Tiffany Tower Realty Corp. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5802. April 21, 2003.] TIFFANY TOWER REALTY CORPORATION (now ASB Development Corporation) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This case involves a claim for refund or issuance of a tax credit certificate in the amount of P40,365,364.00 ( originally in the amount of P140,658,857.00 ) representing unutilized withholding tax credits for the calendar year ended December 31, 1996. The facts as culled from the records are as follows: Petitioner is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at ASB Center, 114 Benavidez St., Legaspi Village, Makati City. (par. 1, Stipulated Facts, Joint Stipulation of Facts and Issues, page 72, CTA Records) For the calendar year ended December 31, 1996, petitioner filed its Annual Income Tax Return on April 15, 1997 ( Exhibit "B" ), declaring a taxable income amounting to P16,074,750.00 and an income tax due thereon of P5,626,163.00. It likewise reflected in its return an excess and/or unutilized creditable income tax amounting to P40,365,364.00 ( Exhibits "B-1", "B-3" ), computed as follows: Tax Due P5,626,163.00 Less: Tax Credits/Payments a) Prior Year's Excess Credit P21,227,607.00 b) Quarterly Payments 24,763,920.00 45,991,527.00 Total Amount Payable (Refundable) P(40,365,364.00) ============ On April 15, 1998, petitioner filed its Annual Income Tax Return for the calendar year ended December 31, 1997 ( Exhibit "C" ). An amended return was thereafter filed on April 30, 1998 ( Exhibit "D" ), declaring a net loss amounting to P16,026,027 and total tax credits/payments in the amount of P140,658,857 ( Exhibits "D-1" and "D-3" ), computed as follows: Tax Due NIL Less: Tax Credits/Payments a) Prior Year's Excess Credits P40,365,365.00 b) Creditable Tax Withheld 100,293,492.00 Total Amount Payable (Refundable) P(140,658,857.00) ============ Since petitioner was at a net loss position, it opted to claim for the refund of its excess creditable taxes in the aggregate amount of P140,658,857.00 as indicated by the "x" mark in box no. 1 described as "To be refunded" ( Exhibit "D-1" ). On September 21, 1998, petitioner filed an administrative claim for refund with the BIR Revenue District Office No. 47, Makati City, in the aggregate amount of P140,658,857.00 representing its unutilized creditable withholding tax credits for the calendar years ended December 31, 1996 and December 31, 1997 ( Exhibit "F" ). Due to the inaction by the respondent Bureau, petitioner filed the instant petition for review on April 15, 1999. Respondent, in his Answer filed on June 18, 1999, raised the following Special and Affirmative Defenses: "5. Petitioner's claim for refund is under investigation by respondent Commissioner of Internal Revenue; 6. Petitioner's claim has partially, if not totally, prescribed; 7. The 1997 Corporation Annual Income Tax Returns are in the name of ASB Development Corporation and no proof has been presented to show that the former is the same company as Tiffany Tower Realty Corporation; 8. 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. 9. Claims for refund are construed strictly against the claimants since they are in the nature of exemption from taxation. ( Manila Electric Co. vs. C.I.R. 67 SCRA 351 ); 10. Taxes are presumed to have been paid in accordance with law, hence not refundable." On November 26, 2001, this case was deemed submitted for decision after respondent failed to file his memorandum within the period given by the court ( page 283, CTA Records ). However, on February 19, 2002, petitioner filed an "Urgent Motion to Re-open Case For Trial And Leave of Court to Present Additional Evidence," which was granted by the court on March 1, 2002 ( page 292, CTA Records ). On June 7, 2002, petitioner filed a "Motion to Withdraw the Claim For Refund or Issuance of a Tax Credit Certificate of Petitioner's Unutilized Withholding Tax Credits for the calendar years (sic) ended December 31, 1997." In said motion, petitioner sought for the withdrawal of its claim for refund for the calendar year ended December 31, 1997 in the amount of P100,293,492.00, in view of the issuance by the BIR of Tax Credit Certificates Nos. 024660 to 024669 in the aggregate amount of P99,485,455.76 (net of the disallowed credit of P808,036.24) ( pages 300302, CTA Records ). The court granted the aforementioned motion in a resolution promulgated on July 1, 2002, thereby limiting petitioner's claim for refund to the amount of P40,365,364.00, representing its unutilized withholding tax credits for the calendar year ended December 31, 1996. On October 8, 2002, petitioner filed a "Motion to Admit Supplemental Memorandum." The motion was granted by the court on November 22, 2002 and confirmed in a resolution promulgated on November 29, 2002. On said date, this case was considered submitted for decision. The sole issue for the court's resolution is: "Whether or not petitioner is entitled to claim for the refund on the basis of the evidence presented." Before we resolve the above-stated issue, we shall first rule on the allegation made by respondent in his Answer that petitioner's 1997 Corporation Annual Income Tax Return is in the name of ASB Development Corporation and no proof has been presented to show that it is the same company as Tiffany Tower Realty Corporation. ADCEaH The court does not agree. On the contrary, petitioner presented in evidence a Certificate of Filing of Amended Articles of Incorporation with an attached Director's Certificate ( Exhibits "A", "A-1" and "A-2" ) in order to prove that ASB Development Corporation used to be Tiffany Tower Realty Corporation and that they are one and the same entity. We now proceed to resolve the above-stated issue. After a careful examination of the evidence adduced solely by petitioner, the instant petition is PARTIALLY GRANTED. Petitioner anchors its claim for refund on Section 69 ( now Section 76 ) in relation to Section 230 ( now Section 229 ) of the Tax Code, which provides, viz : "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. "SEC. 230. Recovery of tax erroneously 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." Based