CTA Case No. 5578 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PLI PROPERTIES INC., C.T.A. CASE NO. 5578 Petitioner, s~~ }Q~9$ Promu lgated:. - vet~sus =-_ 1} COMMISSIONER OF INTERNAL REVENUE, Re s pondent. X .... �- - -- DECISION This case involves a claim for refund of value-added tax in the amount of P381,810.01 alleged to be erroneously paid by the Petitioner for the period January 1996 to August 1997. Petitioner 1s a domestjc corporation with principal office Stone Treatment Center, Saint Luke'1 s Medica~ Center, Quezon City. It is a regis ter ed owner of a parcel of land with improvements located at the Light Industry and Science Park in Cabuyao, Laguna <Exh. C). By vi t' t ue of a Cont t'act of Lease <Exh. D) ' Petitioner leased out its property to USA Laboratories, Inc. effective October 15, 1~93 for the amoun~ of P181,338.00 each month for the first two years subject to 10% increase every t~o years. Petitioner filed its 1996 Corpor3te Annual Income Tax Return on April 4, 1997 deciar1nq a taxable income of P1,333, 193.00 and a tax payable in the sum of

DECISION- C.T.A. CASE NO. 5578 - 2- the peJ-~ioc:l J,T:~nuar�y 1996 to August 1997, Petitioner's lessee allegedy failed to pay the agreed But despite non-receipt of rental income, petitioner still pai d t h e value-added tax <VAT> thereon totalling P381,810. 01 , detailed as follows: IYIONTH t~tifOLJNT EXHIBIT J"anuar~y 1~396 ,..., 9, 973 . ::'"j':3 I ,J Febr~uat~y 1996 t�� L iYiaJ-~ch 1 9':::16 19, 9.t.r-7. 18 M l~pr' i 1 1996 19, 9'~7. 18 0 l71ay 1'396 June 1996 19, 9'+7. 18 j:) Ju 1 y 199E, August 1996 l 9, ~J-4-7. 18 ,R., s(~ptembel-~ 1996 t9,9!.~ 7.1B ;;:) Octobe1-~ 1~-396 l9., ':)f.~"?. 18 November' 1996 December~ 19 ':36 19, ~3L~ 7" 1 B SUB--TOTt~L 19, ':347.18 :1. 9, 91.~7. t 8 1':3,9'+7.18 :1.'::1,9'+7.:l.8 1=� c~22, 232" !:5 ..l J"anu.-=wy 1997 P 19,9-4-7. 1B u Febr~ua r'y 19':37 19,9L~7.1f::i v 1�1arTh 1997 19,9-4-7. 1 E:l. Ap1-~ i 1 1997 19, 9'+7' . lB X May 1997 19 .1 9Lt-7.:l8 y ,June 1997 19,9�:t-7.1f.3 July 1997 j_ 9 , 9L~ 7 . 18 l-~u~~ust 1997 19, 9'+--l. lH ~-3UB--- TOTJ.~L Pl59., !:=.i77. <i.L~ GRI1ND TOTnL_ Thus , on Nove m ber~ f~5, 1997, Petitioner filed with the Revenue Distri c t Of fice No. 39 a claim for refund <E:>{h. in the amount of P3B1,B10.01 representing erroneously paid VAT fro m January 1996 to 11ugust 1997.

DECISION- C.T.A. CASE NO. 5578 - 3- Claiming inaction on the part of the respondent and to toll the running of the prescriptive per i od, judicial Respondent, by way of Special <:md f~ffi t~mat i ve Defenses, states: In an action the taxpayer has the burden to show that the taxes paid were erroneously or illegally collected and failure to do so is fatal to the <T:\ct ion; and Claims for tax refunds are strictly construed against the taxpayer. Petitioner has no cause of action . In of it~~ claim, pet i tioner presented document~ry as well as testimonial evidence. Respondent, on the other hand, was considered to have waived his right to present evidence in view of the �r~epeated absence of his counsel (CTA t~ec., p. ~:�05). The lone issue to be l�~eso 1 ved in this case :is whether or not Petitioner is entitled to a refund of P381,810.01 representing erroneous VAT payments for the period January 1996 to August 1997. After an assiduous review of the fact s, evidence before Us, We rule ~gainst the Petitioner.

DECI S I ON- C.T.A. CASE NO. 5578 - 4- ~Ject ion 102 of Republic Act No. known as the Expanded Value-Added Tax Law, as amended by !iepublic Act No. 82-41.1 pr~ovidr-::>s.1 to l-'Jit: SEC. 10c~. Valued--�,::zdded tax on ~;ale of' s ~?r.. v i C.' I:? !:i c::?ncf Uf:.;e 01'' .lease of' p1�' ope1�'ties. (a) Rat t? <::Inc! base oF tax . - There shall be levied, assessed and collected, a value-added tax equivalent t o 10% of gross re ceipts derived �f'r�om the sale or exchange of services, including the use or lease of properties. ){X X XXX XX>< Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed 1r the property is lease d or u sed in the Philippines. Based on the above provision, Petitioner as lessor, is require d to pay t he 1 0 % VAT on rentals. Petit i on(:>r' submitted the VAT returns afore-enu merated as proofs of payments thereof. As adverted to earlier, Petitioner claimed that from 1996 to August 1997, it did not receive any its lessee, Inc .. the 1996 income tax return of petitioner showed a net income of P1,333, 193.00 and a tax payable in the .::.'!mount 0 f p 1 (l 1 7 'J3LJ.� L~ 7. In said tax return, Petitioner's income w<::\S solely derived from rentals. ~~hy d :i d Petit i. one�r� 1. ncome:'1 Even if

DECISION- C.T.A. CASE NO. 5578 - 5- Petitioner was on accrual method and assuming that its accounting staff were not familiar with the VAT Law~ adjustments/reconciliation are supposedly made at the end of Hence, the mistal-<e ~\lhich Petitioner allegedly committed could have been corrected before the filing of its income tax return on April 4~ 1 ':396. In other words, why repeat the same mistake in the fo 11 owing yec:n<1 Petitionet~ also asset~ted th,::~t USA Labor~aties~ Inc .. admitted in it~, lEd;tet~ <Exh .. CC>, th<:..t i t ovH?d Petit:i.on(~t~ But an examinat i on of the said document will not tell us that said arr earages covered the period subject of this case. In fact, even the letter sent by Petitioner's counsel dated ,July 31, 19'J7 E> informing the lessee of the termination of the lease contract effective August 15, 1997 did not specify that the unpaid rentals were from January 1996 to August 1997. Thus, We cannot accept Petitioner's evidence as sufficient PY'O 0 f t h,3t it did not receive the t~ent a l income during the period involved in this case. And it is worthy to note that Petitioner even submitted a Certificate of Creditable Taxes Withheld at Source CCTA

DECI SION- C. T.A. CASE NO. 5578 - 6- �r��ec. , p. 197) for the period January to December 1996 issued by USt~ Inc ... This presupposes payment on the part of the latter in the amount of 21.mount decla1�~ec1 PE>tit:i.on:�?r~ ir1 it=~ 19'36 income tax return as rental income, from which payment, a tax was withheld in the amount of PJ..l.9,68:3.00 .. somehow defies logic why USA Inc. withheld a tax from an income which it supposedly had not paid. ltJh y iSSUE� the corresponding certificate and why did Petitioner bother to attach the same in the income tax return? It seems that it is not only the Petitioner's account in ~J staff who were confused but its counsel C\ S ~.o.~ e 11 � Because i f the allegation is non-receipt of income then why the declaration of income in the tax return? Wo�r-�se, how come there was a certificate of creditable 1--'.Jithh{-;~ld a t Even th~:~ Petitioner Alleged as demand letters were not dem<=:t n ci but a termination letter (Exh .. E) lAJh:i.ch did not specify the period covering non-payment of and letter� (Exh. DD) t ~--�an s mitt :i. n I] accountabilities. Although the latter mentioned of the period covered, yet We wonder why the attachment referred

DECISION- C.T.A. CASE NO. 5578 - 7- thereto could not be found. It is worth stressing also that this claim includes the period January to August 1997. Yet Petitioner failed to submit the 1997 income tax return which is necessary in verifying Petitioner's financial standing in 1997" entry submitted by the Petitioner was not given any weight as evidence for it is only for the month of February 1996. And as We intimated earlier, E~v en i f the accl�~ual method of accounting was being O:ldopted by the Petitione1��', it had to make the year end adjustment. The so insisted to have committed could have been realized and rectified before the 1996 income tax return was filed. So, it could not be plausible that in 1997, after realizing its ignorance m�~ mista!-:e, it continued to pay t:he t.-1AT despite the non �-� In sum, We really have no way of determining if indeed Petitioner's lessee failed to pay it 5 monthly rentals as averred. Or whether subsequently situation had finally improved thereby fulfilling its promise to settle its accounts. WHEREFORE, finding no solid proof that the VAT in amount of P38l 'I 810 .. 01. was erroneously paid by

DECISION- C.T.A. CASE NO. 5578 - 8- l--Je zn�'(~ const~~ained to DISi"�IISS the! instant Petition for Review for lack of merit. SO ORDERED l.JE ,0~. . . ERN TO D. :A :OSZ T /Y-~ P~ es i~ i ng Jw~ j~~ � RAMON 0. DE f~s!;ociate Jud-~~ CERTIFICATION I hereby certify that this decision was reached after due consultation among the members of tha Court of Tax Appeals in accordance with Section 13, Artice VIII, of the Constitution. ~(0, ~k ERNESTO D. ACOSTA Pr~esiding Judge