CTA Case No. 4096 (Decision)

-. REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY WESTINGHOUSE INTERNATIONAL PROJECTS CO., Petitioner, �- versus - � C.T.A. CASE NO. 4096 COMMISSIONER OF INTERNAL REVENUE, Respondent. >t---�- --. - - - - - x DEC 0N This case involves a claim for refund of alleged overpaid i n come taxes for the taxable year ending December 3.1~ 1984, a moun ti ng to P3,415~822.00. F'eti tioner is a forei gn corporation 1 icensed to do bu siness in the Phi 1 i ppines a nd h a .d been authorized by the Board of Investments to enter into agreements with Westinghouse Electric~ S.A., with re s pect to contracts entered into by the latter with the National Power Corporation in connection with the Nuclear Power Plant Project in Bataan. For the first two quarters of 1984, petitioner paid the following income tax: ~\~Y.?.r: I.~!.!.E'.t?.Jg_~t.. ...!m;;a~ I�'.tLJ).\,\~ T�\1.< ...f~!9 1. First Gk..tarter P14,7C~,646 P 5,137, 326 p 5, 137 ,326 2. Sec:cnd Q...tarter 43, 5Z2 , :!.!)2 15' 2Z2, 9:>5 :!9!1.~5 ~-~?.J Total Paid e~J.l~~~~l~?5

DECISION CTA CASE NO. 4096 - 2- Fo~ the thi~d qua~te~~ howeve~, petitione~ paid no income tax since its ope~ation ~esulted in a loss. Petitione~ filed its final income tax retu~n on Ap~il 11, 1985 showing a net income of P33,762,810.00 which had a cor~esponding income tax of P11,806,903.00. Consequently, petitioner claims i t ove~paid its income ta~: fo~ the ta>:able year, ending Oecembe~ 1994, by P3,415,922.00, and the~eby filed a claim fo~ ~efund with ~espondent on August 15, 1996 and this petition fo~ ~eview on August 22, 1986. In opposing tha petition, ~espondent contends that: a me~e allegation that petitione~ suffe~ed a loss doQs not ips o facto me~it a ~efund and since actions for r fund or tax credit are in the natu~e of exemptions, they ar e st~i ctly construed against the claimants; the bu~den of proof is upon bhe taxpayer to show that the taxes paid were erroneously or illegally collected such that failure to sustain said burden is fatal to the claim for refund or tax credit; and, the claim with respect to P5,137,326.00 corresponding to the fir~t quarter income tax payment is already barred by prescription pursuant to Sec. 292 of the 1977 Tax Code (now Sec. 230), considering that more than two

DECISION CTA CASE NO. 4096 - 3- years had already elapsed from the alleged date of payment (May 29, 1984) to the date of filing the written claim with respondent and the filing of this petition for review (August 22, 1986). Ba!Sed on the records and evidence presented, this Cour� t finds that the petitioner ha.1i5 a meritorious claim. It must be noted that respondent submitted this case based on the records and the pleadings. No evidence controverting or disputing petitioner's entitlement to its claim for refund was presented by respondent. On the other hand, petitioner presented the corresponding quarterly, as well as final income tax returns (Exhibits C, D, E and F), and the payment orders and confirmation receipts evidencing the amount of ta>: paid (for the first quarter, Confirmation Rec eipt No. B- 3830533 c.(hd Payment Order No. B- 3213497, both dated May 29, 1984, and, for the second quarter~ Confirmation Receipt No. A-9749672 and Payment Order No. B- 3721649, both dated August 29, 1984, pp. 7 and 9, Records). Hence, the facts as determined from the pleadings and borne by petitioner's evidence may then be considered as not disputed. 60

WE � ._.... -- DECISION CTA CASE NO. 4096 - 4- As to respondent 's assertion that mere allegation of loss by petitioner does not ipso facto merit a refund, suff ice it to say that from the time of the filing of pet.itioner's income tax return unti 1 this tim , respondent had takan no action on th c!> s1ame. No deficiency assessment has b een issued ~nc:l neither� has the respon dent placed in iss ue the correctness of the income reported" the legal ity of th deductions c: 1 aimed" nor the fact of substantiat ion of these deductions.~./ On the contrary, t he only options raised by the Commissioner of Intern.al Revenue are "whether or not to grant the taxpayer 's request to offset or wait until n eooti ation s with WIPCO are completed" (See letter of Commissione r Jose U. Ong, dated May 15~ 1989, BIR Records , p. 169) P althoLigh the margi na l notes of Sec r etary of Finance Vice~te Jayme on the same letter advised to "pur�sue tax paym~mts due"~ the c:l&\ims of the F'hilippine government being "substantial". Thu9, there being no factual or leQal m tter genuinely in dispu t e, the record s provid e a mple support for petitioner's claim for refund, without preJudice to the govern - ~/See also Datapnep (Phila.) Inc. v. Comdssianer of Intarnal ~ , CTA Case No. 36l")(), March 30, 1984 and ~lth Pacific O::nsultants Ltd.. v. O::mnissiall!l'" of IntErnal RevllntJe , CTA Case No. 2c;l53, 1"'1.!\y 15, 1982.

DECISION CTA CASE NO. 4096 - 5- ment' s efforts to recover whatever Just c 1aims it has against petitioner. As to the a 11 eged prescript ion of the c 1aim with respect to the tax paid on May 29, 1984, the Supreme Court ruled in ~q_m.m_:t_~_?j_QJJgr.____..Q..f___~.n.t�.r:..o..a ~- "when tax is paid in installments, the prescriptive period of two years provided in Section 306 (now Section 292) of the National Internal Revenue Code shoLtld be counted from the date of the final payment. The �final payment' is the last quarter payment at the end of fiscal year when i t is finally ascertainable that the ta~payer either made profits or suffered losses in its business operations." Since the two-year period within which the petitioner may claim a refund commenced to run on April 15, 1985, the last day for f i 1 ing of the f ina 1 or adjustment return and final payment of income tax, pursuant to Sec. 87(b) & (c) of the 1977 Ta:< Code, as amended (now Sec. 70(b) & (c), as implemented by Sec. 7 of Revenue Regulations 10-77) , both the claim for refund and petition for review were filed well within the two-year prescriptive period. ~/A Resoluticn, G. R. No. 85956, January 11, 1989, citing CDllector of Internal Rl!venue v. Prieto, 2 ~ 1007 (1961) ; and Ctnlnissitn!l'" of Internal RP..wu! v. Palanc:a, 18 SCRA 496 ( 1966).

DECISION CTA CASE NO. 4096 - 6- WHEREFORE, the petition is granted. Respondent Commissioner of Internal Revenua is hereby ordered to grant a refund to petitioner Westinghouse International ProJects Co. in tha amount of P3,415,B22.00, reprasenting overpaid income tax for 1984. SO ORDERED. Quezon City, Metro Ma nila, April 12, 1991. STEi~ES Ac ting Associ a te Judg e WE CONCUR: ROAQUIN Judge .. CER.TJ:FJ:CATJ:ON I he reby certify that this decision was reached after 'due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~~~ Co urt of Tax Appeals �-