CTA Case No. 4975 (Decision)

Republic of the Philippines COURT OF TAX APPEALS Quezon City ORANBO REALTY CORPORATION. C.T.A. CASE NO. 4975 Petitioner, Pro�u1gated: - versus - AUG 311995 COKKISSIONER OF INTERNAL REVENUE. Respondent. X- - - - This case involves a claim for refund or tax credit in the amount of P845,235.00 representing overpaid creditable income tax withheld at source for calendar year 1990. Petitioner is a domestic realty corporation organized and existing under Philippine laws. Petitioner allegedly received rental income from its sole lessee Aris Philippines, Inc. the amount of Ji17,914,869.00, representing delayed payments of 1989 rentals, adjustments and 1990 rentals and realty tax paid by the lessee. Respondent withheld the 5Y. expanded withholding tax in the amount of Ji895,743.45 from Aris Philippines. !.137 ,:

DEC I S I 0 N- C.T.A. Case No. 4975 -2- On April 15, 1991, petitioner �iled its corporate i~come tax return �or taxable year 1990 wherein i t declared the total rental income it received in 1990 in the amount o� P14,485,869.00 and an alleged re�undable tax in the amount of P845,235.00 which is computed as follows: Rental Inco� , 14, 485,869 lliscellaneous Inco� 14.872 Less: Deductions 56,778 � 14, 500,741 let Taxable Inco� 81,710 13,960,753 Tax Due 895,743 � 539,988 Less: � 188,966 Prior Years Excess 1,034,23U Credit 1st Quarter Inco� Tax Pay11e11t Creditable Inco� Tax lithbeld at Source JlefUDdable Tax tP 845,235) ============== Furthermore, petitioner alleged that the refundable tax for 1990 was not utilized by it. Thereafter, petitioner filed with the respondent its claim for refund of excess creditable withholding tax in the amount of P845,235.00. To this date, respondent has not acted upon petitioners claim for refund. The issues posed before this Court are: 1. Whether or not petitioner is entitled to the refund of overpaid income tax in the amount of P845,235.00 �or taxable year 1990. ~138

DEC I S I 0 N- C.T.A. Case No. 4975 -3- 2. Whether or not petitioner was able to prove by su��icient evidence its claim �or re�und. Petitioner asserts that its 1990 unutilized creditable income tax withheld at source is anchored on Section 69 o� the Tax Code in re�erence to Revenue Memorandum Circular Nos. 7-85 and 32-76. Furthermore, petitioner invoked the case o� CIR vs. Standard Chartered Bank and the CTA <CA G.R. SP 27671J CTA Case 4272> wherein pertinent portion o� the decision is herein quoted �or re�erence: "From the above provisions o� law and implementing rule, there is no doubt that private respondent is entitled to the re�und o� its overpaid income tax �or the taxable year 1986, as �ound by the respondent court, and which recommendation was even earlier made by petition~r's Regional Director Per�ector T. Domingo but which recommendation was not acted upon by petitioner <pp.39-40, Rollo>. x x x But petitioner would make an issue o� the correct interpretation o� the phrase 'erroneously or illegally assessed or collected' as the taxes subject o� re�und under Section 292 o� the Code also a�orequoted, insisting that it is only where there is an erroneous or illegal assessment or collection o� tax that tax re�und is allowed under said provision, and that as there had been no erroneous or illegal assessment or collection o� taxes in the instant case, no tax re�und can be allowed the private respondent. Such strained and restrictive interpretation o� said provision o� the Tax Code is, however, clearly unwarranted and Section 292 o� the Tax Code should beread and applied together with Section 69 thereo� which expressly provides !138

DEC I S I 0 N- C.T.A. Case No. 4975 -4- that excess taxes paid ~ ~ corporation may be refunded to the latter. Besides, Section 292 allows tax refunds for ~ ~ alleged to have been excessive', which obviously refers to the payment of excess tax ~ the taxpayer, and the facts of this ~ indeed show that there ~ excess payment of income tax ~ the part of nrivate resnondent for the taxable year 1986." <CA Decision, pp. 4- 5) The requirement set by law in claims for refund of excess creditable withholding taxes are the following: 1. that it filed a claim for refund within the two <2> year period as prescribed under Section 299 <now 230> of the National Internal RevenueJ 2. that the income upon which the taxes were withheld were included in the return of the recipient; and 3. the fact of withholding is established 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.6-85J see Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991J and Citytrust Finance Corporation <Formerly Investor's Finance Corporation/FNCB Finance> vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993. ) As borne by the records, petitioner was able to file its claim for refund within the two-year period pursuant to Section 230 of the NIRC. 1140

DE C I S I 0 N- C.T.A. Case No. 4975 -5- Petitioners �iling o� its claim �or re�und with the respondent on March 30, 1993, and the �iling o� the petition �or review with this Court on April 12, 1993 are well within the two-year limit provided �or in Section 292 <now Section 230> o� the Tax Code. The two- year period �or �iling a claim �or re�und commences to run only �rom the �iling o� the �inal return and not �rom the dates the quarterly payments were made. Since respondent's �inal return �or 1990 was �iled on April 15, 1991, the two-year limit would have lapsed only in April 14, 1993. Thus the �iling o� the claim and petition on March 30, 1993 and April 12, 1993, respectively are well within the two-year prescriptive period. As cited in the case o� Asia Australia Express, Ltd. v. CIR <G.R. No. 85956, April 10, 1989), the reason behind the reckoning o� the prescriptive period a�ter the last installment payment is that only a�ter such time can a tax liability be construed as completely paid. Thus, the quarterly payments are mere parts or portions o� respondent's income tax liability �or 1986 and p~yment i~>~~} deemed made~upt~f, tne �inal return is �ile~�~nd th~ t~~ is paid. Inorder to gain better ground by way o� evidences, petitioner presented the �allowing: 1141

DEC I S I 0 N- C.T.A. Case No. 4975 -6 - Exhibit "A-1" - Schedule 4 of Exhibit A <1990 Corporate Annual Exhibit �o� Income Tax Return> BIR Form 1743-1 Certicate of Creditable Income Tax Withheld at Source. Exhibit "F" 1991 Corporate Annual Income Tax Return. Exhibit "G" letter claim for refund dated March 29, 1993, received by the BIR on March 30, 1993. On the second requisite, petitioner presented a reconciliation statement to prove that the amount of P3,429,000.00 was reported as income in the 1989 income tax return. Going over the third requisite, petitioner presented Exhibit �o� which is BIR Form 1743-1 more particularly its Certificate of Creditable Tax Withheld at Source. It is likewise observed that respondents counsel is not zealous enough, to guard the governments interest on the case. This is manifested by her frequent non- appearance during the hearings which results to waiver on her part to present evidence. Respondents counsels failure to present evidence proves fatal to her cause while petitioner exhibited overwhelming proof to his cause. 1142

DEC I S I 0 N- C.T.A. Case No. 4975 -7- After a thorough review of the case at bar, the Court arrived at the following computations: Rental lncollt ' 56,778 ' 14,485,869 liscellaneous lncollt 81,710 14.872 895,743 Leta: Deductions , 14,500,741 let Taxable Inco.e 13,960,153 Tax Due , 539,988 Less: 188,996 Prior Year'a Excess Credit (1. 034. 231) 1st Quarter lncolt Tax Pay.ent Creditable Incolt Tax Withheld 845,235 at Source ==����= Refuadablt Tu In v~ev of the forego~ng, respondent ia her~by ordered to refund to petitioner the amount of P845,23S.OO representing overpaid withholding tax for the year 1990. SO ORDERED. � GRUBA Judge WE CONCUR: (..,.:;z;;;~ ~ ERN 0 D. ACOSTA ::in~Ju/de Vg ~~A RAMON 0. DE Associate Judg 1143

DEC I S I 0 N- C.T.A. Case No. 4975 -8- CERTIFICATION I hereby certify that this decision was reached a~ter due consultation among the members o� the Court of Tax Appeals ~n accordance with Section 13 Article VIII of the Constitution. Q._-,.:-l.C2.... 0~ ERHESTO D. ACOSTA Presiding Judge Court o� Tax Appeals 1144