on the above provisions, petitioner is legally entitled to claim for the refund or tax credit of its unutilized withholding tax credits for the calendar year ended December 31, 1996. Nonetheless, the following basic requirements as provided under Revenue Regulations No. 12-94 (amending Revenue Regulations No. 6-85) and affirmed by jurisprudence must still be met by the petitioner, to state: 1. That the claim for refund was filed within the two-year prescriptive period provided under Section 204(3) [ now 204 (C) ] in relation to Section 230 [ now 229 ] of the Tax Code, as amended; 2. That the income upon which the taxes were withheld were included in the return of the recipient; and 3. That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. [Citytrust Finance Corporation vs. The 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, CA. G.R. SP No. 28239, March 14, 1994; Citytrust Finance Corporation (formerly Investors 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 Investors Finance Corp./FNCB Finance) and the Court of Tax Appeals, CA G.R. SP No. 31104, April 18, 1994; Ayala Life Assurance, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 5631, dated May 11, 2000; Stock Transfer Service, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 5796, dated May 3, 2000; Union Bank of the Philippines vs. Commissioner of Internal Revenue, CTA Case No. 5623, dated April 12, 2000; Citibank, N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459; ACCRA Investments Corporation vs. Court of Appeals, 204 SCRA 957] . As to whether or not the claim for refund was timely filed, the court rules in the affirmative. Petitioner filed its letter-claim for refund with the BIR on September 21, 1998 while this petition for review was filed on April 15, 1999. Reckoned from April 15, 1997, the date of filing of the 1996 final adjustment return, both the administrative and judicial claims for refund were filed within the two-year prescriptive period. It is to be noted, however, that petitioner's 1996 excess tax credits amounting to P40,365,364.00, consisted of the following: Prior Year's Excess Credit P21,227,607.00 Less: 1996 Tax Due P5,626,163.00 P15,601,444.00 Add: Creditable Tax Withheld 24,763,920.00 1996 Excess Tax Credits P40,365,364.00 =========== Considering that petitioner's 1996 claim for refund does not entirely pertain to the year 1996 but includes prior year's (1995) excess credit of P15,601,444.00, this court rules that petitioner is barred from claiming the said portion as the same had already prescribed. Petitioner's claim for refund of its 1995 excess tax credits should have been filed within the two-year prescriptive period computed from the time of filing the Final Adjustment Return or Annual Income Tax Return (Commissioner of Internal Revenue vs. TMX Sales, Inc., G.R. No. 83736, January 15, 1992; Commissioner of Internal Revenue vs. Court of Appeals, G.R. No. 117254, January 21, 1999) . Furthermore, no documents were presented by petitioner to support its entitlement thereto. In view thereof, the discussion is centered on petitioner's remaining creditable tax withheld for the year 1996 in the amount of P24,763,920.00. We proceed to the second requirement. To prove compliance therewith, petitioner presented its income tax returns for the taxable years 1990 to 1996 ( Exhibits "B", "U 11 ", "Z 10 ", "A 11 ", "B 11 ", "K 11 " and "L 11 " ) and various Sales Summaries pertaining to taxable years 1990 to 1996 ( Exhibits "M 11 " to "S 11 " ). A scrutiny of petitioner's income tax returns for the taxable years 1990 to 1996 would show that the income from sale of real property from which the 1996 creditable taxes were withheld were included as part of its gross income ( Exhibits "B", "U 11 ", "Z 10 ", "A 11 ", "B 11 ", "K 11 " and "L 11 " ). Likewise, petitioner's management fees were verified to have been included as part of the gross income declared in its 1996 Annual Income Return. ( Exhibit "B-4" ). However, the court noted that petitioner's rental income as reflected in its certificates of creditable withholding tax is higher than the amount declared in its 1996 Annual Income Tax Return ( Exhibit "B-5" ). Consequently, this court can only grant a refund in proportion to what has been declared in its 1996 Annual Income Tax Return, thus: Rental Income Tax Withheld Per Certificate ( Annex "A" ) P73,705,427.00 P3,686,463.22 Per Income Tax Return 68,022,304.00 3,401,115.20 Difference representing P285,348.02 creditable withholding tax on ========== undeclared income Lastly, we find petitioner to have complied with the third requirement. To establish the fact of withholding, petitioner presented in evidence various certificates of creditable taxes withheld at source ( Exhibits "H" to "Z" and "AA " to "PP" ) and monthly remittance returns ( Exhibits "QQ" to "ZZ", "AAA" to "ZZZ", "AAAA" to "ZZZZ", "AAAAA" to "ZZZZZ" and "AAAAAA" to "GGGGGG" ). Then again, the court is not inclined to grant the entire claim. After an examination of the aforesaid certificates of creditable taxes withheld at source and the monthly remittance returns, the creditable withholding taxes totaled only P23,446,953.87 ( Annex "A" ). TADCSE In fine, petitioner's claim is entitled to the reduced amount of P23,446,953.84, computed as follows: Amount Claimed P40,365,364.00 Less: Disallowances 1. Prior Year's Tax Credits (1995) P15,601,444.00 2. Unsupported Documents P24,763,920.00 23,732,301.89 1,031,618.11 3. Creditable withholding tax corresponding to the undeclared income 285,348.02 16,918,410.13 Amount Granted P23,446,953.87 ========== WHEREFORE, in view of all the foregoing, the instant petition is hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED to REFUND or, in the alternative, ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P23,446,953.87 representing its excess unutilized creditable withholding taxes for the calendar year ended December 31, 1996. SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Judge WE CONCUR: (SGD.) ERNESTO D. ACOSTA Presiding Judge (SGD.) LOVELL R. BAUTISTA Associate Judge ANNEX A Schedule of Allowable Creditable Withholding Tax