CTA Case No. 5237 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS '� QUEZON CITY PDCP DEVELOPMENT BANK, INC. Petitioner, - versus - C.T.A. CASE NO. 5237 COMMISSIONER OF INTERNAL REVENUE, Respondent. X - - - - - - - DECISION This Is an� action for the refund or tax credit of the sum of P815,891.00, representing excess income tax for the year ended December �31, 1992. Petitioner PDCP Development Bank, Inc. (formerly Private Development Corporation of the Phi I lpplnes) Is a domestic corporation duly organized and existing under the laws of the Phi I lppines. It Is registered with the Security Exchange Commission, to engage in the business, as a private development bank having been issued Certificate of Registration No. 22401 <Exh. AA>. On December 29, 1994, petitioner flied Its second amended annual income tax return for the calendar year 1992 reflecting an income tax ue in the sum of

DECISION - C.T.A. CASE NO. 5237 -2- Q, P3 , 13 5, 26 . 00 b ut with an overpaid Income tax In the sum of P 81 5,891. 00, due to Its excessive creditab le withholding taxes, computed as follows : CExh. A) Gross Income P 3 3 2,7 60,5 2 5.00 Less: deductions .3 23,803,3 09.00 p 8,95 7,2 16.00 Net income Tax due p 3,13 5,026.00 Less: Creditable tax withheld 3,950,917 .00 Tax Payable/(Refundable) <P 815,891.00) This 1992 overpayment was carried over as tax credit to the succeeding taxab le year 1993 . However, petitioner suffered a net loss from Its operations during the year 1993, amounting of P 26,6 3 7,2 2 4.00. Thus, petitioner's appllcatlon of the overpayment in the year 1993 b ecame nugatory since there was no Income tax IIab I I I ty where the excess Income tax payment can b e applied for (Exh. B ). Petitioner also manifested that the 1992 overpayment was not appIIed agaInst the Income tax liab ility In the next succeeding calendar year - 1994 (Exh. EE ). On January 1 1, 1995, petitioner flled, through Its auditors, a letter claim for refund or Issuance of a tax credit certificate with the Bureau of Internal R evenue In the amount of P8 1 5,891.00 rpresenting allegedly overpaid Income tax for the year 1992. (Exh. Z).

DECISION - C.T.A. CASE NO. 5237 -3- Th& inaction of respondent on Its letter compelled petitioner to flle the Instant petition on Apri 1 11, 1995 pursuant to Section 230 of the National Internal Revenue Code, as amended. In a resolution dated August 10, 1995, respondent was declared in default, for failure to file her answer on time (pp. 74-76, CTA records). Thus, the case was set for hearing ex-parte. The only issue to be resolved by this Court is whether or not petitioner is entitled to the -�und or to the issuance of a tax credit cer ... (� 1cate of the alleged overpaid income tax or the calendar year ended December 31, 1992. Petitioner alleged that It Is entitled to the refund of its overpaid Income tax as of December 31, 1992 which was not appl led or uti Ilzed In the succeeding taxable year (1993) pursuant to the provision of Section 69 of the Tax Code, as amended. Section 69 of the tax Code reads as follows& "Sec. 69. Final adjustment return. Every corporation Ilable to tax under Section return 24 shall file a final adjustment 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 '' I

' DECISION - C.T.A. CASE NO. 5237 -4- due on the entire taxable income of that year the corporation shal I either: (a) Pay the excess tax st I I I 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 Iiabl I itles for the taxab Ie guarters of the suoo eed 1_!:!.9. taxable year." (Under Iinlng supplled) And to further support Its contention, petitioner presented In evidence various documents which, among others, consist of: [1) the (amended) annual Income tax returns for the years 1992, 1993, and 1994 <Exhs. A, B, and EE >; [21 the oertlfioates of creditable withholding tax at source (Exhs. C, 0, E, F, G, H, I, J, K, L, M, N, 0, P and V); [3] the Central Bank confirmation receipts and the Bureau of Internal Revenue payment orders (Exhs. Q to U-1, Inclusive, and W to Y-1, lnoluslve), relative to Its own payment of expanded withholding tax; and [4) the letter claim for refund with the respondent CExh. Z). The Issue before us Is not of first Impression. This Court has already laid down three baste requirements for a taxpayer to comply with in order to be entitled to the refund of excess creditable withholding tax. These arer

' DECISION - C.T.A. CASE NO. 5237 - 5- a. that It fI I ed a claim for refund period as prescribed within the two (2) year 230) of the National under Section 299 (now Internal Revenue Code; b. that the Income upon which the taxes were Included In the return of were withheld and the recipient; c. the fact of withholding is establ lshed by a copy of statement (BIR Form 1743.1) duly Issued by the payor (withholding agent> to the payee, showing the amount paid . and the amount of tax withheld therefrom. (Sec. 10, Rev Reg. 6-85; see Cltytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; and Cltytrust Finance Corporation (formerly Investor's Finance Corporatlon/FNCB Finance) vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; Paseo Realty and Development Corporation v. Commissioner of Internal Revenue, CTA Case No. 4254, August 10, 1993; Commissioner of Internal Revenue v. Court of Appeals and Paseo Realty and Development Corporation, CA-G.R. SP No. 32927, February 28, 1994). After a careful examination of the records and evidence of the case, petitioner prove Its compliance with the first requirement. It flled within the two years from the date of payment of the tax Its claim for refund, both In the administrative and judicial level, as prescribed under Section 230 of the Tax Code, as amended, which reads as followsa "Seo. 230. Recovery of tax erroneously or -'1--l'.l.:;. ..e; ;. g -.ao.: ;:.l"'l""y." .___ _c;.;: o l-'1 -ec '"- -" t"-e;;d;.: . - No su I t or proceedIng shall be maintained in any court for the recovery of any national internal revenue tax

' DECISION - C.T.A. CASE NO. 5237 - 6- hereafter alleged to have been erroneously or IIIegaIIy assessed or coIIected, 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 oollected, untlI a claim for refund or oredlt has been duly flled with the Commissioner of Internal Revenue; but suoh 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 shaII 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 paymentz Provided, however, That the Commissioner may, even without a written olalm therefor, refund or credit any tax, where on face of the return upon whloh payment was made, suoh payment* appears clearly to have been erroneously paid. (Underlining supplied) XXX XXX X X X. " ( * should read "tax"> The two-year perIod commences to start on AprII 15, 1993, the time required by law for petitioner to flle Its 1992 final adjustment return (Commissioner of Internal Revenue v. TMX Sales, I no., , et aI. G.R. No. 83736, ... --�--- .. &: . 100?\ . Petitioner has, therefore, up to April 15, 1995 to file a written claim for refund or tax oredlt with the BIR and with this Court. lt flled with the Bureau of Internal Revenue a letter-claim for refund on January 11, 1995 and with this Court on Apr I 1 11 ' 1995. 295

-- ______ , . DECISION - C.T.A. CASE NO. 5237 -7 - As;regards the second and third requirements, this Court noted that some of the creditable withholding taxes of petitioner were not supported by a val ld evidence. The amount of P3,316,850.27 was supported by BIA Form 1743. 1 (Exhs. C, 0, E, F, G, H, I, J, K, L, M, N, 0, p and V> whl le the amount of P581,065.19 was covered by Central Bank confirmation receipts <Exhs. a, R, s, T lJ I I w, X and Y>. And the remaining amount of P53,001.54 was not at alI supported by any evidence. The Court strongly believes that the Income payments reflected In the certificates of creditable withholding taxes were reported on petitioner's 1992 Income tax return. However, we cannot ascertain if the Income payments which were covered by Central Bank confirmation receipts were reported by the petitioner as these documents do not show corresponding Income received. Furthermore, there Is no certainty whether or not the expanded withholding taxes, purportedly paid for petitioner's own account, accrue to It or to other payees which petitioner Is bound to remit to the Bureau of Internal Revenue as a withholding agent. As we ruled In the similar oase of Far East Bank and Trust Company v.

� DECISION - C.T.A. CASE NO. 5237 '� -8- Contm Iss i oner of Internal Revenue, CTA Case No. 4972, January 24, 1996: "In Its Petition for Review and In the Memorandum, Petitioner alleged that COB withheld the creditable withholding taxes from the sales proceeds of its acquired assets. It would seem, therefore, from the at legation that COB was the taxpayer_ (recipient of the Income) and the withholding agent at the same time of its own transaction. In fine, they are one and the same. Although, It can, of course, be argued that the Tax Code does not speclflcally prohibit the taxpayer from withholding Its own tax, yet, this Court finds It rather amusing as It Is not In accordance with the normal practice. Under the facts presented, COB as seller of capital assets Is really the one Ilable to pay the creditable withholding tax. Thus, We see no reason why COB cannot pay for the tax it Is responsible to pay In the first place under the expanded withholding tax system. However, In the case at bar, petitioner did not pass the Court's scrutiny In proving its olalm for refund. The documents presented by the Petitioner were not sufficient to warrant that COB withheld and remitted the withholding taxes corresponding to Its own sale of capital assets. The various Central Bank confirmation receipts and BIR official receipts and payment orders presented by petitioner (Exhs. "I" to ""1-36"), although all In the name of COB, are not conclusive evidence as to the actual payment and remittance of the withholding taxes pertaining to the sale of COB's capital assets. The existing doubts are due to the following: 1. The amount of Income payments received by COB cannot be ascertained by the mere presentation of confirmation receipts. The BIR Form 1743.1 Is needed, as requIred

DECISION - C.T.A. CASE NO. 5237 -9 - under Sec. 10, Rev. Regs. 6-85 of the expanded wtthholdlng tax regulations, for the purpose or at the very Ieast the annua I return <I.e., reconcl I iatlon statement of quarterly payments and IIst of payees and Income payments>, required under Sec. 51(d) of the Tax Code, to be submitted to the Commissioner of Internal Revenue wherein the Court can check If the said payments of tax are Indeed done by the COB for its own account by I !sting Its own name as one of the recipients of the tax It paid. 2. It can not be well said that the amounts paid and remitted to the BIR were for COB's account and not for the other possible payees of withholding taxes which COB may also be liable to remit as a withholding agent." Based on the above authority, we are denying the portion which was not supported by BIR Form 1743.1. A recomputation of the refundable Income tax of petitioner would reveal that it is only entitled to the amount of P181,824.27 as shown below: RECOMPUTATION� A11ount of A1ount of Exhs. Withholding Agent lnco1e Received Tax Withheld ABT Industrial Develop�ent Corp. p 3,457,764.40 p 288,147.20 c FH ceunt Corp. Pansalan Cooperative Society 106,790,826.05 2,669,770.65 0 POCP as 1nvest1ent Manager tor 450,000.00 n,5oo.oo E Various Accounts 2,303 1 744 o 00 115,187.22 RAM Holdings Corp. 18,000.00 900.00 G Pilipino Telephone Corp. 18,457.60 922.88 H Mabuhay Vinyl Corp. 50,000.00 POCP Insurance, Brokers, Inc. 2,500.00 I POCP frading, Inc. 1,268,872.10 87,042.99 J R.H. Tan & Associates 713,281.34 35,664.06 K lla Oel Palacio Marine Pro Corp. 129,800.00 Plexchn International, Inc .. 894,942.80 6,490.00 l Netro, Realty/Jose B. Pilar 529,200.00 44,747.14 M 106,762.50 26,460.00 N 5,338.13 0 298

.r DEC I SION - - 10 - 2,430.00 p C.T.A. CASE NO. 5237 8,760.00 v 48 , 600 . 00 Caraen VI I lanueva-Jaclnto 350,000.00 Bue.n M. Morales T0TAl P1171 130,250.79 P3,316,850.27 less 1992 tax due 3,135,026.00 Amount refundable p 181,824.27 WHEREFORE, In view of the foregoing, respondent Is hereby ordered to refund or In the alternative Issue a tax credit certificate In favor of petitioner the sum of P181,824.27 representing val Idly proven overpaid income tax for the oalendar year 1992. No pronouncement as to oosts. SO ORDERED. rt! I CONCUR: Q. ERNESTO D. ACOSTA Presiding Judge RAMON 0 . DE V A Associate Ju ge I CERTIFICA-riON hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals In accordance with Section 13, Article VI I I of the Constitution. ERNESTO D ACOSTA� Presiding Judge Court of Tax� � Appea Is