Motormall Davao Corp. v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 6075. February 5, 2003.] MOTORMALL DAVAO CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This case involves a claim for refund of the amount of P307,765.00 representing excess or overpaid income tax as of December 31, 1998. Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with main office address at EDSA corner Madison Street, Mandaluyong City ( par. 1, Joint Stipulation of Facts ). On April 15, 1998, petitioner filed its Annual Income Tax Return for the year 1997, declaring a net loss of P378,720.00 and creditable withholding tax in the amount of P446,364.00, consisting of income taxes withheld by petitioner's various customers/clients and payors on its income payments ( Exhibit "A" ). Through a letter dated November 27, 1998, petitioner filed its administrative claim for refund in the amount of P446,364.00 representing unutilized creditable withholding tax for 1997 ( Exhibit "C" ). On April 15, 1999, petitioner filed its Annual Income Tax Return for the taxable year 1998 declaring an income tax due in the amount of P275,479.00 and total tax credits amounting to P583,244.00, consisting of its prior year's excess credits of P446,364.00 and tax credits for the first three quarters in the amount of P136,880.00, resulting to an overpayment of P307,765.00 ( Exhibit "B" ). According to petitioner, it carried forward its 1997 unutilized creditable withholding tax amounting to P446,364.00 to the succeeding year 1998 because it was informed by the Appellate Division of the Bureau of Internal Revenue ( BIR ) that the investigation for tax refund claim for 1997 is still pending. On January 11, 2000, petitioner filed its claim for refund with the same division of the BIR in the amount of P307,765.00, representing its excess creditable withholding tax as of December 31, 1998 ( Exhibit "E"; par. 6 Joint Stipulation of Facts ). As the two-year prescriptive period was about to expire, petitioner filed its Petition for Review with this court on April 14, 2000. In his Answer filed on May 26, 2000, respondent raised the following Special and Affirmative Defenses: "4. In an action for refund, the taxpayer has the burden to show that the taxes paid were erroneously or illegally collected and failure to do so is fatal to the action; 5. Claims for tax refund are strictly construed against the taxpayer. Petitioner has no cause of action." The sole issue to be resolved is: Whether or not, on the basis of the evidence presented, petitioner is entitled to the claim for refund in the amount of P307,765.00, representing unutilized creditable withholding taxes for the taxable years 1997 and 1998. The court rules to partially grant the instant claim for refund. In order to be entitled to a refund of excess creditable withholding taxes, the taxpayer-claimant must prove compliance with the following three (3) basic requirements: 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 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; and 3. That the income upon which the taxes were withheld were included in the return of the recipient [ Revenue Regulations No. 2-98; Revenue Regulations No. 12-94 (amending Revenue Regulations No. 6-85); 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, C.A. 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 ]. DaIAcC Petitioner filed its administrative claim for refund for the taxable years 1997 and 1998 on December 3, 1998 and January 11, 2000, respectively. On the other hand, its judicial claim for refund for the taxable years 1997 and 1998 was filed with this court on April 14, 2000. Reckoned from April 15, 1998 and April 15, 1999, the dates when petitioner filed its 1997 and 1998 Annual Income Tax Returns, respectively, both the administrative and judicial claims for refund were filed well within the two-year prescriptive period. We proceed to the second requirement. To prove the fact of withholding, petitioner presented various certificates of creditable withholding tax at source, details of which are shown below: After a careful examination of the above-enumerated exhibits, the court rules to disallow the following: 1) Exhibit DD in the amount of P258.51 the certificate indicated no particular date; 2) Exhibit I in the amount of P2,172.72 representing withholding tax pursuant to R.A. 7649 the withholding is for creditable input VAT; 3) Exhibits UUU, KKK-1 and AAAA in the aggregate amount of P2,377.69 they were merely provisionally marked and petitioner failed to compare them with their originals or even present certified true copies. These exhibits were denied admission by the court in its resolution dated December 14, 2001 ( CTA records, pp. 517-519 ). Anent the third requirement, petitioner was able to prove that the income upon which its 1997 and 1998 creditable withholding taxes were included in the gross income declared by petitioner in its 1997 and 1998 Annual Income Tax Returns. For the taxable year 1997, petitioner declared gross income in the amount of P234,029,593.00, which is greater than the amount of P27,623,449.46, the total income payments reflected in the 1997 certificates of withholding tax. Likewise, the amount of gross income declared by petitioner in its 1998 Annual Income Tax Return is P122,697,810.00, which far exceeds the total income payments declared in the certificates of creditable income tax withheld at source which is P12,891,604.52. Finally, this court finds that petitioner's excess creditable withholding taxes for the years 1997 and 1998 were not carried-over to the taxable year 1999 ( page 594, CTA Records ). This clearly shows that the aggregate amount of excess creditable withholding taxes for the years 1997 and 1998 were not utilized. In sum, petitioner is entitled to the refund of excess creditable withholding taxes for the years 1997 and 1998 in the reduced amount of P302,841.30, computed as follows: Total Excess Creditable Withholding Taxes for 1997 & 1998 P583,244.00 Less: Exceptions 1. Withholding Tax Certificate without date P258.51 2. Withholding by Gov't. pursuant to R.A. 7649 2,172.72 3. Amount denied per court's resolution 2,377.69 4. Unsubstantiated amount Creditable Withholding Tax per ITR P583,244.00 Less: Withholding Tax per Certificates (P136,764.28+ P446,364.94) 583,129,22 114.78 4,923.70 Balance before 1998 income tax due P578,320.30 Less: Income Tax Due for 1998 275,479.00 Refundable Amount P302,841.30 ========= WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount of P302,841.30 representing excess or overpaid income tax as of December 31, 1998. SO ORDERED. TCIHSa (SGD.) ERNESTO D. ACOSTA Presiding Judge WE CONCUR: (SGD.) JUANITO C. CASTAEDA, JR. Associate Judge (SGD.) LOVELL R. BAUTISTA Associate Judge