CTA Case No. 4792 (Decision)

e .. REPUBLIC OF THE PHILIPPINES COURT OF tAX APPEALS QUEZON CITY FIRST.PACIFIC DAVIES C.T.A. CASE NO. 4792 PHILIPPINES. INC�� Promulgated Petitioner, MAR 0219l!; - versus - - - - - - - -X THE COftftiSSIONER OF INTERNAL REVENUE. Respondent. X- - - DECISION This is a case for the refund of alleged unapplied tax credits of ov�erpaid quarterly income tax and unutilized creditable withholding tax as of December 31, 1990 in the total amount of P1,171,555~00. Petitioner is a domestic corporation doing business in the Philippines as a Real Estate Broker. The facts�.of the case as narrated by the P~titioner in its Petition for Review practically remain undisputed as Respo'ndent, although denied some of them, did not do anything to refute the same. A substantial portion thereof is hereby quoted, thusly: On Hay 26, 1989, July 31, 1989 arid November 29, 1989 respectively,. the Petitioner filed its quarterly income tax returns for the first, second and third quarters of the calendar year ending December 31, 1989 with 472

DECISION - C.T.A. Case No. 4792 -2- Revenue District 32-A West Makati, showing quarterly income tax payments in the total amount of P337, 340.. <A copy� o� the quarterly ~ncome 1 tax return, CB Confirmation Receipt and BIR Payment Order for the quarter ending March 31, 1989 are attached hereto and made an integral parts hereof, as Annexes "A", "A-1" and "A-2", respectively. A copy o� the quarterly income tax return, CB. Confirmation Receipt and BIR Payment Order for the quarter ending June 30, 1989 are attached hereto and made integral parts hereof, as Ann~xes "B", "B-1" and "B-2" respectively. A�::copy o:f� the quarterly income tax return, CB Confirmation Receipt and BIR Payment Order for the quarter ending September 30, 1989 are attached hereto and made an integral parts hereof, as Annexes "C", "C-1" and "C-2", respectively). On April 15, 1990, Petitioner filed its final income tax return for the calendar year ending December 31, 1989 with Revenue District 32-A West Makati showing the total quarterly income tax payments of p337,340, total creditable withholding tax payments o� P723,347 and a net income tax due amounting to P113,072. <A copy of the return is attached herewith and made an integral part hereof as Annex "D"). Deficiency income tax incurred by Petitioner for the calendar year ending December 31, 1988 in the amount o� P20, 964 was added to the said income tax due �or the taxable year 1989. At the �end of the taxable year 1989, the total amount to be applied as tax credit �or the succeeding taxable year 1990 was P926,651. On April 15, 1991, Petitioner filed its final income tax return for the calendar year en9ing December 31, 1990 with Revenue District 32-A West Makati, showing a net loss o� P3,601,445 and total creditable withholding tax payments of P224,904. A copy o� the return is attached herewith and made an integral part hereof as Annex "E". 473

DECISION - C.T.A. Case No. 4792 -3- Due to the net loss position o� the operations o� Petitioner during the taxable year 1990, Petitioner was not able to utilize its creditable withholding taxes in the total amount of P224, 904, nor was it able to carry over the total tax credits incurred �or the taxable year 1989. Due to an expected net loss position o� the taxable year 1991, Petitioner was not able to carry over the unutilized creditable withholding taxes for the taxable year 1990. On February 26, 1992, which is within two <2> years a�ter the payment o� the above �taxes, and pursuant to Section 204(3) o� the National Internal Revenue Code <Tax Code>, Petitioner filed a claim for refund of the unapplied tax credits for overpaid quarterly income tax and unutilized creditable withholding tax as o� December 31, 1990 in the total amount o� P1,171,555 with the Bureau of Internal Revenue through the Appellate Division o� the BIR National O�fice, Diliman, Quezon City (A copy of which is attached herewith and made as integral part hereof as Annex "F">. (ibid.> Such cla~m for refund was never acted by herein Respondent. Hence, this appeal. Is the Petitioner entitled to the re�und claimed? We answer in the a��irmative. Section 69 of the National Internal Revenue Code provides, thus: 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 �iscal year. If the sum o� the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire 474

#o' DECISION - C.T.A. Case No. 4792 -4- taxable net income of that year, the corporation shall either: a. Pay the excess tax still due; or b. 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 liabilities �or the taxable quarters o� the succeeding taxable year. <Underscoring supplied> And since the refundable amount shown on its final adjustment return for taxable year 1989 was not applied or utilized in the succeeding taxable years 1990 and 1991 the Petitioner having experienced tax loss positions, the automatic carry-over was therefore, impracticable. Hence, a refund or tax credit in the amount. of P1,171,555.00 is in order, computed as follows: Net income per Final Income Tax Return p 323;063 35X Tax Rate 113,072 Income Tax Due 20,964 Add: 1988 Deficiency 337,340 Income Tax Less: Quarterly Payments: lst Quarter P111,048 ~fi� f.l4�rter . tau��J"t�r� 3..-~ ~76,106 �~ �~Q,186 .. < :-; ~.;,�. . �.r �. �i:.'". .~. t 475 ___ _!>"'

) �J DECISION - C.T.A. Case No. 4792 -5- Less: .Creditable Tax Withheld p 723,347 <P 926,�651) Total Amount to be Applied as Tax Credit for Succeeding Year Net Loss per Final <P 3 1 601 1 445> Income Tax Return 0 Income Tax Due 2241 904 Less: Creditable Tax Withheld 926,651 Less: 1989 Unapplied Tax Credit (p 1.171.555) Total Net Inco�e Tax Refundable In Petitioner's 1990 Income Tax Return <Exh. C>, however, We could readily see that the re�undable amount should have been P1,192,519.00, whereas, the amount prayed for was only P1,171,555.00 or a di��erence of P20,964.00. Such difference was, however, explained by Petitioner's witness, Mr. Edgar Suzon, its Financial Comptroller when he testified, thus: Q. Mr. Witness, per your 1990 ITR, your tax refundable is P1, 192, 519. 00. However, in this letter claim for refund �iled by your tax counsel, your tot~l net income tax refundable being claimed is only P1, 171,555.00. There is a di��erence� of P20, 954. 00. Could you please explain the difference'? A. Well, the P20 thousand represent the 'ndeficiency tax of 1988 which was computed 19~9.~o there resulted a difference of P2o ttio':l.-.-~d. 47G

DECISION - C.T.A. Case No. 4792 -6- Q. Was this deficiency ever re�lected in you �inal statement? A. Yes, Actually we have a recon.cili.ation or the tax due which this P20 thousand reflects, or which it is reflected. <T.S.N. November 26, 1992 Hearing pp.14-15>- Accordingly, a tax credit in the amount o� P1,171,555.00 should therefore, be granted. This case is one of the classic example o� cases which reached this Court but should have been settled in the administrative level. Had it been settled in the administrative level, the Bureau of Internal Revenue should have saved a lot in terms o� manpower, time, effort and financial resources, instead o� keeping the money which in the first place, it did not own. Thill goes without saying that this Court has also spent ita own resources which could have been used more productively. Verily, it is very lamentable to note that cases which the Respondent cannot de�end or ia not interested in defending, including the case at bar, have reached to this level only to contribute to the already clogged dockets of this Court. Counsel in the case did not make any comments nor make any remarks on P~ ~ e::._ t: i.. t�, i:~~o'� n~ ~ ~-~ r~ ~�r':�. ~: . exh:i~ b(..i~.t. ~~. an.d/or cros-s-examine its witnesse.s. ~ei t,ilerr, ~~.~ ,~. tney .. ev!n at~~Jn,pt fP present contrary ;~~~~. ~~~? ""l~~~ ~-' ~.. . . ~.;�;q �,�{;�_,�: ���.��� ��;~-~-. ~-�~�-_:"..�.t�~<.:: h:;~'~.r. +n~� ~.t. ~~~~~"~~ }.�r_,�n.; th~r do. ,''. .t.,�. . ~-. ...... t .� ~ "~: \ J ~ ....�� - � ' 477 ___rD�

I DECISION - C.T.A. Case No. 4792 -7- This is, probably because, they were only �orced to de�end an obviously losing case. Hence, it may not be too much to emphasize that the Respondent should see to it that only cases which can be de�ended reach this Court. Otherwise, it should be settled administratively. Without any evidence on the part o� the Respondent to re�ute Petitioner's evidences, neither any comments or remarks thereto, nor cross-examination on Petitioner's witness, We have no more recourse le�t but to grant Petitioner's claim �or re�und. WHEREFORE, in all the foregoing, this Court hereby ORDERS the Respondent to ISSUE A TAX CREDIT CERTIFICATE to the Petitioner for the sum o� P1,171,555.00 representing overpaid quarterly income tax and unutilized creditable withholding tax as of December 31, 1990. SO ORDERED. GRUBA Judge WE CONCUR: / L 478 /"" �-~--~_.;/

DECISION - C.T.A. Case No. 4792 -8- CERT I F I CAT I 0 N I hereby certify that 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. ~N~D.~ Presiding Judge Court of Tax Appeals 479