NISSAN MOTOR PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILI PPI NES COURT OF TAX APPEALS QUEZON CITY NISSAN MOTOR PH I LI PPINES, INC., C. T.A. CASE NO. 5545 Petitioner, - v e r sus - COMMISSIONER OF INTERNAL RE VENUE, Respondent. x----- DECISION This case involves a claim for refund of alleged overpaid corporate income tax in the amount of Four Hundred Twenty Eight Thousand Six hundred Five Pesos ( P428, 6 0 5 . (H)) r~esulting from an excess payment of creditable withholding taxes for fiscal year ended March 31' 1'3'35. Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines with office address located at 222 E. Rodriguez Sr. Blvd. Quezon City. It is principally engaged in the business of assembly and sale of NISSAN Motor vehicles and spare On July 17, 1'3'35, Petitioner filed its Corporate Annual income tax return for fiscal year ended March 31, 1'3'35 under which it paid its corporate income tax liability in the amount of P12,767,371 <Exhibit A). In said return, Petitioner declared as part of its gross income the payments made by its various dealers. On Apr~i 1 15, 1'3'37, Masco Auto Sales, Inc., one of the dealers of the petitioner, allegedly amended two(2)

DECISION C.T.A. CASE NO. 5545 - 2- of its Certificate of Creditable tax withheld at source <BIR Form 1743-750) previously issued to Petitioner, reflecting the folowing amounts: PERIOD COVERED ORIGINAL AMT. OF TAX WITHHELD AMENDED AMT. OF TAX WITHHELD (January) October to Dece1ber 1994 P1571 129.88 <Exh. B-4) P2951453.88 (Exh. D) January to March 1995 221,683.85 (Exh. B-5) 5111982.85 <Exh. E) Thus, the petitioner's claim for refund of alleged overpayment of income tax for Fiscal year ended March 31, 1995 is computed as follows: INCOME TAX ON TAXABLE INCOME P37' 886, 433. (H) pet~ ot~iginal ITR <Exh. A) LESS: Quarterly tax payments 16,162,666.00 Creditable tax withheld 8,956,396.00 per~ ot~iginal ITR Additional creditable 428,605.00 withholding tax credit as per amended certificate "should be" income payable 12,338,766.00 Income tax paid 12,767,371.00 Erroneous payment P L~28, 605. 00 <Petitioner's memorandum, CTA records p. 185) The inability of petitioner to take up or report the additional withholding tax credit in the amount of P428,605.00 in its income tax return for fiscal year ended Mar~ch 31, 1995 was due to the belated issuance of Masco of the amended Certificate of Withholding tax which was issued only on April 15, 1997. On that same day,

DECISION C.T.A. CASE NO. 5545 - 3- petitioner filed an amended annual income tax return for fiscal year ended March 31, 1995 to reflect the correct amount of withholding tax credits. On June 20, 1997, Petitioner filed with the Bureau of Internal Revenue, a letter-claim for refund <Exh. H> in the amount of P428,605.00 as overpaid income tax for fiscal year ended March 31, 1995 in accordance with section 204(3) in relation to Sec. 230 of the 1995 Tax Code. Since respondent has neither granted nor acted upon the claim for refund, petitioner was left with no recourse but to file the instant petition for Review on July 14, 1997 in order to toll the running of the 2 year prescriptive period allowed under Sec. 230 of the Tax Code, as amended. On September 16, 1997 respondent filed his answer and denied the allegations of the petitioner. Upon these facts, respondent advanced the following special and affirmative defenses, to wit: 1) That petitioner's claim for refund is pending administrative investigation. 2) claims for refund are construed in strictissimi juris against the taxpayer <Rogan vs. CIR 30 SCRA 968; Asturias Sugar Central Inc. vs. CIR 29 SCRA 617) 3) taxes paid and collected are presumed to have been made in accordance with laws and regulations.

DECISION C.T.A. CASE NO. 5545 - 4- 4) It is incumbent upon the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the action. In order to support its entitlement to the refund petitioner presented the following documents: Exhibit Description A, C Corporate Annual Income Tax Return and Audited financial statement for fiscal year ended March 31, 1995 and for Calendat~ Yeat~ Ended Decembet~ 31, 1995 B-1 to B-25 Certificates of Creditable Income tax withheld at source issued by petitioner's vat~ious dealet~s F, G Amended Corporate Annual Income Tax Return for FY ended March 31, 1995 and fot~ CY ended Decem bet~ 31, 1995 D, E Masco Auto Sales Inc's Amended Certificate of creditable Income tax Withheld for the period October to December 1994 and for the period January to March 1995 H letter-claim for refund dated June 11, 1997 I Schedule of Creditable Withholding tax for FY ended March 1995 of Nissan Mot ot~s J, M Annual Information Return of Income Tax Withheld on Compensation, EWT and FWT for the year 1994 of Nissan Auto Parts Mfg. Corp. and Sta. Cruz Island Corp. J-1, N Schedule of EWT for the year 1994 of Nissan Auto Parts Mfg. Corp. and of Sta. Cruz Island Corp. K Certificate of Creditable Withholding tax withheld at source for the period January to March 1994 of Nissan Auto Parts Mfg. Corp.

DECISION C.T.A. CASE NO. 5545 - 5- L Schedule of Certificate of Creditable Tax from Nissan Auto Parts Mfg. Corp. for the year 1994. The aforementioned documents were all admitted by this Court in a Resolution dated April 17, p. 1E2) On the other hand, respondent's counsel submitted his case for~ decision without pr~esentation of any evidence (see minutes of the session, June ..:-:..t..:J:., 1998, CTA t~ec. p. 168) Both parties submitted their respective memoranda. This Com~t is now confronted with the following issues: 1) whether or not petitioner is legally entitled to the refund sought in the amount of P428,605.00; and 2) whether or not petitioner has fully substantiated with pr~oper~ evidence, i t s claim for~ r~efund. Anent the fi r~st issue, petitioner cites as legal bases Sections 204 and 203 of the 1995 Tax Code, as amended, the per~t i nent portions of which are quoted Sec. 204. Author~i t y of the and Commissioner to compromise, abate may r~efund/cr~edit taxes. The Commissioner~ XXX (3) Credit or refund taxes erroneously or illegally received, penalties imposed without authority, refund the value of internal revenue stamp when they are

DECISION C.T.A. CASE NO. 5545 - 6- returned in good condition by the ptn~chaser~, and in his discr~etion, r~edeem 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 or claim for credit or refund within 2 years after the payme nt of the tax or penalty Sec. 230. l~ecovet~y 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 as 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 und<~r~ protest or duress. In any case, no such suit or~ proceeding shall be begun after the expiration of two years from date of payment of the tax or penalty regardless of any supervening cause that may arise after payment x x x x. The above provisions of law settles the Petitioner's legal entitlement to the refund of an excess income tax payment. Thus, apropos to the issue of prescription, the claim for refund was seasonably filed within the two( 2 ) year prescriptive period provided by law. As r~esolved by the Supr~eme Com~ t in the case of CIR vs. TMX Sales, Inc. et al. (GR No. 83736, January 15, 199;;:), the two (2) year~ prescript i ve period within which to claim a r~efund

DECISION C.T.A. CASE NO. 5545 - 7- commences to run at the earliest, on the date of the filing of the adjusted final tax return or Annual tax Return and the final payment of the income tax. Recm~d s show that petitioner filed its Corporate Annual Income tax RetUl�~n fot~ the Fiscal yeat~ ending f'r1at~ch 31, 1995 on July 17, 1995 (Exh. A- I). The letter-claim for refund was filed on June 20, 1997 (Exh. H-I) and the instant petition on July 14, 1997, all of which show that the claim for refund was made within the two(2) year period prescribed by law. We now delve on the second issue which is the factual aspect of the case. Petitioner substantiated its claim by presenting various evidence to further bolster its contention that it is indeed entitled to the refund. Although the f ocus of the instant petition is the correctness of the amended certificates that would determine the tenacity of the claim for refund, petitioner likewise played it safe by submitting vat~ious documents, such as: l. The income tax r~etm~n (both the original and the amended) showing that the income payment it received was declared as part of the gross income (pursuant to Sec. 10, Revenue Reg. No. 5-85) 2. BIR Form 1743. 1 duly issued by the payor (withholding agent) to the payee, showing the amount of income paid

DECISION C.T. A. CASE NO. 5545 8- and the amount of the tax withheld thet~eft~om (ibid. ) 3. Evidence showing that it seasonably filed its claim for~ r~ efund within the two (2) year~ pet~iod pt~esct~i bed under Sec. 230 of the Tax Code. Petitioner's compliance with the basic requirements for the refund of overpaid creditable withholding taxes is clearly indicative of its meritorious claim of the refund sought for. On the issue of whether the amended certificates of creditable withholding taxes could be a sufficient basis for refund of the overpaid income tax due, we answer in the affir~mative. After~ a cat~eful examination of the evidence pt~esented, we are convinced that the said claim for refund was satisfactorily proven by Petitioner. Respondent, in his memot~andum, questions the correctness of the certificates of Creditable Withholding Tax <CWT> issued by MASCO specifically the inconsistencies of the periods and dates of payment contained therein. This fact could be explained by the change of Petitioner's accounting period. Recor~ds show that Petitioner changed its accounting period from fiscal year to calendar year as evidenced by two annual income tax returns submitted <Exh. A and C). Thus, the amended certificate of creditable withholding tax

DECISION C.T.A. CASE NO. 5545 - 9- issued by MASCO is The amended certificates of Creditable Withholding Tax <Exhibits D and E) reflect the true tax withheld and it the contained in the ot~iginal certificates of Creditable Withhoding Tax. (Exhibits B-4 and B-5) Furthermore, judging from the records of the case, it does not appear that the respondent offet~ed any evidence the of the cet~tificates. Thus, as held by this Court in the case of Ateneo de Manila University vs. CIR, CTA Case No. 3213 dated July 28, 1989: "No contt~ovet~ting evidence was presented by respondent. Neither was any evidence disputing petitioner's entitlement to its claim for refund was pesented by respondent and this case having been submitted for decision x x x respondent may be considered to have no serious objection as opposition to petitioner's entitlement to the refund. The circumstances obtaining x x x compels Us therefore to sustain x x x the petitioner's right to the refund x x x based on the evidence and pleadings." Absent any evidence pointing out to the falsity and superfluity of the amended certificates, and considering the fact that MASCO's accounting Manager verified the correctness of the said certificates undet~ pain of

DECISION C.T.A. CASE NO. 5545 - 10 - this Com~t gives credence to the amended certificates of Creditable Withholding Tax. Accot~dingly, as all the document at~y evidence were completely submitted, and its factual contents verified, this Court upholds the veracity of the amended certificates and likewise grants the refund of the overpaid income tax sought for. WHEREFORE, in view of the foregoing, petit i onet~ NISSAN MOTOR PHILIPPINES, INC., is ent it 1 ed to the t~efund of overpaid creditable withholding tax for fiscal year ended Mat~ch 31, 1995, computed as follows: NET INCOME <Exh. F-2) ~108, 2L~6, 952. 00 TAX DUE (108,246,952 x 35%) 37, 886, 433. (H) Less: 1) Quarterly payments ~28,930,037.00 2) Creditable tax withheld <Exh. B-1 to B-3, B-6 to B-25, D and E) 9,385,001.00 38,315,038.00 AMOUNT REFUNDABLE 428,605.00 SO ORDERED. ~((Z. ~ ERNESTO D. ACOSTA Pt~esiding Judge

DECISION C.T.A. CASE NO. 5545 - 11 - CERTIFICATION I hereby certify that this decision was reached after due consutation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~Q.. ~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals