CTA Case No. 4971 (Decision)

Hepublic of the PhilippJner-> COURT IJF TM< APPEALS l]uezon City F. JACINTO GROUP, INC. C.T.A. CASE NO. 4971 Petit:loner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. X D �~ c I s I 0 N This is a claim �or re�und in the amount of ~1,096,272.00 representing excess income tax for the year ending December 31, 1990. Petitioner is a duly organized and existing corporation under Philippine laws engaged jn furnishing management services. It alleged that during the year 1990, the various companies it serviced have withheld and rernit.ted to the respondent several amounts representing 5Y. withholding ta}t on t.heir payments to peti~ipner o� management serv~ce fees that on April 13, �' 1992 ~t filed i t s final a~ju~tmen} r~turn for tax year and t~os~ rerta~ning to t~e u't i l i z a t. i o. n the . o~rried-over tax from 1990 which showed. the following ' ~ �. details: :. ' � 588

DECISlOH - C.T.A. Case Nu. 4971 ,-, L.. Service fees 30,124,370.00 Less: Deductions 28,823,057.00 Net income 1,301,313.00 Add: Misc. income 431,182.00 Taxable income 1,732,495.00 Tax due 606,373.00 Tal{ credits <1,702,545.00) Refundable amount p 1,096.272.00) ===========~===== Un July 10, 1992, petitioner filed its formal claim for refund with the respondent. No allegation is made as to the action taken thereon by the respondent except that "the period to claim refund is set to expire within two years from the filing of the final adjustment return on April 12, 1991 for taxable year 1990, or up to April 11, 1993 and that "the delay of the Commissioner of Internal Revenue in rendering his decision does not e::-ctend the per�iod fi::-ced by statute <Gi.b.bs vs. Collector; L -13453, February 29, 1960>. Hence, this petition. The sole issue to be resolved in this case is whether or not petitioner is entitled to a refund of ~1,095,272.00 representing excess income tax for the year ending December� 31, \ -~ �' ', --~~' .� ?~ .... t..."~--�~......... ,...._ .�' .Fe.ti:.� ~�.�t~ i~ 'bJ!: ~f�.. :. -ancho�r~ hi~� ~rg'~�fu.&t~'o:n .� .�. .� ' �.. . . . ;;� . . } ~ .. . ' ~ . Sect.ioo 69 of ._, the for tn~: :r:�.efund of ' erroneously collected tax. 589

DECISION - C.T.A. Case No. 4971 -3- Insofar as pertinent Section 69 of the NationaJ Internal Revenue Code is herein quoted for reference: Sec. 69. Final Adjustment Return "Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. I.f the sum of the quarterly tax payments made dur~ng the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shalJ either: <a> Pay Lhe excess tax s t i l l due~ or Cbl 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 liabilitjes for the taxable quarters of the succeeding taxable year. Moreso, petitioner averred that the two year period is to be reckoned from the date of .filing of the .final adjustment return. For reference is Sec. 230 of the Tax Code. Sec. 230. Recovery of tax erroneously or illegally collected.- No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erron~q~sly or illegally assessed or col,...J;.~~iih'9,., . or of any penalty claimed to hav~ j~�f?&~:c.oJl.~cteg ,,wi thou.t authority or of ~ny ~Wj::~~-1!J~:9.,�~.~0;~g.;.:,~~_y~�. p~en excessive or ~n any rnannel- wrotlgftllly- collec;t~d, until a 590

DECISION - C.T.A. Case No. 4'371 claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such ta:;.:, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two 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 therefore, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. " Respondent on the other hand interposed the following special and affirmative defenses, to wit: "1. Petitioner's claim for tax credit is pending administrative investi- gation; 2. The total amount of Fl,096,272.00 claimed by the petitioner as alleged overpaid income taxes for the year 1'3'30 was not properly documented; 3. Taxes paid and collected are presumed to have been made in accordance with law and regula- tions, hence, not refundable; 4. In action for tax refund/credit the burden of proof is on the t.a~payer to establish it-a_ right to .t_h,...~�: ~ r. e f u n d and failure to sustain . th~ burden is fatal to the action #~r �i~~ .~rediii �' . .. ~l. ~ .. _......: -. 591

