CTA Case No. 3443 (Decision)

p .. oct'j>l}8UC OF >HE ~~ll.!f>t'LN '" ~OURT Of T .X A.PPf~\L! QlJBOM CJ ~�w KAPATIRAN REALTY CORPORATION, Petitioner, - versus �~ C.T.A. CASE NO. 3443 . COMMISSIO NE R OF INlERNAL REV EN UE , X- - - - - - - - - - - - - - X DECISION This is a claim for refuttd from respondent Commissioner of Internal Revenue of the amo unt of E!2ll, 944.66, repr ese nti r�g overpayment rna de by pet it ioner of corpor ate income tax For year 1980 . The facts are very simple, not jn di~>pute since the same were established by evidence submitted by petitioner Kapatiran Realty Corporation. Counsel for the Commissioner of Internal Revenue had opted to s ubm it the case basr~d upon the genera] pleadings and the r ecords of thi s case. The parties had sub- mitted their r espec tive memoranda . The material facts can be gathered from the uncontradicted documentary evidence of petilicncr, ~nd as recited by respondent's cou nsel in their 31 1

.. DECISION - - 2- CTA CASE NO . 3443 I" memorandu m dat ed June 19, 1986 (pp. 127-129 , CTA rec.) as fo llows: .' Kapatiran Realty Corporation, Kapatiran For brevity, i~ a corporation organized and existing und er the laws of the Philippines. It is engag e d in the bu si nes s of real est a te investment , l easing land and buildings. The Philippine American Life Insura nc e Company is o ne of the lessees. For the year 1979, it f i l ed its first quarterly corporat e income tax return e n dinu Ma r ch 31 , 1979, declaring therein a net taxable income of 8120 ,9 59 . 00 and pa id the t ax due thereon in the amounl o f e39, 836 .D O on !�~arch 30, 1979, under Central Ba nk Co nf i r rn at i o n Re c e i p t No � 2 7 3 80 0 6 ( Exh i b it s n C-1" & "C -3", f or Petitioner). For the sec ond qu arter endin~J Ju n e 30 , 1979 , it filed its c orp orate quarterly income tax return on Auqu st 29' 19 79, de c l <Li ng therein a n e t taxable income of E248,164.00 and paid the correspondinQ tax due th~reon in th e amo unt of 842,021.00 under Cen tral Bank Confirmation Receipt No . 2959207 on Au g u s t 29, 1979. (Exhibits "C-4" & "C-6", Peti �~ t.ione r ). \ 31 2

DECISION - CTA CASE NO. 3443 On November 29, 1979, Kapatiran fi led for its first, second and third quarte rs ending September ~ . 30, 1979, a cummulative quarterly income ta return which it declared a net taxable income of e391,724.00 with a tax due thereon in th e amount of el29,603.00~ For the said quarters, Kapatiran credited the amo unts it paid during the first and second quarter, e39,836QOO and e42,021QOD 9 respec tive ly, and the amount of e3D7,86B.OO, Wi thholding Tax Regulations, which were paid and remitted to the Bureau of Internal Revenue, monthly by Philippine American Life Insurance Company. ( Ex hibit s "C-7" & "C-�8", Petitioner) For calendar year ended Decembe r 31, 1979, Kapatiran filed its final adjusted income tax.return on April 15, 1980, declaring therein a net taxable income of e6B3,482.00, and the tax due thereon is R263~392.00. After crediting the total amount of e3s9~725.oo, (e39,B36.oo + e42,021.oo + e3o7,B6s.oo) representing payments of taxes made on the first and second quarter and the withholding tax withheld ' by Philippine America n Life Insur a nc e Company from \ 31 3 , �.

