PHILIPPINE NATIONAL BANK v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Third Div ision PHILIPPINE NATIONAL BANK, CTA CASE NO. 8077 Petitioner, -versus - Members: BAUTISTA, Chairperson, and COTANGCO-MANALASTAS, JL. COMMISSIONER OF INTERNAL Promulgated: REVENUE, NOV 1 9 2013 Respondent. ~~ .,.� .ft'4 ._.._ . X------------------------------------------------------------------------------------------------------------X DECISION BAUTISTA, [. : The Petition for Review, filed on April 14, 2010, pursuant to Section s 2041 and 2292 of the 1997 National Internal Revenue Code ("NIRC" ), as amended, seeks for the issuance of a tax credit certificate representing excess and unutilized creditable withholding taxes for calen dar year 2007, in the total amount of ~114,051,845. 00 . I 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 erroneo usly or illega lly received or pena lties imposed without a uthority, refund the va lue of internal revenue s ta mps w hen they a re returned in good condition by the purchase r, a nd, in his discretion, redeem or cha nge unu sed stamps that ha ve been rendered unfit for use a nd refund their valu e upon proof of d estruction. No credit or refund of taxes or pena lties s ha ll be allowed unless the tax payer files in writing with the Commiss ioner a cla im for credit or refund w ithin two (2) yea rs after the pay ment of the ta x or penal ty: Provided, however, Tha t a return filed show ing an overpay ment shall be considered as a written cla im for credit or refund. 2 SEC. 229. Recovery ofTax Erroneously or Illegally Collected. - xxx In any case, n o such s uit o r proceeding shall be fil ed after the ex pira tion of two (2) years from the d ate of pay ment of the tax or penalty rega rdless of an y s upervening ca use tha t may arise after pay ment: Provided, however, That the Commissioner ma y, even with out a written claim therefore, refund or credit any ta x, where on 1 the face of the return upon w hich payment was made, such pay ment appears clea rly to have been erroneously V pa id .

DECISION CTA CASE NO. 8077 FACTS OF THE CASE Petitioner, Philippine National Bank, is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at the PNB Financial Center, President Diosdado Macapagal Boulevard, Pasay City. It is engaged in commercial banking, among others, and is a registered taxpayer in the Large Taxpayers Service of the Bureau of Internal Revenue ("BIR"), with Taxpayer Identification Number. 000-188-209-000. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue vested with the 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 national revenue taxes, with office address at the 5th Floor, BIR National Office Building, BIR Road, Diliman, Quezon City. On April 15, 2008, petitioner manually filed its Annual Income Tax Return for the calendar year ending December 31, 2007; while on April 22, 2008, it electronically filed through the BIR's Elech�onic Filing and Payment System ("EFPS") the same Annual Income Tax Return. On July 4, 2008, petitioner filed an Amended Am1ual Income Tax Return for the calendar year 2007; and on October 8, 2009, filed another Amended Annual Income Tax Return for the calendar year ending December 31,2007. Petitioner filed its Quarterly Income Tax Returns for the calendar year 2008 on the following dates: (a) May 29, 2008, for the first (1st) quarter; (b) August 29, 2008, for the second (2nd) quarter; and (c) November 28, 2008, for the third (3rd) quarter. On April 15, 2009, petitioner 1nanually filed its Annual Income Tax Return for the calendar year 2008; while on April 30, 2009 and June 1, 2009, filed its Amended Income Tax Returns for the calendar year /} J/ 2008 through the BIR's EFPS.

DECISION CTA CASE NO. 8077 On November 12, 2009, petitioner filed with the BIR an administrative claim for the issuance of a tax credit certificate for its excess and unutilized creditable withholding tax for calendar year 2007, in the amount of ~114,051,845.00.3 And on April14, 2010, alleging inaction on the part of respondent, petitioner filed the present Petition for Review .4 On June 28, 2010, respondent filed her Answer,s interposing the following: 4. Petitioner's alleged claim for refund is subject to administrative routinary investigation/ examination by the Bureau of Internal Revenue; 5. The amount of ~114,051,845.00 being claimed by petitioner as alleged excess and unutilized Creditable Withholding Tax (CWT) for CY 2007 is not properly documented; 6. Petitioner must prove that it has complied with the provisions of Sections 204 and 229 of the National Internal Revenue Code of 1997 (1997 Tax Code), as amended, on the prescriptive period for claims for refund/ credit of erroneously paid taxes; 7. Petitioner must prove compliance with the prescribed checklist of requirements to be submitted involving claims for refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund, the administrative claim thereof being pro-forma. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the Petition for Review; 8. Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable; 3 Records, pp. 185-188. 4 Id., a t pp. 1-84, with A n11exes. s /d., a t pp. 106-111 .

