CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE vs. UNITED COCONUT PLANTERS BANK. GR. No. 179063. October 23, 2009

FACTS:

UCPB granted loans to George Co., Go Tong Electrical Supply Co., and Tesco Realty Co., secured by several real estate mortgages. The latter failed to pay their loans. Consequently, UCPB filed a petition for extrajudicial foreclosure of the mortgaged properties. A public auction was held on December 31, 2001 and UCPB made the highest winning bid. 

On January 4, 2002, the Notary Public submitted the Certificate of Sale to the Executive Judge of RTC of Manila for approval. The Certificate of Sale was signed only on March 1, 2002 and issued to UCPB. 

UCPB presented the certificate to the Register of Deeds of Manila for Annotation and on July 5, 2002 it paid the Creditable Withholding Tax (CWT) and Documentary Stamp Taxes (DST).

CIR, however, charged UCPB with late payment of DST and CWT and as a consequence, CIR issued a PAN and later on a FAN against UCPB.

TAXPAYER'S ARGUMENT:

UCPB argued that redemption period lapses on June 1, 2002 or 3 months after the Executive Judge of Manila approved the issuance of the Certificate of Sale. Hence, there is no late payment of taxes.

GOVERNMENT'S ARGUMENT:

CIR argued that the redemption period should be reckoned from the date of the action sale and not on the date of the approval by  the Executive Judge.

ISSUE:

Whether the 3 months redemption period for juridical person should be reckoned from the date of the action sale.

RULING:

The 3 months redemption period for judicial persons shall be reckoned from the date the executive judge approved the certificate of sale. Only on this date then did the deadline for payment of CWT and DST on the extrajudicial foreclosure of sale become due. 

Under RMC 58-2008, the time within  which to reckon the redemption period of real estate mortgage is from the date of the confirmation of the action sale which is the date when the certificate of sale is issued. It is held that a Certificate of Sale shall be considered issued only upon approval of the Executive Judge. Hence, in this case, the 3 months redemption period shall start only on March 1, 2002. 

The end of the month when the redemption period expires is important in determining the due payment of CWT and DST. 

If the property is an ordinary asset of the mortgagor, the CWT shall be due and paid within 10 days following the end of the month in which the redemption period expires. Moreover, the payment of DST and the filing of the return thereof shall have to be made within 5 days from the end of the month when the redemption period expires. Therefore, UCPB timely paid its CWT and DST and it is not liable for deficiencies.