PHILIPPINE BANK OF COMMUNICATIONS v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION PHILIPPINE BANK OF COMMUNICATIONS, Petitioner, CTA Case No. 8269 -versus- Members: Castaneda, Jr., Chairperson Casanova, and Cotangco-Manalastas, 11. COMMISSIONER OF Promulgated: INTERNAL REVENUE, NOV 0 7 20~ Respondent , L__J__: ,..., ~~ �"' . X- ---- - -- - - - - - - - - - - - -- - - - - - -- - - - -- - - - - - _, ~ - - - - - -- - --X DECISION CASTANEDA, JR., J.: This is a claim for issuance of tax credit certificate in the amount of Thirty-One Million Eight Hundred Nineteen Thousand One Hundred Sixteen Pesos and Twenty-Five Centavos (P31,819,116.25), allegedly representing unutilized creditable withholding taxes (CWT) of Philippine Bank of Communications for calendar year 2008. Petitioner Philippine Bank of Communications is a domestic corporation engaged in the commercial banking business duly organized and existing under Philippine laws, with principal office at PBCOM Tower, 6795 Ayala Avenue corner V.A. Rufino Street, Makati City. It is registered with the Bureau of Internal Revenue (BIR) with Tax Identification Number (TIN) 000-263-340-000. 1 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue, vested with authority to carry out all the functions, duties and responsibilities of said office, including, inter ,9z..- 1 Pars. 1 and 3, Stipulated Facts, Pre-Trial Order, docket, pp. 92-93.

DECISION CTA CASE NO. 8269 alia, the power to decide, approve, and grant refunds or tax credits of overpaid or erroneously paid or collected internal revenue taxes. She holds office at the BIR National Office Building, Diliman, Quezon City. On April 15, 2009, petitioner filed with the BIR its Annual Income Tax Return (ITR) for calendar year 2008, where petitioner reported a net loss of P655,794,182.41 and creditable tax withheld in the amount of P31,591,458.62.2 On May 7, 2009, petitioner filed its final Annual ITR through the Electronic Filing and Payment System (EFPS) for calendar year 2008 reporting a net loss of P655,794,182.41 and creditable taxes withheld in the amount of P31,819,116.25.3 On April 7, 2011, petitioner filed an administrative claim for the issuance of tax credit certificate with the BIR for its alleged unutilized CWT for 2008.4 Respondent failed to render a decision on petitioner's application for a tax credit certificate, prompting petitioner to file the instant Petition for Review before this Court on April 14, 2011.5 In her Answer6 filed on June 13, 2011, respondent raised the following Special and Affirmative Defenses: "5. Taxes collected are presumed to be in accordance with laws and regulations. 6. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau if Internal Revenue. A claim for refund is not ipso facto granted because respondent CIR still has to f- investigate and ascertain the validity of the claim. 2 Exhibit "A". 3 Exhibit "B". 4 Exhibit "E". 5 Par. 6, Stipulated Facts, Pre-Trial Order, docket, p. 93. 6 Docket, pp. 53-58.

DECISION CTA CASE NO. 8269 7. Taxes are essential to government's very existence; (CIR v. Solidbank Corporation, G.R. No. 148191, November 25, 2003) hence, the dictum that 'taxes are the lifeblood of the government.' For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority. (CIR v. Fortune Tobacco Corporation, G.R. Nos. 167274-75, July 21, 2008) Since tax refunds are regarded as tax exemptions and these are to be construed strictissimi juris against the person or entity claiming the exemption. (Philippine Phospate Fertilizer Corporation vs. Commissioner of Internal Revenue G.R. 141973, June 28, 2005) 8. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications (BPI Leasing Corporation vs. Honorable Court of Appeals, G.R. 127624, November 18, 2003) The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. (Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc. G.R. 163835, July 7, 2010) 9. In claiming a refund, the claimant must first file a written claim for refund, categorically demanding recovery of overpaid taxes with the Commissioner of Internal Revenue, before resorting to an action in court, first, to afford the CIR an opportunity to correct the action of the subordinate officers; and second to notify the government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure (CIR vs. Rosemarie Acosta, G.R. No. 154068, Aug. 3, 2007) In the foregoing case, it should be noted that nowhere in the petition did petitioner aver the required submission of supporting documents to justify its claim for refund. With P=- that, the intendment of the law was not served.

DECISION CTA CASE NO. 8269 10. In order to be entitled to the refund being sought, petitioner must satisfactorily comply with the following requisites: a.) That the claim for refund was filed within the two-year prescriptive period as provided under Section 204( c) in relation to Section 229 of the NIRC of 1997; b.) That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and c.) That the income upon which the taxes were withheld was included in the return of the recipient. 11. The amount of Thirty One Million, Eight Hundred Nineteen Thousand, One Hundred Sixteen and 25/100 allegedly incurred for the taxable year 2008 is not properly documented. 12. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to the claim." The Court issued a Notice of Pre-Trial Conference7 on June 14, 2011, informing the parties that the case is set for pre-trial conference on July 7, 2011. Petitioner submitted its Pre-Trial Brief8 on July 1, 2011; while respondent submitted her Pre-Trial Brief on July 4, 2011. On July 22, 2011, the parties submitted their Joint Stipulation of Facts and Issues with Motion. 10 In its Resolution11 dated August 16, 2011, the Court approved the Joint Stipulation of Facts and;t. 7 Docket, p. 60. 8 Docket, pp. 61-70. 9 Docket, pp. 71 -74. 10 Docket, pp. 80-83. 11 Docket, pp. 88-90 .

DECISION CTA CASE NO. 8269 Issues, and resolved to try as a separate issue the issue proposed by respondent in the included Motion. The Court issued a Pre-Trial Order12 on August 17, 2011, terminating the pre-trial and setting the initial presentation of evidence for petitioner. On October 24, 2011, petitioner filed a Motion for the Commissioning of an Independent Certified Public Accountant13, praying that the Court would commission Mr. Edwin F. Ramos of Constantino Guadalquiver & Company as an Independent Certified Public Accountant (CPA) to conduct the actual examination and audit of petitioner's voluminous documents. During the November 10, 2011 hearing, this Court granted petitioner's motion and ordered the Independent CPA to submit his report within thirty (30) days or until December 10, 2011. The Independent CPA submitted his Report14 on December 12, 2011 and then his Final and Consolidated Independent CPA Report15 on January 9, 2012. On June 22, 2012, petitioner filed its Formal Offer of Documentary Exhibits16, offering Exhibits "A" to "S-13", inclusive of sub-markings. Respondent filed her Comment (Re: Petitioner's Formal Offer of Evidence) on July 23, 2012, interposing no objection to the admission of petitioner's enumerated exhibits, subject to the condition that the same would be compared with the original documents pursuant to Section 4 of Rule 12 of the Revised Rules of the Court of Tax Appeals. In the Resolution17 dated August 23, 2012, the Court admitted petitioner's exhibits, except for Exhibits "G- 2", "G-3", "G-4", "G-5", "G-6", "0-5.1" to "0-5.3", "0-24.32" to "0- 24.51", "0-23.113", "0-35.69", "R-4", "S-3", and "S-4". Petitioner then filed a Motion for Reconsideration (Re: Resolution dated 23 August 2012)18 on September 7, 2012, asking this Court to admit the denied exhibits. In the November 13, 2012k 12 Docket, pp. 92-96. 13 Docket, pp. 133- 135. 14 Exhibit " 0 ". 15 Exhibit " P". 16 Docket, pp. 231-243 . 17 Docket, pp. 361 -364. 18 Docket, pp. 365-372.

DECISION CTA CASE NO. 8269 Resolution 19 this Court reconsidered its earlier Resolution and , admitted the previously denied exhibits save for Exhibit "0-35.69" for petitioner's failure to submit the original copy for comparison. During the May 8, 2013 hearing for respondent's presentation of evidence, respondent's counsels manifested that they are submitting the case for decision since the case has no report of investigation. The Court granted both parties a period of thirty (30) days within which to file their Memoranda. The case was submitted for decision on July 10, 2013, after petitioner filed its Memorandum20 on June 5, 2013 and respondent filed her Memorandum21 on June 14, 2013. 22 The issues23 submitted by the parties for this Court's resolution are as follows: "1. Whether or not the claim for the issuance of a tax credit certificate for the calendar year 2008 was filed within the two-year prescriptive period prescribed under Section 204(C), in relation to Section 229 of the NIRC of 1997, as amended. 2. Whether or not petitioner has an unutilized creditable withholding tax in the amount of P31,819,116.25 for the calendar year 2008. 3. Whether or not the alleged income from which the subject creditable taxes allegedly withheld were included as part of the gross income in petitioner's annual income tax return for the calendar year 2008. 4. Whether or not the alleged unutilized creditable withholding tax for the calendar year 2008 in the amount of P31,819,116.25 was carried-over and applied by petitioner against its tax liabilities in the succeeding taxable year. ~ 19 Docket, pp. 387-388. 20 Docket, pp. 399-412 . 21 Motion for Leave to File and Adm it Attached Memorandum, Docket, pp. 413 -430. 22 Docket, p. 438. 23 Stipulated Issues, Pre-Trial Order, docket, p. 93.

DECISION CTA CASE NO. 8269 5. Whether or not petitioner is entitled to a refund or issuance of a tax credit certificate in the total amount of P31,819,116.25." Jurisprudence and pertinent revenue regulations provide that a taxpayer must satisfy the following requirements in order to be entitled to a refund or issuance of tax credit certificate for excess/unapplied CWT: 1. The claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the NIRC of 1997, as amended; 2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld must be included in the return of the recipient. 24 As regards the first requisite, the applicable provisions of the NIRC of 1997 are as follows: "SEC. 204. Authority of the Commissioner to Compromise/ Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon ~ 24 Section 2.58, Revenue Regulations No. 2-98, as amended; Citibank N.A. vs. Court of Appeals, eta!., G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court ofAppeals, eta!., G.R. No. 96322, December 20, 1991.

DECISION CfA CASE NO. 8269 proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, howeve~ That a return filed showing an overpayment shall be considered as a written claim for credit or refund." "SEC. 229. Recovery of Tax Erroneously or 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 authority, or of any sum alleged to have been excessively 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. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, howeve~ That the Commissioner may, even without 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." It is well-settled in our jurisprudence that the reckoning of the two-year prescriptive period for the filing of a claim for refund/tax credit of excess income tax paid/withheld, both in the administrative and judicial levels, commences from the date of filing of the Final Adjustment Return.25 It is only when the Final Adjustment Return covering the whole year is filed that the taxpayer would know ~ 25 ACCRA Investments Corporation vs. The Honorable Court of Appeals/ eta/., G.R. No. 96322, December 20, 1991; Commissioner of Internal Revenue vs. TMX Sales/ Inc. and the Court of Tax Appeals, G.R. No. 83736, January 15, 1992; Commissioner of Internal Revenue vs. The Philippine American Life Insurance Co./ eta!., G.R. No. 105208, May 29, 1995.

DECISION CTA CASE NO. 8269 whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 26 The present claim covers calendar year 2008 for which petitioner originally filed its Annual Income Tax Return on April 15, 2009.27 Counting from this date, the administrative claim filed by petitioner on April 7, 2011 28 and the Petition for Review filed on April 14, 2011 fell within the two-year prescriptive period. Clearly, the first requirement has been satisfied. Anent petitioner's compliance with the second requisite, the Court of Tax Appeals En Bane in the case of Merma~ Inc. vs. Commissioner of Internal Revenutf9 ruled that claims for refund involving creditable tax withheld shall only be given due course upon submission of BIR Form No. 2307 issued by the income-payor to the recipient-payee, to wit: "On the outset, the third condition is imposed by Section 2.58.3 (B) of Revenue Regulations (RR) No. 2-98, which states: Sec. 2.58.3. Claim for Tax Credit or Refund. - XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment 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 7z- therefrom. (Emphasis provided) 26 Commissioner ofInternal Revenue vs. TMX Sales, Inc. and the Court of Tax Appeals, G.R. No. 83736, January 15, 1992. 27 Exhibit "A". 28 Exhibit "E". 29 CTA EB No. 699, July 27, 2011.

DECISION CfA CASE NO. 8269 Corollary to the condition set forth, the same RR No. 2-98 establishes the requirement on the part of the payor to furnish the payee the withholding tax statement using the prescribed form (BIR Form No. 2307), which shows the income payments made and the amount of taxes withheld. Otherwise, the failure of the payor to furnish the same shall be a ground for mandatory audit, viz.: Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. - XXX XXX XXX (B) Withholding tax statement for taxes withheld. - Every payor required to deduct and withhold taxes under these regulations shall furnish, in triplicate, each payee, whether individual or corporate, with a withholding tax statement, using the prescribed form (BIR Form No. 2307) showing the income payments made and the amount of taxes withheld therefrom, for every month of the quarter, within twenty (20) days following the close of the taxable quarter employed by the payee in filing his/its quarterly income tax return. The payor, nonetheless, should always retain a copy of duly issued BIR Form 2307. Failure to furnish the same shall be a ground for the mandatory audit of payor's income tax liabilities (including withholding tax) upon verified complaint of the payee. XXX XXX XXX The rules are clear. The income-payor, as the withholding agent, is required to furnish the recipient- payee of the statement of withholding or BIR Form No. 2307. And for purposes of claims for refund or tax credit of creditable income tax, the claim shall only be given due course when the income and withholding are established by a copy of the withholding tax statement or BIR Form No. 2307 issued by the income-payor to the recipient- payee." (Emphasis supplied) 9V

DECISION CTA CASE NO. 8269 Per the Independent CPA Report, petitioner's total claim amounti ng to ~31, 819,116.25 is summarized as follows: 30 Findings Annex Supporting Amount of CWT Reference BIR Returns A. Creditable withholding tax payments duly supported by original BIR Forms 1606, 1706 and 2307 Sale ofProoertv 1 Creditable withholding tax payments supported by original Annex Al -l 1606 p 6,925,647.58 BIR Return stamped "received" by the bank Annex Al -2 1606 611 , 520 .00 Annex Al -3 1606 479, 040 .00 2 Creditable withholding ta x payment supported by original BIR Return stamped "received" by the bank and photocopy of bank validated slip as evidence of tax remittance 3 Creditable withholding ta x payment supported by original BIR Return stamped "received " by the bank with erasure in the name and TIN of the company but with cou ntersig nature 4 Creditable withholding tax payment supported by original Annex Al-4 1606 1,470,000.00 BIR Return stamped "received" by the bank with erasure in the amount of taxable base but with countersignature and the amount could be validated throuqh re-computation 5 Creditable withholding tax payment supported by original Annex Al-5 1706 900,000.00 BIR form 1706 without date indicated therein but with Annex Al -6 1706 84,000.00 stamped "received" by the bank on January 10 2008. 10,470,20 7.58 6 Creditable withholding tax payment supported by original BIR Form 1706 with stamped "received" by the bank and photocopy of bank validated slip as evidence of tax remittance Sub-total Lease Income Annex A2 -l 2307 12,406,326.25 1 Creditable withholding ta x payment supported by original BIR Form 2307 2 Creditable withholding tax payment supported by original Annex A2-2 2307 6,224.72 BIR Form 2307 without the Company's TIN indicated therein Sub-Total 12/41 2/550.97 Interest Income on Commercial and Trade Loans 1 Creditable withholding tax payment supported by original Annex A3- l 2307 3,162 , 347.16 BIR Form 2307 Annex A3-2 2307 364,761.92 Annex A3 -3 2307 1,71 5. 98 2 Creditable withholding ta x payment supported by original BIR Form 2307 without the Company's TIN indicated therein 3 Creditable withholding tax payments supported by original BIR Form 2307 with erasure in the amount but with countersignature and the amount could be validated through re-computation 4 Creditable withholding tax payment supported by original Annex A3 -4 2307 16,3 18.18 BIR Form 2307 with erasure in the Company's TIN but with countersignature Sub-Total Annex A4-l 2307 3 545 143.24 Annex A4-2 2307 Reimbursements 48,3 49 .2 3 101,614.49 1 Creditable withholding tax payments supported by original 149 963.72 BIR Form 2307 ,~ 2 Creditable withholding tax payments supported by original BIR Form 2307 without Company's TIN indicated therein Sub-Total Commission Income 30 Exhibit "P", pp. 3-6.

DECISION CTA CASE NO. 8269 1 Creditable withholding tax payment supported by original I Annex A5-1 2307 125,000.00 BIR Form 2307 I' 26 702,865.51 Annex A1-7 1606 TOTAL Annex A1-8 1606 117,684.00 B. Other Findings Annex A1-9 1606 Annex A1-10 1606 1,808,355.60 Sale ofProoertv Annex A1-11 1606 Annex A1-12 189,892 .50 1 Creditable withholding tax payments supported by original - BIR Returns stamped "received" by the bank but the tax Annex A2-3 69,825 .00 base was not indicated therein Annex A2-4 2307 (77 542 .60) Annex A2-5 2307 999 150.00 2 Creditable withholding tax payments supported by Annex A2-6 2307 I' 3,107,364.50 photocopy of BIR return stamped "received" by the bank Annex A2-7 2307 Annex A2-8 1601 764 ,5 75 .04 3 Creditable withholding ta x payment supported by original Annex A2-9 BIR return stamped "received" by the bank but without - 84,750 .22 date indicated therein . Annex A3 -5 - Annex A3-6 385,585 .89 4 Creditable withholding tax payment supported by original Annex A3 -7 2307 385 ,396 .00 BIR return stamped "received" by the bank but dated Annex A3-8 2307 outside the period of claim . Annex A3-9 2307 6,700.00 Annex A3-10 2307 (256 .19) 5 Underclaimed creditable withholding ta x payments Annex A3-11 2307 14921.93 6 Supporting documents not available for verification 1601 1,641 672.89 Annex A4-3 Sub-Total Annex A4-4 - 24,996.58 9,952 .09 Lease Income 2307 2307 84,050.91 1 Creditable withholding tax payment supported by original BIR Form 2307 but with different company TIN indicated 34,216.48 therein 157,2 87.66 2 Credit able withholding ta x payment supported by original 7,427.04 BIR Form 2307 but not dated within the period of claim and 1,853.45 with different Company's TIN 319,784.21 3 Creditable wit hholding tax payment supported by original 46, 167.89 BIR Form 2307 but not dated within t he period of claim 1,261.25 4 Creditable withholding tax payment supported by 47,429.14 photocopy of BIR Form 2307 I' 5,116,250.74 1'31,819, 116.25 5 Creditable withholding tax payments supported by BIR Form 1601-E 6 Underclaimed creditable withholding tax payments 7 Supporting documents not avai lable for verification Sub-Total Interest Income on Commercial Loans 1 Credit able withholding tax payment supported by original BIR Form 2307 but with erasure in the amount and without Com pa ny's TIN 2 Creditable withholding tax payment supported by original BIR Form 2307 but with erasure on the Company's TIN 3 Creditable withholding tax payment su pported by original BIR Form 2307 but with different company TIN indicated therein. 4 Creditable withholding tax payment supported by original BIR Form 2307 but not dated within the period of claim 5 Creditable withholding tax payment supported by photocopy of BIR Form 2307 6 Creditable withholding tax payments supported by original BIR Form 1601-E 7 Supporting documents not available for verification Sub-Total Reimbursement 1 Creditable withholding tax payment supported by original BIR Form 2307 but with different Company's TIN indicated therein 2 Creditable withholding ta x payments supported by original BIR Form 2307 but not dated within the period of claim Sub-Total TOTAL- Other Findings GRAND TOTAL

DECISION CTA CASE NO. 8269 Based on the above findings and the Court's ruling on strict compliance with the required Certificates of Creditable Tax With held at Source or BIR Form No. 2307 in claiming for CWT refund, petitioner has satisfied the second requirement in the amount of P16,302,740.46, as presented below: Annex Amount of Creditable Findings Reference Withholding Tax Creditable withholding tax payments duly supported by original BIR Forms 2307 1. Lease Income Annex A2-1 p 12,406,326.25 Annex A2-6 385,396.00 Annex A3-1 3,162,347.16 2. Interest Income on Commercial and Trade Loans Annex A3-3 1,715.98 Annex A3-4 16,318.18 Annex A3-9 157,287.66 3. Reimbursements Annex A4-1 48,349.23 4. Commission Income Annex A5-1 125 000.00 TOTAL P16 302 740.46 The income payments upon which the creditable withholding taxes of P16,302, 740.46 were withheld amount to P426,506,677.90, detailed as follows: Findings Annex Income Amount of Reference Payments CWT A. Creditable withholding tax payments where the related income are included in the Company's General Ledger Lease Income B2 - 1 ~133,851,398.57 ~ 6,672,167.86 1 Creditable withholding tax payments supported by original BIR Form 2307; the related income of which is supported by original lease contract and accounting ticket and traced to GL 2 Creditable withholding ta x payment supported by original BIR B2-2 36,499,844.03 1,824,992.16 Form 2307; the related income of which is supported by B2 -3 25,484, 511.69 1,274,225.60 photocopy lease contract and accounting ticket and traced to GL 3 Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by photocopy lease contract and accounting ticket and traced to GL Sub-Total 195,835 754.29 9 771385.62 Interest Income on Commercial Loans B3 - 1 7,396,090.39 147,921.83 B3-2 8,123,829 .20 162,476.58 1 Creditable withholding tax payment supported by original BIR B3 -3 2,602,347.22 Form 2307; the related income of which is supported by original B3-4 52,046 .94 promissory note (PN), original instruction sheet and original 166,534.25 3,330.69 official receipt (OR), and traced to GL 2 Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by original PN and original instruction sheet, and traced to GL 3 Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by original instruction sheet and original OR and traced to GL 4 Creditable withholding ta x payment supported by original BIR Form 2307; the related income of which is supported by original PN and photocopy of instruction sheet, and traced to GL 5 Creditable withholding tax payment supported by orig inal BIR B3- 5 828,210.24 16,564.17 Form 2307; the related income of which is supported by orig inal OR and traced to GL /2.. (,'~

DECISION CfA CASE NO. 8269 6 Creditable withholding tax payment supported by original 8IR 83-6 2,114,953.06 42,299.06 Form 2307; the related income of which is supported by 83-7 4,422,383.58 88,447.66 photocopy of PN and oriqinal instruction sheet and traced to GL 83 - 10 61,051.99 1,221.04 7 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is supported by 83-11 815,908.85 16,318.18 photocopy of PN, original instruction sheet and original OR, and traced to GL 83-12 589,230.43 11,784.60 8 Creditable withholding tax payments supported by original 8IR 83- 13 3,890,549.66 77,811.01 Form 2307 with erasure in the amount but with countersignature and the amount could be validated through re-computation; the 83 - 14 2,940,223.99 58,804.46 related income of which is supported by original PN and original instruction sheet, and traced to GL 83 - 15 89,313.89 1,786.28 9 Creditable withholding tax payment supported by original 8IR 34 040 626.75 680,812.50 Form 2307 but with erasure on the Company's TIN but with countersignature; the related income of which is supported by P229 876 381.04 P10,452,198.12 original PN, original instruction sheet and original OR, and traced to GL 82-5 p 3,750,830.49 p 187,541.53 82-6 10 Creditable withholding tax payment supported by original 8IR 82-7 810,145.88 40,507.31 Form 2307; the related income of which is supported by original 82-8 trust receipt, original instruction sheet or debit advice, and traced 82-9 46,350,880.30 2,317,544.01 to GL 107,487.53 5,374.38 11 Creditable withholding tax payment supported by original 8IR 388,170 .00 19,408.50 Form 2307; the related income of which is supported by original trust receipt, instruction sheet, and traced to GL 82-10 1,249,192.92 62,459.65 12 Creditable withholding tax payment supported by original 8IR 82-11 42,105.30 2,105 .27 Form 2307; the related income of which is supported by original A2-6 trust receipt and debit advice, and traced to GL 7,707,920.10 385,396.00 60,406,732.52 3,020,336.65 13 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is supported by original b trust receipt and photocopy of instruction sheet, and traced to GL Sub-Total TOTAL B. Other Findinqs Lease Income 1 Creditable withholding tax payments supported by original 8IR Form 2307; the related income of which is supported by original lease contract 2 Creditable withholding tax payments supported by original 8IR Form 2307; the supporting documents of the related income are not available for verification 3 Creditable withholding ta x payments supported by original 8IR Form 2307; the related income of which is supported by original lease contract and accounting ticket but partially traced to GL 4 Creditable withholding tax payments supported by original 8IR Form 2307; the related income of which is supported by accounting ticket but partially traced to GL 5 Creditable withholding tax payments supported by original 8IR Form 2307; the related income of which is supported by original lease contract and accounting ticket but partially traced to GL 6 Creditable withholding tax payments supported by original 8IR Form 2307; the related income of which is supported by photocopy lease contract and accounting ticket but partially traced to GL 7 Creditable withholding tax payments supported by original 8IR Form 2307; the related income of which is supported by photocopy of lease contract 8 Creditable withholding tax payment supported by photocopies 8IR Form 2307 Sub-Total Interest Income on Commercial Loans

DECISION CfA CASE NO. 8269 1 Creditable withholding tax payment supported by original BIR 83-18 1, 772,573.51 35 ,451.46 Form 2307; the related income of which is supported by original 83-19 2,879,368 .84 57, 587 .38 PN, original instruction sheet and original OR, and partially traced 83 - 20 8,750,000.00 175,000.00 to GL 83-21 1,440,324.48 28,806.49 83-22 2 Creditable withholding ta x payment supported by original 8IR 83-23 263,479 .16 5,269 .60 Form 2307; the related income of which is supported by original 83-24 2,050,075.37 41,001.51 PN and original instruction sheet, but partially traced to GL 83-25 83-26 738,691.32 14,773 .83 3 Creditable withholding tax payment supported by original 8IR 83 - 27 Form 2307; the related income of which is supported by original 83-28 617,500.00 12,350.00 instruction sheet and original OR but partially traced to GL 83-29 83-30 5,972,759.41 119,455 .21 4 Creditable withholding tax payment supported by original 8IR 83-32 5,392,102 .15 107,842 .08 Form 2307; the related income of which is supported by original 83-36 instruction sheet but partially traced to GL A3-9 731,505.95 14,630.13 5 Creditable withholding tax payment supported by original 8IR A4-1 2,446,510.65 48,930.21 Form 2307; the related income of which is supported by original A5-1 OR, but partially traced to GL 461,472.65 9,229.45 6 Creditable withholding tax payment supported by original 8IR 91,437,327.38 1,828,746.53 Form 2307; the related income of which is supported by photocopy of PN, original instruction sheet and original OR, but 24,746.85 494.94 partially traced to GL 7,864,382 .03 157,287.66 7 Creditable withholding tax payment supported by original 8IR 132 842 819.75 2,6 56,8 56.4 8 Form 2307; the related income of which is supported by original PN, original instruction sheet and photocopy of OR, but partially 2,130,744.59 48,349 .23 traced to GL 1,250,000.00 125,000.00 8 Creditable withholding ta x payment supported by original 8IR Form 2307; the related income of which is supported by photocopy of PN, original instruction sheet, but partially traced to GL 9 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is partially supported by original trust receipt and instruction sheet but partially traced to GL 10 Creditable withholding ta x payment supported by original 8IR Form 2307; the related income of which is partially supported by original trust receipt and debit advice but partially traced to GL 11 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is partially supported by original trust receipt and photocopy of instruction sheet but partially traced to GL 12 Creditable withholding ta x payment supported by orig inal BIR Form 2307; the related income of which is partially supported by original trust receipt, instruction sheet or debit advice, but partially traced to GL 13 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is partially supported by original trust receipt, photocopy of instruction sheet or debit advice but partially traced to GL 14 Creditable withholding tax payments supported by original 8IR Form 2307; the supporting documents of the related income are not available for verification 15 Creditable withholding tax payments supported by original 8IR Form 2307 with erasure in the amount but with countersignature and the amount could be validated through re-computation ; supporting documents of the related income are not available for verification 16 Creditable withholding tax payment supported by photocopies 8IR Form 2307 Sub-Total Reimbursement 1 Creditable withholding ta x payments supported by original 8IR Form 2307; the supporting documents of the related income are not available for verification Commission Income 1 Creditable withholding tax payments supported by original 8IR Form 2307; the supporting documents of the related income are not available for verification

DECISION CTA CASE NO. 8269 I TOTAL- Other Findings I P196 630 296.86 p 5 850 542.36 I GRAND TOTAL I P426,506,677.90 P16 302 740.46 Based on the foregoing, the Court finds that only the income payments in the amount of P203,345,072.26 related to the creditable withholding taxes of P9,921,571.97 were clearly declared in petitioner's general ledger and Annual ITR for calendar year 2008, to wit: Exhibit Annex No. Income Amount of Findings Reference (GL) Payments CWT A. Creditable withholding tax payments where the related income are included in the Company's General Ledger Lease Income 82-1 0-18, 0- P133,851,398.57 p 6,672,167.86 82-2 19, 0- 1 Creditable withholding tax payments supported by 82-3 36,499,844.03 1,824,992.16 original 8IR Form 2307; the related income of which 20, 0-21 is supported by original lease contract and accounting ticket and traced to GL 0-18, 0- 19, 0 - 2 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which 20, 0-21 is supported by photocopy lease contract and accounting ticket and traced to GL 0-19, 0 - 25,484,511.69 1,274,225.60 20 3 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is supported by photocopy lease contract and accounting ticket and traced to GL Sub-Total 195 835,754.29 9,771,385.62 Interest Income on Commercial Loans 83 - 12 0-37 589,230.43 11,784.60 83 - 13 0 -37 3,890,549.66 77,811.01 1 Creditable withholding ta x payment supported by original 8IR Form 2307; the related income of which is supported by original trust receipt, original instruction sheet or debit advice and traced to GL 2 Creditable withholding tax payment supported by original 8IR Form 2307; the related income of which is supported by original trust receipt, instruction sheet, and traced to GL 3 Creditable withholding ta x payment supported by 83 - 14 0 -37 2,940,223.99 58,804.46 original 8IR Form 2307; the related income of which is supported by original trust receipt and debit advice, and traced to GL 4 Creditable withholding tax payment supported by 83-15 0-37 89,313.89 1,786.28 original 8IR Form 2307; the related income of which is supported by original trust receipt and photocopy of instruction sheet and traced to GL Sub-Total 7 509 317.97 150 186.35 TOTAL P203 345 072.26 P9 921,571.97 Similarly, the income payments in the amount of P6,054,171.77 upon which the creditable withholding taxes in the amount of P121,083.45 were withheld were also verified to be included in the income reported in the general ledger and Annual ITR of petitioner for calendar year 2008, detailed hereafter: ~

DECISION CfA CASE NO. 8269 Exhibit Exhibit Received from Income Amount of Ref {BIR GL Payments CWT Returns) Inter est Income on Commercial Loans 1. Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by original promisory note { PN), original instruction sheet and original official receipt {OR , and traced to GL (Annex 83-1) 0-4.361 0-27 Gran Export Manufacturing Corp. p 173,298.61 p 3,465.97 0-4.363 0-27 Gran Export Manufacturing Corp. 5 590.28 111.81 0-4.394 0-27 Tao Commodity Trader Inc. 214,296.88 4,285.94 0-4.395 0-27 Tao Commodity Trader Inc. 212,465.28 4,249.31 0-4.468 0-27 Tao Commodity Trader Inc. 219,791.67 4,395.83 0-4.469 0 -27 Tao Commodity Trader Inc. 133,333.33 2 666.67 0-4.47 0 -27 Tao Commodity Trader Inc. 240,305.56 4,806.11 0-4.471 0-27 Tao Commodity Trader Inc. 145,777.78 2 915.56 0 -4.472 0-27 Tao Commodity Trader Inc. 210 267.36 4 205.35 0-4.473 0-27 Tao Commodity Trader Inc. 127 555.56 2 551.11 0-4.550 0-27 Tao Commodity Trader Inc. 172 719.62 3 454.39 0-4.552 0-27 Tao Commodity Trader Inc. 140 000.00 2,800.00 0-4.553 0-27 Tao Commodity Trader Inc. 87,500.00 1 750.00 0-4.554 0 -27 Tao Commodity Trader Inc. 135 406.25 2 708.13 0 -4.555 0 -27 Tao Commodity Trader Inc. 143,333.33 2 866.67 0-4.557 0-27 Tao Commodity Trader Inc. 89 583.33 1 791.67 0-4.559 0-27 Tao Commodity Trader Inc. 119,444.44 2 388.89 Sub-total 2,570, 669.28 51, 413.41 2. Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by original PN and original instruction sheet, and traced to GL (Annex 83-2) 0-4.364 0-27 HBC Inc 35 416.50 708.33 0-4.499 0-27 Camara Realty Corp 44 729.07 894.58 Sub-total 80 145.57 1, 6 0 2.91 3. Creditable withholding tax payment supported by original BIR Form 2307; related income of which is supported by original OR & t raced to GL (Annex 8 3-5) 0-4.288 0 -27 Gran Export Manufacturing Corp. 144 903 .69 2 898.07 0-4.43 0 -27 Gran Export Manufacturing Corp. 198 333.33 3 966.67 0-4.431 0 -27 Gran Export Manufacturing Corp. 230 222.22 4 604.44 0-4.556 0-27 Tao Commodity Trader, Inc. 62 708.33 1 254.17 Sub-total 636,167. 57 12,723.35 4. Creditable withholding tax payment supported by original BIR Form 2307; the related income of which is supported by photocopy of PN and original i nstructi on sheet, and traced to GL (Annex 83-6) 0-4.298 0-27 Legaspi Oil Company Inc. 590 222.89 11,804.46 0-4.373 0-27 Legaspi Oil Company Inc. 474 212.38 9 484.25 0-4.445 0-27 Legaspi Oil Company Inc. 149 964.60 2 999.29 0-4.446 0 -27 Legaspi Oil Company Inc. 83 912.56 1 678.25 Sub-total 1,298, 312.43 2 5 , 9 6 6. 2 5 5 Creditable w ithholding tax payment supported by original BIR Form 2307; t he related income of which is supported by photocopy of PN, original instruction sheet and original OR, and traced to GL (Annex 83-7) 0-4.289 0-27 Gran Export Manufacturing Corp. 140 229.50 2,804.59 0-4.290 0-27 Gran Export Manufacturing Corp. 32 720.19 654.40

DECISION CTA CASE NO. 8269 0 -4.299 0 -27 Leqaspi Oil Company Inc. 57 1 1 8 3 .44 11 423.67 0 -4.300 0 -27 Leqaspi Oil Company Inc. 171 355.03 3 427.10 0 -4.302 0 -27 Leqaspi Oil Company I nc. 331 948.66 6 638.97 Sub-total 1,247. 436.82 24,948.73 6. Creditable withholding tax payment supported by original BIR Form 2307 but with erasure on the Company's TIN but with countersignature; the related income of which is supported by original PN, original instruction sheet and original OR, and traced to GL (Annex 83-11) 0-4.122 0 -27 Tao Commodity Trader I nc. 221 440.10 4 428.80 Sub-total 221,440.10 4,428.80 TOTAL P6,054,171.77 p 121,083.45 Petitioner was able to establish that the income payments of P209,399,244.03 (P203,345,072.26 plus P6,054,171.77) with a corresponding CWT of P10,042,655.42 (P9,921,571.97 plus P121,083.45) formed part of the gross income declared by petitioner in its Annual ITR for calendar year 2008; thus, in compliance with the third requisite. In sum, petitioner has sufficiently proven compliance with the three requisites for the refund of unutilized creditable withholding taxes, but only to the extent of P10,042,655.42 out of the total claimed CWT of P31,819,116.25. The Court shall now determine whether petitioner exercised the option to "carry-over" its excess creditable withholding taxes to the succeeding quarters, as provided under Section 76 of the NIRC of 1997, as amended, which reads : "SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar 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 shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. ~

DECISION CTA CASE NO. 8269 In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." Based on the afore-quoted provision, a corporation entitled to a tax credit or refund of the excess estimated quarterly income taxes paid in a given taxable year has two options: (1) to carry over the excess credit; or (2) to apply for the issuance of a tax credit certificate or to claim a cash refund. If the option to carry over the excess credit is exercised, the same shall be irrevocable for that taxable period and no application for cash refund or issuance of tax credit certificate shall be allowed.31 Records reveal that in its amended Income Tax Return for calendar year 2008 32 petitioner reflected a net loss of , P655,794,182.4133 and income tax overpayment of P72,730,652.7734, which petitioner marked as "To be Issued a Tax Credit Certificate"35� The income tax overpayment of P72,730,652.77 consists of the following: Prior Year's Excess Credits p 40 911,536.52 Creditable Tax Withheld during the year 31 819,116.25 TOTAL P72,730,652.77 31 Systra Philippines/ Inc. vs. Commissioner ofInternal Revenue, G.R. No. 176290, September 21, 2007; Commissioner of Internal Revenue vs. Mirant {Philippines) Operations Corporation et a!., G.R. Nos. 171742 and 176165, June 15, 2011. 32 Exhibit "8". 33 Exhibit "8", Line 218. 34 Exhibit "8", Line 29. 35 Exhibit "8", Line 31.

DECISION CTA CASE NO. 8269 Petitioner was unable to utilize all the tax credits of P72,730,652.77 because it had no income tax liability due to losses incurred in its operations. In petitioner's 2009 Quarterly Income Tax Returns for the first36 and second37 quarters, only the amount P40,911,536.52 was reflected as "Prior Year's Excess Credits"; while on the third38 quarter of 2009 as well as in its 2009 amended Annual Income Tax Return39, the amount of P40,811,031.83 was reflected as "Prior Year's Excess Credits". This amount was arrived at by deducting the second quarter MCIT for the year 2009 amounting to P100,504.69 from "Prior Year's Excess Credits" of P40,911,536.52. Evidently, the claimed CWT amounting to P31,819,116.25 for the year 2008 was not carried over to the succeeding quarters or taxable year. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P10,042,655.42, representing petitioner's unutilized and excess creditable withholding taxes for calendar year 2008. SO ORDERED. ~~ c a:r-~-oi LJUANITO C. CASTANEDA, JR. Associate Justice WE CONCUR: ~,/.:�~- f- AMELIA R. COTANGCO-MANALASTAS Associate Justice CAESAR A. CASANOVA Associate Justice 36 Exhibit "0-30.1". 37 Exhibit "0-30.2". 38 Exhibit "0-30.3". 39 Exhibit "D".

DECISION CfA CASE NO. 8269 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~ c.as-a-..--~ Q juANITO c. CASTANEDA, iR. Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ROMAN G. DEL ROSARIO Presiding Justice