CTA Case No. 5451 (Decision)

REPUBLIC OF THE PHILIPPI NES COURT OF TAX APPEALS QUEZON CITY ASIAWO RLD PROPERTIES PHILIPPI NES CORPORATION <Formerly Mari na Properties Corporation>, Petit i onet', �- Vel�'SUS - C.T.A. CASE NO. 5451 COMM ISSIONER OF I NTERNAL RE VENUE, FE~r15u~gg e~ '~ Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION This case involves a judicial action for the refund of the sum of P12,248,856.00, representing overpaid income tax fot' the calendat' yeat' ended December' 31, 1994. Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines. It is engaged in the real estate business which includes the development and construction of high ri se condominium buildi n gs <E x hs. A and 8 ) . It is a certified member of the Chambe t' of Real Estate a n d Buildet's Asso c iation, I n c. and is licensed by the Housing and Land Use Regulatory Board <Exhs. C and D to D-3). For the calendar year ended December 31, 1994, petitioner filed its Corporation Annual Income Tax Return 17' 1995, declaring an income tax due in the amount of P3,396,606.00 but with a refundable income tax

DECISION - C. T.A. CASE NO. 5451. - 2- payment in the sum of P12,248,856.00, detailed as follows: <Exhs. E to E-5) Income: P75, 986, 3;;::9. 00 Realized Gross Profit on Installment Sales 16, c:~l�'~, 453. oo Var~ious P92, i.7.:oo, 78C:~. oo Total 82.496,194.00 Less: Deductions Taxable Income p 9,704,588.00 Tax Due (9,704,588.00 x 35~) p 3, 3'36, 606. 00 Less: p 1,273,324.00 a. Prior Year's Excess Credit b. Quarterly Payments 1'+, 37P , 138. 00 c. Creditable Tax Withheld P15,645,462.00 P12,248,856.00 Total AMOUNT REFUNDABLE Petitioner opted not to apply this 1994 refundable income tax in the amount of P12,248,856.00 as tax credit to the succeeding taxable year 1995 <Exh. F to F-2), but instead filed on November 8, 1995~ a letter claim for refund with the Bureau of Internal Revenue <Exhs. P to P-i.7.:). No action was taken by the respondent on its claim for~ r~efund thus, petitioner~ lodged its judicial appeal with this Court on December 24, 1996 in order to toll the running of the two-year prescriptive period under Section 230 of the Tax Code, as amended. The lone issue to be resolved by this Court is whether or not petitioner is entitled to the refund of alleged excess income tax payments in the sum of Pl;:::, 24-8, 856.00.

DECISION - C.T.A. CASE NO. 5451. - 3- Section 69 of the 1994� Tax Code, legal basis for petitioner's c laim for refund of creditable withholding tax at source for the calendar year 1994. Section 69 of the 1994 Tax Code provides, thus: "Sec. 69. Final adju s t ment t�etut�n. Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum oF the quar�terl y ta_-...- pa_vment s made dur��.i ng the sa .i d taxable year is not equal to the tota l tax due on the entire taxable .income oF that year the corporati on shall either: (a) Pay the excess tax still due; or (b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quart erly income tax liabilities for the taxable quarters of the succeeding taxable year. (Underscoring supplied) In an act which bolstered petitioner's claim, respondent presented in evidence, the memorandum report of the revenue officer, Ms. Consuela A. Mariano, who made a favorable recommendation on petitioner's claim but in the lesser amount of P11,875,106.70, det<::\iled as follows CExhs. 2 to 2-cl: CWT claimed in 1994 P14,372,138.00 CWT c ertified as r eceived by Revenue Recounting Div. per attached certification

DECISION - C.T.A. CASE NO. 545 1. -4 Page 1 p 4,871,032.50 Page 2 4,706,931. 70 Page 3 4,722,174.55 TOTAL P14,300,138.75 Less: 1995 CWT Feb. 17, 1995 P172,512.50 II 99,348.77 271,861.27 Net CWT per investigation P14,028,277.48 1,273,324.00 Add: Prior Year's Excess Credit P15,301,601.48 TOTAL 3,426,494.78 Less: P11, 875,106.70 Tax paid per 1994 ITR P3,396,606.00 Deficiency Income Tax 29,888.78 Balance: CWT Refundable per investigation CWT Claimed in 1994 P14,372,138.00 CWT Certified by Acctg. Div. 14,300,138.00 Difference: Document presented p 72,000.00 was BIR Form 1743-750 which is only an information document and not an evidence of payment. Ft~om the a fot~e rnent ion ed findings, petit i onet~ d i sagt~e ed on two kinds of disallowances: a) the disallowance in the amount of P271,861.27, and b) the disallowance in the amount of P72,000.00. Petitioner argued that the amount of P271,861.27 should be included in the refund because Section 70 of the 1994 Tax Code, as amended, allows petitioner to file an annual corporate income tax return for calendar year 1994 on ot~ befot~e Apt~il 15, 1995. Thus, withholding tax paid on Febr~u.::n~y 17, 1995, p<?r~taining to income eat~ned in 1994 may be included in the annual adjustment return for 1994, and can be claimed as tax credit on the tax due for 1994 even if the final adjustment return was filed in 1995.

DECISION - C.T.A. CASE NO. 5451. - 5- The records belie petitioner's claim. sct�ut iny of the records show that the evidence of petitioner which consist of the Monthly Remittance Returns of Income Taxes Withheld indicate that the taxes withheld are for the calendar year 1995 <Exhs. M-71 and M-90) and do not refer to income earned in calendar year �1 o q~''+� Exh. M-90 shows that petitioner even .J indicated that the withholding of P99,348.77 was for the month of February 1995. As regards the revenue examiner's disallowance of P7E~, 000. 00, which petitioner objected to, We find the position of petitioner meritorious. Section 10 of Revenue Regulations No. 6-85, as amended, pt�ov ides: Section 10. Clc:~.im For Tax Cr�ed.it� or� Rt?f"und. (a) Claims for Tax Credit or Refund of income tax deducted and withheld on income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received has been declared as part of the gross income and the fact of withholding is established by a copy of the Withholdinc Tax Statement duly issued by the payor to the pavee showing the amount paid and the amount of tax withheld therefrom. (Underlining supplied). Petitioner was able to present in evidence the required Withholding Tax Statement which is the BIR Form 1743-750 showing the fact that the amount of P72,000.00 was withheld on income earned on rental of real property

DECISION - C.T.A. CASE NO. 5451. - 6- in the amount of P1,440,000.00 <Exh. M-94). This is a valid proof of payment and can be made a basis in claiming a refund of excess creditable withholding tax at source pursuant to the aforementioned revenue regulation. In s urn, petitioner is entitled to the refund in a reduced amount of P11,947, 106.70, computed as follows: Amount recommended by the P11,875, 106.70 t~evenue examinet~ 72,000.00 p 11, 947, 106. 70 Add: CWT supported by BIR Form 1743-750 Amount refundable WHEREFORE , finding the petition for review partially respondent is hereby ORDERED to REFUND in favor of the petitioner the amount of P11,947, 106.70, representing overpaid income tax for calendar year ended Decem bet~ 31, 1994. SO ORDERED. WE CONCUR: ~lO. Q_ Ar-- ERN9STO D. ACOSTA Pt~ ~ iding Judge ~::~~2E~

DECISION - C. T.A. CASE NO. 5451. - 7- CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Secti on 13, Article VIII of the Constitution. ~~--~ ERNESTO D. ACOSTA Pt~esiding Judge