DECISION CTA CASE NO. 8077 9. Petitioner must likewise prove that it has fully complied with the requisites to sustain a claim for refund or tax credit of unutilized creditable withholding tax as ruled by the Supreme Court in F. Jacinto Group, Inc. vs. CIR (CTA Case No. 4971, April 5, 1995) and Citibank, N.A. vs. Court of Appeals, et al., 345 Phil. 695 (1997), which are as follows: a) that the claim for refund was filed within the two- year period; b) that the fact of withholding is 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 c) that the income upon which the taxes were withheld is shown in the return of the recipient. 10. In an action for refund/ tax credit, the onus probandi is on the taxpayer to establish its right to refund/ tax credit, and failure to sustain the burden is fatal to its claim for refund/ tax credit (ASIATIC PETROLEUM CO. VS. LLANES, 49 PHIL. 466, cited in COLLECTOR OF INTERNAL REVENUE VS. MANILA JOCKEY CLUB, INC., 98 PHIL. 670); and 11. Claims for refund are construed in strictissimi juris against the claimant for the same partake 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 CO[RP]. VS. COMMISSIONER OF INTERNAL REVENUE, 124 SCRA 1211). Corollary to this principle, therefore, he who alleges must prove and not he who denies (Ei incumbit probation qui dicit, non qui negat) .6 Y On February 21, 2011, the parties filed their Joint Stipulation ~~ Facts and Issues? 6Jd., at pp. 107-109. 7 Id. , at pp. 185-189.

DECISION CTA CASE NO. 8077 Trial ensued. Petitioner presented and offered its documentary and testimonial evidence;s while respondent submitted the case for decision without presenting any evidence.9 On January 31, 2013,10 the case was submitted for decision, taking into consideration the Memoranda filed by petitioner11 and respondent.12 Hence, this Decision. ISSUES As stipulated upon by the parties, the following are the issues for this Court's consideration: 1. WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND/TAX CREDIT IN THE AMOUNT OF ~114,051,845.00 REPRESENTING ITS UNUTILIZED [CREDITABLE WITHHOLDING TAX] FOR [CALENDAR YEAR] 2007; 2. WHETHER OR NOT PETITIONER'S [CREDITABLE WITHHOLDING TAX] FOR [CALENDAR YEAR] 2007 IN THE AMOUNT OF ~114,051,845.00 ARE DULY SUBSTANTIATED BY DOCUMENTARY EVIDENCE; 3. WHETHER OR NOT THE INCOME FROM WHICH THE [CREDITABLE WITHHOLDING TAXES] BEING CLAIMED FOR REFUND WERE WITHHELD WERE REPORTED AS PART OF PETITIONER'S REVENUES FOR INCOME TAX PURPOSES; 4. WHETHER OR NOT PETITIONER CARRIED OVER AND APPLIED ITS EXCESS [CREDITABLE WITHHOLDING TAXES] FOR [CALENDAR YEAR] 2007 AGAINST ITS I s !d., a t pp . 449-450. 9 Id., a t p. 464. 10 ld., a t p. 519. I I Jd., a t pp. 478-501. 12 !d., at pp. 502-517.

DECISION CTA CASE NO. 8077 INCOME TAX LIABILITY FOR THE SUCCEEDING TAXABLE YEAR; 5. WHETHER OR NOT PETITIONER FILED ITS ADMINISTRATIVE CLAIM FOR REFUND OF OR ISSUANCE OF [TAX CREDIT CERTIFICATE] FOR ITS EXCESS AND UNUTILIZED [CREDITABLE WITHHOLDING TAX] FOR [CALENDAR YEAR] 2007 WITHIN THE TWO- YEAR PERIOD PRESCRIBED UNDER SECTION 204(C) OF THE TAX CODE; and 6. WHETHER OR NOT PETITIONER FILED ITS JUDICIAL CLAIM FOR REFUND OF OR ISSUANCE OF [TAX CREDIT CERTIFICATE] WITHIN THE TWO-YEAR PERIOD AS PROVIDED UNDER SECTION 229 OF THE TAX CODE.13 To summarize, the issue to be resolved by the Court is essentially on petitioner's entitlement to its claim for issuance of a tax credit certificate of its unutilized creditable withholding tax for the calendar year 2007 in the total amount of ~114,051,845.00. RULING OF THE COURT The Court finds the Petition for Review bereft of merit. Section 76 of the 1997 National Internal Revenue Code ("NIRC"), as amended, provides as follows: 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 taxabile income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or 13 ld., at p . 188.

