COMMISSIONER OF INTERNAL REVENUE v. SM INVESTMENTS CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF INTERNAL CTA EB NO. 2707 REVENUE, (CTA Case No. 9569) Petitioner, Present: -versus- DEL ROSARIO, P.J., RINGPIS -LIBAN, MANAHAN, BACORRO -VILLENA , MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, JJ. SM INVESTMENTS Promulgated: CORPORATION, Respondent. JAN 16 2024 )C- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION MANAHAN, J. : This involves a Petition for Reviewl filed by the Commissioner of Internal Revenue (CIR) assailing the partial grant of the claim for refund or issuance of tax credit certificate (TCC) of e)Ccess and unutilized creditable withholding t~ (CWT) claimed by SM Investments Corporation (SMIC) for calendar year ending on December 31, 20 14, in the amount of Two Hundred Ninety S~ Million One Hundred Fifty Two Thousand One Hundred Seventy Nine and 59 j 100 Pesos (Php296, 152,179.59). FACTS The CTA 3 rd Division recounts the facts, as follows: I EB Docket , pp. 6- 14 . ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) Page 2 of II Petitioner SM Investments Corporation [now, respondent SMIC] is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal address at lQth Floor One E-com Center, Harbor Drive, Mall of Asia Complex, CBP-IA, Pasay City and herein represented by its Senior Vice President for Corporate Tax, Cecilia R. Patricio. It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number (TIN) 000-169-020-00000. On the other hand, respondent [now, petitioner] is the duly appointed CIR, empowered to perform the duties of the said office including, among others, the power to decide, approve and grant refunds or tax credits as provided by law. He may be served summons, pleadings and other processes at his office at the Bureau of Internal Revenue (BIR) National Office Building, BIR Road, Diliman, Quezon City. On the following dates, petitioner [SMIC] filed its Quarterly Income Tax Return (ITR) for CY 2014: Period Date of Filing Exhibit First Quarter ITR May_23, 2014 "P-9" Second Quarter ITR August 28, 2014 "P-1 0" Third Quarterly ITR Nov 26, 2014 "P-11" On April 8, 2015, petitioner [SMIC] filed its AITR for CY20 14 through eFPS with reference no. 121500010942132, indicating total income tax credits in the amount of P548,765,509.00 and an overpayment of income tax in the amount ofP470,169,461.00, as follows: XXX Petitioner [SMIC] indicated in its AITR for CY 2014 its option to be issued a TCC for its excess and unutilized CWT for CY 2014. On September 21, 2015 petitioner [SMIC] filed with the BIR Regular LT-Audit Division 2, a Letter dated September 14, 2015 for the refund of or issuance of TCC for its excess and unutilized CWT for CY 2014 in the amount of P330,559,574.00.2 There being no action on the part of the CIR, SMIC filed its Petition for Review, docketed as CTA Case No. 9569, on April 7, 2017.3 2 Decision dated June 29, 2020, Division Docket, CTA Case No. 9569, Vol. II, pp. 863- 865. 3 Division Docket, CTA Case No. 9569, Vol. I, pp. 10�19. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) After trial, the CTA 3rd Division rendered its Decision, dated June 29, 2020, which partially granted SMIC's claim for refund/issuance ofTCC, as follows: PpttaheAxetRitcTiroIteWoAndteLiHartLlEcYeR[raEStGimMFfRiOoIcACauRNt)nEe'sTt,bEeDeotih.xfsecsAeuPcseiscdn2os8ritd9naai,nnn7fagdt5vl5yoP,,r1ueol6tneifut3tipto.ia1enlt6iizt,tafeioxodrnrreeerRpCfr[uerSevneMsiddeeiInwCtoat)ibrniligneas Withholding Tax for the calendar year ended December 31, 2014. SO ORDERED.4 wreevacisdoenpnOsrciondemeMrsuaulatgbiroamcnthei,tdt1a,e1sdr,efo2bslo0ylol2vwS2iMsn, :gaICftth,eerthcpeoanratssiiesdase'irlreaedtsiopAnecmotiefvnesduempdpolDteioemcneissniftooanrl WHEREFORE, in light of the foregoing considerations, petitioner [SMIC]'s Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, the Court's Decision dated June 29, 2021, is hereby amended to read as follows: "WHEREFORE, in light of the foregoing consideration, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent [CIRJ is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE m favor of pet1t10ner [SMIC] the amount of P296, 152, 179.59, representing petitioner [SMIC]'s excess and unutilized Creditable Withholding Tax for calendar year ended December 31, 2014. SO ORDERED." On the other hand, respondent [CIR]'s Motion for Partial Reconsideration is DENIED for lack of merit. SO ORDERED.s 4 Division Docket, CTA Case No. 9569, Vol. II, p. 887. s EB Docket, pp. 37-38. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) The CIR's Motion for Partial Reconsideration [re: Amended Decision dated 11 March 2022} was denied in the assailed Resolution6 dated September 27, 2022. On November 2, 2022, the CIR filed the instant Petition for Review 7 seeking the reversal of the CTA 3rd Division's Amended Decision dated March 11, 2022 and Resolution dated September 27, 2022, and praying that SMIC's claim for refund/issuance of TCC for its alleged unutilized CWT be denied entirely. On December 27, 2022, SMIC posted its Comment, s which the Court received on January 12, 2023. On February 9, 2023, the case was submitted for decision.9 ISSUES The CIR assigns the following error: WHETHER OR NOT THE HONORABLE COURT ERRED IN RULING THAT RESPONDENT IS ENTITLED TO THE CLAIM FOR REFUND OF ALLEGED EXCESS AND UNUTILIZED CWT FOR CY 2014.10 CIR's arguments The CIR states that the CTA 3rd Division should have dismissed SMIC's petition for failure to exhaust administrative remedies. The CIR states that SMIC's claim is subject to administrative investigation/examination; that SMIC failed to submit the required documents in support of its claim for refund or to comply with the requirements set forth in Revenue Memorandum Order (RMO) No. 53-98 and Revenue Regulations (RR) No. 2-2006; that SMIC's evidence failed to sufficiently establish direct linkage between the CWT and the income as reflected in the annual income tax return (AITR); and, that SMIC failed to prove actual remittance of the alleged withheld taxes to the Bureau of Internal Revenue (BIR). 6 EB Docket, pp. 41-44. 7 EB Docket, pp. 6-14. s EB Docket, pp. 48-54. 9 EB Docket, pp. 57-58. 10 EB Docket, p. 9. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) The CIR emphasized that the claimants of tax refunds bear the burden of proving the factual basis of their claims. SMIC's arguments SMIC states that the CIR raises no new arguments that have not been exhaustively considered and discussed in the assailed Decision and Resolution. SMIC counters that Section 229 of the 1997 National Internal Revenue Code (NIRC), as amended, only requires the filing of the administrative claim for refund as a condition for the filing of a judicial claim for refund. SMIC also states that the CIR failed to specifically identify a required document that was not submitted by SMIC nor to contradict the findings of the Independent Certified Public Accountant (ICPA) regarding the link between SMIC's gross income and the relevant CWT to be refunded. Further, SMIC states that it has been settled that a claimant of excess CWT refund need not prove the actual remittance of the taxes by the suppliers who made the withholding. Finally, SMIC adds that it is not required to comply with RMO No. 53-98 and RR No. 2-2006 since these issuances do not relate to a claim for refund. RULING OF THE COURT The Petition for Review is denied. The Petition for Review is timely filed. Pursuant to the Revised Rules of the Court of Tax Appeals (RRCTA), Rule 8, Section 3(b),1 1 the CIR had fifteen (15) days from receipt of the assailed Resolution, within which to file his Petition for Review. II Rule 8 Procedure in Civil Cases Sec. 3. Who may appeal; period to file petition.- xxx XXX XXX (b) A party adversely affected by a decision or resolution of a Division of the Court on dpr oapaeanremryte driisetooiov sdtofoitnrohli honuemfetroe rifrooeltrainrw hnew.revf. eUfiucieexplow~ xeonpfdnesiw,!ei:dispattehrthairoeionanpntdCeiforioodfnfmtueerptoeothrnoteimsnoditenoaawyryfiaosgrngtirfdnrrciaaaoontllmshtmtpesraeaepnrbyciaeoeyaafdiodpmprdptweeieontiatfitthohlaeinotnocfaeoltxwtphhppyeheieirrocfaCiufhotloitdlohutnaoernmtoqofbiotfulyeuetehsnxfttiethcliioeeonrenefgdpegtibedlhneteeigmdftoiedeofrcionenifctstiaeikftoeroennayrt

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) tuR222in0m00etv222eii222lley,wTwoNft,hnihio1elt2eevhOdeiwCCncmtIthIhRowbRiebcehhrefiriinerclc4eshw5edt,,aitavona22se0t0fdMig22Pler22oeta.,thatnii1ettot3PihenoeuOdRntf,sineotf,sirotootrhNhEnleRueoxrftevoetiCveeorbinImnyeRRswbeideohv.exainraettdweet2ond.,udnOF2iStni0inlegle2pOO2tPte,chcemttteotoibhtbbiepeoeerernrrCi221foIo079Rdr,,, There is no compelling reason to reverse or modify the findings of the CTA Jrd Division. dDDalaeirtvceeiiasdsdiAioSoytnne'sptbhtdeeDeaemetneocbduiesptrisaoM2esnt7sa,e,rddc2tahh0tee2ud21pa.1orJ,nguun2ma0en2ed22n9;ts,rae2rnsa0odi2l,sv0ee;dadsasbsaiysnialeitldthehedeRCAeCIsmRToelAunhtdai3oevrnded We adopt with approval the following discussion: watbhseieteahnsmianfemCanttowedanleoitdsrf(,ao2rrre)tyoqypuwteeoitairtierr:tsediosfnuprenoornmdde[SretMhnSetIeC[cdC]taiIontReno]'tso2ft2aos9psafeoiylrfemtitohietenns,tNjiuotIRdfwiCtcohiueoalfldt1achx9laa9iva7mes, "SEC. 229. Recovery of Tax Erroneously or fllegally Collected. - No s uit or proceedings shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the 12 EB Docket, pp. 1-4. . 13 EB Docket, p. 5. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." ptapwhfeeiternteihadroiledntscyCiui,tslswceiraohaoebrnglo(yap2ou,r)afdtyttylhhmteeoeesaesjernCusnotdId.fRfi,rcaAobianamenyltfdaoctsxrlhuewapepiafhmeiydelrieanvnfrotge-ernctahltioaanecfixgampstrcawaeeaynfouwmut-sniyneetdeehnaettmthrdhoauipnftssrottmeChtsbeaowceyuratirmapiattx.traiifvdsooeeerr ipepsc1smuler9airnc9mipeahm7fhalu,tariytnMismaladiyaxoznpelperldldeeayda,ogystcvteehhtoedraharau,atttriontstittnohhahtntcaeeinhoctvoeiteCeotiafInwibRxcoeielwpfdsaemaeiinlwymloudeafcfsororotetnwlllhssliofiehneiwtcrShags.tleCetlcdtItathRhniceaoeo'trstntruoCa2ugpncIo2noetR9ilonoetuonsowtss.hflacyetIsoththouteaerrimxntNilptutlIebaaeRsnexgytCfdaeolerbolro'dyeesrf jpctteruwoeorvdefreotiusrr-hcecnyiercadaeitIlpcafnfitrotrleicinotvdnplhmeagritieshpomsoteencchfrareipibisoptpaeestdetifr,itmojtviuutrtheenoiedoefdiinrpctetpeeiehrwearreitliSsaiot[ecsdSniecloMxoaftniiiiplsIomeseiCnhrrd]aaoo'2[btoswSin2oonMi9uannASIdtgCopmeof]rttpiofihtlttnheaot7ieemths,nhteNrbdr2aeaIe.v0sRtsriep1TaCv2o7iheed1n,oul,defwscvte21,lwhaan09teiiot91emtn-7d[5yCw.teIufihaRaotpessr]r XXX cctahoollenmesgptieadldexRelteryeeassftdpiacooiollnacnei.uddmme(en1ed)tnttto[osCpIihRnrae]v'ssseeunpabtpleleoeevrgntiadwtoeiofnitncihtehsteohclfdalaa;ticmatpun,eadtd1l et{r1s2e0e)mnrtveiortetsas[nuSscMbcemaICnoi]ttf prwpearimeyth-oirhtret-oaqPwlnudriociitsnheoighfteoooflftdaiwinaxnic.tgthcuahIlaagtolielmdnmrieitnnumaggsnittdttraaebxnnfeeocustenoediomfs ftpohtthhfeaeaxpsuerainsezyuseewtpdeioli.itnzhtsehhidabeltidlictpryiesrdooinoftofatbtholeaef abcpclyraotuivamaelactFnrhouetep,mrytfshiatueotccarft,hnocthiafeteswtobipwtetehihatthiehrtsohiBolodnIleRdiemn.ringp[ghSoMaftsaItiCxas]xsetitnhsa,attewthmhistiehcnechta;sipseaa,enysndeteaee-bnrdloeisftouhnineltddys tn2s[hSuo-Ma2pwt0pIhC0oet6]Arrh,teesatolhiflsrneeeigoitgstsenaads-crmltsdlyauaestibemfimdasreiipllsiesinupkdsreioRoswntuMnodiaseOennostuwftNbtioot[tm.hChReioI5tRMu3]t-dOc's9moo8mNcceuorlapaim.nltie.5mdet3WneR-tet9sRdh8roaeeNctainuotneu.pmdrme2aetRt-eine2tRrti0asott0hNne6aieodn,t.r """""'--

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) o2ttthahu0xeet0rr6reiigenimnfhfuotewnrdrmdeoelaunyotliirdaiomlcniroppefsoodotrsihtef.esastcFcaatlutoaeprimtmerheneesafnruol,ttrlytirttaetoobxqfeuftraiihenrrefeesuddnfnoedotrnhtoieinanrrolegcniorn-tefhs,dutaihbbtt.eumRtciRslnasoNiimoton.tfh2ooe-rf Thus, the failure of pet itioner [SMIC] to present the proof of actual remittance and to submit complete documents enumerated under 2006, is not fatal to its claim RMO No. 53-98 and RR No. 2- originan for refund. 14 (emphasis in the qrpbPeuryhfooiutoltihnefpedVdpoieSbnfroeuiefllapyocN,ruwtenaut:mhutaieteloisnlCeirazeoleimusdBrsittua.tteaanIsxnkn,cweC1c5eroeritmesdhimetansil.osrSsetuiTaopadhnryeeecrmaorodenelfddeIriCvnteiatosoensurnterndtaptlosoaRtrnatceditlvoeaendisnmseutttehalferoavedrt. wspurRe1ueasn9ietytcm9vuhaho7ebthirnitlo-alNtiuPwilsaszdeaehnieitrttnicihdeotdgeshianeopotcaasnoialtnelsdeunxrdiIradvnn'nsleecrgtoenrsetmepatrr,ndegoisamaetiwscttlntiascihuntt.Rno,otrgatneeaUniivdnsncnectidcevndohtoiueneanomsresttontioeedtCSrdetteetoaorhtcsdwxahepteteieicio,otspolhn.naaandBssiy.tmeheua5neerPm7t-efrrroaeeeoiarunssfonupdfadoneronddeofr5qs,efci8uibfIltiuaniaroliinteicsmfetddtyrutatnhhnooaateeotfllf Av. pApesaiaTlsnh' iesTxrcpaolnaunsrmat'tsiisorsnuio,lininsgCinionsrtprCouorcamttiimvoeni:s,sicointienrgotfhIneteCrnoaulr Revenue t of Tax ... proof of actual remittance by the respondent 1s not needed in withholding order to prove pet1t10ner. and remittance of taxes to Section 2.58.3(8) of Revenue Regulations No. 2-98 clearly provides that proof of remittance is the responsibility of the withholding agent and not of the taxpayer- aharthegreefeleudnnpbtidseyntioctttlfihraouetinhmmseetarsnefBtolthIv.rRaeI.ttsthTpsechhaoeoygnuoostrvlatdsiextreuobnstefmedtwebhnoiettaryh.nshewIonwliidtnihtithnhhmeghoiolndetldadvxaienbernegyst that the withholding agents commit fraud against the government by not remitting the taxes so withheld, such act should not prejudice herein respondent who has been taxes by the withholding agents duly withheld acting under 14 EB Docket, pp. 35-37. 15 G.R. No. 180290, September 29, 2014. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) iphtCtiTtrraSgthhnhereesmhroeceeesirmeeecvmopeeldrtwaeimofnieritiargnoentftditneaoetamnhsemhnnrbirsbrfdbeichtealoeyt,,ieetso5nucloatptirl7tihgfhtTndeeoyehectsainaathenpxhwuoswdnepogaeftediiW orhnrittpnafdteohhodehgtio5hohre-ttteaeif8ofiohpnhttnglyltehiapddeto.ooyesinai.ntffnlnteoytde.aoMgegsortx.f.ah.roaoaettce(rgsftTohhtaeteheiuahmeonSNnewnstvaedocpgItheilRouhtonroeChmnC,ravorBhpeocseegpIerieatpcroRosltatyuondfivatyismfnhrmsxeuois1tsecfrpreruie9uraanopsnowna9neptllmmtne7itddaheso,yteoadvttbebnir)hohaeteityeytsseeosfr. Anent the application of RMO No. 5 3-98, the Supreme Court stated in Pi.lipinas Total Gas, Inc. v. Commissioner of Internal Revenuei6 that: (raCdwadpafereoudouoofetrddcumruempurnilramtdeeommdcrsisoAtlsiseeusynfossenshaiifdMttonolchsolnegwiayfertexnoaiwetrccrhnqteobhheotiutsmeneyaafSsittttpxuIhegynmularleeiltenan/rtieataanauerCytnbwlndthoieaitelardrloruilpiseezdntovRqefisiorreeidfuueaocnsonivtpmu.trirueeoepemmeNxnnnoti)cuedohrtt:eonyeateteshft,xdfssaivapitn.cobastgVecoouTyrgAlvssbeeauTterabimaim.s,amedtineRetAttddafSMoesotuhdirOebnaeepmbe/xtmrtaNynpephCxcosoleaaoo.heuscryintmn5psraettdeso3xoaeudre-psrua9wiadk,atpt8nyihfoocioieoaninnnerrsrt bsRAwbiDRresNmnoyeeMunMuaoIpmfiibRustdnsucOuOThempmCguinatehtlmd,piaecde5tst5opcRroaoae3s3afeloxnRxnic-ytd-or.h9dCputei9.sn3ni8uadmIT8csT-gRyctrh8eohteTe'aifsee8snrendopabrodttrripe"axosefetiltbarrRfieLwSeiyaoeaMRssgliusrfpaitatMer,nOabhhspbaitnomeOlenihniricltntcepiath5ieCot5atqutii3otsIbe3nuetRp-cfasl-gii9doeoe.lr.rt9V.l8c.emeni.8Eeb"Ain"fdigfypvusTiifaSIlectno.tanRetsnaeodriaetMlocTTelltatnoyfhbahOais"roietexsCsohnsucpghdftasrmsacrae1o5eutuyaaatcd1c3ibresbnnenk2iu-eemsrjttlg9qme,iaouoi8scuotutTtfeptfthtihfdntSeroiahaetooitCdnistattesssff XXX Indeed, a taxpayer's failure [to comply] with the requirements listed under RMO No. 53-98 is not fatal to its t6 G.R. No. 207112, December 8, 2015. ~

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) w(ppecellauimeatrtviht,pmyaihntteahi.sdset.ihss.tqeuoaufAfnestfisdhocteteiuiureonnnaCnddtlole,tourdofsirinctsww,octarrhtheirhenetretigahojnueniRntdruittalcthhenhieesaedlogoerljrfievuagvidCniedngtloeaimnnnuocgrreetnwogtsfhouoeivbtnfesmrtntpihhtsrete.aeydcSCeairombsueylpireltiays.s All told, the CIR failed to convince this Court of any ground for reversal or modification of the assailed Amended Decision and Resolution. WHEREFORE, the Petition for Review, filed by the Commissioner of Internal Revenue, is DENIED for lack of merit. The Amended Decision and Resolution, dated March 11, 2022 and September 27, in CTA Case No. 9569, are AFFIRMED. 2022, respectively, SO ORDERED. ~';:~ CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice MA. BELEN M. RINGPIS-LIBAN Associate Justice JEAN MARIE A

DECISION CTA EB No. 2707 (C.T.A. Case No. 9569) ~ ~ F.r.RE~Y'-kf~-rFA.J'AR~DO MARIAN IVY Associate Justice LAN~t'AliVA~AUIJ-MD~AVID Associate Justice C~N~~~RES Associate Justr HENRY ~GELES Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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. Presiding Justice