Philippine National Oil Company Vs CA G
Philippine National Oil Company Vs CA G
No. 1931, which took effect on 11 June 1984, withdrew all tax exemptions of
government-owned and controlled corporations.
In a letter, dated 08 August 1986, the BIR requested PNOC to settle its liability for
taxes on the interests earned by its money placements with PNB and which PNB did
not withhold.6 PNOC wrote the BIR on 25 September 1986, and made an offer to
compromise its tax liability, which it estimated to be in the sum of P304,419,396.83,
excluding interest and surcharges, as of 31 July 1986. PNOC proposed to set-off its
tax liability against a claim for tax refund/credit of the National Power Corporation
(NAPOCOR), then pending with the BIR, in the amount of P335,259,450.21. The
amount of the claim for tax refund/credit was supposedly a receivable account of
PNOC from NAPOCOR.7
On 08 October 1986, the BIR sent a demand letter to PNB, as withholding agent, for
the payment of the final tax on the interest earnings and/or yields from PNOC's
money placements with the bank, from 15 October 1984 to 15 October 1986, in the
total amount of P376,301,133.33.8 On the same date, the BIR also mailed a letter to
PNOC informing it of the demand letter sent to PNB.9
PNOC, in another letter, dated 14 October 1986, reiterated its proposal to settle its
tax liability through the set-off of the said tax liability against NAPOCOR'S pending
claim for tax refund/credit.10 The BIR replied on 11 November 1986 that the
proposal for set-off was premature since NAPOCOR's claim was still under process.
Once more, BIR requested PNOC to settle its tax liability in the total amount of
P385,961,580.82, consisting of P303,343,765.32 final tax, plus P82,617,815.50
interest computed until 15 November 1986.11
On 09 June 1987, PNOC made another offer to the BIR to settle its tax liability. This
time, however, PNOC proposed a compromise by paying P91,003,129.89,
representing 30% of the P303,343,766.29 basic tax, in accordance with the
provisions of Executive Order (E.O.) No. 44.12
Then BIR Commissioner P 2,952,349.23
Bienvenido A. Tan, in a
letter, dated 22 June 1987,
accepted the compromise.
The BIR received a total
tax payment on the
interest earnings and/or
yields from PNOC's money
placements with PNB in
the amount of
P93,955,479.12, broken
down as follows: Previous
payment made by PNB
Add: Payment made by P 91,003,129.89
PNOC pursuant to the
compromise agreement of
June 22, 1987
Total tax payment P 93,955,479.1213
Private respondent Savellano, through four installments, was paid the informer's
reward in the total amount of P14,093,321.89, representing 15% of the
P93,955,479.12 tax collected by the BIR from PNOC and PNB. He received the last
installment on 01 December 1987.14 4 MAS
After their Motions to Dismiss were denied by the CTA, PNOC and PNB filed their
respective Answers to the amended Petition. PNOC averred, among other things,
that (1) it had no privity with private respondent Savellano; (2) the BIR
Commissioner's discretionary act in entering into the compromise agreement had
legal basis under E.O. No. 44 and RMO No. 39-86 and RMO No. 4-87; and (3) the CTA
had no jurisdiction to resolve the case against it.23 On the other hand, PNB asserted
that (1) the CTA lacked jurisdiction over the case; and (2) the BIR Commissioner's
decision to accept the compromise was discretionary on his part and, therefore,
cannot be reviewed or interfered with by the courts.24 PNOC and PNB later filed
their amended Answer invoking an opinion of the Commission on Audit (COA)
disallowing the payment by the BIR of informer's reward to private respondent
Savellano.25
The CTA, thereafter, ordered the parties to submit their evidence,26 to be followed
by their respective Memoranda.27
On 23 November 1990, private respondent Savellano, filed a Manifestation with
Motion for Suspension of Proceedings, claiming that his pending Motion for
Reconsideration with the BIR Commissioner may soon be resolved.28 Both PNOC
and PNB opposed the said Motion.29
Subsequently, the new BIR P 385,961,580.82
Commissioner, Jose U. Ong,
in a letter to PNB, dated 16
January 1991, demanded
that PNB pay deficiency
withholding tax on the
interest earnings and/or
yields from PNOC's money
placements, in the amount
of P294,958,450.73,
computed as follows:
Withholding tax, plus
interest under the letter of
demand dated November
11, 1986
Less: Amount paid under P 91,003,129.89
E.O. No. 44
Amount still due and P 294,958,450.7330
collectible