PHILIPPINE NATIONAL BANK v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION ************* PHILIPPINE NATIONAL BANK, Petitioner, C.T.A. CASE NO. 6652 -versus - Members: ACOSTA, Chairman BAUTISTA, and CASANOVA, JJ. I COMMISSIONER OF INTERNAl REVENUE, Promulgated: J Respondent. JAN 30 2007,]'.~v PM ~ x - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - -x DECISION CASANOVA, C., J.: This Petition for Review seeks the refund of alleged unutilized cred itable withholding taxes in the aggregate amount of Twenty Six Million Four Hundred Sixty i. Six Thousand Seven Hundred TI1irty Five Pesos and 40/100 (P26,466,735.40) j covering the taxable year 2000. Jl The Philippine National Bank (''petitioner') is a corporation duly organized and _j existi~g under and by virtue of the laws of the Republic of the Philippines wit~ J J J

DECISION C.T.A. CASE NO. 665'2 Page 2 principal address located at PNB Financial Center, President Diosdado Macapagal Boulevard, Pasay City. 1 It is engaged in the commercial banking business. The Commissioner of Internal Revenue ("respondent") is vested by law with the power to grant refund for a"ny internal revenue tax erroneously paid, assessed or collected, among others, with office address at the Bureau of Internal Revenue Building, Agham Street, Diliman, Quezon City. In several transactions including but not limited to the sale of real properties, lease and commissions, petitioner allegedly earned income and paid the corresponding income taxes due which were collected and remitted by various payors as withholding agents to the Bureau of Internal Revenue ("BIR") during the I ' taxable year 2000. On April 18, 2001, petitioner filed its tentative income tax return for taxable year 20002 which petitioner subsequently amended on July 25, 2001.3 Seemingly unsatisfied with the first amendment, petitioner filed again an amended income tax return for taxable year 2000 on June 20, 2002,4 declaring no income tax liability (either at the regular rate of 32% or minimum corporate income t~x rate of 2%) as it incurred a net loss in the amount of P11,318,957,602.00 and a gross loss of P745,713,454.005 from its Regular Banking Unit ("RBU") transactions. However, petitioner had a 10% final income tax liability of P210,364,280.00 on J taxable income of P1,959,931,182.00 earned from its Foreign Currency Deposit Unit~ I 11 � Par, 1, Summary of Admitted Facts, Rollo, p. 713. J 2 Exhibit .A. . 3 Exhibit B. J 4 :EXhibit C. 5 . Pursuant to Section 27(E)(4) of the NIRC of 1997, the MCIT rate of 2% is imposed on the corporate , taxpayer's gro,ss income. Schedule of Minimum Corporate Income Tax Computation_ December 31, 2000 attached to Exhibit C J 1 :j

DECISION C.T.A. CASE NO. 6652 Page 3 ("FCDU") transactions for the same year. Ukewise, in the said return, petitioner reported a total amount of P245,888,507.00 final and creditable withholding taxes which was applied against the final income tax due of P210,364,280.00 leaving an overpayment of P35,524,227.00, as shown below: Special Ihte Regular Rate Sa les/ Revenues/R e c e i p t s/ Fees P2.03! ,786,989.00 p 9.4!0,611 ,254 .00 Less: Cost of Sales/Se rvices � - - - - - - - - -- 13.480 972.398.0Q Gross Income from Operation (P 4,070,361 , 144.00) Add: Non-Operating & Other Income P2,031,786,989.00 Total Gross Income 3.324 647 690.00 71.855.807.00 (P 745,713,454.00) Pl ,959,93 1, 182.00 Less: Deduct ions 10 573244.148 00 Tax.ablc Income Pl,959,931.182.00 (P ll.3 18,957,602 00) Tax Rate 10% 32% Income Tax p 210 364 280.00 .!_!'_ _ _ ____: Aggregate Income Tux Due P 210 364 280.00 ,_P_ _ _ __ \ I Less: Tax C redits/Payments Prior Years' Excess Cred its p 13 ,266,584.00 Tax Payments fo r the First Three Quarters 2,976,489.00 C reditable Tax Wi thhe ld ti>r the First Three Quarters 2 16,455,877.00 Cred itable Tax Withhe ld for the Fourth Quarter 13.189.557.00 Total Tax Credits/Payments p 245.888,507.00 Ove1�payrnent (�__.15.524 227.00) In its second amended return, petitioner's income tax overpayment of ) P35,524,227.00 consisted of the balance of the prior year's (1999) excess credits of P9,057,492.00 to be carried-over as tax credit to the succeeding quarter/year and excess creditable withholding taxes for taxable year 2000 in the amount of P26A66,735.00 which petitioner opted to be refunded. J On November 11, 2002, petitioner, through its Vice President Ligaya R. Gagolinan, filed a claim for refund �or the issuance of a tax credit certificate in the amount of P26,466,735.40 for the taxable year 2000 with the responden~ J ..I ' l 6 Exhibit wW. J J

DECISION C.T.A. CASE NO. 6652 Page 4 Due to respondent's inaction on its administrative claim, petitioner appealed before this Cowt by way of a Petition for Review on April 11, 2003. In his Answer, respondent alleged, inter-alia, that petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau; the amount of P26,466,735.40 being claimed by petitioner as allegedly representing overpaid creditable withholding tax for the year 2000 was not properly documented; in an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit; petitioner must show that it has complied with the provisions of Sections 204(C) and 229 of the Tax Code on the prescriptive period for claiming tax refund/credit since claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation. 7 The Court commissioned the services of Mr. Ruben B. Rubio of the SGV & Co. as independent auditor to examine and verify petitioner's voluminous documents. Only petitioner proffered documentary evidence and it presented Mr. Rubio and its Assistant Vice-President of Central Tax Management Department Unit and Financial Management Division, Atty. Julian B. Soriano as witnesses. In the Resolution of April 12, 2006, the parties were given thirty (30) days from receipt thereof to submit their respective memoranda. However, petitioner alone filed its memorandum within the prescribed period. On June 20, 2006, this J' case was deemed submitted for decision. For this Court's consideration, the parties stipulated the following issues~ J 7 Rollo, pp. 689-690. J J J

DECISION C.T.A. CASE NO. 6652 Page 5 "1. Whether or not the daim for refund was filed within the two-year period prescribed by Section 229 of the Tax Code; 2. Whether or not the income upon which the taxes were withheld were included in the return of the redpient; 3. Whether or not the fact of withholding is established by a copy of a statement issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom; 4. Whether or not petitioner had negative taxable income for yea r 2000; s. Whether or not the creditable tax withheld were utilized or not credited in the taxable years of 2000 and 2001; and 6. Whether or not the Certificates of Creditable Withholding Taxes correctly and accurately represent the unutilized amount of P26,466,735.40."8 Being interrelated, the issues shall be jointly discussed. To bolster its claim for refund, petitioner invokes the provision of Section 76 of the 1997 NIRC, as amended, which reads: SEC. 76. Final Adjustment 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 J 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 I against the estimated quarterty income tax liabilities for the taxable I J quarters of the succeeding taxable years. Once the option to carry- over an? apply the excess quarterly income tax against income ta~ J 8 Rollo, pp. 714-716. j ~;, � I ...J I .J

. -.� DECISION C.T.A. CASE NO. 6652 Page 6 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 shall be allowed therefor." From the foregoing, the corporate taxpayer's excess tax credits or overpaid income tax in a given taxable year may either be refunded (in the form of cash or tax credit certificate) or carried-over and applied to the succeeding taxable quarters/years. However, once the option of carry over has been made, the same becomes irrevocable for that taxable period. A perusal of petitioner's second amended income tax return and audited financial statements for taxable year 20009 shows that its Regular Banking Unit ("RBU'') had indeed suffered a net loss in the said year. As can be seen in Part II (Computation of Tax) of the same return, specifically under the column "Regular Rate", petitioner's deductions for "Cost of Sales/Services" amounting to P13,480,972,398.00 and Expense Deductions amounting to P10,573,244,148.00 totalling P24,054,216,546.00 exceeded its gross income of P12,735,258,944.00 representing the sum of its "Sales/Revenues/Receipts/Fees(Schl)" of P9,410,611,254.00 and "Non-Operating & Other Income" of P3,324,647,690.00 resulting in a net loss of P11,318,957,602.00. Accordingly, petitioner had no income tax liability at the normal rate of 32% for the year 2000. J Likewise, for purposes of computing its Minimum Corporate Income Tax (''MCIT") for the same year, petitioner's second amended return/audited financia1z_ I I ..J J 9 B<hibit:S .c, C-4 & c-�s. J J J

DECISION C.T.A. CASE NO. 6652 Page 7 � statements reflected a gross loss of P745,713,454.00. 1 Considering that under Section 27(E)(4) of the National Internal Revenue Code (''NIRC") of 1997, the MCIT is based on gross income (and not gross loss), petitioner also had no MCIT liability for taxable year 2000. Inasmuch as petitioner's second amended income tax return for taxable year 2000 was prepared under penalties of perjury, the figures appearing therein are presumed to be true and correct in the absence of contrary evidence. 11 In the case of Citibank N. A. vs. Court of Appeals and Commissioner of Intemal Revenutf2 the Supreme Court held that: "A refund claimant is required to prove the inclusion of the income payments which were the basis of the withholding taxes and the fact of withholding. However, detailed proof of the truthfulness of each and every item in the income tax return is not required. That function is lodged in the Commissioner of Internal Revenue by the NIRC which requires the Commissioner to assess internal revenue taxes within three years after the last day prescribed by law for the filing of the return. In San Carlos Milling Co., Inc. vs. Commissioner of Internal Revenue, the Court held that the internal revenue branch of government must investigate and confirm the claims for tax refund or credit before taxpayers may avail themselves of this option . The grant of a refund is founded on the assumption that the tax return is valid: that is. the facts stated therein are true and correct. In fact even without Petitioner's tax claim, the Commissioner can proceed to examine the books, records of the petitioner-bank. or any data which may be relevant or material in accordance with Section 16 of the present NIRC." (Underlining supplied.) In the present case, since petitioner had no income tax liability either at the I J regular rate of 32% or MCIT rate of 2% against which the subject creditable ~ . J J 10 Schedule of Minimum Corporate Income Tax Computation for the year ended December 31, 2000 atta,ched to Exhibit C. . 11 Paseo ,Realty and Development Corporation vs. Commissioner of Internal Revenue, CTA case No. 4693, July 29/ 1993 and affirmed by the Court of Appeals in CA-G.R. SP No. 33589, October 14, 1994. 12 G-~� No. 107434, October 10, 1997. j l __j _j

DECISION C.T.A. CASE NO. 6652 Page 8 withholding taxes ("CWT") of P26,466,735.40 may be applied or credrt:ed, the same remained unutilized as of December 31, 2000. In its tentative and first and second amended returns for taxable year 2000 filed on April 18, 2001, July 25, 2001, and June 20, 2002,13 respectively, petitioner marked both options "To be refunded" and "To be carried over as tax credit next year/quarter" and indicated the following: "(Note: 2000 CWT to be refunded while balance of 1999 CWT to be carried over as tax credit next year/quarter)". In its second amended return, it was spedfically indicated that income tax overpayment of P35,524,227.00 shall be treated as follows: CWT for the year 2000 amounting to P26,466,735.00 "To be refunded" while the 1999 CWT amounting to P9,057,492.00 ''To be carried over as tax credit next year/quarter". Clearly, petitioner properly marked the option "To be refunded" insofar as the claimed unutilized excess creditable withholding taxes for taxable year 2000 is concerned. Moreover, in the 2001 tentative and amended income tax returns for its Regular Banking Unit and Foreign Currency Deposit Unit,14 petitioner did not carry- over the 2000 excess creditable withholding taxes of P26,466,735.00. As aptly noted by SGV & Co., 15 it was only the amount of P9,057,492.00 representing the 1999 excess credits that was reflected as "Prior Yea(s Excess Credits" in the said 2001 income tax returns filed by petitioner for its RBU and FCDU, as follows: \ J Prior Year's Excess Credits: RBU (Exhibit E) p 5,106,339.00 .FCDU (Exhibit F) 3,95l.Jjl_.OO TOTAL )) 9.057.492.00 .@ I 13 Exhibits A, B & 'c. 14 Exhibits ZZ-1, AAA-1, XX, YY, E & F. 15 Page 2; ~h ibit G. J J j

