CTA Case No. 4146 (Decision)

J REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FILIPINAS MANAGEMENT & LEASING SERVICES CORPORATION, Petitioner, - versus - C.T.A. CASE NO. 4146 THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - ---- --X D E C:: I s I 0 N This i s a claim for judicial refund or c~edit of an overpaid creditable withholding tax payments in the amount of ?48,934.00 for calendar year 1984. Petitioner is a domestic corporation engaged in providing computer services and is a subsidiary of the Bank of Philippine Islands CTsn, August 20, 1992, pp. 8-9>. During t,he taxable year 1984, petitioner received service fees which were allegedly subjected to withholding taxes by various clients pursuant to Sec. 53 of the Tax Code, as amended. On April 15, 1985, petitioner filed with the Bureau of Internal Revenue its 1984 Corporate Income Tax Retu rn sho wing a net loss of R23,285: oo and a

DECISION C.T.A. CASE NO. 4146 - 2- refundable amount of P217, 732. 00, representing previous <P168,798.00) and current <P48,934.00), computed as follows: <Exh. "A") INCOME P10,892, 137.00 P11,345, 132.00 Services <Sch. 2> 61,417.00 11,368,417.00 Interests CSch. 5) Other income CSch. 6> 372,582.00 CP 23,285.00) Gain on sale of 18,996.00 none equipment CSch. 8) p1, 264. oo 217,732.00 LESS: DEDUCTIONS <Sec. E) 217,732.00 NET INCOME/CLOSS> 2,466.00 TAX DUE 168,798.00 LESS: 48,934.00 a> Previous year's quarterly credits Less: Adjustment b) 1984 Creditable withholding taxes TOTAL AMOUNT REFUNDABLE Since petitioner suffered a net loss in its operation during the said year, it therefore had no income tax liability on which it can apply the excess creditable withholding taxes. Thus, it opted to refund the amount P217,732.00 by m~rking the appropriate box in the lower left portion of the income tax t~ettn~n "to be t~efunded". On Februat~y 12, 1987, petitionet~ filed a l e t t e r claim for refund, received by the BIR on February 16, 1987, asking for the refund of P48,934.00, alleged excess creditable withholding taxes, for the ye.::n~ 19cV+. Since respondent has not acted on the said clai m, petitioner on April 15, 1987 instituted .,.!.'.) u:

DECISION C.T.A. CASE NO. 4146 - 3- the instant petition for review with this Court in acco r dance with the provision of Sec. 243 <now 230> of the National Internal Revenue Code. In his Answer, respondent raised as special and affirmative defenses the following: 6. Petitioner's 1984 corporate income tax return <Annex "A"> is still under audit and verification by respondent'~ Bureau; 7. The petition states no cause of action for failure to allege the date when the taxes in question were paid <Manufacturer's Bank and Trust Company as Trustee for Gen Trust Plans vs. Com. of Int. Rev., CTA CASE NO. 1659, Nov. 29, 1975) ; 8. The mere averment that petitioner suffered a net loss from its operations in the amount of P23,285.00 during the year involved does not ipso f"act:o met~it a t~efund; 9. Any amount claimed to have been withheld must be s hown to have been paid to the Bureau of Inte r nal . Revenue; 1o. It i s incumbent upon the petitioner to show compliance with the pt~ o vi s i on s of Sections 2 92 and 295 <now S e c tions 2 '+3 and 2 46) of the National Internal Revenue Code of 1977' as amended; 11. The income tax withheld on servi c e income payment allegedly withheld by various clients/payors of the petitioner assuming the same to be true, were collected in accordance with law and regulations; hence, not refundable; "'�. 1 -:::o Claim s fat~ tax t~efund at~e strictly construed against the claimants s ince they a r e in the nature of an exemption for taxation <Manila Electric .~.!.'.) b'

