CTA Case No. 3973 (Decision)

:JY �.t.'ioi.JBLCC: 01" HI� t'~lllt'P1l'l:r''f I ~OURT OF TAX Af'PULS 1 . QUftO.N Q rY \ II" l COMMONWEALTH MAN AGEMENT & I SERVICES CORPORATI ON, I Petitione r, ! - vers us - C.T.A. CASE NO. 3973 .. i THE HON. COMMISSIONER OF INTERNAL REVENUE, I I Re s pondent. I X- ~ ~ - - - - ~~ - - ~ - ~ X DECISION ,/" This is a judicial c lai m for efund of erroneously paid withholding ta x_j n the sum of E94,872.00 f or the ...._ year 1984. Petitioner filed its 4th and final quarter corpo- r a te income tax for 1984 s howing a loss of E6 ,336 .00. In said year 1984, petit i o ner had a llegedly paid with- holding tax in the s um of E94,872.00 which amo un t repre- sents asserted exc ess income tax payments, which is herein sought to be refunded in this c as e. On A~ril 29, 1985 , petit ioner filed a cl aim for refund wi th the Commissioner of I nt ernal Revenue of th e said excess income t ax payment of E94,872.00. Fr om the tim e of the filing of the aforesaid clai m fa~ refund, the Com missi on er of Internal Reven ue failed \ 41 J

.I DECISION - CTA CASE NO. 397 3 I II - 2- I I' I to act on pe titi oner's claim. Without waiting for a decision on its claim for refund, petitioner filed its Petition for Review or judicial claim for refund with this Co ur t on September 12, 1985. On January 25, 1986, respondent filed his Answer thereto, which asserted, among others, th ~ t it has no knowledge of the �veracity of the contents of pet itio ner's income tax return showing a loss of 86,336.00 and for which it is not liable for cor porate income tax, and a refundable excess payment of wi~hholding tax in the sum of 894,872.00 in Annex A (Exh. D, p. 3, CTA rec.); and asserted in its special and affirmative defenses that this case does not involve illegally or erroneously collected taxes and, hence, a petition for review does not lie in this case; that under BIR Memo. Circular No. 10-77, any excess of the total quarterly payments over the actual tax compu ted per adjusted or f inal corporate income tax return shall be refunded to the taxpayer, or be credited against the estimate d quarterly income tax liabilities for the quarter of the succeeding taxable year; t hat in the case corpotate annual income tax re- J turhs showing refundable am ounts arising from overpaid \ 41i

DECISION .... CTA CASE NO. 3973 ..... �)z .. . .,�' ' quarterl y income tax~ unde r the authority of Revenue Memorandum Order No. 32-76 dAted June 11, 1976, t he :retuL'ns are then pre~�audil:ecl and the r efund or tax t, credit is gra n t~ d; and t h at, consequently, there is no n eed of ~he petition for review to preserve the right to claim for refund or tax credi t within the 2-year period from date of payment of the tax~ Res- pendent Commissioner of Interna l Revenue finally asse rts . reassuringly, in his affirmative defense against h rein petit ioner 1 s cla i m for refu n d~ th at a taxpayer may r ecover from t he BIR excess in co me tax pai under Sec ti o n B6 of th e Tax Code, being an o b l igation created by l a w, wit h in ten ( 10) :y ears frorn date of pa yment p u rs uan t to Art ic l~ 1144 of the Civil Co de. Ten days after the filing of the Answer by the respondent Com mi ssioner of Internal Hevenue to tho in stant judicial c1a i rn for refundp said .r espondent has not compli ed with Section 2y Rule 7 of the Rules of the Court of lax AppeRls, whic h categorically req uires that he shall certify �and forward to this Court all the re cor ds of this case in hi s possession~ 1i th pag es duly numbered and i f in sepa r ate folders~ then the foLders shall be duly numbered. Until the presen t \ 412 J

ll ;; DECI SI ON CTA CA SE NO. 39 73 - l~ - .I� writing no record s on t he c l8i m f or r e f und wa s e v e r certified and forward e d as di r e cte d , whi ch i s in '� direct c ontempt to the l aw ful s ummo ns of th is Court. Nev er t he l ess , dur in g the he ar ing, i t was o n ly the pet i tion er who had prese n t ed i ts e v id e nce , both documentary a n d t es t i moni a l, s ho win g th a t a cl aim f o r r e fund wa s f il e d wi th t he Commis sion er o f In ter n a l Revenue in t h e am ount o f e94,87 2 . 00 as o verp a i d or e xce s s income tax p a ym e nt for 19 84; th at i t h a d pre- s ented docum ent ar y e vide nce of the.withho ld i ng t ax p a ymen ts (E xh s . E to E-7) whi c h r e p re s e nt s t h e to tal ove rpaid inco me ta x i n th e sai d s um of e 94, 8 72 .D O. Th e only iss ue pr e sent e d to Us for de t ermi n a ti o n is whether pr not the s um o f e9 4, 872 .00 i s a n overpaym e nt of in come tax fo r 1984 a n d whe th er o r not the petitio ner is enti t led to the r e fund the reo f . The e vi de n c e pre se nte d b y pe tition er cons is ti n g o f t h e wit h ho l ding inco me tax p a ym e nt s ( Ex hs. E t o EM7), we re withh e l d o n in c o mes due f or s e rvi c e s r e n- dered by peti t ione r to v a r io us c o mpa ni es ( America n I n t e r n a t i o n a l Un der wr i t e r s ( Ph i 1 s � ) I n c o ; Ame r i c a n I Int~rn at ion al Grou p Ser v ices Corp . ; AI C Data Ce nter \ 410

DECISION CTA CASE NO. 3973 - 5- Manila, Inc .; Manila Adjust e rs & Surveyors Co~; Phi l . Am . Life Ins . Co.; Philippine Home Assurance Corpo- t. iation; Japan Marine Surveyors & Sworn Measures Co rp.), and which shows the amounts of withholding tax payments in 1984, viz: Withholding Agent Service A mo u n t \H t h h e 1 d AI U (Phils.) Inco Management & e 8,358 .19 Technical Am . Int. Group Professiona l 1,577.68 Services Corp~ fees AIC Data Center Profess ional 170.61 Manila, Inc. fees Manila Adjusters & Professional Su rvey ors Co. fees 1,316.78 Phil . Am. Gen. Ins. Services Co~ Phi l . Amq Life Ins. Professional Co. fees Ph il. Home Assu- Profeasional 2,684.90 rance Co rp. fees Japa n Marin~ Sur- Professional 420 ...41' veyors & S1tJorn fees tv!easures Corp~ T o t a 1 ~----~-f�~-.-t-�~--2-:-!-~-9 Accordingly, petitioner, as shown above , is only entitled to the re fund of such overpayment as it can prove. Having prov e n an excess payment in the amount of on 1 y e\8 8 , 6l1- 5 � 3C1 pet i t ion e r i s on 1 y e n tit 1 e d to the )

DECISION - - 6- CTA CASE NO. 3973 I' refund of this amount of E88,645.30 not the alleged sum of 894,872.00 claimed by it, Anent the legal point presented by respondent '� Commissioner to the effect that there is no need for petitioner to file a petition for review (or judicial claim for refund) to be brought to this Court, because this case does not involve illegally or erroneously collected taxes; that any claim for refund due to over- payment shall be granted by respondent after pre-audit; and that this claim for the refund of taxes can be anyway recovered within 10 years under Article 1144 of the Civil Code is not only to beg the issue but thes~ contentions are not legally and factually meri- torious. Not only was there no expeditious investi- gation or pre-audit conducted by respondent regarding this claim with the end in view of granting a refund. And we think that this case involves erroneously collected taxes and, therefore, a proper subject of a judicial claim for a refund within the proper jurisdiction of this Court. Under the law (Section 54(f) of the Tax Code), any income upon which any creditable tax is required to be withheld at source under Section 53 of the same Code, such' tax withh~ld shall be included in the return of \ 410

DECISION - CTA CASE NO. 3973 - 7- its recipient-taxpayer; however, any exce s s of the amount of tax so withheld ov er the La x du e on the recipie nt-ta xpa yer' s return s h all b e re f und e d to him t. s ubj ect to t he provisipns of Sec ti o n 295 ; a nd if the income tax dollected at sourc e i s J e ss th a n the tax due on his return, the di ff e re nc e s hall be p aid in accordance with the provi s ion s of Sect ion 51 ( 54 ) (As amended by BP Big . 4l) o And th a t und e r Se ction 29 5(3) of the Tax Code , a s a dverted to a bo v e, it pro- vides that - "x xx No credit or r e fund of ta xes or pen alties shall be a ll owed unl ess the t ax,payer files in w r i~_ing with t he Commissioner ~ claim for r e fund withi n two' y e a r s a f t e r t h e p a yme n:r--Of-the t a x or penalty. (.309) (as am ended by PO 177 3 .)" It can be gathered from the above authority of la w that there is a n eed to file a c l a im for refund wit h th e Commissioner of Inte r nal Rev e nu e ; a nd in case of the fai lure o f the latt e r to a ct on the said refund, there i s need for the fili ng of a judicial claim for refund by way of a " Pet ition fo r Re view" brought w i~ hin the two- y ear p e rio d c o mputed from the paym e nt of the t a x. The authority grant e d, under \ 41

DECISION - C.TA CASE NO . 39 7 3 .. 8 - Section 292 6f the Tax Code , to the Commissi oner th at he "may" eve n vJithout. a \<J ritt~..!2__Elai_!!l th ere for~efun cl or credit a ny taxt..._where on th e _fac~_f_!.J2.�...~_tt:!..E.D_~o n which (Under U n in g -~J1 1 i.e d) is mere 1 y d j /~c ... tory on his part and calls for a greater l eewa y of discreti on , which may, as i t di d in this case, give ri s e to so much delay in the ref und of overpaid t axes which if given or granted with spee d, the over p ai d taxes may alreGrly hav e long been utilized by petitioner-taxpayer to it s greater advantage as this amount is undoubt edly ne eded in its operatio n and business . WHEREFORE, respondent Commissioner of Internal Revenue is her eb y ordered to refund to petitioner Commo nwealth Manage- ment & Services Corporation the s um of eBB,645.30 as overpaid income tax for 1984. No pronoun ceme nt as to costs .