Wencito F. Yap

November 21, 2008 BIR RULING [DA-(C-141) 454-08] 204(C) Wencito F. Yap CPA-Lawyer Rooms 332 & 334, Regina Building Escolta St., Binondo, Manila Sir : This refers to your letter dated June 24, 2008 requesting for a ruling that: The formal request for income tax refund filed by BVM Sanchez & Son Global Logistics, Inc. (formerly, BVM Sanchez & Son Customs Broker & Freight Forwarding Co., Inc. ("BVM" for brevity) on April 25, 2005 for overpayment of income tax as reflected in the 2004 Income Tax Return, which return was filed on April 12, 2005, was filed within the prescriptive period. The Letter of Authority issued by the Regional Director in connection with the request for refund of overpayment of income tax (excess creditable tax withheld over income tax due) as reflected in the 2004 Income Tax Return (1702) of BVM in the amount of P3,379,973.83 validly includes and covers the authority of the Bureau of Internal Revenue to verify, validate and determine BVM's claim for full refund. The facts, as represented, are as follows: BVM is a domestic corporation with principal office at Suite 207, Ledesma Building, Real St., cor. Gen. Luna St., Intramuros, Manila and was originally engaged in Customs Brokerage and Freight Forwarding but due to the enactment of R.A. 9280 (An Act Prohibiting the Practice of Customs Brokerage in a Corporate Form, among others), it amended its Articles of Incorporation and deleted Customs Brokerage as one of its business activities and consequently, changed its corporate name from BVM Sanchez & Son Customs Broker & Freight Forwarding Co., Inc. to BVM Sanchez & Son Global Logistics, Inc. aCSHDI Sometime on April 25, 2005, BVM filed with RDO No. 33, BIR Manila, a formal request for refund in connection with its overpayment of income tax (excess creditable tax withheld over income tax due) as reflected in the 2004 Income Tax Return (1702) of BVM in the amount of P3,379,973.83, pertinent portion of which shows the following: Aggregate Income Tax due P1,045,211.48 Less: Prior years excess tax credit P3,244,610.18 Creditable tax withheld 1,200,757.00 4,425,185.31 Overpayment (to be refunded) (P3,379,973.83) On June 23, 2005, pursuant to BVM's request, the Regional Director of Revenue Region No. 6, Manila, issued Letter of Authority No. 00014039, authorizing the examination and verification of the Income and Withholding Tax (request for refund) of BVM for the period January 1 to December 31, 2004. Recently, BVM learned from the BIR Regional Office that only the excess of the creditable withholding tax over the income due for taxable year 2004 will be processed for refund as the LOA issued for said purpose is only for taxable year 2004 and does not include prior years. In support of your request, you submitted the following: (1) Letter Request of BVM for tax refund addressed to RDO 33, stamped received on April 25, 2005; (2) Letter of Authority No. 00014039 dated June 23, 2005, signed by Regional Director, Alfredo V. Misajon; and (3) BVM's Income Tax Return (1702) for Taxable Year 2004. In reply, please be informed that the request of BVM for income tax refund is filed within the reglementary period pursuant to Section 204 (C) of the Tax Code of 1997, as amended, which provides: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. The Commissioner may xxx xxx xxx (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." Documents submitted show that BVM not only filed its claim for refund on April 25, 2005, within two (2) years from the filing of its 2004 Income Tax Return on April 12, 2005, but likewise claimed for refund in its 2004 Income Tax Return itself. The Letter of Authority No. LOA 2001 00014039 dated June 23, 2005 was issued to BVM authorizing CRO Dolores Gillego to examine the books of account and other accounting records for income tax and withholding tax for the period from January to December 31, 2004. This Letter of Authority was based precisely on the letter request dated April 21, 2005 of BVM for the refund of its overpayment of income and withholding tax in the amount of P3,379,973.83. As reflected in its 2004 Annual Income Tax Return, the prior years excess (tax credit/payment) and the 2004 creditable tax withheld are in the total amount of P4,425,185.31, less total 2004 income tax due of P1,045,211.48, resulting to a tax refund of P3,379,973.83. The authority of the BIR examiner includes the gathering of additional documentary evidence, receiving supporting documents submitted and such other documents relative to the claim for refund. Finally, the report and recommendation of the examiner shall be the basis of the decision of the Regional Office on the request for tax refund, which decision is appealable to the Office of the BIR Commissioner, through the Legal Service. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. DSEIcT Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service