COMMISSIONER OF INTERNAL REVENUE v. TULLET PREBON (PHILIPPINES) INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTAEB NO. 3016 (CTA Case No. 10273) INTERNAL REVENUE, Petitioner, -versus- P resen t: RINGPIS-LIBAN, P.J., BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, ]]. TULLET PREBON Promulgated: (PHILIPPINES), INC., MAR 16 2026 Respondent. X----------------------------------------------------------------------- -----------------------X DECISION RINGPIS-LIBAN, P.J: The Case Before the Court En Bane is a Petitionfor Review flied by the Commissioner of Internal Revenue (CIR) pursuant to Section 3(b) of Rule 8 of the Revised Rules of the Court of Tax Appeals, as amended (RRCTA).1 Petitioner seeks the ~ 1 SEC. 3. Who may appeat-� period to file petition. - XXX XXX XXX ( b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new t rial may appeal to the Court by filing before it a petit ion for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) reversal of the June 28, 2024 ,\mended Decision and the October 8, 2024 Resolution of the Special First Division of the Court of Tax "\ppeals (CTA), which partially granted the taxpayer's petition and ordered the Commissioner �of Internal Revenue (CIR) to refund the amount ofPhP7,456,064.79 representing the taxpayer's excess and unutilized Creditable Withholding Taxes (CWT) for the Calendar Year (CY) ended December 31, 2017. The Parties Petitioner CIR is the Commissioner of the Bureau of Internal Revenue (BIR), the government agency in charge of, among others, the assessment and collection of all national internal revenue taxes, fees, and charges and act upon and approve claims for refund or tax credit as provided by law. 2 Respondent Tullet Prcbon (Philippines), Inc. (taxpayer) is a domestic corporation duly organized and existing under Philippine laws. It is incorporated with the primary purpose of operating as a broker between market participants in transactions involving, but not limited to, foreign exchange, deposits, interest rate instruments, fixed income securities, bonds/bill, repurchase agreements of fixed income securities, certificates of deposit, bankers acceptances, bills of exchange; over-the-counter options of the aforementioned instruments, lesser developed country (LDC) debt, energy and stock indexes, and all related, similar or derivative products other than acting as a broker for the trading of securities pursuant to the Revised Securities "\ct of the Philippines. It is a registered taxpayer of the BIR Large Taxpayers District Office (LTDO), Revenue District Office No. 1223 The Facts The facts as found by the court a quo were narrated as follows: On September 30, 2019, the taxpayer filed with the BIR Regular Large Taxpayers Audit Division II an Application for Tax Credits/ Refunds (BIR Form No. 1914) with the letter dated August 7, 2019, requesting for the issuance of f/ a tax credit certificate in the amount of PhP8,574,699.00 representing unutilized CWTs for CY 2017 and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. (Rules of Court, Rule 42, sec. la) 2 The CIR's Petition for Review, Rollo, p. 10. 3 The taxpayer's Petition for Review, Docket, Vol. I, pp. 14-15. 4 January 30, 2024 Decision, Docket, Vol. II, p. 736.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) Subsequently, on April 8, 2020, the taxpayer flied its judicial claim with the court a quo. 5 The Pre-Trial Conference, which was initially set on November 12,2020, was reset to March 11, 2021, then further reset to and finally held on May 20, 2021. The CIR filed its Pre-Trial Briefon November 6, 2020, while the taxpayer filed its Pre-Trial Btiej on November 9, 2020. The parties submitted their Joint Stipulation of Facts and Issttes on June 9, 2021. The same was approved by the Court in a Resolution dated June 30, 2021, and Pre-Trial was deemed terminated. The Court issued the Pre-T1ial Order dated July 7, 2021.6 On December 1, 2021, the CIR transmitted the BIR Records.7 Trial ensued, with both parties presenting and offering their respective documentary and testimonial evidence. The taxpayer presented the following �w-itnesses: (1) i\Ir. Philip G. Arabia, 1ts Finance Manager; and (2) Ms. Maria Gracia L. l\Iorfe, the Court- commissioned Independent Certified Public Accountant (ICPA). The ICPA. submitted her Amended Report on November 29, 2021.8 On December 14, 2021, the taxpayer filed its Formal Offer ofEvidence. The CIR submitted a Comment (On Petitioner's Formal Offer ofEvidence) on December 20,2021 9 In a Resolution dated l\Iarch 21, 2022, the Court admitted the taxpayer's exhibits, except for: (1) Exhibit 11P-1 ,11 for failure of the document offered and identified to correspond with the document marked; (2) Exhibits 11 P-25, 11 11P- 328 ' 11 11P-347 ' 11 11 P - 1 342 ' 11 11 P-187 1 11 and 11 P- 2050 ' 11 for not being found in the records of the case; (3) Exhi b 11 P-751 to P- 53, 11 for not being found in and ' 7 its the records of the case. Upon iv1otionfor Partial Reconsideration (Re: Resolution dated March 21, 2022) filed on April 18, 2022 without respondent's comment or opposition, the Court admitted Exhibits 11 P-1 ,11 11P-25, 11 11P-278-1 ,11 11P-1342, 11 and 11P-1871. 1110 Thereafter, the CIR presented Revenue Officer Cheryl G. /\.rbues as the lone witness. 11 The CIR filed a Formal Offer ofEvidence on September 30, 2022. Then the taxpayer filed its Comment (Re: Respondent's Formal Offer of Evidenre) on October 13, 2022. In a Resolution dated November 21, 2022, the Court admitted all the CIR's offered exhibits? 5 !d. 6 !d. 7 !d. 8 !d., pp. 736-737. 9 !d., p. 737. 10 !d. 11 !d. 12 !d.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) Finally, the taxpayer filed its Memorandum on December 28, 2022. The CIR failed to file a memorandum. 13 The case was submitted for decision on January 30, 2023. 1 " On January 30, 2024, the court a quo decided the case in favor of the taxpayer partia!!J granting a refund of PhP6,978,758.87. 15 Upon the CIR's Motion for Pmtia! Reronsideration (Re: Decision dated 30 January 2024) and the taxpayer's Motion for iVIotion for Partial Reconsideration, the court a quo issued the assailed Amended Decision dated June 28, 2024. The assailed Amended Decision, denied the CIR's motion but partially granted the taxpayer's. It increased the refund amount to PhP7,456,064.79. 16 Upon the CIR's Motion for Pmtia! Reconsideration (Re: Amended Decision dated 28 June 2024), with the taxpayer's Comment (Re: CIR's JV!otion for Retonsideration dated Ju!J 18, 2024), the court a quo issued the assailed Resolution dated October 8, 2024, which denied the CUt's motion for lack of merit. The taxpayer did not ask for a reconsideration of the assailed Amended Decision. 17 Proceedings before the Court En Bane On October 28, 2024, the CIR filed a Motion for Extension of Time to File Petition for Review. 18 On October 30, 2024, the Court issued a i\1inute Resolution, which granted the CIR a non-extendible period of fifteen (15) days from October 26, 2024 or until November 10, 2024 to file a Petition for Review. 19 On November 11, 2024, the CIR filed a Petition for Review20 On January 7, 2025, the Court issued a A1inute Resolution, which directed the taxpayer to file a comment on the CIR's Petitionfor Review within ten (1 0) days from notice~ 13 Id., p. 738. 14 Id. 15 Decision dated January 30, 2024, Docket, Vol. II, pp 735-750. 16 Amended Decision dated June 28, 2024, Docket, Vol. II, pp 800-811. 17 Resolution dated October 8, 2024, Docket, Vol. II, pp 800-811. " Rollo, pp. 1-4. 19 Rollo, p. 8. November 10, 2024 was a Sunday. 20 Rollo, pp. 9-18. 21 Rollo, p. 63.

DECISION CfA EB NO. 3016 (CfA CASE NO. 10273) On January 24, 2025, the taxpayer filed a Comment (Re: Petition for Review dated October 8, 2024). 22 This was noted in a Minute Resolution dated February 6, 2025, which also submitted the case for decision. Assignment of Error The CIR raised a single assignment of error for the Court to resolve: "The Honorable Court erred in ruling that respondent is entided to the claim for refund of alleged excess and unutilized CWT for CY 2017"21 The Arguments of the Parties Petitioner CIR's Arguments Petitioner CIR assails the Amended Decision and states that the taxpayer is not entitled to the claim for refund of the alleged excess and unutilized CWT. The CIR adds that it is imperative for the taxpayer to show the CTA that it is not only entitled under substantive law to his claim, but also that he satisfied all the documentary requirement for an administrative claim. Furthermore, the CIR stresses that claims for refund arc construed strictly against the taxpayer and in favor of the government." Respondent Taxpayer's Arguments In its Comment (Re: Petition for Review dated October 8, 2024),25 respondent taxpayer counters that the evidence it submitted sufficiently proves that the income from which the CWTs being claimed for refund were withheld was included in the gross income reported in its Income Tax Return (ITR). 26 Further, the taxpayer states that the presentation of the Certificates of Creditable Taxes Withheld at Source (BIR Form 1\"o. 2307) issued by the withholding agents constitute sufficient proof of the existence and validity of its C:\V'Ts.27 It counters that the CIR failed to substantiate his argument as to why the claim for refund should be denied for non-compliance with Revenue Memorandum Order No. (RlviO) 53-98 and Revenue Regulations No. (RR) 2-2006, which are not essential to prove entitlement to the claim28 and that it is not necessary for the payors to be presented to authenticate the Certificates of Creditable Taxes Withheld at Source, as these certificates alone are sufficient to establish the fact of withholding. 29 Finally, cases flied before the CTA are litigated de novo, hence, t~ 22 Rollo, pp. 64-87. 23 Petition for Review, Rollo, p. 12. 24 Id., Rollo, pp. 12-16. 25 Comment (Re: Petition for Review dated October 8, 2024), Rollo, pp. 64-87. 26 Id., Rollo, pp. 65-69. 27 Id., Rollo, pp. 69-74. '' Id., Rollo, pp. 74-78. 29 Jd., Rollo, pp. 78-80.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) court a quo may accept evidence that was not presented at the administrative leveJ.3� The Ruling of the Court En Bane The Petition for Review with the Court En Bane was timely filed. Before the Court sets out to discuss the merits of the petition, it 1s important to dispense with its jurisdictional aspect. Petitioner CIR received a copy of the assailed Amended Decision through the Office of the Solicitor General (OSG) on July 4, 2024.31 Under Rule 15 Section 1 of the RRCLV2 the CIR had fifteen (15) days to file a motion for reconsideration of the decision, or until July 19, 2024. The CIR filed a lVlotion for Pmtia! Reconsideration (Re: Amended Decision dated 28 fum 2024) on July 18, 2024. 33 This petition was flied under Section 18 of R/\ 1125, as amended by R..-\ 9282. Section 18 of RA 1125, as amended bv Rt\ 92823" in relation to Rule 8 Section 3(b) of the 2005 RRCTA,35 provides that a party may appeal the 3o Id., Rollo, pp. 80-82. ~ 31 Notice of Decision, Division Docket, Vol. II, p. 799. 32 RULE 15 MOTION FOR RECONSIDERATION OR NEW TRIAL SECTION 1. Who may and when to file motion. - Any aggrieved party may seek a reconsideration or new trial of any decision, resolution or order of the Court. He shall file a motion for reconsideration or new trial within fifteen days from the date he received notice of the decision, resolution or order of the Court in question. (RCTA, Rule 13, sec. 1a) 33 Division Docket, Vol. II, p. 812. 34 SECTION 18. Appeal to the Court of Tax Appeals En Bane.- No civil proceeding involving matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en bane. 35 SEC. 3. Who may appeal,� period to file petition. - XXX XXX XXX (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of tile reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) resolution of a division of the Court by filing a petition for review or a motion for extension of time to file the petition with the Court En Bane within fifteen (15) days from receipt of the questioned resolution. On October 15, 2024, the CIR's counsel, the OSG, received the October 8, 2024 Resolution, which denied the CIR's motion 36 The CIR, therefore, had fifteen (15) days from October 15, 2024 or until October 30, 202437 to file a petition or a motion for an extension to ftle a petition. On October 28, 2024, the CIR ftled a Motion for Extension oj'Time to File Petition for Review.38 On October 30, 2024, the Court issued a Jv1inute Resolution, which granted the CIR a non-extendible period of fifteen (15) days from October 26, 2024 or until November 10,2024, a Sunday, to file apetition. 39 On November 11, 2024, the C:IR ftled a Petition for Review.40 Accordingly, since the Petition for Review was filed within the reglementary period, the Court En Bane can take cognizance of the present case. However, although timely filed, the petition is berejt ofmerit. Findings offacts of the court a quo will not be disturbed absent a showing of grave abuse of discretion. In the petition, the C:IR raises two points that are legal in nature: one, the petition ftled before the court a quo was an appeal of an unsuccessful administrative claim and was not an original action; and, two, claims for refund are construed strictly against the taxpayer and in favor of the government. Significantly, the CIR does not dispute the facts narrated by the court a quo. Rather, the CIR adopted the factual findings of the court a quo41 and incorporated them into the petition under consideration by the Court. In Heirs ofTeresita Villanmva, et al v. Heirs ofPetroni!a Syquia Jvfendoza, et a/,42 the Supreme Court ruled that: "Findings of fact made by a trial court are accorded the highest degree of respect by an appellate tribunal and. absent a clear disregard of the evidence before it that can otherwise affect the results of the case. those findings should not simply be ignory 36 Notice of Resolution, Division Docket, Vol. II, p. 850. 37 The original deadline fell on September 21, 2024, a Saturday. 38 Rollo, pp. 1-4. 39 Rollo, p. 8. 40 Rollo, pp. 9-18. 41 Rollo, p. 11. 42 G.R. No. 209132, June 05, 2017.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) Absent any clear showing of abuse, arbitrariness, or capriciousness committed on the part of the lower court, its findings of facts are binding and conclusive upon the Court. The reason for this is because the trial court was in a much better position to determine which party was able to present evidence with greater weight." (Underscon'ng added) :VIore specifically, in Republic of the Philippines, represented by the Commissioner of Internal Revenue v. Team (Phils.) Enet;gy Cotporation (Formerly Mirant (Phils.) Ene1;gy Cotporation,43 the Supreme Court ruled that the findings of facts of the CTA, acting as a trier of facts, are accorded with the highest degree of respect: "With regard to the second requirement, it is fundamental that the findings of fact by the CTA in Division are not to be disturbed without any showing of grave abuse of discretion considering that the members of the Division are in the best position to analyze the documents presented by the parties. Consequently, we adopt the findings of the CTA in Division, which the CTA En Bane cited, as follows." (G'nderscoring added) Factual findings of the CfA, a specialized court exercising expertise on taxation, are generally regarded as final, binding, and conclusive.44 Thus, in the absence of any allegations or evidence to the contrary, this Court will not disturb the facts that have been settled by the court a quo. Cases filed in the court a quo are litigated de novo, thus, the taxpayer should prove every minute aspect of its case. The CIR advances the view that the court a quo, as an appellate court, was bound to review the appealed administrative claim. Thus, the CIR concludes that only those pieces of evidence presented by the taxpayer in its administrative claim for refund are the ones that should be presented in the judicial appeal with the court a quo45 The CIR quotes Atlas Consolidate Niining and Development C01poration v. Commissioner ofIntema! Revenue46 as authority for this view: "Petitioner's [taxpayer'sJ contention that non-compliance with ReYenue Regulations 3-88 could not have ad,�ersely affected its case in the erA indicates a failure on its part to appreciate the nature of the proceedings in that court. First, a judicial claim for refund or tax credit in the CL\ is by no means an original action but rather an appeal by way of petition for review oj:; 43 G.R. No. 188016, January 14, 2015. 44 commissioner ofInternal Revenue v. Deutsche Knowledge Services, Pte. Ltd., G. R. Nos. 226545 & 227691, 226682-83, February 15, 2023. 4' Rollo, pp. 13-15. 46 G.R. No. 145526, March 16, 2007.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) previous, unsuccessful administrative claim. Therefore, as in every appeal or petition for review, a petitioner has to convince the appellate court that the quasi-judicial agency a quo did not ha,-e any reason to deny its claims. In this case, it was necessary for petitioner to show the CTA not only that it \vas entitled under substantiYe law to the grant of its claims but also that it satisfied all the documentary and evidentiary requirements for an administrative claim for refund or tax credit. Second, cases filed in the CL\ are litigated de 110/JO. Thus, a petitioner should prove e\'e!)' minute aspect of its case by presenting, formally offering and submitting its evidence to the CfA Since it is crucial for a petitioner in a judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place, part of the evidence to be submitted to the CT"-\ must necessarilv include whatever is required for the successful prosecution of an administrative claim." First, a reading of the Atlas case does not support the CIR's view. Atlas involved a refund claim of input 'h\T, which was denied by the CTA and the Court of Appeals (CA) for evidentiary reasons. Specifically, the CTA denied the taxpayer's claims on the grounds of prescription and insufficiency of evidence. On appeal to the CA, the CA reversed the CTA's ruling on the matter of prescription but affirmed the latter's decision in all other respects. The Supreme Court affirmed the denial of the claim and held that both "courts correctly observed that petitioner never submitted any of the invoices or receipts required by the foregoing rules and held this omission to be fatal to its cause." l\lore importantly, there is nothing in Atlas that supports the CIR's contention that "only those pieces of evidence presented by the taxpayer in its administrative claim" should have been considered by the court a quo in deciding the judicial claim. What is clear in Atlas is that because the judicial claims are litigated de novo, the taxpayer must again present the evidence in support of its claim with the court a quo. Atlas, however, does not limit the court a q11o to consider only those pieces of evidence presented in the administrative claim. Atlas was reiterated in the 2023 case of Commissioner of Internal Revenm v. Deutsche Knowledge Services, Pte. Ltd where the Supreme Court again said that the taxpayer-claimant should prove every minute aspect of its case "by presenting, formally offering, and submitting its evidence to the CTA. The appreciation of the evidence still lies within the sound discretion of the court."47 Contrary to the CIR's position, Atlas did not diminish the power of the court a quo. Its prime consideration remains the ascertainment of truth 48 Thus, it still possesses the means necessary to carry its jurisdiction into effect, a power based on Rule 135, Section 6 of the Rules of Court, thus: "Sec. 6. lvleam to ('(117]'Jllli.rdidion into ejjict.-When by law jurisdiction is conferred on a court or judicial officer, all auxilia!)' writs, processes and other means necessa!)' to cat!)' it into effect may be employed bv such court ~ 47 G.R. Nos. 226548 & 227691, 226682-83, February 15, 2023. 48 Commissioner ofInternal Revenue v. Marily Development Corp., G.R. No. 263794, April 2, 2025.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) officer; and if the procedure to be followed in the exercise of such jurisdiction is not specifically pointed out by law or by these rules, any suitable process or mode of proceeding may be adopted which appears conformable to the spirit of said law or rules." Finally, in Commissioner ofInternal Revenue v. Univation Motor Philippines, Inc.,"9 a case of inaction by the CIR on a CWT refund claim like this case, the Supreme Court held that the taxpayer is allowed to present new and additional evidence w1th the court a quo in support of its judicial claim: "In this case, it was the inaction of petitioner CIR which prompted respondent to seek judicial recourse with the CrA. Petitioner CIR did not send any \Vtitten notice to respondent informing it that the docmnents it subnlltted were incomplete or at least require respondent to submit additional documents. As a matter of fact, petitioner CIR did not e\�en render a Decision denying respondent's administrative claim on rhe ground that it had failed to submit all the required documents. Considering that the adtninistrati,�e claim \Vas neYer acted upon, there \vas no decision for the CTA to review on appeal per Jf. However this does not preclude the erA from considering evidence that was not presented in the administrative claim wrth the BIR. Thus, R.�\ No. 1125 states: Section 8. Colilt ofmmd; .real; proceeding,�. -The Court of Tax Appeals shall be a court of record and shall have a seal which shall be judicially noticed. It shall prescribe the form of its writs and other processes. It shall have the power to promulgate rules and regulations for the conduct of the business of the Court, and as may be needful for the uniformity of decisions within its jurisdiction as conferred by law, but such proceedings shall nor be governed strictly by technical rules of evidence. The law creating the CT,\ specifically provides that proceedings before lt shall not be governed strictly by the technical rules of evidence. The paramount consideration remains the ascertainment of truth. Thus, the CTA is not limited bv the evidence presented in the administrative claim in the Bureau of Internal Re,�enue. The claimant may present new and additional evidence to the CT;\ to support its case for tax refund. Cases filed in the CT.\ are litigated de 1101'0 as such, respondent 'should prove C\'ery minute aspect of its case bv presenting, formally offering and submitting x x x to the Court of Tax 1\ppeals all evidence x x x required for the successful prosecution of its administrative claim.' Consequent!\'. the CTA mav gi,�e credence to all evidence presented bv respondent. including those that mav not have been submitted to the em. as the case is being essentiali\' decided in the ftrst instance." (UndemmiJt~ .rnpplied and ,ilalion.r omilled) Not all claims for tax refund are in the nature of tax exemptions and consequently construed strictly against the taxpayefl 49 G.R. No. 231581, April 10, 2019.

DECISION CfA EB NO. 3016 (CfA CASE NO. 10273) A claim for tax refund may be based on a statute granting tax exemption. In such case, the claim is to be consuued strictissimi;ims against the taxpayer. \Vhere the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature of an exemption, the claimant must show that he clearly falls under the exempting statute. On the other hand, a tax refund may be predicated on tax refund provisions allowing a refund of erroneous or excess payment of tax. The return of what was erroneously paid is founded c;m the principle of solutio indebiti, a basic postulate that no one should unjustly enrich himself at the expense of another.5� This case involves the recovery of erroneously or illegally collected CWT based on Section 204(C)51 and 22952 of the Tax Code, as amended 5 3 In the recent case of Commissioner oflntema! Revenue v. Sonoma Set7Jices, Inc.,54 the Supreme Court ruled that the taxpayer successfully discharged its burden of proving its entitlement to the claimed CWT refund and, therefore, affirmed the grant of refund by the CT~ �5 Commissioner of Internal Revenue v. Mirant Pagbilao Corp., G.R. No. 172129, September 12, 2008. 51 Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes- The Commissioner may- (A) Compromise the payment of any internal revenue tax when: )()()( )()()( XXX (B) Abate or cancel a tax liability when: 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." 52 "Section 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. 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, however, That the Commissioner may, even without a written claim therefor, 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." 53 Please see Decision dated January 30, 2024, Docket, Vol. II, p. 739. 54 G.R. No. 263916, August 18, 2025.

DECISION CTA EB NO. 3016 (CTA CASE NO. 102.73) Page 12. of 14 "i\t the outset, it must be clarified that not all claims for tax refund are in the nature of tax exemptions and consequentlv construed strictly against the taxpa\'er. In CommiJ.Iioner of In!emal Re~;emte 1'. Fortune Tobacco Co[ji. the Court distinguished claims based on a tax exemption or refund statute and those based on the quasi-contract of solutio indebiti: '[T]he Commissioner's contention that a tax refund partakes the nature of a tax exemption does not apply to the tax refund to which Fortune Tobacco is entitled. There i.rparif)� between tax rejimd and lax exemption on!)� when theJimmr is ba.red either on a tax exemption statute or a tax rejimd statute. Obviously, that is not the situation here. Quite the contrary, Fortune Tobaccos claim for refund is premised on its erroneous payment of the tax, or better still the government's exaction in the absence of a law. Tax exemption is a result of legislative grace. And he who claims an exemption from the burden of taxation must justify his claim by showing that the legislature intended to exempt him by words too plain to be mistaken. The rule is that tax exemptions must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such \Vas the intention. A dazln .for tax zrjimd may be baJerl on statuteJ� granting tax exemption or lax zrjimd. In Juch ca.1e, the mle of.rtnd intnp1~tation agai11.1l the ta>.pil)�er i.~� applimble a.r the dmilljor 1rjimd pmtake.r ofthe nature of an exemption, a legislalil;e grace, wbich mnnot be allowed unlmgranted in t!Je mo.rt exp/i,it and categOJicalla~guage. The taxpayer must show that the legislature intended to exempt him from the tax by words too plain to be mistaken. Tax 1rjimd.r (or tax mdit.1), on the other hand, m< not founded p1imipally 011 legiJiatiJ,e grace but on the legal principle whidJ underlies all quaJi-mntradJ abboning a perJoJt'J lii!}IIJ! emidJment at tbe tL'\jJenJe of anothet: The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract, Jolutio indebiti, which covers not only mistake in fact but also mistake in law. The Go,�ernment is not exempt from the application of JOiutio indebiti. Indeed, the taxpayer expects fair dealing from the Government, and the latter has the duty to refund without any unreasonable delay what it has erroneously collected. If the State expects its taxpayers to obsern fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjusth� enrich itself at the expense of taxpayers. And so, gil;en its essmce, a daim for tax rejimd nece.rsitates on!)� p1~ponderance ofez;ic/ence for it.r approbation like in CIJ!)"' o!ber ordinal)' d!Jl'! ca.re. Lnder the Tax Code itself, apparently in recognition of the pcrvasi\�e quasi~contract principle, a claim for tax refund tnay be based on the following: (a) erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) m!y Jli!Jl alleged to !Jm,e been excessi?Je orin Cli!Y manner WJOJJg/itl!y cuile<tai.' (Emphasis supplin.l; citations omitt"Y

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) The dichotomy between a claim for tax refund founded on a statutory grant and one predicated on the principle of solutio indebiti was outlined by the Court in rrJJttme Tobacco. A claim for tax refund based on a specific statute granting tax exemption or refund partakes of the nature of a tax exemption. As such, it is a mere lcgislati\-c grace, vic'\ved as a derogation of the Statc1s sovereign power of taxation. Hence, the doctrine of strictiSSltJJi ;Jais finds application. In stark contrast a claim for refund that is premised on the taxpayer's erroneous pavment of tax or the government's illegal exaction thereof is not founded on legislative grace but on the time-honored principle of solutio indebiti. Consequent!\�. where the claim for refund is based on .rolutio indebiti the taxpayer must simply establish his claim with the quantum of proof required in ordinary ci\-il cases, i.e., preponderance of evidence. In fine, the determinative factor is the very source of the right being im�oked by the taxpayer. If the claim is anchored upon a specific legislative grant, the taxpayer must establish his right thereto with unerring clarity. If, howeYet the claitn arises from an erroneous paytnent or illegal exaction by the State, the taxpayer need onlY establish his claim bY a preponderance of evidence, as the claim is rooted not in privilege, but in the fundamental tenet of equity that the State shall not unjustly enrich itself at the expense of its taxpavers." (UnderJcoring .mpplied; citation.\ omitter0 . . All told, the CIR failed to raise anv issue that has successfullv convinced the Court to modi�'~� or reverse the assailed Amended Decision and Resolution of the court a quo. The find' ings of fact of said court are not to be disturbed unless clearly shown to be unsupported by substantial evidence.55 ACCORDINGLY, the Petition for Review is DENIED for lack of merit. The assailed Amended DeciJion and the ReJol11tion of the court a q11o are AFFIRMED. SO ORDERED. ~.~)- MA. BELEN M. RINGPIS-LIBAN Presiding Justice WE CONCUR: JEAN MARIE 55 Commissioner ofInternal Revenue v. Union Shipping Corporation and The Court of Tax Appeals, G.R. No. L-66160, May 21, 1990.

DECISION CTA EB NO. 3016 (CTA CASE NO. 10273) MARIA M~ ARIAN IV�hYu~J.r Rf.EY~ E~-FAJJX~RD~O Associate Justice L,AAMfl.A1~ LANififs..,ClJI-DAVID A.ssociate Justice co~ tif&llli'ie3fillis Associate Justice HENRJ~~NGELES Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ~. -t,L, � ) - MA. BELEN M. RINGPIS-LIBAN Presiding Justice