CTA Case No. 5359 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENJAY HOTELS, INC. Petitioner , - versus - C.T.A. CASE NO. 5359 THE COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAY 05 1998j Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - DECISION This case Involves petitioner's claim for refund or issuance of tax credit certificate in the amount of P810,468.00 representing overpaid or excess income taxes paid for calendar year 1994. Petitioner is a domestic corporation duly organized and e�isting under and by virtue of the laws of the Philippines. On Apr i I 15, 1994, petitioner f i Ied its annual income tax return for calendar year 1993 showing a net loss of P5 , 138,424.00 and a Ni I income tax I i ab iIi ty <Exh. A). However, petitioner had a quarterly income tax payment of P950,882.00 during said calendar year <Exh. 0). This payment was not uti I ized in the same calendar year 1993 because petitioner had no income tax I i ab iIi ty for this particular period, thus, it resulted to an over payment, computed as follows:

DECISION C.T.A. CASE NO. 5359 -2- Income P5,138,424.00 Tax Due NIL Less: p 950,882.00 a) Prior Year's Excess Credit p 950,882.00 b) Quarterly Payment P950,882 c) Creditable Tax Withheld Total Refundable Tax Petitioner, pursuant to Section 69 of the Tax Code, signified its intention in the return to refund the overpaid income tax. It marked <x> in the box "to be refunded" on the face of the return. However, records show that petitioner opted not to file a claim for refund for the refundable amount of P950,882.00 but instead appl led the same as tax credit to the succeeding taxable year. For the following calendar year (1994), petitioner f i I ed its annual income tax return showing an income tax due of P10,416,309.00 <Exh. E). The return also shows total tax credit of P11,226,777.00 which was applied against its income tax due which resulted in the refundable amount of P810,468.00, computed as follows: Taxable Income P29,760,885.00 10,416,309.00 Tax Due P11,226,777.00 Less: p 810,468.00 a) Prior Year's Excess Credit p 950,882.00 b) Quarterly Payment P9,604,984.00 c) Creditable Tax Withheld p 670,911.00 Total Refundable Tax

DECISION C.T.A. CASE NO. 5359 - 3- On Apr i I 11 , 1996, petitioner filed a letter with the respondent requesting for a tax refund or issuance of tax credit certificate in the amount of P810,468.00 representing its alleged overpaid income tax for the calendar year 1994 (Exh. JJ). Since no action was taken by the respondent and the two (2) year period was about to expire, petitioner filed a petition for review with this Court on April 12, 1996. Respondent, in her Answer raised the following Special and Affirmative defenses: 1. Petitioner's claim for refund of a I Ieged excess income tax paid is st iII under administrative investigation by the BIR; 2. In a claim for refund, it is incumbent upon petitioner to prove that he is entitled to it. He must be able to point to a positive provision of law granting such right; 3. Claims for refund of taxes are construed strictly against the claimant, the same being in the nature of exemption from taxes (CIR vs. Ledesma, 31 SCRA 95; Manila Electric Co. vs. CIR, 67 SCRA 35} 4. It is incumbent upon petitioner to show that he has campi ied with the provisions of Section 230 of the Tax Code. The sole issue to be resolved by this Court is whether or not petitioner Is entitled to the refund or tax credit in the amount of P810,468.00 representing overpaid or excess income tax for calendar year 1994.

DECISION C.T.A. CASE NO. 5359 - 4- In support of its case, petitioner presented in evidence various documents which, among others, consist of the following: 1 � Annual Income Tax Returns for calendar years 1993, 1994 and 1995 <Exhs. A, E, 11) 2. Quarterly Income Tax returns pertaining to said calendar years <Exhs. B, C, D, F, G, H inclusive of submarkings) 3. Certificate of creditable withholding tax at source <Exhs. I, K, L, M, 0, P, a, R, S, T, U, V, W, X, Y, Z, AA, BB, CC, DO, EE, FF, GG, HH, i nc I us i v e of s u bm ark i ng s > 4. Administrative claim for refund duly filed with the BIR <Exh. JJ) On the other hand, respondent's counsel failed to submit any controverting evidence. Petitioner submitted its memorandum while respondent did not. After a careful scrutiny of alI the evidence presented before Us, We rule in favor of the petitioner. Section 69 of the Tax Code provides as follows: Section 69. Final adjustment return. Every corporation I i ab Ie to tax under Section 24 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 is not equal to the total tax due on the entire taxable income of that year the corporation shall either: (a) Pay the excess tax sti II due; or

DECISION C.T.A. CASE NO. 5359 - 5- (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 I iabi I ities for the taxable quarter of the succeeding taxable year. A portion of the excess income tax payments for the years 1993 and 1994 consist of creditable taxes withheld by various withholding agents, therefore it was also essential to determine whether or not petitioner complied with the requirements provided under Revenue Regulations No. 6-85, to wit: 1 . That it f i Ied a claim for refund within the two ( 2) year period from the date of payment of the tax as prescribed under Section 299 <now 230) of the National Internal Revenue Code, as amended; 2. That the income upon which the taxes were withheld at source under Section 53 were included as part of the income declared in the Income tax 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. 6-85; see Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; affirmed by the Court of Appeals in Citytrust Finance Corporation vs. Court of Tax Appeals and the Commissioner of Internal Revenue, CA- G.R. SP No. 28239, March 14, 1994; and Citytrust Finance Corporation (formerly Investor's Finance Corporation/FNCB Finance)

DECISION C.T.A. CASE NO. 5359 - 6- vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; affirmed by the Court of Appeals in Commissioner of Internal Revenue vs. Citytrust Finance Corporation <Formerly Investors Finance Corporation/FNCB Finance) and the Court of Tax Appeals, CA-G.R. SP No. 31104, Apri I 18, 19941. This Court finds that petitioner has substantially complied with the aforementioned requirements. Petitioner f i Ied its administrative as wei I as judicial claims for refund within the two-year prescriptive period provided by Section 230 of the Tax Code. Petitioner filed its 1993 Annual Corporate Income Tax return on Apri I 15, 1994 <Exhibit "A") and its 1994 Annual Corporate Income Tax return on Apri I 1 7' 1995 <Exhibit "E"). It then filed its claim for refund for the taxable years 1993 and 1994 with the Bureau of Internal Revenue on Apr i I 1 1 ' 1996 <Exhibit "JJ"). Finally, the petition for review covering the taxable years 1993 and 1994 was filed on Apri I 12, 1996. Petitioner also presented the Certificates of Creditable Withholding Tax at Source <Exhibits "I" to "HH", inclusive) to show that income taxes were withheld during the taxable years 1993 and 1994 by its various withholding agents. The records also show that petitioner declared in its annual corporate Income tax returns of 1993 and 1994 the income it earned from which

DECISION C.T.A. CASE NO. 5359 - 7- the creditable withholding taxes were withheld (Exhibits "D" and "E"). WHEREFORE, in view of the foregoing, respondent is hereby ORDERED to REFUND or in the alternative to ISSUE a TAX CREDIT CERTIFICATE in favor of the petitioner the sum of P810,468.00 representing overpaid income tax for the years 1993 and 1994. SO ORDERED. Associate-~ WE CONCUR: P esiding Judge - ~~ (II Veev1 RAMON 0. DE Associate Jud CEATIF CATION hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13 , Article VI I I of the Constitution. ~ 0~ ~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals