Commissioner of Internal Revenue v. United Coconut Planters Bank
REITERATIONFacts
The Antecedents: United Coconut Planters Bank (UCPB) granted loans to borrowers who failed to pay, leading UCPB to file a petition for extrajudicial foreclosure of mortgaged properties. A public auction sale was held on December 31, 2001, where UCPB was the highest bidder. The notary public submitted the Certificate of Sale to the Executive Judge of the Regional Trial Court (RTC) of Manila for approval. The Executive Judge returned the certificate on February 18, 2002, requesting an explanation for an inconsistency in a tax declaration and proof of payment of the Sheriff's percentage of the bid price. The notary public complied, and on March 1, 2002, the Executive Judge finally approved the issuance of the certificate of sale to UCPB. Procedural History: On June 18, 2002, UCPB presented the certificate of sale to the Register of Deeds for annotation. On July 5, 2002, UCPB paid creditable withholding taxes (CWT) and documentary stamp taxes (DST). The Commissioner of Internal Revenue (CIR) charged UCPB with late payment, asserting that the redemption period for juridical persons, which is three months, should be counted from the date of the auction sale (December 31, 2001), making the taxes due on March 31, 2002. UCPB protested, arguing that the redemption period commenced from the date of the Executive Judge's approval of the certificate of sale (March 1, 2002), thus expiring on June 1, 2002. The CTA Second Division set aside the CIR's decision, ruling in favor of UCPB. The CTA En Banc affirmed this decision. The CIR appealed to the Supreme Court. The Petition: The Commissioner of Internal Revenue (CIR) filed a petition for review on certiorari, arguing that the redemption period should be reckoned from the date of the auction sale to prevent delays in tax collection.
Issue(s)
Whether the three-month redemption period for juridical persons in extrajudicial foreclosure sales should be reckoned from the date of the auction sale. Whether UCPB is liable for deficiency creditable withholding tax and documentary stamp tax.
Ruling
The petition is DENIED. The decision of the Court of Tax Appeals (CTA) is affirmed.
Ratio Decidendi
On whether the three-month redemption period for juridical persons in extrajudicial foreclosure sales should be reckoned from the date of the auction sale: The Court held that the three-month redemption period for juridical persons should be reckoned from the date of the confirmation of the auction sale, which is the date when the certificate of sale is issued. This confirmation is contingent upon the approval of the Executive Judge, who must ensure that the requirements for extrajudicial foreclosures have been strictly followed. The Supreme Court, in Administrative Matter 99-10-05-08, has ruled that the certificate of sale shall issue only upon the Executive Judge's approval. Therefore, the foreclosure process, for taxation purposes, is not complete until the Executive Judge approves the certificate of sale. In this case, the Executive Judge approved the certificate of sale on March 1, 2002, making the redemption period expire on June 1, 2002. This interpretation aligns with Revenue Memorandum Circular 58-2008, which clarifies that the redemption period is reckoned from the date of the confirmation of the auction sale, i.e., the date of issuance of the certificate of sale. On whether UCPB is liable for deficiency creditable withholding tax and documentary stamp tax: Based on the established redemption period ending on June 1, 2002, UCPB's payment of CWT and DST on July 5, 2002, was timely. Under Section 2.58 of Revenue Regulation 2-98, CWT is due within 10 days after the end of each month. Under Section 5 of Revenue Regulation 06-01, DST is due within five days after the close of the month when the taxable document was made. Revenue Memorandum Circular 58-2008 further clarifies that CWT is due within ten (10) days following the end of the month in which the redemption period expires, and DST is due within five (5) days from the end of the month when the redemption period expires. Therefore, UCPB had until July 10, 2002, to pay the CWT and July 5, 2002, to pay the DST. Since both taxes were paid on July 5, 2002, UCPB is not liable for any deficiency taxes.
Main Doctrine
The three-month redemption period for juridical persons in extrajudicial foreclosure sales is reckoned from the date of the confirmation of the auction sale, which is the date when the certificate of sale is issued, not from the date of the auction sale itself.