COMMISSIONER OF INTERNAL REVENUE v. SONOMA SERVICES, INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF INTERNAL CTA EB NO. 2416 (CTA Case No. 9771) REVENUE, Petitioner, - versus- Present: DEL ROSARIO, PJ, UY, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, and FERRER-FLORES, JJ. SONOMA SERVICES, INC. , Promulgated: R e sp o n de nt. ){- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - ){ RESOLUTION MANAHAN, J.: For resolution is petitioner's Motion for Reconsideration posted on July 7, 2022 which was received by the Court on July 25, 2022, with respondent's Comment (Re: Motion for Reconsideration Dated July 7, 2022) filed on September 5, 2022. Petitioner seeks reconsideration of the Court's Decision promulgated on June 16, 2022, the dispositive portion of which reads as follows: ~

RESOLUTION CTA EB No. 2416 Page 2 of7 "WHEREFORE, in light of the foregoing considerations, the Petition for Review is DENIED for lack of merit. The assailed Decision dated July 21, 2020 and the Resolution dated December 16, 2020 are hereby AFFIRMED. SO ORDERED." Petitioner requests the Court to revisit its Decision (assailed Decision) based on the following Assignment of Errors, and we quote: I. THE CTA 3rct DNISION (sic) ERRED IN UPHOLDING THE DECISION OF THE CTA 3RD DIVISION DECLARING THAT RESPONDENT ADEQUATELY PROVED THE EXISTENCE OF ITS CALENDAR YEAR (CY) 2016 PRIOR YEAR'S EXCESS TAX CREDITS WITHOUT REQUIRING RESPONDENT'S PRESENTATION OF PRIOR YEAR'S CREDITABLE WITHHOLDING TAX (CWT) CERTIFICATES FROM 2006 TO 2016 IN VIEW OF THE RULING IN CIR VS. ZUELLIG PHARMA CORPORATION (CTA EB CASE NO. 1794, CTA CASE NO. 8801, OCTBER 1, 2019). II. THE CTA 3RD EN BANC (sic) ERRED IN UPHOLDING OF THE DECISION OF THE CTA 3RD DNISION IN NOT DECLARING THAT RESPONDENT FAILED TO COMPLY WITH THE REQUIREMENTS UNDER REVENUE REGULATIONS NO. 2-98, AS AMENDED BY REVENUE REGULATIONS NO. 2-2006, ON THE CLAIM FOR REFUND OF ITS EXCESS/UNUTILIZED CREDITABLE INCOME TAXES WITHHELD FOR CY 2015. On the first assignment of error, petitioner cites the ruling of the Court En Bane in the consolidated case of Zuellig Pharma Corporation vs. CIR and CIR vs Zuellig Pharma Corporation, I where it was supposedly held that the best evidence that would prove the existence and amount of prior year's excess tax credits are the prior year's certificates of creditable withholding taxes (CWT). Petitioner alleges that the Third Division of this Court (Court in Division) merely relied on ~ 1 CTA EBNos. 1793 & 1794, October I, 2019.

RESOLUTION CTA EB No. 2416 Page 3 of7 respondent's Annual Income Tax Return (ITR) for calendar year (CY) 20 16 to substantiate respondent's total credits of Php13,982,000.00 and did not require the corresponding CWT Certificates from 2006 to 2016. She also mentions that the Independent Certified Public Accountant (ICPA) likewise relied on the Annual ITRs of respondent from 2003 to 2016 which served as bases for the conclusions embodied in the ICPA report, thus, unreliable. Petitioner alleges that respondent failed to comply with the requirements prescribed by Revenue Regulations (RR) No. 2-98 as amended by RR No. 2-2006 to prove its claim for refund of alleged excess CWT for CY 2016 specifically, the requirement of showing that the income payments have been declared as part of the gross income of respondent and that the fact of withholding is established by copies of withholding tax statements duly issued by the payor to the payee showing the amount paid and the amount of tax withheld. Petitioner also insists that Section 2 of RR No. 2-2006 declares the mandatory submission of the Summary Alphalist of Withholding Agents of Income Payments Subjected to CWT (SAWT) which refers to a consolidated alphalist of withholding agents from whom income was earned or received and subjected to withholding tax. According to petitioner, respondent failed to present these SAWTs in support of its claim for refund of excessjunutilized creditable income taxes withheld for taxable year 2015, hence, its claim for refund should have been denied outright by the Court in Division. Moreover, petitioner adds that respondent should have also submitted the Monthly Alphalist of Payees (MAPs), which shows, among others, the total amounts of income/gross sales/gross receipts and taxes withheld and remitted. Respondent, in its Comment, contravenes petitioner's assertions and maintains that it has adequately proven the existence of prior year's excess tax credits that were carried over to its Annual ITR for CY 2016. It gives emphasis on the findings of the ICPA which it claims examined the documentary evidence and ascertained that its excess prior year's excess credits in the amount of Php5,366,304.00 consist of the following: ~

RESOLUTION CTA EB No. 2416 Page 4 of7 (i) Reinstated 2004 CWTs amounting to P4,131,427.09; (ii) Adjustments made in CY 2013 amounting to Php380,481.09; and (iii) 2014 CWTs amounting to Php4,864,750.00. Respondent alleges that the ICPA also examined and verified its Certificates of CWT as well as its Annual ITRs for CYs 2004 and 20 14 and was able to ascertain the prior year's excess credits which was also reflected in its Annual ITR for 2016, thus, contravening petitioner's claim. As regards petitioner's insistence on the submission of the SAWTs and MAPs to prove the claim for refund, respondent asserts that this has no basis in law and jurisprudence and that it is well-settled that the presentation of Certificates of CWT issued by the withholding agents constitutes sufficient proof of the existence and validity of its excess CWT. RULING OF THE COURT EN BANC After a careful review of the parties' differing arguments, we find no merit in petitioner's Motion for Reconsideration and hold that the arguments and reasons raised therein have been sufficiently passed upon in the decisions of the Court in Division and the Court En Bane. No novel arguments have been proferred in her Motion for Reconsideration To emphasize, the evidentiary standards in proving a claim for refund of excess CWT have been well-established not only by relevant administrative regulations but also by jurisprudence, to wit: (1) the claim for refund must be filed within the two-year prescriptive period from the date of payment of the tax as prescribed under Section 204 (C) in relation to Section 229 of the 1997 National Internal Revenue Code (NIRC), as amended;~

RESOLUTION CTA EB No. 2416 Page5of7 (2) 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 of tax withheld therefrom; and (3) the income upon which the taxes were withheld was included in the ITR of the recipient as part of the gross income.2 The determination of respondent's claim for refund was based on said requirements vis a vis the documents presented during trial resulting to the grant of the entire amount claimed. Petitioner's assertion that the Court did not require the certificate of CWTs and merely presentation of respondent's is not accurate as records would relied on its 2016 Annual ITR show that it presented said certificates during trial and upon examination, the Court found them to be sufficient. We quote relevant portions of the Decision of the Court in Division dated July 21, 2020, thus: "In this case, in order to prove the fact of withholding, petitioner presented Certificates of Creditable Tax W toiitthhbeyldvaartiouSos uwrictehh(oBlIdRingFoargmentNs of.or2C3Y072)01d6u,lyrefilsescutiendg a CWT ofPhp5,365,000.00 and P1,303.57 on Management Fees of P35,900,000.00 and Proceeds from Sale of Equipment of P65, 178.57, xxx xxx xxx XXX XXX XXX Verification of the said certificates reveal that they are respectively complete in their relevant details, with a written statement that they were made under penalties of perjury. Thus, petitioner has shown compliance with the second condition, i.e., the establishment of the fact of withholding." (Emphasis supplied) As regards the submission of the SAWTs and the MAPs, we agree with respondent that this finds no basis in law and jurisprudence and what is required is the submission of a copy of the withholding tax statement issued by the payor to 2 Commissioner ofInternal Revenue vs. Cebu Holdings, Inc., G.R. No. 189792, June 20, 2018.~

RESOLUTION CTA EB No. 2416 Page 6 of7 the payee showing the amount paid and the amount of tax withheld therefrom which specifically refers to the Certificates of CWT (BIR Form 2307) mentioned earlier. In sum, petitioner's arguments on the insufficient non-presentation of the Certificates evidence, particularly the MAPs to prove a c laim for refund of of CWT and SAWTs and thout factual and legal merit and are not excess CWT is wi a reversal of the assailed En Bane Decision. enough to warrant WHEREFORE, premises considered, the Motion for Reconsideration filed by petitioner CIR is hereby DENIED for lack of merit. SO ORDERED. ~� 7-~~~-~~~~~~---- CATHERINE T. MANAHAN Associate Justice We Concur: Presiding Justice ERL~.UY Associate Justice (ON OFFICIAL BUSINESS) MA. BELEN M. RINGPIS-LIBAN Associate Justice " -VILLENA MARIA Ro/WE'i(MifOl TO-SAN PEDRO

RESOLUTION CTA EB No. 2416 Page 7 of7 ~ 8~ f.~.F~ MARIAN 1\1#. REYES-FAJfuO Associate Justice (On Leave) LANEE S. CUI-DAVID Associate Justice CO~'f'EkkER'-PLORES Associate Justice