CTA Case No. 5481 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ANSCOR INSURANCE BROKERS, INC., Petitioner, - versus - C.T.A. CASE NO. 5481 THE COMMISSIONER OF INTERNAL ~~-2~ ~~ - F. Promulgated: REVENUE, Respondent. )( - - - - DECISION This is a Petition for Review seeking for the refund or issuance of a tax credit certificate in the amount of ~4, 174,451.00 representing overpaid income tax fot~ 1994 and 1995. The facts of the case are as follows: Petitioner is a domestic corporation organized and existing under and by virtue of Philippine laws and is primarily engaged in insurance brokerage. Its income is mainly ft~om commissions subject to the 5% expanded withholding tax under Revenue Regulations No. 6- 85, which, in tm~n, is allowed as tax ct~edit against its income tax liability in the taxable quarter or year in which the income was earned or received. On Apt~i 1 15, 1994, Petitioner filed with the Bureau of Internal Revenue <BIR> its corporate annual income tax return for the calendar year ended December 31, 1993, reflecting a t~efundable income tax of P368,755.00, computed as follows:

DECISION C.T.A. CASE NO. 5481 2 Gross Income P53,490,354 Less: Deductions 41,278,201 Net Income P12,212, 153 Tax Due p 4,274,254 Less: A. Quarterly payments: First Quartet� 338,251 Second Quat�t er 2, 01 y, 701 Th i t�d Quad er 236,557(2,592,509) B. Creditable Taxes (2, 050, 500) (4, 643, 009) Withheld At source p (368,755) Tax Refundable This amount was carried over to the succeeding taxable however, since Petitioner's income tax liability for� 1994 was only P719,482.00, and after applying its prior year's excess tax credit of P358,755.00, there remained a tax due of only P350,727.00, thus r�est\lting again in overpayment of P1,588,273.00, as the total taxes withheld at source for the year totalled P2,039,000.00. Petitioner again carried over and applied its excess income tax ct�edit for� 1994 against its income tax liability for the succeeding taxable year. But since Petitioner's creditable taxes withheld at source for 1995 far exceeded its income tax payable even after deducting the excess cr�edit, there resulted an overpayment of P4, 174,451.00, computed as follows: Gr�oss Income P45, 508.1 508 Less: Deductions L~4, 751, 584 Net Income 845, 9E:4 Tax Rate 35% Income Tax Due Thereon 296,423

DECISION <P1,588,273) C.T.A. CASE NO. 5481 <P2, 782,501) - 3- [P4, 174,451 J Less: Prior year's (1994) excess credit Less: Creditable Taxes Withheld at Source in 1995 Total Overpaid Income Tax as of December 31, 1995 On Febt~uat~y 21, 1997, Petitioner filed with the BIR a claim for the refund of the aforesaid amount, citing Section 204 (3) in relation to Sec. 230 of the Tax Code, which pt~ovides: "Ruthority oF the Commissioner to compr~omise, abate, and r~eFund/cr~edit taxes .. -The Commissioner may- XXX XXX XXX (3) Cr~edit or~ r~eFund ta.J.i�es er~r~oneousl .v or~ illegally received, penalties without authot~ity, t~efund the value of intet~nal t~evenue stamps when they are returned in good condition by the pm~chaset~, and, in his disct~etion, 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 shall be allowed unless the taxpayer has filed in writing with the Commissioner a claim for credit or refund within two years aftet~ the payment of the tax ot~ penalty." On the other hand, Section 230 of the Tax Code states: "Recove>r�.~y� of' Tax Er~r~oneousl.J.�' or i l l e g a l l y 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 or in any manner wt�ongfully collected, until a claim For� r�eFund

DECISION C.T.A. CASE NO . 5 4 8 1 -4 or credit has been duly Filed with the Commissioner�, but such suit or� pr�oceeding ma.v bt.' maintained, wht.-?ther� 01�� not such ta><, penalt.v or� f3um has been paid under� pr�otest or� dur�ess. being no action on the part of he~�ein Respondent, the instant petition was filed on April 2, 1997. Respondent, in he~� Answer�, raised the following Special and Affirmative Defenses: 4. Assuming arguendo that the alleged refundable income taxes were paid by petitioner, the same were collected pursuant to law and pertinent BIR implementing rules and regulations; hence, the burden of proof lies upon the petitioner to establish that the taxes sought to be refunded or collected were erroneously and/or illegally collected by l~espondent. 5. Petitioner's allegation that it excessively paid its annual corporate income taxes during the years under review does not ipso facto warrant refund/credit. Petitioner must prove that the exclusions claimed by it fom its income taxes are allowable exclusions claimed by it from its income taxes are allowable exclusions under the Tax Code and its implementing rules and regulations (sic). Moreover, the same must be supported by evidence. 6. Claims for tax refund or tax credit are construed in strictissimi juris against the taxpayer as they partake of the nature of an exempt i on f t� om tax ; hence, it i s incumbent upon petitioner to prove that it is entitled thereto under the law. Failure on the part of petitioner to prove the same is fatal to its claim for tax refund or tax credit. 7. Lastly, petitioner must prove that it has complied with the provisions of Section 230 of the Tax as amended (sic).

DEC ISION C. T. A. CASE NO. 5481 - 5- Upon manifestation of respondent's counsel, she submitted her case for decision on the basis of the pleadings and available record. The sole issue brought before Us is whether or not petitioner is entitled to the refund sought on the basis of the evidence presented. Petitionet~, in suppm~t of i t s claim, submitted the following documents: Exhs. Desct~i pt ion A Certificate of Filing of To prove that peti- Amended Articles of tioner is a domestic Incorporation, S.E.C. corporation duly Reg. No. 446'33, issued organized and exist- to Petitioner by the ing under the laws Securities and Exchange of the Republic of Commission on July 14, the Philippines 1'381 B Amended Articles of To prove that peti- Incorporation of Peti- tioner is principal- tionet~ ly engaged in the insurance brokerage business C,E & G Cot~pot~at e Annual To prove that peti- Income Tax Returns tioner duly filed and Audited Financial with the BIR its Statements for Income Tax Returns Calendar years 1'3'34, and audited 1'3'35 and 1'3'36, financial state- t~ e s p e ct i v e l y ments for the said y ea-r~s D-1 to Cet~tificates of To prove that for D-4�5 Creditable Income the years 1'3'34 and F-1 to Tax Withheld at 1'3'35, petitionet~ had F-45 total creditable tax Sout~ce withheld in the amounts of P2,03'3,000.00-<1'394) & P2,782,600.56 ( 1'3'35)

DEC I SION C. T. A. CASE NO. 5 481 - 6- H Letter~-claim for~ To prove that peti- refund addressed to tioner filed with BIR dated February the BIR an adminis- 20, 1997 trative claim for refund of its excess withholding tax ct~ e d i t s for~ t h e years 1994 and 1995 within the two year period prescribed by law After examining the evidence presented, We rule in favor of Petitioner. To be entitled to the fo 11 owing requirements have to be met: 1. That the claim for refund was filed within the two (2) year period prescribed under Section 230 of the National Internal Revenue Code; ��=--� That the fact of withholding is established by a copy of statement <BI Form 1743.1) duly issued by the payot~ (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 t~ecipient. Petitioner's claim for refund filed with the Bureau of Intet~nal Revenue on Febt~uar~y 21, 1997 (Exh. H) as well as its Petition for Review filed with this Court on April 2, 1997, are both within the two-year period, that is' 12, 1995 and Apt~il 13, 1996, the dates when Petitionet~' s 199L~ and 1995 Income Tax Returns were respectively filed.

DECISION C.T.A. CASE NO. 5481 - 7- Petitioner has likewise complied with the second requi~~ement by its submission of the various certificates of creditable income tax withheld at source <Exhs. D-1 to D-45, F-1 to F-45>. As regards to the third requirement, however, the Court arrived at different summations for the years involved. For 1994, while the income reflected in Petitioner's income tax return may have included the sum total of the income reported in the certificates of creditable taxes withheld at source, the following adjustments were made so that the total taxes withheld for the year was reduced to P2,022,811.74, computed as follows: Creditable Taxes Withheld P2,039,000.E.3 at Source (1994) as appears in ITR and summa~~y Less:No Certificates (45,052.55) of c~~editable Tax Withheld a t Sou~~ce No Ce~~tificate (1,187.28) of c~~editable Tax Withheld a t Sotn~ce Trans-East Asia Ins. Co. (427.41) No Ce~~tificate of c~~editable Tax Withheld at Sou~~ce Add: Exh. D-29 Not in summary 30,478.34 Adjusted total P2,022,81l..74

DECISION C.T.A. CASE NO. 5481 - 8- For 1995, Petitioner's certificates of creditable taxes withheld at source revealed a total income of ~54,733,682.90, which is P9,643,018.90 more than the income stated in schedule 2 of the annual income tax return submitted by Petitioner. Thus, We infer t h at Petitioner did not include in its return all the income upon which the tax e s were withheld. In view of the foregoing, We are constrained to grant a refund only for such amount as Petitioner has substantially proven, detailed as follows: For Taxable Year 1994 Gross income p 47,274,262.00 Less: Deductions Net Income 45,218,600.00 Tax rate Income Tax Due p 2,055,662.00 Less: 351- Prior year's <1993) ~ 719,482.00 excess credit (368,755) Balance 350,727.00 Less: Creditable Taxes 2 , 022,811.74 Withheld at Source 1,672,084.74 Overpaid income tax for 1994 For Taxable Year 1995 Gross income P45,608,608.00 Less: Deductions 44,761,684.00 Net Income Tax rate p 846,924.00 Income Tax Due 351- p 296,423.00

DECISION 1,672,084.74 C.T.A. CASE NO. 5481 <P1, 375,661. 74> - 9- (2. 254,583. (H)) P3,630,244.74 Less: Prior year's (1994) excess c'r~ed it Balance Less: Creditable Taxes Withheld a t Sotn~ce fo'r~ 1995 (45091664 X 5'1-) Total Ove'r~paid Refundable Amount WHEREFORE , Respondent is hereby ORDERED to REFUND or in the alternative, ISSUE a TAX CREDIT CERTIFICATE, to Petit i one ...~ in the ...~educed amount of P3,630,244.74 representing overpaid income tax for the calendar years ended Dece mbe'r~ 31, 1994 and Decembe'r~ 31, 1995. SO ORDERED. ~~ 1: AMON 0. DE WE CONCUR: ~(Q~~ ERNESTO D. ACOSTA P'r~esiding Judge Associate�~

DECISION C.T.A. CASE NO. 5481 - 10 - CERTIFICATION I hereby certify t hat 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. L~~ ERNESTO D. ACOSTA Pl"~esiding Judge Co urt of Tax Appeals