CTA Case No. 6107 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY I'L MANAGEMENT INTERNATIONAL PIIILIPPINIS, INC., Pd iliollL 'I', - Vl:rSliS - ( '.'1'./\. ( '/\SI �:NO.(, 107 COMMISSIONI(I{ OI'< IN'n:RNAL J' rollllll g;11L:d: REVII:NtJE, DEC 1 0 200Jh,crtdl Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X DECISION This L:USL: invoiVL:S a L:lainl ltll' rduml in !Ill: <llllOUill or I' I ,200,000.00 aiiL:gcdly representing overpaid creditable withholding tax for the taxable year 1997. Petitioner is a corporation duly organized and existing under Philippine laws. ror the taxable year 1997, Petitioner allegedly earned income rrom professional services rendered to UEM-MARA Philippines Corporation (UMPC) in the amount of P24,000,000.00. Such income was, however, declared as part of Petitioner's unearned income in its 1997 Income Tax Return filed on April 13, 1998, particularly in the allached 13alanL:L: Shed lor the period ended DL:cen1bc 3 1, I <)<)7 (Lxhibit /\, pagL: 9<>, CTA Records) UMPC, Petitioner's withholding agent, withheld the amount of PI ,200,000.00 as evidenced by a certified true copy of the Certificate of Creditable Tax Withheld at Source (Exhibit 13). This amount was withheld from the professional Ices paid to Petitioner ;lnwu1lli1lg to P:?A,OOO.OOO.OO. 158G

I>1�:( 'lSI< lN � ("'A' ( 'ASI�: N< >. ldO'/ I' A< il�:} ( >n /\pril I \, I1J1JX. l'l�litiolll'r lil1�d its I1J1)/ llll'ollll' 1':1 ll'llllll ( l�:liihit !\) reporting :1 nd loss or I''>Xl.tll7.tltl and :111 cxn.:ss t:1x credit or I' I .2tltl,tltltl.tltl which was opted to he applied as cn.:dit to the next tax:1hk yc:11�. to wit: Gross Income p 39 1.240.00 Less: Dccludions I J74.177.00 'l'axablc lm.:omc/( Loss) p ( l)t{3 ,037.00) T/\X DlJI�: NIL Less: Tax Credits I' I ,200,000.00 Income Tax Overpayment P( I ,200,000.00) On April 13, 1999, Petitioner filed its 1998 Income Tax Return declaring a net loss of P2.772.043.00 nl1d Uti ii1COtl1C tax OVCI'I'nymctH nr p I.ROO.OOO.OO which iticluclcd pt�iol' year's excess credits of P 1,200,000.00 (Exhibit C), details of which are shown below: Gross Taxable Income p 6,527,901.00 I) ,2<)<).')4 4 '00 I .ess: Dcductio11S Taxable lncomd( Loss) I' (2.772.043.00) T/\X DlJI�: NIL J> 1.200.000.00 I .ess: Tax Credits/Payments 1.) Prior Year's Excess Credits (,()( ).()( )( ).( )( ) 2.) Tax Credits/ Withhel d/ P( I ,800,000.00) Payments for the First Three ()umlcrs Income Tax Overpayment The incollll' 1;:--: ov.:rpaynlcnl of' I' I.XOO.t)(l().O() w:1s opl<.'d lo he c:ll'l�ied over lo the ne:-;1 taxable year as signified by marking the box "to be carried as tax credit next year." 1 v t''8..L

I >t�:t'ISI< >N- < 'T/\ C/\St�: N<>. Cll 07 l't\( i 1�: 3 Petitioner was unable to apply the 1997 tax credit against its 199S tax clue because it incurred a net loss lor that year. A written claim f'or rcf'und was thus. tiled on April 12. 2000 with the 1\l:vcnuc District OrlicL� No. ,')0, Milkilli City pnlilining to the I ()<)7 Iii\: credit in the :lllllllllll or p 1.200,()()(),()()_ 1:or Rcspo1Hknt's l1ilurc lo act on the s<1id chi111. l'ctitioncr lllcd the instant l'clilion lill� l{cvinv 011 April 1�1. �_)()()() hy l'l'l'.isll'll'll 111:1il lo lldl till' running ol' lltl� two- year prescriptive period prescribed under Section 204 (J)lnow 204 (C)J in relation lo Section 230 lnow 2291 of thc old Tax Codc. In his Answer dated June 5. 2000. Respondent raised thc following Special and 1\nirmativc Dclcnc. to wit: "4. The petition states no cause of action as it does not allege the dates when the taxes sought to be refunded were actually paid; 5. Claims for rdu11d arc collstrucd strictly against tllc claimant. lhc samc bcing in thc nalurc or cxemption l1 om laxcs (Commissioner o/lntenwl Revenue vs. Ledesma, 3 I SC 'Nil IJ5; /v/unilu Oectric Co. vs. Commissioner (/lntemal Revenue, ()7 ,\'CR/1 35); (l, ( )m; who ch1i111S to he e\:Cillpl fnllll jlil)'lllelll of il p;1rlicul;11� Iii\: must do so undcr clcar and unmislakablc lcrms ltllllld in lhc slalule (Asiatic Petroleum vs. Llanes, 49 !'hi/. 4oo: Union Garment Co. vs. Court ofTax Appeals, 4 SCRA 304); 7. In action (sic) l'or rcl'ullll. the burden is upo11 the taxpayer lo provc that he is entitled thereto, and failure to sustain the same is fatal to the action for tax refund; X. It is incumbent upon pctitioncr to show compliancc with the provisio11s ofSeclion 22() of the Naliollal llllel'll;ll l{evenue Code: 9. Taxes paid and collected arc presumed to have been made 111 accordance with the law and regulations, hence nul rdundablc." Petitioner formally offered the following documents to support its claim for refund:

DI:CISION- Description C'l't\ ('t\SI�: NO. (>107 l't\(ii�:LI ( 'nli lied True < 'upy ,,r 1'>'>7 Exhibit llll'UIIIL' 'l'il:\ 1\L'Illl'll wii!J (. <tll:u.:lllltc 111 s and suppurling D documents Certi lied True Copy of' Certi lieate nl" ( 'n�dil:thk 'l':t:\ Willdll'ld i ,,, �II� .,I II\ 1 II : [\ I I [\ I II I I II It iIi I I I I i I I� " I '.,qtlllllliolll < 'nl i lin I Trtll' < 'upy ul" I'J'JX llll'olltl' T:t:-.: ll'ltlnt willt :tllm�lllllL'III:; :11ul :;11ppnrlill)-'. documents Letter dated April 12, 2000 addressed to the Commissioner of Internal Revenue and Revenue District Onicer, \llakati District Onice, BIR The followi ng arc the issues which have been jointly stipulated by the parties, to wit: I. Whether or not Petitioner declared the P24,000,000.00 income, !'rom which !he PI .200.000. 00 overpaid t:tx w:ts wi thheld. as par! of i ts uncamed ineontc i1t i ts 191)7 lncomc Tax Rctum (the "I <J()7 ITR"); 2. Whether or not the PI ,200,000.00 was actually withheld at source by UEM-M!\R!\ Phi lippi nes Corporation from thc Pctiti oncr, and 3. Whether or not Petiti oner has cvidcncc to support thc rc l'und i n the claimed amount. We resolve to deny the claim. Revenue Regulations No. 12-94 (amending Revenue Regulations No. 6-85) as affirmed by jurisprudence. laid clown the following three basic requirements ror the refund of excess creditable withholding taxes, thus: 1 r� r, -. \.} (.

DECISION- t Tt\ Ct\SI': N(), (J! 07 l't\(il 5 I. That the cl1im l'or rdund was likd withi11 the two-year prescriptive pL:riml provitkd undL:r SL:ction 204 n) !now 204({') I iII rci;Jtion to Sedion 2JO I now 229 I or the Tax Code. as <llnembl; 2. That the fact ofwithholding is established by a copy ora statement duly bsuL:d hy tilL: payor (withholding <gL:nt) to tilL: paycc, showing tilL: amount paid and the atnount or taxwithheld therdrom; <IIJd 3. That the income upon whid1 the taxL:s WL:re withheld were included in the return or the recipient [Revenue Regulations No. 12-9'-1 (amending Revenue Regulations No. 6-85): Citytrust Finance Corporation vs. The 1/onorohle ( 'on11nissioner n( lntemol Nel'�'11//(', ( "1/1 Case No. -1 13-1. Nol'elllher II, II.)I.)I: of/inned hy the ('our," of;III' 'Cllls i11 ('it)'lmst Fi11ance Corporation vs. Court r/ Tax !IJJpeals and the Collllllissioner rf l11terna/ Revenue, CA. G.R. SF No. 28231.), tv/arch 1-1. /Y9-I: a11d C'itytrust Finance Corporalio11 (/onnerly l11vestor 's Fina11ce ( 'orpomtion/FN( 'IJ Fi11a11ce) vs. ( 'onnnissio11er o/ l11temu/ Revenue. CI'A Case No. -lfN6. Felmtwy 2-1. IYY3: affirmed hy the Court of ilpJwrt!s in ( 'onunissioner (/Internal RevN/11�' vs. ( 'itytr11st Finance Corporation (fimnerly Investor's .J�inance Corp.IFNC/J Finance) and the Court r?f Tax AIJJJeals, CA. G. R. Sl> No. 31 f()-1, !11Jri/ 18. I 99{� Ayala Life Assurance, Inc. vs. CIR. CT!I Case No. 5631, dated May II, 2000: Stock Tramfer Service Inc. vs. CIR. CTA Case No. 5796, dated May 3, 2000: Union Bank ((the Philippines, CTA Case No. 5623, dated April I2, 2000,� Citihank, Nil vs. Court ((Appeals and CIR, 280 SCRA -15 9: ;/ ('('/?;/ lnl'estIll('/Its Cor1wmtion I'S. Court r!{ AIJJJeals. 20-1 ,\'( 'Ntl 1)571. Recor d s reveal that Pctitio11er filed its Annual lncume Tax Return lor taxable year 1997 on /\pril 11. J<)<)X (l �:xl!ihit "/\") <IIJd its clailll l'or rel'u11d with the BIR 011 /\pril 12, 2000 (t�:xhihit "()" <111d No. 2 of the Statement of /\d1nitted Facts and Issues). Several days thcrcartcr, or on /\pril 14, 2000. Petitioner lib! an appeal with this Court. The aforementioned l1cts dearly show that the j udicial claim lor rdund via this Petition for Review was already filed beyond the two-year prescriptive period mandated by Sections 204(C) and 229 of' the Tax Code, quoted hereunder, thus: "S E C. 204. Aut/writ)' 1!( the: ( 'onunissiona to colllpi'OIIlisc:. abate, and refimd/credit taxes.-The Commissiow�r may-

m:CISION- CTt\ Ct\SE NO. 6107 l't\(il (l X X .\ X X .\ .\ .\ ,\ "(C) Credit nr refund taxes erroneously or illegally received or p!.!llitlti\.�s i mpos �d wilho11t illlthority. 1'1..'1'111111 til� v;tl11� ol' intrmnl rv'llll� Sllllllj)S Wlil'll llil')' :11\' l'l'lllllll'll i11 J!,OIId l'UIIdiliull hy llil' jllll\'li:ISl'l, :111d. i11 this discretion. redee111 or change Ullllscd st:11nps tli:1t h:1vc hcen rc1Hkn.:d 111llit l'or usc a1HI rcl'tllHI thl'ir v:dtll upon prool' ol dl'slrllclion. No nl'dit or rcl't111d ol' taxes or penalties shall he allowed lllllcss the t:1xpaycr Iiies i11 wriling with the Conu11issioncr a claim I'm credil or rclu' 11d wilhin lwo (2) years :llh:r lhe p:tyllll'lll or llll.' liiX 01' fK'II:illy: l'f'(}\'id<�d. !J0\1'<'\'('/', Th:\1 :1 I'L'IIII'II likd siHl\Ving :111 11\'L'I'jl:I)'II\L'nl .o.;IJ:dl ilL' l'on:idnl'd :1:; :1 \VI'illl'n cl:1in1 t(>r cl'cdit or rct'und." St�ction 229. N<'<'Ot'c'l:l' o('f'a.r Frrollc'olls(l' or 1//egolll' ( 'o/lected - No suil or procccdi11g shall he 111ai11tained in iiiiY court lo' r the recovery ol' any national internal revenue tax herearter alleged to have been erroneously collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in <IllY manner wrongt'ully colkcted. until a clai111 t(>r rdund or credit has been duly tiled 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, llll such suit or procecdi11g sh:1ll he tiled at'tcr the expir:ttion or two (2) years 1'1'0111 lhe dale ol' p:tylllelll ol' lhc lax or pen: d ly regardless or any supervening cause that may arise artcr payment: Provided however, That the Commissioner may, even without a written claim therefor. rcl'und or credit any tax. where on the l'ace ol' the return upon which payment was made, such payment appears clearly to have been erroneously paid. .Jurisprudence has cl earl y est;1blished that the two-year period of' prescription f'or claiming a refund of corporate income tax is counted from the elate of payment of the tax. that is, ti�om the Jatc or actual tiling or the annual income tax return. The Supreme Court in the case or Commissioner of lntern<tl Revenue vs. Court of Appeals, CTA and Bunk of the Philippine Islands as Liquidatol' of Panmwunt Acecpbmcc Coqwnttion, G.R. No. 117254 promtllatcd on .Janua1-y 21, 1999, explained the

DICISIUN- CT/\ C/\SE NO.6 I 07 1'1\CiJ�: 7 rationale of counting the 2-year prescriptive period rrum the date or filing or the annual ITR. in this manner: On the other lwmL in AC<. 'RA lnvestn1ents <. 'orporatio11 v. Court ol' Appeals, where the questi on was whclher the two-year period of' prescr iptio11 should be reckoilcd from the end ol the taxable year (in that case December :11, I 9X I), we explained why the period should he counted !"Will the lili11g ol" the Jinal adjustlliCilt rclllrll, thus: ('!early. thL�re is the llL'cd tu lik :1 rcl l ll"ll lirst hl'liliL' :1 clai lll l(H� rdu11d C:lll prosper i ii<ISIIlllch :1s lhc rcspo11dcllt Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a rerund must show in its final adj ustment return the income it received l'rom all soun.:cs and the amount ol' withholding taxes remitted by its wi thhold ing agents to the Bureau or lntern<ll Rcvc11ue. The pclitio11er c orporatio11 libl its li11:d adjustment return for its I <)l) I taxable year on April 15, 1982. In our Resoluti on dated April I 0, 1989 in the case of Commissioner ol lnl'!rnal Revenue v. Asia Auslralia Express. Ud. (G.R. No. 85956), we ruled that the two:)'ear prescri ptive period w i thin which to claim a rcrund commences to run at the earliest, on the date or the filing or the adjusted linal lax rclum. l lcnce, the pcli tioner corporation had until April 15, I ()X4 withi11 which to lilc i ts claim lor refund. It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation's claim l'nr rcf'und !'rom the Lime it likd its li11al adjustmc11t return i s the l1ct that it was o11ly then that ACCRAIN could ascertain whether it made profits or incurred losses in its business operations. The "date of payment," therefore, i n ACCRAIN's case was when its lax liability, ir an y, fell due upon its filing or i ts linal adjustment return on April 15, 19X2. As earlier mentioned, Petitioner lilcd i ts Annual I'I'R on Apr i l 13. 199H and liled i ts judicial claim for rel'und only on Apri l 14, 2000 which i s beyond the two-year period earlier discussed. The aforcquoted Sections 204(C) and 229 of the Tax Code mandates that both the administrative and judicial claims for refund must be filed within the two-

lli':l'ISION- LT/\ L'/\SI NO. <1107 Jl/\(11�: X yt.:ar pt.:riml, olllt.:rwist.: Jllc t;txpaycr's cause ol' actiun sll;tll ht.: h;trrcd hy prt.:scription. Unfortunately, this lapse on the part of Petitioner proved fatal to its claim. l'on:-;idring tllal l'titior11.:r litikd to lik its ,iudici<tl clairn within tllc two ycar prescriptive period provided under Section 230 of the old Tax Code (now Section 229), the Court linds it no longer llL'ccssary to discuss Pctitionn's conlpli;tm�c with the otlln two al'orcmcnlioll.:d n.:quirclncrJls. WHERIFOH.E, in view or the roregoing, the Pe tition ror Review IS hereby DENII!:D Jue to prescription. SO ORDERED. ( J-7--<. 1, u:'O.. l.. :") --(.J) .-vt'J..- - �{0 / ( ,, u,:, �/1 t/. J UANITO C. CASTAN I�DA, JH.(/ Associate .Judge U: WECO UR: .I C (. y.- - IQ. / ERNISTO D. ACOSTA Presiding .Judge CERTIFICATION I hereby certify that the above decision was reached arter due consultation with the members ol'the Court oi'Tax Appeals in accordance with Section 13, Article VIII or the Constitution. L.c ERNISTO D. ACOSTA Presiding Judge 1..-� .- ,.,. c) -'_1 1