SUMISETSU PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court Of Tax App eals QUEZON CITY THIRD DIVISION SUMISETSU PHILIPPINES, INC., C.T.A. CASE NO. 8076 Petitioner, Members: -versus- BAUTISTA, Chairperson, PALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, NOV 13 2012 R esp o n den t. ~r~;::;::;t ~.-.N-;P�-. X ----------------------------------------------------------------------------------- X DECISION PALANCA-ENRIQUEZ, J.: THE CASE This is a Petition for Review filed by Sumisetsu Philippines, Inc. (hereafter "petitioner") praying for the refund or issuance of a tax credit certificate (TCC) in the total amount of P18,872,767.00, representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2007.

C.T.A. CASE NO. 8076 2 DECISION THE PARTIES Petitioner is a corporation duly organized under Philippine laws and engaged in the business of providing electrical and mechanical services for electrical transmission and distribution systems, air conditioning and ventilation systems, telephone and communications systems, and other allied services, with principal office located at the 4th/Floor, Glass Tower, 115 C. Palanca St., Legaspi Village, Makati City. Respondent, on the other hand, 1s the duly appointed Commissioner of Internal Revenue, vested with authority to act as such, including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes. She may be served with summons, pleadings and other legal processes at the BIR National Office Building, BIR Road, Diliman, Quezon City. THE FACTS The facts of the case, as stipulated by the parties, are as follows: On April 14, 2008, petitioner filed, through the BIR's Electronic Filing and Payment System, its Annual Income Tax Return for taxable year 2007 with Reference No. 12080002182860.

C.T.A. CASE NO. 8076 3 DECISION On April 15, 2008, petitioner manually filed with the BIR its Annual Income Tax Return for taxable year 2007. On July 30, 2008, petitioner filed a written claim for issuance of a TCC with the BIR. In order to preserve its right and to toll the runmng of the prescriptive period for its judicial claim, on April 14, 2010, petitioner filed the instant Petition for Review. In her Answer, respondent alleged by way of special and affirmative defenses: "xxx xxx 5. Assuming but without admitting that petitioner filed a claim for refund, the same is subject to investigation by the Bureau of Internal Revenue; 6. Petitioner failed to demonstrate that the tax, which is the subject of this case, was erroneously or illegally collected; 7. Taxes paid and collected are presumed to be made in accordance with the laws and regulations, hence, not creditable or refundable; 8. It is incumbent upon petitiOner to show that it has complied with the provision of Section 204(C) in relation to Section 229 of the 1997 Tax Code, as amended; 9. In an action for tax credit or refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to discharge the said burden is fatal to the claim (Emmanuel &

C.T.A. CASE NO. 8076 4 DECISION Zenaida Aguilar v. Commissioner, CA-GR. No. SP 16432, March 30, 1990 cited in Aban, Law of Basic Taxation in the Philippines, 1st Edition, p. 206); 12. Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, G.R. No. L- 13509, January 30, 1970, 31 SCRA 95) and as such; they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121)." Petitioner presented Leonard Lyle M. Tabalon, Rissa R. Ornedo, Barbara Q. Bigay and Cecilia S. Magalona, as witnesses, and documentary evidence, marked as Exhibits "A" to "BBB-1 ", inclusive of their sub-markings, which were admitted by the Court in its Resolution dated November 4, 2011. On the other hand, respondent waived her right to present evidence and submitted the case for decision. Thereafter, both parties were ordered to file their simultaneous memoranda, within thirty (30) days from notice; afterwhich the case shall be deemed submitted for decision. On March 9, 2012, petitioner filed its "Memorandum". Respondent failed to file her memorandum within the prescribed period; hence, in a Resolution dated March 20, 2012, the case was deemed submitted for decision.

C.T.A. CASE NO. 8076 5 DECISION ISSUES As stipulated by the parties, the following are the issues for this Court's consideration: I WHETHER THE INCOME PAYMENTS FROM WHICH THE TAXES WERE WITHHELD WERE INCLUDED IN SUMISETSU'S GROSS INCOME FOR THE YEAR 2007. II WHETHER SUMISETSU HAS EXCESS AND UNUTILIZED CREDITABLE WITHHOLDING TAX FOR THE YEAR 2007 IN THE AMOUNT OF P18,872,767.00. III WHETHER SUMISETSU HAS CARRIED OVER TO THE SUCCEEDING TAXABLE YEARS THE ALLEGED EXCESS CREDITABLE WITHHOLDING TAX FOR THE YEAR2007. IV WHETHER SUMISETSU'S RIGHT TO CLAIM A REFUND OF THE ALLEGED EXCESS/UNUTILIZED CREDITABLE WITHHOLDING TAX FOR THE YEAR 2007 IS DULY SUBSTANTIATED. v WHETHER SUMISETSU IS ENTITLED TO A REFUND OR ISSUANCE OF THE TAX CREDIT CERTIFICATE IN THE AMOUNT OF P18,872,767.00 FOR ITS EXCESS AND/OR UNUTILIZED CREDITABLE WITHHOLDING TAXES FOR THE YEAR 2007.

C.T.A. CASE NO. 8076 6 DECISION Principal Issue The foregoing Issues raised by both parties boil down to the principal issue of whether or not petitioner is entitled to a refund or Issuance of a TCC in the aggregate amount of P18,872,767.00, representing petitioner's excess and unutilized creditable mcome taxes withheld for calendar year 2007. THE COURT'S RULING The Court finds no merit in the petition. Petitioner anchors its claim on the provisions of Section 76 of the NIRC of 1997, as amended, in relation to Sections 204 and 229 of the same Code. Section 76 ofthe NIRC of 1997, as amended, provides: "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. 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

C.T.A. CASE NO. 8076 7 DECISION taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." (Emphasis supplied) Pursuant to the above provision, the corporate taxpayer's excess tax credits or overpaid income tax in a given taxable year may either be refunded or carried over/applied to the succeeding taxable years. However, once the option to carry-over has been made, the same becomes irrevocable for that taxable period. A perusal of petitioner's Annual Income Tax Retum 1 for taxable year 2007 shows that petitioner had total tax credits in the amount of P36,727,530.00, which consisted of the prior year's excess credits in the amount of Pl7,854,763.00 and creditable taxes withheld during the year in the amount ofP18,872,767.00, to wit: Prior Year's Excess Credits p 17,854,763 .002 Creditable Taxes Withheld p 14,990,418 .00 18,872,767.00 for the First Three Quarters 3,882,349.00 36,727,530.00 for the Fourth Quarter p Total Tax Credits The pnor year's excess credits of Pl7,854,763.00 was applied against petitioner's income tax due for the year 2007 in the amount of 1 Exhibits "A" and " 8 " . 2 ICPA noted on page 2, Exhibit "T" of his Report that the Company erroneously placed the prior years ' excess credits amounting to Pl7,854,763 .00 in the line 288 (Tax payments for the first three quarters) of the annual income tax return (presented as Exllibit "A") instead of line 28A (Prior years' excess credits other than MCIT). However, the Company correctly placed the prior years' excess credits amounting to Pl7,854,763.00 in the line 28A of the manually filed annual income tax return (presented as Exhibit "B") . Moreover, the three quarterly income tax returns filed for the CY 2007 (i .e. Ist to 3rd quarter of2007) disclosed no quarterly payment of income tax due.

C.T.A. CASE NO. 8076 8 DECISION P6,654,501.35 ,3 leaving the amount ofP11,200,261.65 , representing prior year' s excess credits and the amount of P18,872,767.00, representing creditable taxes withheld during the year 2007 or a total tax credit of P30,073 ,028.654 unutilized as ofDecember 31 , 2007, as shown below: Pri or Year's Excess Credits p 17,854,763. 00 6,65 4,5 01 .35 I Less: Income Tax Due p II ,200,261.65 Balance of Prior Year's Excess Credits 18,872,767 .00 I Add : Creditable Taxes Withheld During the Year p 30,073,028.65 Unutilized Excess Tax Credits as of December 31, 2007 Inasmuch as petitioner marked the option "To be issued a Tax Credit Certificate" in its Annual Income Tax Return for taxable year 2007 and reflected only the amount of Pll ,200,262.00 as "Prior Year' s Excess Credits" in its Annual Income Tax Return5 for taxable year 2008, the unutilized creditable withholding taxes for taxable year 2007 in the amount ofP18,872,767.00 may be the subject of a claim for refund under Section 76 of the NIRC of 1997, as amended. Settled is the rule that a taxpayer' s excess withholding tax credits for the taxable year shall automatically be allowed as a refund or tax credit for purposes of filing his income tax return for the taxable year succeeding the taxable year in which the aforesaid excess credit arose. 3 Line 27, Exhibit "A". 4 Line 3 1, Exhibit "A" . 5 Line 28A, Ex hibit "N".

C.T.A. CASE NO. 8076 9 DECISION This right to refund or credit, however, is not automatic, the taxpayer must be able to prove the same by substantial evidence, in compliance with the prescribed requirements set forth in our Tax Code and related laws. In order to be entitled to a claim for refund or issuance of a TCC, the taxpayer must satisfy the three conditions for the grant of a claim for refund of creditable withholding tax, to wit: 1) That the claim is filed with the CIR, within the two (2) year period from the date of payment of the tax; 2) That the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom; and 3) That it is shown on the return of the recipient that the income payment received was declared as part of the gross income (Banco Filipino Savings and Mortgage Bank vs. CA, et al. , 519 SCRA 93). First Requisite - Claim for Refund was filed within the two-year prescriptive period. Sections 204(C) and 229 of the NIRC of 1997, as amended, provide: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (A) XXX XXX (B) XXX XXX

C.T.A. CASE NO. 8076 10 DECISION (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 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, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." "SEC. 229. R ecovery of Tax Err oneously 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, 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, however, That the Commissioner may, even without a written 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. XXX xxx." Clearly, the two (2)-year prescriptive period for the filing of a claim for refund under Section 204 (C), in relation to Section 229 of the NIRC of 1997, as amended, commences from the date of filing of the final adjustment return (ACCRA Investments Corp.vs. Court of Appeals, 204 SCRA 95 7). It bears emphasis at this point that the rationale in computing the two (2)-year prescriptive period with respect to petitioner's claim for w refund from the time it filed its final adjustment return is the fact that it

C.T.A. CASE NO. 8076 11 DECISION was only then that petitioner could ascertain whether it made profits or incurred losses in its business operations. Records show that petitioner filed its ITR for calendar year ending December 31, 2007 on April 14, 2008. Counting from April 14, 2008, petitioner had until April 14, 2010, within which to file its claim for refund/TCC both administratively and judicially. Therefore, petitioner's administrative claim for refund filed on July 30, 2008 and judicial claim filed on April 14, 2010 were both filed within the two (2)-year prescriptive period allowed by law. Clearly, the first requirement has been complied with. Second and Third Requisites - As regards the second and third requisites, Section 10 of Revenue Regulation No. 12-94 provides: "SEC. 10. Claim for Tax Credit or Refund. - (a) Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received 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 of tax withheld therefrom." (Emphasis supplied)

C.T.A. CASE NO. 8076 12 DECISION Pursuant to the above provision, petitioner must be able to show that the income payments it received have been declared as part of its gross income and that the fact of withholding must be established by substantial evidence. Second Requisite - Taxes withheld are duly supported by certificates of tax withheld. To prove the fact of withholding of creditable taxes withheld for taxable year 2007 in the amount of P18,872,767.00, petitioner presented Certificates of Creditable Tax Withheld at Source duly issued to it by various withholding agents for the same year (Exhibits "W-1 " to "W-225 ''), which were examined by the Court-Commissioned Independent Certified Public Accountant (ICPA), Mr. Edwin F. Ramos. In his report, Mr. Ramos summarized his findings , as follows: Findings Reference Taxes Witltlteld I Creditable withho lding tax (CWT) duly supported by Annex 1-A p 14,729,350.52 origi nal Certificate of Creditable Tax Withhe ld at Source (BIR Form 2307) Annex 1-B 882, 106.37 2 CWT duly supported by orig ina l BIR Form 23 07 Annex 1-C 2,837,342.68 without Company's address indicated therein p 18,448, 799.57 3 CWT duly supported by orig inal BIR Form 23 07 with Annex 1-D p 3,608.00 diffe rent address indicated therei n Annex 1-E 204,760.40 Sub-total Annex 1-F 37,399.42 Other findings 4 CWT duly supported by orig inal BIR Form 23 07 but w ith erasure on the date and w ithout counters ignature indi cated there in 5 CWT supported by photocopy ofBIR Form 23 07 stamped "received" by the B!R 6 CWT supported by photocopy ofBJR Form 23 07 stamped "received" by the BIR, with out Company's address indi cated there in

C.T.A. CASE NO. 8076 13 DECISION 7 CWT duly supported by original BIR Form 2307 but with different Company's name indicated therein Annex 1-G 32,000.00 8 CWT duly supported by original BIR Form 2307 but 88,2 18.00 with different TIN indicated therein Annex 1-H 9,428.00 9 CWT duly supported by original BIR Form 2307 but 47, 171.20 without Company's TIN and address indicated therein Annex 1-I 1,3 60.00 423,945.02 10 CWT supported by photocopy of BlR Form 2307 18,872,744.59 18,872,764.59 stamped "received" by the BIR and without (20.00) Company's TIN and address indicated therein Annex 1-J II CWT supported by photocopy ofBIR Form 2307 stamped " received" by the BIR but determined to be an over claim Annex 1-K Sub-total p GRAND TOTAL p Company-prepared schedule of creditable withholding taxes Exhibit U Difference p Based from the foregoing, the amount of P423,945.02 under the caption "Other Findings" must be disallowed for the reasons stated therein. In addition, after a careful examination of petitioner's documentary evidence, the Court finds that the following certificates of creditable withholding taxes in the amount ofP435,223.366 shall likewise be disallowed since the supporting certificate bears a TIN not belonging to petitioner.7 Therefore, petitioner was able to substantiate, by proper withholding tax certificates, only the CWT in the amount of P18,013,576.21 8 for taxable year 2007. Third Requisite - The income withheld made part o{petitioner's gross income. 6 Exhibit " W-114", under Annex 1-A. hJ 7 Indicated TIN is 000-693-400-000., while petitioner's TIN is 000-169-334-000. �(A . W 8 Pl8,448,799.57 less P435,223.36.

C.T.A. CASE NO. 8076 14 DECISION A perusal of the evidence on record shows that the revenue under the "Contract Price" account per petitioner's general ledger for 20069, 200i 0 and 2008 11 tallied with the total revenue reported in the Annual Income Tax Returns for 2006 12, 200i3 and 2008 14 � To account for the income related to the claimed CWT, the Court- Commissioned ICPA presented two separate reports, dated May 16, 2011 15 and July 1, 2011. 16 In his report dated May 16,2011 , the Court- Commissioned ICPA summarized his findings, as follows: 17 Amount Findings Reference Tax Base Tax Witltlteld A. Creditable withholding taxes with related income included in the Company's genera l ledgers a nd income tax returns I Creditable withholding tax (CWT) duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307); the related income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes and contract price accounts and to sales invoice or official receipt Annex 2-A p 214,683,741.26 p 4,494,249.81 2 CWT duly supported by original BIR Form 2307; the related income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes, accrued accounts receivables, advances received and contract price 9 Exhibit "MM". 10 Exhibit "Z". II Exhibit "WW". 12 Exhibit "NN". 13 Exhibits "A" and " B" . 14 Exhibits "N" and "0 ". 15 Exhibit "T". 16 Exhibit "AAA" 17 Exhibit "T", pp. 8-11 offina11CPA report or Annex 2.

C.T.A. CASE NO. 8076 15 DECISION accounts and to sales invoice or official Annex 2-B 436,483 ,873.39 8,667,508.76 Receipt Annex 2-C 3 CWT duly supported by original BIR Annex 2-D 23,526,577. 12 470,531.54 Form 23 07 but without Company's Annex 2-E address indicated therein; the related 15 ,738,270.96 314,765.42 income of which was included in the Annex 2-F Company's Annual Income Tax Return 141 ,867, 134.00 2,837 ,342.68 as traced to general ledgers of prepaid p 832,299,596. 73 18 p 16,784,398.21 19 taxes and contract price accounts and to sales invoice or official receipt p 8,900.00 p 178 .0 0 4 CWT duly supported by original BIR Form 2307 without Company's address indicated there in; the rel ated income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes, accrued accounts receivable, advances received and contract price accounts and to sales invoice 5 CWT duly supported by original BIR Form 2307 with different address indicated therein; the related income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes, accrued accounts receivable, advances received and contract price accounts and to sales invoice or official Receipt Sub-total B. Other Findings I CWT duly supported by original BIR Form 2307 but with erasures on the date and without countersignature indicated therein; the related income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes and contract price accounts and to sa les invoice 2 CWT dul y supported by original B1R Form 2307 but with erasures on the date and without countersignature indicated therein; the related income of 18 Erron eo usly summed up by ICPA in the amount ofP832,479,996.73 (Exhibit "T", p. 9 of final ICPA report and Annex 2). 19 Erroneously summed up by ICPA in the amount ofP16,788,006.21 (Exhibit "T", p. 9 offilal/lfP1 report and Annex 2). ~

C.T.A. CASE NO. 8076 16 DECISION which was included in the Company's Annex 2-G 171 ,500.00 3,430 .00 Annual Income Tax Return as traced to Annex 2-H general ledgers of prepaid taxes, Annex 2-1 78 ,722 ,097.29 1,570,751.95 accrued accounts receivable, Annex 2-J advances received and contract price Annex 2-K 4,682 ,470.63 93,649.41 accounts and to sales invoice Annex 2-L 3 CWT duly supported by original BIR 2,639,320.00 52,786.40 Form 2307; the related income of which was included in the Company's 7,5 98 ,700.00 151 ,974.00 Annual Income Tax Return as partially traced to general ledgers of prepaid 1,378, 171.1 2 27 ,563.42 taxes, accrued accounts receivables, advances received and contract price w accounts and to sales invoice or official Receipts 4 CWT duly supported by original BIR Form 2307 without Company's address indicated therein; the related income of which was included in the Company's Annual Income Tax Return as partially traced to general ledgers of prepaid taxes, accrued accounts receivable, advances received and contract price accounts and to sales invoice or official Rece ipt 5 CWT supported by photocopy ofBIR Form 2307; the related income of which was included in the Company's Annual Income Tax Return as traced to general ledgers of prepaid taxes and contract price accounts and to sa les invoice 6 CWT supported by photocopy ofBIR Form 2307; the related income of which was included in the Company's Annual Income Tax Return as partially traced to general ledgers of prepaid taxes, accrued account receivable, advances received and contract price accounts and to sales invoice or official Rece ipt 7 CWT supported by photocopy of BIR form 2307 without Company's address indicated therein ; the related income of which was included in the Company's Annual Income Tax return as traced to ge neral led gers of prepaid taxes and contract price accounts and to sales invoice or official receipt 8 CWT supported by photocopy ofBIR

C.T.A. CASE NO. 8076 17 DECISION form 2307 without Company's address Annex 2-M 491 ,800.00 9,836.00 indicated therein; the related income of which was included in the Company's Annex 2-N I ,600 ,000 .00 32,000.00 Annual Income Tax return as traced to Annex 1-H 88,218.00 general ledgers of prepaid taxes, Annex 1-I - accrued accounts receivable, Annex 1-J - 9,428.00 advances received and contract price Annex 1-K 47,171.20 accounts and to sales invoice - 9 CWT duly supported by original BIR I ,360.00 Form 2307 with different Company - p 2,088,346.38 name indicated therein; the related p 18,872,744.59 income of which was included in the p 97,292,959.0420 Company's Annual Income Tax Return p 929,592,555.7i1 as traced to general ledgers of prepaid taxes and contract price accounts and to sales invoice 10 CWT duly supported by original BIR Form 2307 but with different TIN indicated therein II CWT duly supported by original BIR Form 2307 but without Company's TIN and address indicated therein 12 CWT supported by photocopy ofB IR Form 2307 but without Company's TIN and address indicated therein 13 CWT supported by photocopy ofBIR Form 2307 but determined to be an over claim Sub-total GRAND TOTAL In relation to Annexes 2-H and 2-I under "Other Findings" mentioned above, the Court-Commissioned ICPA added m his Supplemental Report dated July 1, 2011, the following findings: 22 Amount Findings Reference Tax Base Tax Withlteld A. Creditable withholding taxes with related income included in the Company's general ledgers and income tax returns I Creditable withholding tax (CWT) duly supported by original Certificate of Creditable Tax Withheld at Source (BIR 20 Erroneously summed up by !CPA in the amount ofP907 ,292,959.04 (Exhibit "T", p. II). 21 Erroneously summed up by !CPA in the amount ofP935 ,5 84, I 05.77 (Exhibit "T", p. II). " Exhibit "A AA", p. 2 of supplemental ICPA ceport oc Annex I. ~

C.T.A. CASE NO. 8076 18 DECISION Form 2307); the related income of which Annex 1-A p 67,231 ,910 .50 p I,340,948 .21 was included in the Company's Annual Income Tax Return (ITR) as traced to Annex 1-S 4,281 ,470.63 85 ,629.41 general ledgers (GL) of prepaid taxes, accrued accounts receivable, advances p 71,513,381.13 p 1,426,577.62 received and contract price accounts and to sales/billing invoice Annex 1-C p 11,891 , 186.79 p 237,823 .74 2 CWT duly supported by original SIR Form 2307 but without Company's address p 83,404,567.92 p I ,664,401.36 indicated therein; the related income of which was included in the Company's Annual ITR as traced to GL of prepaid taxes, accrued accounts receivables, advances received and contract price accounts and to sales/billing invoice Sub-total B. Other Findings 3 CWT duly supported by original SIR Form 2307 ; the related income of which was included in the Company's Annual ITR as partially traced to GL of prepaid taxes, accrued accounts receivables, advances received and contract price accounts and to sales/billing invoice TOTAL Based from the foregoing tables, the creditable taxes of P18,013,576.21 23 were withheld on income payments received by petitioner amounting to P893,942,996.6524. To further support its claim, petitioner submitted its Quarterl/5IAnnual26 Income Tax Returns for the years 2007, 2008 and 2009; Audited Financial Statements27 for the years 2007 and 2008; 23 P 16,784,398.21 (letter A of the Findings in Exhibit "T", p. 9) plus PI ,664,401.36 (Exhibit " AAA", p. 2 and Annex 1) less P435,223.36 (cwt with different TIN). 24 P832,299 ,596.73 (letter A of the Findings in Exhibit "T", p. 9) plus P83 ,404,567.92 (Exhibit " AAA", p. 2 and Annex I) less P21 ,761 , 168.00 (income of cwt with different TIN) . 25 Exhibits " H", " I", "J", " EE", " FF", "GG", " K", " L", " M", "11", "JJ", and " KK". Iw 26 Exhibits "SS" "NN" " A" " S " "N" "0 " and "HH" r~ WV 27 Exhibits " DO,', and " YY"., , , .

C.T.A. CASE NO. 8076 19 DECISION General Ledger of Contract Price for 200628, 200729 and 200830; General Ledger of Prepaid Taxes for 200i 1 and 1st quarter of 200832; company prepared schedule of prepaid taxes for 200i3; General Ledger of Advances Received for 200i4; General Ledger of Accrued Accounts Receivable for 2006, 2007 and 200835; Schedule of Advances received before and after amortization for 2 0 0i 6 Masterlist of project codes for ; 2006, 2007 and 200837; company prepared additional schedule38; and various official receipts and invoices39 issued by petitioner. However, a perusal of these documents and the reports of the ICPA40 shows that petitioner was able to establish only the income payment of P243,995 ,418.10, upon which the corresponding creditable taxes of P4,880,451.20 were withheld, were shown hereunder: CWT CREDITABLE Certificate Per Exh. " T" INCOME WITHHOLDING attached as Exhibit VERIFIED Annex 2-A No. CLIENT p 2,168,750.00 TAX Annex 2-A ANDO PHILlPPINES CORPORATION W- 2 ANDO PHILIPPINES CORPORATION 20 ,027 ,425.17 p 43,375.00 W- 3 400,548.50 28 Exhibit "MM". 29 Exhi bit "Z". 30 Exhibit " WW". 31 Exhi bit " X". 32 Exhibit " 00". 33 Exh ibit "Y". 34 Exhibit "AA''. 35 Exhibits " LL", " BB" and " XX". 36 Exhibits " PP-1 " to " PP-4". 37 Exhibits "QQ-2", "QQ-1" and "ZZ" . 38 Exhibit "VV". 39 Exhibits "F", "G", "CC-I " to "CC-1045", "CC-1046" to "CC-1048", "CC-1051", "CC-1055", "CC- 1058", "CC-1060", "CC-1063", "CC-1065"and "CC-1069" to "CC-1078". 40 Annex 2 of Exhibit "T" and Annex I of Exhibit "AAA".

C.T.A. CASE NO. 8076 20 DECISION Annex 2-A W- 8 CCT CONSTRUCTORS CORPORATION 357,142.86 7,142.86 Annex 2-A W- 10 CEBU MTTSUMI INC. 3,966,700.00 79,334.00 Annex 2-A W- 12 CEBU MlTSUMI INC. 12,031, I00.00 240,622 .00 Annex 2-A W- 13 CEBU YMTECHNOLOGY, INC. Annex 2-A W- 14 CEBU YMTECHNOLOGY, INC. 61,400.00 1,228.00 Annex 2-A W- 15 CEBU YMTECHNOLOGY, INC. 680,000 .00 13,600.00 Annex 2-A W- 17 CEBU YMTECHNOLOGY, INC. 597,500.00 II ,950.00 Annex 2-A W- 19 CEBU YMTECHNOLOGY, INC. Annex 2-A W- 20 CEBU YMTECHNOLOGY, INC. 48,300 .00 966.00 Annex 2-A W- 21 CEBU YUSHIN INC. 33,500.00 670.00 Annex 2-A W- 21 CEBU YUSHIN INC. 548,500.00 10,970.00 Annex 2-A W- 22 DAIKOKU ELECTRONICS (PHILS), INC. 16,200.00 324.00 Annex 2-A W- 23 EAST CERAMIC PHILIPPINES CORP 27,800.00 556.00 Annex 2-A W- 24 EAST CERAM IC PHILIPPINES CORP 719,000.00 14 ,380.00 Annex 2-A W- 25 EAST CERAMIC PHILIPPINES CORP 400,000.00 8,000.00 Annex 2-A W- 26 EAST CERAMIC PHILIPPINES CORP 15,000.00 300.00 Annex 2-A W- 27 EAST CERAMIC PHILIPPINES CORP 36,400.00 728.00 Annex 2-A W- 28 EAST CERAMIC PHILIPPINES CORP 138 ,90 0.00 2,778.00 Annex 2-A W- 29 EAST CERAMIC PHILIPPINES CORP 126.00 Annex 2-A W- 30 EAST CERAMIC PHILIPPINES CORP 6,300.00 132.00 Annex 2-A W- 31 EAST CERAMIC PHILIPPINES CORP 6,600.00 582 .00 Annex 2-A W- 32 EDS MANUFACTURING INC. 29,100.00 600.00 Annex 2-A W- 33 EDS MANUFACTURING INC. 30,000 .00 700 .00 Annex 2-A W- 34 EDS MANUFACTURING INC. 35,000.00 5,388 .00 Annex 2-A W- 36 EPSON PRECISION (PHILS). INC. 269,400 .00 270 .00 Annex 2-A W- 37 EPSON PRECISION (PHILS). INC. 13,500.00 6,600 .00 Annex 2-A W- 42 FIRST SUMIDEN CIRCUITS, INC 330,000.00 54,347.74 Annex 2-A W- 43 FUJITA PHILS CONSt. AND DEV'T INC. 2,717,387.00 24,216 .00 Annex 2-A W- 49 lNT'L ELECTRIC WIRES PHILS. 1,2 10,800.00 3,710 .00 Annex 2-A W- 50 INT'L ELECTRIC WIRES PHILS. 185,500.00 8,400 .00 Annex 2-A W- 51 INT'L ELECTRIC WIRES PHILS. 420,000.00 760 .00 Annex 2-A W- 56 LAGUNA DAI-ICHI, INC. 38,000.00 1,026.00 Annex 2-A W- 58 LAGUNA DAl-ICHI, INC. 51,300.00 1,900.00 Annex 2-A W- 59 MAHLE FILTER SYSTEMS PHILS, CORP 95,000.00 520.00 Annex 2-A W- 60 NANBU PHILIPPINES, INCORPORATED 26,000.00 4,936.00 Annex 2-A W- 61 NANBU PHILIPPINES, INCORPORATED 246,800.00 3,334.00 Annex 2-A W- 62 NANBU PHILIPPINES, INCORPORATED 166,700.00 5,780.00 Annex 2-A W- 63 NANBU PHILIPPINES, INCORPORATED 289,000.00 4,800.00 Annex 2-A W- 64 NANBU PHILIPPINES, INCORPORATED 240,000 .00 2,000 .00 Annex 2-A W- 65 NANBU PHILIPPINES, INCORPORATED 100,000.00 1,700.00 Annex 2-A W- 66 NANBU PHILIPPINES, INCORPORATED 85,000.00 9,758.00 Annex 2-A W- 68 NANOX PHILIPPINES, INC. 487,900.00 600 .00 Annex 2-A W- 69 NANOX PHILIPPINES, INC. 30,000.00 40,000.00 Annex 2-A W- 70 NANOX PHILIPPINES, INC. 2,000,000.00 67,200.00 Annex 2-A W- 70 NANOX PHILIPPINES, INC. 3,360,000.00 12,700.00 Annex 2-A W- 73 NEC TOKIN ELECTRONICS (PHILS) INC. 635,000.00 7,400.00 Annex 2-A W- 74 NEC TOKIN ELECTRONICS (PHILS) INC. 370,000.00 5,940.00 Annex 2-A W- 75 NEC TOKIN ELECTRONICS (PHILS) INC. 297,000.00 666.00 33,300.00 1,098.90 54,945.00 4,039.30 201,965.00

C.T.A. CASE NO. 8076 21 DECISION Annex 2-A W- 77 N . T. PHILIPPINES, INC. 79 ,000 .00 I ,58 0 .00 Annex 2-A W- 80 PENTA SHIMIZU TOA JOINT VENTURE 2,419,266.00 48 ,385 .32 Annex 2-A W- 81 PENTA SHIMIZU TOA JOINT VENTURE 14,492 , 136.50 289,842.73 Annex 2-A W- 82 PENTA SHIMIZU TOA JOINT VENTURE 13 ,475 ,636.50 269,512.73 Annex 2-A W- 83 PENTA SHIMIZU TOA JOINT VENTURE 14,849,446.50 296,988.93 Annex 2-A W- 85 PHILIPPINES EPSON OPTICAL, INC. 3,054,240.00 61,084.80 Annex 2-A W- 86 PHILIPPINES EPSON OPTICAL, INC. 10 ,400 .00 Annex 2-A W- 86 PHILIPPINES EPSON OPTICAL, INC. 520 ,000 .00 11 ,220.00 Annex 2-A W- 88 PHILIPPINE TONAN CORPORATION 561 ,000.00 22,800.00 Annex 2-A W- 98 SANYO SEMICONDUCTOR MFTG PHILS CORP I, 140,000.00 21,382.00 Annex 2-A W- 100 SANYO SEMICONDUCTOR MFTG PHILS CORP I,069, 100.00 Annex 2-A W- 100 SANYO SEMICONDUCTOR MFTG PHILS CORP 520.00 Annex 2-A W- 100 SANYO SEMICONDUCTOR MFTG PHILS CORP 26,000.00 460.00 Annex 2-A W- 104 SHIMIZU PHIL. CONTRACTORS INC. 23,000.00 400.00 Annex 2-A W- 105 SHIMIZU PHIL. CONTRACTORS INC. 20,000.00 30, 154. 16 Annex 2-A W- 106 SOHBI KOHGEI (PH1LS), INC. 1,507,708.44 229,706.59 Annex 2-A W- 109 TAISE1 SHIMIZU JOINT VENTURE 11 ,485 ,329.51 2,300.00 Annex 2-A W- 121 TAIYO YUDEN (PHILS), INC. 115 ,000 .00 5,535.70 Annex 2-A W- 122 TAIYO YUDEN (PHILS), INC. 276,785.00 I ,968.00 Annex 2-A W- 124 TAKENAKA CORP. PHIL. BRANCH 98,400.00 5,500.00 Annex 2-A W- 124 TAKENAKA CORP. PHIL. BRANCH 275,000.00 28,881.52 Annex 2-A W- 125 TAKENAKA CORP. PHIL. BRANCH I ,4 4 4 ,076.00 173,676.22 Annex 2-A W- 126 TAKENAKA CORP. PHIL. BRANCH 8,683,811 .00 102,567.14 Annex 2-A W- 127 TAKENAKA CORP. PHIL. BRANCH 5,128,3 57.00 246,6 19.30 Annex 2-A W- 128 TAS PLAN, INC. 12,330,965 .00 87,273.94 Annex 2-A W- 131 TOBISHTMA PHILIPPINES, INC. 4,363 ,697.00 339.29 Annex 2-A W- 132 TOBISHIMA PHILIPPINES, INC. 16,964.50 101 ,785.71 Annex 2-A W- 7 CCT CONSTRUCTORS CORPORATION 5,089,285 .71 6,557.14 Annex 2-A W- 76 N. T. PHILIPPINES, INC. 327,857 .14 5,000.00 Annex 2-A W- 91 PILIPINAS KYORITSU INC. 250,000.00 33,264.00 Annex 2-A W- 194 TOKYO STEEL PHILS. CORP. I,663 ,200.00 129,820.00 Annex 2-B W- 5 ATOMED CEBU , INC. 6,491 ,000.00 3,900.00 Annex 2-B W- 6 ATOMED CEBU, INC. 195,000 .00 2,282.00 Annex 2-B W- II CEBU MITSUMI INC. 114 , 100 .00 2,492.00 Annex 2-B W- 11 CEBU MITSUMI INC. 124 ,600 .00 25,230.00 Annex 2-B W- 16 CEBU YMTECHNOLOGY, INC. 1,261 ,500.00 25,966.00 Annex 2-B W- 20 CEBUYUSHIN INC. 1,298,300.00 2,404.00 Annex 2-B W- 35 ENOMOTO PHILIPPINE MFG . INC 120 ,2 00 .00 1,522.00 Annex 2-B W- 39 FIRST SUMIDEN CIRCUITS, INC 76,100.00 1, 186.00 Annex 2-B W- 44 FUJITA PHILS. CONSTRUCTION & 59,3 00 .00 9,716.00 Annex 2-B W- 45 IBTDEN PHILIPPINES, INC. 485,800.00 78 ,200.00 Annex 2-B W- 47 IBIDEN PHILIPPINES, INC. 3,910,000.00 9,784.20 Annex 2-B W- 48 IBIDEN PHILIPPINES, INC. 489,2 10.00 2 1,430.00 Annex 2-B W- 48 IBIDEN PHILIPPINES, INC. I ,026 ,500 .00 900.00 Annex 2-B W- 52 KAJIMA PHILIPPINES INC. 45,000 .00 5,270.00 Annex 2-B W- 57 LAGUNA DAI-ICHI, INC. 263,500.00 185 ,400.00 Annex 2-B W- 67 NANOX PHILIPPINES, INC. 9,2 70,000.00 29,900.00 Annex 2-B W- 71 NEC TOKIN ELECTRONICS (PHILS) INC. 1,495,000 .00 2,280.00 I 14,000.00 34,496 .60 I ,724,830.00

C.T.A. CASE NO. 8076 22 DECISION Annex 2-8 W- 72 NEC TOKIN ELECTRONICS (PHILS) INC. 377,450.00 7,549.00 Annex 2-8 W- 84 PHILIPPINES EPSON OPTICAL, INC. 1,720,000.00 34,400.00 Annex 2-8 W- 92 SANNO PHILIPPINES MFTG. CORP. Annex 2-8 W- 94 SANYO CAPACITOR (PHILS.) CORP. 211,000.00 4 ,22 0.00 Annex 2-8 W- 94 SANYO CAPACITOR (PHILS.) CORP. 30,000.00 600.00 Annex 2-8 W- 95 SANYO CAPACITOR (PHILS.) CORP. Annex 2-8 W- 102 SHIMIZU PHIL. CONTRACTORS INC. I ,700,000.00 34,000.00 Annex 2-8 W- 102 SHIMIZU PHIL. CONTRACTORS INC. 500,000.00 10,000.00 Annex 2-8 W- 103 SHIMIZU PHIL. CONTRACTORS INC. 26,000.00 Annex 2-8 W- 103 SHIMIZU PHIL. CONTRACTORS rNC. I ,300,000.00 Annex 2-8 W- 134 35,7 14.29 357.14 Annex 2-8 W- 195 TSUNEISHI HEAVY fNDUSTRIES (CEBU), INC. 69,357.17 1,387.14 Annex 2-C W- 140 6,301.76 Annex 2-C W-141 TOKYO STEEL PHILS. CORP. 126.04 Annex 2-C W- 142 CORREA ZENITAKA, rNC. 2,370,000.00 47,400.00 Annex 2-C W- 143 CORREA ZEN ITAKA, rNC. 158 ,000.00 Annex 2-C W-145 CORREA ZENITAKA, INC. 27,000.00 3,160.00 Annex 2-C W- 146 CORREA ZENITAKA, rNC. 105 ,000.00 540.00 Annex 2-C W- 148 CORREA ZENITAKA, rNC . 50,000.00 Annex 2-C W-149 CORREA ZENITAKA, INC. 7,000.00 2,100.00 Annex 2-C W- 152 CORREA ZEN ITAKA, INC. 100,000 .00 1,000.00 Annex 2-C W- 153 CORREA ZENITAKA, rNC . 140,000.00 Annex 2-C W- 155 CORREA ZEN ITAKA, rNC. 50,000.00 140 .00 Annex 2-C W- 156 CORREA ZENITAKA, INC. 20,000.00 2,000.00 Annex 2-C W- 157 HALSANGZ PLATrNG CE8U CORP 70,000.00 2,800.00 Annex 2-C W- 163 HALSANGZ PLATrNG CE8U CORP 1,000.00 Annex 2-C W- 165 rNT'L WIRrNG SYSTEMS (PHILS.) CORP. I ,025,000.00 Annex 2-C W- 167 JAPANESE ASSOCIATION MANILA INC. 726,800.00 400.00 Annex 2-C W- 168 JA E PHILIPPrNES, INC. 63,200.00 1,400.00 Annex 2-C W-169 KOHZAN CAVITE, INC. 20,500.00 Annex 2-C W- 170 KOHZAN CAVITE, INC. 2,292,000.00 14,536 .00 Annex 2-C W-171 MACTAN PARTS TECHNOLOGY, rNC. 252,000.00 1,264.00 Annex 2-C W- 175 MACTAN PARTS TECHNOLOGY, rNC. 45,840.00 Annex 2-C W-176 MARUWA ELECTRONICS (PHILS.), rNC. I ,300,000.00 5,040.00 Annex 2-C W-177 MITSUMI PHILIPPINES, rNC. 95,600 .00 26,000.00 Annex 2-C W-184 MITSUMI PHILIPPrNES, INC. 12,600 .00 1,9 12.00 Annex 2-C W- 185 MITSUMI PHILIPPrN ES, rNC. 63,000 .00 Annex 2-C W- 186 RIOFIL CORPORATION 174,350 .00 252.00 Annex 2-C W- 187 RJOFIL CORPORATION 29,000.00 1,26 0.00 Annex 2-C W- 188 TAKASAGO PHILS. INC. 3,487.00 Annex 2-C W-189 TAKASAGO PHILS. rNC. 804 ,999.61 Annex 2-D W- 136 TAKASAGO PHILS. rNC. 343,000.00 580.00 Annex 2-D W- 137 TAKASAGO PHILS. rNC . 720,000.00 16 ,099 .99 Annex 2-D W- 139 CORREA ZENITAKA, INC. 578,571.51 6,860.00 Annex 2-D W- !59 CORREA ZENITAKA, rNC. 14,400 .00 Annex 2-D W- 166 CORREA ZEN ITAKA, rNC. 64,285.50 II ,571.43 Annex 2-E W- 193 rNT'L WlRJNG SYSTEMS (PH ILS.) CORP. 169 ,300.00 Annex 2-E W- 193 KOHZAN CAVITE, INC. 64,400.00 1,2 85.71 TAISEI PHILIPPINE CONSTRUCTION, INC. 3,386.00 TA ISEI PHILIPPINE CONSTRUCTION, INC. 14,000.00 I,288. 00 38, I00.00 256,821.43 280.00 45,000.00 762.00 700,000.00 5,136.43 955 ,000.00 900.00 209,000.00 14,000.00 9,053,571.50 19, 100.00 24,227,678.50 4,180.00 181,071.43 484,553.57

C.T.A. CASE NO. 8076 23 DECISION Per Exh " AAA" W-99 SANYO SEMI CON DUCTOR MFTG PHILS CORP 1,387 ,000 .00 27,740.00 attached as p 243,995,4 18.10 p 4,880,451.20 Annex 1-A TOTAL On the other hand, the CWT ofP13 ,992,315.80, the related income of which amounts to P685,597,137.67, shall be disallowed since the schedules provided by the ICPA41 show some discrepancies between the total income per schedule and per certificates. Petitioner should have presented a schedule or any other document reconciling said discrepancies. Furthermore, there were income payments allegedly traced by the ICPA to the general ledger; however, upon a careful examination of the ledger shows that said income payments cannot be found in the general ledger. In sum, petitioner has complied with the third requisite, but only in the amount of P4,880,451.20. The Court will now proceed to determine whether the said CWT of P4,880,451.20 remains unutilized and may be the proper subject of a claim for refund or issuance of a TCC, pursuant to Section 76 ofthe NIRC of 1997, as amended. A careful perusal of the 2007 ITR reveals that the prior year' s excess tax credit of Pl7,854,763.00 represents the prior year' s excess 41 Annex 2, Exh ibit "T" and Annex I, Exh ibit "AAA".

C.T.A. CASE NO. 8076 24 DECISION credits reflected in the 2005 ITR amounting to P21,385,658.00 and the creditable withholding taxes of P9,114,374.00 for the same year 2005 against which the income taxes due for the years 2005 and 2006 were applied, as illustrated below: Prior Year's excess Credits as reflected in 2005 ITR42 p 21,385,658.00 Add: CWT for the year 200543 9, 114 ,374 .00 Total p 30,500,032.00 Less: Taxes Due p 1,461 ,3 67.0644 12,645 ,2 69 .06 For Year 2005 11,183,902.0045 p 17,854,763 .00 For Year 2006 Prior Year's excess Credits as reflected in 2007 ITR Petitioner, likewise, utilized its prior year's excess tax credit to pay its income tax liability for taxable year 2007 in the amount of P6,654,50 1.3 5. However, petitioner must still prove the existence of its prior year's excess credits from which the tax due for year 2007 may be offset or credited. In support thereof, petitioner presented various CWT certificates, but only for the year 2005. Out of the reported 2005 CWT of P9,114,374.00, petitioner was able to substantiate only the amount of P6,662,857.36.46 However, the same is not sufficient to cover the tax liabilities for the years 2005 and 2006 in the aggregate amount of 42 Line 27A, Exhibit "SS". 43 Sum of line 27C and 270, Exhibit " SS". 44 Line 26, Exhibit "SS". 45 Line 27, Exhibit "NN ". 46 Annex 5, Exhibit "T".

C.T.A. CASE NO . 8076 25 DECISION P12,645,269.06. Thus, there were no more prior year's excess tax credits against which the tax liability ofP6,654,501.35 for the year 2007 may be offset or credited. In effect, the tax due for the year 2007 shall be deducted from its claim. Therefore, considering that petitioner' s substantiated claim of P4,880,451.20 is likewise not sufficient to cover its 2007 income tax due ofP6,654,501.35; petitioner's present claim must, therefore, be denied. WHEREFORE, premises considered, the present Petition for Review is hereby DISMISSED for lack of merit. SO ORDERED. ~~~~~ OLGA PALANCA-ENRIQUEZ Associate Justice ~~~ AMELIA R. COTANGCO-MANALASTAS Associate Justice

C.T.A. CASE NO. 8076 26 DECISION ATTESTATION I attest that the conclusions in the above Decis� on were reached in consultation before the case was assigned to the wri r of the opinion of the Court's Division. Ass ciate Justice Chairpers n, Third Division 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. L<--.~ ERNESTO D. ACOSTA Presiding Justice