JS STEEL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF T H E PHILIPPINES COURT OF TAX APPEALS QUEZON C ITY. JS STEEL CORPORATION, Petitioner, -versus- C.T.A. CASE NO. 5799 COMMISSIONER OF INTERNAL Promulgated: REVENUE, APR 18 2001 Respondent. c.:;YO'#~~~ x-----------------------------------------------------------x DECISION This is a judicial claim for refund of the amount of P3,457,723 .00 representing alleged excess unutilized creditable withholding tax filed by the Petitioner on April 15, 1999. The facts of the case giving rise to the controversy at bar are as follows: Petitioner is a corporation organized and existing under and by virtue of the laws of the Philippines. It is primarily engaged in the manufacture of steel blanks for use by various manufacturers of automotive, electrical, electronics, industrial and household :- . �"1 appliances. Petitioner alleges that it so ld its products in the year 1996 to various industrial users belonging to the top 5,000 corporations. Pursuant to the Bureau of Internal Revenue's requirement on withholding taxes, the buyers allegedly withheld the required 1% tax on 505

DECISION- CTA CASE NO. 5799 PAGE2 its purchases amounting to P3,457,723.00 which was subsequently remitted to the government. This amount is now the subject of Petitioner's claim for refund. On April 15, 1997, Petitioner filed its annual income tax return for the year 1996 reflecting therein a gross income of P45,379,577.00 and business related deductions amounting to P46,558 ,954.00, thus resulting in a net loss ofP1,179,377.00. Having a tax credit of P3,457,723.00, Petitioner, in its return, registered its intention to carry-over the aforesaid amount to the immediately preceding taxable year (Exhibit "A"). Availing of the provisions of Section 69 of the National Internal Re\lenue Code, Petitioner applied its tax credits to its estimated quarterly income tax liabilities in the year 1997 but since it suffered again a net loss of P68,380,390.00, its creditable withholding tax for taxable year 1996 remained unutilized. On May 21, 1998, Petitioner filed with the Bureau of Internal Revenue a claim for refund of its unutilized creditable withholding tax for the year 1996 (Exhibit "1"). Fearing that its claim for refund might prescribe, Petitioner elevated its claim to this Court on April 15, 1999 via Petition for Review. In his Answer filed on May 21, 1999, Respondent denied Petitioner's allegations in qf its Petition for Review and by way Special and Affirmative Defenses, interposed the ~ ... ~l following: 10. That Petitioner has not substantiated much less proved the alleged losses it allegedly incurred for the year 1996; 11 . That to be entitled to refund or tax credit, petitioner, has to prove by clear and convincing evidence that he is entitled to refund or tax credit he claims (sic) ; 50G

DECISION- CTA CASE NO. 5799 PAGE 3 12. That Petitioner is not entitled to the refund or tax cred it of the amount claimed. On January 26, 200 1, this case was considered submitted for decision sans the memorandum of the Respondent. The vortex of the controve rsy now lies on whethe r or not Petitioner was able to substantiate by clear and convincing evidence its clai m for refund. As We have laid down in a number of cases, the grant of a taxpayer's claim for refund of overpaid creditable withholding tax is dependent upon its comp li ance with the following requisites, to wit: I) T hat the claim for refund was filed w ith in two yea rs as prescribed under Section 230 of the Tax Code; 2) That the income upon which the taxes were withheld were included in the return of the recipient; 3) That the fact of withholding is estab li shed by a copy of a statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee showing the amo unt paid and the amount of tax withheld therefrom. [Section I0, Rev. Regs . No. 6-8 5; see Citytmst Finance Corp01�ation vs. The Honorable Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; affirmed by the Court of Appeals in Citytrust Finance Corpo.-ation vs. Court of Tax Appeals and the Commissioner of Internal Revenue, C.A. G.R. SP No, 28239, Mar'd1 14, 1994; and Citytrust Finance Corporation (fonuedy Investot�'s Finance Corporation/FNCB Finance) vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; affirmed by the Court of Appeals in Commissioner of Internal Revenue vs. Citytmst Finance Cot�poration (formerly Investor's Finance Corp./FNCB Finance) and the Court of Tax Appeals, C.A. G.R. SP No. 31104, April18, 1994). 51J '{

