CTA Case No. 2990 (Decision)

-- lll.l!l!''CDL1C OP Ttn PHILIP CO , T OF TAX PP"EALS /P RH1A BUSI NES S HACHIN E S, INC., Petitioner. , - ve rsus - C.TA. CASE NO. 2990 COMr-1lSSI ONER OF INTERNAL REVENU E, Respondent.. X- - - - ------X DEC I S I 0 N It appears in lhis acti on for refund or tax c r edit o f an alleged over-paymen t of income tax that, pe t i ti oner, Pr l ma Busin e ss Hachines, Inc., a domesti c trading corporation, filed with res- pendent Co mmi s s i o ner o f Internal Reven ue on January 17, 1977 its income tax return for the fiscal year ended September 30, 1976; declaring a gros s in c ome of ~1,668,033.0 0 , a total deduction of Pl,002,529.00, a taxable net income of P 66 5,504.00 and a tax d ue thereon a moun ti ng to P2 2 2 ,92G.OO ~ hi c h it paid in in s tallments. Subseq e n tly on January 24, 1978, petitione r filed ... an a mended income tax return consequenced by its o wn a lle g ed e rroneous entry in its books which treated the importations of 60 units of cash registers amounting to ~306,171.20 a s ''merchand ise �.) {� J .-' J

DECISION - CTA CKSE NO. 2990 - 2- in transit" instead of clas si fying them as "purcha.,es" resulting in an ove r statement of ne t income by P306,171.20 as well as the manage- ment bonus which is c o mputed on net incom ~ after taxes by P9,637.36. After prope r adjustme nts to net profit and manag2ment bonus, a taxable n e t income of P368,969.9l instead o f ~665,504.00 previously reported which shou l d hav e been taxed a t ~11 9 ,1 3 9.00 would result in an o v er-payment of inc:o:ne tax amounting t o Pl03,787.00. A claim for the refund/credit of Pl03,787.00, representing the differ e nce between the amounts of P222,926.0 0 a n~ ~1 1 9,139.00, was filed together wi th the a me nd e d r e turn, which had remained unacted by respondent t o date of fil i ng this petition fo r re view on _January 15, 197 9. Peti tione r shore s t he claim on the findi ngs contain ed in th e Report of Inv e stigation dated d arch 5 , 19 79 a u t horized by respondent's office, which, insofar as pertinent, r eads: "'l'h e over-payment mentioned above ~ o sc on an error of its auditors in making adjustments in the books of accounts of the claima nt by debiting "merchandise in t ran s it" and crediting the c or r espondi ng amount to "purchases" thus reducing the ~o st of g oods sold by P308,171.20. Said er r o r was verified ~ �'� 'J ,r")

DECISION - CTA CASE NO. 2990 - 3- by the undersigne d from the Letters of Credii N o s~ R-1272-76 and R-12 71-76 and Central Bank Release Certificates Nos. 11279-76 and 11410-76 to the effect that while the cash regis t ers i nvolved in the importation were alre ady r e served by Prima Business Ma chines, I nc., they were treated as "I-1erchandise in Trans i t" in its books. The allega t ions, therefore, of claimant i n its le t ter are true and the refund of the amount of Pl03 , 787.00 is in order." (Exh. F, p. 47, BIR records) Res p onden L '� k' c .i.f ical l y assails the legal suffic i ency o f h ie e xaminer�s report as the sole ba ;; is fo r the c laim sans the pres en t a tion of aug me n t in0 evidences but s ~ ek s a ltern ;tively a d e[ ie iency tax J. iabi l i t y a gainst peU tioner a s r e commended on the s a JH.:; report, thus: "Howe v er, i n th e examination of -h e rec ords , i t wa~ found that lhere i s st ill due from Prima Bus~ ness Mach ines, I nc . , Pl,095.91 as deficiency advanc sales tax on� importations as compu ted in the attached wor k ing p a pers which should reduce the amount cla imed." (Exh. 2-A, p. 47, BIR re ords) Respondent further takes i s sue on the tena- bility of a part of t he claimed r efund in the amount of P25,440.00 representing three install- ments (Exh. 1- A, p. 28 , BIR records) .out of the total income tax p ~ y ments of P222,926.00 for the fiscal year as barred.by the statutory two- year period o f limitat ion, i.e., from the time ) (']� 0 -~ ~ , }

DECISION - CTA CASE NO. 2990 - 4- of payment b the filing of the petition on January 15, 1979, itemized as follows: QUl\RTJ:R DATE AMOUNT . First instal l ment February 12, 1976 ~ 6,853.85* Second in st~llment May 26, 1976 9,127.71* Th i r d installment Augus t 18, J 976 9,458.44* Fourth installme nts: January 17r J 977 65,828.67 April 15, 197 7 68,950.72 July 13, 19 77 62,706.61 TOTAL P222,926.00 � � � � � � � � � c �� c . . . . . . . *Allegedl y barred by pr~scription (Exh. A, P� 28 , Exh. D, p 25, BIR r e cords) rrhc issue centers therefore on the justification in the use of t he report o� findings as basis for th , c'<... cermina tion of ll e cl aim for r efu nd or tax c red i t o f alleged ov ct - payrnent of inco me tax. The records s hOI\' t hal t'e spondent had the peti tioner' s part icular claim for refund or tax credit adverted to above illvestigated and verified . It will suffice to point out that an appropriate "exami nation of the books o� account and o ther related r ecord of Lhe above-named firm for purposes o f verify ing the validity of their claim for refund/ tax credit of income tax ove r-payment amounting, to Ii l03 ,78 7 .00 per it s le t ter d ated January 16, 1978" (Exh. F, s upra) wa s conduci..ed. The report, itself, furnishes the best means of its own exposition . The fa ctual findings are

DECISION - C7A CASE NO. 2990 - 5- not short of specific support in terms of tractable pertinent d r ta a11 relevant recor d s openly la id and fully disc l sed by the peti- tioner. As such, the re p0 � t deserves the cre de nce t hat should �norma l l y be accorded in the abse n ce o f co11tr ary e vide nc e . Respondent poin ~ s t o no factual errors and su~erfluities which need to be cu red and abridged. And , no t that t he examiner's c � eden tials are impeccable but to his favor muo t be conce~ e d th e presumption of r egularity in t he p e rformance of official duties (Sec . m-5, Rule 131, Revised Rules of Co u r t~ u. s . v s. Es ca l a nte, 36 Phil. 743~ 31 C.J.S. 7 9 9) _whic 1 h as n o l be e n disp r oved by any affirm- a t iv e evid e nc e of irre~ularity or unlawful conduct. Accordingly, we feel compelled to affirm the import and force of the report of findings which may not be su f fe re d to petrify in futility . Mor e o v er, i t adds no strength to respondent's posit ion as certainly it would be an absurd i ty o n hi s p ar t to repudi a te the report by squir ming out of a disadvantageous situation insofar as it su s tains the refund and then, on the same breath, invok i ng the same findings -on the deficiency tax liabili t y again s t peti t ioner . Such a fluctuating 4 01

_. - - DECISION - CTA CASE NO. 2990 - 6- l ux ur 1ance of expedi ency would cast respondent in a role who does not c omport with the standards of fairplay. We appre hen d that the report of inve s tigat i on \hich r espondent himself had occasioned s hould no t serve nar row purposes in construing the rights and obligations of t he par tie s ~ f ~ ec ted ther e by. The in ter e s t of government i s not that it shall win a case but that justice s hall be d o n~ . Turning t u p et it i o n~ ''s objection ag a i s t the ded uction from its reiundable claim the sum of ~1,095.91 re p resent 1ng d e f iciency advance s ales tax liability uncovered in the investi yation, su f fice i t t o slctte th a t as implied in the hol d i ng in Comm 1ssioner o-t= ltlte rnetl Re ven ue vs. Itugon �- Su:z�oc ca s e, (G.R. No . L- 2~2 ~9, July 29, 1969, 28 SCRA 871) .allowing th e taxpayer the right t o apply its refundable claim from its exis ti ng tax l i ab i lity, the gover nment , in the same token a nd for rea s0ns deemed hardly l ess imperative and impor tant, should not be pr ecluded in availing of the same. In the case at bar, respondent deserves no differen t treatwent and mu st be ex- tended the right to deduct � petitioner's tax liabili ty fr om its refunda ble c l aim.

DECISION - CTA CASE NO. 2990 - 7- As t o the question r ~ ised by respondent relative to the prescript i0n of action on the three installments in the amoun t of P25,440.0 0 out of the total income tax paymen ts of P222,926.00 the same must be answered in the negative as it was squarely met 1n the cases of Collector of Internal Revenue v s . Pr i e to , G. R. 1 :.) � L-119 76 , Aug u s t 2 9 , 19 61, 2 SC RA 1007 and Co:.tH1 .i. s sioner of Internal Revenue vs. Palanca, G.r~. No. L-16626, Octobe r 29, 1966, 18 SCRA 496, that , whe r e the tax account was paid by insta llmen , the computation of the two- year prescriptive peLiod under Section 306 (now � Sec. 292) .of the T x Code should be from the date of the final payment. In the instant case, less than two yea r s h0 elapsed from the time petitioner made its f inal income tax payment on July 13, 1977 to ' the time it filed the petition for review on January 15, 1979. The determination of the . pr~scriptive period of two years for recovery of I tax erroneously or illegally collected, rests on well-settled jurisprudence which application may not be tinkered by any such sort of idiosyncratic aberration. ln f i ne, we hold that � th pet itioner is en- titled to the r e fund or tax credit of an overpaid

DECISION - CTA CASE NO. 2990 - 8- income tax for the fiscal period ended September 30, 1976 in the amount 'f Pl03,787.00 with no install- ment payments thereo f ba rred by prescription, but shall be subject to the deficiency advance sales tax liabi li ty 1~ the amount of Pl,09 5 .91, deduct- ible from -he refundable amount. WHE . EFORE, respo n dent is hereby ordered to r e fund or credit to the -r:c titioner the net amount ' of Pl02,691.09 witho p ronouncement as to costs. SO ORDERED. Quezon C1ty , Metro Manila, August 31, 1981. Z. REYES Associate Judge WE CONCU! : / ~.AWM-A7iN:rT.E:t~ P r e s i d i n g, J u d g e CON~~QUIN As soc ia t't" Judge