CTA Case No. 4251 (Decision)

A EPUB~~C O F T H E PH~~~PP~ N ES COURT OF TAX APPEALS QUEZON CJ:TV PROVIDENT INSURANCE CORPORATION, Petit i on er, -versua - C.T.A. CASE NO. 42S1 COMMISS IONER OF I NTERNAL REVENUE, - )( - - - - - - - - Res pond e nt. )( DEC I s I DN This is a clai~ for tax .cr edi t t otalling P 1 9 9 ~ 13 8.00 representing excess i nco~e taxes paid in 1985 and 1986. P et i t ion er , Provident In ~ur ance Corporat i on, is a d u l y organ ized a nd registered dom e stic corporat i on engaged in the business of se ll in g insurance and i nv es t ing its f unds in govern~ent bond s a nd ot her securit i es . It also derives inco~e fro~ the tenan t s o f t heir real estate <t. s . n., p. 13, 10/5/88) . Wh il e the . respondent is the CoMmissioner of Int erna l Revenue. In its petition for review, petitioner alleges the following� 11 HHH )()()( )()()( 4. THAT it filed its 1985 final annual inco~e tax r e turn on time showing a net los s of P1 ,466,028.00 and the su�

DEC I S I ON CTA CASE NO. 4231 - 2- of P89 ,874 . 00 as tax withheld on t~ ent a l i n co me � 5. THAT in 19 8 5 i t filed its q u arte rly inco me tax r e t ur n s a s r equired b y the National Interna l Revenue Code, as follOWII 1s t quarter showin g net los� of P687,355.57 and P21,219. 17 as wi thholding tax on rental. 2nd quarter s howing net los� of P819 , 527.50 and P45,682 .52 as withho l ding tax on rent al. 3rd q uarter s how ing net losa o f P 1,638, 300. 96 and P71, 862.20 withhol din g tax on rent al. 6. T HAT it filed it s 1986 final i n c ome t ax t~ etLn~ n on time, sh owing a net lo s s of P 1, 308 ,858 and a tax of P109,264.00 wit hheld from its ren t al income, 7. TH AT �i t also f i led its 19 86 quart e rly inc om e tax r etu r n s on time, each ahowing a net lo� � � 8. THAT on Apr i l 13, 19 8 8, petitioner fi led a clai m for tax refund i n the tot al amount of P 19 9, 138.00 representing t he total t axe s wit hheld on renta l inc o me d ur ing the two ta x years when petitioner suff e t"' ed net losses and therefore had no i ncome tax liab il ity; 9 . THAT respondent has n ot a c ted on t he aaid claim. . )( )( )( II X)()( X)()( . <CTA r� cords, p p. 1- 2.) In an1wer thereto, r espond e nt denies the above

DECISION CTA CASE NO. 4231 - 3- c:itedallegatione, i.e., par. nos. 4, 5, 6, 7, Bby petitioner for lack of knowledge or information euff:l.c:ient to form a beli~f as t o the t r u t h t h ereof. He admits the allegat ion in para g t~aph B that petitioner filed a claim for tax refund in the amount of P199,138.00 bLit specifically den i es t he grounds �llegod i n support of said claim as we ll as the r95t of the alle gations in the same paragr aph for b�ing gr tui tous assertions and premature c: cmc:ltuiona of law and/o r fi\cts, consideri ng th a t fl6~titicm"'r-' i claim is s t i l l und er admi nistrative investigation. <CTA r ec ord r., pp. 12-13. ) Sy way of specia l a nd affirmative de f ens es r espondent further a l le g ed the following� XX X XXX 1. The ~ mo unt sought to be refund d a t~ ose from the computatio n submitted by the taxpayer itsel f , t herefore, !U l f-ser v ingw 8. The income tax return provides i nauffic:ient proof of refundab ility of the amount �o ught to be refunded, 9. The tax er. so claimed ar e dee me d t o have been paid and collected in ac:c:ordance with law and regulation� � 10. In a claim fot"' t"'efund, i t is incumbent upon petitioner to show that it i s entitled thereto, and petition e r 's f�ilure to pro v e the same is fat a l to its claim for refundt 11. Cl im~ for refund are constr u e d strictly against the claimant f or the

DECISION CTA CASE NO. 42~1 - 4- same partakes of the nature of exemption fY'om taxation <Commissionet~ of I nt et~n a 1 Revenue vs. Ledesma, G. R. No. L- 17509, JanuaY'y eo, 1970, 31 BCRA 91)' 12. Well settled is the rule that one who claims to be exempted ft~om the payment of a particulal'~ tax must do so under clear and unmistakable ter ms found in the statute. The claimant must be able to point to some positi~e provisions of law creating the l'~i ght, as the exemption sought for cannot be allowed to exi�t upon a mere vagLte implication or inference <Asi atic Pett~o leum vs. Llanes, 44 Phil. 466-47 1; Union Garment Co. Inc. vs. Com~t of Tax Appeals, G. R. No. L- 16809, Januat~y 3 1, 1962, SCRA 304 ; Philippine Acetylene Co. Inc. vs . Commissioner' of Internal Revenue, G.R. No. L-19707, Aug ust 17, 1967, 20 SCRA 1056), 13. It is, thet~ efore, incumbent upon petitioner' to show that it has complied with the pr ovisions of Sections 243 and 246 of the Tax Code of 1986. XXX XXX xxx. (CTA Y'ecoY'ds, pp. 13-15) On October 7, 1988, petit i onet"' made a formal offer' of its evidence. Respondent submitted his Opposition thereto in his "Comment of Offer of Evidence 11 dated 6 March 1989. <CTA records, pp. 19-27) However', in a reso 1uti on dated 5 Apri 1 1989, this Court admitted all the exhibits offered �� evidence by petitioner and set the case for further' hearing <CTA records, pp. 37-38> on July ~ 7, 1989, respondent manifested that he would now

DECISION CTA CASE NO. 4251 - 5- present his eviden c e in t h e c a s e . He a dded howevet"' that the Examiner a ss igned t o the case has not yet, a� of the t i me of hearing s ubmitted the report of investigation of petit i on er. Upon his request the hearing was cance lled wit hout objection from petiti on tr-. On the '" xt hea t"'ing d .te, Aug u s t 17, 1989, re5p on d n t m nif ested t h at he sLib mit t f;? d the case for d cision on the p leadings and petitioner ' s v id ence. Both partie s requested some time within which to file their respective 111e111orand�. Thet"'eaftet"', the case was to be deemed sub111itted for decision. The sole issue is whether petitioner is entitlttd to a t"'efund/ ta x credit in the amounts of PS9 ,S74.00 end P109, 264.00 as alleged overpaid income tax for t h e 1985 and 1986, respectively, ore total of P199,138.00. From the record i t does appear that petition ~ filed i t s 1985 first quarterly income tax return oh May 30, 1985 which showed a net loss of P687,355.5 i and tax withheld on rental income in the Still of P21 , 219. 17. <Exh. A-1 > The second quaurterly income tax retLit"'n was filed on August 29, 1985 .�hawing a zero tax liability due to operating loss

DECISION CTA CASE NO. 4251 - 6- of P819,527.50. That t~et urn also showed accumulated withholding taxes of P45,862.20 as tax withheld from its rental income <Exh. A-3> on April 15, 1986, petitionet' filed its final income tax return for 1985 showing a net loss of P1,166,028.00 and the aMount of P89,874.00 as.tax withheld fro~ its rental income <Exh. A>. It further appeat' s that petitioner filed its first 1986 quart et"l y income tax t' et urn on May 30, 1986 which showed a net loss of P386, 441.39 and a zero income tax liabi 1 ity <Exh. B-1>. Similat"ly, its second 1986 quarterly income tax return filed on August 29, 1986 showed a net loss of P491, 011.96 and a zero income tax liability <Exh. B"-2). Its third quarterly income t a x return filed on December 3, 1986 showed a n e t loss of P1 4 5,402.77 and no income tax liabilit y <E><h . B- 3> . On Apt" il 14, 1986 petitioner filed its 1986 final income tax return which showed a net loss from operations of P1,308,8~8.00 and an income tax liability of zero. The total sum of tax withheld from petitioner's income fro� rental during the year is P109,264.00 (EMh. B). Petitioner filed a claim for tax credit/refund

DECISION CTA CASE NO. 4251 - 7- in the su11 of P89, 874.00 for the year 1985 and P109,264.00 for the year 1986 or a total of P199, 138.00 in April, 1988 within the two-year 15tat�Jte of limitat i on s from Apt'il 15, 1986 to April 14, 1987 when the 1985 and 1986 income tax returns were filed <Exh E9 t.ts.n., p. 26,. 10/5/88). Moreover, it appears from t he records that the aggre~ate 15Um of the income taxes withheld from the income of petitioner fro� rental in 1985 and 1986 were reMitted to the respondent as reflected by the withholding tax statements and certifications <BIR Form15 1734 and 1743. 1> flwnished petitionet' by its respective withho lding agents. Petitioner's income taxes withheld from t'e ntals it t �e ceived are shown in the official t'eceipts issued by the petitioner to its tenants t'eflecting the gt' oss rental inco�e earned, withholding tax, and the net amount petitioner received from e tenants <t.s.n., p. 18, 10/5/88; Exh. C, C-1 I : - 13, D, D-1 to D-24>. Exh. F-1 consisting a . batch of 62 pieces official receipts issued by petitioner and Exh. F- 2, consisting of batch of 133 official receipts indicated the withholding taxes fro� rental inco�e in 1985. Similarly, Exh. G-1, consisting of a batch of 48 pieces of official receipts issued by 1 ~ ,~.

DECISION CTA CASE NO. 4251 -~ - pet i t i one r a 1 so i n d l. c ~ t e t t1 at t ax e s wet'' e wi t h h e 1 d in 1986 by peti tion+"n~' <:. w1t t1holdinQ a11ents. In his for~ Respondei�1t" dated Fe bru~ry 2, 1990, t~ espond ..~nt co ntends that mer~ e allegation of ne t loss does not t.P .~ _Q.__f ..~.G.:~..Q- mer~it a ref1..1nd. Res pond ent fl1rt her~ av et~ s that peti tion er d:i.d not present any evidenc: e to s ubstantiate its Newht'H''~ in the pleadinQs o r r ecor~ ds of the ~t this case do es it ref lect that the dilallowat~a of itemized deductions was eithet~ alleged or l'" ised ~c:. an is su e in the pleadinqs or~ tri~l of th~s case. lhe tact is that durinq trial, re5pondent d ' d not present any evidence to dispute the eorreetn~~~ ~f th e deductions shown in the 1 985 &nd 198& annu ~ l income t ax return$ of petitio ner or the correctnes s of the entirety of the returns fil d. manifested that 17' 1989 heat~ ing, t~e spondent it would present its evidence, petitionltr hav ing had ah~eady presented its own. Re~pondent howe ver was no t able to do so and asked for a canc~llat ion of the hearing. Lat et~ , howe vet~, inste~d of P~'"'Oceed inq with th e presentation of i t s m�� n :li-~.sted that it was

DECISION CTA CASE NO. 4231 - 9- submitting the case for decision based on the pleadings and petitioner's evidence <17 August 1989 hearing). In other wot~ds, no evidence in contravention of thos e offered by petitioner was presented by respondent. "Since one who pt~ays fot"' ,judgment on the pleadi ngs wit hout . o ffering pt'oof as to the pt"'o of of the allegations, must be understood to have admitted the truth of all the material and relevant allegations of the opposing pat' ty and to rest his motion fot"' judgment on the allegations taken together with such of his own as are admitted (Bauermann v. Casa, 10 Phil. 386; Evangelista v. De la Rosa, et al. ; 76 Phi 1. 115> t~espondent may be considered ll 6 no t questioning set'iOllsly petitioner' � entitlement to its claim for t'efund. More 50 when the evidences presented which were not disputeud by t'espondent , sufficiently established petitioner's right to the refund." <Commonwealth Management and Set'vice Cot"'poration v. Commissionet' of Int et'nal Revenue, CTA Case � No. 3232 , June 26, 1985. ) In the said memorandu� respondent furthet"' argues that the official receipts which petitioner issued to various forms from whom it received

DECISION CTA CASE NO. 4251 . - 10 - rental payments which indicated the amot..mt of tax withheld from said rental payments is devoid of any probative value in pt~oving the withholding of the corre~pondin g tax from petit ioner's rental income. On the other hand, petitioner in its " Repl y Memorandum" dated Augu st 14, 1990 � at~ gue s that "When an offered evidence sufficiently answet~s the two requirement~ above mentioned and competent> it is admissible, and its probative value or weight i s a question to be determined by the com~t. There are no iron clad rules regarding the weight which should be given certain evidence. M�.tch of this is left to the appt~ec iation of the individual judge (Qt,.tot ing Moran, Comments on the Rule s of Court. > Petitioner adds that "The afot' ement ioned official receipts issued by petitioner indicating the amount withheld ft~om its t~e ntal income, more than satisfy the requirements of relevance and competence and in the absence of evidence to the contrary, the same should be given it s due probative value." We agt~e e with the petitioner. To prove income tax payments, this Court in many ca~es has ruled that the taxpayer should present the corresponding receipts and various withholding

DECISION CTA CASE NO. 42S1 - 11 tax certificates issued to taxpayer. It is noteworthy to state th at when the Tax Code speaks of proof of payment it means official receipts evidencing paymen t. We further adopt petit ion er ' s stand that it is within respondent's compete n ce . at~ powet~ and authority to vet~ ify whether at~ not the withheld taxes from petitionet~' s rental income wet~ e indeed actually remitted to the govet~nment and such fact have been pt~esented dm~ ing the tt~ial. failed to present any evidence to contradict the evid e nc e presented by petitioner. Since responden t failed to rais e the issues of the correctness o f deductio ns in the 1985 and 1986 ann�.tal income tax t~e tm~ ns of petitionet~ and the issue t~egarding the p t~obit y of the said official receipts issued by petitioner and failed to present controverting evidence it is too late � in the day for him to raise these matters now. Under an identical situation, this Court z. speaking through Judge Alex Reyes said� 11 It does not appear that respondent Commissioner of Internal Revenue disputes the correctness of the material facts nor has presented any evidence controverting the same. Respondent poses no objection in having the cases submitted for

DECISI N CTA CASE NO. 4251 - 12 - dP.c:ision on the basis of thP. pleading s and CTA rec~ordfi." " (ll J t 11 1 rf t I\!? mat e t~ i a l fact s a r~ e rPll'lti vely simple a nd so .:.u~ e the issue!' under resolve essentially arldressPd to the que~tion of whether or not petitionPr has established a valid claim to the refund of exce~s income tax pay ments for t h e t .;uc a b 1 a y e 1'1 r r.~ i n q �.1P. !'\ t i on � " 11 Th!~' cac;pc; bPfor~e Us ha'r��dly pr-esent -A gri. ppinq qLwsti.nn or r~eqtdt~P a tor~ tm ~ ed rat:t.oeinAtion. As thus shown thP basis for the claims are not short of spPcifir support in terms of tractable data openly lAid and fully rJj scl osed. Going by the record!5, petiti.on et�'s income tax t"ettwns for the subject tax ab e years ha ve shown losgeg and excess incf1me tax payments. Re ~ pondeht po i nt s to no factual errors nor superfl ui t ies which n~ed be abridged. Neither were ther e any deficiency a~~essments issuPrl- Moreover, the rf.?C'Ordg m ke i.t. r:-1n;'w that. ti1P t" P.flUi.c;i t ro <?t;\\te men t<; n �� rPr � tificatjonr; of the i n co me t~Heo;; Wlth l te l d a nd drrl�t c tf'd by th~ wi thh'1 d i nq ;:~qnn+ tln" nl\[111 �r1l1 i rl 1 rP.'>portdent collrc~Pd t h r in ~""11 mP- t;~){Ps, .=tnrl upon ,..,hi rh t .'l r I r d 1::11,. r-l.<imf'd t"ef 11nd could fw�nish the bC'lsis fn1 ~ "' def ini.l; i. ve r ~ ~olve. Rut offi~ial i'\ction thereon appear$ consiqn,d t:o"' limbo of linqet~ing verification, to d �"tr.. " "Wf! see no t"P ; ><; on a n rl none is vo�1cl 1 g.afed why these simple cases where fc r:-t anrl fabri~~tinn are no longer i ndistinguishable, s houl d remain curi CHlS 1 y unpert �Jrbed. It may be n ee~sary to repeat what so plainly apply to the cases at b i'\t~ that, "But as � should be expect ed, the action could be mAintained on th e b~sis of the pleadings, admission and affid.:3vit of the pat"ties which neitht~r rwnvol.<~s i'\ny unsettling questions nor 1nvolvPs mater-ial f artual is~Ue $ genuinely in dispute. The administrative ~a c hinery or process

DECISION CTR CASE NO. 4251 - 13 - e mp l o y e d o n t h P t~ i Ll h t t o t h eo c l a i 111 s e ""''~ <> to have moved b~rely at idling speed. To be r e 1 at i v e l y q u i e s c e n t f o t~ c; fl mP f o 'It"' ( '� > y~ars on a claim of such a si mple n ~t ure and not so considerable a stake which no longer incites controversy nor exc"tes a qtJeasy sen se of expectation, ct~eates but an unwarranted bureaucratic inertia of inaction. Readily a legal conc lusion can be safely reached. Petitioner or any similarly cirr-�.rm<:~tP~nr:~d tdxpayer fm~ that matter deserve s a mPasure of.fair dealinq in a more eoxpPrlitious and competeontly t'P!'Ipontttvl! ac~t �inn. <CommonweC\lth r:'Rcific Co n c:;u ltant r;, 1 hL, v. t.omnli sc:;ionrt~ nf Inte nl!ll ReoveniJf.', ClA Case Nn. 2 953, 1'1<'\y tS, 1982 ), citer' in Di'\t.i'\pt�Pp (f'hil s. > Inc . v . Commisc:;innrl t'f TntPt��n al Rr->vPn .lP., C1 n CIA\!:! P. No. 3 r..no. tlrlr'rl' 30, 1 9f.V� ; appea 1 witlldr wn, G. R. L - 67'735, SP.pt ember 12, 198/+) o II I "The circul'lst ;:mce obtaining in the Cal fit. at bar of the mo J d no d i ff'erent f'rnm the aforecit'"'d c~seos co mpel Us to ~ugtain the . Pnability of the pe �titioner' c:; riqht to the t~efu nd based on the pleading s and recot~ds." <Commonwealt h Manaqement and Service Corporation v. Comm1ssionet� of Intet~nal RevetlttP., CTA Cas,,.�, Nn o;. 3383 and 3578, June 30, 1'H3'!. > This was thu~ t ll r l "'llinq in t hP. C.T.A. cases o f Co mmon we r:~ 1 t h M"' 11tl l1 f' M o n t; i'\ n cl S e t �v i c e l: c> t ' p o t~ at i o n vs. Commissioner of Interna l Revenue <CTA Cases Nos. 3383 and 3587, June 30, 1987), cited above and reiterated in the later case of A. So riano Corporation vs. Commis si oner of Internal Revenue <CTA Case No. 36 94, Novembet' 2, 1987 >, also with identical fact~ as thi~ one.

.. DECISION CTA CASE NO. 4251 - 14 - Thu� as this Court found no t~eason to depart from its conclusion in the Commonwealth Management and Service Cot~pot~at ion case, as expt~essed in the above-quoted opinion of the Court in said case of A. Soriano Corporation vs. Commissio ner of Internal Revenue <CTA Case No. 3894), We �1 ikewise find no coMpelling reason to deviate ft~om the findings ot~ ruling of said case s i nee the same should apt 1y re�olve the si111ilar problem bt~ought before Us in thi� proceeding. WHEREFORE, respondent is hereby ordered to i�sue a tax credit petitioner in the ��ount of P199,138.00. Without �pronounce�ent �� to costs. SO ORDERED. Quezon City, Metro Manila, June /""'---..._ � ROAQUIN WE CONCUR1 ~ti~1t~, ig\R~~_t.:_ ~~~~ ERNEBTO D. ACOSTA A��ociate Judge

DECISION CTA CASE NO. 4251 - 15 - CE RT I F I CAT I 0 N I hereby certify that this decision was reached fter due consultation among the members of th Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. Court