CAMARA STEEL INDUSTRIES INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY CAMARA STEEL INDUSTRIES, INC., C.T.A. CASE NO. 5469 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - DECISION This is a petition seeking for the t~efund at~ issuance of a tax credit certificate amounting to One Million Nine Hundred Ninety One Thousand Sixty Nine Pesos <Pi, 991, 069. OO>, representing alleged ovet~paid income taxes for the year 1995. The facts of the case are as follows: Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Ph i l i p pines. It is a manufacturer of steel containers for various industrial and household purposes. On Apt~i l 15, 1996, Petitioner filed its annual income tax return for the calendar year ended December 31, 1995, declaring a taxable income of P11,381,630.00 and an income tax due of P3,983,570.00. During the year, Petitioner had already made three quarterly payments totalling P3,347,721.00, detailed as follows: Fi t~st quat~t et~ P1,708,099. 18 <Exh. A-5> Second q uat~t et~ 997,403.31 <Exh. A-5-a) 642,218.81 <Exh. A-5-b) Thit~d quat~tet~ P3, 347,721.30 Total Likewise, fat~ the same y eat~ 1995, i ndust t~i a l us et~s of Petitioner's products belonging to the top 5,000

DECISION C.T.A. CASE NO. 5469 - 2- corporations withheld the required 1~ tax on their~ put~chases to Petitioner in compliance with Revenue Memorandum Circular No. 28-94, to wit: "(n) Income payments by top 5, 000 corporations.-Income payments made by any of the top five thousand (5,000) corporations, as determined by the Commissioner of Internal Revenue, to their local suppliers of goods-one percent u:z;L. II These withheld the total amount of P2,626,918.00, broken down as follows: Withholding Agent Tax Withheld Annex 3M Philippines Inc. 9,718.33 B, B-1, B-2, B-3 Alyson's Cheaical Ent. 1, '302.17 C1 C-1 1 C-2, C-3 Atoa Cheaicals Co. Inc. 1,812.77 D, D-1 AustralAsia Cyl. Corp. BASF Coating + Ink Phils. 295.45 E Bayer Philippines, Inc. 33,187.19 Borden Int'l Philippines F, F-1, F-2, F-3 84.09 112,373.98 6 H, H-1 1 H-2, H-31 H-4 Bush-Boake Allen Phils. Inc. 11767.50 H-5, H-6, H-7, H-81 H-9 California Manufacturing Co. 934.55 H-101 H-11, H-121 H-13, H-141 H-15, H-16, H-17, Caltex Phils. Inc. 125,959.15 H-181 H-19, H-201 H-21 1 H-22, H-23, H-241 H-25, Coca Cola Export Corp. 151 407.40 H-26, H-27, H-28, H-29, Dow-Elanco 2,032.22 H-30, H-31 1 H-32, H-331 El Inventor Body 245. 80 H-34, H-351 &H-36 Exxon Cheaicals, Inc. 22,041.52 I Goodyear Phils. Inc. 654.55 J Hillel Industries 11 412.73 K1 K-1, K-2, K-3 Hoechst Phils. Inc. 586.36 L, L-1 M, M-1 1 M-2, M-3 Inkote Phils. Inc. 51 415.26 Intel Phils. Inc. 1,841. 78 N Jacinto Press Coat Corp. 11500. 00 o, D-1 p Q R S, S-1, S-2, S-31 S-4 T u

DECISION C.T.A. CASE NO. 5469 - 3- Mallinckroot Vet. Clinic 3,573.62 V, V-1, V-2 W, W-1 1 W-2, w-3, W-4 NCH Phils. Inc. 3,460.07 X, X-1, X-2 Y, Y-1, Y-2 Nippon Paint Phils. Inc. 18,433.50 Z, Z-1, Z-2 Northern Foods Corp. 61,295.46 AA, AA-1 Pacific Products, Inc. 8,419.35 AB AC, AC-1, AC-2 Pacific Rare Metal Ind. 10,298.82 AD, AD-1 Philip Morris Phils. 7,878.80 AE, AE-1, AE-2, AE-3, AE-4, AE-5, AE-6, AE-7 Philippine Electric Co. 15,191.53 AF, AF-1, AF-2 Pilipinas Shell 1,669,679.23 AG Saka1oto Orient Che1ical 6,366.99 AH, AH-1, AH-2 AI, AI-1 S.C. Johnson 2, 740.83 AJ, AJ-1, AJ-2, AJ-3 Scientific Industries 114.55 AJ-4 Shell Phil. Petroleu1 Corp. 255,097.53 AK, AK-1 1 AK-2, AK-3 Si1e Darby Phils. 670.90 AL Stedrra Adhesives 1,628.37 AM Unilever Philippines 48,153.31 Unilox Industrial Corp. 128.82 United Coconut Che1icals 174,613.90 TOTAL PhP 2,626,918.38 Thus, after applying the quarterly payments made by Petitioner amounting to P3,347,721.00 and the taxes withheld by its purchasers in the amount of P2,626,918.00 to its tax liability of P3,983,570.00, there resulted an overpayment of P1,991,069.00. Fot~ of 1996, Petit i onet~' s quarterly income tax return reflected a taxable income of P2,356,668.61 and a tax due thereon of P824,834.01. The creditable taxes withheld for the quarter totalled P777,245.55 leaving a balance of P47, 588. L~6 which Petitionet~ paid on May 29, 1996 <Exhibit "AN"). Fot~ the second and third quarters, however, no payment was made by Petitioner since the total of its creditable taxes withheld for these quarters plus the payment made during

DECISION C.T.A. CASE NO. 546 9 - 4- quarter far exceeded its income tax liability (see Exhibits "AO" and "AP"). On May 29, 1996, Petitioner filed with the Appellate Division of the Bureau of Internal Revenue a request to apply its overpaid income tax for the year 1995 to its monthly value-added tax liabilities <Annex AP-2, Petition fat' Review). No action was undertaken by Respondent on t h i s r~equest. 1997, Petitioner again filed with Revenue District No. 43 of Pasig City a letter-claim for the refund of the unused creditable taxes withheld <Exh. AQ) for 1995 in the amount of P1,991,069.00. was no immediate action on the part of herein Respondent, the instant petition was filed o n Mar~ch 11, 1997. Respondent, raised the following Special and Affirmative Defenses: 5. Taxes are presumed to have been collected in accordance with law. Thus, petitioner must prove that the taxes sought to be refunded were erroneously or illegally collected. 6. Taxes allegedly withheld must be shown to have been remitted to the government. 7. Petitioner must show that it has complied with the provisions of Sections 204(3) and 230 of the Tax Code. 8. Claims for refund of taxes are construed strictly against claimants, the same being in the nature of an exemption from taxation <Manila Electr~ic Co. vs. Commissioner~ of Internal Revenue, 67 SCRA 351).

DECISION C.T.A. CASE NO. 5469 - 5- The lone issue We are tasked to resolve is whether or not Petitioner has fully substantiated its claim to be entitled to the relief sought. Petit i onet~, in support of its case, presented the following evidence: Exhibits Desct~i pt ion Purpose Annual Income A - A-4 Tax Return (1995) To pt~ave that petitioner filed A--5 -A-5-b Quarterly income for the year 1995 t a x t~ettn~ns its annual income B to B-�-3; t a x t~et l.ll"~n <1st-3t~d) fat~ C to C-3; To pt~ave that 1995 petitionet~ f i l e d D, D-1; E; i t s qual�~tet~ly Cl�~editable income tax fat~ F to F-3; the fit~st three G; H to H-36; Withholding quat~tet~s of 1995 Tax Certificates and paid the I; J; K to cat~t~espond i ng 1-\-3; L, L-1; taxes for~ the said quat~ters M to M-3; To prove the fact N, O, 0-1; of withholding P; Q; R; s t 0 g ..-4; T; U; V to V-2; W to W-4; X to X-i.7~; Y to Y-;:::; z t a z-;~~; AA, AA-1, AC to AC-2; AD, AD-1; AE to AE--7;

DECISION C.T.A. CASE NO. 5469 - 6- AF to AF-C::; Quarterly Income To pr~ove that AG; AH to Tax Retur~ns petitioner~ filed AH-2; AI, i t s quar~ter~ly AI-l; AJ to <lst-3r~d) fat~ income tax AJ-4; AK to t~et twns for~ the AK-3; 1996 f i t~st thr~ee AN, AN-1; quar~ter~s of 1996 AO,A0-1; which fact AP, AP-1 confit~ming t h a t it was unable to AQ Fot~mal t~equest use the excess ct~editable tax for issuance ft~om 1995 of tax t~efund To pt~ove that petit i onet~ or~ tax cr~ed i t formally requested that it be issued dated Febt~uat~y a tax ct~edit or~ refund of the 13, 1997 excess or overpaid tax. Respondent, offered no controverting evidence and submitted the case for decision on the basis of the pleadings and BIR record. After an examination of the facts and evidence attendant to the case at bar, this Cour~t finds that, indeed, Petitioner is entitled to refund for excess or overpaid income yax for the year in question. Section 69 of the 1995 National Revenue Cod e pr-' o v i d e s : Sec. 69. Final adjust�ent return. -Evet~y corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding

DECISION C.T. A. CASE NO. 5469 - 7- 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: <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 the taxable quarter of the succeeding taxable year. <Underscoring supplied) Clearly then, from the above-quoted provision, Petitioner may legally claim for the refund of the taxes withheld and remitted during the year 1995. Petitioner has likewise complied with the requirements set forth under Revenue Regulations 6-85 in claiming for the refund of excess creditable withholding taxes: First, Petitioner filed the claim for refund within the two-year period prescribed under Sec. 230 of the National Internal Revenue Code. Second, it was shown on the return that the income payments received has been declared as part of the gross income; and Lastly, the fact of withholding was established by copies of the Withholding Tax Statements duly issued by the payers to the payees showing the amount paid and the amount of tax withheld therefrom.

DECISION C.T.A. CASE NO. 5469 - 8- Petitioner's entitlement to the refund sought was even bolstered by Revenue Officer Lailo G. Viernes who recommended to the Revenue District Officer of Revenue District No. 43 <Pasig City) that the amount of P1,991,069.00 be refunded to herein Petitioner <pp. 26- 27, BIR records). In view, however, of the denial of Exhibits AB, AL and AM which are nowhere to be found from among the exhibits presented in Our Resolution, dated December 17, 1997, We can only grant such amount that has been duly proven which in this case is P1,808,447.48, computed as follows: Total amount of claim P1,991,069.00 Less: Exh. AB-Philip Morris 182,621.52 P1,808,447.48 Phils. p 7,878.80 Exh. AL-Unilox Industrial Corp. p 128.82 Exh. AM-United Coconut Chemicals P174,613.90 Total amount refundable WHEREFORE, in the light of the foregoing, Respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND to Petitioner the sum of P1,808,447.48 representing overpaid income tax year 1995. SO ORDERED. 1~- ~~ RAMON 0 . DE V A Associate Ju e

DECISION C. T.A. CASE NO. 5469 - 9- WE CONCUR: G&>-o~ ERNESTO D. ACOSTA Pt~esiding Judge CERTIFICATION I hereby certify that this decision was reached after due consutation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. Q ... :zcQ.. a~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals