CTA upholds Manila ruling giving P10B tax refund to Metrobank

The Metropolitan Bank and Trust Company (Metrobank) is entitled to a P10.8-billion tax refund, according to the Court of Tax Appeals (CTA). In a 19-page decision penned by Associate Justice Juanito Castañeda, the CTA Second Division upheld a ruling of the Manila Regional Trial Court Branch 34 that said the city treasurer should refund the bank because it was doubly taxed in 2007. On July 2, 2007, Metrobank filed with the city treasurer a tax refund claim for the taxable year 2007, in which the bank requested a refund of P10,771,602.92. The city treasurer twice taxed the bank pursuant to Sections 19 (tax as a bank and financial institution) and Section 21 (tax as a business entity) of the Manila Revenue Code. The bank argued it should have been taxed once only, because the two sections, in the case of Metrobank, only pertained to one business. In an amended tax refund claim, the bank later clarified with the local government that the amount should have been P10,870,792.72. A witness later presented by the bank in a Manila court claimed that the city government owed the bank a tax refund of P10,870,791.80. Noting the conflicting figures, the city treasurer refused to grant the tax refund and said it did not receive any demand letter containing the other figure as testified by the witness. The local government used as basis Section 196 of the Local Government Code that states that "failure to comply with requisite demand is fatal to the cause of the respondent," the CTA noted. This prompted the bank to file a case against the local government before the Manila court Regional Trial Court Branch 34, which in two rulings in June and July 2012 sided with the bank and ordered a tax refund. This prompted the city government to elevate the case to the Court of Tax Appeal. In its ruling however, the CTA upheld the trial court ruling and brushed off the discrepancies in the figures. "Nowhere does Section 196 of the LGC of 1991 does it provide that the demand for refund has to be exact demand claimed to the last decimal point or else consider one's claim naught," the CTA said. "This is a too literal reading of the law that tends to frustrate the fundamental principle of equity, that those who erroneously paid in good faith must be given back what is his," the CTA said. The CTA said the trial court did not "err" when it ordered the local government to refund P10,771,602.92 even if the lone witness presented testified a different figure. The local government's "contention is clearly devoid of merit," the CTA said. The court ruled that apart from the witness testimony, the bank was also able to "sufficiently establish its entitlement to a refund." "It is sufficient that the respondent (bank) was able to comply with Section 196 of the LGC. Inasmuch as respondent was able to satisfy the reqiurements... respondent is entitled to a tax refund," the CTA ruled. — BM, GMA News