DECISION CTA CASE NO. 8077 (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. Based on the afore-cited provisiOn, in case of overpayment of income taxes, a taxable corporation has two options: (1) it may file a claim for refund (either in the form of cash or issuance of a tax credit certificate); or (2) it may carry over the same to the succeeding taxable quarters/years until it is fully utilized. However, once the carry over option is taken actually or constructively it becomes irrevocable for that taxable period.14 And 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.15 Records show that petitioner manually filed with the BIR its 2007 Am'lual Income Tax Return on April 15, 2008, reflecting therein an income tax overpayment of ~162,860,277.00 and marked the option "To be issued a Tax Credit Certificate" ;16 it also filed the same return through the BIR's EFPS on April 22, 2008.17 Petitioner subsequently filed an Amended Annual Income Tax Return for the calendar year 2007 through EFPS on July 4, 2008, reflecting an increased income tax overpayment in the amount of ~188,562,398.60.18 Petitioner then filed its second and final Amended Annual Income Tax Return for the year 2007 on October 8, 2009, reporting additional creditable withholding 14 Philam Asset Ma na gement, Inc., v. Commissioner of Interna l Revenue, G. R. Nos. 156637/162004, December 14, 2005, 477 SCRA 76; Systra Philippines, Inc., v. Commissioner of Internal Revenu e, G.R. No. 176290, September 21, 2007, 533 SCRA 776. 15 Commissioner of Internal Revenu e v. Ba nk of the Philippine Isla nds, G.R. No. 178490, Jul y 7, 2009, 592 SCRA Y 219. 16 Exh ibits "C," "C-1" and "C-2." 17 Exhibits "0" and "0- 1." IS Exhibits "E" and "E- 1."

DECISION CTA CASE NO. 8077 taxes in the amount of ~11,060,739.00, and consequently a higher income tax overpayment in the amount of ~199,623)37.60.19 Records further show that petitioner has consistently marked the option "To be issued a Tax Credit Certificate" on its manual and electronic filings of its Annual Income Tax Return, as well as its subsequent amendments thereto. A perusal of petitioner's second and final Amended Income Tax Return for taxable year 2007 reveals that the income tax overpayment of ~199,623)37.60 consisted of the following :2o Prior year' s (2006) excess credits IJ112,194,616.00 Tax payments 10,000,000.00 Creditable tax w ithheld during the year (2007) 114,051,845.00 Total tax credits/payments Less: MCIT for 2007 IJ236,246,461 .00 Income tax overpayment (36,623,323.40) ~199,623,137.60 And the subject claim consists of creditable taxes withheld for the year 2007 as declared in petitioner's second and final Amended Annual Income Tax Return, to wit: Creditable tax w ithheld for the first three quarters IJ26,196,927. 00 Creditable tax w ithheld for the fourth quarter 87,854,918.00 Claim for refund ~114,051,845.00 An examination of its subsequent Quarterly and Annual Returns for the year 2008/ 1 shows that only the amount of ~85,571,293 .00, as computed hereafter, was carried over to the subsequent taxable periods: 22 Prior year's excess credits IJ112,194,616.00 v Add: Tax payments 10,000,000.00 Less: MCIT for 2007 I Tax credits carried over to 2008 (36,623,323.00) ~5,571,293.00 19 Exhibits " F" to " F-4. " 2o Exhibi t "F-3." 21 Exhibits "G " to " L. " 22 Exhibits "j-1, " " K-1," " L-1," "H-1" a nd " /-1. "

DECISION CTA CASE NO. 8077 Thus, the claimed creditable withholding taxes for year 2007 in the amount of IJ114,051,845.00 were clearly not carried over and applied against any income tax liability. Consequently, the same may be a proper subject of refund or tax credit pursuant to the earlier quoted Section 76 of the 1997 NIRC, as amended. The Supreme Court has already set forth in the case of Citibank, N.A . v. Court of Appeals and Commissioner of Internal Revenue,23 the basic requirements in order to validly avail the refund of excess creditable withholding taxes, viz.: 1. The claim for refund must be filed within the two (2)-year prescriptive period provided under Section 204(C), in relation to Section 229 of the 1997 National Internal Revenue Code, as amended; 2. The fact of withholding is established by a copy of a statement 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 had been withheld were included in the return of the recipient.24 First requisite. The two (2)-year prescriptive period for filing a claim for refund of excess income tax paid/withheld commences from the date of filing of the relevant final adjustment return. 25 In the case at bench, the subject claim for excess creditable withholding taxes covers calendar year 2007 for which petitioner originally filed its Annual Income Tax Return on April 15, 2008.26 Counting from said date, petitioner had until April 15, 2010 within which to file its claim both in the administrative and judicial levels. Clearly, petitioner's administrative claim filed on November 12, 2009,27 J/ 23 G.R. No. 107434, October 10, 1997, 280 SCRA 459. 24 Section 2.58.3(B) of Reve nu e Regula tions N o. 2-98. 25 A. CC.RA Invesbnents Corpora tion v. Court of A ppeals, G.R. No. 96322, December 20, 1991, 204 SCRA 957. 26 Exhibit "C-2. " 27 Records, p . 186; Exhibit "M. "

DECISION CTA CASE NO. 8077 and the present Petition for Review filed before this Court on April14, 2010, were both within the two (2)-year prescriptive period. Second and Third requisites. The Court-commissioned Independent Certified Public Accountant ("CPA"), Manabat Delgado Amper & Co., through its Partner, Atty. Fredieric B. Landicho, noted the following findings in two separate Reports dated August 15, 2011/ 8 and October 5, 2011/9 summarized, thus: Findings Exhibit CWT a) CWT s upported with origin al C WTs, Transaction "CC" Ticke ts / Input Sheets a n d Deed o f Sale dated 2007 w ith "NN" ~70 , 0 28,460. 94 ~8 2, 652,425.5 1 income reporte d in 2007. "DO " b) C WT supporte d with origina l CWTs, Tra nsaction "00" 12,623,964.57 Ticke ts/ Input Sheets and Deed of Sale da ted 2007 w ith 1,554,122.70 loss or n o incom e recognized in 2007. "EE " 1,284,936 .00 2,839,058.70 c) CWT s upporte d w ith original C WTs, Transaction "PP" 1,229,302.80 Tickets/ Input Sheets and cer tified true copy of Deed of Sale d a ted 2007 w ith incom e re ported in 2007. "QQ" 279,246.60 1,508,549.40 d) CWT s upporte d w ith o rig inal CWT and orig inal/ certified tru e cop y o f Deed of Sale d a ted 2007 "RR " 24,120,831 .21 and original/ certified true cop y of Transaction Ticke ts/ Input Sheets d a te d outside 2007 with incom e "55 " 31,8 00 .00 reported o utside 2007. e) C WT supporte d w ith o ri ginal C WT and Transac tion "TT" 1,86 0,000 .00 Ticke ts/ Input Shee ts d a te d outside 2007 a nd o rigina l 1,039,180.46 Deed of Sale d a ted 2007 w ith incom e rep orted o utside 2007. ~114,051,845.28 f) CWT supported w ith original CWT and Tran saction Ticke ts/ Input Sh eets dated o utsid e 2007 and certified true cop y of Deed o f Sale d a te d outside 2007 w ith incom e re ported o utsid e 2007. g) CWT supported with original/ photocop y CWTs, Transaction Ticke ts/ Input Shee ts and Deed of Sale were no t yet provided for verifica tion . TOTAL Moreover, in his supplemental and final Report dated October 5, 2011, the Court-commissioned Independent CPA made the following comments:30 a) Our examination reveals that the claim for the issuance of a tax credit certificate or tax refund for creditable w ithholding 28 Exhibit A A , 11 pp. 5-6. II 29 Exhibit 11MM," pp. 4-5. 30 Exhib i t M M , 11 11 pp. 5-7.

