CTA Case No. 4440 (Decision)

. . ,..r' r \.- REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY BPI DATA SYSTEMS CORPORATION. (formerly. Filipinas Management & Leasing Services. IncJ. Petitioner. - versus - C.T.A. CASE NO. 4440 COMMISSIONER OF INTERNAL REVENUE. Respondent. X- - - - - - - - - - - - - - - - X DECISION Petitioner seeks to recover by way of this petition for review alleged creditable taxes withheld for the year 1987 in the amount of P362,617.00. Petitioner, BPI Data Systems Corporation, formerly Filipinas Management & Leasing .Services Corporation, is a corporation engaged in the business of rendering computer services to the affiliates of the Bank of the Philippine Islands. On April 15, 1988, petitioner filed it's Corporate Annual Income Tax Return (Exh. A) for the calendar year ending , ~ ..-, .1. 0~

DECJSION- C.TA. CASE NO. 4440 - Page2- December 31, 1987. The return shows a Net Loss of Pl56,971.00 and a "NIL" tax liability. However, there appears a refundable amount of P565, 158.00, consisting of prior year's excess credit of P202,541.00 and creditable taxes withheld in 1987 of P362,617.00. Then on May 24, 1988, petitioner filed an Amended Income Tax Return (Exh. A-1) for tl1e year 1987 showing a refundable amount of P538,582 .00, computed as follows : Computer Services Fees P31,681,055.00 Miscellaneous Income 1.280.736.00 Gross Income Less: Deductions P32,961 ,791.00 .32.885860.00 NET INCOME p 75,931.00 TAX DUE p 26,576.00 LESS : a) Prior Year's Excess Credit P2 02,541 .00 b) Quarterly Payments . . 202.)41.00 Balance of Tax Due (P 175,965.00) LESS: Tax Credit Creditable taxes withheld in 1987 362.617.00 AMOUNT OF TAX REFUNDABLE (P538,582.00) On March 26, 1990, petitioner filed with tlle respondent a claim for refund in the amount of P362,617.00, representing excess withholding taxes for the year 1987 (Exhs. Cand C-1). Wittrout vniting for respondent's decision on tlle claim for refund, petitioner filed a petition for review with tl1is Court on April 16, 1990 (Monday), tl1e next working day following April 15, 1990 (Sunday). As ruled by the Supreme Court when the last

DF.CISION- C.T.A. CASE NO. 444.0 - Page3- day for filing a petition for review falls on a holiday or a Sunday the petition is timely filed if done on t11e next working day. (Galang v _ Workmen�s Compensation Commission.. 44 SCRA 22 L) In this case, the last day for filing a suit to claim for a refund falls on April 15, 1990 (a Sundayt therefore, the filing of the petition on April 16, 1990 (a Monday) was considered timely filed . Respondent raised the defense of prescription and that the petition sta.tes no cause of action for failure of petitioner to state when the taxes withheld were paid. Respondent averred that taxes witllheld are deemed paid when remitt-1nce thereof becomes due at the end of t11e year, that is, on December 3C 19a7. The petition filed on April 16, 1990 is beyond the two- year prescriptive period under Section 230 of the National Internal Revenue Code. The burden is on the petitioner to show entitlement to the refund claimed. The issue is whether or not petitioner is entitled to be refunded the amount of P362,617.00, representing alleged creditable taxes withheld for the calendar year 19a7. Contrary to the contention of respondent that the two-year period should be counted from December 31, 19a7 V'lhen the taxes withheld are deemed paid, the Supreme Court in t11e case of Commissioner of Internal Revenue v _TMX Sales.. Inc_, et_ aL.. G_R_ No_ 83736.. January 15.. 1992.. held that the two- year prescriptive period should be computed at the time of the filing of t11e Final Adjustment Return or the Annual Income Tax Return, when it can be finally ascertained if the taxpaye~ has still

DECJSION- C.TA. CASE NO. 4440 - Pa~4- to pay additional income tax or if he is entitled to a refund of overpaid income tax. [See also ACCRA Investments Corporation v. The Honorable Court of Appeals, Commissioner of Internal Revenue and The Court of Tax Appeals, G.R. No. 96322, December 20, 1991; Commissioner of Internal Revenue v. Asia Australia Express, Ltd., represented by Soriamont Steamship Agencies, Inc., and Court of Tax Appeals, G.R. No. 85956, April 10, 1989; Commissioner of Internal Revenue v. Citytrust Banking Corporation, CA - G.R. SP No. 26839, July 31, 1992; and Servicewide Specialists, Inc. v. Commissioner of Internal Revenue and Court of Tax Appeals, CA - G.R. SP No. 25893, November 9, 1992.1 "Petitioner is not required to show the date of payment of the tax withheld at source. The rule is a corporate taxpayer pays on a quarterly basis. The final payment is the last quarter payment at the end of the taxable year or on the 15th day of the fourth month following the close of the calendar or fiscal period. This is the time when it can be finally ascertained that the ta.xpayer either made profit or suffered a loss in its operations." [Sun Insurance office Ltd. v . Acting Commissioner of Internal Revenue.. CTA Case No. 3205.. June 23.. 1989; Ateneo de Manila University v. Commissioner of Internal Revenue.. CTA Case No. 3213, July 28.. 1989; Asia Australia Express Ltd. v. Commissioner of Internal Revenue, CTA Case No. 3976.. October 18.. 1989; Paseo Realty & Development Corporation v. Commissioner of lb .

DHCISION- C.TA. CASE NO. 4440 - Page5- Internal Revenue,. CTA Case No. 4523,. April 30.. 1993 and Jardine Davies,. Inc... v. Commissioner of Internal Revenue,. CTA Case Nos. 3339.. 4013 and 4124. January 20,. 1994.1 In this case, since the petitioner is on a calendar basis of reporting its income tlle final payment of the income tax is on April 1'). 1988. which is tl1e 15tll day of tl1e fourth month following the close of the calendar period (December 31, 1987). The two-year prescriptive period is counted from April 15, 1988. Petitioner has up to April 15, 1990 to file a suit for the recovery of excess income taxes paid through the withholding agent. April 15, 1990 falls on a Sunday. When the period for filing the petition for review falls on a Sunday or a legal holiday the last day for filing tl1e petition should be understood to be the next day. Therefore, for purposes of computing the two-year prescriptive period, the filing of the petition on April 16, 1990 is still within tl1e period allowed for by law. Petitioner presented in evidence the Statements of Taxes Withheld at Source (BIR Forms 1743. 1743.1 and 1743A) showing the income received and tl1e amount of taxes withheld therefrom. For 1987, the computer service income received by petitioner amounted to P35,311,726.64 and tl1e tax withheld by various withholding agents namely, the Bank of the Philippine Islands, BPI Credit Corporation, BPI Family Bank and BPI Securities Corporation totalled P362,617.27, itemized as follows: 1 b8

IJECISION- C.TA. CASE NO. 4440 - Pa~6- Rate of Tax Amount of Exhs. Income Received Withheld Tax Withheld B p 2)36,000.00 1% p 22,360.00 B-1 2.236,000.00 1% 22,360.00 22,360.00 B-2 2,2 36,000.00 1% 26,575.00 26,575.00 B-3 2,657,500.00 1% 26,575.00 30,432.27 B-4 2,657,500.00 1% 30,189.00 30,075.00 B-5 2,657,500.00 1% 19,575.00 26..575.00 B-6 3_043,226.64 1% 5,500.00 B-7 3,0 18,900.00 1% 22,360.00 14,370.00 B-8 3,007,500.00 1% 26,736.00 10.000.00 B-9 1,957,500.00 1% B-10 2,657,500.00 1% B-11 550,000 .00 1% B-12 2,2 36,000.00 1% B-13 1,437,000.00 1% B-14 2,673_600.00 1% B-15 50.000.00 20% Total p 35,311,72 6.64 P362,617.27 It appears from the record that petitioner declared as computer services income only the amount of P32,961,791.00 (See 1987 Statement of Income and Retained Earnings, p. 51 CTA record) instead of P35,311,72 6.64. Petitioner failed to include the amount of P2,349,935.64 as part of its gross income in the Amended Income Tax Return in order to reflect the actual income received in the sum of P35,311,72 6.64 (Exhs. B, B-1 to B-15, inclusive). In claims for refund of excess withholding taxes petitioner need only to prove the following : "(1) that it filed a claim for refund witllin the two (2) year period as prescribed under Section 292 (now 230) of the National Internal Revenue Code;

DEOSION- C.TA. CASE NO. 4.440 - Pa.ge7- (2) that the income upon V'l1lich 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 Fonn 1743.1) duly issued by tile payor (witilholding agent) to tile payee, shovl/ing the amount paid and the amount of tax witi11leld therefrom ." [Sec_ 10, Rev_ Reg_ 6-:- 35; 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 and Paseo Realty and Development Corporation v _ Commissioner of Internal Revenue.. CTA Case No_ 4254, August 10.. 1993-1 Having failed to overcome the burden of proof vl/iti1 respect to No. 2 - that the income upon which the taxes were vl/iti1held were included in the return of the recipient.. the Court cannot a\hro.rd the refund claimed for. A recomputation of petitioner's income tax for the year 19a7 would reveal that there is still a liability of P283,895.45, computed as follows: Amended Return Should Be P35,311 ,727 .00 Gross Income p 32,961,791.00 32.885.860.00 Less: Deductions 32.tH35.860.00 p 2,425,867.00 Net Income p 75,931.00 202,541.00 Tax Due: p 26,576.00 Less: 202,541.00 a) Prior Year's l ~J U Excess Credit

DECJSION- C.T.A.CASENO. 444.0 -PageS- b) Quart~rly Payments Balance of Tax Due (P p 646512 .45 Less:Tax Credit )62.617.00 p 2&3,895.45 Creditable taxes withheld in 1987 362.617.00 538,582.00) Tax Still Due (P Comparing tlle amended income tax return filed by petitioner witll the recomputation made by this Court, there still appears to be an income tax liability contrary to the allegations of petitioner that it is entitled to a refund. It must be remembered that while petitioner is claiming for the refund of excess creditable taxes withheld for 1987 what it is actually claiming for refund is the alleged overpaid income tax which was collected at source. Section Sl(d) in relation with Sections 204 and 49 of t11e National Internal Revenue Code is clear on this point. Pertinent portions of said provisions are quoted hereunder, to wit: �sec_ 51 - Returns and payment of the taxes withheld at source_ - (a) Quarterly returns and payment of taxes withheld _- x x x. XXX XXX XXX XXX. (d) Income of recipient_ - Income upon which any creditable tax is required to be withheld at the source under Section 50 shall be included in the return of its recipient but any 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; if the income tax collected at source is less than the tax due on his return. the difference shall be paid in accordance witl1 the provisions of Section 49. , (As amended by BP Blg. 41 and PD 1959.) (see PD 1994.) !Empnasis supplied.} 1 b8

DECJSION- C.TA. CASE NO. 4440 - Page9- (e) X X X XXX xxx.� �sec. 204. Authority of the Commissioner to compromise. abate. and refund/credit taxes. - The Commissioner may - XXX XXX XXX XXX. (3) Credit or refund taxes erroneously or illegally received, 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 shall be allowed unless the taxpayer files in v'Vfiting with the Commissioner a claim for credit or refund within two years after UH~ payment of the tax or penalty . (As amended by PD 1773.t �sec. 49. Payment and assessment of income tax for individuals and corporations. (a) Payment of tax. - ( 1) In general -x x x. (b) Assessment and payment of deficiency tax. - After the return is filed, the Commissioner of Internal Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and demand from the Commissioner. As used in t11is Chapter, in respect of a tax imposed by t11is title, the term 'deficiency' means: ( 1) The amount by which the tax imposed by this Title exceeds the amount shown as the tax by the taxpayer upon his return; but tl1e amount so shown on the return shall first be increased by the amounts lCO

DF.CJSION- C.T.A. CASE NO. 4440 - PagetO- previously assessed (or collected witJ1out assessment) as a deficiency, and decreased by the amount previously abated, credited, returned, or otherwise repaid in respect of such tax; or (2) If no amount is shown as the tax by the taxpayer upon his return, or if no return is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed or collected without assessment .. shall first be decreased by the amountS previously abat~d.. credited, returned, or otherwise repaid in respect of such tax. (As amended by PD 1994 and EO 37.)" There is no doubt that the income taxes withheld at source were rightfully collected and paid. However, with respect to the refund of excess creditable taxes witJ1held the actual claim for refund covers the alleged overpaid income tax corresponding the }Tear 1987. With the underdeclaration of income received by petitioner, it is evident that the income tax collected at source is less than U1e income tax due per our computation. Petitioner has the burden of proof to show that it is entitled to the refund of the amount claimed as refundable because taxes are presumed to have been collecwd in accordance with lavvs and regulations. (Caltex (PhiL) Inc. v. Commissioner of Internal Revenue~ CTA Case No. 2371~ January 29~ 1936.1 Having failed to overcome such burden, We see no reason why the claim for refund should be granwd. l bi

DECISION - C.T.A. CASE NO. 4440 - Pagett - WHEREFORE, in view of tile foregoing, the petition is hereby DENIED. Costs against the petitioner. SO ORDERED _ Quezon City, Metro Manila, March 3 1994. I ,.,_' 0v. D~li~~Ill{l RAMONAssocia~ Judge WECONCUR: Q~o~ ~ ERNESTO D. ACOSTA C.ERTIFICA T/ON I hereby certify ti1at the decision vo~as reached af~r due consultation among the members of tile Court of Tax Appeals in accordance witll Section 11 Article VIII of the Constitution. ~<Eh~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals