SONY PHILIPPINES INCORPORATED v. COMMISSIONER OF INTERNAL REVENUE

REPlJBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION SONY PHILIPPINES, CTA CASE NO. 10585 INCORPORATED, Petitioner, Members: -versus - RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and FERRER-FLORES,]].. COMMISSIONER OF INTERNAL Promulgated: REVENUE, x--------------------------------------------~~~~,{e~t~----------------~AjDR_~--"~~:::::--~-:-~-:---x DECISION )"' I RINGPIS-LIBAN, J.: The Petition for Review prays that the Court render judgment ordering respondent Commissioner of Internal Revenue to refund to petitioner the amount of P60,157,273.00 representing unutilized creditable withholding taxes (CWT) for the fiscal year (FY) ended March 31, 2019.1 THE PARTIES Petitioner Sony Philippines, Incorporated is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office at 12/F Inoza Tower, 40th Street Bonifacio Global City, Fort Bonifacio, Taguig City.2 It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number (TIN) 005-338-777-00000.3 Respondent Commissioner of Internal Revenue is the chief of the BIR who, under the law, is empowered to perform the duties of said office including, among others, the power to assess and collect all national internal ~ 1 Statement of the Case, Pre-Trial Order dated September 12, 2022, Docket- Vol. IV, p. 1711. 2 Exhibits "P-1", "P-1-1" and "P-2", Docket- Vol. 5, pp. 2196 to 2223. 3 Exhibits "P-3" and "P-4", Docket- Vol. 5, pp. 2224 to 2226.

DECISION erA Case No. 10585 revenue taxes, fees and charges, and to enforce all forfeitures, penalties, and fines connected therewith.4 THE FACTS On July 12, 2019, petitioner filed its Annual Income Tax Return (BIR Form No. 1702-RT) (Annual ITR) for FY ended March 31, 2019,5 which reflected the following Tax Credits/Payments:6 Schedule 7- Tax Credits/Payments p 221,845,356.00 Prior Year's Excess Credits Other Than Minimum Corporate Income Tax (MCIT) 48,322,530.00 Creditable Tax Withheld from Previous Quarter/s per BIR Form No. 2307 11,834,743.00 Creditable Tax Withheld per BIR Form No. 2307 for the 4th Quarter p 282,002,629.00 Total Tax Credits/Payments Petitioner's Annual ITR for FY ended March 31, 2019 also reflected an overpayment of P255,012,863.00, computed as follows: 7 Part II- Total Tax Payable Total Income Tax Due (Overpayment) p 26,989,766.00 Less: Total Tax Credits/Payments 282,002,629.00 Total Amount Pavable (Overpavment) p (255,012,863.00) In the said Annual ITR, petitioner also marked the option (To be refunded" for overpayment.8 On July 6, 2021, petitioner flied with the BIR Regular Large Taxpayer Audit Division I, the letter of even date,9 together with the Application for Tax Credits/Refunds (BIR Form No. 1914),10 requesting for the refund of unutilized CWT for FY ended March 31,2019, in the amount ofP60,157,273.00. Petitioner filed the present Petition for Review on July 9, 2021.11 On February 2, 2022, respondent filed his Answer,12 interposing the following special and affirmative defenses, to wit: (1) petitioner failed to exhaust administrative remedies; (2) petitioner is not entided to the claim for ~ 4 Par. 1, Admitted Facts, Joint Stipulation ofFacts &Issues (JSFI), Docket- Vol. IV, p. 1695. 5 Exhibit "P-6", Docket- Vol. 5, pp. 2230 to 2237. 6 Exhibit "P-6", Schedule 7 - Tax Credits/Payments, Docket- Vol. 5, p. 2235. 7 Exhibit "P-6", Part II -Total Tax Payable, Docket- Vol. 5, p. 2230. 8 Exhibit "P-6", Line 21 (offered as Exhibit "P-6-C''), Docket- Vol. 5, p. 2230. 9 Exhibit "P-11", Docket- Vol. 5, pp. 2272 to 2280. 1o Exhibit "P-12", Docket- Vol. 5, p. 2281. 11 Docket- Vol. I, pp. 1 to 32. 12 Docket- Vol. IV, pp. 1604 to 1613.

DECISION CfA Case No. 10585 refund of alleged unutilized C\XIT; (3) it is incumbent upon petitioner to prove that the alleged claim for refund was filed within the two (2)-year period provided under Section 229 of the National Internal Revenue Code (NIRC) of 1997, as amended; (4) petitioner failed to prove that income related to CWT was declared in the Annual ITR; and (5) the instant claim for tax refund is tainted with procedural infirmity due to petitioner's failure to submit complete documents to support its administrative claim for refund. After due proceedings and trial, the present case was considered submitted for decision on August 15, 2024.13 THE ISSUE The parties submit the following issue for this Court's resolution: "1. Whether or not Petitioner is entitled to refund of alleged unutilized creditable withholding taxes for fiscal year ending 31 March 2019 in the amount ofP60,157,273.00."14 Petitioner's arguments: Petitioner argues that it is entitled to a tax refund pertaining to unutilized excess creditable taxes withheld and remitted to the respondent as: (1) the claim for refund was filed within the two (2)-year prescriptive period; (2) the income payments where the taxes were withheld were included as part of the gross income declared in the 2019 Annual ITR; (3) the fact of withholding is substantiated by the BIR Form No. 2307 issued by the income payor to petitioner; (4) petitioner elected to refund the excess CWT in the 2019 Annual ITR; and (5) the amount claimed for refund was not carried over or applied to the succeeding year. Respondent's counter-arguments: Respondent contends that petitioner failed to exhaust administrative remedies; that petitioner is not entitled to the claim for refund of alleged unutilized CWT; that it is incumbent upon petitioner to prove that the alleged claim for refund was filed within the two (2)-year period provided under Section 229 of the National Internal Revenue Code of 1997, as amended (1997 NIRC); that petitioner failed to prove that income related to CWT was declared in the Annual ITR; and that the instant claim for tax refund is tainted with procedural infirmity due to petitioner's failure to submit complete documents to support its administrative claim for refund. /"' 13 Minute Resolution dated August 15, 2024, Docket- Vol. 5, p. 2640. 14 Stipulated Issues, JSFI, Docket- Vol. IV, p. 1696.

