CTA Case No. 5294 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY MAKATI SUPERMARKET CORPORATION, C.T.A. CASE NO. 5294 Petitioner~, COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - - - - - DEC I I DN This case involves a judicial action for the refund and/or issuance of a tax credit certificate in the sum of P1, 142,417.00, representing overpaid income tax for the fiscal year~ ended June 30, 19'33. Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines. It is engaged in the retail business and in leasing real For the fiscal year ended June 30, 1993, Petitioner filed its Corporation Annual Income Tax Return on October 15, 1993 declaring an income tax due in the amount of P294,688.00 but with a refundable income tax payment in the sum of Pi, 142,417.00, arising from its quarterly income tax payments and creditable withholding tax at sour~ce, detailed as follows: <Exh. D) Income P59,683,288.00 Sale of Goods 6,474,143.00 Rentals/Leases

DECISION C.T.A. CASE NO. 5294. 2- Miscellaneous Income 629,228.00 Total P66,786,659.00 Less: Deductions Taxable Income 65, 94'+, 693. 00 p 841,966.00 Tax Due p 294,688.00 Less: p a. Prior Year's Excess Credit 1,217,571.00 b. Quarterly Payments 219,534.00 Qtr~. Date Amount p 1,437,105.00 p 1, 1L~2, 417. 00 1st 12-01-92 P375,367.00 2nd 03-01-93 467,348~00 3rd 05-31-93 374,856.00 c. Creditable Tax Withheld Total TOTAL AMOUNT REFUNDABLE Petitioner sought to apply this 1993 income tax refundable amount of Pl, 142,417.00 as tax credit to the succeeding taxable fiscal year 1994. Howeve1�~, the intended application became nugatory due to the fact that in the fiscal year 1994, Petitioner suffered net loss from its operations in the amount of P9,498,496.00 leaving no income tax liability from which the said overpayment could be applied. On July 14, 1995, Petitioner', thr~ough SGV & Company, filed a letter claim for refund with the Bureau of Internal Revenue seeking the amount of Pl, 142,417.00, representing overpaid income tax for fiscal year ended J�une 30, 1.993 <Exhs. V and W). Since Respondent had neither granted nor acted upon the claim for refund, Petitioner' filed the instant Petition fot' Review on October~ 14, 1.995 in or~der' to toll the running of the two-year prescriptive period allowed under Section 230 of the Tax Code, as amended.

DEC I SION C.T.A. CASE NO. 5294. 3 Respondent, in het~ Answet~, raised as special and affirmative defenses that the claim for refund of Petitioner is pending administrative investigation and was not properly documented; taxes paid are presumed to have been collected in accot~dance with law and reg u lations; in an action for refund, the burden of proof is on the taxpayer; it is incumbent upon the Petitioner to show that it has complied with the provisions of Section 204 in relation to Section 230 of the Tax Code, as amended; and claims for refund are construed strictly against the claimants since it partakes of the nature of an exemption from taxation <Resins , Inc. vs. Audit or Gener al , 25 SCRA 754 [1968]). its entitlement to the said claim, Petitioner presented the following documents: a. The final income tax returns for fiscal years ended June 30, 1993, June 30, 1994, ,June 30, 1995 and June 30, 1996. <Exhs. D, D-1 to D-10, U, U-1 to U-3, X, X-1 to X-6, and Y, Y-1 to Y-5); b. The Corporation Quarterly Income Tax Returns for fiscal year 1993 <Exhs. A, B, and C); c. The cet~t i ficat es of ct~editable withholding tax at source 1743. 1 J <Exhs. E to T>; and

DECISION C.T.A. CASE NO. 5294. - 4- d. The letter-claim for refund with the Bureau of Internal Revenue <Exhs. V and W). Respondent, on the other~ hand, pl�~esent ed the following documentary exhibits: a. Letter of Authority, dated August 7, 1995 <Exhs. 1 to 1-a); b. Certification issued by the Chief, Revenue Accounting Division of the Bureau of Internal Revenue regarding Petitioner's payments of tax <Exh. 2); and c. Memo..-~andum of the ..-~evenue officer~ recommending the approval of the claim for refund <Exh. 3). Eventually, this case was submitted for decision sans the memorandum of the Respondent. The only issue to be resolved by this Court is whether or not Petitioner is entitled to the refund of the sum of P1, 142,417.00, representing alleged overpaid income tax for fiscal year 1993. The records show that Petitioner's claim falls within the two-year prescriptive period provided by law for claiming the refund of overpaid income taxes. Section 230 of the Tax Code provides that the claim both in the administrative and judicial level, must be filed within two years from the date of payment of the tax. For easy reference, Section 230 of the Tax Code is hereby quoted as follows:

DECISION C.T.A. CASE NO. 5294. - 5- Sec. 230. Recovery oF tax erroneously or illegally collected. - No suit at~ pr~oceeding shall be maintained in any court for the recovery of any national internal revenue tax hereinafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have bee collected without authority, or of any sum alleged to have been excessive or i 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 pr~oceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided, however, that the Commissioner may, even without a written claim therefor, refund or cr~edit any tax, wher~e on face of the r~etur~n upon which payment was made, such payment appears clearly to have been erroneously paid. <Underlining supplied) in claiming for the refund of excess cr~editable withholding tax, Petitioner~ must show compliance with the following three requisites: 1. That i t filed a claim for~ r~efund within the two ( c:) i od year~ per~ fr~om the date of p<::"tyment of the tax as pr~esct~i bed und et~ 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 pay at~ (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom.

