CTA Case No. 5353 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FEB INVESTMENTS, INC. , C.T.A. CASE NO. 5353 Petitioner, - versus - THE COMMISSIONER OF INTERNAL REVENUE, Respondent. x - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x D-ECISION This is a j udicial action for the refund or for the issuance of a tax credit certificate of the sum of P448,698.00, representing overpaid creditable withholding tax for the calendar year ended December 31, 1993. The antecedent facts of the case are as fo I Iows: Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines. It is engaged in the business of property management with office address at FEBTC Center Bui !ding, Sen Gi I Puyat Avenue, Makati City. On Apr i I 14, 1994, petitioner filed its 1993 Annual Income Tax Return reflecting creditable withholding taxes in the amount of P709,723.00, representing prior year's excess credit of P104,494.00 and the current creditable tax withheld in the amount of P605,229.00. Since petitioner only had an income tax Iiabi Iity of P261,025.00 for the

DECISION - C.T.A. CASE NO. 5353. -2 - calendar year 1993, petitioner alleges that it overpaid its income tax in the sum of P448,698.00. Petitioner opted to carry over this overpaid income tax as tax credit to the succeeding taxable year 1994 pursuant to Section 69 of the Tax Code, as amended. However, in the calendar year 1994, petitioner suffered net loss from its operations in the sum of P962,089.00, therefore it was unable to apply the excess income taxes against its anticipated income tax iabi I ity in 1994. Subsequently, on June 6, 1995, petitioner filed a letter claim for refund with the Bureau of Internal Revenue in the amount of P448,698.00, q I Ieged I y representing overpaid income tax for the calendar year 1993 (Exhibit "H"). The apparent inaction of the respondent on the claim for refund prompted the petitioner to fi I e this present j udicial action on April 12, 1996 and to toll the running of the two-year period allowed under Sec. 230 of the Tax Code, as amended. Upon these facts, respondent advanced the following special and affirmative defenses thus: 1. Petitioner's claim for tax refund or request for issuance of tax credit certificate in the amount of P448,698.00 allegedly representing excessive overpaid income tax for the taxable year 1993 is still under administrative investigation;

DECISION - C.T.A. CASE NO. 5353. -3 - 2. Taxes paid are presumed . coIIected in law and regulations, hence, not accordance with refundable; 3. In an action for tax refund the burden of proof is on the taxpayer to estab Iish its right thereto and fai Iure to sustain the burden is fata I to said action; 4. It is incumbent upon the petitioner to show compliance with the provisions of Sections 204 and 230 of the Tax Code, as amended; 5. Well-settled is the rule that claims for refund are construed strictly agains claimants since they partake of the nature of exemption from taxation, (Resins, Inc. vs. Auditor General, 75 SCRA 754, 1969). In support of its claim for refund, petitioner presented various documentary exhibits which consist of the following: a. The 1993 Annual Income Tax Return (Exhs. "A" to "A-4", inclusive); b. The 1994 Annual Income Tax Return (Exhs. "G" and "G-1"); c. The letter-claim for refund with the Bureau of Internal Revenue (Exh. "H"); and d. The various Certificates of Creditable Withholding Tax. at Source [SIR Form 1743.11 <Exhs. "B" to "E-1", inclusive). These documents were not objected to by the respondent insofar as their existence is concerned but takes exception t:o the veracity of the figures supplied therein. The only issue to be resolved by this Court is whether or not petitioner is entitled to the refund of the sum of

DECISION - C.T.A. CASE NO. 5353. -4- P448,698.00, representing overpaid creditable withholding tax for the calendar year 1993. The legal basis of petitioner in claiming for the refund of its overpaid income tax is Section 69 of the Tax Code, as amended, which reads as follows: "Sec. 69. Final adjustment return. Every corporation Iiable to tax under Section 24 shalI file a final adjustment return covering the total 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 income of that year the corporation shalI either: (a) Pay the excess tax stiII due; or (b) Be refunded the exces 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 quarterIy income tax I iab iIities for the taxable quarters of the succeeding taxable � (Underscoring suppIied) Based on the above proviso the refundable income tax payment of a given year can only be credited against estimated quarterly income tax IiabiIities for the taxable quarters of the succeeding taxable year. Since petitioner did not utiIize the 1993 overpaid income tax in the succeeding year 1994, due to the losses incurred for that year, the amount of P448,698.00 appears to

