CTA Case No. 5053 (Decision)

- REPOllLIC OF TITE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ACP INDUSTRIAL CORPORATION, C.T.A. CASE NO. 5053 Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Responden-t:. ,.., - - - DECISION Th i ::; of ' ' 'l the amount of Pli6S,ti23.5J for the ye:J1.� cnr!cd f);;:::.�1h'l.' "'.J, 199] Petitioner is a dom0stic corpnr~1tion r1nl}' �lrg~Hli 7 r'd existing in accordance with the and (,. r t-l1...., L \.1.) '�� Philippines. It is engaged in the buslacss which p 1� o Y i des f o r investment and man:Jgcillcnt. ~;cJ�,;,:,�::; L'ith pl_�incipal ::1ddrc::;s at SGV I Builcli11g, G7CO .\)�:!:.1 ,\\:'n:t�', r.bknti, Het;�. Hnnila. On April 24, 1992, petitioner filed i n c o me t ax 1 e t u r n f o r t h c c a 1 e n d a r y� c> '1 r� 1 f) 0 1 an operating loss in the sum of P32,892,41~.on, a nil . :~�. ' 156

- nr:cr;, roN -- c.T.A. CASE HO. 5053. - 2 �- income ta:-: Ji8hility \d th _; f rcprescntlng crcdit8hlr (E"" "B") PoL" tli�� yc:1r l 0 0 2 , p c t: i t i o u c c c .t ;.� r t : :.1 '� �.: ;�� r ! h r~ llO income t :1 =�: du� ;:hi h rr~ t i L i.<JllC r, b c 1 i e \' i n g t h .1 t it: i. (.) c.: 1} t i t l ._; t_l to rcfuntl of the 1991 excess tJ.x credit.., fiJcJ 1c t! \.1 cL.1im for n,;fuuJ. with the Durcau f InL L�-�1�.. d',� :_ l ~; Dcci..Owbcr 20, l'J93 puL.,;uu.nL Lo Sec. C7 Ln .! ...� 1 .; L ~JO t..hc N.::.tLiulldl Intern.::; l r.�:-.�ccc:. Jmcnded, N (: m(;rand u tn C i 1� c� u 1 ~I r ~~ ,_,:. .; .I l J 2 ... 7 6 ( E ~dl. II D" ) . neither ;;,t�.lnll:d n- the clnl1a r J' i�c�fund, pcLitiuncr 1[-i lr f~ I;; but to f i 1 c t l1 c i 11 CJ t: <.1 n t p c t i t i on 1Q9J ,<_')(-)' ) 111 01�dcr to toll the runnin&;, !._ --~-�, 1 l : {" � : prescriptive period alluwed by law. P. c~ ::; pun d c n t , in h e r ilnSh'er, the ~:;pccLd and ~tffirmali'vt.~ cleftnses, to �..-it: '."J' � Iu un ~1ctioa for rcfuud ,_:,[ L,;_~c:-;;, :lie. rn:oof i~> upon the '..... 'i t.hL1L the t c1 x. e s paid ot� 1 c �i� : :. L 1..:.: ~ r 1� u n e. u 11 s 1y or illegally collectod. Failure to 157

DECISION - C.T.A. CASE NO. 5053. - 3 -- sustain said burden i::; fatal to the ,Jctit.;J; f(;r refund; 6. It is incumbent upon petitioner to show that it has complied with the provisions of Section 230 of the Tax Code regarding the prescriptive period within which to file claims for refund; 7. Petitioner has not showu th~t the sought to be refunded in accordance ~o�i~h Nati.utwl Internal Revenue Code; 8. r c t i t i one r , lv h o has t� h c b 11 1�'1 <' 11 ' ' f proving that it is entitled to tax rcf11nd, !1;1::::; f a i 1 c d t o c s t ab 1 i s h t h a t the t ax ::; u b j c c L o f i L s claim for refund was erroneously or illc~ally collected; !J. The claim for tax t�cfund, b~in= in the nature of an exemption frolli LJ.xJLion, llllL.it: bc c o a :.:i L r u c d :.:; l r i c L 1 y ~1 g u L n :~ t: 1' ' t i t i (: :1 1� ( In s I! 1 ;J r L u m l>C' r r: o . F ,c-; � Co u r t c> f "" .., �, 1 '~ � , ' ; ;l ,. , JOq SCRJ 7ZO [lfJBl]) The ~-J ( ! '��, i. !3 ::::; u c: i: ~dt<:' t hr: 1' c 1' r1 � l ~c� c t� i t .i on e ~- l ~: ,.' n 1. i t 1 , � d L ' . L l I ~ the ClnlU1lllt uf p ,, 6 5 ' ,, :2 1 . 5 J ' . \ ( i l' ;: ; d credit.:1ble \v i t h h o 1 d in g t ::1 x :1t source for c:1! cnd:1 r 1991. As proof of its allegations, petitioner rt'~ScnLcd and offered relevant o.nd mcttcrio.l o.mong othcro, of: a 1901 and 1992 corporation annu:.t 1 LltC; Jl ~-�, i" 1' ,-. t U l'flS Lot:;,c' her \.\, i th the:. ::lt to.chmcnt. nf ::t !Jt.l i t (��, l I l t' ( 158

DECISION - C.T.A. CASE NO. 5053. and f inane Ld statements; (Exhs. "n .. to "~- 15" ;] il<l "D- 2 !1") b. Certificate of Creditable Incumc T~L Pithhclcl at Source issued by Royal Underganucul Cutl_JOf' .Jtic.n of Lhl: Philippine:~;; (Exh. "/\") .tnd t h c 1e t t e r c Ld m for r c f u a: 1 d :1 t '" d Dc ,, ,_, mh c r ua the t�.Jcnty-�t'tb,ht pages atto.chmcnts. (E�:lt'1. ffn n .. "D�~~8") i� Rc :_; p C' i 1cl c r1 t , o n t !1 c other ltand, f::; i J c:J ' :111 :: i 1. dnct!mcnt:ary C'/ idcncc cL1c� to the ab:.<n�.::c .r r �~' L :inYt"Stigation on petitio1ccr's she submitted the case based on th~ documents Jdduccd by petitioner. Doth p:1rtics, submitted their rc:;;pccti�. Respondent contended that petitioner :~::n L ... r 1.-:li m for t:hc refund () f p t, 6 5 , ,, 2 ,, . ()f) ' �I !' \ :Jllcgccl n\'Cl"l'Ctid crcclit . lllle h'ithholclin;;; L.t�: f, 1001. The said amount in �Jj Pl,378,00J.OO ~hich petitioner sought to be refunded tn the rc:1r 10~2 as shown in Exhibit "D-2~" of pet Lt: i.:~ nc-L~. Thu~;, rc::'l'uudcnt reasoned that "in the . I 1 d~ r c\�idcncc tc, c;ho>-J th3t petitioner aL,tndunuJ it:. ' :; l refund of the said sum of Pl,37C,08J.G8, L lie l ns L,_jr .. : ,':- �,�.

DECISION - c.T.A. c~~r ~n. 5051. - 5- claim fo~ ~cfund must be disrnis::~;cd, nt11r�r\.~t.-~r', pc!_ i. t i i.)1lC"I' \.Ji 1 1 b c g ran t c d the refund twice for thr same :1mount, to the damngc ~nd prejudice of the Government". h'8ll t give credence on the a-r6un1cnt of t ~-l ;~- 1- c .~; p u n c1r� ; ' t: , lbc� .san1c i ::-~ defeated pending ~JccLcts of this f t) u 11 d uut I p �.-~ t it i.cuc r filed :1 ~:;cr o r3 te c 1a i r.: r c~ r c u~ d i t :1 b 1c �-:ithho1ding ta:; ia :u:n P0l.;,C50.CO for yc:H 1002 aloac. T1j i (~ I. 1 '! i J:: f :> l :: c r .; ;1 r1 C. T . /~... Case Nc. r .. r� :�_. 1�:. ) __. 1 I1 !' \ ;._ ~. government 1d 11 not: he prcj ucl iced ' f :: l:-! c ll c .. ' l ' ,.,. -j .ldl.l ~' ''ll j_;l_ � petitioner 1: i 1 l be found en tit led to i t ~-~ l()'l 1 ~: :�: �" -' �rcditablc �.;lthholding taxes. P.cc:.puqJc�n t furthc:r argued t h :t t , ,- c 1 . i :n '� ,, p /j 65 ' . .. r ;) f: : .. t ;) :.;: f J ,.,, cf .... 00 ho ~) nc 1 \1 ~) j ,- � '� , .1n .1 .l. '-� �c j llll I' 1 :1v ' ;Jnd (~l ll :.. t JlQ cc;.:; ~~ :'�1 r l 1 y bn den icd f'l- I j t: ..,, ,, 1"\ :1 .I rl "" '' .~ ~: t 11 o 1 ] y i n c: u r 1us ::> r: ~; pui.ntcd nut th~1t petitioner (leductc:l .iU ,-:-1'':i:;c :.:Li:.�h not related to its business. ( Re sponclc n t: interest and fin8ncing charges in e1 mn u n t� p 3 ,, ' 1 ,, 2 ' J 7 0 .'0 0 0 (Exh. �"B-2") d (' d t1 ,~ ! r:' ,, from itr:; gross � . o.LF She :1 n ~~ 1 y .-: :�d ~ncom~ that since the bulk of its income ... , . . ��.1 �.�.:.�.,� ':�., .��, :_ 160 _/ 0 I

