JS Steel Corp. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5799. April 18, 2001.] JS STEEL CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This is a judicial claim for refund of the amount of P3,457,723.00 representing alleged excess unutilized creditable withholding tax filed by the Petitioner on April 15, 1999. The 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. It is primarily engaged in the manufacture of steel blanks for use by various manufacturers of automotive, electrical, electronics, industrial and household appliances. Petitioner alleges that it sold its products in the year 1996 to various industrial users belonging to the top 5,000 corporations. Pursuant to the Bureau of Internal Revenue's requirement on withholding taxes, the buyers allegedly withheld the required 1% tax on its purchases amounting to P3,457,723.00 which was subsequently remitted to the government. This amount is now the subject of Petitioner's claim for refund. On April 15, 1997, Petitioner filed its annual income tax return for the year 1996 reflecting therein a gross income of P45,379,577.00 and business related deductions amounting to P46,558,954.00, thus resulting in a net loss of P1,179,377.00. Having a tax credit of P3,457,723.00, Petitioner, in its return, registered its intention to carry-over the aforesaid amount to the immediately preceding taxable year (Exhibit "A"). Availing of the provisions of Section 69 of the National Internal Revenue Code, Petitioner applied its tax credits to its estimated quarterly income tax liabilities in the year 1997 but since it suffered again a net loss of P68,380,390.00, its creditable withholding tax for taxable year 1996 remained unutilized. On May 21, 1998, Petitioner filed with the Bureau of Internal Revenue a claim for refund of its unutilized creditable withholding tax for the year 1996 (Exhibit "I"). Fearing that its claim for refund might prescribe, Petitioner elevated its claim to this Court on April 15, 1999 via Petition for Review. In his Answer filed on May 21, 1999, Respondent denied Petitioner's allegations in its Petition for Review and by way of Special and Affirmative Defenses, interposed the following: 10. That Petitioner has not substantiated much less proved the alleged losses it allegedly incurred for the year 1996; 11. That to be entitled to refund or tax credit, petitioner, has to prove by clear and convincing evidence that he is entitled to refund or tax credit he claims (sic); 12. That Petitioner is not entitled to the refund or tax credit of the amount claimed. On January 26, 2001, this case was considered submitted for decision sans the memorandum of the Respondent. The vortex of the controversy now lies on whether or not Petitioner was able to substantiate by clear and convincing evidence its claim for refund. As We have laid down in a number of cases, the grant of a taxpayer's claim for refund of overpaid creditable withholding tax is dependent upon its compliance 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 were 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 ]. These aforementioned requisites were specifically mentioned and affirmed in the case of Citibank N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459 . There is no dispute that Petitioner has complied with the two-year prescriptive period provided under Section 204 of the National Internal Revenue Code, the administrative claim for refund having been filed with the Respondent on May 21, 1998, and its Petition for Review filed with this Court on April 15, 1999. Both periods are well-within two years reckoned from April 15, 1997, the date Petitioner filed its 1996 Final Adjustment Return. As disclosed by Petitioner's Statements of Income and Retained Earnings (Exh. B-3) attached to its 1996 annual income tax return, Petitioner declared as part of its gross income the amount of P541,594,668.00, the income from which the taxes were withheld in compliance with the second requirement. Likewise, to further bolster its stance, Petitioner presented during the trial various Certificates of Income Tax Withheld at Source for calendar year 1996, thus, proving its receipt of income payment and the corresponding taxes that were withheld therefrom. CAcDTI With all the evidence on record veering towards the existence of Petitioner's excess creditable withholding tax which remains unutilized as of this date, this Court finds it ineluctable to grant the claim for refund but only in the amount of P3,119,295.16 which Petitioner was able to fully substantiate by documentary evidence, computed as follows: PERIOD INCOME TAX WITHHOLDING AGENT EXHIBIT COVERED PAYMENT WITHHELD 3-D Industries, Inc. M Jan-Mar 1996 P 220,466.35 P 2,204.67 3-D Industries, Inc. N Jul-Sep 1996 444,245.45 