ASIANBANK CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ASIANBANK CORPORATION, C.T.A. CASE NO. 5628 Petitioner, - versus COMMISSIONER OF INTERNAL REVENUE, Respondent. X �- �- -� �- DECISION WhEther or not Petitione~ is entitled to a rPfund of allE>g!?dly represe1ting unused ct~editable wit~holding taxes for the year ended December 31, 1995 is the sole focus of this petition for review. Petition~~t' 1s ::1 domestic co��'pJt~::~tion w1th pt�jncipal oftice at AsianBank Centre, Sen Gil J. Puyat Avenue, Makati City. For the year ended December 31, 1 9':35' Pet it ione1�~ incurred a nPt loss in the amount of P13,428,310.00 <Exh. A). Petitione1�' s withholdinR ar,er:ts r'emitted to the But~eau of Internal Revenue ( B TR) taxes withheld on income payments in the total amount of Petitionet~, declared a net loss n the amount of P34g,866.0U <Exh. D-5) for taxable year 1396.

DECISION C.T.A. CASE NO. 5628 2 1f.,' 1998, Petitioner filed its corporate annual income tax return for taxable year 1997 <Exh. F) r~e f 1 ect in g a net loss in the sum of P16, 163,420.00 <Exh. F-5). By ~irtue of its net loss position in the year 1995? Petitioner contends that it had no income tax liability. Hence, the creditable taxes withheld and remitted to the BIR by its wi thholding agents shoul d be r'efunded. Accordingly, a let te r -claim for refund was file d with the Respondent's Bureau on March 20, 19S8. Alleging inaction on the part of the Respondent and considering that the period allowed by L'::I II'J to file a judicial claim for refund was about to this Petition for Review was filed on April 15, 1998. Respondent, by way of Special and Affi ~~mat i ve 1) Pe tit ioner's claim for refund of unused withholding taxes for the year 1995 allegedly filed with BIR's Appellate Division on i"l<:."'lr'ch ;:;::o, 1998, h,~\s not yet been r'efeJ�'r'8d to BIR Revenue Region No. 8, Makati City. Processing of the claim will commence immediately upon receipt of the said letter- cl,;:\im; 2) The alleged withholding taxes remitted are presu med to have been made in accordance with law and regulations, hence, not �r-�efundabl P; 3) It is incumbent upon t h e petitioner to show that it has complied with the provisions

DECISION C.T.A. CASE NO. 5628 - 3- of Section 204 in relation to Section 230 (now 229) of the Tax Code; 4) In an action for tax refund/credit, the burden of proof is on taxpayer t o establish its right to the refun d and failure to sustain the burden is fatal to the action for tax ct~E~d 1 t ; and 5) ~~ell-settled is the rule that claim for refund are construed strictly against claimants since it partakes of the nature of an exemption from taxation. To bolster its claim, herein Petitioner submitted the corporate annual income tax returns for the years 19'35, 1':3'35 and 1997 toge t her with its respective audited fi.nanci<=il statements; certificates of creditable taxes ~" ithheld at sout~ce and the letter-claim for refund. Respondent, on the other~ hand, was declared to have waived his right to present evidence clue to his failure to appear for two consecutive hearings despite the final war~ning gj ven <CTf.~ Rec., p .. l.L:-5). ThfJ only issue to be resolved in this case is whether or not Petitioner has fully substantiated its claim for the entitlement of the refund sought. We answer in the affirmative. Section 59 of the Tax Code, as amended, provides: SEC. b'3.. Final ~djustment Return. - Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar

DECISION C.T.A. CASE NO. 5628 - 4- or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year the corporation ~;hc.ill 1-:)ither~~ (a) Pay the excess tax still due; or (b) Be refurded 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 for the taxable quarters of the succeeding ta><able year~. Based on the above provision of law, excess creditable withheld taxes can only be carried forward to the taxable of the succeeding taxable Since Petitioner incurred losses in 1995 and 19':36 and even in 19'37' it appears that the amount of creditable withheld was unutilized and unapplied in the succeeding year of therefore refundable. must with substantial evidence , /'\ the t that requirements of the law and regulations have been complied with. Section 51 of the Tax Code requires that: SEC. 5L r~etu�r~n!> and Payments of Taxes Withheld at Source.-(a) xxx xxx xxx (b) Stat E'flll:?n t: of' .i ncomt:> pa ym1?n i: s made and i:"CIX~'S withhel~-Every withholding a!;1ent �;-~equir'ed to deduct and withhold taxes und ~?r-�

DECIS I ON C.T.A. CASE NO. 5628 - 5- Section 50 shall furnish each recipient, in respect to his or its receipts during the calendar quarter or year, a written statement showing the income or other payments made by the withholding agent during such quarter or year, and the amount of the tax deducted and withheld therefrom, simultaneously upon payment at the t~equest of the payee, but not lat et~ than the 20th day following t~e close of the quarter in the case of ccn~pot~atf~ payee, ot�� not latet~ thc:1t ltl.:.u~ch 1 of the following yeec"'lr~ in the c.:.\se of individual payee for creditable withholding taxes. x x x X ){ X >< X X X X >< (d ) r .rnco mc::> o the r' ~? c .i pi en i:. ����� I nco mf:! upon which any creditable t ax is required to be withheld at source under Section 50 shall be included in the return of its recipient but the excess of the amount of tax so withheld over the tax due on his return shall be refunded to him subject to the provisions of Section 204; Corollary thereto, Section 10(a) of BIR Revenue F<e~]u.l.ations j\.lo .. :l.i:~�-91~., amending Section :1.0 of Revenue Regulations No. 6-85, mandates that: Section 10. C.l,:.~.im Fo1�' T.-::1x Cred.it or� f?e f-und.-�- (a) Claims fot�� Tax Ct�� edit en~ F~efund 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. Section!=, 70(b) and 230 of the Tax Code, also

DECISION C.T.A. CASE NO. 5628 - 6- SEC.. 70. (a) X X X (b) Ti me o f f".i 1 i n g the i nco me t: ax ret:urn.-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 .. C::30.. t7ecovei�'.V o-F t~ax en�'on�ously cw illegally collected.-No suit or proceeding 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 authot'ity, Ot' of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim fot' t'efund Ot' ct'edit 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. 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 regardless of any supervening cause that may at'ise afte1�' payment; P1�'ovided.1 however, That the Commissioner 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. We have ruled in numerGus cases that the ~;:want of l'efund when ct'editc:;ble withholding tax is in e><cess of the amount of the tax due, depend!: on thl�'E~e factCJl��'s, viz:: (l) that the claim for refund is filed with thP

DECISIOI\I C.T.A. CASE NO . 5628 7- Commissioner of Internal Revenue within the tv--Jo-yea�r� period from the date of payment of tax as ~"equi ~"eel 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 f a ct of withhold i ng 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 dictionary. (Citytrust Finance Corporation vs. The Commissioner of Internal Revenue , CTA Case No. 4134, November 11, 1991; Citytrust Finance Corporation [formerly Investor's Finance Corporation/FNCB Finance vs. Comm i ssi o ner of Internal Re v en u e ~ CTA Case No . 4046, F<-?bl�-�J..t.::n"y ;::;:.4., 1.993; FEB Investments, Inc. vs. The Commissioner of Internal Revenue , CTA Case No. 5353, l~ ugu!st ;?E: , 1997 ; Benguet Corpm~ation vs. Commissioner of Internal Revenue ~ CTA Case No . 5323, August 25, 1997; Columbian Motors South Super Inc. vs. Commissioner of Internal Revenue, CTA Case No. 5345~ August 28, 1998; Mermac, Inc. vs. Commissioner of Internal Revenue , CTA Case No. 5510, September 2, 1998 ; Smithkline Beecham Research Limited Philippine Branch vs. Commissioner of Internal Revenue , C"H:.'l C<::\SP t-.!o . ~':i:'.'"jOf.., SeptembE).r"' 1::i, 19'38). A~; <::vi n c'r~d by t h e r'eccn���d!:; o f t his case, both the administrative and judicial claims for refund were filed within th e two-year prescriptive period . It can also be for' the year ended Dec9mber ~1 , Petitio n er declared as part of its gross inc o me thr~ income:� pay m 0.�nt~; SOUI:jht to bf? t"E~fun<:i<�?d. Finally, Petitioner submitted the correspondi n g certificates of creditable income taxes withheld at source evidencin~ the fact of withholding <Exhs. B, C ). In other words, herein Petitioner has fully substant:i.at~d i t s ca~e.

DECISION C. T.A. CASE NO. 5628 - 8- WHE REFORE , in view of all t~e foregoing, the claim f or refund of Petitioner is hereby granted. Respondent is hereby ORDERED to REFUND to the Petitioner tho amount of P'30~5-44.:~7 ~�'ej:wesenting unutilized cJ~eclitable t21.xes fo~~ the yea~~ t::nded Decemb2~~ 31. 1'3'J!:i. SO ORDERED. WE CONCUR: ERNESTO D. ACOSTA Pl~ e s i cling J ucl g e J~s~;o.ocI iattel. ~ \ 'J(? CERTIFICATION I hereby certify that thr above derision was reached after due consultation with the members of ~he Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitt.ltion. ~ ~~ ERNESTO D. ACOSTA Pr-�~o.~sidinq .Judqe