DECISION CTA CASE NO. 8077 taxes amounting to F12,623,964.57 were duly corroborated with original copies of BIR Form No. 2307, transaction tickets/input sheets and Deed of Sale dated 2007. Out of the total amount of creditable withholding taxes of F12,623,964.57, F9,826,039.96 were installment sales, l40,800.00 were UPASE transactions and the remaining F2,757,124.61 relates to other income payments such as Rental Income, Commissions and Interest Income. We have ascertained that the related income of F5,613,606.70 creditable withholding taxes for installments, all UPASE transactions and all other income payments were properly reported to and formed part of the gross income of the Company for the taxable period 2007 as reported in its Audited Financial Statements and Annual Income Tax Return. However, we were not able to trace the related income on installment sales from which the creditable withholding taxes in the amount of 14,212,433.26 were withheld in the Company's Annual Income Tax Return. b) The claim for the issuance of a tax credit certificate or tax refund for creditable withholding taxes amounting to F1,284,936.00 were substantiated with original copies of BIR Fonn No. 2307, transaction tickets/input sheets and Deed of Sale dated 2007. However, there were loss or no income recognized from the transactions since the selling price is less than or equal to the book value of the properties sold. The non-recognition of income or loss does not affect the Company's application for issuance of tax credit certificate or refund for excess creditable withholding taxes because the basis on which the taxes are withheld is either the gross selling price/ total amount of consideration or the fair market value, whichever is higher, pursuant to Revenue Regulations No. 6-01. c) The creditable withholding taxes amounting to F279,246.60 were duly supported with original copies of BIR Form No. 2307 and transaction tickets/input sheets and certified true copies of Deed of Sale dated 2007.

DECISION CTA CASE NO. 8077 Included in the total amount of creditable withholding taxes of ~279,246.60, were ~72,474 . 60 installment sales, ~9,600 . 00 UPASE transactions and the remaining l2197,172.00 relates to other income payments such as Rental Income, Commissions and Interest Income. We have ascertained that the related income for all UPASE transactions of ~9,600.00 plus the l2197,172.00 other income payments were properly reported to and formed part of the gross income of the Company for the taxable period 2007 as reported in its Audited Financial Statements and Annual Income Tax Return. Conversely, we were not able to trace the related income on installment sales from which the creditable withholding taxes in the amount of ~72,474.60 were withheld in the Company's Annual Income Tax Return. d) The creditable withholding taxes amounting to ~24,120,831.21 were supported with original copies of BIR Form No. 2307 and original/ certified true copies of Deed of Sale dated 2007. The supporting original/ certified true copies of transaction tickets/input sheets were dated other than 2007. Out of the total amount of creditable withholding taxes amounting to ~24,120,831.21, ~1,790,196 . 00 were installment sales, ~13,046,860.66 were UPASE transactions and the remaining l29,283,774.55 relates to other income payments such as Rental Income, Commissions and Interest Income. We have verified that income relating to the ~1,481,736.00, ~13,022,311 . 60 and l29,283,774.55 CWTs for installment sales, UPASE and other income, respectively, formed part of the gross income of the Company for the taxable period other than 2007 as reported in its Audited Financial Statements and Annual Income Tax Return. Related income pertaining to the balances of the l2308,460.00 for installment sales and ~24,549. 06 for UPASE were verified to be included in the Company's books. However, we were not able to trace if the same were reported in the Company's Annual Income Tax Return. e) Taxes withheld amounting to l231,800.00 was substantiated with original certificates of creditable tax withheld and r2007 transaction tickets/input sheets dated outside

DECISION CTA CASE NO. 8077 Page 13 of17 supported with Deed of Sale executed during 2007. Upon perusal of the document provided, we have verified that the late remittance of creditable withholding tax was due to the delayed booking of income. f) The claim for issuance of a tax credit certificate or tax refund for creditable withholding taxes amounting to ~1,860,000.00 were substantiated with original BIR Form No. 2307, transaction tickets/input sheets dated outside 2007 and certified true copy of Deed of Sale dated outside 2007. We were not able to trace if the income related to the transaction was reported in its Audited Financial Statements and Annual Income Tax Return for taxable year 2007. g) Taxes withheld amounting to ~1,039,180.46 was substantiated with certificates of creditable tax withheld, except for one transaction which amounts to F57,000.00. Further, out of the total amount of creditable withholding taxes with certificates amounting to ~982,180.46, all were supported with original BIR Form No. 2307 except for one certificate which was supported with a photocopy of the BIR Form No. 2307. In addition, all certificates are dated 2007 except for one that is undated amounting to F342,000.00. However, the related transaction tickets/input sheets and Deed of Sale supporting were not provided for our examination. Hence we were not able to trace if the income related to the transaction was reported in its Audited Financial Statements and Annual Income Tax Return for the taxable year 2007. Based on the foregoing, the creditable withholding tax in the amount of ~7,548,897.38, as itemized below, is hereby disallowed for failing to meet the second and third requirements, viz.: Findings CWT Amount a) Related income payments were not traced in the petitioner's 2007 Am1Ua l ITR W,212,433.26 c) Related income pay ments were not traced in the petitioner's 2007 Annua l ITR 72,474.60 308,460.00 d) Related income payments were not traced in the petitioner's 2007 Annual ITR 24,549 .06 31,800.00 e) Supporting documents were dated outside the period of claim 1,860,000 .00 t) Supporting documents were dated outside the period of claim and the income payments were not traced in the petitioner's 2007 Audited FS a nd Annual ITR

D E CI S ION CTA CASE NO. 8077 g) Income payments were not traced in th e petitioner's 2007 Audited FS and Annual ITR 1,039,180.46 TOTAL F7,548,897.38 Upon further scrutiny, the amount of ~5,393,071.01 should also be disallowed, as presented below: j Exhibit Withholding Agent Incom e CWT Payments 1. No iudicatiou of period covered i11 tlte certificate of withlw lding "J]-5126 " Anto nio L. Anastacio ~1,800,000.00 ~108,000 . 00 " JJ-5152" Teodora M. Villanueva 3,162,000.00 189,720.00 335,000.00 20,100.00 " J]-5161 " Emma n uel S. Mo n tarde 400,000.00 24,000.00 299,000.00 17,940.00 "JJ-5172" Janet Ontal 540,540.00 32,432.40 "J]-5188" P rimi tivo B. Juli to, Jr. 8,520,000.00 511 ,200.00 3,100,000.00 186,000.00 " JJ-5190" Jenn y S. Celis 7,700,000.00 462,000.00 2,720,000.00 163,200.00 "JJ-5198" Rejoice Employmen t Inti. Corp. 710,000.00 42,600.00 "]j-5204" Nancy D. Quimpo 3,600,000.00 216,000.00 56,100.00 " J]-52 14" Indanan M. Bru1sao 935,000.00 670,800.00 40,248 .00 " JJ-5222" Reuben P. deJa Cruz 300,000.00 18,000.00 855,900.00 51 ,354.00 " J]-5228" Salvador S. de Jesus 950,000.00 57,000.00 506,800.00 30,408.00 "JJ-5239" Mirza C. Merza-Crisaldo 648,000.00 38,880.00 12,175,000.00 730,500.00 " JJ-5250" Vicente M. Mendoza, Jr. 268,000.00 16,080.00 " J]-5257" 1,123,200.00 67,392.00 Sps. Metodio G. I Maria Rita F. Gran 1,100,000.00 66,000.00 3,000,000.00 180,000.00 "JJ-5268" Corazon M. Palileo 160,000.00 4,100,000.00 9,600.00 "JJ-5275" Rosy M. Andres 3,300,000.00 246,000.00 290,000.00 198,000.00 " JJ-5283" Fa usto Antonio T. & Rhodora A. Tibi 225,000.00 63,494,240.00 25 ,770 .00 " J]-529 1" Gloria Mariano Young 13,500.00 3,8 18,024 .40 " J]-5633" Cherry Mae Acedo "ZZ-931" La Paloma Holdings Corporation "ZZ-939" Iris M. Beltran "ZZ-950" Kristine R. Tumlos "ZZ- 1289" Sps. Joselito P. I Decena ). Diokn o "ZZ-1297" Mary 0 . Ong " BBB-25" Cherry J. Rojano "CCC-1479" Emmanuel M. Calanog "CCC-1493" Ma . Christina A. Ga lura "CCC-1542" Leonida V. Ramos "CCC-21 52" Ferdinand L. Ventura Sub-total 2. Certificate of w itltlwldiug bears 110 siguature of autlw rized represe11tative "J]-694" Toyota Financial Services Phil ippines Corporation 8,431 ,800.00 168,636.00 586,328.20 29,316.41 " JJ-3788" Andres Marcelo Padernal Guerrero & Paras Law Offices 592,430.76 29,621.53 121 ,990.74 6,099.54 " JJ-3795" And res Marcelo Paderna l Guerrero & Paras Law Offices 4,647.98 92.96 580,405 .11 29,020.26 " J]-4146 " Greenfield Freigh t Services ,Inc. 3,000,000.00 1,238,202.00 " JJ-611 5" Macondray Plastics, Inc. 13,317,602 .79 1,500,988. 70 "ZZ-184" And res Marcelo Pad ernal Guerrero & Paras Law Offices "ZZ- 11 65" Robinland ,Inc Sub-total

