Case Digest (G.R. No. 146667)
Facts:
In The Hongkong and Shanghai Banking Corporation Limited-Philippine Branches v. Commissioner of Internal Revenue (G.R. Nos. 166018 and 167728), decided on June 4, 2014, petitioner HSBC, a custodian bank for resident and non-resident investors, executed purchases of domestic shares on instruction via SWIFT electronic messages and paid Documentary Stamp Tax (DST) totaling ₱19,572,992.10 for September–December 1997 and ₱32,904,437.30 for January–December 1998. Relying on BIR Ruling No. 132-99 (August 23, 1999), which held that electronic instructions not involving fund transfer from abroad are not subject to DST, HSBC filed administrative refund claims. When the Bureau of Internal Revenue failed to act, HSBC elevated the claims to the Court of Tax Appeals (CTA) as CTA Cases Nos. 5951 and 6009. The CTA partially granted HSBC’s petitions, ordering a refund of ₱16,436,395.83 for 1997 and ₱30,360,570.75 for 1998, but the Court of Appeals reversed, holding that HSBC’s acceptance or paymCase Digest (G.R. No. 146667)
Facts:
- Parties
- Petitioner: The Hongkong and Shanghai Banking Corporation Limited-Philippine Branches (HSBC).
- Respondent: Commissioner of Internal Revenue.
- Transaction Background
- HSBC provides custodial services for investor-clients (residents and non-residents) who invest in shares of domestic corporations.
- Investor-clients maintain peso or foreign-currency accounts with HSBC and issue electronic instructions (SWIFT messages) from abroad to debit those accounts and pay the purchase price of securities.
- Documentary Stamp Tax (DST) Payments
- HSBC paid DST on electronic instructions to purchase securities:
- September–December 1997: ₱19,572,992.10.
- January–December 1998: ₱32,904,437.30.
- Payments were broken down by month as substantiated in HSBC’s claims.
- Administrative Ruling and Claims
- BIR Ruling No. 132-99 (Aug. 23, 1999) held that electronic instructions not involving transfer of funds from abroad are not subject to DST under Sections 180–181 of the 1997 Tax Code.
- Based on that ruling, HSBC filed administrative claims for refunds for the two periods; BIR did not act.
- Judicial Proceedings
- HSBC filed petitions with the Court of Tax Appeals (CTA) to preserve refund claims.
- CTA Case No. 5951 (Sept.–Dec. 1997) and CTA Case No. 6009 (1998) resulted in Decisions ordering refunds or tax credits of ₱16,436,395.83 and ₱30,360,570.75, respectively.
- The Court of Appeals reversed the CTA Decisions in CA-G.R. SP No. 77580 and CA-G.R. SP No. 70814, dismissing HSBC’s petitions.
- HSBC elevated the cases to the Supreme Court via petitions for certiorari under Rule 45.
Issues:
- Scope of Documentary Stamp Tax
- Whether electronic SWIFT instructions to debit local accounts and pay third parties constitute “bills of exchange” or “orders for payment” subject to DST under Section 230 of the 1977 Tax Code and Section 181 of the 1997 Tax Code.
- Effect of BIR Rulings
- Whether BIR Ruling No. 132-99 correctly interpreted the DST law and whether it binds the Commissioner.
- Judicial Review
- Whether the Court of Appeals erred in disturbing the CTA’s specialized findings and in applying DST to electronic instructions.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)