DECISION C.T.A. CASE no. 5053. - 6- nr ._, 1:. J gem en t ;.;crviccs r'n(!CJ ~dl'll!C'llt Corporat iotl of the rhilippincs ln til c .1mo un t ;_,f P9,308,~70.20, the interest and financing ch~;rgc:o; ::.;hou"!,J be disa.llo\Jcd ::li nee i t is not related Lu ll:..; bus lllC: :_, .:�. She Lh.:.:il .:..:itL:tl Section 29(a) of Lh~ provides: sc,:tion 29. Deductions frura gt"<)SS Lnc(.lliC. -� Iu --:uwputiug tJ"'"J.ble income ::>uLjr_:cL Lu L,L�. u n d c r S e c . 2 1 ( <1 ) ; 2 l1 ( a ) , ( b ) ,111 . ! (' ) ; ' 1u 1 2 S (.~1 ) ( l ) , the 1: c ::d1.tl 1 be a 1 1 (l\v c d :1 s d c :ln :: t i ,; n ::; t! t 'c i t ,, m;-:-, :::; p c c i f i c d in p a.r a g r n r h: . ( :1 ) t- - ( i ) :\ [: t h. i :�_, ,"� ~-, =.~~ L l. (> rl � ( :l ) Expen~:rc':3. c1 ) nus 1 n c ,. :; :.~ :; r, �:: .' t~ ~; � (.\) In general. - .\11 ordin�1r:' ~~nd r��.,�.-.;�� -,~-:- expenses paid or incurred during the t :l :: ;'! h! ("' ~�e:.1r in ca:tT:,�ing on any trncL� �;:� inclu:Jir::; a rc.Jc:�.,)n;tblc alloh':1ac.~ [.� . . . ' �. .~ nc oth~._r contf'!C"tl!J~1tiotl fnJ' il:-~r.r_�.{__,n.-:1 actu.J11> '�'' L rcndc~�ed; t.raYcl]int, ---1 r:. 1. 1 " :�lh':l~� fi�c,r:t home i.tl tltc pur::.tt: t ' ' profc:�;:�;inn (il." b11::i1l<'f'::::, r::;;:�:.tl:-: ,�,1� ''l� r:,t_:,:;n~:n t :; r:�:~"lu 1 rctl ~- :1 1)c m:�\clc' t:-�, : 1 :~t:~ 1 t : .;!: �, t h e ,- .-, n t l n u c cl u :': (_' o r p u ~; :~ c ::: :: : ,_. u , f �; :. ~ h: pur p o fC:"' of t h C' t r ::Fl (' , prof c sf~ i n n n r l� 11 '~ i tF' :-; s , c f pr:')1'r~r1-y t o \l!li~~ll tlle t:l~�:r1:1~1'f~r h:1,.... nnt- t- �~l� ~~i"t or is not: takirq; title o~� in ;:hicli he: 1;;<:; tl'! equity. Tt from th12 ,'J bo v c �- ,- i 1 C' d .Iii deductible from ;t r '�~ r::1 u i r c n1 c n t s ) t o t\� i t ~ .161

DECISION - C.T.A. CASE NO. 5053. - 7- ( 1 ) th 0 expense must be [1oth orrlinn~:r 11 c c c s s a r ~T ; ( 2) the c::pcnsc must be paid ur ( j) th:~ c;.;:pen:::;c mu::;t be incurrcJ t:�.Jde ()j JJ\1 .. LllC'US. E::pctlc::: i r,; conr:; i dcrc~(l i n , � 11 :.� i 11 tL:' tl�:Jdc or t ..:::f.lj'Cl' It r :�.: c <..dl:. 1 c1 c 1.� c d 11 c :.: c s ::; ,, r ~� if l t: is appro p r :. J t c :w r! 1t e: ~ i f :Ll the t:J'ZP:JY('r's or business or c l) (' 1l p Cl t mand:Jtory t:ho.t a l l c~:pen ses be both orr:linn;�~- necessary c::pcnclituro::;. An cspcn:.:;c Go u i' :; t~ , p .; ,. . '� 0 ; , Js citcJ iu Lhc National Internal by AraiLt:;, p. 193, Vol. 1; H. Newtua Hh t l. I. 1 (' :.; :; ,; y, Tnc., TC 700 (19';7) !. r t:hu r- nall<Jnliac, ..T~ "'"'" ,. ) (1")5G) L1;; nf '�.".. Thu;:, respondent opinerl tho.t 1 n ,-,... fr0rn has T �� p ] � 27~. 03?_~00 Net i.nc,Jme 162 �~

DECISION - C.T.l. CASE NO. 505J. - B- to th (' Court's n t�l r t r1. , r :r ,., ~� c~ n rlo n t~ , ,... cnntcntion j:�_: out of issue. The d c d u l' t _t h j 1 i. t y of an expense :;;:hould be . u" a:~sc~r:3rncr1t c;1SC or .J.t the time . t u L L o r i ;_ c cl L � - ] :r h' i' 1 e.,.. c� 1 . T 1J..i 'l ,��� Court i :.:. not ~'' ,. t ;1 c k ] c ;_: u ( h .','. ! 1-1 �~ ��'�. �c n -r 1..) 1 Th i :: judicial claim fu:: ;�~_�fu;l\! �, f .J n ~redtt1.h!c t _r1:: �1n�l ~: -�' l! o 1 J f i r n: th~lt it: r: f ~ 1 ' .... ,�~ '1 ~� r .-.,-idt:cncc to.::paye r -'! l 1 ~- l' l' <>ilil~� Laic�:: -.. It. h the f o 11 ,-,�.;in~ three 1J.: : i c '-'j1! � :_CT~ ~lt.:-;; ( 1 ) th.::tt: filed (_ 1 ;~ ! (Il d I'.. ': -~ pc�rir"l ~-~ :., r t . r ~ l -1 IIJJt!<�r ":.:-ction 2':':2 (nC\.J ~ 10) ,, r t� ~ 1 ' "1 1 ~ In t c r o .1 1 r. .-, \' c n L: (: r., "1c ; ( 2) that the Lnco mc up D n ~-: ~ t t :! 1 t h: � t: ~\:. c: ::~ \JC rc I; 1 L h h c 1 d \\ c 1� c included la the r't:11n :~[ ( ~J) the fact of ~d thlw Ll it�:::; e .; L 1b 1 i .:> li c d. b y .::t c o p y o [ s t o t c mc n t ( r T '!; r : m 1 7 t1 3 . 1 ) d u 1 y i s s u c d b y t h c p a r c r c1: it !!11 �]:.lit:.; .1gcut) to tho P<l':J't~c, sho\\ine, ~-hr: .Jm�~��t!::!. u,,. . ta.:;- ~>'i.thh��l.l .1nd tll:� amount of .,-\ 'r! 'ill' ( :J c c . 1 0 , Rc v � Rc g s � 6 �- 0 '3 ; C i t y t. r<J f; L C:Jrpoc;Lion v. The CommissitHl'.'C o( Tic~"..~t~t~t;:-:, CT!-,. C~1~;c �Nc). '�13ft, t!nv(�:J:Lt(}r ~1 1'"""'"' ~1.~-~�L.~:~_�;t Fin~'Jn.c�,~ c~)['fL,:rr~:~: .:�a rr 1- Invc::::~ors Finance Corporation/fNCfl ; ir;,l::� :;j Commicsioner of Internal Revenue, CTI\ Case No. 163

DECISION - C.T.A. CASE NO. 5053. -9- 't 0 t, G , r ,� h r u a r y 2 t, , 1 9 9 J ; a n d l' a s co nc a 1 t y ~' n d Dcv(~lc;pr!lf~nt: Corporation v. Commissionc1� of Intcrn;d Revenue, CTA Case No. 1,251,, /'.ugu:~t 10, 1993; Commissioner of Internal Revenue v. Court of Tax Appeals and Pasco Realty and Development Corporation, CA-G.R. SP No. 32927, February 28, 199/t) . . Ba::>ctl :..JU the u[ Lh'-' pcti.Li.uuc1� n1ct :tll the three r c q u i. r c mc n t. ~=- ~' c L c 1 :~ 1 :1 :... '�� L furth. F 11::; t, the cLtim for re [ unJ \:~1::; t: ilte 1 y f l J. '1 h'itllin 1.1:-:: 1.\Jo�-ycar per i,;c] .r '" f ;,' :J 111 t� n t c. r ::.1f ~lt(' "" 1 �tLj~Jl1 1 In t c r n ;J 1 P.. �: ,. c n u <' amended. T1 it: ( 1 ,I; j,: for refund �.-�ith the Durco.u of IulCl.'ll..J.l (' L. Dcc r.2mbc t' 20 ) 1CJIJ3 (Exit "D-2CJ " ) antl i ..,;, Llt c (_� L1.; \J J.l -.'l! J..L .......) - D c ,_. �.� 1:1 b c .:.:'ln 1 n n " ' ...1. The th�o-year , pe~ Lod l il Ll11...~ " li.3 L ~-i .. I _; _i ' '' t 'I l.'t on Av r 1 l 1 'i ) 1 'l 'J ::: ) ' } L �,. '- i ;:: cc,1uirc:l the pc t i. t i :) il c: 1 !' r: ! 1 '' I" i\ ' 1 I " I r ( Contnl i.:;:-; i CHl.Cr 0 T:1c. al., G.R. No. .., r:. ) Sc c: '\ld) pctitiun.c:c clcclarc:l :~~ Jt: i Il1 ~, : ; ' L .1 x 1: c t� ll c n , [ o r \.'hi ��h t 1� ' tax sought to be refunded ~as withheld. Tll i c: "P,-lG" \vherein the amount of P ') , l o n , '1 7 '1 . n n , rcprcscntin~ management fee, received as part of petitioner's gross income. Aud lastly, the . ' 164

DECISION C.T.A. CASE NO. 5051. - 10 - uf ;,�i.thholdin;; iS h'C 11 1 l 1 '~ ; t ~; ~ i j ' : 1 ,. '1 'J ~rcscntation of Certificate of Crcdit~blc Hithheld At Source (Exh. "A"). In th; absence of rcsvuaJcul mi::.;crauly f<.~iled to i 11 L. 1� u d u. c c ) Lh i:; Ccc;L finJs for thn petitioner. t 1,. ~:; um of p 1 (j 5 ) ,, 2 3 . 5 3 ; ;:itLhuJ.lin;; t~1x at :�.n11:�c:' fnr the cnl 11d:1r :,�:'.11. 1"'11. ~0 ORDERED. ERrJF.STO !) , A~ f' n ~ T ~~ , 1' 'l n 0 .� . 'C) HE CONCUR: CRUfl.', Judge ~a.w C. DE VE.~. ,(, .._ l cl L C J ll J;; ,; '165

n:--cr.-: Tf'Y'! - ".T.A. ~~~r nn. sos1. CEnT TF TCAT I C N ;..: �.: 1" t i [ ~- t h :1 t tllC T :1~ �. n. ], c r: ',.' 1, '.'TTT r .t� �::l�i::l:Jnc '-: i L li SccLiuJJ 1"' \!.I r.l .-.: i �.. j . :0 ~ 1 . � 1' �..1 \.J _j.bl 166