Asiaworld Properties Philippines Corp. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5567. January 20, 2000.] ASIAWORLD PROPERTIES PHILIPPINES CORPORATION (Formerly Marina Properties Corporation) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This case involves a claim for refund of excess or unutilized creditable withholding taxes in the amount of P8,061,203.00 for the calendar year ended December 31, 1995. Petitioner is a domestic corporation principally engaged in the real estate business. (Exhs. A to F-3). On April 15, 1996, Petitioner filed its 1995 Annual Corporate Income Tax Return (Exh. G) declaring a taxable income in the amount of P10,669,072.00. Tax due for the period was P3,734,175.00 while the reported creditable tax withheld amounted to P11,750,378.00 (Exh. G-4), thus leaving the amount of P8,016,203.00 as excess creditable tax withheld (Exh. G-1). Petitioner filed its 1996 Annual Corporate Income Tax Return reflecting a taxable income of P10,483,075.00. The declared tax due was P3,669,076.45 and the tax credits totalled P3,196,269.00. The deficient amount of P472,806.58 was paid by Petitioner on the same date (Exh. H-3). On September 12, 1997, Petitioner filed a letter claim for refund with the Bureau of Internal Revenue (BIR) in the amount of P8,016,203.00 (Exh. Q) representing excess creditable withholding taxes for the calendar year ended December 31, 1995. The instant petition was subsequently filed on December 23, 1997. Respondent, by way of Special and Affirmative Defenses, had this to say: 1) Petitioner's claim for tax refund is yet pending administrative investigation; llcd 2) Taxes paid are presumed to have been collected in accordance with law and regulations, hence, not refundable; 3) In an action for tax refund, the burden of proof is upon the taxpayer to establish its right thereto and failure to sustain the burden is consequently fatal to the said action; 4) It is incumbent upon the petitioner to show faithful compliance with the provisions of Section 204 in relation to Section 230 of the Tax Code, as amended; 5) Well settled is the rule that claims for refund are construed strictly against claimants, since they partake of the nature of exemption from taxation. Both parties presented testimonial and documentary evidence. The simple issue to be resolved in this case is whether or not Petitioner is entitled to the refund of P8,016,203.00 corresponding to excess creditable withholding taxes for the calendar year ended December 31, 1995. We rule in the affirmative. Section 69 of the Tax Code, as amended, provides: SEC. 69. Final Adjustment Return . 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 quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation 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 quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. (Emphasis supplied). Based on the above provision of law, Petitioner's excess creditable withheld taxes in 1995 can only be credited to the succeeding quarters of 1996. However, Petitioner opted not to apply the same to its tax liabilities for 1996 (Exh. H-4). Seemingly, Petitioner's claim is refundable. However, the law and regulations laid down the requisites before a claim for refund of excess or unutilized creditable withholding taxes can be positively acted upon. The pertinent provisions are hereunder quoted for easy reference: SEC. 51. Returns and Payments of Taxes Withheld at Source . (a) . . (b) Statement of income payments made and taxes withheld . Every withholding agent required to deduct and withhold taxes under Section 50 shall furnish each recipient, in respect to his or its receipts during the calendar quarter or year, a written statement showing the income or other payments made by the withholding agent during such quarter or year, and the amount of the tax deducted and withheld therefrom, simultaneously upon payment at the request of the payee but not later than the 20th day following the close of the quarter in the case of corporate payee, or not later than March 1 of the following year in the case of individual payee for creditable withholding taxes. . . . xxx xxx xxx (d) Income of the recipient . Income upon which any creditable tax is required to be withheld at source under Section 50 shall be included in the return of its recipient but the excess of the amount of tax so withheld over the tax due on his return shall be refunded subject to the provisions of Section 204. SEC. 230. Recovery of erroneous]y or illegally collected . No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however , That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. SEC. 70. (b) Time of filing the income tax return . The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three quarters of the taxable year. The final adjustment return shall be filed on or before the 15th day of April or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be. Section 10(a) of BIR Revenue Regulations No. 12-94, amending Section 10 of Revenue Regulations No. 6-85, corollarily mandates, to wit: Section 10. Claim for Tax Credit or Refund . (a) Claims for Tax Credit or Refund of income tax deducted and withheld as 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 withholding Tax Statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. In fact, the already held in several cases that the grant of refund involving creditable withholding taxes depends on three factors: (1) that it filed a claim for refund within the two year period as prescribed under Section 230 of the NIRC, as amended; prcd (2) that the income upon which the taxes were withheld were included in the return of the recipient; and (3) the fact of withholding is established by a copy of statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom (see Citytrust Finance Corporation vs. The Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; Citytrust Finance Corporation [formerly Investor's Finance Corporation/FNCB Finance] vs. Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; FEB Investments, Inc. vs. The Commissioner of Internal Revenue, CTA Case No. 5353, August 22, 1997; Benguet Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5323, August 25, 1997; Shangri-la Plaza Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5346, January 9, 1998; Nestle Philippines, Inc. (formerly, Magnolia Nestle Corporation) vs. Hon. Liwayway Vinzons-Chato, Commissioner of Internal Revenue, CTA Case No. 5350, January 20, 1998; Bank of Commerce vs. The Commissioner of Internal Revenue, CTA Case No. 5101, March 17, 1998; Oranbo Realty Corporation vs. Commissioner of Internal Revenue, CTA Case No. 5335, July 4, 1998.) Petitioner undoubtedly complied with the first requirement. This case involves the calendar year 1995 and the annual income tax return was filed on April 15, 1996. Considering therefore that the administrative claim was filed on September 12, 1997 and the judicial claim on December 23, 1997, both claims were indeed filed within the reglementary period. Petitioner also reported on its return the income payments in the amount of P144,276,720.00 (Exh. G-5) as part of its gross income. Finally, the fact of withholding is established by the following documents: AMOUNT NAME WITHHELD EXHIBIT Julia Inv. Realty P37,684.65 R Alvina Ieleen 27,142.24 R-1 Transglobe Holdings 77,713.97 R-2 Larry Datiles 73,822.55 R-3 Ece Realty 41,190.21 R-4 Emilio Solco 77,113.10 R-5 Anita Magsaysay Ho -- R-6 Anita Magsaysay Ho 647,164.42 R-6A Anita Magsaysay Ho (Additional) 4,375.00 R-7 Carlos Uy Corp. 552,207.09 R-8 Carlos Uy Corp. 552,207.09 R-9 Pinnacle Prop. Corp. 90,432.61 R-10 Pinnacle Prop. Corp. 74,108.69 R-11 Anna Dominique Coseteng 136,697.37 R-12 PJ. Hardware 98,834.64 R-13 PJ. Hardware 98,819.30 R-14 PJ. Hardware 96,829.56 R-15 Cecilio Pedro 41,875.00 R-16 Titan Ikeda 690,040.35 R-17 Titan Ikeda 509,796.00 R-18 Caroline Antonio 124,039.68 R-19 Asia Cathay Realty Corp. 69,035.23 R-20 Lorraine Sy 111,559.56 R-21 Titan Ikeda Const. 121,500.00 R-22 Titan Ikeda Const. 187,500.00 R-23 Asaje Realty & Dev't. Corp. 543,935.62 R-24 Titan Ikeda Const. 531,935.10 R-25 Titan Ikeda Const. 674,325.00 R-26 Titan Ikeda Const. 509,796.00 R-27 Titan Ikeda Const. 1,300,851.90 R-28 Titan Ikeda Const. 1,004,256.75 R-29 Titan Ikeda Const. 531,935.10 R-30 Paraiso Dev't. Corp. 173,762.50 R-31 Asia Cathay Realty 96,391.38 R-32 Alexander Ong 23,542.79 R-33 Magnagon Dev't Corp. 14,687.50 R-34 Ho Men Wui 31,562.50 R-35 Desiree Ong 745,107.41 R-36 Gran Asia Const. Dev't. Corp. 515,375.00 R-37 Prime Rock Phils., Inc. 515,375.00 R-38 Titan Ikeda Const. 72,000.00 R-39 TOTAL P11,827,327.86 =========== It is worth mentioning, however, that in the findings of the Revenue Officer who conducted the examination and verification of Petitioner's claim, a disallowance of P55,714.28 as miscellaneous expense was made for being unsupported by evidence which resulted to a deficiency tax, computed as follows: Taxable Income P10,669, 072.00 Add: Disallowance 55,714.28 Total 10,613,357.72 Rate x 35% Tax Due 3,714,675.20 Tax Paid (3,734,175.00) Deficiency Tax 19,500.00 Add: 25% Surcharge 4,875.00 20% Interest 8,531.25 Compromise 4,000.00 17,406.35 P36,906.35 =========== Finally, it was determined by the same Revenue Officer that the documents submitted by the Petitioner indeed supported its claim of P8,016,203.00 (Exh. 2) and except for the abovementioned disallowance, a refund of its claim was favorably recommended. Inasmuch as herein Petitioner did not find said disallowance to be objectionable (TSN), Sept. 1, 1998), the deficiency tax of P36,906.35 shall then be deducted from Petitioner's total claim of P8,016,203.00. WHEREFORE, in the light ;of all the foregoing, the instant claim for refund, is hereby PARTIALLY GRANTED. Respondent Commissioner of Internal Revenue is ORDERED to REFUND to the Petitioner; the amount of P7,979,296.65 representing excess or unutilized creditable taxes withheld for the calendar year ended December 31, 1995. SO ORDERED. (SGD.) RAMON O. DE VEYRA Associate Judge WE CONCUR: (SGD.) ERNESTO D. ACOSTA Presiding Judge (SGD.) AMANCIO Q. SAGA Associate Judge