DECISION - .� 4 - CTA CASE NO. 3443 ,, Kapatiran's rental income, resulted to a creditable amount of El26,333.DO. (Exhibit "C-9", Petitioner) ~. The aforesaid amount of el26r333~00, was applied and dredited by Kapatiran as a tax credit against i t s income tax liabil it ies for three quarters, first, second and third quarters of calendar year 1980. For the l as t quarter of calendar year 1980, ended De cem ber 3lv 19 80, Kapatiran filed its final adjusted return on April 15, 1981, declaring therein net taxable income of P-583,106.00 and the tax due thereon in the amount of 8223,242.00. Kapatira n credited the amount of El26,334.16 for the final quarterly return ending December 31, 1979, and the amount of E308,852.50, representing Withholding Tax at Source withheld by Philippine American . Life Insurance Compan y from the rental income of Kapatiran. Thus resulting to a total creditable amount of E435,186.66~ Accordingly, Kapatiran 1 s final adjusted return, ended December 31, 1980, sl;o~tied a refund ab le amount of E2J.l,91+4~66. (Exhibits "C-10" & "C-11") For the 4th or fina l quarter of 1980, peti- tioner�s net income was accumulated with the net \ 314

DECISION - CTA CASE NO. 3443 ,-.�� in c ome of the 1st, 2nd and 3rd q ua rters of the same year . The computation of th e amount due '� and claimed as refundable, in the sum of ~211,944.66, for 1980, is arrived at a s follows: Ne t Cumulative income 1980 ---�-----.... - ....... P-58 3 ,:106.00 fax Due thereon (including corpo- rate devu tax) ---------- - -------~-~- 2 2 3 ,242.00 Less: (1) Creditable amount for year ending Dec. 31, 1979 ------ ------ el26,334.16 (2) Withheld tax at source by Phil. American Life Ins � Co.. --�-~�- - -�- -_2.QJL. 852 $1..9_ _4 3 S..J.l.~ 6 � 6_�_ ----------- Amount Refundable --�-~--- ---- -�-- ....... - .. - ~ f1! 1 ~~~! ~ ~ As shown in the above computation, the amount of E308,852.50 is an item that was withheld by Philippine American Life Insurance Co~, against the rental income due to petitioner Kapatiran Rea 1 t y Corporation i ~ the year __19,8 o.. (Ex h s � "C" and "C-10", "C-11", pp. 70-71, 79 & 80, CTA rec .. , respectively.) So that when thi s amount of e308,852 . 50 was subtract e d , together with the I ' creditable sum of 8126,334.16~ from the fin a l \ 31 5

- ' Dt:CISION - CTA CASE NO. 3443 - 6- corporate tax due for 1980 of 822},242QOO t here resulted a refundable sum of ~211,944.66, which ~. both peti~ioner and respondent are, wi th �es pect to the computa ti on~ apparently in agreement . On January B, 1982, petition er, through 1ts external auditor, filed its claim for r e fund of the said overpayment of income ta x of 8211,944.66 for 1980. On April 13, 1982, petition er , wi thout further waiting for the decision of the Commissioner of Internal Revenue, filed its judicial claim f or refund with this Court by way of a ''Petition for Hevie w. " I n the special and affirmative defenses of his Answer, (pp. 27 ... 28, CTA rec. ) respondent con~� tends that - 6. Assuming, but not admitting, that petitioner is entitled to the tax refund , the right to claim the refund with respect to the amounts poid prior to April 13, 1980 has pre sc ribed , pur- suant to Sections 292 & 295 of the Tax Code; 7. The tax in question was col- l ected in accordance with law; B. In an action for r efund the burden of proof is upon the taxpayer \ ,, ' 3 1G

DECISION - - 7- CTA CASE NO. 3443 ,. to establish its right to the ref und and failure to sustain this burden is fatal to the action for refund; 9. It is incumbent upon peti- tioner to show that it h~s complied with the provis i ons of sections 292 and 295 of the Tax Code as amended; 10. Claim for refund are cons- trued strictly against the claimants since a claim for refund is in the nature of and exemption from taxation (Comm. of Int. Rev. vs. Ledesma, L-17519, January 30, 1970, 31 SCRA 95). The only issue for determination ~ this case is whether or not petitioner's right to the refund of the amount of ezll,944e66 overpaid income tax f or 1980 has prescribed. It is respondentffs contention that all income tax payment made prior t6 April 13, 1980 c an no longer be refundable as the r ight of petition~r to claim for refund has prescribed. We note that apparently respondent had been erroneously ref e rrir g to the withholding taxes of 8307,868.00, which were clearly ta~es withheld on rentals of peti- tioner's buildings largely during the years 1979~ But the question properly to be answered is not 1 with respect to the withhold i ng taxes which has \ 317