DECISION C.T.A. CASE NO. 5294. 6- [Sec. 10, Rev. Reg. 6-85; see Cit ytrust 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) 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, April 18, 19941. A perusal o f the evidence submitted by Petitioner re vea l t h at it s at is f a cto ri ly co mplied with the foregoing the cl a im f or r e fund was seasona b ly filed within two years f r o m the date of payment of t h e tax. It f iled t h e cl a im for refund with the Bureau of I nt e rn a l Revenue on Ju l y 14, 19 9 5 <Exhs. V and W) and the i n sta n t petit ion with t his Co tw t on October 14, 1995. The t wo - yeat~ pet~iod, in the instant case, c ommenced to t~ un on Octob et~ 15 , 1993 , t he date whe n the an n ual i n co me ta x r et urn o f Pet itioner fo r fiscal year 1993 was filed (Commissioner of Internal Revenue vs. The Philippine American Life Insurance Co., The Court of Tax Appeals and The Court of Appeals, G. R. No. 105208, May 29, 1995; Commissioner of Internal Revenue vs. TMX Sales, Inc. and The Court of Tax Appeal s, G.R. No. 837736, January 15, 1992; ACCRA Investment Corp. vs. The Honorable Court of Appeals, Commissioner of Internal Revenue and The Court

DECISION C.T.A. CASE NO. 5294. - 7- o f Tax Appeals , G. R. No. 96322, December 20, 1991; Co mm i ssioner of Internal Revenue vs. Asia Au stralia Express Ltd., represented by Soriamont Steamship Agencies, Inc. and Court of Tax Appeals, G.R. No. 85956, Apri 1 10, 1989) . Secondly, the quarterly income tax payments were duly proven to have been paid and remitted to the Respondent's bur~eau as cer~tified by the Revenue Accounting Division (Exh. 2) which tally with the machine validations on the quarterly income tax r~et twns of Petitioner for fiscal year 1993. Lastly, Petitioner also showed that the i nc ome upon which the creditable withholding taxes for 1993 were paid was included in its gross income as shown in Schedule 4, Section D of the 1993 annual income tax return of petit i onet~ <Exh. D-5). upon scrutiny of the amounts reflected on the certificates of creditable withholding tax at source, the summation of the amounts reflected therein is lesser than the amount reflected in the final adjustment return. Thus, only those creditable taxes withheld which were certified by the withholding agents as tax payments of Petitioner should be given ct~edence. Thus, Petition er is entitled to a lesser sum of P1, 141,204.02 which is validly supported by evidence.

DECISION C.T.A. CASE NO. 5294. - 8- Below is the computation of Petitioner's allowable income tax t~efund: Tax Due for 1993 (Exh. D-6) p 2941688.00 Less: p a. Prior Year's Excess Credit b. Quarterly Pay1ents Made This Year: Qtr. Exh. Date A1ount P375,367.00 1st A 12-01-92 467,384.00 3741856.00 2nd B 03-Ql-93 c 3rd 05-31-93 1,217,607.00 c. Creditable Tax Withheld: Withholding Agent Ex h. A1ount of Tax Withheld Golden Bakery, Inc. E P112,500.00 Marivic Padilla F 14,700.00 12,292.51 Rizal Co11ercial Banking Corp. G 12,292.51 8,640.00 Far East Bank &Trust Co1pany H 8,640.00 7,920.00 Mo11 Catering I 7,200.00 7,200.00 Sea Beauty Treats J 5, 760.00 5,760.00 Binan Delicacies K 3, 750.00 2,880.00 Florex {Orchids &Flowers) L 2,750.00 Milano Ge1s &Jewels M 2,400.00 31600.00 Santa Cruz Drug &Chemical Co. N Alberto R. Ra1os 0 Long Distance Trading p Serra1onte Trading (First Key Dup.l Q Siegfredo R. Contreras/The House of Stereo R s Lil Orbit Prestige Watch &Jewelry T 2181285.02 Tot a 1 P1 14351892.02 P1 1141 1204.02 AMOUNT REFUNDABLE WHEREFORE, finding the Petition few Review meritorious, Respondent is hereby ORDERED to REFUND, or in the alternative, to issue a TAX CREDIT CERTIFICATE in favor of Petitioner in the amount of P1, 141,204.02,

DECISION C.T.A. CASE NO. 5294. - 9- representing overpaid income tax for fiscal year ended June 30, 1'3'33. ~-�I:J~ SO ORDERED. JRAMON 0. DE VE~ A / Associate Jud e WE CONCUR: ~ 0~ ERNESTO D. ACOSTA Pt~ e siding Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appe a ls in accordance with Section 13, Article VIII of the Constitution. L:: -Q. ~ ERNESTO D. ACOSTA Pt~esiding Judge