Zuellig Pharma Corp. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 8801. September 5, 2017.] ZUELLIG PHARMA CORPORATION , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASANOVA , J p : This is a Petition for Review, filed on April 11, 2014 by petitioner Zuellig Pharma Corporation, praying for the refund of the amount of P477,269,935.23, allegedly representing its excess and unutilized creditable withholding taxes (CWT) for the calendar year (CY) ended December 31, 2011. Petitioner Zuellig Pharma Corporation is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal place of business at Km. 14 West Service Road, South Superhighway corner Edison Avenue, Barangay Sun Valley, Paraaque City. 1 It is a registered taxpayer with the Bureau of Internal Revenue (BIR), Large Taxpayer Service, with Taxpayer Identification No. (TIN) 000-172-443-000. 2 On the other hand, respondent is the duly appointed Commissioner of Internal Revenue (CIR), vested with authority to carry out all the functions, duties, and responsibilities of said office, including inter alia , the power to decide, approve, and grant claims for refund of or issuance of TCC for overpaid or erroneously paid or collected internal revenue taxes, including excess and unutilized CWT, with office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. 3 Petitioner is primarily engaged in the business of manufacturing, preparing, compounding, processing, packaging, buying and selling at wholesale and retail, importing and exporting, and otherwise dealing in all kinds of drugs, chemicals, patent, proprietary and other medicines, biological products, oils, dyestuffs, perfumeries, toilet and fancy articles, fancy goods, cosmetics, druggists, sundries, soaps, veterinary products and generally dealing in goods, wares, merchandise and personal property of every kind. 4 On April 16, 2012, petitioner filed its Annual Income Tax Return (ITR) 5 for CY 2011 with the BIR, through the Electronic Filing and Payment System (eFPS). Petitioner then manually filed on April 30, 2012, its Annual ITR 6 for CY 2011 with the BIR, Large Taxpayers Assistance Division I together with a copy of its audited financial statements 7 for the year ended December 31, 2011. On June 13, 2013, petitioner filed with the BIR through eFPS its Amended Annual ITR 8 for CY 2011 using the new BIR Form No. 1702. In both its manually and electronically-filed Annual ITRs 9 for CY 2011 petitioner indicated its option to claim for refund of its excess and unutilized CWT for CY 2011. On April 13, 2012, petitioner filed with respondent a letter 10 signifying its intent to claim for refund of its excess and unutilized CWT for CY 2011. Thereafter, on February 28, 2014, petitioner submitted a letter 11 dated February 12, 2014 to the BIR, Large Taxpayers Services, supplementing its claim for refund and expounding on the legal and factual bases thereof. On April 1, 2014, petitioner filed with the BIR, Large Taxpayers Services, an Application for Tax Credits/Refunds (BIR Form No. 1914), 12 praying for the refund of its excess and unutilized CWT for CY 2011 in the amount of P477,269,935.23. To date, respondent has neither approved nor denied petitioner's administrative claim for refund of its excess and unutilized CWT for CY 2012. Hence, the instant Petition for Review filed on April 11, 2014. Within the extended time granted by the Court, 13 respondent filed his Answer 14 on June 6, 2014, interposing the following Special and Affirmative Defenses: " SPECIAL AND AFFIRMATIVE DEFENSES On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as her affirmative defenses that: CAIHTE 4. Taxes collected are presumed to be in accordance with laws and regulations. 5. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue. A claim for refund is not ipso facto granted because respondent CIR still has to investigate and ascertain the validity of the claim. 6. Taxes are essential to government's very existence; ( CIR v. Solidbank Corporation , G.R. No. 148191, November 25, 2003) hence, the dictum that taxes are the lifeblood of the government." For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority. ( CIR v. Fortune Tobacco Corporation , G.R. Nos. 167274-75, July 21, 2008) Since tax refunds are regarded as tax exemptions therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. ( Philippine Phospate Fertilizer Corporation vs. Commissioner of Internal Revenue , G.R. 141973, June 28, 2005) 7. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications ( BPI Leasing Corporation vs. Honorable Court of Appeals , G.R. 127624, November 18, 2003) The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. ( Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc., G.R. 163835, July 7, 2010) 8. Petitioner must prove that it filed the corresponding administrative and judicial claim for refund within the two-year prescriptive period pursuant to Sections 204 and 229 of the National Internal Revenue Code of 1997, as amended. 9. The amount of Php477,269,935.23 being claimed by petitioner as alleged excess and unutilized Creditable Withholding Taxes for the calendar year ended December 31, 2011 is not properly documented. 10. In the foregoing case, it should be noted that nowhere in the petition did petitioner aver that it complied with the required submission of supporting documents to justify its claim for refund. 11. In relation thereto, petitioner must prove compliance with the prescribed checklist of requirements to be submitted involving claims for creditable withholding tax pursuant to Revenue Memorandum Order (RMO) No. 53-98 (Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue Officer, all of which comprise a Complete Tax Docket), otherwise there would be no sufficient compliance with the filing of an administrative claim for refund, the administrative claim thereof being merely pro-forma . 12. RMO No. 53-98 was issued to identify the documents required from a taxpayer during audit of the application for refund. For Income Tax/Withholding Tax, the specific documents that need to be submitted are as follows: INCOME TAX/WITHHOLDING TAX A) Requirements from Taxpayer 1) Certified Financial Statements, including comparative Profit and Loss Statement with Statement of Cost of Goods Manufactured and Sold, if applicable. 2) Proof of claimed tax credit if applicable. 3) Proof of the claimed 'Interest Expense,' if applicable. 4) Proof of claimed Bad Debts/worthlessness of credits, if applicable. 5) Reconciliation of 'Book Income' and 'Taxable Income.' 6) Certificate of Registration issued by the appropriate regulatory agency, together with the conditions attached to such registration, if applicable. 7) Proof of Exemption under special laws, if applicable. 8) Certification of the appropriate regulatory agency as to taxpayer's entitlement to tax incentives, if applicable. 9) Xerox copy of used Tax Credit Certificate with annotation of issued TDM at the back, if applicable. 10) Proof of payment of deficiency tax, if any/applicable. a) current year/period b) previous year/period 11) Reports submitted to applicable regulatory agency that reflects the financial condition and result of operation of the taxpayer e.g. , Annual Statement prepared by insurance companies submitted to the Insurance Commission etc., if applicable. 13. Further, Revenue Regulations (R.R.) 2-2006 (Mandatory Attachments of the Summary Alphalist of Withholding Agents of Income Payments Subjected to Tax Withheld at Source (SAWT) to Tax Returns With Claimed Tax Credits due to Creditable Tax Withheld At Source and of the Monthly Alpha list of Payees (MAP) Whose Income Received Have Been Subjected to Withholding Tax to the Withholding Tax Remittance Return Filed by the Withholding Agent/Payor of Income Payments) provides: Section 2. MANDATORY SUBMISSION OF SUMMARY ALPHALIST OF WITHHOLDING AGENTS OF INCOME PAYMENTS SUBJECTED TO CREDITABLE WITHHOLDING TAXES (SAWT) BY THE PAYEE/INCOME RECIPIENT AND OF MONTHLY ALPHALIST OF PAYEES (MAP) SUBJECTED TO WITHHOLDING TAX BY THE WITHHOLDING AGENT INCOME PAYOR AS ATTACHMENT TO THEIR FILED RETURNS. A. x x x B. Persons required to submit Summary Alphalist of Withholding Agents of Income Payments subjected to Withholding-Taxes (SAWT) 1. All persons claiming refund or applying their creditable tax withheld at source against the tax due with not more than ten (10) withholding agents-payor of income payment per return period are strictly required to submit SAWT in hard copy as attachment to the required tax return; DETACa 2. All persons claiming for refund or applying their creditable tax withheld at source against the tax due with more than ten (10) withholding agents-payor of income payment per return period are strictly required to submit SAWT electronically in 3.5 inch floppy diskette following the format to be prescribed by the BIR; xxx xxx xxx 14. In its claim for refund for the calendar year 2011, petitioner clearly failed to submit the pertinent documents required pursuant to RMO No. 53-98 and R.R. 2-2006. 15. Likewise, petitioner must prove that it has fully complied with the requisites to sustain a claim for refund or tax credit of excess and unutilized creditable Withholding Tax as ruled by the Supreme Court in Citibank N.A. vs. Court of Appeals, et al. quoted herewith, to wit : a.) That the claim for refund was filed within the two year prescriptive period as provided under Section 204(c) in relation to Section 229 of the NIRC of 1997. b.) 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. c.) That the income upon which the taxes were withheld was included in the return of the recipient. 16. Petitioner must also prove that it did not carry-over the excess creditable withholding taxes against the Quarterly and Annual Income Tax Returns in the succeeding taxable years as provided under Section 76 of the 1997 Tax Code. 17. In the alternative, if petitioner opted to choose a tax refund instead of tax credit certificates or to be carried over as tax credit next year/quarter for the alleged excess and unutilized Creditable Withholding Taxes, such option should be indicated in its Annual Income Tax Return by shading the circle of its choice provided for in Part II, Line 37 of the said return. 18. Unfortunately for the petitioner, it never made a choice in its Annual Income Tax Return filed for the calendar year 2011. Upon scrutiny of the aforesaid document, all the options were left blank. Petitioner did not shade the option to be refunded in Line 37 of the said return. Hence, it never signified that it chose to be refunded. 19. For ease of reference, Section 76 of the NIRC, as amended is quoted herewith as follows: SEC. 76. Final Adjustment Return. Every corporation liable to tax under Section 27 shall file a final adjustment return covering the taxable 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 income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credits; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefore. 20. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to the claim." A pre-trial conference was scheduled on July 17, 2014. 15 Subsequently, the Respondent's Pre-Trial Brief 16 was filed on July 3, 2014 while the Petitioner's Pre-Trial Briefs 17 was filed on September 8, 2014. Thereafter, the parties filed their Joint Stipulation of Facts and Issues 18 on September 29, 2014, which was approved and adopted by the Court in the Pre-Trial Order dated October 8, 2014. 19 Upon motion 20 of petitioner, the Court commissioned Ms. Katherine O. Constantino as the Independent Certified Public Accountant (ICPA). In support of its claim for refund, petitioner presented the following witnesses: Mr. Joel R. Ducut, 21 petitioner's Assistant Corporate Controller; and Ms. Katherine O. Constantino, 22 the Independent Certified Public Accountant (ICPA). Petitioner filed its Formal Offer of Evidence 23 on May 13, 2015, which was resolved by the Court in the Resolution dated September 15, 2015. 24 On October 5, 2015, petitioner filed a Motion for Reconsideration with Motion to Admit, 25 which was partially granted by the Court in the Resolution 26 dated April 14, 2016. Thereafter, respondent presented his lone witness, Revenue Officer Ma. Theresa L. Espino. 27 Respondent filed his Formal Offer of Documentary Evidence 28 on June 24, 2016. In the Resolution 29 dated June 28, 2016, the Court admitted all of respondent's evidence. On July 11, 2016, respondent filed a Manifestation 30 stating that in lieu of filing a Memorandum, he is adopting his Answer dated June 5, 2014 as his Memorandum. Petitioner, on the other hand, filed its Memorandum 31 on August 30, 2016. The case was then considered submitted for decision in the Resolution 32 dated September 6, 2016. aDSIHc The parties stipulated that the main issue 33 to be resolved in this case is: "WHETHER OR NOT PETITIONER IS ENTITLED TO ITS CLAIM FOR REFUND OF ALLEGED EXCESS AND UNUTILIZED CWT FOR CY 2011 IN THE AMOUNT OF P477,269,935.23.' The issue may be broken down in the following sub-issues: 1. Whether or not petitioner's alleged excess and unutilized CWT for CY 2011 in the amount of P477,269,935.23 are duly substantiated by documentary evidence. 2. Whether or not the income from which the CWT's being claimed for refund were withheld was reported as part of the revenues declared in petitioner's Annual ITR. 3. Whether or not petitioner exercised the option to carry over its alleged excess and unutilized CWT for CY 2011 to the succeeding taxable periods. 4. Whether or not petitioner filed its administrative and judicial claims for refund of alleged excess and unutilized CWT for CY 2011 within the two-year prescription period provided under Sections 204(C) and 229, National Internal Revenue Code of 1997 (the 'Tax Code')." Based on relevant jurisprudence and BIR Revenue Regulations, 34 in order for a taxpayer to be entitled to a refund of or an issuance of tax credit certificate for its unutilized excess CWT, the following three (3) basic requisites must be sufficiently established: 1. the claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended; 2. The fact of withholding must be 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. The income upon which the taxes were withheld must be declared as part of the gross income of the recipient. As to the first requisite, Sections 204(C) and 229 of the NIRC of 1997, as amended, provide as follows: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes . The Commissioner may xxx xxx xxx (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided , however , That a return filed showing an overpayment shall be considered as a written claim for credit or refund." "SEC. 229. 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 excessively 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 filed after the expiration of two (2) 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." In applying the foregoing provisions, the Supreme Court in the case of ACCRA Investments Corporation vs. Court of Appeals, et al. , 35 held that the two-year prescriptive period for claiming a refund of overpaid income tax/CWT commences to run on the date of filing of the Final Adjustment Return. It is only when the Final Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 36 This ruling was reiterated in the case of Commissioner of Internal Revenue vs. Primetime Property , 37 where the Supreme Court held that the two-year prescriptive period is reckoned from the filing of the final adjusted return. The present claim pertains to taxable CY 2011 for which petitioner filed its original Annual Income Tax Return (AITR) through the BIR's Electronic Filing and Payment System (EFPS) on April 16, 2012. 38 Counting from this date, petitioner had until April 16, 2014 within which to file a claim for refund of its 2011 excess CWT both in the administrative and judicial levels. Petitioner's letter-claim for refund 39 filed with the respondent on April 13, 2012, supplemental letter-claim for refund 40 and Application for Tax Credits/Refunds 41 filed with the BIR's Large Taxpayers Service on February 28, 2014 and April 1, 2014, respectively, as well as its subsequent appeal via a Petition for Review filed before this Court on April 11, 2014 fell within the two-year prescriptive period under Sections 204(C) and 229 of the NIRC of 1997, as amended. With regard to the second and third requisites, Section 2.58.3 (B) of Revenue Regulations (RR) No. 02-98, as amended, states: "Sec. 2.58.3. Claim for tax credit or refund . xxx xxx xxx (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment 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 ." (Emphasis Supplied) To prove the fact of withholding of the claimed CWT of P477,269,935.23, petitioner presented its Schedule 42 of Creditable Withholding Tax and the related Certificates 43 of Creditable Tax Withheld at Source for CY 2011. Upon examination of these documents, the Court-commissioned Independent CPA firm, Constantino Guadalquiver & Co., through its Partner, Ms. Katherine O. Constantino, summarized its findings as follows: 44 Findings Annex Reference (Exh. "P-19") Income Payment Tax Withheld CWT duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307) Annex 1-a P43,249,700,267.27 P441,220,333.92 CWT duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307) with incorrect Petitioner's TIN indicated therein Annex 1-b 847,817,242.41 9,822,185.21 CWT duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307) with unclear date Annex 1-c 2,752,283.81 24,449.26 CWT supported by photocopies certificate with correct name, TIN and date Annex 1-d 743,610,625.61 7,545,434.24 CWT certificates not yet provided 18,657,143.95 Total P44,843,880,419.10 P477,269,546.58 The Court noted that the amount of P477,269,546.58 is lower by P388.65 when compared with petitioner's claimed CWT of P477,269,935.23. Thus, the said discrepancy of P388.65 shall be disallowed from petitioner's claim for being unsupported. ETHIDa Moreover, the CWT in the amounts of P9,822,185.21, P24,449.26, P7,545,434.24 and P18,657,143.95 aggregating to P36,049,212.66 shall be disallowed. While the amount of P9,822,185.21 was duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307), it has incorrect petitioner's TIN, and the date indicated in BIR Form 2307 was unclear. On the other hand, the amount P7,545,434.24 was only supported by photocopies of certificates with correct name, TIN and date. Finally, the amount P18,657,143.95 is disallowed because the same was not supported with CWT Certificates. In addition, petitioner's claim should be reduced by the following CWT in the total amount of P786,401.46 for also not being properly substantiated with BIR Forms No. 2307: Exhibit Customer Name Payment Income CWT CWT supported by BIR Forms No. 2307 but not in the name of the petitioner P-254 Argent Business Consultants and Stores Specialist, Inc. P1,400.00 P14.00 P-365 Argent Business Consultants and Stores Specialist, Inc. 26,977.60 269.78 CWT supported by BIR Forms No. 2307 but without signature of the payor/payor's authorized representative P-3643 Majesty Pharmacy, Inc. 3,422,350.23 34,223.52 P-358746 Drugman Drug House 85,773.75 857.74 P-358771 Drugman Drug House 216,321.92 2,163.22 P-362567 New Sacred Heart Pharmacy-Dumaguete Branch 113,811.56 1,016.17 P-363929 Rufino Brodeth & Co., Inc./Luz Pharmacy 713,954.80 7,139.55 CWT supported by BIR Forms No. 2307 but with different petitioner's TIN indicated therein P-358233 Dagupan Doctors Villaflor Memorial Hospital, Inc. 1,009,389.69 9,012.38 P-358234 Dagupan Doctors Villaflor Memorial Hospital, Inc. 1,646,455.02 14,700.48 P-358235 Dagupan Doctors Villaflor Memorial Hospital, Inc. 3,415,526.61 30,495.78 P-358237 Dagupan Doctors Villaflor Memorial Hospital, Inc. 2,411,579.22 21,531.96 P-358244 Dagupan Doctors Villaflor Memorial Hospital, Inc. 1,268,977.16 11,330.13 P-361298 LTS Supermarkets, Inc. 23,564,047.00 235,640.47 CWT supported by BIR Forms No. 2307 but dated outside the period of claim P-359666 First Lane Supertraders Co., Inc. 767,290.00 7,672.90 P-359667 First Lane Supertraders Co., Inc. 316,718.00 3,167.18 P-359668 First Lane Supertraders Co., Inc. 199,794.00 1,997.94 CWT supported by BIR Forms No. 2307 but without petitioner's TIN indicated therein P-363038 Philhealthcare, Inc. 404,462.71 4,044.63 P-363039 Philhealthcare, Inc. 654,743.82 6,547.44 P-363040 Philhealthcare, Inc. 1,094,030.23 10,940.30 P-365467 Tai-Pan Dev't. Inc. Gaisano Capital San Carlos 16,327.00 163.27 P-365468 Tai-Pan Dev't. Inc. Gaisano Capital San Carlos 17,430.00 174.30 Supporting BIR Forms No. 2307 which do not pertain to the claimed CWT P-361523 Mactan Doctors Hospital, Inc. 2,164,518.00 21,645.18 P-361524 Mactan Doctors Hospital, Inc. 1,810,106.00 18,101.06 CWT supported by BIR Forms No. 2307 which were claimed twice by petitioner P-1696; P-1697 Capitol Medical Center, Inc. 14,681,104.00 146,811.04 P-1490; P-4191 Professional Services, Inc. (The Medical City) 21,244,791.35 189,685.66 P-356821; P-356822 Cebu Fedco Marketing Corp. 790,203.00 7,055.38 Total Additional Disallowed CWT P786,401.46 As to the third requisite, records disclose that the claimed CWT pertain to petitioner's sales of goods and services for the CY 2011. In ascertaining that the total amounts of sale of goods and services which were booked by petitioner in its sales register and general ledger (GL) for the CY 2011 tally with the sale of goods and services declared as taxable income per petitioner's AITR for the same year, the ICPA prepared the following reconciliations: On the Sale of Goods: "We compared the net sales per sales register generated by the Petitioner's BIR-registered system (to be presented as Exhibit P-31, Folder 12 to 77, Box 7 to 14) , with the general ledger balances of total revenue for the year 2011 (previously presented as Exhibit P-25, Folder 5, Box 1 ), with the net sales reported in the audited financial statements for the year 2011 (previously presented as Exhibit P-5 ) and with the net sales amount of the amended annual income tax return for the CY 2011 (previously presented as Exhibit P-6 ). A detailed tabular presentation is presented in Annex 3 . Summarized details follows: Particulars Amount of sales Per sales register P57,915,958,134.46 Per general ledger of all sales 58,031,790,982.54 Per audited financial statements 57,985,824,408.00 Per amended annual income tax return 58,012,576,794.00 Comparison disclosed the following differences: Differences a. Sales register and general ledger (P115,832,848.08) b. General ledger and audited financial statements 45,966,574.54 c. Audited financial statements and amended annual income tax return (26,752,386.00) d. Sales register and annual income tax return 96,618,659.54 a. Reconciliation of Sales Register and General Ledger amount The discrepancy of P115,832,848.16 pertains to the following amounts which were not included in the sales register because these do not relate to the sale of goods: Account Code Account Name General Ledger Balance 40101 Accrued Tax T/P (P217,250,159.30) 41202 Financial Discounts (83,778,665.26) 42001 Services T/P 399,261,189.10 42002 Services I/C 182,780.00 P98,415,144.54 Add adjustment for timing differences: Undelivered sales for CY 2010 reported as sales in GL 2011 ( Exhibit 34, Folder 80, Box 1 ) Trade Returns for 2010 recorded in 2011 25,128,948.63 ( Exhibit 37, Folder 80, Box 1 ) Trade Returns of 2011 not yet recorded 11,162,033.18 in GL ( Exhibit 35, Folder 80, Box 1 ) (18,471,733.37) Undelivered sales of 2011 recorded in 2012 ( Exhibit 36, Folder 80, Box 1 ) (401,544.82) 17,417,703.62 115,832,848.16 b. The difference of P45,966,574.54 between the general ledger and audited financial statements pertains to clinical trial management service income, recorded in the general ledger under Account code 42001 Service T/P account, which was treated as an outright reduction to non-operating expenses under Account Code 48605, Other N-OP inc/exp with GL balance amounting to P47,639,031.33 (P45,966,574.54 clinical trial management and P1,672,456.79 pertaining to others). Entry details of P45,966,574.54 were provided by the Petitioner (to be presented as Exhibit P-26, Folder 6, Box 1 ). Accordingly, the difference between the sales reported in the sales register and the audited financial statements amounting to P69,866,273.60 was due to the following: cSEDTC Difference between sales register and general ledger as shown in a. above P115,832,848.16 Clinical trial management services income treated as outright reduction (45,966,574.54) Total P69,866,273.62 c. The difference of 26,752,386.00 between sales per income tax return and audited financial statements pertains to the excess municipal taxes accrual which was an additional to the taxable income in the annual income tax return per Petitioner-prepared reconciliation (to be presented as Exhibit P-27, Folder 7, Box 1 ). d. Accordingly, the difference of net sales per sales register with the sales per amended return of 96,618,659.60 was due to the following: Difference between sales register and general ledger as shown in a. above P115,832,848.16 Clinical trial management services income treated as outright reduction as shown in b. above (45,966,574.54) Excess Municipal taxes accrual stated above 26,752,386.00 Total P96,618,659.60" On the Sale of Services: "Reconciliation between general ledger and amended annual income tax return as follows: SALES AMOUNT Account Description per GL per ITR Difference 40001 VAT SALES T/P (64,838,920,385.00) (64,838,920,385.48) 0.48 40101 ACCRUED TAX T/P 217,250,159.30 190,497,773.43 26,752,385.87 40201 VAT ON SALES T/P 6,905,544,547.00 6,905,544,547.46 (0.46) 41202 FINANCIAL DISCOUNTS 83,778,665.2 83,778,665.26 - 42001 SERVICES T/P (399,261,189.10) (353,294,614.94) (45,966,574.16) 42002 SERVICES I/C (182,780.00) (182,780.00) - TOTAL (58,031,790,982.54) (58,012,576,794.27) (19,214,188.27) Accordingly, the difference of total sales per general ledger with the sales per amended annual income tax return of 19,214,188.27 was due to the following: Clinical trial management services income treated as outright reduction (to be presented as Exhibit P-26, Folder 6, Box 1 ) (P45,966,574.54) Excess Municipal taxes accrual stated above (to be presented as Exhibit P-27, Folder 9, Box 1 ) 26,752,386.00 Total (P19,214,185.54)* * Difference of P2.73 (P19,214,188.27 - P19,214,185.54) is due to rounding decimals." Certainly, the total taxable sales of goods and services per petitioner's sales register and GL were the same amounts reported by petitioner in its 2011 AITR. The income payments related to the claimed CWT were recorded in petitioner's sales register and GL. The ICPA was able to trace the income payments related to the claimed CWT to the sales register and GL, except for the following sales of goods in the amount of P969,074,728.83 and sales of services in the amount of P618,630,611.39, detailed as follows: SALE OF GOODS Customer Name Per BIR Form 2307 ICPA's Computation of Sales Amount per Sales Register (B) Difference (A-B) Income Payment (A) Tax Withheld INCOME PAYMENT WITH NO CORRESPONDING RECORDS IN THE SALES REGISTER Barili District Hospital 75,661.00 756.61 - 75,661.00 Benguet Provincial Government 18,670.00 166.70 - 18,670.00 Cebu Doctors College, Inc. 152,678.57 1,526.79 - 152,678.57 Cypress Manufacturing Limited 1,045,200.00 10,452.00 - 1,045,200.00 Daanbantayan District Hospital 1,618.00 16.18 - 1,618.00 DOH-Regional Health Office CAR 257,142.86 2,571.43 - 257,142.86 Dynasty Management & Development Corp 75,382,233.93 735,017.49 - 735,017.49 Emilus Supermarket, Systems Inc. 49,894.69 498.95 - 49,894.69 Everlink Distribution Group, Inc. 30,775.44 30,775.44 - 30,775.44 Far East Noble House 38,638,763.36 383,286.13 - 38,638,763.36 FMC Renalcare Corp. 431,125.00 4,311.25 - 431,125.00 Gaisano Dadaingas, Inc. 66,893.25 668.94 - 66,893.25 Handyman Express Mart, Inc. 73,275.00 732.75 - 73,275.00 Lion Commercial Corp. 294,308.02 2,943.08 - 294,308.02 Provincial Government of Cavite 780,535.89 7,369.44 - 780,535.89 Riviera Mercantile Sys., Inc. 4,044,159.00 40,441.59 - 4,044,159.00 Sara Lee Philippines Inc. 89,285.71 1,785.71 - 89,285.71 Shogun Management & Development Corp. 40,030,611.29 399,260.26 - 40,030,611.29 Shopmore Commercial Corp. 245,319.64 2,453.18 - 245,319.64 Waltermart Handyman, Inc. 124,625.00 1,246.25 - 124,625.00 Subtotal 161,832,775.65 1,626,280.17 - 161,832,775.65 INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES AB Pharma, Inc. 20,381,040.24 203,810.41 20,233,930.44 147,109.80 Ace Hardware Phil's., Inc. 11,179,300.00 111,793.00 11,025,551.42 153,748.58 Ace Med, Inc. 2,954,419.83 29,544.20 2,580,027.64 374,392.19 Act General Merchandise & Drug, Inc. 144,780,830.81 1,447,808.32 144,670,718.92 110,111.89 Adela Serra Ty Memorial Medical Center 691,370.57* 6,913.70 522,706.14 168,664.43 Allah Valley Medical Specialists Center, Inc. 5,854,536.00 58,545.36 5,576,733.70 277,802.30 Antipolo City Hospital, Inc. 1,473,385.94 14,733.87 1,356,312.03 117,073.91 Asia Renal Care (Phils.) 1,468,286.22 14,682.86 516,492.10 951,794.12 Asociacion Benevola De Cebu, Inc. (Chong Hua Hospital) 214,552,762.01 2,145,527.65 206,176,602.34 8,376,159.67 Benguet General Hospital 4,513,965.49* 45,148.57 4,252,494.34 261,471.15 Botica Real 34,709,394.08 336,657.61 10,312,376.74 24,397,017.34 Bureau of Corrections 2,588,471.00 25,884.71 2,483,890.32 104,580.68 Cagayan De Oro Medical Center, Inc. 17,852,832.00 178,528.32 16,969,829.26 883,002.74 Cagayan Valley Medical Center 10,912,837.60 232,944.64 9,053,476.24 1,859,361.36 Cebu Far Eastern Drug, Inc. 2,163,237.24 19,341.77 1,884,554.97 278,682.27 Center For Health Development IV-B 229,906.03 2,052.73 86,284.32 143,621.71 Christ The King Medical Services, Inc. 11,544,341.00 115,443.41 356,523.16 11,187,817.84 City Government of Pasig 45,690,051.00 456,900.51 18,256,901.26 27,433,149.74 City Government of Bago 51,339.29 513.39 47,767.86 3,571.43 City Government of Binan 1,571,429.00* 15,714.29 136,562.50 1,434,866.50 City Government of Makati 29,713,385.71 297,133.86 21,333,043.66 8,380,342.05 City Government of Muntinlupa 2,008,928.57 20,089.29 1,169,709.18 839,219.39 City Supermarket Incorporated 51,544,719.99 515,447.18 50,543,219.22 1,001,500.77 Colinas Verdes Hospital Managers Corp. 123,829,568.00 1,238,295.68 119,035,961.00 4,793,607.00 Commission on Audit 2,428,261.00 24,282.61 137,573.71 2,290,687.29 Commission on Elections 160,039.20 1,453.03 155,012.68 5,026.52 Complete Solution Pharmacy And Gen. Mer. 91,798,776.00 917,987.76 76,510,309.92 15,288,466.08 CVC Supermarket, Inc. 738,512.00 7,385.12 735,418.37 3,093.63 Davao Adventist Hospital, Inc. 3,205,653.65 30,932.35 2,618,366.10 587,287.55 Davao Central Warehouse Club, Inc. 10,101,256.00 101,012.65 1,671,797.18 8,429,458.82 Davao Regional Hospital 30,485,949.18 304,859.50 30,352,181.41 133,767.77 De Los Santos Med. Ctr. Diagnostic Corp. 15,232,920.78 152,329.21 14,163,576.80 1,069,343.98 Dranix Distributor Inc. Iloilo 10,310,756.00 108,196.38 (1,206,667.24) 11,517,423.24 E. Berlin Pharmacy 4,851,894.00 48,518.94 4,077,860.92 774,033.08 Erlinda G. Germar/Farmacia Fatima & Fatima Soda Founta 15,451,062.84 154,510.62 10,535,625.73 4,915,437.11 Ever Commonwealth Center, Inc. 44,764,014.47 447,640.07 36,906,409.12 7,857,605.35 Evercare Pharmacy 296,745.57 3,631.49 206,136.46 90,609.11 Everplus Superstore, Inc. 107,054,277.70 1,070,552.93 76,910,417.45 30,143,860.25 Extract Sales Incorporated 102,659,130.47 1,026,591.32 78,820,886.01 23,838,244.46 FEB Cuisine Corp. 3,331,046.11 30,110.01 3,010,996.18 320,049.93 FEU-Dr. Nicanor Reyes Medical Foundation 8,130,608.00 81,306.08 8,031,427.66 99,180.34 Gaisano Bros. Mdsg., Inc. 15,084,981.00 150,849.81 15,078,129.00 6,852.00 Grand Union Supermarket Inc., Operator 28,603,984.71 286,039.85 20,342,184.64 8,261,800.07 Inter-Medical Unified System, Inc. 13,359,095.27 133,590.96 13,355,251.11 3,844.16 ISS Facility Services Phil., Inc. 1,093,587.21 10,935.87 150,296.25 943,290.96 Jemstar Trading Corporation 14,283,673.00 142,836.22 13,499,641.94 784,031.06 Juliano, Susan G. 84,000.00 1,680.00 6,447.26 77,552.74 K2 Drug & Medical Supplies 10,381,614.12 103,816.14 5,323,076.74 5,058,537.38 Larrazabal, Susanna Ortega 108,432,225.46 1,084,545.61 106,784,231.16 1,647,994.30 LTS Affiliates, Inc. 61,824,609.38 618,246.09 9,648,673.07 52,175,936.31 Lucena United Doctors Incorporated 12,455,928.00 124,559.28 12,333,856.68 122,071.32 Manson Drug Corp. 347,337,544.82 3,473,375.69 246,640,598.58 100,696,946.24 Marionnaud Philippines, Inc. 26,710,298.00 267,102.98 26,672,619.64 37,678.36 Mary Johnston Hospital, Inc. 1,781,627.77 17,816.27 1,461,365.65 320,262.12 Medical Mission Group Hospital & Health Services Cooper 158,017.92 1,580.17 118,004.15 40,013.77 Metropolitan Pharmaceutical Products, Inc. 17,856.47 257.12 15,943.28 1,913.19 Mindanao Sanitarium And Hospital 25,287,731.24 136,521.59 15,908,113.44 9,379,617.80 Mount Carmel Diocesan General Hospital 32,028,938.00 320,289.38 31,301,758.99 727,179.01 Negros Union Drug Co., Inc. 30,342,354.11 303,423.53 29,755,646.84 586,707.27 Norvic Drugs Corporation 54,556,608.66 545,566.09 54,500,131.63 56,477.03 Nueva Ecija Prohealth Inc./Heart of Jesus Hospital 300,785.66 3,007.87 (29,619.72) 330,405.38 Oslob District Hospital 18,000.00 160.71 16,071.43 1,928.57 Perpetual Succor Hospital & Maternity, Inc. 58,770,014.28 587,700.15 54,026,909.59 4,743,104.69 Philex Mining Corporation 7,601,762.08 76,017.61 6,162,002.66 1,439,759.42 Philippine Long Distance Telephone Company 139,984,747.45 1,399,847.48 132,244,275.27 7,740,472.18 Philippine Heart Center 294,471,060.57 3,776,666.97 137,624,178.74 156,846,881.83 Province of Pampanga 2,678,348.21 26,783.48 2,187,098.21 491,250.00 Provincial Government of Negros Occidental 3,372,840.00 33,728.40 2,530,189.39 842,650.61 Provincial Government of Nueva Vizcaya-Nueva Vizcaya 314,065.00 2,804.15 283,640.18 30,424.82 Provincial Government of Or. Neg. 1,868,680.08 17,421.92 1,486,520.11 382,159.97 Puregold Junior Supermarket, Inc. 109,971,961.92 1,099,719.66 60,160,645.38 49,811,316.54 Research Institute for Tropical Medicine 18,780,384.92 187,737.62 16,784,499.05 1,995,885.87 Right Choice Supermarket 330,641,059.97 3,306,387.59 325,551,286.74 5,089,773.23 Rilem Pharma Corp. 233,134.67 2,331.34 233,134.60 0.07 Rivera Medical Center, Inc. 24,567,322.17 244,230.89 18,957,477.40 5,609,844.77 Roldan, Kenneth Bautista-Netnet 6,343,721.00* 63,437.21 6,342,824.78 896.22 Royal Duty-Free Shops, Inc. 10,635,565.00 106,355.73 10,472,530.83 163,034.17 Rustan Supercenters Inc. 127,323,391.00 1,273,233.91 12,740,561.88 114,582,829.13 San Pedro Doctors Hospital, Inc. 6,823,716.27 68,237.16 6,517,936.44 305,779.83 Super 8 Retail Systems, Inc. 29,549,624.00 295,496.24 28,405,611.84 1,144,012.16 Suy Sing Commercial Corp 35,528,582.00 355,285.82 35,449,835.41 78,746.59 The Landmark Corporation 47,922,257.00 479,222.57 43,927,289.23 3,994,967.77 Vaduz Marketing, Inc. 165,275,664.38 1,652,756.64 161,868,769.29 3,406,895.09 Veterans Memorial Medical Center 45,815,791.00 408,936.17 38,498,667.54 7,317,123.46 Waltermart Supermarket, Inc. 63,669,284.14 636,691.95 52,213,056.54 11,456,227.60 Watsons Personal Care Stores (Phils.), Inc. 1,889,289,750.00 18,892,897.50 1,846,923,169.36 42,366,580.64 Wing An Marketing Inc. 10,366,943.01 103,669.42 5,268,888.92 5,098,054.09 Subtotal 5,409,204,731P19.51 54,868,554.21 4,601,962,418.33 807,241,953.18 TOTAL P5,571,037,147.16 P56,494,834.38 P4,601,962,418.33 P969,074,728.83 * Income payment per BIR Form No. 2307 included VAT amount. Independently computed income payment based on tax withheld. SALE OF SERVICES Customer Name Per BIR Form 2307 Service Income per General Ledger (B) Difference (A-B) Income Payment (A) Tax Withheld INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES Abbott Laboratories 237,571,740.90 5,526,721.13 25,002,625.57 212,569,115.33 Alkem Laboratories, Inc. 159,777.76 3,195.56 137,450.19 22,327.57 B. Braun Medical Supplies 6,581,894.42 88,666.62 917,383.47 5,664,510.96 Bayer Philippines, Inc. 12,477,307.25 508,149.29 9,705,279.35 2,772,027.90 Fresenius Kabi Philippines, Inc. 10,100,859.16 204,030.19 9,286,767.80 814,091.36 Galderma Philippines, Inc. 1,334,800.50 26,696.01 185,091.04 1,149,709.46 Glaxosmithkline Philippines, Inc. 75,573,915.50 1,417,195.47 32,490,214.39 43,083,701.11 Msd (I.A) Corp Ph 22,417,495.87 448,349.93 12,335,460.20 10,082,035.67 Novartis Healtcare Philippines, Inc. 89,228,264.81 1,754,719.18 37,736,808.38 51,491,456.43 Oep Philippines, Inc. 3,497,199.98 69,180.59 3,319,125.72 178,074.26 Pascual Laboratories, Inc. 55,910,118.00 559,101.18 5,747,749.48 50,162,368.52 Pfizer, Inc. 80,051,571.00 1,587,316.28 27,605,441.69 52,446,129.31 Reckitt Benckiser Healthcare (Phil), Inc. 103,198,827.70 2,746,302.20 3,528,596.62 99,670,231.08 Sandoz Philippines Corp. 9,869,251.00 197,385.02 7,779,982.91 2,089,268.09 Sanofi-Aventis Philippines, Inc. 19,920,254.50 398,405.09 12,322,163.26 7,598,091.24 Sanofi Pasteur, Inc. 28,667,725.50 482,299.15 5,453,826.65 23,213,898.85 Schering-Plough Corp. 59,966,008.98 1,199,269.09 4,342,434.71 55,623,574.27 TOTAL P816,527,012.83 P17,216,981.98 P197,896,401.44 P618,630,611.39 Consequently, petitioner's claimed CWT in the amounts of P10,121,236.91 and P13,090,532.87 related to the unverified sales of goods and services in the amounts of P969,074,728.83 and P618,630,611.39, respectively, shall be denied as follows: SDAaTC SALE OF GOODS Customer Name Tax Withheld (A) ICPA's Computation of Sales Amount per Sales Register (B) Income Payment per BIR Form 2307 (C) Deduction from Petitioner's CWT Claim [D=A-(A x B/C) INCOME PAYMENT WITH NO CORRESPONDING RECORD IN THE SALES REGISTER Barili District Hospital P756.61 - P75,661.00 P756.61 Benguet Provincial Government 166.70 - 18,670.00 166.70 Cebu Doctors College, Inc. 1,526.79 - 152,678.57 1,526.79 Cypress Manufacturing Limited 10,452.00 - 1,045,200.00 10,452.00 Daanbantayan District Hospital 16.18 - 1,618.00 16.18 DOH-Regional Health Office-CAR 2,571.43 - 257,142.86 2,571.43 Dynasty Management & Development Corp 735,017.49 - 75,382,233.93 735,017.49 Emilus Supermarket Systems Inc. 498.95 - 49,894.69 498.95 Everlink Distribution Group, Inc. 30,775.44 - 30,775.44 30,775.44 Far East Noble House 383,286.13 - 38,638,763.36 383,286.13 FMC Renalcare Corp. 4,311.25 - 431,125.00 4,311.25 Gaisano Dadaingas, Inc. 668.94 - 66,893.25 668.94 Handyman Express Mart, Inc. 732.75 - 73,275.00 732.75 Lion Commercial Corp. 2,943.08 - 294,308.02 2,943.08 Provincial Government of Cavite 7,369.44 - 780,535.89 7,369.44 Riviera Mercantile Sys., Inc. 40,441.59 - 4,044,159.00 40,441.59 Sara Lee Philippines, Inc. 1,785.71 - 89,285.71 1,785.71 Shogun Management & Development Corp. 399,260.26 - 40,030,611.29 399,260.26 Shopmore Commercial Corp. 2,453.18 - 245,319.64 2,453.18 Waltermart Handyman, Inc. 1,246.25 - 124,625.00 1,246.25 Subtotal P1,626,280.17 - P161,832,775.65 P1,626,280.17 INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES AB Pharma Inc. P203,810.41 P20,233,930.44 P20,381,040.24 P1,471.10 Ace Hardware Phil's., Inc. 111,793.00 11,025,551.42 11,179,300.00 1,537.49 Ace Med, Inc. 29,544.20 2,580,027.64 2,954,419.83 3,743.92 Act General Merchandise & Drug, Inc. 1,447,808.32 144,670,718.92 144,780,830.81 1,101.12 Adela Serra Ty Memorial Medical Center 6,913.70 522,706.14 774,335.04 2,246.68 Allah Valley Medical Specialists Center, Inc. 58,545.36 5,576,733.70 5,854,536.00 2,778.02 Antipolo City Hospital, Inc. 14,733.87 1,356,312.03 1,473,385.94 1,170.74 Asia Renal Care (Phils.) 14,682.86 516,492.10 1,468,286.22 9,517.94 Asociacion Benevola De Cebu, Inc. (Chong Hua Hospital) 2,145,527.65 206,176,602.34 214,552,762.01 83,761.60 Benguet General Hospital 45,148.57 4,252,494.34 5,055,641.35 7,172.37 Botica Real 336,657.61 10,312,376.74 34,709,394.08 236,634.54 Bureau of Corrections 25,884.71 2,483,890.32 2,588,471.00 1,045.81 Cagayan De Oro Medical Center, Inc. 178,528.32 16,969,829.26 17,852,832.00 8,830.03 Cagayan Valley Medical Center 232,944.64 9,053,476.24 10,912,837.60 39,689.79 Cebu Far Eastern Drug, Inc. 19,341.77 1,884,554.97 2,163,237.24 2,491.73 Center For Health Development IV-B 2,052.73 86,284.32 229,906.03 1,282.34 Christ The King Medical Services, Inc. 115,443.41 356,523.16 11,544,341.00 111,878.18 City Government of Pasig 456,900.51 18,256,901.26 45,690,051.00 274,331.50 City Government of Bago 513.39 47,767.86 51,339.29 35.71 City Government of Binan 15,714.29 136,562.50 1,760,000.00 14,494.98 City Government of Makati 297,133.86 21,333,043.66 29,713,385.71 83,803.42 City Government of Muntinlupa 20,089.29 1,169,709.18 2,008,928.57 8,392.20 City Supermarket Incorporated 515,447.18 50,543,219.22 51,544,719.99 10,015.01 Colinas Verdes Hospital Managers Corp. 1,238,295.68 119,035,961.00 123,829,568.00 47,936.07 Commission on Audit 24,282.61 137,573.71 2,428,261.00 22,906.87 Commission on Elections 1,453.03 155,012.68 160,039.20 45.64 Complete Solution Pharmacy And Gen. Mer. 917,987.76 76,510,309.92 91,798,776.00 152,884.66 CVC Supermarket, Inc. 7,385.12 735,418.37 738,512.00 30.94 Davao Adventist Hospital, Inc. 30,932.35 2,618,366.10 3,205,653.65 5,666.92 Davao Central Warehouse Club, Inc. 101,012.65 1,671,797.18 10,101,256.00 84,294.66 Davao Regional Hospital 304,859.50 30,352,181.41 30,485,949.18 1,337.68 De Los Santos Med. Ctr. Diagnostic Corp. 152,329.21 14,163,576.80 15,232,920.78 10,693.44 Dranix Distributor, Inc. Iloilo 108,196.38 (1,206,667.24) 10,310,756.00 120,858.60 E. Berlin Pharmacy 48,518.94 4,077,860.92 4,851,894.00 7,740.33 Erlinda G. Germar/Farmacia Fatima & Fatima Soda Founta 154,510.62 10,535,625.73 15,451,062.84 49,154.37 Ever Commonwealth Center, Inc. 447,640.07 36,906,409.12 44,764,014.47 78,576.04 Evercare Pharmacy 3,631.49 206,136.46 296,745.57 1,108.85 Everplus Superstore, Inc. 1,070,552.93 76,910,417.45 107,054,277.70 301,441.46 Extract Sales Incorporated 1,026,591.32 78,820,886.01 102,659,130.47 238,382.45 Feb Cuisine Corp. 30,110.01 3,010,996.18 3,331,046.11 2,893.00 FEU-Dr. Nicanor Reyes Medical Foundation 81,306.08 8,031,427.66 8,130,608.00 991.80 Gaisano Bros. Mdsg., Inc. 150,849.81 15,078,129.00 15,084,981.00 68.52 Grand Union Supermarket Inc., Operator 286,039.85 20,342,184.64 28,603,984.71 82,618.00 Inter-Medical Unified System, Inc. 133,590.96 13,355,251.11 13,359,095.27 38.44 ISS Facility Services Phil., Inc. 10,935.87 150,296.25 1,093,587.21 9,432.91 Jemstar Trading Corporation 142,836.22 13,499,641.94 14,283,673.00 7,840.28 Juliano, Susan G. 1,680.00 6,447.26 84,000.00 1,551.05 K2 Drug & Medical Supplies 103,816.14 5,323,076.74 10,381,614.12 50,585.37 Larrazabal, Susanna Ortega 1,084,545.61 106,784,231.16 108,432,225.46 16,483.34 Lts Affiliates, Inc. 618,246.09 9,648,673.07 61,824,609.38 521,759.36 Lucena United Doctors Incorporated 124,559.28 12,333,856.68 12,455,928.00 1,220.71 Manson Drug Corp. 3,473,375.69 246,640,598.58 347,337,544.82 1,006,969.53 Marionnaud Philippines, Inc. 267,102.98 26,672,619.64 26,710,298.00 376.78 Mary Johnston Hospital, Inc. 17,816.27 1,461,365.65 1,781,627.77 3,202.62 Medical Mission Group Hospital & Health Services Cooper 1,580.17 118,004.15 158,017.92 400.14 Metropolitan Pharmaceutical Products, Inc. 257.12 15,943.28 17,856.47 27.55 Mindanao Sanitarium And Hospital 136,521.59 15,908,113.44 25,287,731.24 50,638.01 Mount Carmel Diocesan General Hospital 320,289.38 31,301,758.99 32,028,938.00 7,271.79 Negros Union Drug Co., Inc. 303,423.53 29,755,646.84 30,342,354.11 5,867.07 Norvic Drugs Corporation 545,566.09 54,500,131.63 54,556,608.66 564.77 Nueva Ecija