SONOMA SERVICES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPIN ES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION SONOMA SERVICES, INC., CTA Case No. 924 9 Petitioner, Members: CASTANEDA, JR., Chairperson, CASANOVA, and MANAHAN, JJ. -versus- COMMISSIONER OF Promulgated: INTERNAL REVENUE, ,/ Respondent. AUG 1 5 Z018/ r7 }; N l �"' - x-------------------------------------------------------------------- -------------x DECISION CASTANEDA, JR., J.: THE CASE This is a Petition for Review1 filed by Sonoma Services, Inc. to seek the refund or issuance of tax credit certificate in the amount of P4,733,500.00, allegedly representing its excess and unutilized creditable withholding tax (CWT) for calendar year (CY) 2013. ,)<- 1 Docket, pp. 12-19.

DECISION CfA CASE NO. 9249 THE FACTS Petitioner Sonoma Services, Inc. is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at 3rd Floor, Makati Stock Exchange Building, Ayala Triangle, Ayala Avenue, Makati City.2 It is a registered taxpayer of the Bureau of Internal Revenue (BIR), Revenue Region No. 8, Revenue District Office (RDO) No. 50 with Taxpayer Identification No. 220-868-954-000.3 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (CIR), vested under the appropriate laws with authority to carry out all the functions, duties, and responsibilities of said office, including, inter alia, the power to decide, approve, and grant refunds and/or tax credits of overpaid and erroneously paid or collected internal revenue taxes. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On April 12, 2014, petitioner filed with the BIR its Annual Income Tax Return (AITR)4 for CY 2013, through the Electronic Filing and Payment System (eFPS). It indicated therein its choice to claim the refund of its alleged excess and unutilized CWT for CY 2013. Consequently, petitioner did not carry over its excess and unutilized CWT for CY 2013 in the amount of P4,733,500.00 to the succeeding taxable year. On June 16, 2015, petitioner filed with the BIR RDO No. 50 an administrative claim for refund of excess and unutilized CWT for CY 2013 in the amount of P4,733,500.00.5 Due to respondent's inaction on its administrative claim for refund, petitioner filed the present Petition for Review on January 27, 2016.6 ;.:- 2 Par. 1, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket, p. 188. 3 Par. 2, Admitted Facts, JSFI, Docket, p. 188. 4 Exhibit "P-1", Docket, pp. 284-291. 5 Exhibits "P-6" and "P-6-1", Docket, pp. 332-343. 6 Docket, pp. 12-19.

DECISION CTA CASE NO. 9249 Within the extended time granted by the Court/ respondent filed his Answer 8 through registered mail on March 21, 2016 and was received by this Court on April 5, 2016. Respondent interposed the following special and affirmative defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 3. She reiterates and repleads the preceeding (sic) paragraphs of this Answer as part of her Special and Affirmative Defenses; 4. Taxes paid and collected are presumed to have been made in accordance with law and implementing regulations, hence, not refundable. 5. In an action for refund/credit, the burden of proof is upon petitioner to establish its right to the claimed refund and failure to adduce sufficient proof is fatal to its claim. 6. Petitioner's claim for refund/ issuance of tax credit in the amount of Php4,733,500.00, as alleged excess and unutilized creditable income taxes withheld for taxable year 2013 were not fully substantiated by proper documentary evidence, such as, but not limited to certificates of income taxes withheld at source, official receipts and other relevant tax returns. 7. Petitioner failed to prove that the amount of Php4,733,SOO.OO, as alleged excess and unutilized creditable income taxes withheld for taxable year 2013 was included as part of its gross income for taxable year 2013 and the same was not utilized in payment of its income tax liability for the succeeding taxable quarters/years; )'t- 7 Order dated March 7, 2016, Docket, p. 71. s Docket, pp. 72-74.

DECISION CTA CASE NO. 9249 8. Petitioner has already exercised its option to carry- over to the succeeding taxable quarters/years the subject of its claim, pursuant to Section 76 of the 1997 Tax Code. 9. Petitioner failed to prove that the amount subject of its claim was remitted in full to the BIR. 10. Petitioner failed to comply with the requirements prescribed under Section 76 of the 1997 Tax Code. 11. Petitioner evidently failed to comply with the requirements under Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 2-2006, relative to its claim for refund of excess/unutilized creditable income taxes withheld for taxable year 2013. 12. It is incumbent upon the latter to show that it has complied with the provisions under Sections 204 of the 1997 Tax Code in relation to Section 229 ofthe same Code. Otherwise, its failure to prove the same is fatal to its claim for refund. 13. Claims for refund are construed strictly against herein petitioner for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner ofInternal Revenue, 124 SCRA 1211)." The Pre-Trial Conference was set on May 12, 2016.9 Thus, the Respondent's Pre-Trial Brief1� was filed on May 2, 2016; while the Petitioner's Pre-Trial Brief11 was filed on May 6, 2016.)t-- 9 Notice of Pre-Trial Conference, Docket, pp. 76-77. 10 Docket, pp. 78-80. 11 Docket, pp. 81-92.

DECISION erA CASE NO. 9249 On May 27, 2016, the parties filed their Joint Stipulation of Facts and Issues12� This was approved and adopted by the Court in the Pre- Trial Order13 issued on June 22, 2016. Upon motion of petitioner, 14 the Court commissioned Ms. Ma. Milagros F. Padernal as the Independent Certified Public Accountant (ICPA) for the case. 15 During trial, petitioner presented the following witnesses: (1) Ms. Myra 0. Aranel16, its Financial Accountant; and (2) Ms. Ma. Milagros F. Padernal17, the Court-commissioned ICPA. Thereafter, petitioner filed its Formal Offer of Evidence 18 on February 14, 2017. In the Resolution19 dated March 29, 2017, the Court admitted Exhibits "P-1", "P-2", "P-3", "P-4", "P-5", "P-6", "P-6- 1", "P-7"I "P-8"I "P-9"I "P-10"I "P-11"I "P-12"I "P-12-1"I "P-12-2"I "P- 12-3" "P-12-4" "P-12-5" "P-12-6" "P-12-7" "P-12-8" "P-12-10" "P-'IIIIII '13" "P-14" "P-14-1"to"P-14-24" "P-15" "P-15-1"to"P-15-1-24" "P-IIII 15-2" "P-16" "P-16-1" "P-17'' "P-17-1" & "P-17-1-1" "P-17-2" & "P-'IIII 17-2-1", "P-17-3" & "P-17-3-1", "P-17-4" & "P-17-4-1", "P-17-5" & "P- 17-5-1", "P-17-6" & "P-17-6-1", "P-17-7" & "P-17-7-1", "P-17-8" & "P- 17-8-1"I "P-17-9" & "P-17-9-1"I "P-17-10" & "P-17-10-1"I "P-17-11" & "P-17-11-1", "P-18", "P-19", "P-20", "P-20-1" to "P-20-20", "P-21", "P- 22"I "P-22-1" to "P-22-20"I "P-23"I "P-24"I "P-25"I "P-25-1"I "P-25-2"I "P-25-3", "P-26"I "P-27"I "P-27-1" to "P-27-45"I "P-28"I "P-29"I "P-29- 1" to "P-29-23", "P-30"I "P-30-1"I "P-31"I "P-32"I "P-32-1" to "P-32- 24"I "P-33"I "P-33-1"I "P-34"I "P-34-a"I "P-35"I and "P-35-a"' However, Exhibits "P-12-9" and "P-20-21" to "P-20-54" were denied admission for not being found in the records of the case. Petitioner then filed a Motion for Partial Reconsideration (Re: Resolution dated March 29, 2017) 20 on April 12, 2017. This was ;1- 12 Docket, pp. 188-193. 13 Docket, pp. 195-199. 14 Docket, pp. 204-207. 15 Oath of Commission, Docket, p. 222. 16 Minutes of the Hearing dated September 19, 2016, Docket, p. 223; Exhibit "P-11", Sworn Statement of Ms. Myra 0. Aranel to Questions Propounded by Atty. Ma. Carmela A. Esquivias, Docket, pp. 93-102. 17 Minutes of the Hearing dated January 25, 2017, Docket, p. 257; Exhibit "P-34", Sworn Statement of Ms. Ma. Milagros F. Padernal to Questions Propounded by Atty. Ma. carmela A. Esquivias, Docket, pp. 230-242; Exhibit "P-35", Supplemental Sworn Statement of Ms. Ma. Milagros F. Padernal to Questions Propounded by Atty. Ma. Carmela A. Esquivias, Docket, pp. 250-255. 1s Docket, pp. 263-282. 19 Docket, pp. 380-381. 20 Docket, pp. 386-389.

DECISION CTA CASE NO. 9249 granted by the Court in the Resolution21 dated September 14, 2017 and Exhibits "P-12-9" and "P-20-21" to "P-20-54" were admitted into evidence. On the other hand, respondent's counsel manifested during the hearing on October 9, 2017 that since there is no report of investigation, he would instead submit the case for decision of the Court. 22 Petitioner filed its Memorandum23 on November 23, 2017; while respondent failed to file his memorandum24 � Accordingly, the Court declared the present case submitted for decision on December 18, 2017. 25 THE ISSUES The parties stipulated that the main issue26 to be resolved in this case is: "Whether or not petitioner is entitled to its claim for refund of or issuance of TCC for its excess and unutilized CWT for CY 2013 in the amount of P4,733,500.00." The afore-mentioned issue is broken down into the following sub-issues: 1. Whether or not petitioner's excess and unutilized CWT for CY 2013 in the amount P4,733,500.00 are duly substantiated by documentary evidence. 2. Whether or not the income from which the CWTs being claimed for refund were withheld was reported as part of the revenues declared in petitioner's Annual ITR. )c- 21 Docket, pp. 396-397. 22 Minutes of the Hearing dated October 9, 2017, Docket, p. 400. 23 Docket, pp. 410-428. 24 Records Verification dated December 6, 2017, Docket, p. 429. 25 Resolution, Docket, p. 430. 26 Issues, JSFI, Docket, p. 189.

DECISION CfA CASE NO. 9249 3. Whether or not petitioner exercised the option to carry over its excess and unutilized CWT for CY 2013 to the succeeding taxable periods. 4. Whether or not petitioner filed its administrative and judicial claims for refund of excess and unutilized CWT for CY 2013 within the two-year prescription period provided under Sections 204(C) and 229, National Internal Revenue Code of 1997 (the "Tax Code''). THE COURT'S RULING The Petition shall be granted. Petitioner anchors its claim on Sections 58(D) and 76 of the National Internal Revenue Code (NIRC) of 1997, as amended, which provide: "SEC. 58. Returns and Payment of Taxes Withheld at Source.- XXX XXX XXX (D) Income of Recipient - Income upon which any creditable tax is required to be withheld under Section 57 shall be included in the return of its recipient but the excess of the amount of tax so withheld over the tax due on his return shall be refunded to him subject to the provisions of Section 204; xxx" "SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable 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 shall either:~

DECISION CTA CASE NO. 9249 (A) Pay the balance of tax still due; or (B) Carry over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." Under the cited law, there are two options available to the corporation whenever it overpays its income tax for the taxable year: (1) to carry over and apply the overpayment as tax credit against the estimated quarterly income tax liabilities of the succeeding taxable years (also known as automatic tax credit) until fully utilized (meaning, there is no prescriptive period); and (2) to apply for a cash refund or issuance of a tax credit certificate within the prescribed period.27 If the option to carry over the excess credit is exercised, the same shall be irrevocable for that taxable period and no application for cash refund or issuance of tax credit certificate shall be allowed therefor.28 The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer. 29 In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, either to carry over the excess credit or to Jt- 27 University Physicians Services Inc. -Management, Inc. vs. Commissioner of Internal Revenue, G.R. No. 205955, March 7, 2018. 28 Systra Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 176290, September 21, 2007, 533 SCRA 777. 29 Commissioner ofInternal Revenue vs. Bank of the Philippine Islands, G.R. No. 178490, July 7, 2009, 592 SCRA 219, 231-232.

DECISION CTA CASE NO. 9249 claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. 30 A perusal of its Annual Income Tax Return (AITR) for CY 201331 shows that petitioner had total credits of P11,225,875.00 32, which consisted of the prior year's excess tax credits in the amount of P6,492,375.00 and creditable taxes withheld during the year 2013 in the amount of P4,733,500.00 (P4,723,500.00 plus P10,000.00). Petitioner claims that its regular corporate income tax (RCIT) due for CY 2013 in the amount of P971,659.0033 was paid using a portion of its prior year's excess credits of P6,492,375.00. This leaves the prior year's excess tax credits in the amount of P5,520,716.00 and creditable taxes withheld during CY 2013 in the amount of P4,733,500.00 totaling P10,254,216.00 unutilized as of December 31, 2013, as shown below: Prior Year's Excess Credits other than MCIT p 6,492 375.00 Less: Tax Due (RCIT) Balance of Prior Year's Excess Credits 971,659.00 p 5L520,716.00 Add: Creditable Taxes Withheld- CY 2013 Excess Creditable Taxes Withheld as of Decem1Jea1, 2013 4,733 500.00 J 10,254,216.00. The prior year's excess tax credits of P6,492,375.00 were accounted for by the Court-commissioned Independent Certified Public Accountant as follows: 34 Excess CWT carried over from previous period- CY 2012 p 2 515,357.05 Add: CWT found to be properly supported in CTA Case No. 761335 4,357,499.04 but were denied refund in CTA EB No. 697 due to petitioner's 380,481.09 failure to prove that it did not exercise the option to carry over P6,492,375.00 the said CWT to the succeeding quarters of CY 200536 '/L- Less: Adjustment to CY 2010 income tax due Total Prior Year's Excess Credits other than MCIT - CY 2013 30 Systra Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 176290, September 21, 2007, 533 SCRA 776, 776-785. citing Philippine Bank of Communications vs. Commissioner ofInternal Revenue, et a/., G.R. No. 112024, January 28, 1999. 31 Exhibit "P-1", Docket, pp. 284-291. 32 Exhibit "P-1", Schedule 7, Docket, p. 289. 33 Exhibit "P-1", Line 16, Docket, p. 284. 34 Exhibit "P-30", pp. 5-6. 35 Exhibit "P-25-1". 36 Exhibit "P-25-2".

DECISION erA CASE NO. 9249 The adjustment to CY 2010 income tax due amounting to P380,481.00 arose from the difference between the income tax due per 2010 AITR and income tax due as disclosed in the 2010 Audited Financial Statements (AFS), to wit: 2010 AITR income tax due37 p 1781931.38 I 2010 AFS- Note 11 (Current provision for income tax)38 559,413.00 I Un_paic!_~()rtig11_o! CY_2_!)10 jnJ:Q_rnJ! !a~ ~ue ____ jtgSO_L481.62_l_' The above unpaid portion of P380,481.62 was settled by reducing the prior year's excess tax credits other than MCIT reported in the AITR for CY 2013. The prior year's excess credits of P2,515,357.00 originated from the creditable taxes withheld for the year 2011 in the amount of P4,386,654.40, which is duly supported with Certificates of Creditable Taxes Withheld at Source (BIR Form No. 2307) 39 after deducting therefrom part of the income tax due for CY 2011 in the amount of P392,088.24 and the entire income tax due for CY 2012 in the amount of P1,479,209.10, as can be gleaned from the !CPA's summary of the movements of the excess CWT reflected in petitioner's AITRs from CYs 2003 to 2013, reproduced hereunder:40 Particulars Prior Years CWT Total i Excess Credits for the Year 2003 p - p 2 506 600.00 p 2 506,600.00 Tax credits/payments Less application of excess tax credits - (289 502.00) (289,502.00) aQainst RCIT due p - p 2 217 098.00 p 21217L098.00 Amount carried over to 2004 2004 Tax credits/payments p 2 217 098.00 p 5 188 970.00 p 7,406,068.00 Less: Application of excess tax credits against RCITdue (550 220.00) - (550 220.00) Amount claimed for refund of or issuance of TCC (erA Case No. 7613) - (5 188,970.00) (5,188 970.00) Amount carried over to 2005 p --= 1,666,~78.00_ P_______ ~ 1l666l878.00 ~ 37 Exhibit "P-12-8", Line 29. 38 Exhibit "P-24(16/20)". 39 Exhibits "P-22-1" to "P-22-20" summarized in Exhibit "P-21". 40 Exhibit "P-30", pp. 3-5.

DECISION CTA CASE NO. 9249 Particulars Prior Years CWT Total I Excess Credits for the Year 2005 Tax credits/payments p 1666 878.00 p 5 070 932.00 p 6 737,810.00 Less: Application of excess tax credits against (1 029 302.00) - (1,029,302.00) RCIT due - (5 070 932.00) {5 070,932.00) Amount claimed for refund of or p 637 576.00 p - p 637,576.00 issuance of TCC (CTA Case No. 7757) Amount carried over to 2006 2006 Tax credits/payments p 637 576.00 p 3 991 800.00 p 4 629,376.00 Less: Application of excess tax credits against RCIT due (434 043.00) - (434,043.00) Amount claimed for refund of or issuance of TCC (CTA Case No. 7911) - (3 991 800.00) (3 991 800.00) Amount carried over to 2007 p 203 533.00 p -p 203,533.00 2007 Tax credits/payments p 203 533.00 p 3 643 050.00 p 3 846,583.00 (756,740.00) Less application of excess tax credits (203 533.00) (553,207 .00) 3,089[843.00 -p 3 089 843.00 p against RCIT due Amount carried over to 2008 p 2008 Tax credits/payments p 3 089 843.00 p 3 683 100.00 p 6 772,943.00 Less: Application of excess tax credits against RCIT due (827 408.40) - (827 408.40) Amount claimed for refund of or issuance of TCC (CTA Case No. 8266) - (3 683 100.00) (3,683 100.00) Amount carried over to 2009 p 2 262 434.60 p - p 2,262 434.60 2009 Tax credits/payments p 2 262 434.60 p 4 045 410.00 p 6,307 844.60 Less: Application of excess tax credits against RCIT due (995 903.10) - (995 903.10) Amount claimed for refund of or issuance of TCC (CTA Case No. 8458) - (4 045,410.00) (4 045 410.00) Amount carried over to 2010 p 1 266 531.50 p - p 1,266 531.50 2010 Tax credits/payments p 1 266 531.50 p 3 911,850.00 p 5,178 381.50 Less: Application of excess tax credits against minimum corporate income tax (MCIT) due (178,931.38) - (178 931.38) Amount claimed for refund of or issuance of TCC (CTA Case No. 8639) - (3,911 850.00) (3 911 850.00) Amountcarri�!Q_()ver to 2011 p 1,087,600.12 p - p 1 087 600.12 ~ ----

DECISION CTA CASE NO. 9249 Particulars Prior Years CWT Total Excess Credits for the Year 2011 p 1 087,600.12 p 4,386,6S4.40 p 5 474 254.52 Tax credits/_pa_y_ments (1 087 600.12) (392,088.24) (1 479 688.36) Less: Application of excess tax credits ~ainst RCIT due Amount carried over to 2012 p - p 3,994,S66.16 p 3 994 566.16 2012 p 3,994,S66.1S* p 4,880 190.40 p 8 874 756.55 Tax credits/payments (1,479,209.10) - (1_,479 209.10) Less: Application of excess tax credits (4 880,190.40) (4 880 190.40) against RCIT due p 2,S1S,3S7.OS p - p 2,515 357.05 Amount claimed for refund of or issuance of TCC (CTA Case No. 9026) Amount carried over to 2013 *Amount rounded-off 2013 Tax credits/payments p 21 S1S,3S7.OS p 4J33_L500.00 p 7 248 857.05 cwr Add reinstatement of 2004 disallowed by the CTA (per decision in CTA EB Case No. 697 dated April 20 2012) 4 357 499.04 - 4,357 499.04 (380,481.09) - (380 481.09) Less adjustment made by the Petitioner 6 492 375.00 4,733 500.00 11 225 875.00 Less: (971,659.00) - (971 659.00) Application of excess tax credits (4 733,500.00) (4 733 500.00) - against RCIT due Amount claimed for refund of or issuance of TCC (CTA Case No. 9249) L_L Amount carried over to 2014 ------- J- -~,520rZJ,6.09 ~-----~ ~520,716.00 Since petitioner marked the box corresponding to the option "To be Refunded"41 in its AITR, the cwr for CY 2013 in the amount of P4,733,500~00 may be a proper subject of a claim for cash refund pursuant to Section 76 of the Tax Code. This refund option was further affirmed by petitioner when it carried over only the amount of P5,520,716.00 as prior year's excess tax credits other than MCIT in its Quarterly42 and Annual43 Income Tax cwr Returns for CY 2014. Said amount already excludes the being claimed for refund in this case amounting to P4,733,500.00~ 41 Exhibit "P-1", Line 21, Docket, p. 284. 42 Exhibits "P-8", "P-9" and "P-10", Line 31A, Docket, pp. 366, 371 and 375. 43 Exhibit "P-7", Schedule 7, Line 1, Docket, p. 349.

DECISION CTA CASE NO. 9249 However, in addition to the requisites provided under Section 76 of the Tax Code, jurisprudence and pertinent BIR Revenue Regulations provide that the following requisites must be complied with in order that the refund claim may be granted: 1. The claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the Tax Code, as amended; 2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld must be included in the return of the recipient.44 With respect to the first requisite, the pertinent provisions are Sections 204(C) and 229 of the NIRC of 1997, as amended, which provide: "SEC. 204. Authority of the Commissioner to Compromise/ Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties lt- 44 Republic ofthe Philippines_ represented by the Commissioner ofInternal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015, 746 SCRA 41, 41-50; United International Pictures AB vs. Commissioner of Internal Revenue, G.R. No. 168331, October 11, 2012, 684 SCRA 23; Citibank N.A. vs. Court ofAppeals_ eta!., G.R. No. 107434, October 10, 1997, 280 SCRA 459; ACCRA Investments Corporation vs. The Honorable Court ofAppeals_ eta!., G.R. No. 96322, December 20, 1991, 204 SCRA 957; Section 2.58, Revenue Regulations No. 2-98, as amended.

DECISION CfA CASE NO. 9249 shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund." (Emphasis supplied) "SEC. 229. 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 collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully 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 filed after the expiration of two (2) 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 the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) It is well-settled that the reckoning of the two-year prescriptive period for the filing of a claim for refund/tax credit of excess income tax paid/withheld, both in the administrative and judicial levels, commences from the date of filing of the Final Adjustment Return.45 It is only when the Final Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures.46 ?t- 45 ACCRA Investments Corporation vs. The Honorable Court ofAppeals, eta!., G.R. No. 96322, December 20, 1991, 204 SCRA 957; Commissioner ofInternal Revenue vs. TMX Sales, Inc. and the Court of Tax Appeals, G.R. No. 83736, January 15, 1992, 205 SCRA 184; Commissioner ofInternal Revenue vs. The Philippine American Life Insurance Co., eta/., G.R. No. 105208, May 29, 1995, 244 SCRA 446. 46 Commissioner ofInternal Revenue vs. TMX Sales Inc., eta!., G.R. No. 83736, January 15, 1992, 205 SCRA 184.

DECISION CTA CASE NO. 9249 Moreover, in the case of Metropolitan Bank & Trust Company vs. The Commissioner ofInternal Revenut!7, the Supreme Court held that it is only logical to reckon the two-year prescriptive period from the time the Final Adjustment Return or the Annual Income Tax Return was filed, since it is only at that time that it would be possible to determine whether the corporate taxpayer had paid an amount exceeding its annual income tax liability. In the present case, petitioner electronically filed its AITR for CY 2013 on April12, 2014.48 Counting from this date, petitioner had until April 12, 2016 within which to file its administrative claim for refund or issuance of tax credit certificate, and to institute the corresponding judicial action. Considering that petitioner's administrative claim for refund was filed on June 16, 201549 and the subsequent appeal was filed before this Court on January 27, 2016, clearly, both the administrative and the judicial claims were filed within the two-year prescriptive period under Sections 204(C) and 229 of the NIRC of 1997, as amended. The second and third requisites are imposed by Section 2.58.3(8) of Revenue Regulations No. 02-98, as amended, which states: "SECTION 2.58.3. Claim for Tax Credit or Refund. - XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom." (Emphasis supplied)~ 47 G.R. No. 182582, April 17, 2017. 4B Exhibit "P-1", Docket, p. 283. 49 Exhibit "P-6", Docket, pp. 332-333.

DECISION CTA CASE NO. 9249 In order to prove the fact of withholding, petitioner presented the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)50 duly issued to it by various withholding agents for CY 2013, reflecting total CWT of P4,733,500.00 on management fees of P31,690,000.00 received by petitioner for the said year, detailed as follows: Exhibit Period Payor Income Payments CWT No. Covered Corullon Holdings, Inc. 262 500.00 Management Fees Corullon Holdings, Inc. 262 500.00 Subtotal P-14-1 1st quarter p 1 750,000.00 p 525.000.00 P-14-2 3rd quarter 1 750 000.00 262 500.00 262 500.00 p 3. 500 000.00 p 525.000.00 P-14-3 1st quarter Eliia Holdings Inc. p 1 750JOOO.OO p P-14-4 3rd quarter 1 750 000.00 262 500.00 Gracie S_quare Holdings Inc.* 3. 500 000.00 p 262 500.00 Subtotal p 525.000.00 P-14-5 1st quarter FBC Holdings, Inc. p 1 750,000.00 p 45 000.00 P-14-6 3rd quarter FBC Holdings Inc. 45 000.00 Subtotal 1 750 000.00 90000.00 p 3. 500 000.00 p 262 500.00 P-14-7 1st quarter FBC Steps Realty, Inc. p 300,000.00 p 262 500.00 P-14-8 3rd quarter FBC Steps Realty, Inc. Subtotal 300 000.00 525.000.00 p 600000.00 p 10 000.00 P-14-9 1st_guarter Fercat Holdings Inc. p 1 750,000.00 p 10 000.00 P-14-10 3rd quarter Fercat Holdings Inc. 10 000.00 Subtotal 1 750 000.00 10 000.00 p 3. 500 000.00 p 40,000.00 Francisco R. Elizalde Jr. 262 500.00 262 500.00 P-14-11 2nd quarter (Steps Dance Studio) p 100 000.00 p 525,000.00 Francisco R. Elizalde Jr. JL- P-14-12 3rd quarter (Steps Dance Studio) 100,000.00 Francisco R. Elizalde Jr. P-14-13 3rd_quarter _(Ste_ps Dance Studio) 100,000.00 Francisco R. Elizalde Jr. P-14-14 4th quarter (Steps Dance Studio) 100,000.00 Subtotal p 400000.00 p P-14-15 1st_guarter Gilmon Holdings Inc. p 1 750,000.00 p P-14-16 3rd quarter Gilmon Holdings Inc. Subtotal 1 750,000.00 p 3,500,000.00 p so Exhibits "P-14-1" to "P-14-24".

DECISION erA CASE NO. 9249 P-14-17 1st quarter Mermac Inc. p 2 345,000.00 p 351 750.00 P-14-18 3rd quarter Mermac, Inc. 351 750.00 Subtotal 2 345,000.00 703.500.00 p 4690000.00 p P-14-19 1st quarter Reinosa Holdinqs Inc. p 1 750,000.00 p 262 500.00 P-14-20 3rd quarter Reinosa Holdinqs Inc. Subtotal 1 750,000.00 262 500.00 p 3. 500 000.00 p 525.000.00 P-14-21 1st quarter San Puente Holdinqs, Inc. p 1 750 000.00 p 262 500.00 P-14-22 3rd quarter San Puente Holdings Inc. 1 750 000.00 262 500.00 Subtotal p 3. 500 000.00 p 525.000.00 P-14-23 1st quarter Zobel de Ayala Jaime Pfitz p 805.000.00 p 120 750.00 P-14-24 3rd quarter Zobel de Ayala Jaime Pfitz Subtotal 695,000.00 104 250.00 p 1,500 000.00 p 225.000.00 Total p 31,690,000.00 p 4,733,500.00 Regarding the third requisite, petitioner complied therewith as the P31,690,000.00 management fees related to the ONT of P4,733,500.00 were traced to petitioner's official receipts (0Rs)51, cash receipts book (CRB)52, and general ledger (GL)53, and in turn were reported in its AFS54 and AITR55 for CY 2013. While the amount of PSO,OOO,OOO.OO management fees reflected per petitioner's 2013 AFS and AITR is higher than the amount of P31,690,000.00 shown in the certificates, the discrepancy of P18,310,000.00 was verified against petitioner's 0Rs56 and CRB57 as pertaining to management fees upon which no withholding of ONT was made by petitioner's clients/payers. In sum, petitioner has sufficiently proven its entitlement to a cash refund in the amount of P4,733,500.00 representing unutilized excess CWT for CY 2013. WHEREFORE, the present Petition for Review is GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND OR TO ~ 51 Exhibits "P-15-1-1" to "P-15-1-24". 52 Exhibit "P-15-2". 53 Exhibit"P-16-1". 54 Exhibit "P-2", Docket, p. 298. 55 Exhibit "P-1", Line 30, Docket, p. 285. 56 Exhibits "P-32-1" to "P-32-24". 57 Exhibit "P-15-2".

DECISION CfA CASE NO. 9249 ISSUE A TAX CREDIT CERTIFICATE in the amount of P4,733,500.00 in favor of petitioner, representing its excess and unutilized CWT for CY 2013. SO ORDERED. ~�~c. ac.:r~~~ Q fuANITO c. CASTANEDK, lR. Associate Justice WE CONCUR: ~7-/~~ - CAESAR~SANOVA CATHERINE T. MANAHAN Associate Justice Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. 9c.ca-w~ c ~~" ~ JtiANITO C. CASTANEDA, JR. Associate Justice Chairperson

DECISION CfA CASE NO. 9249 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ROMAN G. DEt'ROSARIO Presiding Justice