CTA Case No. 4275 (Decision)

' REPUBLIC OF THE PHILIPPINES COUR T OF TAX APPEALS QUEZ ON CITY PCCI SECURITIES BROKERS CORPORA 1'ION, Peti t ioner, - versus C. T.A. CASE NO. 42 75 THE conniSSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - -X D E C I S I CJ N I n the c ase a t bat~ , / peti t ioner prays that "_j udgment be rende r ed ordering the respondent to reFu nd t o the petitioner the sum oF P~~7,B2B.OO or, in the a lternative, issue a tax c red it Fo t~ th e said a mou n t in Favo r o F t he petitioner" ("Pet ition For R e view", p. 3; CTf:l Records, p. 3). This amount re pt~ e s ent s petit i on e r's allege dly o vet~ pa i d incom e t .::uc For taxable ( c alend ar ) year F or ca lendar year 1 9B6, p e t itioner, a Philippine corpo ration, Filed with the Bureau oF Internal Revenue, its "Corporation/Partnership l=lnnual Income Tax Return" CExh. "A"; I b i d. , p. 7) , th erein declaring a net taxable income oF P2B0,597.00 which is sub_ject to tax in the amount 61

C.T.R. CRSE NO. 4275 - DEC ISION - oF P98., 209. 00. In said return., petitioner also declared the Following: prior year's excess credit: in the amount: oF P95,742.00; quarterly payments 111ade in 1986 totalling P 251,707.00 ; and 1986 - creditable withholding tax in the amount oF P8, 588.00. Consequent: 1 y, For the taxable year 1986, petitioner had a declared reFundable a..rount: oF P257,828.00, computed as Follows (See Exhs. "R". to "L"; Id., pp. 7-18) : R1ount of Tax Due for 1986 p 98,209.00 Less: .. Prior year's tax cr�edit p 95,742.00 ,. 1986 quarterly payrents 251,707.00 1986 creditable withholding tax 81588.00 3561037.00 Total arount due (refundable} iP2571 828. 00) Exhibit: "A" indicates that: this amount: is "t: 0 be applied as tax cr~dit to succeeding taxable year" <Exh. "R-1 "; Id. ) � Petitioner's an~ual income tax return Fo~ taxable year 1987 shows th~t it: incurred loss For that: year, and consequently, a tax due oF "NIL" CExh. "N"; Id. , p. 59). On April 25, 1988, petitioner Filed with the BIR, in a 1et~er dated March 19, 1988, i t s request

.. C. T.R. CRSE NO. 4275 - DECISION - 3 Fot~ oF the amount oF P231, 388 . 71, representing alleged overpaid income tax For taxab l e year 1986 CExh. "N"; Id., pp. � 4 - 6). Rs respondent has, admittedly, not yet acted on said request For reFund, peti~ioner Filed the instant petition For review with the Court on May 27, 1988 in order to suspend the running oF the two-year pre scription period under the Tax Code. The issue beFore the Court For adjudication in the present case is, w~at amount, iF any, should be reFunded/credited to petitioner For allegedly overpaid inco�e tax ' For 1986. In order to settle this issue, the Court shall discuss the diFFerent alleged 1986 tax payments set Forth in petitioner's 1986 annual income tax return and deducted From the declared income tax due For .that year, separately. 1. Re: P95, 742. 00 in "Pri Ot' Year's Tax Credit" Respondent, in its "Answer" Cid., pp. 30-32) a nd me~orandum Cid., pp. 112-116), sets Forth For the issue oF prescription regarding the amount declared in petitioner's 1986 annual inco111e tax

C.T.R. CRSE NO. 4 2 75 - DECISION - 4 return as alleged tax credit From taxable year 1985 . Recording to respondent, "petitioner's right to claim the reFund oF the amount o F P95, 7 42.00 has prescribed" under the provisions oF Section 292 oF the 1977 Tax Code Cnow Section 230>, reFerring to the .amount reFundable to petitioner's Fro* taxable yea~ 1985 which i t carried over to 1986 CSee Exhs. "R", "0", and "0- 1"; Id., PP� 7 and SB, t~ espect i vel y) .. The Tax Code provision adverted to . . "\ , r eads, in part, as Follows: "Section 230.. Recovery oF tax � \� erroneously or illegally collected.. No suit . or proceeding sl;lall be maintained in any court For the recovery oF any nationa l internal revenue tax hereaFt~r all e ged to have been erroneously or illegally assessed or collected, or oF any penalty claimed to have been collected without authority, or oF any sum alleded to have been exces s ive or in any manner wrongFully collected, unt i l a claim For reFund or credit has been dul~ Filed with the Commissioner; but such suit or proceeding may be ~aintained, whether or not such t~x, 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 /~ I

C. L R. CASE NO. 4 2 75 - DECISION - - 5- regardless oF any supervening cause that may arise aFter payment; Provided, however, That the Commiss ioner may, even without a written claim thereFor, reFund or credit any tax, where on the Face oF the return upon which payment ~as made, such payment appears dlearly to have been erroneou s 1 y paid. �~ Respondent contends that ~tHe a�ourit aF P95,74.2.00 was allegedly paid in 1985, but the petitioh �or � I ... or review was Filed on May 27, 1988 or a period more than two years as prescribed by the aForesaid Section .230 oF the Tax Code" ("Memorandum For The Respondent", p. 5 ,� Id., p. 116)- �., The Court disagrees with respondent. The amount . oF P95,742.00 was declat"'ed in petitioner's 1985 annual income tax (Exh. "0", Id.) as the amount reFundable -For said taxable year. Petitioner's intention to apply the same as tax credit For 1 9 86 i~ shown in sai~ return, by Exhibit "0-1" (Id. ). In Fact, the excess tax payment For 1985 oF P95,74.2.00 was autoMatically set oFF against the income tax due dn petition.. er For the First quarter ending March 31, 1986. (Exhibit "B "' I d., p. 8). This is available to petitioner in .consonance with Section 69 (Formerly

. C.T.R. CRSE NO. 4275 - DECISION - - 6- Section 8 7 ) o F the Tax Code which s tates as Follows: "Section 69. Final f.ldjustment Return. - Every corporation l iable to tax under Section 24 shall File a Final adjustment return covering the total taxable income For the precedinb c al endar or Fiscal year. IF the sum oF the quarterly tax payments made during the said ta~able year is not equal to the total tax due on the entire taxable income o F that year the corporation shall eith er: (a) Pay the excess t ax still due; or CbJ Be reFunded th e exces s amount paid, as the case m ay �- . b~. In case the corporat ion is entit l ed to a reFund oF the excess esti mated quarterly income taxes paid, the reFundable amount shown on its Final adjustment return may be credited against the estimated quarterly income tax liabilities � Fo~ the tax able aua rters oF the succeeding taxable year." (underscoring supplied) Accordingly, the reFund being claimed by petitioner in the am ount oF P 257,828.00 does not include the ' 1985 exces s ta x credit oF P95,742.00 since this was al r eady utilized as aForementioned. The conjured is sue oF precription oF P95,752.00 is nowhere n~~r. The question that needs to be add ressed next i s whether petitioner can claim the entire excess taxes paid oF P95, 742.00 shown on its 1985 annual

C.T.R. CRSE NO. 427 5 - DECISION - - 7- income tax t~etu r n (Exhibit "0", Id., p. 58) . Let Us consider how it was arrived at : 1985 Inco1e Tax Due p 261, 149. 00 Less: 1984 Excess Tax Credits p 19,293.00 1985 Quarterly Tax Paynnts 1st(} CR# B-6755624 P 268,935.00 3t'CfG CR# B-7610161 25,11 1.00 294,046.00 313,339.00 Balance of Tax Due (or credit available} IP52,190.00J Less: Tax Credits 1984 Creditable Withhol~ing Ta x p 2, 125.00 1985 Creditable Withholding Tax I 41,427.00 43,552.00 TOTRL f1/IKJIMT IXEIIREFUNMBLEJ IP95, 7112. OOJ t �� iTo be llppl i ed as Tax Ct�edit to Succeeding Taxable Year} The BIR Rudit Sheet For Corporate Annual - Income Tax Return Showing Over Pa yment oF Income Taxes Paid For taxable year 1985 (Exh'iB ' it " S", Id., p . 62) sh owed however, the amount For reFund/credit to be P32, 897.,00. The computation is presented below: 1985 Inco1e Tax Due Pe68, 935.00 P261,149. 00 Deduct : 1985 Quarterly Ta x Pay1ents 25,11 1. 00 294,046.00 lstO CR# B-6755624 e 3E,897.oo 3rd�1 CRII B-7610161 ll1~unt for Refund/Credit Petitioner oFFered the Foregoing as evidence to pt~ov e that the BIR Mal<ati Regional OFFice has determined that petitioner had a reFundable amo'unt totalling P32,897.00. It appears that BIR did not tal<e into consideration the 1984 excess tax credits carried ov er to 1985 as well as the 1984

- C.T.R. CRSE NO. 4275 - DEC ISION - - 8- and 1 985 cred"f;ab l e withholding taxes claimed. The disallowan ce is on account' oF petitioner's Failure to attach supporting documents as required under Section 54 (now Section 51 ) oF the Tax Code, as amende d and its illfplementing t~ e g u 1 a f; i _on s � ~s to the 1984 accounts, these can be credited only against esti�ated tax ,. liabilities For the taxable quarters oF s u cceedi ng t axable year as provided by Section 69 <Fo r merly S e ction 87) oF th~ Tax Code or a written �., claim For reFund or credit oF any n a tional i nternal rev enue tax must be Filed within two years FrdM the date oF Paymen.t; <Section 230 [Fo rm erly Section 2921 oF the Tax Code). Said determination by the BIR is entitled to g r eat weight. ~ccordingly, We hold th a t only P3e,897.00 oF the 1985 a l 'l eged ~ exc ess tax . credits oF P95 ,742.00 can be cat~ried over to taxa ble year 1 986. 2. Re: P251,707.00 in alleged 1986 quarterly f; ax pa y men f; s � The Court Finds that petitioner's Exhibits "C", "E" and "6" CCTA Records, pp. 11 - 13) 60

C.T.A. CI1S E NO. 4275 - DEC I S ION - - 9- s uF Ficiently evid e nce the payment b y peti tio ner oF th e r e s p e ctive amounts oF P65, 56 9. 11, P78,112.42 a n d P1 0 8,025.65, For the First three quarters oF 1 986. I t is worthwhile to note that petition~r's i n c ome and business tax liabilities For 1986 have a l r eady been investigated and the deFiciehcy ; ta~es ,. Fou nd due thereon were already paid per Exhibi~ "H"' an d "L " !CTA Records, pp. 17- 18). 3. Re : P8,588. 0 0 i n alleged w it h held creditable tax For �., 1 986 . P e t itioner submitted in evidenc~ Certi'f\icate oF Cred itable In c ome Tax Withheld at Source For the y e ar 1 9 86 !Exhibit "H", Id., p. 14) to prove that th e a mount oF P8, 5 5B. 03 wa s d e du c ted and withheld by MIESCOR on consultancy Fees paid to petitioner a mo unting to P171, 760. 54. We Fi nd the suFFicie nt to show the act u a l withhdlding oF said amou n t. The Court, however, Finds that di sa llow the t~eFund oF the amount declared in pe ti t ioner"s 1986 income tax return as creditable withholding ;ax, by reason oF petitioner's Failure to s how that the P171,760.54 in consultancy 6S

.. C.T.R. CRSE NO. 4275 - DECISION - - 10 - From which the P8,588.03 was withheld Forms part oF i t s declared income For 1986. W~11 ...:. settled is the rule that claims For tax cr~dit or reFund oF income tax deducted and withheld on income payment s shall be given due course only w~en i t l is shown on the was return I that the income j payment received . � I declared as part oF the gross income ' and the Fac,.t: oF withholding is established by a copy oF th6 statement duly issued by the payor to the payee (BIR Form 1743) showing the amount: paid and the , amount oF 10, "'h, ~ tax withheld thereFrom ' (section Revenue Regulation No. 13-78 as amended by Rervenue Regulations No ~ 6-85, Section 54 [now Section 51] (F) oF the Tax Code; Citytrust Finance Corporation v. CIR, CTR Case No. 4134; November 11, 1991; BPI S avings Bank Inc. v. CIR, CTR Case No. 4412, August 1 7 , 1992). We would now tackle the discr~pancy in the amount claimed as reFund/tax credit with the BIR and that claimed in the petition For r ev iew. Bas'ed on petitioner's l~tter to the BIR. dat:ed March 19, 1988, the amount claimed is P231,388.71 while in the petition . For review, it was P257, 828. 00. The diFFerence oF P 26 ,439.29 pertains to the e~mount

C.T.R. CASE NO. 4 275 - DEC ISI ON - - 11 - allegedly applied as automatic credit against petitioner's income tax liabilit~ as oF' the third quarter oF 1987 <Exhibt "N", CTI=J Records, pp. 4-6), which surprisingly was not borne out ~y the 1987 I=Jnnual Income Tax Return as it showed a tax due oF "NIL" since it .I loss For the year incurred 1 a Id.; 59). , 1 However, ... <Exh:,i.bit ''P", P� For lack or t' Failure to File a clai� For� reFund/tax � credit oF � I the balance oF P 26,439.29 with the Co�aissioner ' oF Internal Revenue within two (2) years From the "" ~,, payment oF the tax For 1986, petitioner�s clai� is still barred by law <Sections 292 and 295) \' fnow Section 230 and ?,04) oF the 1Tax Code as amended). ThereFore, based on the above Findings, the Court holds that petitioner is entitled to the reFund/tax credit oF the amount oF P159, 955. 71, thus computed: l11ount of Inco1e Tax Due for- 1986 P98,209. 00 , Les s: Prior Year's (1985J Excess Tax Cre~it P32,897r 00 1986 Quarterly Pay1ent s 251, 707~00 284,604.00 Balance of Tax Due lor Credit available for I tPt86,~. ooJ �~;It '' succeeding quarterly return) .I I j' Le ~s : Tax Credit - '' R1ount of Tax Still Due/fRefundableJ lP186,395. OOJ Less: Refundable a1ount credited against the inco1e tax liability for the Jr'C/ quarter of 1987 26,439.29 TOTRL RMOUNT REFIMJRBLE fP159, 955. 71J �j

C. T. A. CASE NO. ./+275 - DEC I SION - - 12 - IN VIEW OF THE FOREGOING, ~he Cour~ GRANTS in par~, pe~i~ioner's ins~ant cla ~ m ' For ' reFund/~ax credi~- Respond e n ~ i s hereby o r dered ~o reFund ~0 ot-- i s s u e a ~ax cr edi~ in pe~i~ioner's Favor, in ~he ~o~al a~oun~ oF P159,955.71j represen~ing overpaid � in c ome ~axes For ~axable year 1986 wh 1 ch .. bee n uti 1 i zed. No cos~s. SO ORDERED Quezon Ci~y, Me~ro Manila, February 16, 1993. GRUBA Judge WE CONCUR : <?~ Q... ~ . ACOSTA ~~~~~ RAMON 0. DE V RA Associa~e J u d e

...,..-� C.T.R. CRSE NO. 4275 - DECISION - - 13 - C:ERTIFIC:ATION I hereby certiFy that this decision was reached aFter due consultation a�ong the me�bers o�F the Court oF Tax Rppeals in accordance wi th Section j1 13, Rrticle VIII oF the Constitut~on. I . ~"I;; Q, ~ ERNESTO D. ACOSTA Presiding Judge Court, oF Tax f:lppeal s . ~ ' ........