Jardine Davies Transport Services, Inc. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5789. January 8, 2001.] JARDINE DAVIES TRANSPORT SERVICES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N Submitted before Us for decision is a Petition for Review filed on April 14, 1999, seeking for a refund of the amount of P3,097,794.00 representing alleged excess unutilized creditable withholding taxes for taxable years 1996 and 1997. The antecedent facts of the case giving rise to the controversy at bar are as follows: Petitioner is a corporation organized and existing under and by virtue of the laws of the Philippines. As culled from the records, Petitioner filed with the Respondent Bureau of Internal Revenue on April 14, 1997 its annual income tax return for taxable year ended December 31, 1996 (par. 3, Joint Stipulation of Facts and Issues) declaring therein a net loss of P28,788,207.00 and unutilized creditable taxes withheld in 1996 amounting to P1,548,527.00. Petitioner, as indicated in its return, opted to apply the aforesaid amount as tax credit to whatever tax liability it may incur in the succeeding taxable year 1997. Incurring a net loss of P43,547,402.00 in the year 1997 as reflected in its 1997 annual income tax return filed on April 15, 1998, Petitioner, allegedly, was not able to utilize its prior year's excess tax credit of P1,548,527.00. On August 31, 1998, Petitioner amended its 1997 tentative annual income tax return filed on April 15, 1998, reflecting therein the same refundable amount of P1,548,527.00 representing the 1996 excess tax credit but with a lower amount of net loss of P41,474,106.00 (Exhibit "C"). Seemingly unsatisfied with its first amendment of the 1997 annual income tax return, Petitioner amended again its 1997 return on December 28, 1998, indicating the same amount of net loss of P41,474,106.00 but declaring now a much higher refundable amount of P3,097,794.00 which latter amount allegedly represents the sum of its 1996 tax credit of P1,548,527.00 and creditable taxes withheld during taxable year 1997 amounting to P1,549,267.00 (Exhibit "D"). On March 15, 1999, believing that it has an overpaid income tax, Petitioner, through counsel, filed with the Appellate Division of the Bureau of Internal Revenue a claim for refund of overpaid income tax as of December 31, 1997 amounting to P3,097,794.00 (Exhibit "E"). Unable to obtain an affirmative response from the Respondent, Petitioner elevated its grievance to this Court on April 14, 1999 to toll the running of the prescriptive period provided under Section 230 (now Section 229) of the Tax Code. In an Answer filed on June 14, 1999, Respondent denied Petitioner's assertions and by way of Special and Affirmative Defenses, interposed the following: 5. In an action for tax refund, petitioner must show that taxes were paid erroneously or collected illegally. Failure to sustain this burden is fatal to the action for refund; 6. Claims for refund are construed strictly against the claimants since they are in the nature of exemptions from taxation. (Manila Electric Co. vs. Commissioner of Internal Revenue, 67 SCRA 351); 7. Taxes are presumed to have been paid and collected in accordance with law; 8. Petitioner failed to state the jurisdictional facts and specific provision of law on which its action is based. As shown in the parties' Joint Stipulation of Facts and Issues, the vortex of the controversy lies on whether or not Petitioner is entitled to the refund of the amount of P3,097,794.00 representing its overpaid income tax as of December 31, 1997 based on the evidence presented. The basis of Petitioner's claim for refund is Section 69 (now Section 76) of the Tax Code, and We quote, thus: Section 69. Final Adjustment Return . Every corporation liable to pay tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar year 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 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. However, as held in numerous cases decided by this Court, a taxpayer, to be entitled to the refund of excess creditable withholding tax, must comply with the following requisites, to wit: 1) That the claim for refund was filed within two years as prescribed under Section 230 of the Tax Code; 2) That the income upon which the taxes were withheld was included in the return of the recipient; 3) That the fact of withholding is established by a copy of a 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. [Section 10, Rev. Regs. No. 6-85; see Citytrust Finance Corporation vs. The Honorable Commissioner of Internal Revenue, CTA Case No . 4134, November 11, 1991 ; affirmed by the Court of Appeals in Citytrust Finance Corporation vs. Court of Tax Appeals and the Commissioner of Internal Revenue, C . A . G . R . SP No . 28239, March 14, 1994 ; and Citytrust Finance Corporation (formerly Investor's Finance Corporation/FNCB Finance) vs. Commissioner of Internal Revenue, CTA Case No . 4046, February 24, 1993 ; affirmed by the Court of Appeals in Commissioner of Internal Revenue vs. Citytrust Finance Corporation (formerly Investor's Finance Corp./FNCB Finance) and the Court of Tax Appeals, C . A . G . R . SP No . 31104, April 18, 1994 ; Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459 ]. After a circumspect study of all the relevant documents submitted by the Petitioner with this Court, coupled by the Respondent's failure to refute the same, We find the Petitioner to have complied with all of the above requirements but was able to substantiate only the amount of P2,194,976.14 out of the total claim for refund of P3,097,794.00. We now discuss Petitioner's compliance with the aforesaid requirements ad seriatim . Anent the first requirement, records clearly show that Petitioner complied with the two-year prescriptive period within which to file its claim for refund having filed its administrative and judicial claims for refund on March 15, 1999 (Exh. E) and April 14, 1999, respectively, which are both within two years from April 14, 1997 and April 15, 1998, the respective dates when Petitioner filed its 1996 and 1997 tentative annual income tax returns. Proceeding now to the second requirement, the supporting documents submitted by the Petitioner to prove the fact of withholding showed only an aggregate amount of P2,308,822.60 as creditable withholding taxes for the years 1996 and 1997 broken down as follows: While it may be observed that some of the above certificates were issued under the name of United Terminals Services, the same pertain to the account of the Petitioner since it operates under the said business name as shown on its Certificate of Registration of Business Name (Exh. J-13), hence the said certificates were extended credence and probative value by this Court. However, this Court found out, after a thorough scrutiny of Petitioner's documents that there are several certificates which do not pertain to Petitioner's account, hence, were disallowed, to wit: Payor Income Tax Exh. Period Covered Payee (Withholding Agent) Withheld QQQ Oct. to Dec. 96 UTS Transport Co., Inc. Johnson & Johnson P1,614.55 DDDD Jan. to Dec. '96 UTS Transport Co., Inc. KPPI Foods Corporation 14.00 XXXXX Jan. 1 to Jardine Freight Jardine Aboitiz Int'l Dec. 31, '97 Services Ltd. Forwarders, Inc. 8,159.50 P12 Jan. 1-Dec. 31, '97 UTS Transport Royal Cargo Corp. 39.00 Y12 Oct.-Dec. 31 '97 Jardine Davies, Inc. Thorn Lighting (Phils.), Inc. 6,912.99 Z12 Apr. 1-June 30 '97 Jardine Davies, Inc. Thorn Lighting (Phils.), Inc. 2,940.00 A13 Jan. 1-Mar. 31, '97 Jardine Davies, Inc. Thorn Lighting (Phils.), Inc. 30.00 Total: P19,710.04 ========= In the same breath, Petitioner failed to establish the authenticity of the following documents whose originals were not presented before the Court for comparison, viz: Payor Income Tax Exh. Period Covered Payee (Withholding Agent) Withheld AAAA Jan. 1 to Jardine Davies Dec. 31, '96 Transport Serv, Inc. KPPI Foods Corp. P12.00 BBBB Jan. 1-Dec. 31, '96 United Terminal Serv KPPI Foods Corp. 7,015.05 CCCC Jan. 1-Dec. 31, '96 United Terminals Serv KPPI Foods Corp. 13,542.05 YYYY Jan. 1 to Jardine Davies Apollo Trading Dec. 31, '97 Transport Services, Inc. & Mfg. Corp. 1,332.04 CCCCC Jan. 1 to Jardine Davies Dec. 31, '97 Transport Services, Inc. Avantex Mill Corp. 12,571.15 KKKKK Jardine Davies Transport Services Cebu Fil-Veneer Corp. 267.00 OOOOO Mar. 29 to Jardine Davies Jun. 28, '97 Transport Services Goodyear Phils., Inc. 1,101.79 TTTTT July 1 to Jardine Davies Sept. 30, '97 Transport Services Shemberg Mktg. Corp. 6,327.11 UUUUU Jan. 1 to Jardine Davies Mar. 31, '97 Transport Services, Inc. TA Philippines, Inc. 1,592.44 YYYYY Jan. 1 to Dec. 31, '97 United Terminals Allegro Microsys. Phils. 491.92 HHHHHH Apr. 1 to Jun. 30, '97 Jardine Davies Caltex Phils., Inc. 4,736.70 IIIIII Oct. 1 to Dec. 31, '97 Jardine Davies Caltex Phils., Inc. 1,355.49 JJJJJJ Jul. 1 to Sept. 30, '97 Jardine Davies Caltex Phils., Inc. 3,215.81 UUUUUUU Jan. 1 to Dec. 31, '97 United Terminals Serv Isla Comm. Co., Inc. 1,412.08 V8 Apr. to June '97 United Terminals OOCL (Phils.), Inc. 1,000.92 X8 Apr. to June, '97 United Terminals Serv OOCL (Phils.), Inc. 635.30 Y8 Apr. to June '97 UTS OOCL (Phils.), Inc. 226.26 Z8 Apr. to June '97 UTS OOCL (Phils.), Inc. 7.50 A9 Apr. to June '97 UTS OOCL (Phils.), Inc. 2.00 B9 Apr. to June '97 UTS OOCL (Phils.), Inc. 22.50 C9 Apr. to June '97 UTS OOCL (Phils.), Inc. 530.65 D9 Apr. to June '97 UTS OOCL (Phils.), Inc. 387.95 E9 Apr. to June '97 UTS OOCL (Phils.), Inc. 84.20 F9 Apr. to June '97 UTS OOCL (Phils.), Inc. 152.43 Total: P58,022.34 ========= Likewise, We disallowed the aggregate amount of P36,114.08 creditable withholding taxes since their corresponding certificates do not bear the dates or period when the indicated creditable taxes were withheld: Payor Income Tax Exh. Period Covered Payee (Withholding Agent) Withheld H United Terminal Serv Bacardi Jardine Prod'n P46.50 J United Terminals Serv. Birkart-East West Freight 35,697.96 HH United Terminal Serv. Famous Pacific 252.00 KK United Terminal Serv. Famous Pacific 117.62 Total: P36,114.08 ======== Prescinding from the aforesaid disallowances, Petitioner was able to substantiate only the amount of P2,194,976.14 out of the total creditable withholding taxes of P2,308,822.60. Anent the last requirement, it could be clearly seen from its 1996 and 1997 annual income tax returns/audited financial statements (Exhs. A and D) that Petitioner declared the corresponding income payments from which the creditable withholding taxes with valid certificates of P2,194,976.14 were withheld. Having complied with the requisites laid down by this Court, We grant the claim for refund but only in a reduced amount of P2,194,976.14. WHEREFORE, in view of all the foregoing, Respondent is hereby ORDERED to REFUND or in the alternative to ISSUE a Tax Credit Certificate in the amount of P2,194,976.14 in favor of the Petitioner representing excess unutilized creditable withholding taxes for taxable years 1996 and 1997. SO ORDERED. (SGD.) ERNESTO D. ACOSTA Presiding Judge WE CONCUR: (SGD.) RAMON O. DE VEYRA Associate Judge (SGD.) AMANCIO Q. SAGA Associate Judge