DECISION CfA Case No. 10585 THE COURT'S RULING The present Petition for Review must be denied. Petitioner complied with Section 76 of the NIRC of 1997, and has not carried over the excess CWT being claimed for refund. Section 76 of the 1997 NIRC states: "SEC. 76. f-<_,inal AqjuJtment 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 taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." The above prov1s1on discusses the two (2) options of a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due. The taxpayer may either: (1) carry-over the excess amount to the succeeding taxable quarters/years until it is fully utilized, or (2) file a claim for refund in the form of cash or tax credit certificate. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period.15 The phrase "for that taxable period' /'/' 15 Rhombus Energy, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 206362, August 1, 2018, citing the case of Republic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; Phtlam Asset Management, Inc. vs. Commissioner of Internal Revenue, G.R. Nos. 156637 & 162004, December 14, 2005; Systra Philippines, Inc vs. Commissioner of Internal Revenue, G.R. No. 176290, September 21, 2007.

DECISION CTA Case No. 10585 refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer. 16 In exere1smg its option, the corporation must signify in its annual corporate adjustment return (ry marking the option box provided in the BIR form) its intention, either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. 17 A perusal of its Annual ITR for FY 201918 shows that petitioner had total tax credits ofP282,002,629.00,19 which is determined as follows: Prior Year's Excess Credits other than MCIT p 48,322,530.00 p 221,845,356.00 Add: Creditable Taxes Withheld- FY 2019 11,834,743.00 60,157,273.00 Creditable tax withheld for the first three P282,002,629 .00 quarters Creditable tax withheld per BIR Form 2307 for the 4rh quarter Total tax credits Petitioner claims that its income tax due for FY 2019 in the amount of P26,989,766.0020 was paid using a portion of its prior year's excess credits of P221,845,356.00, thus leaving the prior year's excess credits in the amount of P194,855,590.00 and the creditable taxes withheld during the FY 2019 in the amount ofP60,157,273.00, or a total ofP255,012,863.00 unutilized as of:March 31,2019, as shown below: Prior Year's Excess Credits other than MCIT p 221,845,356.00 Less: Tax Due (MCIT) 26,989,766.00 Balance of Prior Year's Excess Credits Add: Creditable Taxes Withheld - FY 2019 p 194,855,590.00 60,157,273.00 Excess Creditable Withholding Taxes as of March 31, 2019 P255,012,863.00 Since petitioner marked the box corresponding to the option "To be refunded'm in its Annual ITR for FY 2019, the CWT for that year in the amount of P60,157,273.00 may be a proper subject of a claim for refund under Section 76 of the NIRC of 1997. /#"' 16 Republic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; Commissioner ofInternal Revenue vs. Bank of the Philippine Islands, G.R. No. 178490, July 7, 2009. 17 Philippine Bank of Communications vs. Commissioner of Internal Revenue, eta!., G.R. No. 112024, January 28, 1999. 18 Exhibit "P-6", Docket- Vol. 5, pp. 2230 to 2237. 19 Exhibit "P-6", Schedule 7, Docket- Vol. 5, p. 2235. 20 Exhibit "P-6", Line 44, Docket- Vol. 5, p. 2231. 21 Exhibit "P-6", Line 21 (offered as Exhibit "P-6-C"), Docket- Vol. 5, p. 2230.

DECISION CTA Case No. 10585 This refund option was further affirmed by petitioner when it carried over only the amount of P194,855,590.00 as prior year's excess tax credits other than MCIT in its Annual ITR for FY 2020.22 Said amount already excluded the C\VT being claimed for refund in this case amounting to P60,157,273.00. Requisites to claim a tax credit or refund of excess and unutilized CWT. In addition to the requisites provided under Section 76 of the NIRC of 1997, jurisprudence and pertinent BIR issuances provide that in order for a taxpayer to be entitled to a refund or an issuance of tax credit certificate for unutilized excess CWT, the following three (3) requisites must be further complied with, viZ:: 1. The claim for refund must be filed within the two (2)-year prescriptive period as provided under Sections 204(C) and 229 of the NIRC of 1997; 2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld must be included in the return of the recipient.23 Petitioner must establish the foregoing requisites for the grant of the refund claimed. Petitioner's administrative and judicial claims for refund were timely filed. Anent the first requisite, the pertinent provisions are Sections 204(C) and 229 of the 1997 NIRC, which provide as follows: "SEC. 204. Authoriry qf the Commi.rsioner to Compromise, Abate and Rifund or Credit Taxe.r.- The Commissioner may- ;/ 22 Exhibits "P-9" and "P-10", Schedule 7, Line 1, Docket- Vol. 5, pp. 2259 and 2268, respectively. 23 Republic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; United International Pictures AB vs. Commissioner of Internal Revenue, G.R. No. 168331, October 11, 2012; Citibank N.A. vs. Court ofAppeals, et al., G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta!., G.R. No. 96322, December 20, 1991; Section 2.58, Revenue Regulations No. 2-98, as amended.