Prohealth Inc./Heart of Jesus Hospital 3,007.87 (29,619.72) 300,785.66 3,304.07 Oslob District Hospital 160.71 16,071.43 18,000.00 17.22 Perpetual Succor Hospital & Maternity, Inc. 587,700.15 54,026,909.59 58,770,014.28 47,431.05 Philex Mining Corporation 76,017.61 6,162,002.66 7,601,762.08 14,397.59 Philippine Long Distance Telephone Company 1,399,847.48 132,244,275.27 139,984,747.45 77,404.72 Philippine Heart Center 3,776,666.97 137,624,178.74 294,471,060.57 2,011,601.54 Province of Pampanga 26,783.48 2,187,098.21 2,678,348.21 4,912.50 Provincial Government of Negros Occidental 33,728.40 2,530,189.39 3,372,840.00 8,426.51 Provincial Government of Nueva Vizcaya-Nueva Vizcaya 2,804.15 283,640.18 314,065.00 271.65 Provincial Government of Or. Neg. 17,421.92 1,486,520.11 1,868,680.08 3,562.92 Puregold Junior Supermarket, Inc. 1,099,719.66 60,160,645.38 109,971,961.92 498,113.18 Research Institute for Tropical Medicine 187,737.62 16,784,499.05 18,780,384.92 19,951.82 Right Choice Supermarket 3,306,387.59 325,551,286.74 330,641,059.97 50,897.38 Rilem Pharma Corp. 2,331.34 233,134.60 233,134.67 0.00 Rivera Medical Center, Inc. 244,230.89 18,957,477.40 24,567,322.17 55,769.10 Roldan, Kenneth Bautista-Netnet 63,437.21 6,342,824.78 7,045,642.41 6,327.99 Royal Duty-Free Shops, Inc. 106,355.73 10,472,530.83 10,635,565.00 1,630.34 Rustan Supercenters, Inc. 1,273,233.91 12,740,561.88 127,323,391.00 1,145,828.29 San Pedro Doctors Hospital, Inc. 68,237.16 6,517,936.44 6,823,716.27 3,057.80 Super 8 Retail Systems, Inc. 295,496.24 28,405,611.84 29,549,624.00 11,440.12 Suy Sing Commercial Corp 355,285.82 35,449,835.41 35,528,582.00 787.47 The Landmark Corporation 479,222.57 43,927,289.23 47,922,257.00 39,949.68 Vaduz Marketing, Inc. 1,652,756.64 161,868,769.29 165,275,664.38 34,068.95 Veterans Memorial Medical Center 408,936.17 38,498,667.54 45,815,791.00 65,310.16 Waltermart Supermarket, Inc. 636,691.95 52,213,056.54 63,669,284.14 114,562.12 Watsons Personal Care Stores (Phils.), Inc. 18,892,897.50 1,846,923,169.36 1,889,289,750.00 423,665.81 Wing An Marketing, Inc. 103,669.42 5,268,888.92 10,366,943.01 50,980.54 Subtotal P54,868,554.21 P4,601,962,418.33 P5,410,719,504.25 P8,494,956.74 TOTAL P56,494,834.38 P4,601,962,418.33 P5,572,552,279.90 P10,121,236.91 SALE OF SERVICES Customer Name Tax Withheld (A) Service Income per General Ledger (B) Income Payment per BIR Form 2307 (C) Deduction from Petitioner's CWT Claim [D=A-(A x B/C) INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES Abbott Laboratories 5,526,721.13 25,002,625.57 237,571,740.90 4,945,075.61 Alkem Laboratories, Inc. 3,195.56 137,450.19 159,777.76 446.55 B. Braun Medical Supplies 88,666.62 917,383.47 6,581,894.42 76,308.28 Bayer Philippines, Inc. 508,149.29 9,705,279.35 12,477,307.25 112,893.27 Fresenius Kabi Philippines, Inc. 204,030.19 9,286,767.80 10,100,859.16 16,444.07 Galderma Philippines, Inc. 26,696.01 185,091.04 1,334,800.50 22,994.19 Glaxosmithkline Philippines, Inc. 1,417,195.47 32,490,214.39 75,573,915.50 807,924.61 Msd (I.A) Corp Ph. 448,349.93 12,335,460.20 22,417,495.87 201,640.72 Novartis Healthcare Philippines, Inc. 1,754,719.18 37,736,808.38 89,228,264.81 1,012,605.66 Oep Philippines, Inc. 69,180.59 3,319,125.72 3,497,199.98 3,522.61 Pascual Laboratories, Inc. 559,101.18 5,747,749.48 55,910,118.00 501,623.69 Pfizer, Inc. 1,587,316.28 27,605,441.69 80,051,571.00 1,039,937.05 Reckitt Benckiser Healthcare (Phil), Inc. 2,746,302.20 3,528,596.62 103,198,827.70 2,652,400.04 Sandoz Philippines Corp. 197,385.02 7,779,982.91 9,869,251.00 41,785.36 Sanofi-Aventis Philippines, Inc. 398,405.09 12,322,163.26 19,920,254.50 151,961.82 Sanofi Pasteur, Inc. 482,299.15 5,453,826.65 28,667,725.50 390,545.24 Schering-Plough Corp. 1,199,269.09 4,342,434.71 59,966,008.98 1,112,424.10 TOTAL P17,216,981.98 P197,896,401.44 P816,527,012.83 P13,090,532.87 In fine, petitioner complied with the three basic requisites for refund of excess CWT for taxable CY 2011 to the extent of only P417,222,162.68, computed as follows: Amount of Claimed CWT P477,269,935.23 Less: Disallowances 1) CWT without proper BIR Forms No. 2307 Per ICPA report P36,049,212.66 Per this Court's further verification 786,401.46 Discrepancy between the CWT per petitioner's schedule and CWT per Petition for Review 388.65 36,836,002.77 2) CWT the related income payments of which were not traced to the sales register and general ledger Sales of goods P10,121,236.91 Sales of services 13,090,532.87 23,211,769.78 Properly Substantiated CWT P417,222,162.68 We now proceed to determine whether the aforesaid CWT of P417,222,162.68 are unutilized and may be the proper subject of a claim for refund or issuance of tax credit certificate pursuant to Section 76 of the NIRC of 1997, as amended, which reads: "SEC. 76. Final Adjustment Return . Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable 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 income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." The above provision prescribes two options to a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or avail of a tax credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period. 45 The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer. 46 In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. 47 A perusal of petitioner's Amended Income Tax Return (AITR) 48 for CY 2011 filed on June 13, 2013 shows that petitioner had income tax credits in the total amount of P1,084,014,135.33 49 consisting of the prior year's excess credits other than the Minimum Corporate Income Tax (MCIT) in the amount of P606,744,200.10 50 and creditable withholding taxes accumulated during the four (4) quarters of CY 2011 in the aggregate amount of P477,269,935.23, 51 to wit: acEHCD Prior Year's Excess Credits other than MCIT 606,744,200.10 Creditable Tax Withheld for the First Three Quarters P269,508,749.26 Creditable Tax Withheld for the Fourth Quarter 207,761,185.97 477,269,935.23 Total Tax Credits P1,084,014,135.33 Petitioner claims that its 2011 income tax due in the amount of P286,241,875.50 52 was paid using a portion of its prior year's excess credits of P606,744,200.10 leaving the prior year's excess credits in the amount of P320,502,324.60 (P606,744,200.10 less P286,241,875.50) and creditable taxes withheld during the year 2011 in the amount of P477,269,935.23 totaling P797,772,259.83 53 unutilized as of December 31, 2011, as shown below: Income Tax Due P286,241,875.50 Less: Prior Year's Excess Credits 606,744,200.10 Balance of Prior Year's Excess Credits P320,502,324.60 Add: Creditable Taxes Withheld-2011 477,269,935.23 Excess Creditable Taxes Withheld as of December 31, 2011 P797,772,259.83 As illustrated below, the prior year's excess credits of P606,744,200.10 arose from the years 2003 to 2010, thus: Exh. Taxable Year Income Tax Due (a) Prior Year's Excess Credits (b) (Income Tax Still Due)/Balance of Prior Year's Excess Credits (c) = (b) less (a) CWT for the Year Excess CWT at the end of the Year "P-33-a" 2003 230,768,665.60 81,872,706.00 (148,895,959.60) 201,932,078.00 53,036,118.40 "P-33-b" 2004 132,913,922.24 53,036,118.00 (79,877,804.24) 268,776,166.00 188,898,361.76 "P-33-c" 2005 241,944,558.70 188,898,362.00 (53,046,196.70) 287,973,112.00 234,926,915.30 "P-33-d" 2006 231,799,757.70 234,926,915.00 3,127,157.30 304,484,366.00 307,611,523.30 "P-33-e" 2007 341,664,169.70 307,611,523.00 (34,052,646.70) 389,190,279.00 355,137,632.30 "P-33-f" 2008 376,397,087.50 355,137,632.00 (21,259,455.50) 392,075,751.00 370,816,295.50 "P-33-g" 2009 279,561,489.90 370,816,295.00 91,254,805.10 417,215,892.00 508,470,697.10 "P-33-h" 2010 337,760,187.90 508,470,697.00 170,710,509.10 436,033,691.00 606,744,200.10 To prove the existence of its prior year's excess credits, petitioner submitted BIR Forms No. 2307. However, only those pertaining to taxable year 2010 in the total amount of P436,033,691.27, was accounted by the ICPA, to wit: Summary of Findings Annex Reference (Exh. "P-19") Income Payment Tax Withheld 1. CWT duly supported by original BIR Form 2307 Annex 8-a P29,618,642,348.35 P296,832,700.36 2. CWT duly supported by certified true copy of BIR Form 2307 Annex 8-b 4,217,889,832.61 43,942,418.50 3. CWT duly supported by original BIR Form 2307 with incorrect Petitioner's TIN indicated therein Annex 8-c 294,131,240.34 2,902,371.19 4. CWT duly supported by original BIR Form 2307 with unclear date Annex 8-d 213,227.48 1,903.81 5. CWT certificate supported by photocopies with correct name, TIN and date Annex 8-e 1,939,236,066.22 19,055,743.90 6. CWT certificates not provided 73,298,553.51 Total P36,070,112,715.00 P436,033,691.27 Based on the foregoing, only the amounts of P296,832,700.36 and P43,942,418.50 totaling P340,775,118.86 were properly supported by BIR Forms No. 2307. However, these CWT do not represent petitioner's excess CWT for CY 2010 since petitioner reflected in its AITR for the said year an income tax due of P337,760,187.90. Deducting this income tax due of P337,760,187.90 from the CWT of P340,775,118.86, yields to an amount of only P3,014,930.96 excess tax credits for CY 2010. As stated earlier, petitioner reflected in its 2011 AITR an income tax due of P286,241,875.50 which when offset against the prior year's (CY 2010) excess tax credits in the amount of P3,014,930.96, there still remains an income tax due of P283,226,944.54 which shall be deducted against the substantiated CWT of P417,222,162.68. Consequently, petitioner's unutilized excess CWT for CY 2011 amounted only to P133,995,218.14, computed as follows: SDHTEC Income Tax Due for CY 2011 P286,241,875.50 Less: Prior Year's (CY 2010) Excess Credits 3,014,930.96 Balance of Income Tax Due for CY 2011 P283,226,944.54 Less: Properly Substantiated CWT for CY 2011 417,222,162.68 Refundable Excess CWT for CY 2011 P133,995,218.14 In its original 2011 AITR 54 electronically filed on April 16, 2012, petitioner marked the option "To be refunded." Moreover, in its subsequent manual filing of the said return on April 30, 2012, petitioner also marked the option "To be refunded." 55 These, together with petitioner's submission of a letter-claim for refund 56 with the respondent's office on April 13, 2012, supplemental letter-claim for refund 57 and Application for Tax Credits/Refunds 58 with the BIR's Large Taxpayers Service on February 28, 2014 and April 1, 2014, respectively, and the fact that petitioner did not carry-over the present claim to the subsequent CY 2012 59 served as an expression of its choice to have the CWT for CY 2011 refunded. Clearly, petitioner sufficiently proved that it is entitled to a refund of unutilized excess CWT for CY 2011 but in the reduced amount of P133,995,218.14. WHEREFORE , premises considered, the instant Petition for Review is PARTIALLY GRANTED . Accordingly, respondent is ORDERED to REFUND in favor of petitioner the amount of P133,995,218.14, representing its excess and unutilized creditable withholding taxes for CY ending December 31, 2011. SO ORDERED. (SGD.) CAESAR A. CASANOVA Associate Justice Juanito C. Castaeda, Jr. and Catherine T. Manahan, JJ. , concur. Footnotes 1. Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket (Vol. I), p. 289. 2. Par. 4, JSFI, Docket (Vol. I), p. 290; Exhibit "P-2". 3. Par. 2, JSFI, Docket (Vol. I), p. 289. 4. Par. 3, JSFI, Docket (Vol. I), p. 290; Exhibit "P-1". 5. Exhibit "P-3". 6. Exhibit "P-4". 7. Exhibit "P-5". 8. Exhibit "P-6". 9. Exhibits "P-3", "P-4", and "P-6". 10. Exhibit "P-10". 11. Exhibit "P-11". 12. Exhibit "P-12". 13. Order dated May 6, 2014, Docket (Vol. I), p. 98. 14. Docket (Vol. I), pp. 99-106. 15. Notice of Pre-Trial Conference, Docket (Vol. I), p. 108. 16. Docket (Vol. I), pp. 109-113. 17. Docket (Vol. I), pp. 265-276. 18. Docket (Vol. I), pp. 289-296. 19. Docket (Vol. I), pp. 299-303. 20. Docket (Vol. I), pp. 304-307. 21. Exhibit "P-17", Sworn Statement of Mr. Joel R. Ducut to Questions Propounded by Atty. Gelina Rose E. Recio, and Supplemental Sworn Statement of Mr. Joel R. Ducut to Questions Propounded by Atty. Gelina Rose E. Recio, Docket (Vol. I), pp. 252-262 and 371-473, respectively; Minutes of the Hearing dated October 20, 2014 and April 13, 2015, respectively, Docket (Vol. I), p. 321 and 657. 22. Exhibit "P-6", Sworn Statement of Ms. Katherine O. Constantino to Questions Propounded by Atty. Gelina Rose E. Recio, Docket (Vol. I), pp. 351-366; Minutes of the Hearing dated March 18, 2015, Docket (Vol. I), p. 367. 23. Docket (Vol. II), pp. 662-680. 24. Docket (Vol. II), pp. 830-879. 25. Docket (Vol. II), pp. 882-893. 26. Docket (Vol. II), pp. 1018-1048. 27. Exhibit "R-9", Judicial Affidavit of Revenue Officer Ma. Theresa L. Espino, Docket (Vol. II), pp. 819-824; Minutes of the Hearing dated May 11, 2016, docket vol. II, p. 1050. 28. Docket (Vol. II), p. 1053-1060. 29. Docket (Vol. II), pp. 1070-1071. 30. Docket (Vol. II), pp. 1072-1075. 31. Docket (Vol. II), pp. 1085-1111. 32. Docket (Vol. II), p. 1112. 33. Issues, JSFI, Docket (Vol. I), p. 290. 34. Citibank N.A. vs. Court of Appeals, et al. , G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court of Appeals, et al. , G.R. No. 96322, December 20, 1991; United International Pictures AB vs. Commissioner of Internal Revenue , G.R. No. 168331, October 11, 2012; Republic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; Section 2.58, Revenue Regulations No. 2-98, as amended. 35. G.R. No. 96322, December 20, 1991, 204 SCRA 957. 36. Commissioner of Internal Revenue vs. TMX Sales Inc., et al. , G.R. No. 83736, January 15, 1992. 37. G.R. No. 162155, August 28, 2007. 38. Exhibit "P-3". 39. Exhibit "P-10". 40. Exhibit "P-11". 41. Exhibit "P-12". 42. Exhibit "P-23-a". 43. Exhibits "P-39" to "P-5043" and "P-354706" to "P-366467". 44. Exhibit "P-19", p. 7. 45. Philam Asset Management, Inc., vs. Commissioner of Internal Revenue , G.R. Nos. 156637/162004, December 14, 2005; Systra Philippines, Inc., vs. Commissioner of Internal Revenue , G.R. No. 176290, September 21, 2007. 46. Commissioner of Internal Revenue vs. Bank of the Philippine Islands , G.R. No. 178490, July 7, 2009. 47. Philippine Bank of Communications vs. Commissioner of Internal Revenue, et al. , G.R. No. 112024, January 28, 1999. 48. Exhibit "P-6". 49. Exhibit "P-6", line 33R. 50. Exhibit "P-6", line 33A. 51. Exhibit "P-6", lines 33F and 33H. 52. Exhibit "P-6", line 32. 53. Exhibit "P-6", line 34B. 54. Exhibit "P-3", line 37. 55. Exhibit "P-4", line 37. 56. Exhibit "P-10". 57. Exhibit "P-11". 58. Exhibit "P-12". 59. Exhibits "P-13", "P-14", "P-15", line 31A, "P-16", line 33A.