CTA Case No. 5620 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY INTERLAND RESTAURANT, INC., Petitioner, -versus- C.T.A. CASE NO. 5620 COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. X----- ----------------------------------------------------- - X DECISION This is a Petition for Review filed by the herein Petitioner on April 14, 1998, seeking for a refund of the amount of SEVEN HUNDRED TWENTY TWO THOUSAND NINE HUNDRED AND NINETY PESOS (P722,990.00), representing allegedly overpaid quarterly corporate income taxes and excess creditable income taxes withheld at source for the taxable years 1995 and 1996. The antecedent facts ofthe case are as follows : Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office address at 2282 CBI Building, Pasong Tamo Extension, Makati City. As culled from the records, Petitioner filed its Ammal Income Tax Return for calendar year 1995 on April 15, 1996 (Exh. D) reflecting a net operating loss in the amotmt of P3 ,880,5 70.00 and a creditable withholding tax amounting to P244,253.00 (Exhs. D and D-1 ). Likewise, it has qumierly income tax payments in the total amount of

DECISION - CTA Case No. 5620 Page 2 P116,039.00 in the same calendar year (Exhs. A, A-1, B, B-1, C, and C-1), thus, giving the Petitioner a total excess credit of P360,292.00 for the taxable year 1995 which, by reason of its net loss position, was carried over to the succeeding taxable year 1996. In taxable year 1996, Petitioner allegedly incurred again a net operating loss in the amount of P4,811 ,137.00, thus, it was not able to apply as a tax credit the prior year' s (1995) excess income tax payments and creditable taxes withheld at source of P360,292.00. In the same breath, its creditable income taxes withheld at source and quarterly corporate income tax payments for 1996 in the amount of P355 ,041.00 and P9,657.00, respectively, were likewise not applied against Petitioner's income tax liability in 1997 calendar year due to net losses from its business operations. On April 3, 1998, Petitioner filed an administrative claim for refund of the amount of P722,990.00 with the Bureau of Internal Revenue, representing its allegedly overpaid quarterly income taxes and over withheld creditable income taxes withheld at source in 1995 and 1996. Without waiting for the decision of the Respondent and the two-year reglementary period within which to file a claim for refund to this Court about to expire, Petitioner elevated its case to Us on April14, 1998. On May 25 , 1998, Respondent filed his Answer to the Petition for Review and prayed for the dismissal of the petition based on the following Special and Affirmative Defenses: 4. The alleged filing and/or payment of quarterly annual corporate income tax returns for taxable years 1995 and 1996 as well as the alleged previous filing by its adviser of a claim for refund/tax credit with the Bureau of Internal Revenue are subject to and pending administrative investigation;

DECISION - CTA Case No. 5620 Page 3 5. Taxes paid to the government are presumed to have been collected in accordance with law and regulations, hence, not refundable; 6. In an action for tax refund/credit, the burden of proof is upon the taxpayer to establish its right thereto, otherwise, failure to sustain the same is fatal to the action and it is incumbent upon Petitioner to show compliance to the provisions of Section 229 (formerly 230) of the Tax Code; 7. Well-settled is the rule that claims for refund are construed strictly against taxpayers/claimants, since the same partake of the nature of exemption from taxation (Resins, Inc. vs. Auditor General, 25 SCRA 754, 1968). To prove its entitlement to the refund sought, Petitioner formally offered as documentary exhibits its Quarterly Corporate Income Tax Returns for taxable years 1995, 1996 and 1997. In addition, copies of various Certificates of Creditable Tax Withheld at Source were likewise presented in evidence. The authenticity of the aforementioned exhibits were testified to by Petitioner's witness during the hearings of this case. In a resolution promulgated on December 3, 1998, all the exhibits formally offered by the Petitioner were admitted subject, however, to Our appreciation of their relevancy, materiality and probative value to the issues involved in this case. On June 21 , 1999, this case is considered submitted for decision sans the memorandum ofthe Respondent. In the absence of the memorandum of the Respondent, We are now tasked to resolve the issue of whether or not the Petitioner was able to present clear and convincing proof of its entitlement to a refund of the amount ofP722,990.87. In its Memorandum, Petitioner, in support of its stance, placed reliance on the provisions of Section 69 which reads, thus:

DECISION - CTA Case No. 5620 Page 4 Section 69. Final Adjustment Return. - Every corporation liable to pay tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar year 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 net income of that year the corporation shall either: (a) Pay the tax sti ll due; or (b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. Furthermore, Petitioner relied upon Our decision in the case of Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5323, August 25, 1997 where We declared the requirements for entitlement to a refund of excess creditable taxes withheld at source, thus : 1. That the taxpayer fi led its claim for refund within the two year period prescribed under Section 230 of the Tax Code; 2. That it was shown on the return of the recipient that the income payment received was declared as part of the gross income (Sec. 10, Revenue Regulations No. 6-85, ACCRA Investment Corp. vs. CA, 204 SCRA 957); 3. The fact of withholding is establi shed by a copy of the statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount of income paid and the amount of tax withheld therefrom (ibid.). The aforementioned requirements cited by Petitioner for the entitlement to a refund of excess creditable taxes was affirmed by the Supreme Court in the case of Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459.

DEC ISION - CTA Case No. 5620 Page 5 A careful scrutiny of Petitioner's evidence veers towards the direction of granting the claim for refund. Firstly, Petitioner complied with the requirement set forth under Section 230 of the 1997 Tax Code which provides, thus: Section 230. R ecovery of tax erroneously or illegally 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 excessive 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 begun after the expiration of two 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 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. As could be gleaned from the records, Petitioner filed its administrative claim for refund with the Respondent on April 3, 1998 and elevated its case to this Court on April 14, 1998, both dates are well within two years from April 15, 1996 and April 15, 1997, the dates Petitioner filed its final adjustment return with the Bureau of Internal Revenue. Anent the second requirement, Petitioner was likewise able to comply by including, as pmi of the gross income declared in the income tax return ofthe Petitioner, the income payments upon which the taxes were withheld. The total income as established by the certificates of income tax withheld at source amounted to P46,628, 114.72 for taxable year 1995 (Exhs. N to YY) and P66,717,509.83 for taxable year 1996 (Exhs. ZZ to

DEC[SION - CTA Case No . 5620 Page 6 HHHHHHH). The total amount of income was verified to have been included in the annual income tax returns of Petitioner. Finally, Petitioner was able to establish the fact of withholding through presentation of a copy of a statement duly issued by its withholding agents except the amount of P7,209.50 which certificates were not duly signed by its withholding agents, to wit: 1995 Withholding Agent Exhibit Amount Rizal Commercial Banking Corp. KK p 15.25 Far East Bank & Trust Co. 902.32 Far East Bank & Trust Co. zz 662.80 Far East Bank & Trust Co. Far East Bank & Trust Co. AAA 1,350.29 1,462.58 BBB DDD Subtotal p 4,393.24 1996 Withholding Agent Exhibit Amount Rizal Commercial Banking Corp. QQQQQ p 166.89 uuuuuu 1,031.11 Far East Bank & Trust Co. Far East Bank & Trust Co. GGGGGGG 1,6 18.35 Subtotal p 2,816.35 TOTAL p 7)09.59 In sum, only the amount ofP233 ,744.71 for taxable year 1995 and P330,890.07 for taxable year 1996 were properly substantiated, detailed as fo llows: 1995 EXHIBIT INCOME TAX PAYMENT WITHHELD WITHHOLDING AGENT Citibank N. A N 1,426,412 .01 7,131 .90 Citibank N. A 6,624 .89 0 1,325 ,016.67

DECISION - p 513 ,057.57 7,565 .10 CTA Case No. 5620 1,243,081 .92 6 ,215.29 Page 7 Q 1, 169 ,732 .88 5 ,848.47 Citibank N. A. R 1,231 .55 6.15 Citibank N. A. 96,919 .09 4 8 4 .54 Citibank N. A. s 1' 11 0,237 .52 5,551 .02 Citrbank N. A. 221 ,021.85 1, 105 . 11 Citibank N. A. T 398,690 .00 1,993 .00 Citibank N. A. 497,906 .00 2,489 .53 BA Merchant Services, Inc u 450,468 .00 2,252 .34 BPI Express Card Corporation 679 ,758.00 3,398 .79 BPI Express Card Corporation v 420,760.00 2 , 103 .80 BPI Express Card Corporation 799,394 .00 3,996 .97 BPI Express Card Corporation w 538 ,854.00 2 ,694.27 BPI Express Card Corporation X 594,568 .57 2,972 .84 BPI Express Card Corporation 734 ,922 .80 3,674 .61 BPI Express Card Corporation y 709 ,201 .09 3,546 .01 Bankard , Inc. 731 ,025.58 3 ,655 . 13 Bankard , Inc. z 785,433 .32 3 ,927 . 17 Bankard , Inc. 963 ,689 .00 4 ,818.45 Bankard, Inc. AA 703 ,517 .64 3 ,517 .59 Bankard, Inc. 23,758.46 118.78 Bankard , Inc. BB Bankard, Inc. 1,047 .67 5.24 Rizal Commercial Banking Corp. cc 5,568 .34 27 .84 Rizal Commercial Banking Corp. 5,499 .30 27 .50 Rizal Commercial Banking Corp. DD Rizal Commercial Banking Corp. 841.40 4.21 Rizal Commercial Banking Corp. EE 25 ,180.13 125.91 Rizal Commercial Banking Corp. 165,672 .74 828 .36 Rizal Commercial Banking Corp. FF 157,604 .02 788.02 Rizal Commercial Banking Corp. Rizal Commercial Banking Corp. GG 2,052 .00 10.26 Rizal Commercial Banking Corp. HH 7,701 .70 38 .51 Rizal Commercial Banking Corp. 146,984.19 734 .92 Rizal Commercial Banking Corp. II 163 , 124 .25 815 .63 Rizal Commercial Banking Corp. 184,642 .11 923 .22 Rizal Commercial Banking Corp. JJ 171 ,960.62 859 .83 Far East Bank & Trust Co. 286,662 .09 1,433.28 Far East Bank & Trust Co. LL 226 ,821 .07 1 , 134 . 11 Far East Bank & Trust Co. 220,451 .58 1' 102.25 Far East Bank & Trust Co. MM 144 ,225 .50 721 .14 Far East Bank & Trust Co. 230,287 .95 1,151.43 Far East Bank & Trust Co. NN 627 ,354.05 3,136.77 Far East Bank & Trust Co. 460,704 .24 2,303 .54 Far East Bank & Trust Co. 00 433,656 .03 2 , 168 .29 Far East Bank & Trust Co. 485 ,825.73 2,429.12 Far East Bank & Trust Co. pp 485 ,842 .74 2,429 .22 Equitable Card Network, Inc. 469 ,946 .82 2 ,349 .72 Equitable Card Network, Inc. QQ 1,656 ,892 .62 8 ,284 .57 Equitable Card Network, Inc. 2,105,148.00 10,525 .74 Equitable Card Network, Inc. RR 793 ,632 .77 3,968 .16 Equitable Card Network, Inc. 2,542 ,259 .88 12,711 .35 Equitable Card Network, Inc. ss 866 ,758 .75 4 ,333 .78 TT uu w ww XX yy CCC EEE FFF GGG HHH Ill JJJ KKK LLL MMM NNN 000 PPP QQQ RRR sss

DECI SION - TTT 2,832 ,432 .91 14,162 .16 CTA Case No. 5620 403 ,717.43 2,018 .59 Page 8 uuu 532 ,404.59 2,662 .02 wv 767 ,545 .68 3,837. 69 Equitable Card Network, Inc. 463 ,890.00 2 ,319.45 Security Diners International Corp. \fiJ\.IWJ 4,776 .00 23 .88 Security Diners International Corp. 11 ,461 .93 Security Diners International Corp. XXX 2,292 ,386 .00 9,171.49 The Hongkong & Shanghai Banking 1,834 ,298 .00 2 ,460 . 10 The Hongkong & Shanghai Banking yyy 940 .15 The Hongkong & Shanghai Banking 492 ,020.21 1,154.50 The Hongkong & Shanghai Banking zzz 188 ,037 .61 1,320 .98 American Express lnt'l , Inc. 230 ,901 .04 982 .27 American Express lnt'l , Inc. AAAA 264 ,198 .21 2,772 .92 American Express lnt'l , Inc. 196 ,447.40 1,011 .56 American Express lnt'l, Inc. BBBB 554,580 .23 13 ,274 .87 American Express lnt'l, Inc. 202 ,308.54 7,070.92 American Express lnt'l, Inc. ecce 2,655 ,111.48 484 .54 American Express lnt'l, Inc. 1,414,271 .68 5,551 .02 The Unibancard Corp. DDDD The Unibancard Corp. 96,910 .00 233 ,744 .71 Citibank N. A. EEEE 11110,228 .92 Citibank N. A. TAX FFFF 46 ,628 ,114.72 WITHHELD TOTALS GGGG 38,214 .73 1996 14 ,94 7 .01 HHHH 13,696 .31 WITHHOLDING AGENT 16,646 .04 1111 15,692 .68 Equitable Card Network, Inc. Equitable Card Network, Inc. JJJJ 4,227 .07 Equ itable Card Network, Inc. 3, 170.63 Equitable Card Network, Inc. KKKK Equitable Card Network, Inc. 209 .7 0 Bankcard , Inc. LLLL 4,425 .59 Bankcard , Inc. 3,168.83 Bankcard, Inc. EXHIBIT INCOME 3,769 .65 Bankcard , Inc. PAYMENT 3,291 .77 Bankcard , Inc. MMMM 3 ,77 0.40 Bankcard , Inc. NNNN 7,642 ,945 .79 3,009 .37 Bankcard , Inc. 2,989,403.42 3,780 .00 Bankcard , Inc. 0000 2,739 ,261 .79 2,490 .88 Bankcard , Inc. 3,329,208 .36 3,836 .88 BPI Express Card Corp. pppp 3,138,536 .59 2,871 .84 BPI Express Card Corp . QQQQ 3,856 .84 BPI Express Card Corp. RRRR 845,413 .59 2,895 .11 BPI Express Card Corp. 634 ,126 .33 1,542.76 BPI Express Card Corp. ssss 2 ,534 .37 BPI Express Card Corp. 41 ,939 .17 BPI Express Card Corp. TTTT 885 ,117.50 956 .53 BPI Express Card Corp. 633 ,766 .30 Rizal Commercial Banking Corp. uuuu 753 ,929 .87 ww 658 ,349.86 754 ,083 .50 W\fiJ\.IWJ 601 ,878 .93 756 ,000.00 xxxx 498 ,176.00 767 ,376.00 yyyy 574 ,368.00 771 ,368.00 zzzz 579 ,022 .00 308 ,552 .00 AAAAA 506 ,874 .00 BBBBB 191 ,303 .15 ccccc DDDDD EEEEE FFFFF GGGGG HHHHH IIIII

DECI SION - JJJJJ 203 ,184.79 1,015 .92 CTA Case No. 5620 KKKKK 198,444.33 992 .24 Page 9 152,575.74 762 .88 LLLLL 147,900.51 739.47 Rizal Commercial Banking Corp. 209 ,127 . 18 Rizal Commercial Banking Corp. MMMMM 162,690.45 1,045 .62 Rizal Commercial Banking Corp. NNNNN 189,606.55 813.47 Rizal Commercial Banking Corp. 00000 948 .05 Rizal Commercial Banking Corp. ppppp 19 ,541.59 97 .71 Rizal Commercial Banking Corp. 2,664,498.39 Rizal Commercial Banking Corp. RRRRR 2 ,705 ,578.29 13,321 .87 Rizal Commercial Banking Corp. 3,001 ,352 .00 13,645 .68 The Unibancard Corp. sssss 3,685 ,916.00 15 ,006.76 The Unibancard Corp. 5,480,236 .00 18,429.58 The Hongkong & Shanghai Banking TTTTT 5,141,996.00 27 ,401.18 The Hongkong & Shanghai Banking 25 ,709.98 The Hongkong & Shanghai Banking uuuuu 698 ,117 .33 The Hongkong & Shanghai Banking wwv 737 ,499 .36 3 ,490 .59 Security Diners lnt'l Corp. 668 ,432 .53 3,687.46 Security Diners lnt'l Corp. WNWWVV 697 ,167.00 3,342 .16 Security Diners lnt'l Corp. 593 ,301.47 3,485 .86 Security Diners lnt'l Corp. XX XXX 202 ,247 .35 2,966 .51 American Express lnt'l 576,296.68 1,011 .27 American Express lnt'l YYYYY 177,418 .94 2,881 .52 American Express lnt'l 759 ,101.44 American Express lnt'l zzzzz 253 ,013.51 887 .11 American Express lnt'l 591 ,099.08 3,795 .54 American Express lnt'l AAAAAA 229 ,061 .97 1,265 .12 American Express lnt'l 292 ,256.00 2 ,955.52 American Express lnt'l BBBBBB 298 ,908 .00 1' 145.33 Far East Bank & Trust Co. 206 ,706 .00 1,461 .28 Far East Bank & Trust Co. cccccc 341 ,646.00 1,494.54 Far East Bank & Trust Co. 231 ,084.00 1,033.53 Far East Bank & Trust Co. DDDDDD 356 ,740.00 1,708.23 Far East Bank & Trust Co. 217 ,637.98 1' 155.42 Far East Bank & Trust Co. EEEEEE 265 ,816.22 1,783.70 Far East Bank & Trust Co. 187 ,375 .69 1,088.19 Far East Bank & Trust Co. FFFFFF 236 ,842 .16 1,329.08 Far East Bank & Trust Co. 276 ,094 .35 Far East Bank & Trust Co. GGGGGG 140,837 .78 936 .87 Far East Bank & Trust Co. 211 ,217 .19 1' 184.21 Far East Bank & Trust Co. HHHHHH 214 ,538.00 1,380.49 Far East Bank & Trust Co. 412,694 .00 Far East Bank & Trust Co. IIIII I 185,561 .14 704 .19 Far East Bank & Trust Co. 240 ,328 .00 1,056.07 Far East Bank & Trust Co. JJJJJ 1,072 .69 Far East Bank & Trust Co. KKKKKK 34 ,502 .64 2 ,063 .47 Far East Bank & Trust Co . 387,452 .35 Far East Bank & Trust Co. LLLLLL 174 ,358 .00 927 .79 Far East Bank & Trust Co. 197 ,304 .00 1,201 .64 Far East Bank & Trust Co. MMMMMM 298 ,231.74 Far East Bank & Trust Co. NNNNNN 172.51 000000 66 ,717,509.83 1,937 .21 TOTALS pppppp 871 .89 QQQQQQ 986.52 1,491 .16 RRRRRR 330 ,890 .07 ssssss TTTTTT wwvv WVNVWVVW xxxxxx yyyyyy zzzzzz AAAAAAA BBBBBBB ccccccc DDDDDDD EEEEEEE FFFFFFF HHHHHHH

DECISION - CTA Case No. 5620 Page 10 Thus Petitioner's total refundable amount has been reduced to P690,330.65 computed as follows: 1995 P116,039.00 QUARTERLY INCOME TAX PAYMENTS 233,744 .71 CREDITABLE TAX WITHHELD SUBTOTAL P349 ,783.71 1996 p 9,656.87 QUARTERLY INCOME TAX PAYMENTS 330,890.07 CREDITABLE TAX WITHHELD SUBTOTAL P340,546.94 TOTAL REFUNDABLE AMOUNT P690.330 .65 WHEREFORE, in view of all the foregoing, Respondent is hereby ORDERED to REFUND or in the alternative to ISSUE a Tax Credit Certificate for the amount of SIX HUNDRED NINETY THOUSAND THREE HUNDRED THIRTY PESOS AND SIXTY FIVE CENTAVOS (P690,330.65) in favor of the Petitioner, representing unutilized excess corporate quarterly income tax payments and creditable income taxes withheld at source for the taxable years 1995 and 1996. SO ORDERED. WE CONCUR: residing Judge 1.. ~ 7,..; MONO.DEV Y Associate Judg

DECISION - CTA Case No. 5620 Page II CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~c ~ ERNESTO D. ACOSTA Presiding Judge