4,442.45 Concepcion Industries, Inc. O Jan-Mar 1996 22,071,378.81 220,713.77 Concepcion Industries, Inc. P Apr-Jun 1996 29,014,163.03 290,141.58 Concepcion Industries, Inc. Q Jul-Sep 1996 22,413,606.43 224,136.05 Concepcion Industries, Inc. R Oct-Dec 1996 12,961,940.64 129,619.38 Cutler-Hammer Asia Corp. S Jan-Dec 1996 201,449.00 2,014.49 Dai-ichi Denshi Industries T Jan-Mar 1996 315,033.75 3,150.34 Dai-ichi Denshi Industries U Apr-Jun 1996 577,997.85 5,779.99 Dai-ichi Denshi Industries V Jul-Sep 1996 1,468,494.46 14,684.94 Dai-ichi Denshi Industries W Oct-Dec 1996 303,383.21 3,033.83 Dai-ichi Electronics Mfg. X Apr-Jun 1996 1,392,336.65 13,923.36 Dai-ichi Electronics Mfg. Y Jul-Sep. 1996 786,984.59 7,869.86 Dai-ichi Electronics Mfg. Z Oct-Dec 1996 1,239,941.18 12,399.42 Honda Philippines, Inc. AA Jan-Mar 1996 21,818.18 218.18 Honda Philippines, Inc. BB Jul-Sep 1996 8,245.45 82.45 K. Nakajo Kozai, Inc CC Sep-Dec 1996 2,558,713.59 23,474.41 Mercury Tinsmith Corp. DD Jan-Mar 1996 312,060.46 2,836.91 Mercury Tinsmith Corp. EE Apr-Jun 1996 122,488.38 1,113.53 Mercury Tinsmith Corp. FF Jul-Sep 1996 388,980.20 3,536.18 Mercury Tinsmith Corp. GG Oct-Dec 1996 356,300.00 3,239.09 Mitsuboshi Cutlery Co. HH Jan-Mar 1996 183,856.00 1,838.59 Mitsuboshi Cutlery Co. II Apr-Jun 1996 104,873.00 1,048.73 Mitsuboshi Cutlery Co. JJ Jul-Sep 1996 87,218.00 872.18 Mitsuboshi Cutlery Co. KK Jan-Dec 1996 375,950.00 3,759.50 Mitsui Industria Corp. LL Jan-Mar 1996 401,204.00 4,012.04 Mitsui Industria Corp. MM Apr-Jun 1996 271,858.00 2,718.58 Mitsui Industria Corp. NN Jul-Sep 1996 159,005.00 1,590.05 Mitsui Industria Corp. OO No pd covered 1,769,203.00 17,692.03 Nissan Motors Philippines PP Jan-Mar 1996 799,669.66 7,996.70 Nissan Motors Philippines QQ Apr-Jun 1996 1,508,467.68 15,084.67 Nissan Motors Philippines RR Jul-Sep 1996 3,486,421.07 34,864.22 Norkis Trading SS Jan-Mar 1996 1,996,907.00 19,969.07 Norkis Trading TT Apr-Jun 1996 727,881.00 7,278.81 Norkis Trading UU Jul-Sep 1996 3,163,448.00 31,634.48 P.I. Manufacturing VV Jan-Mar 1996 46,023.73 460.24 Philippine Appliance Corp. WW Jan-Mar 1996 19,714,381.00 197,143.81 Philippine Appliance Corp. XX Apr-Jun 1996 14,189,589.00 141,895.89 Philippine Appliance Corp. YY Jul-Sep 1996 15,055,643.00 150,556.43 Saisho Onkyo ZZ Jan-Mar 1996 363,970.00 3,639.70 Saisho Onkyo AAA Jul-Sep 1996 603,212.15 6,032.12 Saisho Onkyo BBB Oct-Dec 1996 709,232.38 7,092.32 Saisho Onkyo CCC Jan-Mar 1996 2,638,659.00 26,386.59 Sanyo Philippines DDD Apr-Jun 1996 4,979,407.00 49,794.07 Sanyo Philippines EEE Jul-Sep 1996 1,159,665.00 11,596.65 Sanyo Philippines FFF Oct-Dec 1996 4,134,178.00 41,341.78 Saisho Denshi, Inc. GGG Jan-Mar 1996 23,262.41 232.62 Saisho Denshi, Inc. HHH Apr-Jun 1996 2,838.45 28.38 Saisho Denshi, Inc. III Jul-Sep 1996 45,235.46 452.36 Saisho Denshi. Inc. JJJ Oct-Dec 1996 3,022.73 30.23 Sharp (Phils) Corp. KKK Jan-Mar 1996 1,425,720.00 14,257.20 Sharp (Phils) Corp. LLL Apr-Jun 1996 1,551,796.57 15,517.96 Sharp (Phils) Corp. MMM Jul-Sep 1996 663,996.86 6,639.96 Standard Electric Mfg. Corp. NNN Jan 1-31, 1996 1,042,360.16 10,423.60 Standard Electric Mfg. Corp. OOO Mar 1-31, 1996 1,141,755.00 11,417.55 Standard Electric Mfg. Corp. PPP Apr 1-30, 1996 1,045,902.17 10,459.02 Standard Electric Mfg. Corp. QQQ May 1-31, 1996 1,008,629.47 10,086.30 Standard Electric Mfg. Corp. RRR Jun 1-30, 1996 718,100.04 7,181.00 Standard Electric Mfg. Corp. SSS Jul-Sep 1996 3,858,726.00 38,587.26 Standard Electric Mfg. Corp. TTT Oct-Dec 1996 2,430,085.00 24,300.85 Tisdall Industrial Corp. UUU Jan-Mar 1996 370,775.20 3,707.76 Tisdall Industrial Corp. VVV Apr-Jun 1996 1,715,190.63 17,151.93 Tisdall Industrial Corp. WWW Jul-Sep 1996 1,348,458.65 13,484.62 Tisdall Industrial Corp. XXX Oct-Dec 1996 1,114,256.63 11,142.59 Transunion Corp. YYY Jan-Mar 1996 75,422.05 754.22 Transunion Corp. ZZZ Oct-Dec 1996 26,439.44 264.39 Universal Stainlessware Mfg. AAAA Jan-Mar 1996 28,823.00 288.23 Universal Stainlessware Mfg. BBBB Jul-Sep 1996 40,074.00 400.74 Universal Stainlessware Mfg. CCCC Jan-Dec 1996 82,621.00 826.21 Matsushita Electric Phils. DDDD Jan-Mar 1996 24,961,310.00 249,613.10 Matsushita Electric Phils. EEEE Apr-Jun 1996 30,678,323.00 306,783.23 Matsushita Electric Phils. FFFF Jul-Sep 1996 37,268,912.00 372,689.12 Matsushita Electric Phils. GGGG Oct-Dec 1996 23,766,054.00 237,660.54 TOTAL 312,248,039.25 3,119,295.10 ============ =========== WHEREFORE, in view of all the foregoing, the Respondent is hereby ORDERED to REFUND or in the alternative, to ISSUE a Tax Credit Certificate in the amount of P3,119,295.10, in favor of the Petitioner representing overpaid creditable withholding tax for taxable year 1996. SO ORDERED. (SGD.) ERNESTO D. ACOSTA Presiding Judge I CONCUR: (SGD.) AMANCIO Q. SAGA Associate Judge