Revenue v. Far East Bank & Trust Company

DEL CASTILLO, J.:

Entitlement to a tax refund is for the taxpayer to prove and not for the government to disprove. This Petition for Review on Certiorari assails the January 31, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 56773 which reversed and set aside the October 4, 1999 Decision2 of the Court of Tax Appeals (CTA) in CTA Case No. 5487. Also assailed is the July 19, 2006 Resolution3 of the CA denying the motion for reconsideration.

The CTA found that respondent Far East Bank & Trust Company failed to prove that the income derived from rentals and sale of real property from which the taxes were withheld were reflected in its 1994 Annual Income Tax Return. The CA found otherwise. Factual Antecedents On April 10, 1995, respondent filed with the Bureau of Internal Revenue (BIR) two Corporate Annual Income Tax Returns, one for its Corporate Banking Unit (CBU)4 and another for its Foreign Currency Deposit Unit (FCDU),5 for the taxable year ending December 31, 1994.

The return for the CBU consolidated the respondent's overall income tax liability for 1994, which reflected a refundable income tax of ₱12,682,864.00, computed as follows: FCDU CBU Gross Income ₱13,319,068 5,348,080,630 Less: Deductions 1,397,157 5,432,828,719 Net Income 11,921,911 [84,748,089] Tax Rate 35% 35% Income Tax Due Thereon 4,172,669 NIL Consolidated Tax Due for