cta_decision CTA Case No. 1027310273 2024-06-28

TULLETT PREBON (PHILIPPINES) INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Fom1 No. 8 111111111111 1111111111 1111111111111111111111111111111111111111 111111111111111111 20-000 118-0066 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE NO. 10273 TULLETTPREBON (PHILIPPINES) INC., Petitioner, -versus- NOTICE OF AMENDED DECISION COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Vi llage Makati City ATTY. SYLVIA A. ALMA JOSE ATTY. AYESHA HANIA B. GUILING-MATANOG ATTY. MARVEEN B. DE LA PAZ Bureau of Internal Revenue Room 703, Litigati on Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Oi liman, Quezon City SALVADOR LLANILLO & BERNARDO 8th Floor, Tower One & Exchange Plaza Ayala Triangle. Ayala Avenue 1226 Makati City GREETINGS: You are hereby notified by these presents that on June 28, 2024, an Amended Decision was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, July 1, 2024. Page 1 of I

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION TULLETT PREDON CTA Case No. 10273 (PHILIPPINES), INC., Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. - )(- - - - - - - - - - - - - - - - - - - - - - - - AMENDED DE MANAHAN, J.: For resolution of the Court are the following: 1. Motion for Partial Reconsideration (Re: Decision dated 30 January 2024) filed by respondent on February 19, 2024 ("respondent's Motion") ,1 with petitioner's Comment (Re: CIR's Motion for Reconsideration dated February 16, 2024) ;2 and 2. Motion for Partial Reconsideration filed by petitioner on February 21, 2024 ("petitioner's Motion"), 3 without respondent's comment.4 Both Motions assail the Court's Decision dated January 30, 2024 ("Assailed Decision"),s the dispositive portion of which reads: I Docke t - Vol. II , pp. 7 5 1-758. 2 Doc k et- Vol. II, p p. 775-79 3. 3 Docket- Vol. II , pp. 760-77 2. 4 Per Records Verification d a ted Ma rch 12, 2024. s Docket - Vol. II, pp. 735 -750. ~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED. Respondent is hereby ordered to refund petitioner the amount of P6,978,758.87 representing the latter's excess and unutilized CWTs for the CY ended December 31, 2017. SO ORDERED. Respondent's Motion Respondent Commissioner of Internal Revenue ("CIR") argues that in a judicial claim for refund or tax credit, it is crucial for the taxpayer to prove that its administrative claim should have been granted in the first place. Here, petitioner allegedly failed to satisfy all the documentary and evidentiary requirements for its administrative claim. It cannot therefore cure the same by presenting the necessary documents before the Court; otherwise, it would be tantamount to circumventing the CIR's role in evaluating the taxpayer's claim. Respondent cites Revenue Memorandum Order (RMO) No . 53-98 which provides the checklist of documents to be submitted by a taxpayer upon audit of its tax liabilities, and Revenue Regulations (RR) No. 2-2006 which require the submission of the Summary Alphalist of Withholding Agents of Income Payments subjected to Withholding Tax (SAWT) . According to respondent, there is no record of petitioner submitting the complete documents under the said issuances. In its Comment, petitioner counterargues that respondent did not specify which specific documents it failed to submit. Moreover, it has been settled already that RMO No. 53-98 and RR No. 2-2006 merely enumerates the documents that the Bureau of Internal Revenue ("BIR") may require from the taxpayer. They are not the benchmark in determining whether the documents submitted are sufficient to support a claim for refund of erroneously paid or collected taxes.~,___

AMENDED DECISION CTA Case No. 10273 Tallett Prebon (Philippines), Inc. u. Commissioner of Internal Revenue Petitioner's Motion Petitioner moves that the Court revisit its evidence and reconsider the assailed Decision on the following grounds: First, of the creditable withholding taxes (CWTs) in the amount of P875,606.69 disallowed by the Court based on the findings of the ICPA that the same are unsupported by valid CWT certificates (BIR Forms No. 2307), P17,406.06 are in fact properly supported by CWT certificates forming part of the evidence it submitted. Second, the amount of P49,751.11 disallowed by the Court due to discrepancies between the amounts stated in the CWT certificates and the amounts per claim was due to the fact that the Court missed to appreciate that the latter are supported by two CWT certificates. Third, the amount of P6,969.86 disallowed by the Court because the exhibit reference for the purported supporting CWT certificate does not pertain to the client per the schedule of claim was due to the fact that the Independent Certified Public Accountant (ICPA) inadvertently marked the CWT certificate issued to First Metro Investment Corp. as Exhibit "P-61" instead of Exhibit "P-62." Fourth, the amount of P106,108.72 disallowed by the Court, because the exhibit references for their supporting CWT certificates already pertained to other CWT amounts, was due to erroneous exhibit markings. Fifth, contrary to the Court's findings, the CWTs in the amount ofP289,926.03 are in fact properly supported by CWT certificates. We now resolve. O'h.,.,..__

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue Section 8 of RA No. 1125,6 as amended by RA No. 9282,7 describes the Court as a court of record. It is already well- settled that cases before the Court are litigated de novo, therefore party litigants should prove every minute aspect of their cases.8 The Court's decision should be "solely based on the evidence formally presented before it, notwithstanding any pieces of evidence that may have been submitted (or not submitted) to the CIR."9 Respondent's contention therefore that petitioner should have first submitted the complete documents under RMO No. 53-98 and RR No. 2-2006 in support of its administrative claim deserves scant consideration. Aside from the fact that respondent did not even indicate which specific documents petitioner failed to submit, Section 229 of the Tax Code clearly expresses that the only requirement for a judicial claim of refund to be maintained is that an administrative claim had been filed. The law does not require that the latter be acted upon before a judicial claim may be filed. 10 Moreover, RMO No. 53-98 and RR No. 2-2006 do not provide that non-submission of the documents enumerated therein ipso facto results in the denial of the taxpayer's refund claim. This was already addressed by the Supreme Court in Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue: 11 "...RMO No. 53-98 is addressed to internal revenue officers and employees, for purposes of equity and uniformity, to guide them as to what documents they may require taxpayers to present upon audit of their tax liabilities. Nothing stated in the issuance would show that it was intended to be a benchmark in determining whether the documents submitted by a 6 AN ACT CREATING THE COURT OF TAX APPEALS. 7 AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT No. 1125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES. 8 Commissioner of Internal Revenue v. Jerry Ocier, G.R. No. 192023, November 21, 2018 [Per J. Bersamin, First Division]. 9 Commissioner of Internal Revenue v. Philippine Bank of Communications, G.R. No. 211348. February 23, 2022 [Per J. Hernando, Second Division]. Emphasis supplied. 10 Commissioner of Internal Revenue v. Univation Motor Philippines, Inc. iformerly Nissan Motor Philippines, Inc.), G.R. No. 231581, April 10, 2019 [Per J. Reyes Jr., Second Division]. 11 G.R. No. 207112, December08, 2015 [PerJ. Mendoza, En Bane].~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue taxpayer are actually complete to support a claim for tax credit or refund of excess unutilized excess VAT." Accordingly, we deny respondent's Motion. Meanwhile, the Court finds partial merit m petitioner's Motion. To recapitulate, aside from compliance with Section 76 of the National Internal Revenue Code, as amended ("NIRC"), the following requisites must be met for the successful claim of refund of excess unutilized CWTs: 1. The claim must be filed within the two-year prescriptive period under Sections 204(C) and 229 of the NIRC; 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 payee or recipient. Here, for the reconsideration of the subject disallowances, petitioner must convince the Court that the second and third requisites have in fact been met. Below is a summary of the Court's findings on petitioner's compliance with the second requisite: Per assailed Decision I ! Client Name Amount Ground for Ground for Disallowed Disallowance Reconsideration CHINA BANKING CORPORATION (PhP) JP MORGAN CHASE BANK NA 763.20 N/A CITIBANK NA 1,050.00 N/A .,. INTERNATIONAL NEDERLAND BANK --- Without BIR Form Duly covered by BIR Form No. 2307 per No. 2307 per Exhibit "P-46" 12,197.47 !CPA's findings Duly covered by BIR 2,487.85 Form No. 2307 per

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. u. Commissioner of Internal Revenue Exhibit "P-64," except the amount of1'149.50 RIZAL COMMERCIAL 907.54 Duly covered by BIR BANKING CORP. Form No. 2307 per Exhibit "P-428" Subtotal 17,406.06 SECURITY BANK CORP. The amount per claim is duly supported by (P29,603.68 per claim less 14,759.84 Exhibit "1 03" fl4,843.84 per 2307) -.. The amount of 1'6,423.37 is duly covered by AUSTRALIA & NEW ZEALAND --�-------� The CWT amounts another BIR Form No. per BIR Form No. 2307 per Exhibit "!31" BANKING GROUP LTD 6,423.37 2307 are lower than the CWT The amount per claim is (P82,991.85 per claim less amounts per claim duly supported by Exhibit "210," except f76,568.48 per 2307) the amount of 1'250.97 SECURITY BANK CORP. 28,567.90 (P48,397.23 per claim less fl9,829.33 per 2307) Subtotal 49,751.11 FIRST METRO INVESTMENT 6,969.86 The supporting Duly covered by BIR CORP. BIR Form No. 2307 Form No. 2307 per does not pertain to Exhibit "P-62" the client per schedule of claim Subtotal 6,969.86 SECURITY BANK CORP. 38,393.61 The supporting Duly covered by BIR - BIR Form No. 2307 Form No. 2307 per SECURITY BANK CORP. already pertains to Exhibit "P-1 03" except 36,755.80 other income the amount of1'315.16 INTERNATIONAL NEDERLAND - payments and BANK CWT amounts Duly covered by BIR Subtotal 30,959.31 Form No. 2307 per Exhibit "P-210" 106,108.72 Duly covered by BIR Form No. 2307 per Exhibit "P-172" CITIBANK NA 22,129.94 Duly supported by BIR Form No. 2307 per Exhibit "P-46" METROPOLITAN BANK & 61,622.52 TRUST COMPANY Duly supported by BIR METROPOLITAN BANK & 57,183.37 Form No. 2307 per Exhibit "P-76" TRUST COMPANY �---�� METROPOLITAN BANK & 73,790.73 Without BIR Form TRUST COMPANY No. 2307 per Court Duly supported by BlR -- verification Form No. 2307 per -~---~ -----~---- Exhibit "P-209" SECURITY BANK CORP. 5,400.00 SECURITY BANK CORP. 14,429.31 AUSTRALIA & NEW ZEALAND 16,041.91 Duly supported by BIR BANKING GROUP LTD. Form No. 2307 per ��-- Exhibit "P-352" - AUSTRALIA & NEW ZEALAND 8,005.72 BANKING GROUP LTD. RIZAL COMMERCIAL 41,255.00 Duly supported by BIR BANKING CORP. Form No. 2307 per Exhibit "P-428" Subtotal 299,858.50 TOTAL 480,094.25

AMENDED DECISION CTA Case No. 10273 Tullett Pre bon (Philippines), Inc. v. Commissioner of Internal Revenue I. Of the P 17,406.06 CWTs disallowed by the Court for not being supported by BIR Form No. 2307 per ICPA Report, P15,443.26 is pro- perly substantiated. In the !CPA Report, the CWTs in the amounts of P763.20 and Pl,OSO.OO listed in Annex 3, "Schedule ofCWT Certificates that are scanned/photocopies only", were disallowed because the supporting documents thereof are mere scanned copies or photocopies of the BIR Forms No. 2307. Meanwhile, the CWTs in the amounts of Pl2,197.47, P2,487.85, and P907.54 found in Annex 4, "Schedule of CWT subject for refund without certificates (BIR Form 2307)", were disallowed because there are no exhibit references for the corresponding BIR Forms No. 2307 in support thereof. Upon verification, the Court finds that the CWTs listed in Annex 3 in the total amount of P1,813.20 are properly disallowed. Their supporting documents are in fact scanned copies or photocopies, therefore, the same cannot be given probative value by the Court. The CWTs listed in Annex 4, on the other hand, are found to be properly substantiated by Exhibits No. "P-46," "P-64," (except for Pl49.50 withheld by the International Nederland Bank) and "P-428." Therefore, the Court affirms the disallowance of CWTs only in the amount ofP1,962.70. The amount ofP15,443.3612 shall be allowed by the Court as it was established by petitioner to be properly substantiated by BIR Forms No. 2307. II. Of the P49,751.11 CWTs disallowed by the Court due to the amounts per BIR Form No. 2307 being lower than the amounts per claim, the amount of P49,500.14 is properly substantiated. "P12,197.47 + (P2,487.85- P149.50) + P907.54. ~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue To support its allegation that the discrepancies between the amounts stated in the BIR Forms No. 2307 and the amounts per claim was due to the fact that the latter are supported by two CWT certificates, petitioner submits the following exhibit references: Exhibit Client Name Exhibit No. of CWT Amount No. Additional BIR Form 1" 14,759.84 P-102 Security bank Corp. 2307 6,423.37 Please refer to Exhibit P-132 -� 28,567.90 P-209 P-103 Australia & New Zealand Please refer to Exhibit ,. 49,751.11 Banking Group Ltd. P-131 Security Bank Corp. Please refer to Exhibit TOTAL P-210 - ... Verification of the above exhibits confirm that the CWTs withheld by Australia & New Zealand Banking Group Ltd. is indeed duly supported by another BIR Form No. 2307 per Exhibit No. "P-131." As to the CWTs withheld by Security Bank Corp., further verification reveals that Exhibits No. "P-1 02" and "P-209" do not actually pertain to the CWTs from which the amounts of P14,759.84 and P28,567.90 are respectively derived. In any case, Exhibits No. "P-1 03" and "P-21 0" do support the latter amounts, save for the amount of P250.97 which is still in excess of the CWT covered by Exhibit No. "P-210." Thus, the CWTs in the amount of P49,500.1413 shall be allowed by the Court. III. The P6,969.86 CWTs disallowed by the Court because the supporting BIR Form No. 2307 does not pertain to the client is properly supported. Examination of the supporting documents for the CWTs in the amount of P6,969.86 reveal that the ICPA indeed erred 13 P6,423.37 + P14,759.84 + (P28,567.90- P250.97) ~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines}, Inc. v. Commissioner of Internal Revenue in indicating Exhibit "P-61" as supporting reference therefor, although the BIR Form No. 2307 issued by First Metro Investment Corp was correctly marked as Exhibit "P-62." Verily, Exhibit "P-62" supports the "Tax Withheld For the Quarter" amounting to P32,022.61 which includes the amount of P6,969.86 corresponding to the income payment of P69,698.63 for the 3rd month of the quarter. IV. Of the P 1 06, 1 08. 72 CWTs disallowed by the Court because the supporting BIR Form No. 2307 pertains to another period or income payments and CWTs, the amount of P105, 793.56 is supported. To support its claim that the CWTs in the amount of P106,108.72 disallowed by the Court due to their supporting exhibits pertaining to other CWT amounts was simply due to erroneous exhibit markings, petitioner points to the following correct exhibits: Exhibit Client Correct CWT No. name Exhibit amount "P-100" SECURITY BANK CORP. No. "P-100" (PhP) "P-169" SECURITY BANK CORP. "P-103" 38,393.61 INTERNATIONAL NEDERLAND BANK "P-210" 36,755.80 �- "P-172" 30,959.31 Upon validation of the above exhibits, the Court finds that the amount of P315. 16 withheld by Security Bank Corp. was not covered by Exhibit "P-1 03." The amount of P105,793.5614 is properly substantiated and shall therefore be allowed by the Court. V. The P299,858.50 CWTs disallowed by the Court for lack of supporting BIR Form No. 2307 are in fact properly supported. ' 4 (P38,393.61- P315.16) + P36,755.80 + P30,959.31. ~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue Petitioner insists that the following CWTs in the total amount of P289,926.03 15 are properly supported by BIR Forms No. 2307: Client Name BIR Form No. 2307 Amount (Exhibit No.) CITIBANK NA 12,197.47 METROPOLITAN BANK & TRUST COMPANY Included in P-46 61,622.52 METROPOLITAN BANK & TRUST COMPANY P-76 57,183.37 METROPOLITAN BANK & TRUST COMPANY P-76 73,790.73 SECURITY BANK CORP. P-76 SECURITY BANK CORP. 5,400.00 AUSTRALIA & NEW ZEALAND BANKING Included in P-209 14,429.31 GROUP LTD. Included in P-209 AUSTRALIA & NEW ZEALAND BANKING 16,041.91 GROUP LTD. P-352 RIZAL COMMERCIAL BANKING CORP. 8,005.72 Total P-352 41,255.00 P-428 289,926.03 The Court notes that the disallowed CWT withheld by Citibank N.A. in the assailed Decision is in the amount of P22,129.94, 16 not Pl2,197.47. Hence, the total CWTs without supporting BIR Forms No. 2307 for reconsideration 1s P299,858.50, not P289,926.03. Upon verification of the specified exhibit references which were already offered in evidence and admitted by the Court, the Court confirms that the CWTs in the amount of P299,858.50 is duly substantiated. In sum, out of the P480,094.25 total disallowed CWTs, the amount of P477,565.42 is duly substantiated. GROUND FOR AMOUNT OF UNSUPPORTED RECONSIDERED DISALLOWANCE PER DISALLOWED CWTS UPON CWTs SUPPORTED ASSAILED DECISION FURTHER BY BIR FORMS NO. CWTs FOR VERIFICATION Without BIR Form No. 2307 RECONSIDERATION 2307 per !CPA's findings Pl,962.70 Pl5,443.36 Pl7,406.06 The CWT amounts per BIR P49,500.14 Form No. 2307 are lower than P49, 751.11 P250.97 �------- P6,969.86 the CWT amounts per claim - P6,969.86 The supporting BIR Form No. 2307 does not pertain to the ---~-- client per schedule of claim 15 Incorrect total due to incorrect input of CWT amount withheld by Citibank N.A. 16 Docket- Vol. II, p. 746. ~

AMENDED DECISION CTA Case No. 10273 Tullett Prebon (Philippines}, Inc. v. Commissioner of Internal Revenue The supporting BIR Form No. P106, 108.72 P315.16 P105,793.56 2307 already pertains to other P299,858.50 - P299,858.50 income payments and CWT P480,094.25 P477,565.42 amounts P2,528.83 Without BIR Form No. 2307 Nonetheless, petitioner still has to establish the third requisite for the valid claim of refund of excess unutilized CWTs-i.e. that the income upon which the taxes were withheld must be included in the return of the recipient. Upon further scrutiny of the documents for income tracing, the Court finds that out of the validly substantiated CWTs amounting to P477,565.42, the amount of P259.50 withheld by Security Bank Corp. corresponding to the income payment of P2,594.97 should still be disallowed. The said income payment is not traced to the revenues (net brokerage) per Annex 7 "Summary of Revenue Ledger" of the ICPA Report that were included in petitioner's gross income in its annual income tax return for calendar year (CY) 2017. Consequently, only the amount of P477,305.9217 satisfied the third requisite. In view of the above findings, the Court finds that petitioner sufficiently proved its entitlement to the refund of its excess and unutilized CWTs for CY 2017 in the adjusted amount of P7,456,064.79, as computed below: Valid CWTs granted per p 6,978,758.87 assailed Decisiont8 477,305.92 Add: Total reconsidered valid CWTs p 7,456,064.79 Adjusted valid CWTs ACCORDINGLY, respondent's Motion for Partial Reconsideration (Re: Decision dated 30 January 2024) filed on February 19, 2024 is DENIED for lack of merit, while petitioner's Motion for Partial Reconsideration filed on February 21, 2024 is PARTIALLY GRANTED. The dispositive portion of the Decision dated January 30, 2024 is hereby AMENDED to read as follows: 17 P477,565.42 - P259.50. 18 Docket- Vol. II, p. 749. ~

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