CTA Case No. 5092 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY JOLOU REALTY AND DEVELOPMENT C.T.A. CASE NO. 5092 CORPORATION, -------X Petitioner', - Vet'SUS- COMMISSIONER OF INTEHN/\L llEVENUE, Respondent. X- - - UECISIC>N This case involves a judicial action for the refund of the sum of P2,161,ti32.16, representing overpaid income tax resulting from excess payment of creditable withholding taxes for tile calendar yeat' ended December 31,1991. Petitioner is a domestic corporation duly organized and existing under the laws of tt1e Philippines. Its principal offloe Is located at the 6th Floor, Sol Building, Atnorsolo Street, Legaspi Village, Makatl, Metro Man I I a. o n A p r� i I 1 5 , 199<:~. petitioner filed its 1991 Annual lnoomP. lax Return (l::xhs. A, A-2 and A-3) reflecting a r�efundablfl amount of p;;:,161,6a2.16, computed as follows: (Exh. A- I)

DECISION C.T.A. CASE NO. 5092 - 2- Gr�oss Income P6,485,982.59 Less: Deductions Net Income --~-L 054_,_Q20 ~4.1 Tax due Less: P3,431 ,962.15 !.:_!.~9~ 86_:. 75 a. Prior years excess credit b. Quarterly payments made P1 ,509,057.18 this year __ 1_~.~_?_3._..t_?~l.:J 3 c. Creditable tax withheld P~,_~6 2_) _8.__!~-~.~-!_ Total P2, 161,632.16 Amount Refundable On Apr i I 12, 1994, petitioner filed a letter claim for� refund with the Bur-eau of Internal Revenue seeking t h refund of P2,161,632.16, r�epresen t i ng Its alleged overpaid creditable withholding tax at source for the year 1991 CExhs. 1 and 1-1 ). Un Apri 14. 1994' petitioner� filed the instant petition tor rev I e w i n or de r� t o t o I I t 11 e r u n tt 1 n g of the two-year prescriptive period under Section 230 of the Tax Code, as amended. Wh i I e tile case was pending t r i a I , a Letter� of Author�ity No. 18251. dated May 24, 1994, was Issued aut hot' i zIng r�evenue officer� Pau I I no 1\ganon to examIne petitioner�'s books of accounts and other� accounting r�ecor�ds for' a I inter�nal revenue taxes for the year 1991 <Ex h. I). He was also tasked to investigate on petitioner's blalm for refund as contained in the Memorandum <Ref. No. 1059 I 505) , dated July 18, 1995,

DECISION C.T.A. CASE NO. 5092 - 3- issued by Ms. Eleanor N~ Litao, Actg. Asst. Rev. Dist. Officer <Exhs. 2 and 2-a). The only Issue to be resolved is whether or not petitioner is entitled to the refund of the sum of P2,161,632.16, representing allegedly overpaid creditable withholding tax for the year 1991. Petitioner cites as legal bases Sections 204 and 230 of the Tax Code, as amended. For easy reference pertinent portions of Section 204 in relation to Section 230 of the lax Code, as amended, are hereby quoted as fo I I ows: "Sec. 204. AutiJOr i ty of the Commissioner to compromise, abate, and refund/credit taxes. - The Commissioner may - (1) XXX (2) XXX (3) Credit or refund taxes erroneously or Illegally received, penalties imposed without authorIty; refund the va I ue of i nterna I 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' cr'edlt or' re�fund witlrin two years after the payment of the tax or� pen a I ty." "Sec. 230. Recovery of tax erroneously or Illegally collected. No suit or pt'oceed i ng sha I I be rna i nta I ned in any court for 1 ' 4I ~~- (.., t_}

c-- DECISION C.T.A. CASE NO. 5092 - 4- the recovery of any national internal revenue tax hereafter a I Ieged to have been erroneous Iy or� I I I ega I I y assessed or co I I ected, or of any penalty claimed to have been collected without authority, or of any surn at leged to have been excessive or in any manner wrongfully collected, unti I a claim for refund nr credit has been duly filed with the Commissioner; but such suit or pr�ooeeding may be maintained, whether or' not such tax, pen a Ity, or sum has been paid under protest or duress. In any case, no such suit or proceeding shal I be begun after the expiration of two years from the date of payment of the tax or pena I ty r'egard I ess of any supervenIng cause that rnay arise a�fter payment: Provided, however, that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on face of the return upon which payment was made, such payment (should be read "tax") appears clearly to have IJ e e n e t' r o n eo u s I y p a i d � XXX X X )<. X X X." lo fur�ther' support its entitlement for the refund, petitioner� pr�esented the following doouments as evidence: a. the 1991 final income tax r-etur'n (Exhs. A, A-1, A-2, and A-3): b. the auditor's report on petitioner's financial statements <Exlls. B and B-1 l: c. petitioner's financial statements <Exhs. C, 0 and El; d. the various certificates of creditable withholding tax at source tBIR 1743.11 <Exhs. F, F-1, G, G�-1, H, and H-1); and 1 .,, '"' r, "�' i -

DECISION G.T.A. CASE NO. 5092 - 5- e. the I etter-c I aim for� refund with the Bureau of Internal Revenue <Exhs. I and 1-1>. The issue pr'esented before us Is nothing new. In fact this Court has already laid down three basic requirements. for a taxpayer� to comply with, in order' to be entitled f' or t11e r�elund of excess creditable withholding tax at source. lhese ar�e: 1. That it f i I ed a claim for refund within the two (:C:) year period from date of payment of the tax as prescribed under Section :<99 <now 230) of the National Internal Revenue code, as amended; 2. lhat the income upon which the taxes were withheld at source under Section 53 were included as part of the income declared In the income tax return of the recipient: and 3. The fact nf withholding is estat)l ished by a cnpy of statetnent (BIH Form 1 1 4 3 . 1 l d u I y i s s u e d by t h e p a yo r� ( w I t h h o I d i n g agent> to the payee, showing the amount paid and the amount uf tA.x withheld therefrom. lSec. 10, Hev. Heg. 5-85; see Cltytrust Finance Corporation vs. fhe Commissioner of Internal Hevenue, CTA Case No. 4134, November t 1 , 1 9 9 1 ; a f �fl r me d by t he co u r� t of A p pea I s I n Cllytr�ust Finance CoqlOr�ation vs. Court of Tax Appeals and the Commissioner of Internal nevenue, CA-G.H. SP No. i'H2::J9, Mar�ch 14, 1994; and (;ttvtrust Finance corporation (Formerly I n v e s t o r� � s F i n a n o e Co r- p o J' a t i o n I F NGB F i nanc e ) vs. Commissioner of Internal Hevenue, ClA Case No. 4046, Febr'uary 24, 19H3; atf lr'med by the cour� t of' Appea Is in Gomrn Iss I oner� of' I nterna I Hevenue vs. Citytrust ~inance Corporation (former I y Investor's f ina 11ne corporatIon I FNGB 1- inance) and the Court ot lax Appeals, CA-G.R. SP No. 31104, Apri I 18, 194�11. 1''4~: I � I -�

UECISION C.l.A. CASE NO. 5092 - 6- Petitioner filed within the two-year period Its claim for- refund with the BIR and with this Court. It t i I ed its letter-claim for refund with the BIR on Apri I 12, 1994 (Exh. I) and its petition for review with this Court on Apri 1 4' 1994. lhe two-year period, in the instant case. commences to run on Apr� I I 15, 1992, the actual date of filing its 1991 Annual Income Tax Return which is also the time required by law for the filing of its fittai income tax t'e1.urn (Commissioner of Internal Revenue v. fMX sa I es, Inc. et a I., G.R. No. 837736, January 15, 1992) . certificates of creditable withllolding tax at sour�ce <BIR Form 1743.1), o�ffered In evidence by petitioner, sufficiently established the amount o�f cr�editable withholding tax for� the year� 1991. Furtller�more. as testified by petitioner's witness, Mrs. Anita Besltall, tl1e i11corne upon which these creditable witllholdlng taxes were paict w~re included in petitioner's gr'OSS i llCOilH~ for Income tax purposes < lSN, December 12' 1994. p. I 1 l . However, we are convinced that petitioner is entitled only to a lesser amount of P1 ,966,296.31 as recommended by r�evenue officer, Mr. Paulino Aganon, In his Memot'iHldum Repor�t ( E xh. 3). Pertinent portion of which reads AS follows: .. ~ < 1 {:. ':t (!

------- .,..,."' .... ,, DECISION C.T.A. CASE NO. 5092 - 7- "3) The 1991 alI Internal revenue tax I lability of the above-named taxpayer was already examined under Letter of Authority No. 18251 dated May 24, 1994 and the corresponding report thereon was already submitted on July 28, 1995 with an assessment of the following deficiency internal revenue taxes: Taxable Income per 1,396,522.60 BIH Form 17. 17-A ....i3 ! 3 6 2 1 8 1 8_:..~!. Tax due per Investigation (P1 ,966,296.31) Less: Tax credit Refundable amount per audit In view of the foregoing facts and issues as wei I as the results of the tax audit findings and assessment, JOLOU Realty and Developme~t Corporation now requests that the a I Ieged unut I I I zed excess creditable taxes withheld at source for the year 1991 be granted a refund in the total amount of P2,161,632.16. However, based on the final report of investigation conducted by the undersigned d i so Iosed tha.t the taxpayer�' s unut iIi zed excess tax credit for 1991 was only P1,966,296.31 and such amount wer�e not yet app I i ed in the succeeding years. In the light of the for~egolng, and since the taxpayer's claim for refund has legal and factua I basis, _i__~ _____i.�____ _!.'_f!:~_f?.ec_!_!_~-~--l_y___ ~comrne__nde_sf __ _!_~_~_! !!.!..~__r::_~_q u_e s_!______~.-~...f:l.!.'_~_r!.!.~E....il-~!_c!___! _!~_!~_____!..�.!...~ a r~!_2_':!!l.!. ......?.!____Q_'l..!.Y_P..!..~ ~~�..L?.~~-=_?~___CJ~! ~-n d e d___i'.!!.~! .B...P.P!'...?.~~_L___2.!____�~.Jl}..�__.J:_e._P.~.E..! ........~:.Y.. ...!!.lf:l..Q.~..!.~. --~-Y..:!..b or- i_!_l_ e s . " <Emphasis suppl led) Petitioner did not object to said findings. As a matter- of fact, it adopted the findings of the revenue officer when it so declared that petitioner should at least be granted a tax refund of P1,966,296.31 as found by Revenue officer Pau I I no Aganon (see last par. of

DECISION G.T.A. CASE NO. 5092 - 8- Petitioner's Memorandum, p. 97, CTA r�ec.). It Is presumed that the official duty of said examiner has been regularly performed [Sec. :3(m), Rule 131, Rev. Rules of Court]. It is an elementary rule that in the absence of proof' of any i rTe~JU I ar� It i E~S in tile performance of official duties, an assessment will not be disturbed. Corollarily, the finclin~JS of the revenue officer as shown i n h i s i n v e s t i g at i v e r� e p o r� t t ll a t pet i t I o n e r I s I i a b I e t o pay an i nco me tax due of P I . :~ 9 6 , 52 2 . 6 0 stands of great weight. Thus, petitIoner is ent it I ed to the r'efund of a lesser amount of P1 ,966,296.21. The same wi II hold Judic:lal afftrmanc:e i f not o o n t r� o v e r t e d by pet i t I o n e I' � In this case, it was admitted by petitioner in Its memot'andum. WHEFlEFOIH.:, in view of the foregoing, the petition for review Is hereby BRANIED PAUliALLY. Respondent Is ordered to nEFUNIJ in favor� or petitioner the sum of PI ,966,2.96.2.1, repr'esenl:iny over'paid income tax for� the calendar year 1991. SO OIWHtEIJ. ~~.~ ERNESTO 0. ACOSTA Presiding Judge 1 "I':'."a(}

DECISION C.T.A. CASE NO. 5092 - 9- -~~~~ I CONCUR: RAMON 0. OE VEV, Associate Jud _ C E n �1 I 1:-: I c; A T I 0 N hereby certify that this decision was reached after due consultation with the member' of the Court of Tax Appeals in accordance with Section 1;3, Article VIII of the Constitution. ~LC2-~ ERNESTO 0. ACOSTA Presiding Judge Court of Tax Appeals