COLLIERS INTERNATIONAL PHILS., INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION ************ COLLIERS INTERNATIONAL CTA CASE NO. 7768 PHILS., INC., Members: Petitloner, ACOSTA, Chairperson -versus- BAUTISTA, and CASANOVA, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, 8 2011 ;3:01 P""". Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - AMENDED DECISION CASANOVA, l-: For resolution is petitioner's "Motion For Reconsideration {of the Decision dated May 31, 2010) with Motion to Admit Original Income Tax Return for Taxable Years 2005 and 2006" filed on June 22, 2010, without respondent's comment despite notice. Petitioner prays for the following: a. the setting aside of this Court's Decision dated May 31, 2010, which reads: . . . _

AMENDED DECISION CTA CASE NO. 7768 "WHEREFORE, premises considered, the Petition for Review is hereby DENIED for lack of merit. SO ORDERED." b. admission of petitioner's original Annual Income Tax Returns for taxable years 2005 and 2006; and c. the granting of petitioner's request for a tax credit certificate in the total amount of P5,514,715.00. In the Resolution 1 dated September 14, 2010, this Court allowed petitioner to present in evidence the documents attached to the instant Motion, as prayed for, and this case was set for hearing for the presentation of petitioner's additional evidence. On November 19, 2010, petitioner filed its Supplemental Formal Offer 3" and "Z8-4"; which this Court admitted in the Resolution dated January 19, 2011. On February 3, 2011, petitioner filed its Supplemental Memorandum. On February 15, 2011, the Motion for Reconsideration was deemed submitted for resolution in view of respondent's failure to file her Supplemental Memorandum despite the lapse of the period given by this Court to submit the same. Petitioner avers that a taxpayer is allowed by law to file an amended income tax return pursuant to Section 6(A) of the National Internal Revenu~ 1 Docket, pp. 377 and 378. 2 Docket, pp. 382-384.

AMENDED DECISION CTA CASE NO. 7768 Code (NIRC) of 1997 and that it opted to file an amended income tax return in order to correct errors and/or omissions in its originally filed income tax return. Petitioner further claims that in its original Income Tax Return for taxable year 2005, filed on April 17, 2006, it did not indicate an "x" mark on any of the options provided in Line 31; hence, when it filed its amended Income Tax Return on May 2, 2006, it marked the box "To be issued a Tax Credit Certificate" to expressly indicate its intention that a tax credit certificate, be issued for its excessjunutilized creditable withholding tax for taxable year 2005 in the amount of P5,514,715.00. Petitioner also pointed out that it was consistent in its choice to be issued a tax credit certificate for its excessjunutilized creditable withholding tax for taxable year 2005, as shown in its original and amended income tax return for taxable year 2006 where petitioner did not carry-over the same. Petitioner finally avers that it complied with all the requisites provided under the law in order to claim for refund/tax credit certificate; that it filed the subject claim for issuance of a tax credit certificate within the two-year reglementary period; it presented Quarterly and Annual Income Tax Returns for the years 2005, 2006 and 2007 and Quarterly Income Tax Returns for the first and second quarters of 2008 in order to prove its total creditable withholding tax and the fact that the amounts were declared as part of its gross income; and it presented several certificates of income tax withheld at source corresponding to the period of claim to prove the total amount of the taxes erroneously withheld.#-

AMENDED DECISION CTA CASE NO. 7768 After a careful evaluation of the arguments and additional evidence adduced by petitioner, this Court hereby partially reconsiders. Under Section 76 of the National Internal Revenue Code (NIRC) of 1997, as amended, the corporate taxpayer's excess tax credits or overpaid income tax in a given taxable year may either be refunded (either in the form of cash or tax credit certificate) or carried-over/applied to the succeeding taxable years. However, once the option to carry-over has been made, the same becomes irrevocable for that taxable period. During the hearing to adduce additional evidence incident to the Motion, petitioner presented and formally offered in evidence, the following income tax returns: original Annual Income Tax Return3 for taxable year 2005, original Annual Income Tax Return4 for taxable year 2006 and amended Annual Income Tax Return5 also for taxable year 2006. The returns were presented to assist the Court in determining whether or not petitioner carried- over the 2005 unutilized creditable withholding taxes to the subsequent taxable quarters/year. A perusal of petitioner's original Annual Income Tax Return for taxable year 20056 reveals excess tax credits as of December 31, 2005 in the amount of P11,506,612.00, consisting of the balance of the prior year's (2004) excess credits in the amount of P5,991,897.00 and net creditabl ~ 3 Exhibit "W8", inclusive of sub-markings. 4 Exhibit " X8", inclusive of sub-markings. 5 Exhibit " Y8", inclusive of sub-markings. 6 Exhibit " W8".

AMENDED DECISION CTA CASE NO. 7768 taxes withheld during the year (2005) in the amount of P5,514,715.00, as shown below: Minimum Corporate Income Tax p 408 399.00 Less : Creditable Ta xes Withheld During the Year Balance of Creditable Ta xes Withheld During the Year 5 923 114.00 Add: Prior Year's Excess Credits Excess Tax Credits p 5 514 715.00 5 991 897 .00 p 11,506,612.00 In the same return, petitioner did not mark any option regarding its excess tax credits of P11,506,612.00. However, in petitioner's original and amended Annual Income Tax Return for the subsequent taxable year7, only the prior year's (2004) excess credits in the amount of P5,991,897.00 were reflected. This means that the excess credits for taxable year 2005, which is the subject of the instant claim, were not carried-over to the succeeding taxable year of 2006. Moreover, a perusal of petitioner's Amended Annual Income Tax Return for taxable year 20058 shows that petitioner marked the option "To be issued a Tax Credit Certificate", indicating its choice to be issued with tax credit certificate for its excess creditable taxes withheld for taxable year 2005. Considering the foregoing, the claimed excess tax credits for taxable year 2005 in the amount of P5,514,715.00, appears to be refundable/creditable pursuant to Section 76 of the NIRC of 1997, as amended. However, in order for petitioner to be entitled to a refund or issuance of a tax credit certificate of excess creditable withholding tax at source, it must satisfy the following requisites ~ 7 Exhibits "X8" and "SSSSSSSS-4". 8 Exhibit "C".

AMENDED DECISION CTA CASE NO. 7768 1.) That the claim for refund was filed within the two-year prescriptive period as provided under Section 204(C) in relation to Section 229 of the NIRC of 1997; 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 was included in the return of the recipient. 9 Anent the first requisite, Sections 204(C) and 229 of the NIRC of 1997, provide that: "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 penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, 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 claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund ..."(Emphasis supplied) "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~ 9 Section 2.58, Revenue Regulations No. 2-98, as amended; Citibank N.A. vs. Court of Appeals and CIR, 280 SCRA 459; ACCRA Investment Corporation vs. CA, 204 SCRA 957.

AMENDED DECISION CTA CASE NO. 7768 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: Provided, howeve~ That the Commissioner may, even without a written claim therefore, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied.) In ACCRA Investments Corporation vs. Court of Appeals/10 the Supreme Court held that the two-year prescriptive period within which to claim a refund commences to run, at the earliest, on the date of the filing of the adjusted final tax return. It is only when the Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 11 From the foregoing, petitioner has two years from the filing of the Final Adjustment Return within which to file a claim for the issuance of tax credit certificate of excess creditable income taxes withheld both in the administrative and judicial level. In this case, petitioner filed its original Annual Income Tax Return12 on April 17, 2006. It follows that the two year prescriptive period to file a claim for the issuance of tax credit certificate would be on April 17, 2008. Records reveal that the administrative13 and judicial claims were filed simultaneously on April 16, 2008. Both dates fell within the two-year prescriptive period. Further, the parties stipulated that the instant claim for refund was file'1a- 10 G.R. No. 96322, December 20, 1991. 11 Commissioner of Internal Revenue vs. TMX Sales Inc., eta!., G.R. No. 83736, January 15, 1992. 12 Exhibit "W8". 13 Exhibit " D"; Paragraph 1(c), Joint Stipulation of Facts and Issues, docket, p. 116.

AMENDED DECISION CTA CASE NO. 7768 within the two-year reglementary period based on Section 204(C) of the NIRC of 1997, as amended. 14 Anent the second requisite, petitioner submitted Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307)15, which were examined by the Court-commissioned Independent CPA (ICPA)16� Upon review of the !CPA's amended report17 and the supporting documents, the Court finds that the following creditable withholding taxes in the amount of P1,636,645.93 should be disallowed from petitioner's claim: 18 Findings Attached to Amount of Exhibit CWT Creditable withholding taxes supported by BIR Form 2307 of which the period is beyond the " I I I I I I I I " as taxable year of claim Creditable withholding taxes supported by BIR Annex A-7 p 8 421.15 Form 2307 indicated by the ICPA as "certified true copy" but no such certification can be found Annex A-8 73 500.00 from the records or on the face of the BIR Form 2307 Annex A-9 12,464.84 Creditable withholding taxes supported by Annex A-11 821120.25 photocopy of BIR Form 2307 Annexes A-2 and 721,139 .69 Creditable withholding taxes with no supporting A-5 P1,636,645.93 BIR Form 2307 Difference between amount actually withheld and amount indicated per BIR Form 2307 Total Thus, petitioner was able to satisfy the second requisite only to the extent of P3,878,069.07, out of the total claim of P5,514,715.00, computed as follows : Claimed Creditable Withholding Tax(CWT) p 5,514 715.00 1,636,645.93 I Less: CWT not properly supported by BIR Forms No. 2307 p 3,878 069.07 Excess CWT with valid BIR Forms No. 2307 14 Paragraph l(d), Joint Stipulation of Facts and Issues, docket, p. 116. 15 Exhibits "E" to "KKKKKKKK". 16 Emmanuel Y. Mendoza of Mendoza Querida & Co. 17 Exhibit " I I I I I I I I ". 18 Exhibit" I I I I I I I I", pp. 3-4.

AMENDED DECISION ITA CASE NO. 7768 As regards the third requisite, a review of the withholding tax certificates reveals that the creditable income taxes were withheld from gross income payments of P85,119,614.94Y On the other hand, petitioner's Annual Income Tax Return for taxable year 2005, disclosed a lower gross income amount of P55,963,304.00.20 As evaluated by the ICPA, petitioner's revenues for the year 2005 likewise amounted to P55,963,304.41, which included adjustments and write-offs. 21 The Court traced the corresponding invoices of the income payments from which valid creditable taxes were withheld as listed in Annexes A-1 to A- 6 of the amended ICPA Report with the Schedule of Revenues for the year 2005, Annex B of the same report, and found that the following income payments in the amount of Pl,001,671.76, with creditable withholding taxes in the amount of P57,823.37 did not form part of petitioner's declared revenues per its 2005 Annual Income Tax Return: Exh Pavor/Withholdinq Aqent Income Pavment CWT Caltex (Asia) Ltd. 409 .09 QQQQQQ Caltex (Asia) Ltd. p 8,181.82 p E-Data Services Phils. Inc. 2,579.55 RRRRRR E-Data Services Phils. Inc. 51 590.91 998.18 Hitachi, Ltd . wwwwww Infonxx Phils. Inc. 49 909.09 2 495.45 KLM Royal Dutch Airlines 2,454 .54 )()()()()()( KLM Royal Dutch Airlines 49 909.09 2 729.55 Malayan Insurance Co. Inc. 1 518.00 yyyyyy 49,909 .09 1 602.00 Mitsubishi Heavy Industries 27 272.73 FFFFFFF Mitsubishi Heavy Industries 54,590.91 Nippon Express Phils. Corp. 493.64 JJJJJJJ Pacific Northstar Inc. 75 900.00 4 845.01 KKKKKKK Pacific Northstar Inc. 1,813 .63 Phil. Cosmo Computer Business Inc. 80 100.00 LLL Reach Network Phils. Inc. 181 818.10 698.18 Siemens Inc. 698.18 MMMMMMM Steag State Power Inc. 24 682.00 872.73 952 .00 NNNNNNN 96 900.20 3 818.18 700 .00 QQQQQQQ 36,272.00 AAAA 34 909.09 BBBB 34 909.09 vwww 16 581.82 ZZLllll 47 600.00 IIIIIIII JJJJJJJJ 76 363.00 14,000 .00 19 Exhibit "I I I I I I I 1", Annex A. 20 Ex hibit " C", Line 15. 21 Exhibits "I I I I I I I 1", Annex B and "PPPPPPPP- 10".

AMENDED DECISION CTA CASE NO. 7768 TOTAL P 1,001,671.76 P 872.73 57,823.37 As indicated in the amended ICPA report, the foregoing income payments of Pl,001,671.76, represent reimbursable expenses that were subjected to creditable withholding tax. However, petitioner failed to provide documents to corroborate such statement. Thus, the creditable taxes withheld therefrom in the amount of P57,823.37 shall be disallowed. Likewise, creditable withholding taxes in the amount of P1,290,217.9322 is denied because it cannot be ascertained whether the related income payments in the amount of P36,746,771.04 formed part of petitioner's declared revenues per Income Tax Return as petitioner failed to present the corresponding Sales Invoices. In addition, petitioner's claim should be reduced by P1,577,896.38 as there is a discrepancy in the amounts of income payments per BIR Form 2307 and revenues declared per petitioner's Schedule of Revenues, to wit: Amount Income Declared as Payment per Revenue per CWT Per BIR BIR Form 2307 Schedule of Form 2307 ( E x h. Revenues ( E x h. "I I I I I I I I", ( E x h. "11111111" Annexes A1- "I I I I I I I I", pnnexes A1- Allowable CWT23 Ex h. Payor A6) Annex B) A6) Difference Emerald Mansion Condo p 7 260.00 DD Emerald Mansion Condo p 7 260.00 p 72 600.00 p 7 260.00 4 840.00 p - Emerald Mansion Condo 9,680 .00 FF Mitsubishi Corp. 4 840.00 48 400.00 4 840.00 68 838.60 - Phil. AXA Life Insurance 1404.95 HH Phil. AXA Life Insurance 9 680.00 96 800 .00 9,680 .00 619 .84 - uuu Insular Life Assurance Co . 28 050.78 KKKKK Ayala Land Inc. 888 240.00 688 386.00 88 824.00 12,000.00 19 985.40 Ayala Land Inc. 31 000 .00 LLLLL Ayala Land Inc. 17 000.00 15 454.54 1 545.45 11 800 .00 140.50 Panorama Devt. Corp. 4 234 .63 ww 7 500.00 6 818.18 681.82 61.98 I 590 542.80 280 507.83 59 054.28 31 003 .50 J 132,000.00 120,000.00 13 200 .00 1,200 .00 J 341 000 .00 310,000 .00 34,100.00 3 100.00 ecce 618 000.00 590 000.00 12 360 .00 560.00 44 575 .00 42 346 .25 4 457.50 222 .88 22 Exhibit" I I I I I I I I", Annex A-10. 23 Amount declared as revenue x Actual tax rate used per BIR Form 2307.

