G.R. No. 247345 - Abutin vs. San Juan

Petitioner, IFC Capitalization (Equity) Fund, L.P., is a non-resident foreign limited partnership engaged in making investments in private sector banks that have a systemic impact in their home markets.
The petitioner traded shares on the Philippine Stock Exchange from September 20, 2013 to September 3, 2014.
The trading was executed through two trading companies—Deutsche Securities Asia Limited (DSAL) and UBS Securities Asia Limited (USAL).

DSAL and USAL instructed stockbrokers (Deutsche Regis Partners, Inc. [DRPI] and UBS Securities Philippines, Inc. [USPI]) that the proceeds from the sale of the listed shares were to be remitted to the petitioner’s designated custodian banks in the Philippines, namely J.P. Morgan and Hongkong and Shanghai Banking Corporation (HSBC).
During these transactions, the stockbrokers withheld a stock transaction tax at a rate of one-half of one percent (0.5%) from the proceeds, amounting in the aggregate to P62,444,698.37.

The petitioner, claiming an exemption from the stock transaction tax, filed a claim for refund due to the alleged erroneous or illegal collection of the tax.
The Bureau of Internal Revenue (BIR) did not act on the refund claim, prompting the petitioner to file a Petition for Review with the Court of Tax Appeals (CTA) before the two-year deadline for filing such a claim.
During subsequent pre-trial and trial proceedings:

The petitioner presented four witnesses, including an independent certified public accountant.
The Commissioner of Internal Revenue (CIR) failed to submit the required judicial affidavits and memorandum, resulting in the waiver of his evidentiary rights.

The CTA in Division granted the petitioner’s claim for refund and ordered the CIR to refund P62,444,697.57.
The decision was grounded on an interpretation of Section 32(B)(7)(a) of the National Internal Revenue Code (NIRC), which exempts income derived by financing institutions owned, controlled, or enjoying refinancing from foreign governments from gross income (and hence, income tax) under Title II of the NIRC.
A dissenting opinion by Presiding Justice Roman G. Del Rosario argued that stock transaction tax, being not an income tax, should not benefit from the said exemption.

The CTA En Banc reversed the decision of the CTA Division, holding that petitioner is not entitled to claim a refund.
The court clarified that stock transaction tax is a percentage tax imposed under Title V of the NIRC, and not an income tax under Title II.
The En Banc ruling referred to the legislative history of Section 127 of the NIRC, emphasizing the clear separation between income tax and percentage tax, and thus concluding that the exemption under Section 32(B)(7)(a) does not extend to a stock transaction tax.

Petitioner filed a motion for reconsideration which was denied in a Resolution dated June 16, 2021.
Following the denial, the petitioner elevated the issue by filing a Petition for Review on Certiorari under Rule 45 of the Rules of Court.

The petitioner raised the argument that the CTA En Banc improperly took cognizance of the issue of whether the stock transaction tax is an income tax, claiming the issue was raised belatedly.
Additionally, the petitioner maintained that the tax should be interpreted as an income tax subject to the exemption provided in Section 32(B)(7)(a) of the NIRC.

Whether the stock transaction tax imposed on the sale of shares is classified as an income tax subject to the exemption provided under Section 32(B)(7)(a) of the NIRC.
Whether the CTA En Banc was proper in taking cognizance of an issue allegedly raised belatedly by the CIR in the context of a refund claim.