DECISION C.T.A. CASE NO. 6652 Page 9 Thus, petitioner could not have possibly utilized the claimed creditable withholding taxes of P26,4661735.40 in the year 2001 or in any of the succeeding years. In which case, the amount of P26,466,735.40 appears to have been excessively paid and refundable pursuant to Section 76 of the NIRC of 1997. However to be entitJed to a refund of the subject claim, petitioner must observe the following requisites : 1. That the claim for refund is filed with the Commissioner of Internal Revenue within the two-year prescriptive period from the date of payment (Section 204 in relation to Section 229, 1997 NIRC); 2. That the fact of withholding is 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. That the income upon which the taxes were withheld were included in the return of the recipient}6 With regard to the first requisite on prescription, petitioner asserts that it filed its claim for refund before the administrative and judicial levels within the two (2)-year reglementary period under Sections 204(C) and 229 of the 1997 NIRC, as amended, which provide: SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or J penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, andr 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 writing with the Commissioner a J cl.aim for' credit or refund within' two (2) years after the payment of theJl;L I 16 Section 2.5$, Revenue Regulations No. 2-98, as amended; Citibank, N.A. vs. Court of Appeals and J CIR, 280.5Q:RA 457. J :J

DECISIO N C.T.A. CASE NO. 6652 Page 10 tax or penalty: Provided, however, TI1at a return filed showing an overpayment shall be considered as a written claim for credit or refund. SEC. 229. Recovery 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 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: Providfft 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 to have been erroneously paid. Petitioner satisfied the first requisite. The reckoning of the two-year prescriptive period for the filing of a claim for refund/tax credit of excess credit:lble withholding taX/quarterly income tax payments commences from the date of filing of the annual income tax return .17 Petitioner filed its income tax return for the taxable year 2000 on April 18, 2001. 18 Counting from this date, petitioner had until April 18, 2003 within which to file its claim for refund or tax credit certificate both in the administrative and judicial levels. Therefore, the administrative claim for refund filed on November 11, 200219 and this Petition for Review filed on April 11, 2003 are well \tVithin tl;le two-year prescriptive period:.a . _j :� �:� 17ACCRA Irwestments Corporation vs. Court of Appeals, 204 SCRA 957 (1991); Commissioner of ~:- I Intern~ll~evenue vs. TMX Sales, Inc., 205 SCRA 184 (1992) . 18 Per~gMc No. 19-2001 .l . taxpayers with accounting period ended December 31, 2000 were granted an .J extens~n� of?time to file their income tax returns up to April 18, 2001. ; J . 19 ExhitJ�l.'t WW. I �'' _j ''{ 1 {' I :J �, ,

DECISION C.T.A. CASE NO. 6652 Page 11 As to the second requisite, per verification by the commissioned auditing firm, SGV & Co./0 the amount of P26,466,735.40 representing taxes withheld for 2000, the subject of the claim for refund, are supported by Certificates of Withholding Taxes ("CWTs") as follows: Taxes withheld with original copies of the CWTs p 24,05 8,809.85 Taxes withheld with original copies of the CWTs- 1, 488 ,7 87.9 5 128,775.00 no indication of period covered Taxes withheld with original copies of the CWTs- 781 ,362. 60 9 000.00 where the Bank's name was placed under the payor's name f .26...466..IJ5.40 Taxes withheld supported by CWTs but still subject to further verification Tax withheld taken up twice Total Upon examination of the SGV report and petitioner's supporting documents, this Court finds the above claimed creditable taxes withheld in the amount of P24,058,809.85 (with original copies of t he CWTs) valid except for the amount of P48,600.00 the corresponding certificates of which do not bear the dates or period when the indicated creditable taxes were withheld, to wit: Exhibit Withholding Agent Tax Withheld D-590 SALAP AN G, AMELIA P 45 , 000 .00 D-5 16 BEBITA, EDWARD 3.600.00 TOTAL P48.600.00 As to the creditable taxes withheld in the amounts of Pl,488,787.95 and P128J75.00, although this Court observes that there were no dates indicated in the J certificates covering the creditable withholding taxes of P1,488,787.95, the related Deeds of Absolute Sale which were executed in the year 200021 show that the I _j creditable taxes of P1,488,787.95 pertain to creditable taxes withheld on petitioner's .� ~ . 20 Exhibit G. . . ' 21 Exhibits I to 1-40. I _j ;.

