CTA Case No. 6081 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY JARDINE PACIF IC FINANCE INCORPORATED, Pe titi one r, -versus - C.T .A. CASE NO. 608 1 COMMISSIONER OF INT ERNAL Promulgated: REVENUE, JUN 15 20Ql#~c�ijtf- Res pond ent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION A t bar is a jud icia l c la im Cor refund fi led by th e Petitioner on April 14. 2000, seeking fo r the re fun d of th e amo un t o r P6,3 70,2 12. 00, represe ntin g a ll eged excess qu arterly income tax pay ments and c reditab le w ithho lding taxes fo r th e year 1997 . The antecedent fac ts and proceedin gs o r thi s case may be s umm ar ized as follows: Petitio ner is a co m pany orga ni zed and exist ing under and by vi rt ue of the laws of the Phi lippines. It is engaged in the genera l financing a nd investment business. On M ay 30, 1997, Pe titio ner fil ed its first quarterl y income tax return for taxabl e yea r endin g December 3 1. 1997, dec larin g the re in a ne t taxa bl e income in the amou nt of P8,757,8 75.59 and a tax due o r P3,065,256. 00 (Ex hibit "A"). S ince Petitioner allegedly had credita bl e w ithh old in g taxes fo r th e first q uarte r of 199 7 in the amo unt of P8,467.07, th e la tter amount was ded ucted from th e ori gina l tax du e of P3,065,256 .00 a nd {85

DECISION- CTA CASE NO. 6081 PAGE2 consequently, a tax payable in the amount of P3,056,788.96 was re fl ected m its first quarterl y incom e tax re turn for 1997. On August 29. 1997, Petitioner fil ed its inco me tax return for the second quarter of 1997 showin g th ere in a net taxa bl e income in th e a mo unt of P18 ,200,667.46 and an income tax due of P6 ,370,234.00. Pet iti oner then carri ed over its income tax credits/payments for th e first quarter in the amount of P3,065.256.00, thus, resulting in Petitioner 's tax liability for the seco nd quarter in the amount of P3 ,304,978.00 (Ex hibit "C"). For the third quarter of 1997, Petitioner dec lared in its quarterly income tax return, a net taxabl e income in the amount of P6 ,095 , 18 5.00 and a tax due of P2.133,315.00. After applying the prev io us inco me tax payments for th e first and second quarters of 1997, Petitioner reOected in its income tax return an overpay me nt/refu nd able amo unt of P4,236,9 19.00 (Exhibit "0"). Allegedly, by reason of th e region 's financial cri sis, Petitioner suffered losses at th e end of taxab le year 1997 . Thus, in its 1997 amended annu a l income tax return fil ed on Ap ril 30, I998. it reflected a net loss or P55 .232, 14 I .00 a nd an a ll eged re fundab le amount of P6,370,2 12.00 (Section A of Ex hibit "F") co nsistin g of its reported quarte rl y income tax es paid for the first and second quarters of 1997 in the amounts of P3,056, 789.00 and P3,304,978.00 and cred itab le taxes withheld in the a mount of P8,445 .00 (Section E of Exhibit "F"). On April IJ, 2000, Petitioner fil ed a c laim for refu,ld wi th the BIR in the am o unt of P6,370.2 12.00 anchored on the provisions of Sections 5 1 (now Section 58), 69 (now t tJ tJ I ' "- �"'>

DEC ISION - CTA CASE NO. 6081 PAGE 3 Secti on 76) and 204 of the th en Tax Code of 1997. The nex t day or on Apri l 14, 2000, Petiti oner fil ed an appeal to thi s Co urt reiterating its cl aim for refund fil ed with the BIR. As earli er stated, Petitioner placed reli ance on the followin g prov isions of the Nati onal Internal Reve nue Code, to wit : Section 51. -� Rctu.-n s and Pay ment of Taxes Withheld at Sou t-e e. (A) Quarterly Returns and Payments (~(Taxes Withheld - x x x (B) Statement o{income payments made an:l taxes withheld. - x x x (C) Annual returns. - x x x (D) In come (~/ rec ipie nt. - In co me upon whi ch any creditab le tax is required to be withheld at the so urce under Secti on 50 shall be included in the return of its rec ipient but the excess of the amount of tax so withheld over the tax due on hi s return shall be refund ed to him subj ect to the provisions of Section 204 ; if the income tax co ll ec ted at so urce is less than the tax due on his return, the difference shall be paid in acco rdance with the prov isions of Secti on 49. A ll taxes withheld pursuant to the prov tstons of thi s code and its impl ementing regul ations are hereby co nsidered trust fund s and shall be maintained in a separate acco unt and not co mmingled with any other fimds or the withh olding age nt. " Scdion 69. Final Adjustment Return. - Every co rporati on liab le to pay tax under Secti on 24 shall iil e a fin al adjustment return covering the total net income for the preceding cal end ar yea r or fi sca l yea r. If the sum of the quarterl y tax payments made durin g the said ta xa bl e year is not equal to the total tax due on the entire taxa bl e net inco me of that yea r the corporation shall either: (a) Pay the tax still du e: or (b) Be refunded the excess amount paid, as the case may be. In case the co rporati on is entitl ed to a refund of the excess estimated quarterl y inco 111e taxes paid , the refund ab le amount shown ou its fi nal

DEC ISION- CTA CASE NO. 6081 PA GE4 adjustment return may be credited against the estit. .atecl quarterl y in come tax li abi lities lor the taxable quarters of the succeeding taxable year. Section 204. Authority of the Commissiouer to compromise, abate, aud rejimd/credit taxes. - The Co mmi ss ioner may: XXX XXX XXX (3) Credit or refund ta xes erroneously or illega lly received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good co nditi on by the purchaser, and, in hi s discretion, redeem or chan ge unused stamps that have been rendered unfit for use and refund their va lue upon proof of destructi on. No credit or refund of tax es or penalti es shall be allowed unl ess the taxpayer fil es in writing with the Commissioner a claim for credit or refund within two yea rs after the payment of theta~ or penalty. On March 28. 200 l , aner the parti es have submitted their respecti ve memorandtim , thi s case was considered submitted for dec isio n. Central to th e dispute are the fo ll owi ng issues: I . Whether or not th e Petiti oner is entitl ed to the refund of the amo unt of P6,370.212.00 representing excess quarterly income tax payments and excess cred itabl e wi thholdin g taxes for th e ta xab le yea r ended December 3 1. 1997 . 2. Whether or not the alleged excess quarterly incom e tax payments and excess creditabl e withholding ta xes f�o r the taxabl e yea r ended December 31 . 1997 is substantiated by documentary ev idence. Anen t the lirst Issue, thi s Co urt intend s to divide the di sc ussion Sin ce excess quarterl y income tax payments and excess creditable withholding taxes apparently refer to twe� separate and distinct clai ms.

DECISION - CTA CA SE NO. 6081 PAGE 5 With regard to the iss ue of whether or not Petitioner has excess income tax payments for taxable yea r 1996. it is r:ecessary to prove , in the case at bar, that it was at a net loss pos ition in taxab le yea r 1997 and in the succeedi ng taxable yea rs th ereby creating a conclusive presumpti on th at " pri or yea rs excess credits'' were never utili zed aga in st any of its tax liabilities. Sustainable is Petitioner's assertion that it has excess quarterl y inco me tax payments for taxable yea r 1996 since Petitioner's amended 1997 annual mcome tax return shows that it s business operati ons 111 the yea r 1997 resulted in a net loss of P55 ,232, 141.00 (Exhibit ''F"). Such being the case, it being at a net loss position in the sa id yea r, it foll ows that it has no inco me lax li ability against which th e amo unt of P6,370,212.00, which is no w the subj ect of the claim, may be applied or credited. Thus, there is, indeed. merit in Peti ti oner's contention that the aforesaid amo unt should be refunded . Be that as it ma y. a portion of the amount of PG ,370,2 12.00. pertains to creditabl e withholding taxes and well -settled is the rul e that re fund of excess credi table with ho ldin g taxes depend s upon the taxpayer's co mpliance with the followin g requirements, viz: I) That the claim for refund vws fil ed within two yea rs as prescribed un de r Section 230 of the Tax Code; 2) That the inco me upon whi ch the ta xes we re wi thheld we re included in the return or the recip ient; 3) That the fact of \V ithholding is establi shed by a copy of a statemen t (B IR Form 1743.1 ) duly iss ued by the payor (withholding age nt) to the payee showing the amount paid and the amount of tax withheld therefrom. ',' L8

DEC IS ION- CTA CASE NO . 6081 PA GE 6 [Section l 0, Rev. Regs. No. 6-85 ; see Citytrust Finance Coq)()ration vs. TIH~ Hononable Commissione1� of Intcmal Revenu e, CTA Case No. 4134, Novcmbe1� 11, 1991; affinned by the Court of Appeals in Citytmst Financ:e Corporation vs. Coud of Tax Appeals and the Commissione1� of Internal Revenue, C.A. G.R. S P No, 28239, March 14, 1994; and Citytrust Finance Co qwration (formedy Investo r' s FinaJH~e Corporation/F NC B Finance) vs. Commissioner of Internal Reven�ue, CTA Ca.se No. 4046, Febmary 24, 1993; affirmed by the C oud of Appeals in Commissione1� of Inten1al Revenue vs. Cityt1�ust Finance Co1�po1�ation (fonuerly Investor's Finance C01�p./FNCB Finance) and the Court of Tax Appeals, C.A. G.R. SP No. 3J 104, April 18, 1994; Citibank, N.A. vs. CA, CIR, October 10, 1997, G.R. No. 1074341. There being no di spute as regard s the period o r prescription, the same having been jointly stipulated upon by the parti es, We now proceed to the second requisite. To establi sh th e f~tct or withholding o f the amount of P8,44 5.00 cred itable taxes, Petitioner prese nted in evide nce a Ccrti licat c o r Creditable Tax \Vithheld at So urce issued by Renta Co lor Philippines, Inc . (Exhibit "B''). Thorough eva luati on of the sa id certificate reveals, however, that the amount of P8 ,467.00 indicated therein pertains to creditable taxes withheld in 1996 which are not within the period covered by th e instant petition . Con formab ly, We hold that the Ce rtifi ca te of Cred itable Tax Withheld at So urce issued by Renta Co lor Philippines, Inc. ca nnot be give n weight as proof of withholdi ng of the 1997 creditab le taxes of P8,445 .00. In the same breath, considering that th e Ce rtif~ ca t e of Creditable Tax Withheld at Source (Exhibit "B'') presented by Petiti oner covers creditable taxes withheld in 1996, consequently, the related income payments indicated therein are co nclusively pres umed to be not refe rring to the income declared by the Petitioner in its 1997 Income Tax 't' 0

D EC ISION- CT A CA SE N O. 603 1 PA GE 7 Return . Having been mooted by thi s. di scussion of Petitioner's co mpliance with the third req uiremen t is no longe r necessary. Proceedin g now to the las t iss ue, all ev id ence at hand offe red and presented by the Petitioner during the hearings of thi s case, veer towards the directi on that the reported income taxes paid for the fi rs t and seco nd quarte1'.> of 1997 in the amounts of P3,056,78 9. 00 and P3.304.978 .00, respec ti ve ly. we re, indeed remitted to th e government. Mac hine valid ati on on the lower porti ons of Petiti oner's quarterly income tax returns for the first and seco nd quart ers of 1997 ev idence the b et that Petiti oner ac tuall y paid and remitted to the Bureau of Internal Revenue income taxes o r P3,056,78 8.93 (Ex hib it "/\-:2 " ) ~md P3.304.978.00 (Fx hi bit �'C-2"). respecti vel y. The !'act of rem ittance is furth er bolstered by the bank statements iss ued by Urban bank to Petitio ner lo r the month s of rvlay and August 1997 \Vhcre the sa id in co me tax pay ments were charged against Petitioner's acco unt on May 30, 1997 (Ex hibit ''A-3 -1 ") and on August 29, 1997 (Ex hibit "C-3- 1''). Parall el to thi s. the Ce rti ficati on from the Reve nue Accou ntin g Di vision of the I3IR Nati onal Office, dated September 14, 2000 (Ex hi bi t ''.J'') signed by its Chief, Carmelita SJ Pasc ual ultim ately proves that the amoun t of PG.36 1.766.96. indeed, went to the co ffers of the gove rnment. Having consi dered the di sall owance mad e on the alleged overp<lid cred itabl e withholding tax , thi s Co urt grants th e cl aim in the amount of P6,36 1,766.93. WHEREFORE, in view o r all the fo rego ing, Respondent is hereby O R DE R E D to REFlJND or in the alternati ve to ISSUE a TAX CREDIT CEilTIFI CATE in the , 1" < . .1

DECISION- CTA Ci\SE NO. 6081 PAGE 8 amount of P6,361 .766.93 in fa vo r of the Petiti oner. representin g excess quarterly income taxes paid for taxable year 1997. SO ORDERED . ~($).~ ERNESTO D. ACOSTA Presi ding Jud ge I CONCU R: CERTlFICATIOl': I hereby ccrlify th at the above dec ision was rcacllcd after du e consult~ttion w ith the 11!CI1lbcrs of the Court ofTax Appeals in accordance w>h Section 13. Arlic lc V III o f the Constit uti o11 . L&. Q~ I~ RNESTO D. ACO STA Presicl ing Jud gc ' I ' -; 'l t :~