DECISION C.T.A. CASE NO. 4146 - 4- Co. vs. Com. o� Int. Rev., G.R. No. L-29907, Oct. 22, 1975, 67 SCRA 351>. The sole issue raised in this petition is whether or not petitioner is entitled to the re�und or credit of P48,934.00 representing excess creditable withholding taxes paid for the year 1984. Petitioner in support of its claim, presented in evidence the Corporation/Partnership Annual Income Tax Return <Exh. "A">, the certi�icates o� creditable income tax withheld at source - BIR Form 1743.1 <Exhs. "B", "B-1" to "B-8" > and the claim for refund with the Bureau of Internal Revenue <Exh. cn II) � Respondent objected to the admission o� the above exhibits. However, when it was his time to present evidence, his counsel failed to gather the BIR records. What was presented in evidence were just letters and forms trying to retrieve the said document <Exhs. "1" to "8">. Respondent maintains, in his Memorandum, that petitioner's evidences are not su�ficient to be entitled �or a refund/credit. He said that under Sec. 54<c> of the National Internal Revenue Code, the withholding agents in the instant case are obliged to furnish herein petitioner a copy of: <1> certificate of creditable income tax withheld at

DECISION C.T.A. CASE NO. 4146 -5- source <BIR Form 1743.1)~ <2> Payment Order~ and (3) Con�irmation Receipt. Respondent would like to impress upon Us that the certificates <BIR Form 1743. 1> presented by petitioner are self-set"ving unless accompanied by their corresponding payment con f i t"mat ion t"ece i pt s ot" in the alternative admitted by the withholding agents. Howe vet", such pt"e sent at ion of additional documents at"e not t"equ i t"ed by law and/ot" implem e nting revenue regulations. 1 The pt"ovision �.1nd et" Sec. 54(c) of the National Intet"nal Revenue Code in connection with Sec. 6 of Revenue Regulations No. 13-78 simply d i t"ect e v et"Y withholding agent to fut"n ish each recipient written statement <BIR Fot"m showing the income or other payments made by the withholding agent and the amount of tax deducted and withheld thet"eft"om. For easy reference, Sec. 54(c) is herein quoted as ftlllows: 1 Commissioner of Internal Revenue v. The Philippine American Life Insurance Co. and The Court of Tax Appeals, CA - GR SP No. 26598, March 26, 1992; Citytrust Finance Corporation <Formerly Investors Finance Corporation/FNCB Finance) v. Commissionet" of Internal Revenue, C. T.A. Case No. 4046, sttpt�a; Ateneo de Manila v. Commissioner of Internal Revenue, CTA Case No. 3213, July 28, 1989; and Commonwealth Pacific Consultants Ltd. v. Commissioner of Internal Revenue, CTA Case No. 2953, May 15, 1982. .; ) ..!..0

DECISION C.T.A. CASE NO. 4146 -6- <c> Statement of income payments made and taxes withheld. Every withholding agent required to deduct and withhold taxes under Section fifty-three shall furnish each recipient, in respect to his or its receipts during the calendar quarter or year, a written statement �.bowing the income or other payments made !lY._ the withholding agent during such q~~rter~earL and the amount of the tax <;!egucted and withheld therefrom <BIR Form 1743.1>, simultaneously upon payment at the request of the payee, but not later than the 20th day following the close of the quarter in the case of corporate payee, or not later than March 1 of the foJ.lowing year in the case of individual pRyee for creditable withholding taxes. For final withholding taxes, the statement s hould be given to the payee on or before January 31 of the succeeding year. <Underlining supplied> Based on the above provision, the withholding agent is not required to furnish each recipient a copy of the payment order and confirmation receipt only the written statement. The SIR Form 1743.1 having been signed under the pain of perjury can be taken on its face and as an admission of the withhold ing aqent. Thus, is significant to note that the pt��e sent at ion of payment confi t"'mat ion receipts or i n the alternative the admission of the withholdin g agents are not at all required under the law and requlatiu ns. f\le i thet.. is it t.. equ:i.t.. ed ��of petitionet.. to show the date of payment of the tax withheld at source.

DECISION C.T.A. CASE NO. 4146 - 7- Such responsibility belongs to the withholding agent as the tax a~ent of the Commissioner. He is the one solely liable for payment and remittance of the same. Respondent reiterated his stand that a mere allegation of a net loss does not ipso f"acto met~it a He stressed that petitioner failed to submit a summary of expenses for the year 1984 which is necessary in order to show the nature of its alleqed loss in operation. Howe vet~, upon cat'e fu 1 e><amination of the t'ecot�d s of �t~ he case, pat�ticulat' ly the income tax t~et l.lt' n <F.: xh. II (Cj" ) ! found the ite mized deductions totalling to P11,368,417 . 00~ broken down as follows: CCTA Records, p. 67) Representation and Entertain�ent p 224,681.00 Salaries and Wages SSS, Medicare and E1ployer's Co1pensation 3,455,401.00 Transportation/Travelling Profe~sional Fees 60,407. 00 Office Supplie~ and Stationeri es Rentals and Electricity 420,384.00 Repairs and Maintenance Security and Janitorial Services 109,837.00 Insurance Taxes and licen~es 171,526.00 Aror1izatinn of Pa~t Service Cost 3,289,544.00 Mi ~t'! 11 aneous 1,373,361.00 Depreciation and Awortiz3tion Contribution to Pension Trust 218,838.00 T 0 T Al 501020.00 429, 337.00 4,682.00 19,207.00 1,424, 875.00 _ .:.._ .U~s.J17.00 _ P~~. 368.4t7.~ lou

DECISION C.T.A. CASE NO. 4146 - 8- In fact, the BIR Records Division attested that petitioner incurred no deficiency income tax for the years 1984 and 1985 which means that respondent either assessed or failed to assess petitioner's income tax t'etut'n fat' the said yeat'S <E><h. "8", CTA Recot'ds, p. 11 2 ). Thus, rendering the contention of respondent with no leg to stand on. It is noteworthy to stat e that respondent, dm'inq nevet' questioned the qenuineness of petitioner's exhibits neither did his counsel cross-examine petitioner's witness. Thet'efo t'e , it is cleat' that petitionet' was able to substantiate the three basic requirements set forth in clai mi ng for a refund: (1) that it filed a claim fot"' t"'efund within the two ( 2 ) yeat"' pen"'i od as prescribed under Section 299 (now �?.30) of the� National Internal Code; (2) that the income upon which the taxes were withheld were included in the return of the recipient; and <3> the fact of withholding is established by a c opy of statement <BIR F ot' m :1. 7 Lt 3 � 1 ) d u 1 y i s s u e d by the payot"' (withholding age nt) to the payee, showing the amount paid and the amount of tax withhe ld therefrom. ~ <=~ sec. 10, Rev. Regs. No. 13-78; see Citytrust Fi nance Corporation v. The Commissioner of Internal Revenue, CTA Case No. 4143, Nov. 11, 1'3'31; and Citytrust Finance Corporation <Formerly Investors Finance Corporation/FNCB Finance) v. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1'3'33. le>.i

DECISION C.T.A. CASE NO. 4146 -9- WHEREFORE, in view of all the foregoing, respondent is hereby ordered to REFUND OR CREDIT in favor of petitioner the amount of P48,934.00, representing excess creditable withholding taxes paid for the calendar year 1984. No pronouncement as to cost. SO ORDERED. Quezon City, Metro Manila, Ma1�~ch 11., 1994. ~-�""Z:\Q,~ ERNESTO D. ACOSTA I=:Ot' esicJi nr~ J�Jd~Je te ,Judr.w ~55~~:~~~ CERTIFICATION ~" f .. t f_' 1�' cl �.1 P c o n s u .1. t a 1; :i. o n "'' mo n q 'I; h e me mb e t~ s o f t h e Court of Tax Appeals in accordance with Sectio n 13 n)�' t i c 1 (~ v I J 0 f t l' l P. c D n !:i t i t u t i () n � -~~-~ ERNESTO D. ACOSTA Pt~esidinq ,Judqe Court of Tax Appeal s