CTA Case No. 5267 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ROBERTO T. VILLANUEVA, INC., Petitioner, - versus C.T.A. CASE NO. 5267 COMMISSIONER OF INTERNAL REVENUE, Pro�ulgated: Respondent. SEP 201999 ~~~ X- - - - - - - - - - - - - - - - - - - --- -- - X DECISION This case involves a claim for refund/tax credit in the amount 0 f p 1' 6 70' 141 � 56' allegedly r~ept~esent ing excess and unutilized creditable income taxes withheld at so m~ce f ot~ the f i sea 1 y eat~ ended Mat~ch 31, 1993. Petitioner is a domestic corporation (investment holding company) engaged in the business of investment and management <TSN, Oct. 4, 1995, pp. 6 & 36). Fat~ the fiscal year~ ended Mat~ch 31, 1993, Petitioner~ fi 1 ed its cot~pot~at e annual income tax r~et m~n <Exh. A> with the Bureau of Internal Revenue <BIR> on July 15, 1993 <Exh. A-12) declaring a net loss of P36,806,515.00 (Exh. A-13> and excess creditable withheld taxes of P1,670, 142.00 <Exh. A-14). On July 15, 1994 <Exh. J-10>, Petitionet~ filed its e cot~pot~at ann ua 1 income tax return <Exh. J) r~epor~t i ng a net loss in the amount of P21,070,528.00 <Exh. J-11) and excess tax credits in the sum of P2,555,569.00.

DECISION C. T.A. CASE NO. 526 7 - 2- Consequently, Petitioner f1led a written claim for t~e fund {Ex h. IJ 1n the amount of Pl, 670~ 141.56 on July J.'395 (Exh. I �-�l) comorisinr PPtitioner's unutilized and unapplied creditable taxes withheld at fiscal yeal�~ ended Ma~~ch 31, 19'33. as follm'>~s ~ Income Pavment Withholding Tax Consultancy fees f=t 5'! ~37";~tt 8-~~;1 ~ ~~~() P 318,EAL.;"..'i6 Rent Income Gain on S.::d. e a f 1 ~ OB9,~ 66o. ob � 54,000.00 Investment 25,'350,000.00 1,2'37,500.00 Total P1,670, 1Ltl.56 Petitioner filed the instant Petition for Review an J"uly 15. 1995, that is' the day after it filed its administrative claim for refund. i.n of' i. t s case, pt~esent ed documentary as well as testimonial evidence. Respondent, by way of special and affi r~mat i ve defenses, states: 1) Petitioner~s claim for tax refund is still undergoing administrative routinary investigation/examination by respondent's Btn~eau; 2) The alleged creditable withholding taxes were collected and paid pursuant to law and pertin en t BIR implementing ~!les ard r~gulat1ons, hence, the same is not rPfu~dable. 3) Petitioner's allegation that it sustained losses during the year under review does not icso facto warrant the refund; 4) Petitioner must likew1se prove that the alleged creditable withholding taxes we~e neither automatically applied as tax credit against its tax liability for the succeeding year nor included as creditable taxes declared and applied to the succeeding taxable year/s;

DEC I S I :11\.J C.T. A. CASE NO. 5267 - 3- 5) Claims for tax refund are construed strictly aga1nst cla1mant as 1~ partakes of the nature of an exemption f~om tax ant it is incumbent upon petitioner to prove that it is entitled thereto under the law. Failure on the part of the pet1tioner to orove the same 1s fatal to its claim for tax refund. As its evidence, Respondent presented the Revenue Officer' who conducted ti-Je invest :i. g.::~t ion on Petitioner's clai m and the concomitant documents relat1nq to said investigation. The only issue to be resolved in the case is whett1et' or not Petitioner has fully substant1ated its cl.::nm to be entitled to the refund sought. s~~�ct ion 6':3 of the 1. '39.3 Ta>e Code, as amend<~d, m�ovides. thus: SEC. 69. Final fldjust111ent Retw-,n. �-� Evel�'y 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'. If the sum of the C'''�"H'te~�lv tax payments made during the sa1d taxable year 1s not equal to the total tax due on the entire taxable 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 coronration is entitled to o refund of the excess estimated quarter!~ income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for.. tht? ta.xa.ble fl' .ta_r-..J;n'"-.S ~-F t'J'� su.t~reedino taxable year'. Based on the above pr'ovision of law, excess cr��ed :it a.b 1 (7~ withheld taxes can only be carried forward to the taxable

DECISION C.T.A. CASE NO. 5267 - 4- of the succeeding taxajle y eat'. Inasmuch as herein Petitioner incurred losses both in 1993 and 1994, it appe�.:ws that the amount o& ~reditable wit~~eld taxec of P1,670, 141.56 for the fiscal year en de d Mar~~ ~ 1 W<"l.S unut i 11 zed a.nd un.:~.r.JP 1 :i eel year ended March 1994 and, r~efundable. However", compliance w1t~ certain statutory ~, f.~ q u i t' e me n t, s must also be complied with. S e ction 51 of the Tax Cod e r�equit'es that: SEC. 51. Returns and Payments of Taxes Wit hhe l d at Sour ce. (a) xxx xxx xxx (b) Statement ot income pavment~; made and taxes withhel~ ~very withholding 0qent required to deduct and with h old taxes under Sn.ct :' (~ ,..., ;:-c:.c'- in �'E>"'~Jert to his 01�' its r�ece i pt s dut'i ng the calendar quarter or year, a written statement showing the income or other payments made by the withholding agent during such quar~er or year, and th e amoun t of the ta x deducted a nd withheld therefro m, simultaneously upon pay ment at the r e quest o f t he payee, but not later tha n t~e 20th day following the close of the quarter in the case of corporate payee, or not later that March 1 of the following year in t~e case of individ u al paye e for c r edi table withholdiP~ taxes. x x x XXX XXX XXX '� o J .tnco me a F the ,., e c i pi en t:. : "co me upon which any creditable tax is required to be withheld at source under Section 50 shall be i nc luded i n the re turn o f its recipient but the excess of the amount of tax so w1thheld over the tax due on his return shall be refunded to h1m subject to the provis1ons of Section 204;

DECISION C.T.A. CASE NO. 5267 - 5- Section 10(a) of BIR Revenue Regulations No. 12-94, amending Section 10 of Revenue Regulations No. 6-85, provides that: Sect ion 10. Claim for Tax Credit or Refund. - (a) Claims for Tax Credit or Refund of income tax deducted and withheld as income payments shall be given due course only when it is shown on the return that the income payment received has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding Tax Statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. Sections 70(b) and 230 of the Tax Code, also pt~ovides: SEC. 70. (a) X X X (b) Time of filing the income tax return. The corporate quarterly declaration shall be filed within sixty <60) days following the close of each of the first three quarters of the taxable year. The final adjustment return shall be filed on or before the 15th day of April or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be. SEC. 230. Recovery of tax erroneously or illegally collected.- No suit ot~ pt~oceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

DECISION C.T.A. CASE NO. 5267 6- In any case, no such suit at~ pt~oceeding 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, hm'llevet-~, That the Commissionet~ may, even without a written claim therefor, 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. This Court in several cases ruled that the grant of refund, when creditable withholding tax is in excess of the amount of the tax due, depends on three conditions, \liz: (1) that the claim for refund is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of tax as required under Section 230 of the Tax Code; (2) it must be shown on the return of the recipient that income payment received was declared as part of the gross income; and (3) the fact of withholding is established by a copy of statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. (Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, Novembet~ 11, 1991; Citytrust Finance Corporation [formerly Investor's Finance Corporation/FNCB Finance vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 2-4�, 1993; FEB Investments, Inc. vs. The Commissioner of Internal Revenue, CTA Case No. 5353, August 22, 1997; Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5323, August 25, 1997). As disclosed by the records of this case, Petitioner has complied with the first requirement. It filed its income tax t~et ut~n on Ju 1 y l.5, 1. 994 and the administrative claim for refund was filed with the

ncr-.:~-- -- r T n rAsE NO. 5267 - 7- But~eau of Intet~nal Revenue on July 14, 1995. The instant petition was filed the day following, that is, on July 1.5, 1.995. It can also be noted that for the fiscal year ended Mat~ch 31, 1993, Petitioner declared as part of its s s gt~o income the income payments from which the taxes sought to be refunded were withheld. Last 1 y, Petit i onet~ submitted the corresponding certificates of creditable income taxes withheld at source evidencing the fact of withholding <Exhs. B, C, D). However, an examina tion of Exhibit 2 did not lead us to the same conclusion. The Revenue Officer who conducted the investigation found out that the VAT and withho l d ing taxes wet~e con~ect 1 y the Petit i onet~. In fact, he stated that the Petitioner is entitled to the issuance o f the Tax Credit Certificate in the amount of P1,670, 141.56, subject on 1 y to the verification as to the correctness of the remittances made by the withholding agents. Said verification, as testified to by the Respondent's witness resulted to an unsupported amount of P76,500.00. But a re-examination of the documents on othet~wise. Petitionet~ submitted the confit~mation t~eceipt <Exh. G> and payment order <Exh. H) to suppot~t its claim that the P22,500.00 withholding tax was indeed remitted to the BI R. Petitioner also submitted documents to prove that its withholding agent, AG & P, withheld and remitted to

DECISION C.T.A. CASE NO. 5267 - 8- the Bureau the amount of P54,000.00 for the period involved in this case <BIR. t~ec., folder~ 1, p. 5; folder~ 2, pp. 6-10 ) . In other words, the P76,500.00 was indeed substantiated. WHEREFORE , in view of all the foregoing, Respondent is here by ORDERED to REFUND or ISSUE a Tax Credit Certificate in favor of the Petitioner in the amount of P1,670, 141.56, excess and unutilized creditable taxes for fiscal year at~ch 31, 1993 � SO ORDERED. ~~{ . / RAMON 0. DE V RA Associate J� (jge WE CONCUR: I I I ~to,O~ ERNESTO D. ACOSTA CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of th e Constitution. ~~.o~ ERNESTO D. ACOSTA Pr~ e siding Judge