PHILIPPINE EDS TECHNO-SERVICE, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PHILIPPINE EDS TECHNO-SERVICE, lNC.~ Pet it Loner�, C.T.A. CASE NO. 5580 CO MISSIONER OF INTERNAL REVENUE. Re: C'l -t.. X �- �- �- - DECISION . n v () .l 1 (� <o C I "� 'I cTea 1 t i'l the amo_nt 0 f f:�383. <)57" (H) r' e pl�' e sen -c 1 n q unutl-~'F~ ~reditatle taxes w1thheld for the ~:seal Petitioner 1s a domes~ic corQoratio~ Dr'lncioal_v r-nc..?.ceo enoire<: �1nc ~erv1ces for the des .qn of a~tomotive wirinc ha�nes- and cc-ponent par~s ~hereof. fln 1 'I, l '=! CJC:, ., p e t 1 t � ore t' f:.lec 1-:s T a x ' e ' t r�� n ' E x l � i J ro�- �:he caleraar� P.nnt;.a.l rr ccme ended December 31, !995 dec!ar 'l~ a ret !oss and the s ,_,m c� e'..;li.:"ab for the year <Exh. A-1). Peti.t1onet� was gt�ant ed Pet�m i 1: <:;o Change Accollnt::to ��ear� to fi<;cal I.'E'<H" effect~�/e J.. 1996 t; o trlat�ch (Exh. G) on Apt�i .. 15, I-I owe vet". �:~e...-; i t 1 on et" 1 s r-� 2 o '-' L " e CJ f le a pet�iod 1ncome tax r�et ur�n ~or the 1n~erim p.:.r�iod anuer"Y l.. :19Sc .,., ,- n r.l a ;.. e ,� ��� 12 t '- .,.. P wa<, f~ led by ;;he o e t L t t o n e r- o n 8)

DEC ISI ON C.T.A. CASE NO . 5580 reflecting a ne~ loss and a total tax crecits in the amount of P383,067.00 wh1ch comprised the or1or year's excess tax credits of P255,616.00 and the credita~le taxes withheld for~ the per~ i od the amount of P127. '15:1. 00. Although petitioner i nd icat pr�J int;;:nti.on to i~E,T und the amount P3B3. Cf.,7, 00 (Exh. nonetheless ooted -c o cat'r~y over' the same to the s~cceeding fiscal year ended March 31, 1997 lExh. D-2>. But the amount of P383,067.00 remained unutilized due to the loss position incurred by thP net1tioner during the said fiscal year. Consequently, pe~itioner filed a letter claim for refund wit~ t~e BGreau of Internal Reverue <BIRl on J"uly LJ.. 1997 <Exh. E). Claiming inaction on t~e part of the p,p7 and to toll the running of the prescriptive perioe the instant petition was thus filed on March 10. 1998. To support its case, the pet1t:or0r submitted the following documents, to wit: a) Corporate Annual Income Tax Ret ut'n fat' the Calendar Year Ended December 31, 1995; b) Transitory Short Period Income Return for the Fiscal Year Ended March 31, 1996; c) Corporate Annual Income Tax Return fat~ the Fiscal Year ended March 1997;

DEC ISION C.T.A. CASE NO. 558 0 3 cl ) Corporate Annual Income Tax f o'�- t n e Fiscal Yea~~ ended Mar~ch 31, 1998; p) Cer~t i f i cates of Cr~eci i table Sour~ce; f) Letter Claim for Refund; and g) Permit to Ch~nge Accounting Period. Petitioner~ also presented Miss Minerva Vallestet~os, Senior Accountant o..;:: Pet1t:Lcner~ .. v~ho tE.'Stlf::.ec! identified the abovementioned documents. by of Special and Af f i �,.~mat 1 v e Defenses, avers, that: 1. Petitioner's claim for refund or Issuance of tax credit certificate is yet pend1ng administrative investigation; 2. The total amount of P383,067.00 being claimed by Petitioner allegedly representing overpaid creditable withhol1ing tax for the fiscal year ended March 31, 1996 was not j:WOPP'r"l y dOC!. ment ed; .:;md 3. In an action for refund and/or tax cred i t, the taxpayer has the burden of showinc that the taxes paid were erroneously collected and the same claims are construed strictly against the claimant s since they are in the nature of tax e~emption an~ ~annat be a:lowed unless granted 1n the most explicit and categorical language. Respondent did not present any evidence~ docu~entary or testimonial in this ca.se. In fact 1 he just submitted the case based on the pleadings (CTA rec., p. 111, TSN Further, he cons1cered 1t unnecessary to f i 1 e a memo~~ctndum <CTA r~ec., p. 121).

DECISION C.T.A. CASE NO. 5580 - 4- sa.~..e 1ss ..te to in this 1s whether or not petitioner is ent1tled to the refund of P383,067.00 representin~ alleged :~ncome ta:><,es fol�~ the fiscal year~ ended Mar~ct-, 31~ 19'36. Under~ Section 69 of the 1'396 Tax Code~ as amended~ SEC. 69. Final lldjustment Return. Evel���v corporation liable to tax Lnde~ ~ect1on 24 shall file a final ad.justment return covering the total net income for the preced1ng calendar or fiscal year. If the sum of the quarterly tax payments made dur1n~ the sa1c taxable year 1s not eoual to the total tax due on the entire taxable income of that year the corporation shall e1ther~: (a) Pay the excess tax s t i l l due; or~ (b) Be refunded the f?><cess amour.t pa1d. as the case may be. In case is entitled to a �r~efund of the excess est1mated quar��ter~l�� }ncomP taxes paid, the refundable a�ount shown on its finaJ Adjustment return may be credited ,ga1rst the est1mated quarterly income tax liabilities for the taxable quar~ers of the succeeding t ax a b 1 e y eat'. Based on the above provision, the refundable income tax payment of a given year can only be cJ�~echted against estimated qua-terly income tax liabilities for~ the taxable of the succeedi.no .. '/ear~ Considering that herein petitioner incurred a net 1oss in the succeeding fiscal a.s well as in the next fiscal years 1gg7 and 19'38~ the amount of to be Y'e fundab 1 e .. Howe vet.. ~

DECISION C.T.A. CASE NO. 5580 - 5- ::Jet 1 t i on e t~ mus t substantial evidence its entitlement to the refund souq~t. Section 10(a) of BIR Revenue Regulations No. 12-'34. amendi.no Section 10 of Revenue Regulations No. 6-85, requires that: Section 10. Refund. �- (a) Claims for Tax Credit or Refund of income tax ceducted and wit~he:d as 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 o~ withholding 1s established by a copy of the Withholding Tax Statement duly issued by the oayor to the payee showing the amount paid and the amount of tax withheld therefrom. Hence, comoliance petitionet~ with the fnJlowing requisites must first be shown, namely~ <1> that 1t filed a claim for refund r W:l t in the tWO <";::;:) ;I<? en�� per�' J OG �:::<" pl�'e set~ :i. bed under Section 230 of the NIRC, as amended; (2) that the income upon which the taxes were withheld were included in the return of the recipient; and (3) the fact of withholding is established by a copy of statement <BIR Form 1743. 1) duly issued by the payor (withholding agent) tG the payee, sho,..-Ji"lg t"ie amount p...:Jid and the amount of tax withheld therefr om <see Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; Citytrust Finance Corporation [formerly Investor's Finance Corporation/FNCB Finance] vs. Commissioner or Internal Revenue, CTA Case No. 4046, February 24, 1993; FEB Investments, Inc. vs. The Commissioner or Internal Revenue, CTA Case No. 5353, August 22, 1997; Benguet Corporation vs. Commissioner or Internal Revenue, CTA Case No. 5323, August 25, 1997; Shangri-la Plaza Corporation, vs. Commissioner of Internal Revenue, CTA Case No. 5346, January 9 7 1998;

DECISION C.T.A. CASE NO. 5580 Nestle Philiopines, I n c. (fot'merl y , Ma g n o lia Nestle Corporation) vs. Han. Liwayway Vinzon s- Chato, Commissioner of In t e r na l Reven u e, CTA Case No. 5350, January 20, 1998; Ban k of Co mm erce v s . Th e Com mi ssion er of I nt erna l Revenue, CTA Case No. 5101 , Mar ch 17, 1998 ; Oranbo Realty Corporation v s . Commiss i oner o f Internal Revenue, CTA Case No. 5335, J u l y 24, 1998; AGP Industrial Cor poration (f ormer ly AGP Investment Corporation) vs. Commissioner of Internal Re v e nue , CTA Case No. 5239, Apr i l 13, 1999 ; The Ph ilippine Banking Corporation vs. Comm is si o ner of Internal Reven u e, CTA Case No. 5507, April 30, 1999; Philippine National Bank~ Inc. vs. Commissioner of Inte r nal Re v enue , CTA Case No. 551 1, April 30, 1999 ; Shimizu Ph i lippine Co n t r acto rs I nc. vs. The Commissioner of Internal Re v enue, CTA Case No. 5544~ Ma y 1 2~ 19~ q , 1':3'35 Tax Code, as amended, pr'D vide s: SEC. 230. Recovery o t= tax e t't~oneous I y or illegally collected. 1\.lo � u i t (H" �T���(1C'PPc1 :Lni: sh.:d 1 be ma1ntained in any for' the rerovery of an~ ~ational ir:tel�'nal J�'evenu.e +� -.. . , v .:;.-..'\ h e r e a f t e r alleged to have been eJ�~t'oneous 1 y �l'egally assessed o~ collected, or of 3ry oenaltv claimed to have been collected witho0t authority or of an~ sum alleged to have b~P~ excess1ve or in any ~annp~ ~rongfu\ly rrllecte~, urtil a claim fay refund or rred1t has been duly filed with the Commissioner; but such su1t or proceed1ng may be maintained~ whether or not such tax, penalty, or sum has been pai~ under protest or dure~s. In any case, no such suit or pr oceeding shall be begun after the expiration of two vears from the date of payment of the tax or penalty regardless of any superve~ing cause that mav <::n"ise after�' pa�;~mentr, P~��::;vided. however�, That the Commissioner may, even wi.thout a writt~n claim therefor, refund or c~edit any tax, whore on the face of t~e ~etu~n upon which payment was made, such payment appears clearly to have been ?rroneou~ly paid. :rr ~'e12l�~inr thel"''eto, Section -70(b) 1s quoted, viz:

DECISION C.T.A. CASE NO. 5580 - 7- SEC. 70. { ., \ \.-::'It (i::J) TimE' or t�il.inq the .income {::,'fiX ;-��etw��'n. -The cor~orate quarterly declaYatio~ sha'l b? filed within sixty C60) days follow1ng the close of each of the first three quarters of the taxable year. The final adjustment return shall bF f1l0d on or before the 15th day of April or on or before the 15th da�.:--y:;.. of the 4t~ month the close of the followin~ sc:�.:=-.1., yea;��~ as the case �ma.y be. As can be gleaned from the records, petitioner filed its 1995 Corpor~te Annual Income Tax Return on Apt'::." 1g95 and the ~ransitory Short Period Income Tax Return for�� ths on Jul�l iL T'�e claim �or refund was f~led with the BIR on ~~~, h 1 997 and the instant Petition for Review on ~arrh Hence. the two-year prescr1pt1ve period requirement ha~ been compl1ed w1th. Petitioner' likewise reported as part of its !;;j!"'OSS jncome for the calendar year ended December 31, 1995 <Exh. A) the income payments of P9,606,990.00 from wh1ch the c~editable taxes in the amount of P255,61C.OO were withheld at source CExh. A-3). 1~ l s o 1 f o l�' t h e f i s c a 1 y ear' ended !Ylal�'ch 31~ P4,256,051.00 as i t s ~F'O s s income ft'om which the r�editable ta/PS SOUr'Ce n::}{h. B--3). Lastly, petit1oner submitted Cert1;icates of Cr��r::>d i tabJ e Income Tax Withheld at Source to prcve the f'act of withholding, to �rlit ~

DECISION C.T.A. CASE NO. 5580 - B- Inco1e WithholdiD~ Acent Penod Pay1ent ~hthhcloinr; Tax Eltr. EDS Man1Jfachring1 : c. July 1 to Sept. 30. :99: p 1. J78. 75 �l. 00 P &e. 937. sc� [-1 EDS M.:;nufacturing, Inc. Oct. 1 to Dece1ber1 1995 3, 733,577.00 :861�78.8� C-2 1995 Ct"editablE Tax With' eld P255.6~6.36 EDS Manufacturi ng. Inc. Jan. 1 to Marc1 31. 199� 2,049,65.5.('0 102,483.:)0 C-3 EDS Manufactur:ng, I c. March 16 tn 31, 1996 1996 Ct�editab.. e Ta~ Withheld 499,356.00 241968.00 C-4 TOTA~ P127 1 451.00 P3831067.36 WHEREFORE~ ~ n "- . ;;,. n~ all the foregoinq, the Detition for Review is hereby GRANTED. Resoondent lS ORDERED tc REFUND or jn the E'tPI native. ISSUE A TAX CREDIT CERTIFICATE in favol'~ of the o:::�tition�~r~ :tn the sllm wit'oheld fat~ the fiscal yeat~ ended Mat~ch 31, 1':336. SO ORDERED. L- IQ. ~ ERNESTO D. ACOSTA CERTIFICATION T hereby certi~y tnat the above decision was reached arter due consultation w1t~ the members of tne Court of Tax Appeals in accordance with Section 13, Article VIII of the Corstitution. ~ Q~~ ERNESTO D. ACOSTA Pt'es:idin!:_: Judge