CTA Case No. 4254 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PASEO REALTY AND DEVELOPMENT CORPORATION, Petitioner, versus C.T.A. CASE NO. 4254 COMMISS ONER OF INTERNAL REVENUE,. Respondent. X- - - - - - - - - - - - - X DEC sI 0N The case at bar invokes petitioner's claim �or the tax refund of ?254,999. 00 representing a lleged overpaid incom tax for the calendar year ending December 31, 1985. Petitioner, Paseo Realty and Development Corporation, i a corporation du ly organized and existing under Philip pine laws with principal office in Makati, Metro Manila. On April 14, 1986, petitioner fi l ed its Income Tax Return for 1985, with the Bureau o� Internal 7'73

DECISION - C.T.A. CASE NO. 4254 - 2- Revenue, declaring a refundable income tax in the amount of ?254 , 999.00, detailed as follows:~ Income <Schedule 4 - p ,855,000.00 R ntal / Le s s) _ !_,__?.? 9_,__~_12_!....QQ p 75,158.00 Less: Deductions Net Income p 18,790.00 Tax Due _ _!81 039. QQ. Less: <P162,249.00> Prior y(ot'ar's exc as credit B lance of Tax Due Leas: Tax credit - 5~ exp nded withholding t x on rentals TOTAL AMOUNT OF TAX DUE/ REFUNDABLE A separate c laim for refund or tax credit was filed on April 13, 1987 with respondent's office regarding p titioner's prior year's' excess credit in th amount of P181,039. 00.a Sub quently, petition r filed on October 1, 1987 a w : tt. n c l im for ref und or tax credit o:f P73, 96 . 23, r@'presenting excess creditable 1 Exh. A-1. :a Exh. F. Mot : A eparate petition taa filed lith the Court docketed as CTA Case Ko. 4143 with respect to the elai1 for refund of Pl81,039.00. On April 3, 1992, this Court rrived at a dooision granting th! petition. On appeal, the Court of Appal in its decision <GA ~ G.R. SP Mo. 279031 dated July 31, 1992 reversed the CTA decision on the ground that no decision was rendered by the respondent Co �issioner of Internal Revenue thus �aking the petition lith the CTA preaature. A "otion for Reconsideration is now pending with the sate Court.

.J DECISION - C.T.A. CASE HO. 4254 -3- withholding taxes for the year 1985. 3 The claim for refund of P73,9G0.23 was arrived at after deducting the 1985 tax liability of Pl8,790.00 from the current year <1985> withholding tax on rentals amounting to P92,750.00. On April 15, 1988, there being no acti on on the claim for refund or tax credit, petitioner filed the instant judicial claim for refund of the amount of P254,999. 00 instead of P73,9G0.23. Respondent alleged as special and affirmative defenses lack of cause of act ion for failure of petitioner to state the date when the tax was paid. Furthermore, the income tax return standing alone is not sufficient t o prove entitlement to the claim being sought. Moreover, in act ions for refund, the burden is on the petit ioner- taxpayer to show entitleme nt thereto. Petitioner offered in evidence, the following documents: a. 1985 Income Tax Return ( BIR Form No. 1702> together with the audit or's report and its financial statements; 4 2 Exh. G. � Exh. A-1. 7 0 ~~i .,... I

DECISION - C.T.A. CASE NO. 4254 - 4- b. Statements of Tax Withheld at Source <BIR Form No. 1743> issued by Citibank, N. A. as withholding agent;~ and c. Letter dated September 24, 1987 filed with the respondent's office on October 1, 1987 seeking the tax refund or credit of the amount of P73,960.23 as alleged excess creditable withholding taxes for the year 1985. 6 Respondent maintains that the petition ~tatee no cause of action for failure of petitioner to allege t~e date of payment of the tax being claimed for refund. Respondent for hie part waived hie right to present any evidence. Instead, he submitted the case based on the pleadings. We disagree with respondent's position. Section 292 (now 230> of the National Internal Revenue Code provides a two-year prescriptive period to file a s uit for a re:fund o:f tax erroneously or illegally collected �or o:f any sum alleged to have been excessively collected counted from the date o:f paym~nt. The date o:f payment :for corporate income taxpayers has been construed to mean the period when the income tax return is s Exhs. C and C-1. 6 Exh. G.

DECISION - C.T.A. CASE NO. 4254 - 5- required to be �iled. 7 Corporate annual income tax returns are requested to be �iled on or be�ore the 15th day o� April <i� on a calendar basis> or on the 15th day o� the �ourth month �allowing the close o� the �iscal period, as the case may be. 8 The "two-year prescriptive period is thus computed at the time o� the �iling o� the Final Adjustment Return or the Annual Income Tax Return, when it can be �inally ascertained i� the taxpayer has still to pay additional income tax or i� he is entitled to a re�und o� overpaid income tax". 9 In this case, the two-year prescriptive period commenced to run, at the earliest, from the time petitioner was required to file a return, that is, on April 15, 1986. Petitioner filed a written claim for refund or tax credit with the respondent on October 1, 1987. Hence the two-year period for _, 7 Sec. 87<c> MIRC. 8 Sec. 87<b>, ibid.; Unibake Inc. v. Co..issioner of Internal Revenue, CTA Case Mo. 3987, July 31, 1989. - 9 Co��issioner of Internal Revenue v. TftX Sales, Inc., et. al., G. R. No. 83736, January 15, 1992; ACCRA Invest~nts Corporation v. The Honorable Court .of Appeals, Co��issioner of Internal Revenue and The ~ourt of Tax Appeals, G.R. No. 96322, Dece�ber 20, 1991; Co��issioner of Internal Revenue v. Asia Australia Express, Ltd., represented by Soria�ont Stea.ahip Agencies, Inc., and Court of Tax Appeals, G.R. Mo. 85956, April ~ 10, 1989; Co�dssioner of Internal Revenue v. City'trust Banking Co~~oration, CT - G.R. SP Mo. 26839, -July 31, 19~2; and Servicewide Specialists, Inc. v. Co��issioner of Internal Revenue and Court of T~x Appeals, CA - G.R. SP Mo. 25893, Nove�ber 9, 1992. - ' 7 '7?

DECISION - .) C.T.A. CASE NO. 4254 -6- judicially claiming for a refund has not yet lapsed when the petition was filed on April 15, 1988. In the case of ServiceJTide Special.ists, Inc. v. Commissioner o.f Internal. Revenue and Court o.f Tax Appeal.s, CA - G. R. SP No. 25893, February 14, 1992, the question relative to the prescriptive period for claims for refund has been sufficiently discussed and clarified as follows: "The ruling was subsequently clarified by this Court in a later case, Commissioner of Internal Revenue vs. Insular Lumber Co., Dec. 11, 1967, 21 SCRA 1237. It was there held that Sections 306 and 309 of the Internal Revenue Code were intended to govern all kinds of refunds of internal revenue taxes - those taxes imposed and collected pursuant to the National Internal Revenue Code. In _q_t.h~.!'~Qrds the __E.!'~scrip.!,.!.ve g~ r i _Q_g 9 f two _L~l.._y_~_? r s_ t h.�'rJo> ii!__p_:r..p v_~.9 eq_ !�__!.l:t_~_C?..!!.!L_'!.).:_\ :i.o.Q.!L_~n.Q.~_j._g__g..Q.y_~m__a n d _QQ_i;,. ___ ~ny .Q!,_he!:.._J.1.r ~�_Q.t.::.!.P- tJ.:.~g...._P._~!:..!f.l...c:!r..__:!?._\!C h J . s :t.h.~_t_._ o . j_t_~n._L!..9_L_ .Y_~3~.L~_J.l.!:..9 v i _g ec!._f C?._L ..._;tn. ~ri;,.;l<;:l ~ 1144, __par C!gLC!P_h__i�L_ o f __the_ Ci y_j,._l g~ de. XXX XXX XXX. 'In fine, when the tax sought to be refunded is illegally or erroneously collected, the period of prescription starts from the date the tax was paid; but when the tax is legally collected, the prescriptive period commences to run from the date of occurrence of the supervening cause which gave rise to the right of refund. The ruling in Muller & Phipps is accordingly modified.'" Again this Court in the case of Citytrust Banking Corporation v. Commissioner o.f Internal. ~/

DECISION - C.T.A. CASE NO. 4254 -7- Revenue, CTA Case No. 4099, nay 28, 1991, has ruled: "Although the title of Sec. 230 of the Tax Code is 'Recovery of Tax Erroneously or Illegally Collected', the title alone is not controlling. By the t e nor of Sec. 230, the two-year limit ap plies t o actions to recover - 1. any nat ional internal revenue tax erroneously or illegally assessed or co llected: 2. any penalty claimed to have been co llected without uthorityJ or 3. a ny u rn alleged to h ve b een exc&- eive or in any man ne r wrongfully collecte d (See Mulle r & Phipps v. Commissioner of Internal Revenue, 103 Phils. 145, Marc h 20, 1958 >. The overpaid income taxes in this case fall under #3 for although they were legally collected by virtue of the withholding tax system and the requirement for quarterly income tax p yments, they were nonethe less 'excessive'. " s.o This case evidently involves claim for refund o f excessive payment of income t ax covered by the 5% wit hh old ing of rental inc ome of petiti oner. Thus, the two-year pe riod of filing a claim for refund with this Court is in o rder. Respondent further argued that petitioner failed to present as proof of payment and remittance the Official Recei pts or Central Bank 10 Affirted by the Court of Appeals in Conissioner of Internal Revenue v. Citytrust Bankin9 Corporation, CA- G.R. SP No. 26839, July 31, 1992. /

.. _ DECISION - C.T.A. CASE NO. 4254 -8 - Confirmation Receipt issued by r espondent, that the pre sentation of Statement and Certificate of Withholding although establishing a prima facie evidence of withholding is not e nough to prove that the taxes wit hhe ld were in fact re mit ted to the Bureau of Int ernal Revenue, and likewise, the income tax return is insufficient proof of refundabilit y. Time and again this Court has r uled that i n claims for refund of exc e sa withhol ding taxes petitioner - t xpayera need only prove t he following: ( 1 > that it fi led a claim for refund within the two <2 > year period as prescribed under Section 292 (now 230 > o� the National Internal Revenue Code; (2) tha t th inco me upon which the taxes were withheld were i ncluded in t he r eturn of the rec ipie nt; and <3> the fact of withho ldi ng is established by a copy of statement <BIR Form 1743.1> duly issued by the payor <wi thholding agent> to the payee, showing the amo unt pa id and the amount of tax withheld therefro m. 11 11 Sec. 10, Rev. Reg. 6-85; see Citytrust Finance Corporation v. The Coeeissioner of Internal Revenue, CTA Case Mo. 4134, Noveeber 11, 1991 ; and Citytrust Finance Corporation IFonerly Investors Finance Corporation/FIICB Finance) v. Coeeissioner of Internal Revenue, CTA Case No. 4046, Febru ry 24, 1993. ?0 0

- DECISION - C.T.A. CASE NO. 4254 -9- The law and/or the implementing revenue regulations do not require the production ox Central Bank Conxirmation Receipts or the Withholding Tax Return or the verixication by the revenue � enxorcement oxficer ox the statement ox withholding taxea. 1 2 All that is required to show proof o� withholding is the presentation o� Stat ment of Tsx Withh ld at Source <BIR Form 1743.1> showing the income received and the amount of tax withheld therefrom nd that the income was included to form part of petitioner's gross income as stated in its income tax return. The reason for this is simple. The withholding agents are not within the control o:f t he payee taxpayer but are the tax agents of the Commissioner of Internal Revenue. The withholding agents merely hold the amount in trust :for the government.l3 It appears from the doc uments presented by petitioner that only the amoun t of P73, 960. 23 wa s 12 Coaaiasioner of Internal Revenue �� The Philippine Aterican Life Insurance Co. and The Court of Ta~e Appeals, CA ~ G. R. SP llo. 26598. Jlarch 26, 1992; Citytrust Finance Corporation CForterly Investors Finance Corporation/FIICB Finance! v. Co111ssioner of Internal R venue, CTA C se llo. 4046, supra. 1 Ateneo de Jlanila v. � Co11issioner of Internal Revenue, CTA Case Mo. 3213, July 28, 1989; and Cononwealtb Pacific Consultants Ltd. v. Cotliasioner of Internal Revenue, CTA Case llo. 2953, Jlay 15, 1982. l 3 Coaais ioner of Int&rnal Revenue v. Citytrust Banking Corporation, CA -G.R. SP llo. 26839, supra. 7 8.1

- DECISION - C.T.A. CASE NO. 4254 - 10 - asked for in its claim for refund/tax credit filed in the administ~~ative leveL But in the petition brought before this Court petitioner prays for the refund of the whole amount reflecte d as income tax refundable in the income tax ret urn for 1985 or the amount of P254,999.00. S�..1bsequent 1 y in its mem o~~andum petitio 1HH" admitted that it was merely asking fat" the t'' ef und of P73, 960.23 re pr esenti ng I, the excess with hold i ng taxe s paid for the year 1 '385. the event petition~ r i s entit le d to the ref und clai111ed only be f Ot" t he amount of P73,'360.23 and not P254,'3'3'3 . 00 as prayed for in t he petltion. Potitio n ar w~ s ab le to @Sta blis h that it f iled a written � aim f ar refund/t a x c edit with the respondent in th a mount of P73, 960. 23. In as much as the jt.lt'is d iction of the Colwt is excl usi vely appellate in natt.lr~e, t he Cour t shal l therefore limit it$ r~e v iew with what petition claimed initially in tha ad m.T1i s tr�,ative level. ther~e has alt"ea dy been file d a separate petit ion with respect to the re mainde r of P181,039.00. This Court has al t�eady gt~a nt ed s uch c laim in its deci sion dated ApY'il 3 , 19'32 in CTA Cas e No. 7 0 '~ 1 0~

- DECISION - C.T . A. CASE NO . 4 254 - 11 - WHE REFORE.,. in V.i. PW of to RE F UND j Tl f t::l\1 0 1 ~ nf p e t i t i o n e t~ t h e a mo '..l llt nf ~~ e rn~ e s e n t i n g i ts ct ' f)cl it a b l P N o cost�; . SO ORDERED . (,l u e<:o n C ity , l>"l r~� t t" Cl t' IC:\ nil ,:1 , (-)u g�..l st 10, 1 9 93. ~ GRUBA MANUEL K. n <; s () c i C."\ t e J d 1..\ I] e WE ONCUR: Q.~ STO D. ACOS TA

- DECISION - C.T.A. CASE NO. 4254 - 12 - CERTIFICATION I hereby certify tha this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~Q.~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals