STAGES PRODUCTION SPECIALISTS, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC STAGES PRODUCTION CTA EB NO. 2658 SPECIALISTS, INC. (CTA Case No. 9817) Petitioner, Present: DEL ROSARIO , P.J., RINGPIS-LIBAN, -versus- MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and. ANGELES, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. FE 8 2 3 2024 J(- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - RESOLUTION CUI-DAVID, J.: Before the Court En Bane is petitioner's Motion for Reconsideration filed on October 24, 2023, with respondent's Comment/Opposition (on Motion for Reconsideration) filed on October 31, 2023. Petitioner seeks reconsideration of the Court's Decision dated October 4, 2023, with the following dispositive portion: WHEREFORE, premises considered, the instant Petition for Review is DENIED for lack of merit. SO ORDERED.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue x------------------------------------------------------------------------------------------x Petitioner argues that the Court erred in disregarding creditable withholding taxes (CWT) amounting to P666,596.18, even if the original copies of the respective certificates were not produced under the Original Document Rule. According to petitioner, a duplicate is admissible to the same extent as the original, and that respondent did not file any comment or opposition to petitioner's Offer ofExhibits. Petitioner also argues that the Court erred in finding that the pieces of evidence it submitted were insufficient to prove that the income payments subjected to CWT were declared in its 2015 income tax return (ITR). According to petitioner, the testimonies of Ms. Michelle Lacsamana and Ms. Evangeline G. Agustin and the documentary exhibits submitted more than sufficiently proved that the incom'e payment received is part of petitioner's gross income. Petitioner also faults the Court for strictly construing tax refunds. According to petitioner, the case of Petron Corporation v. Commissioner ofInternal Revenue1 ruled otherwise. In his Comment, respondent argues against the admissibility of petitioner's exhibits. First, respondent points out that petitioner did not file a motion for reconsideration to the resolution/ order denying its exhibits. Second, respondent argues that the absence of respondent's objections does not refrain the Court from ruling on the inadmissibility of documentary evidence presented by petitioner. Respondent ends his argument by stating that tax refunds are in the nature of tax exemptions, and hence, these must be construed strictly against the taxpayer. Petitioner's Motion is not impressed with merit. Petitioner cannot belatedly question the Court in Division's denial of admission ofits Certificates of Creditable Taxes Withheld. To reiterate, petitioner argues that the Court erred in disregarding CWTs amounting to P666,596.18, even if the 'G.R. No. 255961. March 20, 2023.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue X------------------------------------------------------------------------------------------X respective original copies of the individual certificates were not produced under the Original Document Rule. A perusal of the records reveals that the Court in Division made the denial of admission of the said Certificates of Creditable Taxes Withheld in its Resolution dated June 3, 2020. 2 Consequently, the following CWTs were disallowed: Exhibit No. Payor's Name Amount Amount "P-10-1" Asian Academy of Television of Income of Tax "P-10-m" Arts Inc. Payment Withheld "P-10-u" 1'12,352.94 "P-10-v" Ayala Land, Inc. 1'82,352.94 10,244.98 "P-10-ii" 512,249.05 "P-10-xx" Bloomberry Resorts and Hotels, 225.48 Inc 11,274.11 294.11 "P-10-bbb' Bloomberry Resorts and Hotels, 14,705.36 21,831.41 "P-10-ccc" Inc 145,542.75 161.68 "P-10-eee" Creative Juice 11,764.71 Communications, Inc. 8,084.13 14,117.65 Smart Communications, Inc. 117,647.06 13,462.71 1,666.67 GMA Network, Inc. 94,117.64 714.29 89,751.40 5,294.12 Golden Arches Development 16,666.67 8,823.53 Corporation 35,714.29 153,294.64 35,294.12 15,882.35 Grolier International, Inc. 58,823.53 20,000.00 1,021,964.27 21,176.47 "P-10-fff' GV Productions, Inc. 105,882.36 3,508.68 "P-10-iii" 1,000,000.00 21,176.47 "P-10-mmm" Intelligent Beauty Skin 141,176.47 21,176.47 "P-10-mmm" Solutions Inc. 175,434.00 17,647.06 "P-10-nnn" Magic Leaf Marine Logistics 141,176.47 26,470.59 "P-10-ppp" Corp. 141,176.47 23,969.06 Magic Leaf Marine Logistics 117,647.06 Corp. 176,470.59 Makati Shangri-1a Hotel & 159,793.73 Resort, Inc. Manuela Corporation "P-10-sss" Marivent Resort Hotel Inc. "P-1 0-aaaa" Pilipino Cable Corporation "P-10-bbbb" "P-10-cccc" Philippine Long Distance "P-10-dddd" Telephone Company "P-1 0-eeee" Prime Events Force Unlimited Inc. "P-10-ffff' "P-1 0-gggg" Push Associates Inc Red Events & Communications, Inc. Red Events & Communications, Inc. Robinsons Land Corporation (Crowne Plaza Galleria Manila) 2 CTA Case No. 9817. Docket- Vol. II. pp. 1302 to 1303.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue X------------------------------------------------------------------------------------------X "P-10-llll" Sky Cable Corporation 70,588.27 10,588.24 "P-10-nnnn" 8,084.13 161.68 "P-10-oooo" Smart Communications, Inc. "P-10-pppp" 1,172,766.64 23,455.34 "P-1 0-qqqq" SPI CRM Inc 80,357.14 12,053.57 "P-10-wwww" 80,357.14 12,053.57 Strategic Works (Stratworks), "P-10-yyyy" Inc. 1,248,578.89 24,971.58 Strategic Works (Stratworks), "P-1 0-zzzz" Inc. 638,197.46 12,763.95 "P-1 0-ddddd" The Philippine American Life and General Insurance 638,197.46 12,763.95 Company 90,721.65 13,608.25 The Philippine American Life 35,384.98 and General Insurance 1'769 ,249.34 Company 35,114.05 5,267.11 The Philippine American Life 52,941.17 7,941.18 and General Insurance 10,612.81 Company 530,640.60 5,543.17 277,158.43 666,596.18 Tupperware Brands Phils. Inc. 13,804,433.06 "P-10-hhhhh" United Coconut Planters Bank "P-1 0-iiiii" United Coconut Planters Bank "P-10-jjjjj" Vidanes, Elizabeth Alviar SPI CRM Inc "P-10- Ayala Land, Inc. mmmmm'' Subtotal "P-10-ooooo" A further examination of the records reveals that petitioner did not file any motion for reconsideration or any objection to the ruling made by the Court in Division in its Resolution. Further, petitioner failed to file any tender of excluded evidence. In light of this, the ruling of the Supreme Court in Fortune Tobacco Corp. v. Commissioner of Internal Revenue 3 is elucidating, to wit: At any rate, even if the Court should find fault in the ruling of the CTA Division in denying the admission of petitioner's evidence, the result would be the same because petitioner failed to offer any proof or tender of excluded evidence. As aptly discussed by the CTA En Bane: Petitioner posits that if their exhibits, specifically Exhibits "G", "G-1" to "G-7" and Exhibit "H", are admitted together with the testimony of their witness, the same would sufficiently prove their claim. A closer scrutiny of the records shows that petitioner did not file any offer of proof or tender of excluded evidence. 3 G.R. No. 192024. July I. 2015.762 PHIL 450-467.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue x------------------------------------------------------------------------------------------x Section 40, Rule 132 of the Rules of Court provides: Sec. 40. Tender of excluded evidence. If documents or things offered in evidence are excluded by the court, the offeror may have the same attached to or made part of the record. If the evidence excluded is oral, the offeror may state for the record the name and other personal circumstances of the witness and the substance of the proposed testimony. The rule is that evidence formally offered by a party may be admitted or excluded by the court. If a party's offered documentary or object evidence is excluded, he may move or request that it be attached to form part of the records of the case. If the excluded evidence is oral, he may state for the record the name and other personal circumstances of the witness and the substance of the proposed testimony. These procedures are known as offer of proof or tender of excluded evidence and are made for purposes of appeal. If an adverse judgment is eventually rendered against the offeror, he may in his appeal assign as error the rejection of the excluded evidence. It is of record that the denial of the excluded evidence was never assigned as an error in this appeal. Thus, this Court cannot pass upon nor consider the propriety of their denial. Moreover, this Court cannot and should not consider the documentary and oral evidence presented which are not considered to be part of the records in the first place. Thus, Exhibits "G", "G-1" to "G-7" and Exhibit "H", together with the testimony of petitioner's witness thereon, cannot be admitted and be given probative value. It has been repeatedly ruled that where documentary evidence was rejected by the lower court and the offeror did not move that the same be attached to the record, the same cannot be considered by the appellate court, as documents forming no part of proofs before the appellate court cannot be considered in disposing the case. For the appellate court to consider as evidence, which was not offered by one party at all during the proceedings below, would infringe the constitutional right of the adverse party - in this case, the CIR, to due process of law. [Emphasis supplied]

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue X------------------------------------------------------------------------------------------X Thus, the Court En Bane cannot belatedly reverse the ruling of the Court in Division in relation to the denial of admission of the said exhibits. Petitioner failed to prove that the income payments subjected to CWT were declared in its 2015 ITR. As mentioned in the assailed Decision, to prove that the income payments related to the claimed CWT formed part of petitioner's declared income per ITR, petitioner presented its original and amended Annual ITRs forTY 2015,4 Quarterly ITRs forTY 2015,5 Summary Alphalist of Withholding Taxes (SAWT) forTY 2015,6 2015 Audited Financial Statements (AFS),7 and its witnesses, Ms. Michelle Lacsamana and Ms. Evangeline G. Agustin. However, petitioner's Motion for Reconsideration merely reiterated its argument in its Petition for Review that it was able to prove that the income payments subjected to CWT were declared in its 2015 ITR. We quote our assailed Decision: Notwithstanding the foregoing testimonies and the above-mentioned documentary exhibits, the Court is unable to verify whether the income payments subjected to CWTs for TY 2015 were indeed reported and formed part of petitioner's 2015 gross income. The bare testimonies of Ms. Michelle Lacsamana and Ms. Evangeline G. Agustin in their respective Judicial Affidavits, stating by way of a hastv conclusion that the amounts withheld were declared as part of the income of petitioner for TY 2015, without guiding this Court as to how the amounts indicated in the SAWT and the Certificates of Creditable Tax Withheld at Source formed part of the declared income in the 2015 Annual ITR, were not sufficient to prove that income payments subjected to CWTs were declared as part of petitioner's gross income in its 2015 Annual ITR. Simply put, petitioner's failure to prove its compliance with the third requisite is fatal to the present refund claim. [Emphasis supplied] 4 Exhibits "P-1-a" and "P-I". CTA Case No. 9817. Docket- Vol. II. pp. I062 to 1069 and I054 to I061. 5 Exhibits �'P-3". "P-4". "P-5", and "P-5-a". CTA Case No. 9817, Docket- Vol. II, pp. 1078 to I087. 6 Exhibit "P-2". CTA Case No. 9817. Docket- Vol. II. pp. I071 to I076. 'Exhibit "P-15". CTA Case No. 9817, Docket- Vol. II, pp. 1268 to 1282.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue x------------------------------------------------------------------------------------------x There is no automatic grant of a tax refund.8 As We have stated, the burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit. Since taxes are the lifeblood of the government, tax laws must be faithfully and strictly implemented, as they are not intended to be liberally construed.9 In its final attempt to convince the Court, petitioner invokes Petron Corporation v. CIR (Petron case), to which, according to petitioner, reversed the long-standing principle that tax refunds are to be strictly construed against the taxpayer. Petitioner's invocation is misplaced. The Petron case, citing CIR v. Philippine American Accident Insurance Co., Inc. (Philippine American Accident Insurance case),ll ruled: The rule that tax exemptions should be construed strictly against the taxpayer presupposes that the taxpayer is clearly subject to the tax being levied against him. Unless a statute imposes a tax clearly, expressly and unambiguously, what applies is the equally well-settled rule that the imposition of a tax cannot be presumed. Where there is doubt, tax laws must be construed strictly against the government and in favor of the taxpayer. This is because taxes are burdens on the taxpayer, and should not be unduly imposed or presumed beyond what the statutes expressly and clearly import. We note that this ruling is inapplicable to petitioner. In the Petron case, Petron's production of alkylates was ruled to be not subject to the excise tax on manufactured oils and other fuels. In the Philippine American Accident Insurance case, petitioner therein was judged to be not subject to fixed tax on lending investors as it is an insurance company. In both cases, the burden of proof is indeed on the State, as the State must prove that petitioners therein are properly subject to tax for the State to deny their claim for refund. Hence, the Supreme Court ruled that "tax laws must be construed strictly against the government and in favor of the taxpayer." ~ ~ CJR vs. Far East Bank & Trust Company. G.R. No. 173854. March 15. 2010. 629 SCRA 405-418. 9 Coca-Co/a Botrfers Philippines. Inc. vs. C!R. G.R. No. 222428. February 19.2018. 10 G.R. No. 255961. March 20, 2023. 11 G.R. No. 141658. March 18.2005.493 PI-IlL 785-803.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue X------------------------------------------------------------------------------------------X However, the instant case is far from similar. Here, petitioner is undoubtedly subject to the regular corporate income tax imposed by Section 27(A) of the NIRC of 1997, as amended. The imposition is clear; hence, the rule of strict construction of tax laws against the government is inapplicable. The claim for refund in this case does not arise out of clear exemptions by law but because of alleged unutilized CWTs, which petitioner must prove. The general rule remains that tax refunds are strictly construed against the claimant, and it is incumbent upon the taxpayer to prove their entitlement thereto. Unfortunately for petitioner, petitioner failed to overcome its burden of proof. The Court reiterates the time-honored principle that tax refunds are construed strictly against the taxpayer, and liberally in favor of the State. Hence, the law upon which the claim of refund is made, and the documents presented to prove such entitlement to the refund are construed strictissimi juris against the taxpayer and are strictissimi scrutinized. 12 Accordingly, it is incumbent upon the claimant to establish the factual basis of his or her claim for tax credit or refund. This petitioner failed to do. WHEREFORE, premises considered, the instant Motion for Reconsideration is DENIED for lack of merit. SO ORDERED. ~d#-- LANEE S. CUI-DAVID Associate Justice WE CONCUR: (I reiterate my Concu �ng Opin � n in the assailed Decision of the Court in Division) ROMAN G. DEL ROSARIO Presiding Justice 12 Tanduay Distillers, Inc. v. Commissioner ofInternal Revenue. G.R. No. 256740 (Notice), February 13, 2023.

RESOLUTION CTA EB No. 2658 (CTA Case No. 9817) Stages Production Specialists, Inc. vs. Commissioner of Internal Revenue X------------------------------------------------------------------------------------------X ~- ~ -1- '---- MA. BELEN M. RINGPIS-LIBAN Associate Justice t~7~ CATHERINE T. MANAHAN Associate Justice JEANMA . BACORRO-VILLENA ustice ~ ~ f. ~ -F~'rrA MARIAN IVY(t. REYE~-FAJARDO Associate Justice CO~As"so;ci;"t~..~~:;tOl?eR'. . ES ON OfFICIAl Bl.i3ii'li.J:. HENRY S. ANGELES Associate Justice