DECISION - C.T.A. Case No. 4371 5 .. It is incumbe>nt upon the petitioner to show that it has complied with the provisions o:f Section 204 in relation to Section 230 of the Ta:.t Code as amended; 6. Well--settled is the rule that claims 'for refund are construed strictly against claimants, since it partakes of the nature o:f an exemptton from taxation <Resins, Inc. vs. Auditor General, 25 SCRA [ 1 968 J J. " Petitioner adduce�cl and offered in evidence E=-thibi ts A to DD-1 with submarkings, which were all admitted together with the testimonies of its witnesses. The Court set several dates for �the reception of respondent's evidence which were all deferred upon motion of respondent's counsel on the ground that he.was not ready until finally; when respondent's counsel failed lo appear. The Court granted petitioner's motion "that respondent's presentation o:f evidence be deemed waived." The Court notes the zealous concern of respondent Commissioner a� Internal Revenue in tax collection but deplores at the same time the apparent indi:fference .. ~�: ~ ~- 1~ Pordering Of! negl~pt to support :l.er well in tax cases on � .� ~-' ' .~ � �. r � ..�. ~he part of hei couJ~~l, p~~tip4l~rly in this case. The parties were g:t,ver~ . :fifteen (1~�} days to submit simultaneous ~~~6~~ndu~ 'but on+y petitioner complied whi~e respondent ~id not. The Court is, theref�ore, 592

DECISION - C. T. A. C:::ise No. 4'371 -6- constrained to resolve this casE? on �the basis of the evidence submitted by the petitioner. In claims for refund, there are three basic requirements that has to be met before a claim can be granted. First, that the claim for refund was filed within twa-years as prescribed under Sec. 230 of the National Internal Revenue Code. Second, that the income upon which the taxes were withheld were included in UH�> rt?tur n of t.he recipient. Third, the fact of withholding i~ ~~tablished by a copy of statement CBIR Form 1743.1) duly issued by the J.iB>'C�r ( wi t.hholding agent> to the payeE�~ showing the amcntnt paid and t.he arnt1unt. oi ta}t w:tthheld there>from. <Sec. 10, Rev. Reg. 6-85J see Citytrust Finanr~e Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4134, Nov. 11, 1991~ and Citytrust Finance Corpoxation �Formerly Inve?stors Finance Carporation/FNCB Finance) v. Commissioner of Internal He;:>vemue, ,CTA Case No. 4046, February 24, 1993. > l t is an ~' leme. ntar. y rule in taxation that an automattc barry-over of an excess income tax payment should onl~ be made ior the succeeding year. <Paseo Realty and Vevelopment Corporation v. Commissioner of Internal Re~<�enue, C:TA Case No. 4528, April 30, 1993> ./ 593

DECISION - C.T.A. Case No. 4971 -7 - Petitioner religiously complied with the three . basic requirements set by the law and was able to prove to the satisfaction of the Court its entitlement to the relief sought for. In claims for refund, all that is required is the presentation of Statement of Tax Withheld at Source <BIR Form 1743.1> showing the income received and the amount of tax withheld therefrom and that the income was included to form part of petitioner's gross income as stated in its income tax return. The rationale for this is that the withholding agents are not within the control of the payee taxpayer but are the tax agents of the Commissioner of lnt~rnal Revenue. The withholding agents merely hold �the amount in trust for the government. <Commissioner of Internal Revenue v. Cit.yt.rust. Banking Corporation, CA -G. R. S'P No. 26839, supra; Paseo Realty and Development. Corporation v. Commissioner of Internal Revenue, CTA Case No. 4254, August 10, 1993> After a circumspect study of the case, petitioner ' to ltut �rf?~\. H~d-..~. ., �~, is il'ldeed entitled .: �1',� . . . . . � ;:-: a:re ~s follow~:. 594

DECISION - C.T.A. Case No. 4971 -8 - 1990 Income tax liability IExb. B-21 , 247,234.00 Less: 1990 quarterly inco�e tax pay�ent 42,379.00 Qtr. CBCR No. Date , 204,855.00 1st 20095569 05-30-901Exb. C-21 Balance of 1990 incoae tax liability Less: 1990 creditable withholding tax Withholding Agent ftindanao Steel Corporation G 850,000.00 Beatriz ftarketing &Trading Corp. H 180,000.00 Jacinto Iron &Steel Sheet Corp. l 697,500.00 180,000.00 Ca�ara Steel Industries, Inc. J T 0 T AL 1,907,500.00 A�ount refundable Ito be applied as tax credit in 19911 , 1,702,645.00 Less: portion applied in 1991 as tax credit IExh. K-11 606,373.00 Unapplied - to be refunded , 1t 096, 272. 00 -------------- The Court finds petitioner's claim �or refund meritorious and well supported by evidence. WHEREFORE in view o� the foregoing circumstances respondent, is hereby ordered to refund in favor o� petitioner the amount o� Fl,096,272.00 representing excess income ~ax �or the year ending December 31, 1990. No pronouncement as ~o cost. SU ORDERED. ~E GRUBA Associ Judge �...... _�:;. 595

- DECISION - C.T.A. Case No. 4971 - 9- WE CONCUR: "-' ~~~� RA ON 0. DE V Associate Ju / I CER~r I F " I C A ~r I O N 1 hereby certify that this decision was reached after due consultation among the members of the Court o:f Tax of Appeals in accordance with Section 13 Article VIII of the Constitution. ERNESTO D. ACOSTA Presiding ~Tudge Court of Tax Appeals 596