-- ----.. ..... . . ----~--- ���-�hlf.-....~�--�- - I DECISION - - 8- CTA CASE NO. 3443 J" been credited by petitioner in its 3rd quarter corporate return of 1979 in the sum of e307,86B.OO,, , but the wi thhold ing tax withheld on rental incom es due from Ph ilippine Amerlcan Life Insuranc e Co. in the amount of e308,852.50. One will note that this amount was withheld on various rental incomes of its buildings in the ...l~-~E 1980 (See Exh. "C" & "C-10", "C�-11, EJ:.� ciJ..; see also pp. 1 88, 189, BIR rec., ..!.!ill_~~ ) by the said Philippine American Life Insurance Co. c,)J�.nce the rental inco mes we re payable to petitioner by the Phi l ippine Am eric an Life Insurance Co., presum a bly monthly, for use of its property, and the se payments were certified by the latter to have been paid to peti- tioner in the year 1980, the income ta xes due , thereon vJere definitely withhel d and paid ~..�.f. the end of _th~ear 1980, _or on Dec~mber 3lt 1980. The Supreme Court held that where "xxx, a ta xe_aye r whose in co me is wi thhe 1 d at the source ~~' will be deemed t "Jlave paid his tax liabiliu_when / the sarrie falls due at thr:: end of the . tax_z:ear . It \ 31o

DECISION - CTA CASE . NO" 3443 .' me nt s ~ffe c ted th r~_ug.!l._tj~ e .v~ ~.!.b.h ol.d j:1.l.9...._l.nx s.y~_te.!,11_ xxx." (Gibbs vs. Comrn, of Into Rev., lS SCRA 318, On Janu a ry 8, 1982, petitioner n�oresaid had filed its claim with th e respondent Co~missioner of Internal Revenue for the re . und of the am ount o f 1:: 2 11 , 9ll. 4 � 6 6 , \\' h i c h a Ill o u n t o s t e n s i v e 1 y 1.:1 n d clearly arose solely , from the i ncome tax in sa id amount of e30B,B52.50 withheld and paid as of the end of the taxable year, or on Dece mber 31, l9BO, by t he Philippine Ame r i can Life Insu �ance Co .. The judicial. c l aim was f:i.1ed with thi D Court on April 13, 1982~ The refore~ both the adminis-� trative and judicial claims for refund were f iled 1 year, 1 month and 7 days, and 1 year, 3 months and 12 days, respecti vely, well with in the two- year prescripti ve period provided in said Sec t ion 292 (previously Section 306) of the lax Code counted from the date of payment of the withholding '' 31 9

DECISION �� '"' 10 - CTA CASE NO. 3443 J' tax on the rentals of petitioner from the Philippine American Life Insurance Co. as of December 31, 1980 ��. Consequently, we are of the opinion and so hold th~t this Court has jurisdiction over the refund of the sum of 8211,944 . 66 which was duly substan- tiated by evidence and by the admission of res- pendent~ WHEREFORE , respondent Commissioner of Internal Revenue is hereby ordered to refund to petitioner Kapatiran Realty Corporation the sum of e211,944.66. No pronouncement as to costs. SO ORDERED. Quezon City, Metro Manila, June 8, 1987. / ~~7/, C~~ANTEfC. HOAQUIN /Associate Judge WE CONCUR: {)~w;;;IJ~V M~ANTE /:r~LER PresidH1g .Judge . 320 \ �� II