DECISION CTA Case No. 10585 XXX XXX XXX (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 wrltlng 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." (EmphaJiJ added) "SEC. 229. Recovery rif Tax ErroneoUJ/)1 or Illegaljy 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, or 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." (EmphaJeJ added) The above-stated provisions mandate that the administrative and judicial remedies of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax. It is well settled that the two (2)-year prescriptive period for claiming a refund of overpaid income tax/CWT commences to run on the date of filing of the Final Adjustment Return24 (or Annual ITR). This is so because it is only when the Final Adjustment Return covering the whole year is flied that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 25 In other words, it is only logical to reckon the two (2)-year prescriptive period from the time the Final Adjustment Return or the Annual ITR was flied, since it is only at that time that it would be /V' 24 ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta!., G.R. No. 96322, December 20, 1991; Commissioner of Internal Revenue vs. TMX Sales, Inc., eta!., G.R. No. 83736, January 15, 1992; Commissioner of Internal Revenue vs. The Philippine American Life Insurance Co., eta!., G.R. No. 105208, May 29, 1995. 25 Commissioner ofInternal Revenue vs. TMX Sales Inc., eta!., G.R. No. 83736, January 15, 1992.

DECISION CTA Case No. 10585 possible to determine whether the corporate taxpayer paid an amount exceeding its annual income tax liability.26 Petitioner flied its Annual ITR for FY ended March 31, 2019 via the electronic filing and payment system or eFPS of the BIR on July 12, 2019.27 Thus, counting from July 12, 2019, petitioner had until July 12, 2021,28 within which to file both its administrative and judicial claims. Considering that petitioner flied its administrative claim for refund with BIR on July 6, 2021,29 while the present judicial claim was flied on July 9, 2021,30 both claims for refund of unutilized/excess CWTs were seasonably filed within the two (2)-year prescriptive period. Be that as it may, respondent contends that petitioner failed to exhaust administrative remedies as petitioner filed its administrative claim for refund on July 6, 2021, and barely three (3) days from the filing thereof, or on July 9, 2021, petitioner flied the present Petition for Review. This Court, however, disagrees with respondent. In Commissioner qf Internal Revenue vs. Carrier Air Conditioning Philippines, Inc.,31 the Supreme Court held as follows: "A closer reading of Sections 204 and 229 of the 1997 National Internal Revenue Code, in conjunction with Section 7 of Republic Act No. 9282, reveals a problem of what is considered a 'reasonable period' for the Commissioner of Internal Revenue to act on a claim for refund of taxes. Section 229, which requires a prior administrative claim before a judicial claim is filed, recognizes the Commissioner of Internal Revenue's primary jurisdiction to decide refunds of internal revenue taxes. It gives the Commissioner 'an opportunity to consider [their] mistake, if mistake has been committed,' or to investigate and ascertain the veracity of the claim, before they are sued. This Court in CBK Power Compatry,32 citing P.]. Kiener,33 held that the primary purpose of filing an administrative claim is to serve as a notice or warning to the Commissioner that court action would follow unless the tax or penalty is refunded. This necessarily ~ 26 Metropolitan Bank & Trust Company vs. The Commissioner of Internal Revenue, G.R. No. 182582, April 17, 2017. 27 Exhibit "P-6", Docket- Vol. 5, pp. 2230 to 2237. 2s Docket -Vol. I, pp. 1 to 32. 29 Exhibits "P-ll"and "P-12", Docket- Vol. 5, pp. 2272 to 2281. 3o Docket- Vol. I, pp. 1 to 32. 31 G.R. No. 226592, July 27, 2021. 32 That is, CBK Power Company Limited vs. Commissioner ofInternal Revenue, 750 Phil. 748 (2015) [Per J. Perlas-Bernabe, First Division]. 33 That is, P.J. Kiener Company, Ltd. vs. David, 92 Phil. 945 (1953) [Per J. Tuason, En Bane].

DECISION GA Case No. 10585 implies that the Commissioner has sufficient time to examine, evaluate, and act on the matter within their jurisdiction. On the other hand, Section 7 of Republic Act No. 9282 grants the Court of Tax Appeals exclusive appellate jurisdiction over a decision or 'inaction deemed denial' of the Commissioner in a claim for refund. Under its clear wording, the Court of Tax Appeals can take cognizance of appeals in cases of the Commissioner's 'inaction' only where the 1997 National Internal Revenue Code specifically provides a period for the Commissioner to act on a claim for refund. However, unlike in claims for refund of input value-added tax, the 1997 National Internal Revenue Code does not prescribe a specific period within which the Commissioner must resolve the claim for refund or credit of erroneously paid taxes. Sections 204 and 229 fixed the same period of two years for filing an administrative claim for refund before the Bureau of Internal Revenue and to sue before the Court of Tax Appeals. CBK Power Company explained that as long as these two acts fall within the two-year period, there is no legal impediment to the judicial claim for refund. Consequently, from the plain language of the law, it does not matter how far apart the administrative and judicial claims were filed, or whether the Commissioner of Internal Revenue was actually able to rule on the administrative claim, so long as both claims were filed within the two-year prescriptive period. Thus, in CBK Power Compaf!y, as with subsequent cases, this Court upheld the propriety of the taxpayer's judicial claim instituted as early as five 34 and 1335 days after the administrative claim had been filed, on the ground that both claims were filed within the two-year prescriptive period. The Court of Tax Appeals likewise allowed judicial claims filed simultaneously, or one to 28 days from the administrative claim's filing, on the same ground that both claims were filed within the two-year prescriptive period. In much earlier cases, however, it was the Commissioner who was considered long delayed in resolving the administrative claims. Hence, this Court has held that the taxpayer need not wait for the Commissioner's decision, and may file its judicial claim when the two- year prescriptive period is about to lapse. For instance, in P.]. Kiener, the taxpayer filed its administrative claim for refund four months after the last payment of the tax sought to be refunded. Yet, the then Collector of Internal Revenue took their ,#" 34 Commissioner ofInternal Revenue vs. United Cadiz Sugar Farmers Association Multi-Purpose Cooperative, 35 Commissioner of Internal Revenue vs. Goodyear Philippines, Inc., 792 Phil. 484 (2016) [Per J. Perlas- Bernabe, First Division].

DECISION CTA Case No. 10585 time-more than two year.r-to decide on the claim, so much so that when the taxpayer filed its appeal, its action had already prescribed. This Court held: 'Haz;ingfiled hi.r daim and the Collector of Internal Revenue having had ample time to study it, the daimant mqy, indeed .rhottld, within the .rtatutory period qftwo_yean- proceed with hi.r .rttit without waiting for the Colledor'.r ded.rion.' In Collector qf Internal Revenue v. Court rifTax Appeal.r and Hume Pipe & A.rbe.rto.r Co., Im:.,36 this Court deemed two month.r as ample time for the Collector to have decided the claim for refund of overpaid income tax. Hence, in that case, it upheld the taxpayer's filing of a petition for review before the Court of Tax Appeals without waiting for the Collector's decision, since the two-year prescriptive period was already about to expire. In CommiJJioner qf Ctt.rtom.r and CommiJJioner qf Internal Revenue v. The Honorable Court q[Tax Appeal.r and Planter.r Produc:t.r, Inc.,37 eight month.r and 10 dqy.r had lapsed from the taxpayer's filing of an administrative claim, but the Commissioner had not acted on it. Ruling in the taxpayer's favor, this Court, quoting a ruling of the tax court, said: The taxpayer need not wait indefinitely for a decision or ruling which may or may not be forthcoming and which he has no legal right to expect. It is disheartening enough to a taxpayer to keep him waiting for an indefinite period of time for a ruling or decision of the Collector [(now Commissioner)] of Internal Revenue on his claim for refund. It would make matters more exasperating for the taxpayer if we were to close the doors of the courts of justice for such a relief until after the [Commissioner], -would have, at his personal convenience, given his go signal. In these cases, the written claim for refund was duly filed at the administrative level, but the claim had not been acted upon by the Commissioner (then Collector) of Internal Revenue. Since the two- year period was about to lapse, the taxpayer was held justified in filing its judicial claim, without waiting for the Commissioner's decision, to protect its interest. Otherwise, should the Commissioner render an adverse decision after the two-year period, the taxpayer would be barred, to its prejudice, from pursuing its appeal to the Court of Tax Appeals. These cases show that the lack of a specific period fixed by the la-w within which the Commissioner must decide the claim ~ 36 110 Phil. 680 (1961) [Per J. Dizon, En Bane]. 37 253 Phil. 339 (1989) [Per J. Grino-Aquino, First Division].

DECISION CfA Case No. 10585 has led to delays, to the taxpayer's prejudice. On the other hand, there were instances when the Commissioner was deprived of the opportunity to act on the matter within their jurisdiction because of the short interval between the filing of the administrative claim and the filing of the judicial claim. This is so because the law merely provides two years for a taxpayer to file the administrative claim and judicial claim, with the former required to be filed first. Nonetheless, the silence or insufficiency in the law on the reasonable period for the Commissioner's action is one that can be addressed not by judicial pronouncement, but by appropriate legislation." (EmphaJeJ and ttnder.rmring added) Section 229 of the NIRC of 1997 only requires that an administrative claim be priorly filed primarily to give notice or warning to respondent that court action would follow unless the tax or penalty alleged to have been collected erroneously or illegally is refunded. Hence, as long as the filing of both administrative and judicial claim fall within the two (2)-year prescriptive period, there is no legal impediment to the judicial claim for refund. Since the two (2)-year prescriptive period was about to lapse, petitioner was justified in filing its judicial claim, without waiting for the respondent's decision, to protect its interest. It should be stressed that petitioner need not await the final resolution of its administrative claim for refund, since doing so would be tantamount to the petitioner's forfeiture of its right to seek judicial recourse should the two (2)-year prescriptive period expire without the appropriate judicial claim being ftled. Hence, petitioner's judicial claim filed within the two (2)-year prescriptive period is proper and cannot be dismissed on the ground of failure to exhaust administrative remedies. Petitioner established the fact of withholding, but only to the extent of P41,511,626.30. With regard to the second and third requisites, Section 2.58.3(B) of RR No. 2-98, as amended, states: "Sec. 2.58.3. Claim for Tax Credit or &fund.- XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment 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 /

DECISION CTA Case No. 10585 amount paid and the amount of tax withheld therefrom." (Empha.ri.r added) The second requisite mandates petitioner to prove the fact of withholding of the claimed CWT through a copy of the statement duly issued by the payor (withholding agent) to the payee showing the names of the payor and payee, the income payment and the amount of tax withheld therefrom. In Commissioner of Internal Revenue vs. Philippine National Bank,38 the Supreme Court held that the Certifimte of Creditable Tax Withheld at Source (BIR Form No. 2307), complete in relevant details, is the competent proof to establish the fact that taxes are withheld. In this case, petltl.oner submitted various Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307)39 issued by its various withholding agents covering the subject period, as well as the Schedule of Creditable Income Tax Withhelcf0 for FY 2019 reflecting CWT in the total amount of P60,157,272.55, with related income payments ofP6,015,727,255.00, which were duly examined by the Court-commissioned ICPA, Mr. Joseph Cedric V. Calica, as summarized below: REGISTERED NAME AMOUNT OF AMOUNT OF EXHIBIT NO. INCOME TAX "\BENSON LIBERTY "\PPL INC PAYMENT "P-1166-/1.-1" to "P- WITHHELD 1166-,\-2" ABENSON VENTURES INC p 20,686,469.00 p 206,864.69 "P-1166-A-3" to "P- ADDESSA CORPORATION 1166-A-6" AEROPHONE ENTERPRISES AND CO 799,017,664.00 7,990,176.64 None 12,180,424.00 121,804.24 "P-1166-A-7" to "P- ALTURAS ABENSON APPL BOHOL INC 1,550,919.00 15,509.19 1166-A-8" "P-1166-A-9" to "P- 1\NSON @HOME INC 20,941,529.00 209,415.29 1166-A-11" "P-1166-A-12" to "P- ANSON Ei\fPORIU.l\1 CORP 16,660,897.00 166,608.97 1166-A-35" ANSON i\HRKETING ,\ND COMMERCL\L "P-1166-A-36" to "P- INC 101,227,531.00 1,012,275.31 ~WPLL\NCE CENTRUi\I B.\COLOD 1166-~\-45" ~WPLL\NCE CENTRUM ILOILO 52,056,990.00 520,569.90 ~\SL\N HOi\IE ~WPL i\L\G,\LL\NES 28,632,603.00 286,326.03 "P-1166-A-46" to "P- "\UDIO VIDEO SOLUTION CORPORATION 1166-,\-55" AUT01\IATIC APPLIANCES INC 852,800.00 8,528.00 None AV SURFER SUBIC CORP 27,644,062.00 276,440.62 None "\\'ID SALES CORPORATION None 744,987.00 7,449.87 None 106,6 7 5,683.00 1,066,756.83 "P-1166-A-56" to "P- 13,045,683.00 1166-A-73" 557,475,065.00 130,456.83 None 5,574,750.65 "P-1166-A-74" to "P- 1166-A-76" 38 G.R. No. 180290, September 29, 2014. 39 Exhibits "P-1166-A-1" to "P-1166-A-1010", USB. 40 Exhibit "P-1166", Docket- Vol. IV, p. 1750.

DECISION 816,835.00 8,168.35 "P-1166-,-\-77" to "P- CTA Case No. 10585 262,661.00 2,626.61 1166-.-\-82" Page 13 of 20 58,648,608.00 586,486.08 "P-1166-A-83" to "P- 793,750.00 7,937.50 1166-A-84" "\ VLS .-\LL VISU.-\L .-\NO LIGHTS SYSTEi\fS 79,987,746.00 799,877.46 "P-1166-A-85" to "P- 16,598,614.00 165,986.14 1166-A-93" .-\XN NETWORKS PHILS INC 4,759,621.00 47,596.21 "P-1166-A-94" 62,690,351.00 626,903.51 "P-1166-A-95" to "P- R-\NBROS COiviE-.IERCL-\L INC 60,555,811.00 605,558.11 1166-A-99" BONIFACIO ART FOUNDATION INC "P-1166-A-100" to C-\BLE ACCESS TECHNOLOGIES INC 57,192.00 571.92 "P-1166-A-118" 910,134.00 9,101.34 "P-1166-A-119" to C-\l\IERAHi\US INC 16,306,262.00 163,062.62 "P-1166-A-126" 10,044,606.00 100,446.06 "P-1166-A-127" to C-\l\IERASOUND INC l\L\L-\TE l\L-\IN 38,960,903.00 389,609.03 "P-1166-.-\-130" 52,296,416.00 522,964.16 "P-1166-.-\-131" to CENT~-\L QU,-\LITY APPL C-\G,-\Y,-\N 210,879,161.00 2,108,791.61 "P-1166-A-154" 5,463,018.00 54,630.18 None CITI' SUPERi\L-\RK.ET INC 61,794,860.00 617,948.60 None CITI'SUPER .-\L-\R-\NG INC 254,871,781.00 2,548,717.81 "P-1166-A-155" to CITI'SUPER INCORPORXfED 103,813,770.00 1,038,137.70 "P-1166-A-176" COLOURSFOTOSHOP 9,346,328.00 93,463.28 "P-1166-A-177" to 124,943.00 1,249.43 "P-1166-,\-199" 0,-\VAO IMPORT DIST INC 1,375,183.00 13,751.83 "P-1166-A-200" to 36,367,380.00 363,673.80 "P-1166-A-244" DBK. ELECTRONICS TOTAL 408,900.00 4,089.00 "P-1166-A-245" to 1,356,554.00 "P-1166-A-383" DES APPLL-\NCE OROQUIETA 37,791,280.00 "P-1166-A-384" to 1,230,530.00 "P-1166-A-476" DESl\L-\RK. CORPORATION CAPTAIN RO,-\ 811,796,231.00 "P-1166-A-477" to "P-1166-.-\-493" DGTE .-\PPLL-\NCE CENTRUM 13,902.00 "P-1166-A-494" to 3,463,765.00 "P-1166-,-\-581" DIGI K.-\DEN INC "P-1166-i\-582" to-- 496,871.00 "P-1166-,-\-600" DU EK S.-\i\f INC LESS.-\GE "P-1166-A-601" to "P-1166-A-619" DUTY FREE PHILS "P-1166-A-620" to "P-1166-A-621" ELECTROWORLD INC ETON PROPERTIES PHILS INC "P-1166-A-622" to EXT~-\ORDINARY PRODUCTS T~-\DE & MKTG "P-1166-A-623" FIESTA APPLIANCECENTER INC "P-1166-A-624" to GREAT\VORLD APPLIANCE CENTER INC "P-1166-A-626" GUANZON MERCH.-\NDISING None CORPOR.-\ TION HENRYS PROFESSION.-\L PHOTO i\IKTG None HOTEL PHILIPPINE PL-\Z.-\ 13,565.54 None Ii\IPERL-\L APPL PL-\Z,-\ 377,912.80 "P-1166-.-\-627" to INNOVE COMMUNIC-\TIONS INC "P-1166-A-629" J ,-\NO R ELECTRONICS BINONDO 12,305.30 "P-1166-A-630" to JU,-\N TY FULE/GEC STATIONERY & GEN "P-1166-,-\-631" MERC 8,117,962.31 "P-1166-A-632" to 139.02 "P-1166-A-664" None 34,637.65 None 4,968.71 None

DECISION CTA Case No. 10585 KEY LARGO CAR ACCESSORIES CENTER 384,982.00 3,849.82 "P-1166-A.-665" to LYCEUM OF THE PHIL UNIVERSITY INC 4,158,738.00 41,587.38 "P-1166-A-668" i\L\GIC .WPLL\NCES D:\GUP.-\N 41,395,997.00 413,959.97 None "P-1166-"-\-669" to MEG.-\ CELLULAR NET\'V'ORK INC 18,245,265.00 182,452.65 "P-1166-"-\-708" i\IELCO RESORTS LEISURE PHP CORP 10,843,188.00 108,431.88 "P-1166-A-709" to METRO ILOCOS "-\PPLL-\NCE INC 3,476,516.00 34,765.16 "P-1166-A-753" METRO PL-\Z"-\ D"-\VAO 485,364.20 None MIKE S DEPT STORE 48,536,420.00 None O.MNI SOLID SERVICES INC 870.01 "P-1166-A-754" to PAN "-\PPLIANCE CORPORATION 87,001.00 17.63 "P-1166-"-\-789" PHILIPPINES AIR ASL-\ IN CORPORATED 1,763.00 None PINN"-\CLE APPLL-\NCE INC 31,044.29 None PO S i\L-\RKETING B"-\COLOD 3,104,429.00 1,656.81 None POUNDIT INC 165,681.00 "P-1166-A-790" PROGRESSI\'E WIRELESS 89,336.93 "P-1166-A-791" to COi\fMUNIC.-\TION 8,933,693.00 64,099.74 "P-1166-A-792" PROTON i\fiCROSYTEi\IS INC 6,409,974.00 None 8.35 None RJ HOi\IES i\L-\IN 835.00 556.24 None RL .WPLL-\NCE INC TACLOB"-\N 55,624.00 ROBINSONS APPL CORP NOVALICHES 3,783,234.00 "P-1166-"-\-793" to 37,832.34 ROY.-\L ST"-\R "-\PPLS i\ifK.TG INC SAND J CALEON i\HRKETING INC "P-1166-A-794" Sl TECHNOLOGIES INC S.-\\'ER S T.-\R T.-\RL.-\C i\L-\C ENT INC 93,698,275.00 "P-1166-A-795" to 936,982.75 S.-\\'ERS ELECTRONIC \'1/0RLD INC "P-1166-A-797" SC-\N .-\ND PRINT GRAPHIC HOUSE INC SC~-\P S"-\LES 64,852,180.00 "P-1166-A-798" to SILICON VALLEY COMPUTER GROUP PHILS 648,521.80 SOLID ELECTRONICS CORP "P-1166-A-828" SOLID VIDEO CORPO~-\TION 208,211,934.00 "P-1166-A-829" to SPH CREDIT CONTROL CLE"-\RING ACCNT 2,082,119.34 STAR .-\PPLL-\NCE CENTER INC "P-1166-A-831" SUPER E.-\ST .-\SL-\ ENT INC T.-\GUi\1 FIEST.\ APPLL-\NCE INC 4,481,183.00 "P-1166-A-832" to THE L-\NDi\L-\RI<. CORPOR..-\TION 4,078,131.00 44,811.83 URQUANINC W"-\TERFRONT CEBU CITY C-\SINO HOTEL 36,329.00 "P-1166-A-833" 50,123,215.00 40,781.31 None 363.29 "P-1166-A-834" "P-1166-A-835" to 501,232.15 "P-1166-.-\-886" 14,860,045.00 "P-1166-A-887" to 148,600.45 "P-1166-.-\-888" 22,163,904.00 "P-1166-A-889" to 15,964.00 221,639.04 "P-1166-"-\-890" 21,295,521.00 159.64 None "P-1166-A-891" to 212,955.21 "P-1166-A-892" 114,496,050.00 "P-1166-A-893" to 1,144,960.50 "P-1166-A-894" 7,226,872.00 "P-1166-A-895" to 72,268.72 "P-1166-A-951" - 135,605.00 - 1,356.05 None 1,348,478,546.00 "P-1166-.-\-952" to 13,484,785.46 "P-1166-A-957" 88,512,591.00 "P-1166-A-958" to 885,125.91 10,651,013.00 1,927,253.00 "P-1166-"-\-998" 2,430,192.00 823,065.00 106,510.13 None 19,272.53 "P-1166-A-999" 24,301.92 None 8,230.65 None

DECISION CfA Case No. 10585 WA.VE MOBILE INC / PL\YTELCOM 4,733,338.00 47,333.38 None I \'\!ESTERN GRAND CENTRAL CO INC 52,227,464.00 522,274.64 "P-1166-A-1000" to \'x;tESTERN i\L\RKETING CORP 39,937,027.00 399,370.27 "P-1166-A-1002" "P-1166-A-1003" to WILLY .\ND SONS CORP 5,128,504.00 51,285.04 "P-1166-.\-1005" \VRENLEYS APPLL\NCE PL\Z.\ 2,213,651.00 "P-1166-A-1006" to Grand Total P6,015, 727,255.00 "P-1166-A-1009" 22,136.51 "P-1166-A-1010" P60,157 ,272.55 In his Report,41 the ICPA further summarized his findings as follows: Total Amount of Claim for Tax Refund p 60,157,273.00 Total Amount of Creditable Income Taxes Withheld indicated in the SAWT 60,157,272.55 0.45 Discrepancies in the amount claim vs. amount per SAWT 18,645,646.25 Less: Exceptions noted on Creditable p 41,511,626.30 Withholding Taxes pr BIR Form 2307 No BIR Form 2307 submitted (Exhibit "P- 1167 -A") Total Amount ofUnutilized Creditable Income Taxes Withheld Valid for Claim \V/e find the foregoing findings of the ICPA in order. As such, out of the total claim for refund of P60,157,273.00, only the amount of P41,511,626.30 was properly supported by BIR Form No. 2307. Accordingly, petitioner was able to satisfy the second requisite but only to the extent of the duly substantiated CWTs amounting to f'41,511,626.30. Proof of actual remittance ts not indispensable. Respondent further contends that it is incumbent upon the claimant to prove actual remittance of the same alleged withheld taxes to the BIR. Hence, respondent claims that petitioner should have presented evidence to prove actual remittance of the same alleged taxes to the BIR. Respondent allegedly is not obliged to prove before the Court non-remittance of the alleged withheld taxes, it is the duty of the petitioner to prove otherwise. Respondent contends that proof of actual remittance of the taxes withheld to the BIR is indispensable in a claim for refund of excess CWT. We again disagree with respondent/.! 41 Exhibit "P-1162", Docket- Vol. IV, p. 1745.

DECISION CfA Case No. 10585 In Commissioner of Internal Revenue vs. Philippine National Bank,42 the Supreme Court ruled as follows: "Petitioner's posture that respondent is required to establish actual remittance to the Bureau of Internal Revenue deserves scant consideration. Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits. Under Sections 57 and 58 of the 1997 National Internal Revenue Code, as amended, it is the payor-withholding agent, and not the payee-refund claimant such as respondent, who is vested with responsibility of withholding and remitting income taxes. This court's ruling in CommiJJioner qf Internal Revenue v. AJian TranJmiJJ-ion Corporation,43 citing the Court of Tax Appeals' explanation, is instructive: proof of actual remittance by the respondent is not needed in order to prove withholding and remittance of taxes to petitioner. Section 2.58.3(B) of Revenue Regulations No. 2-98 clearly provides that proof of remittance is the responsibility of the withholding agent and not of the taxpayer-refund claimant. It should be borne in mind by the petitioner that payors of withholding taxes are by themselves constituted as withholding agents of the BIR. The taxes they withhold are held in trust for the government. In the event that the withholding agents commit fraud against the government by not remitting the taxes so withheld, such act should not prejudice herein respondent who has been duly withheld taxes by the withholding agents acting under government authority. Moreover, pursuant to Section 57 and 58 of the NIRC of 1997, as amended, the withholding of income tax and the remittance thereof to the BIR is the responsibility of the payor and not the payee. Therefore, respondent ... has no control over the remittance of the taxes withheld from its income by the withholding agent or payor who is the agent of the petitioner. The Certificates of Creditable Tax Withheld at Source issued by the withholding agents of the government are prima facie proof of actual payment by herein respondent- payee to the government itself through said agents." (EmphaJeJ and undem:oring added) Thus, respondent's contention that proof of actual remittance of the taxes withheld to the BIR is indispensable lacks merit. ~ 42 G.R. No. 180290, September 29, 2014. 43 G.R. No. 179617, January 19, 2011.

DECISION CfA Case No. 10585 Petitioner failed to prove that the income payments from which taxes were withheld were declared as part of its gross income in its Annual ITR. Anent the third requisite, petitioner must prove that the income payments from which the substantiated CWT were withheld were declared as part of its gross income. Correspondingly, it becomes necessary to trace the revenues recorded in the general ledger book to ascertain that the related income was duly reported as revenues for FY 2019. A perusal of petitioner's Schedule of Creditable Income Tax Withhelcf4 reveals that the claimed CWT ofP60,157,273.00 were withheld from income payments of !>6,015,727,255.00, which is lower as compared to the income of !>6,069,302,659.00 reported in petitioner's FY 2019 AITR,45 to wit: Sale of Goods/Properties p 6,281,690,402.00 Sale of Services 99,226,696.00 Total Less: Sales Returns, Allowances and Discounts p 6,380,917,098.00 Net Sales/Revenues/Receipts/Fees 311,614,439.00 Amount of income payments per Schedule of Creditable Income Tax Withheld p 6,069,302,659.00 Total Income 6,015,727,255.00 p 53,575,404.00 In his Report, the ICPA ascertained that the difference in the amount of !>53,575,404.00 is due to the fact that some of petitioner's income payors are not part of those corporations which are required to withhold 1% on the regular purchase of goods.46 The ICPA further concluded that the income payments received by petitioner from its transactions subject to withholding tax were completely and correctly declared as part of the gross income of petitioner in the Audited Financial Statements (AFS) and Annual ITR for FY 2019.47 He described the procedures performed to arrive at such conclusion as follows: 48 "3. Examination of Petitioner's Income Upon which the Taxes were Withheld a) We tied up the amount of income upon which the taxes were withheld and declared in the return of the taxpayer for the fiscal year ended March 31, 2019 with the Company's annual ~ 44 Exhibit "P-1166-A", Docket- Vol. IV, pp. 1751 to 1813. 45 Exhibit "P-6", Schedule 1, Docket- Vol. 5, p. 2232. 46 Exhibit "P-1162", Docket- Vol. IV, p. 1746. 47 Exhibit "P-1162", Docket- Vol. IV, p. 1748. 48 Exhibit "P-1162", Docket- Vol. IV, p. 1742.

DECISION CTA Case No. 10585 sales in the audited financial statements and AITR (see Exhibits 'P-1166', 'P-6', and 'P-43'). b) We ascertained that the income upon which the taxes were withheld were included as part of the gross income, properly recorded in the Company's books of accounts, in relation to the sales found in the AITR and audited financial statements (see Exhibits 'P-6' to 'P-43')." The Court, however, emphasizes that it is not bound by the findings of the ICPA, as provided under Section 3, Rule 13 of the Revised Rules of Court of Tax Appeals, which states: "SEC. 3. f-<..inding.r qf independent CPA. - The submission by the independent CPA of pre-marked documentary exhibits shall be subject to verification and comparison with the original documents, the availability of which shall be the primary responsibility of the party processing such documents and, secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be challenged by the parties and shall not be conclusive upon the Court, which may, in whole or in part, adopt such findings and conclusions subject to verification." (Emphasis added) Based on the foregoing, the ICPA's findings are not conclusive upon this Court as the same are subject to its verification, to determine its accuracy, veracity and merit. The Court may either adopt or reject the ICPA Report, wholly or partially, depending on the outcome of its own independent verification. It is essential for the petitioner to present evidence to support its compliance with the requirements of the law in order to pursue its claim for credit or refund. Upon review of the ICPA's Report, the Court observes that while the ICPA categorically finds for the proper recording of income in petitioner's books, there was no mention of the tracing of such income in the general ledger books of petitioner, or of determining the actual itemized composition of the sales reported in the Annual ITR and AFS. Instead, the ICPA merely made a general statement that he tied up the amounts of income and ascertained that the income payments were indeed reported. While there was a reference to Exhibits "P-1166", "P-6", and "P-43" (i.e. Sthedttle of Creditable Im�ome Tax Withheld, Annual ITR, and AFS, respectively), there was no mention of petitioner's submission of any general ledger account under which the reported sales were recorded, or any other documents that would somehow aid the Court in verifying whether the income payments related to the claimed CWT were indeed declared in the Annual ITR for FY 2019 of petitioner. Thus, We are unable to determine the veracity of petitioner's claim on having duly reported the sales related to the subje~

DECISION CTA Case No. 10585 claimed withholding taxes, and thus, We cannot definitely rule that petitioner complied with the third requisite for entitlement to a refund or an issuance of tax credit certificate for unutilized excess CWT. Petitioner's non-compliance with the third requisite is fatal to its claim. A claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund.49 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictzssimi juris against the person or entity claiming the � refund. 5 Considering petitioner's failure to discharge such burden of proof, the present claim for tax refund must necessarily fail. \VHEREFORE, premises considered, the present Petition for Review is DENIED for lack of merit. SO ORDERED. MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR� -SAN PEDRO s 49 Citibanly N.A. vs. CourtofAppeals, eta!., G.R. No. 107434, October 10,1997. so Commissioner of Internal Revenue vs. S.C Johnson and Son, Inc., eta!., G.R. No. 127105, June 25, 1999.

DECISION CTA Case No. 10585 ATTESTATION I attest 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. MA. BELEN M. RINGPIS-LIBAN Associate1ustice Chairperson 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. Presiding1ustice