AECOM PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION AECOM PHILIPPINES, INC., CTA CASE NO. 10007 Petitioner, Members: -versus- DEL ROSARIO, P.J. , Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. JUN 2Q2022 1i/..)f?,.._ X---- -------- -------------------------~-----'--------- X RESOLUTION DEL ROSARIO, P.J.: This resolves petitioner's Motion for Reconsideration (Re: Decision Rendered on October 25, 2021) filed on December 1, 2021, without respondent's comment as per Records Verification dated March 8, 2022. The dispositive portion of the assailed Decision1 dated October 25, 2021 reads : "WHEREFORE, premises considered, the present Petition for Review is DENIED for lack of merit. SO ORDERED." Petitioner moves for the reconsideration of the assailed Decision based on the ground that the Court erred in not considering petitioner's pieces of evidence showing that its income upon which the taxes were withheld was included as part of the gross income declared in its income tax returns. It raises the following arguments: 1 CTA Docket, pp. 523-536. 0'1

RESOLUTION CTA CASE NO. 10007 Page 2 of6 1. The income payments upon which the taxes were withheld were included as part of the gross revenue declared in its Income Tax Return (ITR); 2. Petitioner's unutilized creditable withholding taxes (CWTs) for fiscal year (FY) 2016 are duly substantiated by documentary evidence; and, 3. The amount claimed by petitioner was not carried over nor applied to the succeeding year. After a careful evaluation of petitioner's arguments, the Court finds no merit in the motion. In the assailed Decision, the Court found that petitioner failed to prove that its income payments were declared as part of the gross income reported in its Annual ITR. More specifically, the Court held that petitioner's income payments could not be traced to the Annual ITR due to lack of supporting documents, to wit: "A perusal of petitioner's Amended Annual ITR for FY 2016 shows that its gross income amounted to f"190,088,152.00, computed as follows: Net Sales/Revenues/Receipts/Fees P172,615,367.00 Add: Other Taxable Income Not Subjected to Final Tax 17,472,785.00 Total Income 190,088,152.00 On the other hand, the withholding tax certificates reveal that the CWTs in the amount of P12,355, 134.07 (against which the claimed amount of P11 ,968,655.00 was compared) was withheld on gross income payments of P94, 143,379.31. The Court, however, is unable to verify whether the gross income payments off"94, 143,379.31 indeed formed part of the gross income of P190,088, 152.00 reported by petitioner in its Amended Annual ITR for FY 2016. It is noted that petitioner presented a Tax Recovery General Ledger Account and Project Performance Report for FY 2016 in an attempt to show that the income payments were declared in the Amended Annual ITR. Perusal of the Tax Recovery General Ledger Account, however, shows that no amount of income payment was reflected therein but only the amounts of CWTs sourced from FY 2016. Moreover, the Project Performance Report for FY 2016 does not indicate the name of petitioner's income payers, the amounts of income payment and the CWTs. These documents, taken together, were not sufficient to prove that the total income recorded per petitioner's books tallies with or were the same income that is reflected in its Amended AnnuaiiTR for FY 2016."2 2 CTA Docket, pp. 534-535. ~

RESOLUTION CTA CASE NO. 10007 In its Motion, petitioner admits that the Tax Recovery General Ledger Account3 does not reflect the amount of income payment but only the amounts of CWTs sourced from Fiscal Year (FY) 2016, and that the Project Performance Reports (PPRs) for FYs 2014, 4 2015, 5 and 20166 do not indicate the name of petitioner's income payers, the amounts of income payment and the CWTs. Petitioner claims that a tracing procedure could be undertaken to determine how income payments received by petitioner are eventually reported as part of the gross income in its ITRs. The Court has painstakingly reviewed the tracing procedure presented by petitioner and it can be summarized as follows: (1) The income payment and withholding tax are determined from the individual BIR Forms No. 2307 or Certificates of Creditable Tax Withheld at Source (CWT Certificates). (2) The amount of income payment is traced to an official receipt (OR) that bears an "Invoice No." (3) The "Invoice No." is then traced to a billing invoice that states a certain project contract code (PCC). (4) The PCC is then presented as a line item in the PPR. Petitioner illustrated the foregoing tracing procedure using Exhibit "P-24" (BIR Form No. 2307) as an example, thus: (1) The BIR Form No. 2307 indicates that petitioner received an income from Trans Aire Development Holdings Corp. during the period October 1, 2015 to December 31, 2015 in the amount of P1, 866,336.04 with a corresponding withholding tax of P37,326.72. (2) The income payment is then traced back to OR No. 0000856 bearing an invoice amount of P2,052,969.64 which is gross of value-added tax (VAT) and net of the 2% withholding tax. Adding the 2% withholding tax of P37,326. 72 and deducting the VAT of P223,960.32 will result to an income payment amounting to P1 ,866,336.04 which tallies with the income 3 Exhibit "P-163". 4 Exhibits "P403" and "P-403-A". 5 Exhibits "P402" and "P-402-A". 6 Exhibits "P401" and "P-401-A".C1'J

RESOLUTION CTA CASE NO. 10007 Page 4 of6 payment reflected in BIR Form No. 2307. The OR indicates Invoice No. PH 15-034 as the source document. (3) A quick look at Billing Invoice No. PH 15-034 (Exhibit "P- 167") readily shows an amount due (VAT inclusive) of P2,727,200.00 and the PCC "MNLD13109WC". (4) The Court then traced the PCC to the PPR. The PPR for FY 2016 indeed presents the PCC "MNLD13109WC" as one of its line items. It shows that the Inception- to-Date Gross Revenue (lTD GR) or the gross revenue recognized for the entire duration of the project from its commencement to the date of the report already amounted to P19, 145,756.00. Moreover, the PPR states that the Inception-to-Date Billing (lTD Billing) or the total amount of invoices billed by petitioner from the commencement of the project up to the date of the report already amounted to P17, 111,205.00. According to petitioner, the lTD GR being greater than the lTD Billing means that any amount collected from the said billings already had a corresponding revenue recognition in petitioner's books. In other words, petitioner is saying that no billed amount has not been recognized in its books. Applying petitioner's explanation to the above example, petitioner claims that the income payment of P1 ,866,336.04 formed part of the total lTD Billing of P17, 111,205.00 which in turn was part of the lTD GR amounting to P19, 145,756.00. The Court is not convinced. It should be noted that the amount reflected as lTD GR is the gross revenue recognized for the entire duration of the project from its commencement to the date of the report. Taking petitioner's example, this means that the amount of P19, 145,756.00, of which petitioner claims that the income payment of P1 ,866,336.04 is part of, covers several years. As to how much of the P19,145,756.00 pertain to the income earned and reportable for FY 2016, the same was not shown. First, the PPR does not indicate the Year-to-Date Gross Revenue (YTD GR) or the gross revenue recognized for the FY and the amount eventually reflected in the Audited Financial Statements (AFS) pertaining to the PCC "MNLD13109WC". Second, petitioner did not provide any breakdown of the P19, 145,756.00 to show that indeed an income payment of P1,866,336.04 for FY 2016 was part of the former."J

RESOLUTION CTA CASE NO. 10007 Page 5 of6 A perusal of the PPR for FY 2016 shows that for PCC "MNL013109WC" a dash was reflected under the YTO GR column. This means that there is no gross revenue recognized for FY 2016 and such fact only leads to the reasonable conclusion that the ITO GR of P19,145,756.00 does not include any income earned in FY 2016. The income payment ofP1 ,866,336.04 was not established to have formed part of the ITO GR of P19, 145,756.00. Even assuming that the income payment of P1 ,866,336.04 was actually part of the ITO GR of P19,145,756.00, it does not negate the fact that no income for PCC "MNL013190WC" was reported for FY 2016. More importantly, petitioner still failed to show the total breakdown of the total income of P190,088, 152.00 as declared in petitioner's Amended Annual ITR for FY 2016. 7 Consequently, the Court cannot verify whether the gross income payments of P94, 143,379.31 on which the subject withholding taxes were made certainly formed part of the gross income of P190,088, 152.00. The PPR for FY 2016 dedicated a column for YTO GR which supposedly represents the gross revenues recognized for the FY and the amount eventually reflected in the AFS. The PPR for FY 2016 shows that the total YTO GR for FY 2016 is only P169,004,612.00 which still does not match the gross income for FY 2016 amounting to P190,088, 152.00 or at least the Net Sales/Revenues/Receipts/Fees amounting to P172,615,367.00 as reported in the AFS for FY 2016. The discrepancy between the total amount of P169,004,612.00 reported in the YTO GR found in the PPR of 2016 and the Net Sales/Revenues/Receipts/Fees reflected in the AFS for FY 2016 amounting to P172,615,367.00 leaves doubt as to the veracity of the total income payments declared by petitioner. At this point, it is apparent that the application of the tracing procedure presented by petitioner to the other income payments would yield the same result. Remarkably, petitioner already admitted that "the exact amount of income payment shown in BIR Forms No. 2307 cannot be matched to any single line item reported in the PPR."8 Thus, even though the YTO GR amounted to P169,004,612.00, the admitted fact remains that the breakdown thereof does not match any of the income payments reflected in BIR Forms No. 2307 or CWTs. Anent the timing difference allegedly caused by petitioner's use of the percentage of completion method of recognizing revenue, while Section 48 of the National Internal Revenue Code (NIRC) of 1997, as 7 Exhibit "P-5", CTA Docket, pp. 429-436. 8 Par. 24, Motion for Reconsideration, CTA Docket, p. 547. f11

RESOLUTION CTA CASE NO. 10007 Page 6 of6 amended, sanctions the use of said method, petitioner failed to point out the exact years when the respective incomes were reported. Notably, petitioner did not offer in evidence the AFS and AnnuaiiTR of FYs other than that for 2016 and 2017 to show that the gross income in such other periods contained the timing difference being alleged. Tax refunds or credits, just like tax exemptions, are strictly construed against the claimant, the latter has the burden to prove strict compliance with the conditions for the grant of the tax refund or credit.9 The claimant should prove every minute aspect of its case by presenting, formally offering and submitting its evidence to Court. 10 Evidently, petitioner failed to discharge the burden of proof entitling it to the refund being claimed. Considering the foregoing, the Court finds no cogent reason to reverse or modify the assailed Decision dated October 25, 2021. WHEREFORE, premises considered, petitioner's Motion for Reconsideration (Re: Decision Rendered on October 25, 2021) is hereby DENIED for lack of merit. SO ORDERED. Presiding Justice WE CONCUR: ~- /'. /i:Arc...~..-&.4..--- CATHERINET.MANAHAN Associate Justice 1m. ~{)l.h'J:'~�~ MARIAN REves-FA~RDo Associate Justice 9 Applied Food Ingredients Company, Inc. vs. Commissioner of Internal Revenue, G.R. No. 184266, November 11, 2013. 10 Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007.