DECISION C.T.A. CASE NO. 6652 Page 12 sales of real properties in the year 2000. Similarly, while petitioner's name was placed under the payor's name in the cettificates covering the creditable taxes withheld of P128,775.00, the related Deeds of Absolute Sale which indicated petitioner as the selle~2 prove that the said creditable taxes of P128,775.00 were withheld on petitioner's sales of real properties in the year 2000. Thus, the said '1 certificates were extended credence and probative value by this Court. Regarding the creditable taxes withheld of P781,362.60 detailed in Annex D of Exhibit G, this Court observes that only the certificates corresponding to the following creditable withholding taxes of P42,417.00 can be considered valid: Exhibit V\'ithholding Agent Tax Withheld D-22 Carol Ann Wy p 5,400.00 D-104 37 017 .00 Felipa L. Garcia p 42.417.00 TOTAL The certificates covering the remaining creditable withholding taxes in the amount of P738,945.60 (P781,362.60 less P42,417.00) shall be disallowed due to the following reasons: Exhibit Withholding Agent Tax Withheld 1.) Supported by certUicates dated outside the period ofclaim _,' a.) Supported by certificates dated 2001 D-26 Albert Figueroa p 2,781.~ I I I ~ .J 22 Exhibits�J- i to J-2. J

DECISION C.T.A. CASE NO. 6652 Page 13 D-57 Apolonio Bati, Jr. 39,000.00 D-74 Elaine Garcia 17,925 .00 D-119 Emerald Cachola 24,570.00 37,230.00 D-:76 Emmanuel Duterte 101 ,250.00 12,985.50 D-157 Evilla T. Amar 27,029.68 D-140 F1orante Pamittan 6,000.00 D-4 Florits Su 25 ,905 .00 D-105 Henuinia D. Manlapaz 3,982.50 D-49 Jennete Cruz 4,387.50 D-88 Julius Decierto 37,350.00 D-117 Lerma Tacipit 4,103.52 D-89 Loma Sta. Maria 26,250.00 D-5 Ma. Linda Casugod 13,950.00 D-151 Melitona C. Retutas D-158 Nelda Onenieta 4 ,575 .00 D-6 Pedro Membrana 54,187.50 D-27 Perseveranda Domingo 25 ,696.40 D-24 PNB Forex, Inc. 16,800.00 D-165 Ramon/Veronica Laxamana D-144 Rodolfo S. Teodoro 2,325.00 D-111 Rodolfo/Estrellita Malabanan 49,5 00.00 D-86 Rogelio B. Co. D-147 Ruhaida Amed 7,650.00 D-93 � SHJ Development Corporation 2,970.00 D-28 Sps. Luis Antonio/Rizalina Y ao 2:5,462.50 D-138 Susan Honculada 21,000.00 D-1 Urbano Amante 43 ,500.00 D-133 Wilfreda Navarro 12,360.00 53 ,925.00 b.) Supported by a certificate dated 1999 D-602 Luzviminda de Villa 22,500.00 p 730,151.10 2.) Supported by a certificate with no indicated amount of creditable tax wirhheld 8,794.50 D-15 May Jane Catubig r138.945..@ Total: Regarding the creditable taxes withheld in the amount of P9,000.00 which was noted by SGV & Co. as ''taken up twice", the same shall be denied for being .J cla imed twice by petitioner. J Based on the above discussion, out of the total claimed creditable withholding J ta?<es of P26,466,735.40, petitioner was able to substantiate only the amount of J . ~25,666,0,64.80, computed as follows~ '� ' r �. ' . ;.'1: I �p II I --.)

DECISION C.T.A. CASE NO. 6652 Page 14 Amow1t of C laimed Creditable Taxes Wi thheld p 26,466,735.40 Less: 1.) Certificates which do not bear any date or period 48,600.00 when the indicated creditable taxes were �vilhheld 730,l5l.l0 2.) Certificates dated outside the peri_od of claim 8,794.50 9 000.00 3.) Certificate without indicated amoWlt of tax withheld f...25_.6 70.189Jill 4.) Certificates taken-up twice Substantiated Creditable Taxes Withheld I' Anent the third requisite that the income upon which the taxes were withheld were included in the return of t he recipient, the commissioned auditing firm, SGV & Co, summarized in its report dated September 29, 2004,23 its findings as follows: Updated Summary of the Results of Lhe Procedures to Determine the Related Income Income/loss of which were recorded in 2000 as traced to Lhe Bank' s p 8,462,031.27 general ledger (GL) transaction history using as reference the name of the payor/withholding agent, amount of income/loss reflected in the transaction tickets, branch name, transaction date, and accoWJt title (e.g. PLASE, Income from Assets Acquired, and Rent Income). Income/loss of which were traced to the 2000 general ledger transaction 7, 185 ,275.34 history using as reterence the amount of income/loss retlected in the transaction tickets, branch name, transaction date and accOLmt title. However, the names of the withholding agents were not indicated in the GL. Income/loss of which were traced in the 2000 general ledger (GL) . 5,806,814.92 transaction history using as reference the amount of income/loss reflected in the transaction tickets, bran.ch name, transaction date and accmmt title properties. Income of which were recorded either in 1999 and 2001 1,574,572.56 No income earned or loss incurred from the transaction, only recovery of 978,870.33 expenses. Income/loss of which were traced in the 2000 general ledger (GL) 513 , 662.61 transaction history using as reference the names ofthe previous owners of 1,067,205 .98 the properties as ret1ected in the accounting tickets showing the reciprocal entries between the Branch concerned and the Head Office to take-up the taxes withheld on the transaction. Income of which were only supported by documents (i.e. transaction ticket, and/or input sheet), the details of which cannot be traced to the � general ledger transaction history . Income of which were not veritied in the general ledger transaction history in the absence of supporting docmnents (i.e. transaction ticket and/or input sheet} 878 302.39 ,, TOTAL J P 26.466.735. 40 Ja. J 23 Exhibit RR. I _)

DECISION C.T.A. CASE NO. 6652 Page 15 Based on the above findings, the creditable withholding taxes in the amounts of P1,067,205.98 and P878,302.39 amounting to P1,945,508.37, the related income of which were not traced to the general ledger must be denied. However, this Court notes that the following creditable withholding taxes of P37,666.40 disallowed earlier due to petitioner's failure to substantiate the same by proper certificates were also included in the amount of P1,945,508.37, to wit: Exhibit Withholding Agent Tax Withheld K, QQ PNB Forex p 25,696.40 K, QQ 2,970.00 L, PP Ruhaida Amed 9 000.00 Agnes Esmile p 37.666.40 T OTAL Hence, only the net creditable withholding taxes in the amount of P1,907,841.97 (P1,945,508.37 less P37,666.40) shall be denied for failure to satisfy the third requirement. Consequently, out of the claimed amount of P25,670,189.80 supported by valid certificates, only the creditable withholding taxes of P23,762,347.83, the related income of which were verified to have been recorded in petitioner's general ledger and reported in petitioner's income tax return either in the year 1999, 2000 or 2001, satisfied the third requisite, computed as follows: Creditable Taxes Withheld With Valid Certificates p 25,670,189.80 Less: Creditable Taxes Withheld, the related income of which was not verified against the general ledger 1 907.84 l. 97 I Refundable E xcess Creditable Taxes Withheld p 23.762.347.83 ~ WHEREFORE, premises considered, the petition is hereby GRANTED. i . Accordingly, respondent is hereby ORDERED TO REFUND or ISSUE A TAX ....; CREDIT CER~IFICATE to petitioner in the reduced amount of Twenty Three~ I _J .i -~� i , I .J { I -'

DEOSION C.T.A. CASE NO. 6652 Page 16 Million Seven Hundred Sixty Two Thousand Three Hundred Forty Seven Pesos and 83/100 (P23,762,347.83) representing unutilized excess creditable withholding taxes for taxable year 2000. SO ORDERED. $ CAESAR A. CASANOVA Associate Justice WE CONCUR: L~.~ ERNESTO D. ACOSTA CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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 Courrs Division. LlQL~ ERNESTO D. ACOSTA Presiding Justice Chairperson, First Division II I; __j II u