DECISION- CTA CASE NO. 5799 PAGE 4 These aforementioned requisites were specifically mentioned and affirmed in the case of Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459. There is no dispute that Petitioner has complied with the two-year prescriptive period provided under Section 204 of the National Internal Revenue Code, the administrative claim for refund having been filed with the Respondent on May 21, 1998, and its Petition for Review filed with this Court on April 15, 1999. Both periods are well-within two years reckoned from April 15, 1997, the elate Petitioner filed its 1996 Final Adjustment Return. As disclosed by Petitioner's Statements of Income and Retained Earnings (Exh. B- 3) attached to its 1996 annual income tax return, Petitioner cleclarecl as part of its gross income the amount of P541 ,594,668.00, the income from which the taxes were withheld in compliance with the second requirement. Likewise, to further bolster its stance, Petitioner presented during the trial various Certificates of Income Tax Withheld at Source for calendar year 1996, thus, proving its receipt of income payment and the corresponding taxes that were withheld therefrom. With all the evidence on recqrp veering towards th existence of Petitioner's excess . :�. � .. creditable withholding tax whici1 ' n!li1ains unutilizecl as of this elate, this Court finds it ineluctable to grant the claim for refund but only in the amount of P3, 119,295.16 which Petitioner was able to fully substantiate by documentary evidence, computed as follows: WITHHOLDING AGENT EXHIBIT PERIOD INCOME TAX COVERED PAYMENT WITHHELD 3-D Industries, Inc. M Jan-Mar 1996 P 220,466.35 p 2,204 .67 5Ub

r DECISION- CTA CASE NO. 5799 PAGES 3-D Industries, Inc. N Jui-Sep 1996 444 ,245.45 4,442.45 Concepcion Industries, Inc. 22 ,071 ,378.81 220 ,713.77 Concepcion Ind ustries, Inc. 0 Jan-Mar 1996 29,014 ,163.03 290,141 .58 Concepcion Industries, Inc. p 22,413,606.43 224 ,136.05 Concepcion Industries, Inc. Apr-Jun 1996 12,961,940.64 129,619.38 Cutler-Hammer Asia Corp. Q Dai-ichi Denshi Ind ustries Jui-Sep 1996 201,449 .00 2,014.49 Dai-ichi Denshi Industries R 315,033 .75 3,150 .34 Dai-ichi Denshi Industries Oct-Dec 1996 577 ,997 .85 5,779 .99 Dai-ichi Denshi Industries s 1,468,494.46 14,684 .94 Dai-ichi Electronics Mfg . Jan-Dec 1996 303 ,383.21 3,033.83 Dai-ichi Electronics Mfg . T 1,392,336 .65 13 ,923 .36 Dai -ichi Electronics Mfg . Jan-Mar 1996 ' 786,984 .59 7,869 .86 Honda Philippines, Inc. u 1,239,941 .18 12 ,399.42 Honda Philippines, Inc. Apr-Jun 1996 K. Nakajo Kozai, Inc v 21,818 . 18 218.18 Mercury Tinsmith Corp. w Jui-Sep 1996 8,245.45 82.45 Mercury Tinsmith Corp. Mercury Tinsmith Corp. X Oct-Dec 1996 2,558,713 .59 23 ,474.41 Mercury Tinsmith Corp. 312 ,060.46 2,836 .91 Mitsuboshi Cutlery Co. y Apr-Jun 1996 122 ,488 .38 1, 113 .53 Mitsuboshi Cutlery Co. 388 ,980 .20 3,536.18 Mitsuboshi Cutlery Co . z Jui-Sep. 1996 356,300 .00 3 ,239.09 Mitsuboshi Cutlery Co . 183,856 .00 1,838.59 Mitsui Industria Corp. AA Oct-Dec 1996 104,873.00 1,048.73 Mitsui Industria Corp. 87 ,218 .00 872 .18 Mitsui Industria Corp. BB Jan-Mar 1996 375 ,950 .00 3,759 .50 Mitsui Industria Corp . 401,204 .00 4,012.04 Nissan Motors Philippines cc Jui-Sep 1996 271 ,858.00 2,718 .58 Nissan Motors Philippines 159,005 .00 1,590 .05 Nissan Motors Philippines DO Sep-Dec 1996 Norkis Trading 1' 769,203 .00 17,692 .03 Norkis Trading EE Jan-Mar 1996 799,669 .66 7,996.70 Norkis Trading P.l. Manufacturing FF Apr-Jun 1996 ., ,508,467.68 15,084 .67 Philippine Appliance Corp. GG 3,486,421 .07 34 ,864.22 Philippine Appliance Corp. Jui-Sep 1996 1,996,907.00 19,969.07 Phil ippine Applian ce Corp. HH Saisho Onkyo Oct-Dec 1996 727,881 .00 7,278 .81 Saisho Onkyo II 3,163,448 .00 31 ,634.48 Jan-Mar 1996 ....~� ~i~ho Onkyo JJ 46 ,023.73 460.24 Apr-Jun 1996 19,714 ,381 .00 197,143.81 Saisho Onkyo KK 14,189 ,589 .00 141,895 .89 Jui-Sep 1996 15,055 ,643.00 150,556.43 t~nyo Philippines LL Jan-Dec 1996 363 ,970 .00 3 ,639 .70 Sanyo Philippines MM 603,212 .15 6,032 .12 Sanyo Philippines Jan-Mar 1996 709,232 .38 7,092 .32 Saisho Den shi, In c. NN 2,638 ,659.00 26,386 .59 Saisho Denshi, Inc. Apr-Jun 1996 4 ,979,407 .00 49,794.07 Saisho Denshi , Inc. 00 1'159 ,665.00 11 ,596 .65 Saisho Denshi, Inc. pp Jui-Sep 1996 4 ,134,178 .00 41,341 .78 QQ No pd covered 23,262.41 232 .62 2,838.45 28 .38 RR Jan-Mar 1996 45 ,235.46 452 .36 ss Apr-Jun 1996 3,022 .73 30 .23 TT Jui-Sep 1996 uu Jan-Mar 1996 w Apr-Jun 1996 ww ~.~H~.P 1996 -JS,-n-�a~c 1996 XX� .,.!:.a.. n.-.~M.a,,'.r ' 1996 n.. ~pr-Jun 1996 ')�,l1..... ~ Bfi ~ . Jui-Sep 1996 ' Pl;C J~n-Mar 1996 r. :wi, J ~ Jui-Sep 1996 DOD ~~I-De:~ 1996 J~~-M~r ; 996 EEE Apr-Jun 1996 FFF GGG Jui-Sep 1996 HHH Oct-Dec 1996 Ill Jan-Mar 1996 JJJ Apr-Jun 1996 Jui-Sep 1996 Oct-Dec 1996

DECISION- CTA CASE NO. 5799 PAGE6 Sharp (Phils) Corp. KKK Jan-Mar 1996 1,425, 720.00 14,257.20 Sharp (Phils) Corp . Apr-Jun 1996 1,551,796.57 15,517 .96 Sharp (Phils) Corp . LLL Jui-Sep 1996 Standard Electric Mfg . Corp . Jan 1-31 , 1996 663,996 .86 6,639 .96 Standard Electric Mfg . Corp . MMM Mar 1-31 , 1996 1,042 ,360 .16 10,423 .60 Standard Electric Mfg . Corp. NNN Apr 1-30, 1996 1,141 ,755.00 11,417.55 Standard Electric Mfg . Corp. May 1-31, 1996 1,045,902 .17 10,459.02 Standard Electric Mfg. Corp. 000 Jun 1-30, 1996 1,008,629.47 10,086.30 Standard Electric Mfg. Corp. Jui-Sep 1996 Standard Electric Mfg. Corp. ppp Oct-Dec 1996 718 , 100 .04 7,181 .00 Tisdall Industrial Corp. Jan-Mar 1996 3,858,726 .00 38,587 .26 Tisdall Industrial Corp. QQQ Apr-Jun 1996 2 ,430,085 .00 24,300 .85 Tisdall Industrial Corp. Jui-Sep 1996 Tisdall Industrial Corp. RRR Oct-Dec 1996 370 ,775 .20 3,707 .76 Transunion Corp. J;m-Mar 1996 1,715,190 .63 17,151 .93 Transunion Corp. sss Oct-Dec 1996 1,348 ,458 .65 13,484.62 Universal Stainlessware Mfg. Jan-Mar 1996 1,114,256.63 11,142 .59 Universal Stainlessware Mfg . TTT Jui-Sep 1996 Universal Stainlessware Mfg . Jan-Dec 1996 75,422.05 754 .22 Matsushita Electric Phils. uuu Jan-Mar 1996 26,439.44 264.39 Matsushita Electric Phils. Apr-Jun 1996 28,823 .00 288.23 Matsushita Electric Phils. wv Jui-Sep 1996 40,074 .00 400 .74 Matsushita Electric Phils. wwvv Oct-Dec 1996 82 ,621 .00 826..21 24,961,310 .00 249,613 . 10 XXX 30,678,323 .00 306,783 .23 37 ,268 ,912.00 372 ,689.12 yyy 23,766 ,054 .00 237,660 .54 zzz 312,248,039.25 3,119,295.10 AAAA BBBB ecce DODD EEEE FFFF GGGG TOTAL WHEREFORE, in vtew of all the foregoing , the Respondent is hereby ORDERED to REFUND or in the alternative, to ISSUE a Tax Credit Certificate in the eJ amount of P3, 119,295.10, in fav.~)!' tj1e Petitioner representing overpaid creditable withholding tax for taxable year J~~~P� ! .. SO ORDERED. ~lsz-~ ERNESTO D. ACOSTA Presiding Judge I CONCUR: 510

DECISION- CTA CASE NO. 5799 PAGE 7 CERTIFICATION I hereby certify that the above 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. ~- Q_._Q~ ERNESTO D. ACOSTA Presiding Judge �, 511