC received another Formal Letter of Demand with Assessment Notices dated October20, 2000, following the reinvestigation it requested, which drastically reduced the original amount of deficiency

taxes to the following:[8]

Particulars Basic Tax InterestSurcharge &/Compromise Total

Deficiency Income Tax1995 (INC-95-000003) 374,348.45 346,656.92 721,005.371994 (INC-94-000002) 1,392,366.28 1,568,605.52 2,960,971.80Deficiency Gross Receipts Tax1995 (GRT-95-000004) 2,000,926.96 3,322,589.63 1,367,222.04 6,690,738.631994 (GRT-94-000003) 138,368.61 161,872.32 300,240.93Deficiency Final Withholding Tax1995 (FT-95-000005) 362,203.47 351,287.75 713,491.221994 (FT-94-000004) 188,746.43 220,807.47 409,553.90

Deficiency Final Tax on FCDUOnshore Income1995 (OT-95-000006) 81,508,718.20 79,052,291.08 160,561,009.281994 (OT-94-000005) 34,429,503.10 40,277,802.26 74,707,305.36Deficiency Expanded Withholding

Tax1995 (EWT-95-000004) 520,869.72 505,171.80 25,000.00 1,051,041.03

1994 (EWT-94-000003) 297,949.95 348,560.63 25,000.00 671,510.58Deficiency Documentary Stamp

Tax1995 (DST-95-000006) 599,890.72 149,972.68 749,863.401995 (DST2-95-000002) 24,953,842.46 6,238,460.62 31,192,303.08

1994 (DST-94-000005) 905,064.74 226,266.18 1,131,330.921994 (DST2-94-000001) 17,040,104.84 4,260,026.21 21,300,131.05

TOTALS 164,712,903.44 126,155,645.38 12,291,947.73 303,160,496.55

On the same day, RCBC paid the following deficiency taxes as assessed by the BIR:[9]

Particulars 1994 1995 Total

Deficiency Income Tax 2,965,549.44 722,236.11 3,687,785.55Deficiency Gross Receipts Tax 300,695.84 6,701,893.17 7,002,589.01Deficiency Final Withholding Tax 410,174.44 714,682.02 1,124,856.46Deficiency Expanded WithholdingTax

672,490.14 1,052,753.48 1,725,243.62

Deficiency Documentary StampTax

1,131,330.92 749,863.40 1,881,194.32

TOTALS 5,480,240.78 9,941,428.18 15,421,668.96

RCBC, however, 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]


Deficiency Final Tax on

FCDU Onshore IncomeBasic 34,429,503.10 81,508,718.20 115,938,221.30

Interest 40,277,802.26 79,052,291.08 119,330,093.34

Sub Total 74,707,305.36 160,561,009.28 235,268,314.64

Deficiency DocumentaryStamp Tax

Basic 17,040,104.84 24,953,842.46 41,993,947.30Surcharge 4,260,026.21 6,238,460.62 10,498,486.83

Sub Total 21,300,131.05 31,192,303.08 52,492,434.13

TOTALS 96,007,436.41 191,753,312.36 287,760,748.77

RCBC argued that the waivers of the Statute of Limitations which it executed on January 23, 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.[11]

As regards the deficiency FCDU onshore tax, RCBC contended that because the onshore tax was
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collected in the form of a final withholding tax, it was the borrower, constituted by law as the withholding agent,

that was primarily liable for the remittance of the said tax.[12]

On December 15, 2004, the First Division of the Court of Tax Appeals (CTA-First Division) promulgated its

Decision[13]

which partially granted the petition for review. It considered as closed and terminated the assessments

for deficiency income tax, deficiency gross receipts tax, deficiency final withholding tax, deficiency expanded

withholding tax, and deficiency documentary stamp tax (not an industry issue) for 1994 and 1995.[14]

It, however,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]


Deficiency Final Tax on

FCDU Onshore Income

Basic 22,356,324.43 16,067,952.86 115,938, 221.30

Interest 26,153,837.08 15,583,713.19 119,330,093.34

Sub Total 48,510,161.51 31,651,666.05 119,330,093.34

Deficiency Documentary

Stamp Tax (Industry Issue)

Basic 17,040,104.84 24,953,842.46 41,993,947.30Surcharge 4,260,026.21 6,238,460.62 10,498,486.83

Sub Total 21,300,131.05 31,192,303.08 52,492,434.13

TOTALS 69,810,292.56 62,843,969.13 171,822,527.47

Unsatisfied, RCBC filed its Motion for Reconsideration on January 21, 2005, arguing that: (1) the CTA erred in

its addition of the total amount of deficiency taxes and the correct amount should only be 132,654,261.69 andnot 171,822,527.47; (2) the CTA erred in holding that RCBC was estopped from questioning the validity of the

waivers; (3) it was the payor-borrower as withholding tax agent, and not RCBC, who was liable to pay the final tax

on FCDU, and (4) RCBCs special savings account was not subject to documentary stamp tax.[16]

In its Resolution[17]

dated April 11, 2005, the CTA-First Division substantially upheld its earlier ruling, except

for its inadvertence in the addition of the total amount of deficiency taxes. As such, it modified its earlier decisionand ordered RCBC to pay the amount of 132,654,261.69 plus 20% delinquency tax.

[18]

RCBC elevated the case to the CTA-En Banc where it raised the following issues:

I.Whether or not the right of the respondent to assess deficiency onshore tax and documentary stamp tax fortaxable year 1994 and 1995 had already prescribed when it issued the formal letter of demand and assessmentnotices for the said taxable years.

II.Whether or not petitioner is liable for deficiency onshore tax for taxable year 1994 and 1995.

III.

Whether or not petitioners special savings account is subject to documentary stamp tax under then Section 180

of the 1993 Tax Code.[19]

The CTA-En Banc, in its assailed Decision, denied the petition for lack of merit. It ruled that by receiving,

accepting and paying portions of the reduced assessment, RCBC bound itself to the new assessment, implying that

it recognized the validity of the waivers.[20]

RCBC could not assail the validity of the waivers after it had receivedand accepted certain benefits as a result of the execution of the said waivers.

[21] As to the deficiency onshore tax,

it held that because the payor-borrower was merely designated by law to withhold and remit the said tax, it would

then follow that the tax should be imposed on RCBC as the payee-bank.[22]

Finally, in relation to the assessment of

the deficiency documentary stamp tax on petitioners special savings account, it held that petitioners special

savings account was a certificate of deposit and, as such, was subject to documentary stamp tax.[23]

Hence, this petition.

While awaiting the decision of this Court, RCBC filed its Manifestation dated July 22, 2009, informing the Court that

this petition, relative to the DST deficiency assessment, 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.[24]
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In its November 17, 2009 Comment to the Manifestation, the CIR pointed out that the only remaining issues raisedin 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 80,161,827.56 plus 20% delinquency interest per annu m. 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.[25]

THE ISSUES

Thus, only the following issues remain to be resolved by this Court:

Whether petitioner, by paying the other tax assessment covered by the waivers of the statute of limitations, isrendered estopped from questioning the validity of the said waivers with respect to the assessment ofdeficiency onshore tax.

[26]

and

Whether petitioner, as payee-bank, can be held liable for deficiency onshore tax, which is mandated by law to

be collected at source in the form of a final withholding tax.[27]

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, then Coordinator for the CIR, and that he failed to indicate acceptance or

agreement of the CIR, as required under Section 223 (b) of the 1977 Tax Code.[28]

RCBC further argues that theprinciple 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.[29]

The Court disagrees.

Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the rule that an admission or

representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against theperson relying thereon. A party is precluded from denying his own acts, admissions or representations to the

prejudice of the other party in order to prevent fraud and falsehood.[30]

Estoppel is clearly applicable to the case at bench. RCBC, through its partial payment of the revised assessments

issued within the extended period as provided for in the questioned waivers, impliedly admitted the validity of

those waivers. Had petitioner truly believed that the waivers were invalid and that the assessments were issuedbeyond the prescriptive period, then it should not have paid the reduced amount of taxes in the revised

assessment. RCBCs subsequent actioneffectivelybelies its insistence that the waivers are invalid. The recordsshow that on December 6, 2000, upon receipt of the revised assessment, RCBC immediately made payment on the

uncontested taxes. Thus, RCBC is estopped from questioning the validity of the waivers. 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.[31]

Liability for Deficiency

Onshore Withholding Tax

RCBC is convinced that it is the payor-borrower, as withholding agent, who is directly liable for the payment of

onshore tax, citing Section 2.57(A) of Revenue Regulations No. 2-98 which states:

(A) Final Withholding Tax. Under the final withholding tax system the amount of income tax withheld by thewithholding 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 ofhis failure to withhold the tax or in case of under withholding, the deficiency tax shall be collected from the
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payor/withholding agent.The payee is not required to file an income tax return for the particular income.(Emphasis supplied)

The petitioner is mistaken.

Before any further discussion, it should be pointed out that RCBC erred in citing the abovementionedRevenue Regulations No. 2-98 because the same governs collection at source on income paid only on or

after January 1, 1998. 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. Hence, Revenue Regulations No. 2-98 obviously does

not apply in this case.

In Chamber of Real Estate and Builders Associations, Inc. v. The Executive Secretary,[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; (2) to ensure the collection of tax, and (3) to improve the governments

cashflow. Under the withholding tax system, the payor is the taxpayer upon whom the tax is imposed, while the

withholding agent simply acts as an agent or a collector of the government to ensure the collection of taxes.[33]

It is, therefore, indisputable that the withholding agent is merely a tax collector and not a taxpayer, as elucidated

by this Court in the case ofCommissioner of Internal Revenue v. Court of Appeals,[34]to wit:

In the operation of the withholding tax system, the withholding agent is the payor, a separate entity acting no

more than an agent of the government for the collection of the tax in order to ensure its payments; the payer is

the taxpayer he is the person subject to tax imposed by law; and the payee is the taxing authority. In otherwords, the withholding agent is merely a tax collector, not a taxpayer. Under the withholding system, however,

the agent-payor becomes a payee by fiction of law. His (agent) liability is direct and independent from thetaxpayer, because the income tax is still imposed on and due from the latter. The agent is not liable for the taxas no wealth flowed into him he earned no income. The Tax Code only makes the agent personally liable for thetax 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,

but for the enforcement of the withholding provision of Section 53 of the Tax Code , compliance with which isimposed on the withholding agent and not upon the taxpayer.

[35](Emphases supplied)

Based on the foregoing, the liability of the withholding agent is independent from that of the taxpayer. The

former cannot be made liable for the tax due because it is the latter whoearned the income subject to withholdingtax. 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. The liability for the tax, however, remains with the taxpayer because the gain wasrealized and received by him.

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, RCBC, as the taxpayer and the one which earned income on the transaction,

remains liable for the payment of tax as the taxpayer shares the responsibility of making certain that the tax is

properly withheld by the withholding agent, so as to avoid any penalty that may arise from the non-payment ofthe withholding tax due.

RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the payor-borrower as the

withholding agent. As such, it is liable for payment of deficiency onshore ta

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