DECISION CTA CASE NO. 8077 3. No supportiug docmueut-s Maria Celes te G. Leonen 41,040.00 41,040.00 Sub-total - 3,197.91 4. Certificate of withholding is dated outside tile of period of claim Period Covered 18,360.00 21,557.91 "ZZ- 1" Internationa l Container Terminal Services, Inc. 12/ 28/ 06 to 1/03/07 159,895.56 11,460.00 "CCC-211 8" Isagani T. Talavera 1/ 1/ 09 to 3/31/09 306,000.00 11,460.00 P5,393,071.01 Sub- total 465,895.56 5. Certificate ofwit/IIwldiug w it/1 erasure 011 the period covered but w WttiO co unter-siguature "CCC-2183" Valerio P. Matildo 191,000.00 S u b - total 191 ,000.00 TOTAL P77,468,738.35 With this, from the total claimed creditable withholding taxes of ~114,051,845.00, only the remaining amount of ~101,109,876.61 appears to be a valid claim, computed as follows: Claimed creditable withholding taxes IJ7,548,897.38 IJ114,051,845 .00 Less: Disallowances 5,393,071.01 12,941,968.39 Per ICPA Reports P101,109,876.61 Per this Court's Findings Valid Creditable withholding taxes However, while the Court-commissioned Independent CPA had ascertained that the income from which the creditable withholding tax in the amount of ~101,109,876.61 had been withheld were included as part of the gross income of petitioner by tracing them in the Transaction Tickets/Input Sheets to the Audited Financial Statements and Annual Income Tax Return,31 petitioner failed to submit a breakdown or detailed schedules of its revenue with the corresponding creditable withholding taxes it reported in its Audited Financial Statements and Annual Income Tax Return for the year 2007. Petitioner should have presented its detailed general ledger or any other supporting documents whereby the Court can trace and determine with certainty that the income payments related to the claimed creditable withholding taxes indeed formed part of its gross taxable income in its 2007 Annual ITR. Failure to do so is fatal its claim. Noteworthy of emphasis is that the Court is not bound by the findings of the Independent CPA. The Report submitted is but a tool or 5 ~~:h~: ~:Aa1: t~"~ ~:ur: :n the resolution of fue case. The deterrrtinationr

DECISION CTA CASE NO. 8077 of the merit or the probative value of such Report is still within the province of the Court. Thus, the Court is free to adapt or disregard, completely or partially, the findings of the Independent CPA. It can even make its own audit and evaluation of the documents pertinent to the case presented during the trial in order to intelligently resolve the conflict brought before it.32 It also bears stressing that a claimant has the burden of proof to establish the factual basis of its claim for tax credit or refund.33 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund. In sum, the Court has no recourse but to deny petitioner's claim for refund of its excess and unutilized creditable withholding taxes for the year 2007. WHEREFORE, the Petition for Review 1s hereby DENIED for insufficiency of evidence. SO ORDERED. . BAUTISTA I CONCUR: ~/-~~ AMELIA R. COTANGCO-MANALASTAS Associate Justice 32 First Lepanto Ta isho Insurance Corp ora tion v. Commissioner of Internal Revenue, CTA EB Case No. 563, (CTA Case No. 6200) March 1, 2011 . 33 Citibank, N.A. v. Court of Ap pea ls and the Commissioner of Internal Revenue, G.R. No. 107434, October 10, 1997,280 SCRA 459.

�I DECISION CTA CASE NO. 8077 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. ~~ e Justice Chai person C E R T IF I CAT I 0 N Pursuant to Section 13 of Article VIII 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's Division. Presiding Justice