AMENDED DECISION CTA CASE NO . 7768 K Ayala Land Inc. 399 999 .00 430 000.00 7 980.00 7 980.00 - 16 176.32 17,793.95 1,617 .63 1,617 .63 EEE KSY Land Devt. Corp. 23,252.08 12 000.00 - 232 520 .83 120 000.00 7 345.25 6 677.50 MMMMM Post Oaks Properties Corp . 73,452 .50 66 775 .00 52 500.00 12 874.73 11,252 .08 85 831.55 4,840 .00 4 840.00 667 .75 Q Chartex International Corp. 350 000.00 48 400.00 4 840.00 6 615.00 4 410.00 39 625.27 uu HSBC EDPI 94 500.00 141 750.00 21,735.00 13 041.00 - FF Emerald Mansion Condo 141,750.00 1 607.20 360.00 236 250.00 18 000 .00 9 900.00 2 205.00 Equitable Bank Tower 80 360.00 66 000.00 6 600.00 99 000.00 73 500.00 23 934 .58 8,694 .00 MM Condo 735 000.00 239,345.75 73,500.00 72 225.35 1 247 .20 735,000.00 722 253.46 73 500.00 24 568.99 3 300.00 Equitable Bank Tower 735 000 .00 245 689 .90 49,565.43 27 877.50 19,470.00 1,274.65 QQ Condo 185,850.00 129 800.00 48 931.01 27 877.50 18 585.00 CCC International School Inc. 185 850.00 123 900.00 21,080 .00 20 400 .00 8,407.50 210,800.00 204 000.00 13 600.00 13 600.00 www Nol Madrigal Realty 136 000.00 204 000.00 15,000 .00 13,636.37 9 292 .50 100 000.00 90 909.10 91 244.10 75 571.65 680.00 DDDDD Philexcel Business Park 912 441.00 755,716.50 91,976.84 61,818.17 919 768.60 618,181.84 20 254.00 20 013.48 - EEEEE Philexcel Business Park 202 540.00 200 134.80 51,975 .00 47 250.00 346 500.00 315,000.00 10 526.32 9 569.38 1 363 .64 FFFFF Philexcel Business Park 105 263.16 95,693 .78 27 200 .00 20 400 .00 15 672.45 272 000.00 204 000.00 30, 158 .67 Phil. Bank of 180,027 .27 95,054.40 1,200,181.80 633 696.00 169 536.66 25 364.61 240.52 FFFF Communications 1 695 366.64 253 646.10 229,196 .53 15 374.61 4 725.00 2,291 965.32 153,746 .10 257,846.10 23,061.91 GGGG Phil. Bank of 1,718 974.01 153 746.10 257 846.10 23 061.91 956.94 Communications 1 718,974.01 153 746.10 91,589.84 14 157.00 6 800.00 QQQQ Petron Megaplaza Condo 4 579 492 .16 707 850.00 76,565 .89 4 167.24 Petron Megaplaza Condo 3 828 294.55 208,362 .00 72 769 .90 6 068.36 84,972 .87 nn 3,747 919 .83 312,543.00 78 789 .85 3 893.66 144 172.05 4 216 297.72 208 362.00 31 651.78 3 328.06 213,821.92 JJJJJ Phil. Plaza Holdings 1 582 589.00 166 403 .03 234,784.19 104 013 .14 4 993.82 2,080 .26 234,784.19 NNNNN RCBC Realty Corp. 249 691.00 4 516.98 1 000.00 77 432.84 225 849.07 50,000 .00 5 086 .32 1,000.00 72,398.65 m Renaissance 2000 Condo 254 315.83 50,000.00 7 720 .06 1 000.00 66 701.54 386 002.89 7,941.67 1,000 .00 74 896.19 H Ayala Land Inc. 397,083.70 so 000.00 4,195 .11 1 000 .00 28 323.72 209 755.38 16 029.94 5 443 .64 DDD Itochu Corp. 801,497 .00 50,000.00 4 202.83 1 000.00 2 913 .56 210 141.71 4,111.54 1,000.00 3,5 16.98 III Macho Holding Corp. 205 577.09 so 000.00 p 2,497,124 .66 P9 19,228 .28 4,086 .32 P39,596,967.9 2 6 720.06 RRRR Petron Megaplaza Condo 272 181.81 6 941.67 3 195 .11 GGG& so 000.00 10 586.30 so 000.00 3 202 .83 HHH Land bank of the Phils. 3 111.54 P11,187,283.8 1 P1,577,896.38 M Citicenter Bldg. Corp. N Citicenter Bldg. Corp . 0 Citicenter Bldg. Corp. p Citicenter Bldg. Corp. R Citibank Square Condo s Citibank N.A. w Citibank N.A. z Citibank N.A. zz International School Inc. BBB International School Inc. HHHH Petron Corp. LLLL Petron Corp. MMMM Petron Corp. NNNN Petron Corp. pppp Petron Corp. AAA International School Inc. 1111 Petron Corp. 0000 Petron Corp. OTAL In sum, petitioner has sufficiently proven its entitlement to a tax credit certificate of excess creditable withholding taxes for taxable year 2005 in the reduced amount of P952,131.39, computed as follows: ~

AMENDED DECISION CTA CASE NO. 7768 Amount of Claimed Excess CWT p 5 514 715.00 Less : Disallowances P1,636 645.93 CWT not properly supported by BIR Forms 2307 57,823.37 CWT the related income payments of which 1,290 217.93 did not form part of Petitioner's declared gross income per income tax return 1.1_577 896.38 4 56~583.61 CWT the related income payments of which do not have supporting invoices p 952,131.39 CWT pertaining to the discrepancies in income as reflected in the BIR Forms 2307 vis-a-vis the Schedule of Revenues Refundable Excess CWT WHEREFORE, premises considered, petitioner's "Motion for Reconsideration" is hereby PARTIALLY GRANTED and the assailed Decision dated May 31, 2010 denying petitioner's claim for issuance of tax credit certificate of unutilized creditable withholding taxes for taxable year 2005 is hereby REVERSED. ACCORDINGLY, respondent Commissioner of Internal Revenue is hereby ORDERED to ISSUE A TAX CREDIT CERTIFICATE to petitioner in the amount of P952,131.39, representing unutilized creditable withholding taxes for taxable year 2005. SO ORDERED. ~ CAESAR A. CASANOVA Associate Justice WE CONCUR: ~..__;-\.p, ~ ERNESTO D. ACOSTA Presiding Justice

AMENDED DECISION CTA CASE NO. 7768 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. t~t;), ['~ ERNESTO D. ACOSTA Presiding Justice Chairperson, First Division