CTA Case No. 5785 (Decision)

,� / REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY STANDARD CHARTERED BANK- PHILIPPINE BRANCHES, Petitioner, -versus- C.T.A. CASE NO. 5785 COMMISSIONER OF INTERNAL Promulgated: REVENU E, Respondent. x----------- - - - -- - ------------------------------------------x DECISION The instant petiti on seeks the refund or issuance of a tax credit certificate amounting to P11 ,898 ,416.00, allegedly representing overpaid income tax for the calendar year ended December 31 , 1996. The facts of the case are as follows: Petitioner is a resident foreign banking institution duly organized and registered under the laws of England and is authorized by the Sect ities and Exchange Commission to engage in business in the Philippines, with office address at 6756 Ayala Avenue, Makati City. On April 15, 1997, Petitioner filed with the Bureau of Internal Revenue (BIR) its Corporate Annual Income Tax Return for the calendar year ending December 31, 1996 reflecting a taxable income of P46, 190,105.00 and the tax due thereon amounting to P16,166,537.00 (Exh. A). .1.92

DECISION- CTA CASE NO. 5785 PAGE2 Since its tax liability for the said year amounted only to P16,166,537.00 and Petitioner paid a total of P28,064,953 .00, the latter still had unutilized tax payments in the amount of P 11,898,416.00 which it opted to carry over to the succeeding taxable year 1997. Petitioner, however, failed to do so as it ended up in a net loss position in 1997 allegedly due to its expansion program and investment in computers (p. 95, CTA Records). Thus, on May 6, 1998, Petitioner filed with RDO No. 47, Revenue Region No. 8 of the Bureau of Internal Revenue, a letter claim for the refund of its unutilized tax credit in the amount of P II ,898,4 16.00 (Exh. H), on the basis of the following provisions ofthe Tax Code: "Section 69. Final Adjustment Return. - Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either: (a) Pay the excess tax still due; or (b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for th e taxable quarters of the succeeding taxable year. Section 204. Authority of the Commissioner to compromise, abate and refund/credit taxes.- The Commissioner may- XXX (3) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of the internal revenue stamps when the y are returned in good co,1dition by the purchaser, and in his di scretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of

DECISION- CTA CASE NO. 5785 PAGE3 destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two years after the payment of the tax or p e n a l t y. SEC. 230. Recovery of tax erroneously or illegally collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or co llected. or of any penalty claimed to have been collected without autho rit y, or any sum alleged to have been excessive or in any manner wrongl'ul ly collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless or any supervening cause that may arise after payment; provided, huwewr. that the Commissioner may, even without a written claim therelor, refund or credit any tax , where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.'' As there was no action on the part of herein Respondent and the two-year prescriptive period was about to lapse. the instant Petitio11 was filed on April 14, 1999. In his Answer, Respondent claimed by way of Special and Affirmative Defenses that: "4. The amount cla imed by Petitioner has been applied as tax credit to the next succeeding year, hence, not refundable; 5. The petition states no ca use of action as it does not allege the datc/s .when the taxes sought to be refunded were actually paid; 6. In an action lor tax refund/credit, the burden of proof is on the taxpayer to establish its right to the refund and failure to sustain the burden is LHal to the actio n for tax refund; 7. Taxes paid and co ll ected are presumed to have been made 111 accordance with law and regulation&, hence, not refundable; and �l94 1

DECISION- CTA CASE NO. 5785 PAGE4 8. Well-settled is the rule that claims for refund arc construed strictly against the claimants since it partakes of the nature of an exemption from taxation. (Resins, Inv. vs. Auditor General, 75 SCRA 75-1, 1968). The issues vvc arc tasked to resolve have been stipulated by the parties to be as follows: "Main Issue Whether or not the Petitioner is entitl ed to the refund of the amount ofP11,898,416.00 representing overpaid income tax for calendar year ended 31 December 1996 . Sub-lssu1:s 1. Whether or nor Petitioner overpaid its income tax in the amount of P 11 ,898 ,416.00 1~1r calendar year ended December 31, 1996. 2. Whether or not Petitioner fil ed its claim for refund in the amount of P11.898.416.00 for overpaid income tax for calendar year ended December 31 , 1996 within the two year prescriptive period. 3. Whether or not Petitioner applied the excess tax payments for calendar year December 31, 1996 as credit against its income tax liability Cor the succeeding calendar year ended December 31, 199 7." Petitioner, to support its ca s~.', offered the following documents as evidence: Exhibits Description A BlR Form 1702: Corporate Annual Income Tax Return of Petitioner for calendar year ended December 31, 1996 B BIR Form 1702: Corporate Annual Income Tax Return of Petifoner for calendar year ended December 31, 1997 C toE BlR Form 1702 Q: Quarterly Income Tax Returns of Petitioner for the first three quarters of 1997 ._. ��'195 / .�'

DECISION- Tax Debit Memo No. SN 017853 issued to CTA CASE NO. 5785 Petitioner on May 23, 1996 PAGES F G Tax Debit Memo No. SN 017854 issued to Petitioner on May ?1, 1996 H Administrative claim for refund of overpaid income taxes dated May 4, 1998 in the amount of P 11 ,898,416.00 filed by SGV on behalf of Petitioner I to K 811<.. Form No. 1702 Q: Quarterly Income Tax Returns of Petitioner for the first three quarters or 1996 L CertiJication dated January 5, 2000 issued by Carmelita SJ. Pascual, Chief of the Revenue Acco unting Division of the BIR Respondent 's counseL on his ptrt, submitted this case for decision based on the pleadings on the gro und that the records were not to� Narded to him despite repeated follow-ups. Atter a careful examination of the evidence adduced solely by Petitioner, this Court rules in its favor. or Th~ right a ta:-:pay~:r to recover from the BIR any excess ir~comc tax paid is provided for under Scctil)l1 6t) o!" the Tax Code, hereinbefore quoted. As to whether or nut Petitiuncr was able to prove that there was an overpayment, its 1996 Corporate Annual Income Tax 1~cturn clearly sho\vs that while it was liable to pay only P16,16G,537.00, which is 35% of its taxable inc\;'ne of P46,190,105.00, it p:1id a total ofP28,064,953 .00 result ing to an overpayment ofP11,898,416.00. Moreover, in the said return, Petiti one r signiliccl its int ention to apply its overpaid income tax against its income tax liabilities in the succeed in g year. Unfortunately, though, it was unable to do 19 6

.. . DECISION- CTA CASE NO. 571{5 PAGE6 so as shown by its IIJ97 income tax returns, both quarterly and annual, on account of its ending up in a net loss position. the reason why Petitioner is now claiming for a tax credit certificate for the said amount. With reference to the seco nd sub-issue. this Co urt finds Petitioner's claim for refund, both in the administr~1tivc nnd judicial leve l, ..1s timely filed. The Corporate Annual Income Ta;.; Return or l)ctitioner !'or the calendar year ended December 31, 1996 was filed on April 15. 1997. Verily. the claim for refund filed with the BIRon May 6, 1998 as well as the instant petition for review tiled on April 14, 1999 fall within the two- year prescriptive period. Finally, it bears stressing that Respondent offered no evidence to counter Petitioner's claim . 1\nd si nce thL~ Litter has shown sufficient evidence to support its entitlement to the relic !' so ught. this C�) urt has no recourse but to grant the same. WHEREFORE . in vic \\ u!' all the J'oregoing, thrs Court finds the instant Petition meritorious and in ~tccurd ~ tn ec \\ ith law. Respondent is hereby ORDERED to ISSUE A TAX CREDiT CERTIFICATE to Petitioner in the amount of P11,898,416.00, representing overpaid income tax lor the ca lendar year ended December 31 , 1996. Respondent coum;cl is alsu hereby ordered to inform the Revenue District Officer of RDO No. 47, Re ve nue Region No. 8 or the BIR of this decision so they will not act anymore on the cl<tim riled with their onice. SO ORD ERED. G2-..(v.Q. Q~ ERNESTO D. ACOSTA Presiding Judge � 197

,\ DECISION- CTA CASE NO. 57 85 PAGE7 WE CONCUR: 11.6ss'o_cfia~tc~.?.P~? - 1,~.: 1.~J ~~YRA RAMON 0. Associatc.luc c CERTI Fl CATION I hereby ccrti !'y that the above decision was reached after due consultation with the or members of the Court Tax /\ppea ls in accordance with Section 13, Article VIII of the Constitution . ~~.~ ERNESTO D. A COSTA Presiding Judge 198