DECISION - C. T. A. CASE NO. 5353. -5 - be refundable. However, petitioner must prove its entitlement for refund by substantial evidence. Section 230 of the Tax Code provides that the claim for refund, both in the administrative and judicial level, must be filed within two years from the date of payment of the tax. For easy reference, Section 230 of the Tax Code is hereby quoted as foIIows: "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 aI I eged to have been erroneousIy or iIIegaIIy assessed or coIIected, or of any penaIty cIaimed to have been without authority, or of any sum aIIeged to have been excessive or in any manner wrongfully collected, untiI 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 sha I I be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on face of the return upon �which payment was made, such payment appears clearly to have been erroneously paid." <Underscoring supplied) Furthermore, in claiming for the refund of excess creditable withholding tax, petitioner must show compliance with the following three requisites, namely:

DECISION - C.T.A. CASE NO. 5353. 6 1. that it filed a claim for. refund within the two (2) year period as prescribed under Section 299 (now 230) of the National Internal Revenue Code; 2. that the income upon which the taxes were withheld were included in the return of the recipient; and 3. the fact of withholding is established by a copy of statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. (Sec. 10, Rev. Reg. 6-85; see Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; and Citytrust Finance Corporation (Formerly Investor's Finance Corporation/FNCB Finance) vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1 993) . A perusal of the evidence submitted by the petitioner reveals that" petitioner's claim for refund was timely filed within two years from the date of payment of the tax. Its claim for refund with the Bureau of Internal Revenue was filed on June 6, 1995 (Exh. ) H " " and its Petition for Review with this Court was filed on Apri 12, 1996. The two-year period commenced on April 15, 1994, the time required by law for the petitioner to fi_le its final income tax return for the calendar year 1993 (Commissioner of Internal Revenue v. TMX Sales, Inc. et al., G.R. No. 837736, January 15, 1992). In addition, the 1993 creditable withholding taxes were duly supported by Certificates of Creditable Withholding Tax at Source (BIR Form 1743.1) in accordance with the fl.\' l�. � . �

DECISION - C.T.A. CASE NO. 5353. -7- requirements of Revenue Regulations No. 6-85, as amended, itemized as follows: Withholding Agent Amount of Amount of Ex h. Income Payment Tax Withheld Francisco Automotive Oist., Inc. 175,000.00 p 8,750.00 B, B-1 & B-2 FEB Stock Brokers, Inc. 6,924,710.00 346,235.52 C, C-1 & C-2 Far East Bank Oev't Corp. 2,451,965.20 t22,598' 26 0, 0-1 & 0-2 FEB Insurance Brokers, Inc. 215521913.18 1271645.66 E, E-1 & E-2 T0TA L P12,104,588.38 .P605,229.44 It was further established that the income upon which these creditable withholding taxes were paid were included in petitioner's return (schedule 5, Exh. "A"). However, we would Iike to stress that petitioner did not present any evidence with regard to the prior year's excess credit in the amount of P104,494.00. It even faiIed to attach the first page of the 1992 annual income tax return on the 1993 income tax return for us to verify if said amount was indeed excessive. Thus, we are constrained to deny said portion for lack of evidence. A recomputation of petitioner's overpaid income tax wi II show that it is entitled to the amount of P344,204.44, detailed as follows: 1993 Creditable withholding p 605,229.44 tax at source 261,025.00 Less 1993 income tax IiabiIity p 344,204.44 AMOUNT REFUNDABLE 81'\j }

DECISION - C.T.A. CASE NO. 5353. -8 - WHEREFORE, finding the petition for review meritorious, respondent is hereby ordered to REFUND or in the al ernative to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the sum of P344,204.44, representing overpaid income tax for the calendar year ended December 31, 1993. SO ORDERED. L-(Q. ERNESTO D. ACOSTA Presiding Judge ( CERTIFICATION I hereby certify th@t this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VI I I of the Constitution. L.Q ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals