CTA Case No. 5231 (Decision)

REPUBLIC OF THE PHILIPPINES COURT O F TAX APPEALS QUEZON CITY F. JACINTO GROUP, INC. , Petitioner, - versus - C.T.A. CASE NO. 5231 COMMISSIONER OF INTERNAL cfi Promulgated: REVENUE, Respondent. ' __AU_G_ 1_5_19_97_ X-- --------- -- -- ----- - --- -- - X DECISION This case refers to a claim for refund in the amount of P1,146,176.30 representing withholding taxes on the income payments made by various c I ients of F. Jacinto Group, Inc. for the year 1992. Petitioner is a registered domestic corporation, with office address at 4/F, F. Jacinto House, No. 1 16 Rada St., Legaspi Village, Makati, Metro Manila. It is engaged in the business of providing management services. On April 12, 1993, it fi I ed its corporate annual income tax return (Exh. "B", Pet.; p. 52, CTA rec.) for the year 1992. It declared therein a gross income in the amount of P28,808,409.00 and business-related deductions in the sum of P27,263,853.00, resulting in a net income amounting to P1,544,556.00. The tax due was computed at 8.) u

DECISION - 5 2 31 C.T. A. CASE NO. -2 - P540,595.00, which was paid by applying the available tax credit from the excess tax carried over from 199 1. F or the same year 1992, various clients of petiti oner wi thheld and remitted to the government a total amount of P1,465, 538.00, detai Is of which are as fo I I ows�: Name of CIient Amount Withheld and Remitted a) Mind anao Steel Corp. p. 692,350.00 "C-1" (p. 53, BIR rec.) "D-1" (p. 54, BIR rec.) b) Beatriz Marketing "E-1" (p. 5 5, BIR rec.) "F-1" (p. 56, BIR rec.) and Trading 283,226.00 C) Camara Steel Industries, Inc. 444 , 074.00 d) Jacinto Iron and Steel S heets Corp. 4 5!888.00 T 0 T AL ' p1,465,538.00 As this amount was not used to pay any of petitioner's tax liabi ities for the year 1992, it was carried over to pay tax liabilities of petitioner for the following quarters of 1993. In petitioner's 1 993 annual income tax return (Exh. J " ", Pet .; .. p . 60, CTA rec.), it declared a gross income of P32,378,31 8.04 (P31, 78 1,382.56, net of M isee I I aneous I n come of P 596,935.4 8), and business-related expenses in the amount of P31,46 5, 8 56.0 5. The result was a net i n come of P9 12,461.99 with a corresponding tax due of P3 19,361.70. In settIing this tax due, petitioner applied the amount of P 1,465, 538.0 0, wllich was the 0{) ''_') ::

DECISION - C.T.A. CASE NO. 5231 -3- unutiIized withholding tax credits in 1992, giving rise to a refundable amount of P1,14 6,176.30. On February 3, 1995, petitioner filed with the BIR a claim for refund of the amount of P1,14 6,176.30. To toII the running of the two-year prescriptive period, petitioner filed the instant petition with this Court on April 11, 1995. Respondent's Answer (pp. 19-20, CTA rec.) was fiIed on May 2 4 , 1995 alleging a s Special and Affirmative Defenses the following: "4 . Petitioner's claim for refund is pending administrative investigation; 5. The amount of P1,14 6,176.30 claimed by Petitioner as alleged difference between its tax payments and IiabiIities for the year 1992 and 1993 was not properly documented; 6. Taxes coIIected are presumed to have and been made in accordance with law reguIations, hence, not refundabIe; 7. In an action for tax refund the burden of proof is upon the taxpayer to establish its right thereto otherwise, failure to sustain the burden is fataI to said action or claim; 8. It is incumbent upon the petitioner complied to show that it has with the provisions of Section 204 in relation to Section 230 of the Tax Code as amended; 9. Well settled is the rule that claims for refund are construed strictly against claimants, since it partakes of the nature of exemption from taxation (Resins, Inc. v. Auditor General, 25 SCRA 754, 1968)." 8-,lIV '"

DECISION - C.T.A. CASE NO. 5231 -4 - The lone issue to be resolved ln this case is, whether or not petitioner is entitled to the refund of the amount of P1,146,176.30, as excess income tax payments in 1992 representing creditable withholding taxes coIIected by various cIients. In the hearings conducted, petitioner presented Ms. Josephine Reyes, its Finance and Administrative Officer, to identify the documentary evidence, consisting mainly of the following: 1. Written claim for refund filed with the BIR Exh. "A"; 2. Income Tax Returns for the years 1992 and 1993 - Exhs. "B" and "J", respectively; 3. Certificates of Creditable Income Tax Withheld At Source (BIR Form No. 1743-1) - Exhs. "C", "D", "E" and "F"; 4. Corporate Quarterly Income Tax Returns for the calendar year 1993 - Exhs. "G", "H" and "I"; 5. Alphabetical Lists of Creditable Income Tax Withheld At Source - Exhs. "BK-1", "BI-1", "BM- 1" and "BN-1"; and 6. Monthly Remittance Returns of Income Taxes Exhs. "L" to Withheld (BIR form No. 1743W) - '' W" , incIusive. Respondent also presented one witness in the person of Noel Marcellano who identified the two (2) documents presented and offered in evidence, nameIy: 1� Letter of Authority - Exh. "1" (p. 136, CTA rec.) and 8.,.,.'}

DECISION - C.T.A. CASE NO. 5231 - 5- 2. Memorandum Report dated January 15, 1996 - Exh. "2" (pp. 137-138, CTA rec.>. In his Memorandum report, Mr. Marce I Iano recommended the granting of the refund in the amount of P1,146,176.00. He stated in his report that: "The following documents were submitted by the said taxpayer in support of its claim: 1.) Income tax return for 1992, 1993 2. ) Formal claim for refund for the excess tax credit for the taxable year 1992 3.) Certificate of Creditable Income Tax Withheld At Source (1743.1) a.) Mindanao Steel b.) Corp. P 692,350.00 c.) d.) Beatriz Marketing and Trading Corp. 283,226.00 Camara Steel Industries Inc. 444,074.00 Jacinto Iron and Steel Sheets Corp. 45,858.00 P1 ,465,538.00 4.) Alphabetical List - Creditable Income Tax Return At Source of: a.) Mindanao Steel Corp. b.) Beatri�z Marketing and Trading Corp. c.) Camara Steel Industries, Inc. d.) Jacinto Iron and Stee I Sheets Corp. 5.) Monthly Remittance of Income Tax Withheld (1743W) January to December, 1992. a.) Mindanao Stee I Corp. b.> Beatriz Marketing and (0_) '� '' - ,:

DECISION - C.T.A. CASE NO. 5231 -6- c.) Trading Industries, d.) Camara Steel t:lnd Steel Inc. Jacinto Iron Sheets Corp. XXX XXX XXX In view thereof, it is respectfully recommended that the claim for refund representing excess creditable withholding tax for 1992 be granted." (Underscoring supp Iied) After a car.eful perusal of the records of the case, plus the evidence presented by both parties, the Court found out that petitioner has complied with the requirements to be entitled to a refund, namely: 1. That it filed a claim for refund within the two-year period as prescribed under Section 292 (now 230) of the Tax Code, as amended; 2. That the income upon which the taxes were withheld was included in the return of the recipient, the petitioner herein; and 3. The fact of withholding is Form estab I ished by a copy of statement ( B I R 1743.1) duly issued by the payor to the payee, showing the amount paid and the amount of tax withheld therefrom. (Sec. 10, Rev. Regs. 6-85; Citytrust Finance Corporation v. The Commissioner of Internal Revenue, CTA Case No. 4134, �� November 11, � 1991; Citytrust Finance Corporation (formerly Investors Finance Corporation/FNCB Finance) v. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; Paseo Realty and Development Corporation v. Commissioner of Internal Revenue, CTA Case No. 4254, August 10, 1993; Commissioner of Internal Revenue v. Court of Tax Appeals and Paseo Realty and Development Corporation, CA-G.R. SP No. 32927, February 28, 1994)

DECISION - C.T.A. CASE NO. 5231 -7- The Court, however, noted that petitioner did not report aII the income payments reflected in the Certificates of Creditable Withholding Tax at Source (BIR Form No. 1743) as shown in Schedu I e 2 of its 1992 Income Tax Return. Only the amount of P28,257,927.00 was reported instead of P29,307,888.00 which is the summation of income payments reflected in the certificates. Due to the fact that only the amount of P28,257,927.00 was declared in its 1992 Income Tax Return, petitioner is entitled to a refund of the reduced amount of P1,093,534.65, computed as follows: Income Payments declared P28,257,927.00 in the 1992 I TR 5% Multiply by p 1,412,896.35 319 361.70 Corresponding Creditable Withholding tax Less: 1993 tax due Amount Refundable p 1,093,534.65 WHEREFORE, in view of all the foregoing,, respondent is hereby ORDERED to REFUND in favor of petitioner, the amount of P1,093,534.65 as withholding taxes on the income payments made by its various cIients for the year 1992. SO ORDERED. (}lR NESTOQ.-. D . ACOSTA Presiding Judge

DECISION - C.T.A. CASE NO. 5231 -8- viI RAMON 0. DE RA Associate Judge : CIO Q S G Associate Judge CERTIFICATION hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. - ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals 8"u