Aecom Philippines, Inc. v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 9239. April 2, 2019.] AECOM PHILIPPINES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : In this Petition for Review 1 filed on January 14, 2016, petitioner Aecom Philippines, Inc. prays for the refund of its alleged excess and unutilized creditable withholding tax (CWT) for fiscal year (FY) 2013 in the amount of Thirteen Million Nine Hundred Eighty-Two Thousand Four Hundred Thirty-Three Pesos (P13,982,433.00). CAIHTE THE FACTS Petitioner Aecom Philippines, Inc. is a domestic corporation, with principal office located at 23rd Floor, Fort Legend Towers, 31st Street, Fort Bonifacio Global City, Taguig City. Petitioner is registered with the Bureau of Internal Revenue (BIR) with Certificate of Registration No. OCN9RC0000321684 2 and with the Securities and Exchange Commission (SEC) with Company Registration No. A1996-02509. 3 Per its Amended Articles of Incorporation, 4 petitioner was established primarily for the following purposes: To engage in the business of providing engineering, consultancy, technical, advisory, construction project management, and environmental impact analysis services as well as implementation and execution of plans, and doing any and all other businesses incidental thereto or connected therewith, and the doing and performing of any and all acts and things necessary, proper or convenient for and incidental to the furtherance and/or implementation of the purposes herein enumerated. aScITE According to petitioner, it earns income from the performance of the above-enumerated services to its clients/customers, and a part of its earnings were subjected to creditable withholding tax by its payors/clients. For FY 2013, a portion of petitioner's income was allegedly subjected to 15% CWT pursuant to Section 2.57.2 (B) of Revenue Regulations (RR) No. 2-98, as amended by RR No. 30-03, while some were subjected to the 2% CWT under Sections 2.57.2 (E) and 2.57.2 (M) of RR No. 2-98. On January 15, 2014, petitioner electronically filed its Annual Income Tax Return 5 (AITR) for FY ended September 30, 2013, and amended 6 it on January 15, 2015. In its Final Adjustment Return (FAR) filed on January 15, 2015, petitioner indicated that the tax overpayment of P18,574,811 was "To be refunded". 7 DETACa On January 13, 2016, petitioner filed an application for tax refund 8 with supporting documents, with the Revenue District Office (RDO) No. 44 for its alleged unutilized CWT in the amount of P13,982,433.00. Immediately the day after, or on January 14, 2016, petitioner filed the instant Petition for Review 9 before the Court. On February 5, 2016, respondent posted his Answer 10 through registered mail, stating that taxes paid and collected are presumed to have been made in accordance with law and implementing regulations, hence, not refundable. Further, petitioner has the burden of showing that it has complied with the provisions of Section 204 (C),in relation to Section 229 of the National Internal Revenue Code (NIRC) of 1997, but failed. Petitioner was unable to fully substantiate by proper documents, i.e. ,sales invoices and official receipts, its claim for refund of its alleged unutilized CWT in the amount of P13,982,433.00 for FY 2013. Further, in a claim for tax refund/credit, taxpayer such as petitioner must prove not only entitlement to the grant of the claim under substantive law, it must also show satisfaction of all documentary and evidentiary requirements for an administrative claim for refund or tax credit. 11 Finally, claims for refund are construed strictly against the claimant, as the same partake the nature of exemption from taxation 12 and as such, they are looked upon with disfavor. 13 After the pre-trial conference, 14 a Pre-Trial Order was issued on June 20, 2016. 15 HEITAD During the trial, petitioner presented as its witnesses Ma. Lourdes Lascoa, Attorney Clifford Chua and Janis Myrtle P. Delos Reyes. By way of a Judicial Affidavit, 16 petitioner's Senior Finance Manager, Ma. Lourdes Lascoa testified that she has been under the employ of petitioner since March 28, 2011 and was promoted to her current position on January 1, 2016. As a Senior Finance Manager, she is in possession of petitioner's corporate records such as its Articles of Incorporation, BIR Certificate of Registration, tax returns, and other documents it filed with the SEC, the BIR and other government agencies. She also ensures that petitioner complies with existing tax laws and regulations, supervises the preparation of its tax returns, including payments and filings thereof, and handles tax issues. Petitioner is registered with the SEC with Company Registration No. A1996-02509, 17 as well as with the BIR with BIR Certificate of Registration No. OCN9RC0000321684 and TIN 004-868-770-000. 18 She opined that petitioner is entitled to a refund of P13,982,433.00, representing its excess and unutilized creditable income taxes withheld for the FY 2013 since it is engaged in the business of providing engineering consultancy, technical advisory, construction project management and environmental impact analysis services, as well as implementation and execution of plans. As such, the professional fees paid to petitioner were subjected to 15% CWT, while the services it rendered to clients belonging to Top Twenty Thousand Corporations were subjected to 2% CWT. Petitioner's income and the CWTs deducted therefrom were all reported in petitioner's ITR for FY 2013. The said CWTs were not utilized against petitioner's income taxes liability, 19 hence, it is entitled to its claim for refund. For FY 2013, petitioner utilized its prior year's excess credit of P22,416,120.00 and a portion of its creditable taxes withheld by its customer in 2013, in the amount of P6,401,324.00, against its income tax due of P28,817,444.00 leaving a total of P14,131,115.00 unutilized CWT for FY 2013. In its AITR for 2013, petitioner indicated the option "To be refunded" for its tax overpayment. The witness recalled that the prior year's excess credits indicated in petitioner's AITR for FY 2014 20 in the amount of P4,443,696.00, was composed of the amount P3,839,671.31 for which petitioner filed a claim for issuance of tax credit certificate (TCC) for 2006, and foreign tax credit of P604,025.00. The said application for issuance of TCC was denied by the Court in Division in the Decision dated October 21, 2011 21 and Resolution dated December 26, 2011 22 due to petitioner's non-submission of the original of its ITR. Such denial was affirmed by the Court En Banc in its Decision dated October 23, 2012 23 and Resolution dated May 28, 2013. 24 Petitioner's previous business name was Maunsell Philippines, Inc. 25 The witness further declared that the amount of P3,839,671.31 has been included in petitioner's 2013 AITR but it is not part of the present claim for refund. ETHIDa On January 13, 2016, petitioner filed with BIR RDO No. 44 an administrative claim for refund 26 together with supporting documents and BIR Form No. 1914. 27 The Court-commissioned Independent Certified Public Accountant (ICPA) Attorney Clifford Chua testified 28 that he audited and evaluated petitioner's documents and records to verify the validity of its claim for refund of its alleged unutilized and excess creditable income taxes withheld for FY 2013. Per his examination and verification of petitioner's pertinent documents and as stated in his Final ICPA Report, 29 it is entitled to a tax refund on the unutilized and excess creditable income taxes withheld for FY 2013 in the amount of P13,653,367.43 which is equivalent to around 96% of its claimed refund/TCC. He based his computation from petitioner's Certificates of Tax Withheld and Official Receipts, among others. Petitioner's Senior Accountant Janis Myrtle P. Delos Reyes declared 30 that she keeps copies of petitioner's financial documents, including its Audited Financial Statements (AFS) and tax returns. She likewise assists petitioner's Finance Manager in ensuring that petitioner complies with existing tax laws and regulations. She likewise supervises the preparation of its tax returns, filing thereof and payments of the corresponding tax liabilities. She sees to it that the returns and payments thereof are accurate and correct. She assisted petitioner's Finance Manager in handling tax issues related to the present case. TIADCc By virtue of her position, she has custody of the consularized People's Republic of China General-Purpose Tax Payment Vouchers 31 issued by the 9th Tax Office, Shanghai Pudong New Area Office, SAT, and the 9th Tax Office, Pudong New Area Office, Shanghai Bureau of Local Taxation, in favor of Aecom Limited Beijing for taxable year 2013. The said documents are the foreign tax certificates issued by the People's Republic of China to Aecom Limited Beijing proving that taxes were withheld from petitioner's income received from Aecom Limited Beijing. The witness however clarified that she learned about the case when it was endorsed to her by petitioner's former Senior Finance Manager before the latter left the company. On March 3, 2017, petitioner filed its Formal Offer of Evidence, 32 which was resolved in the Resolution 33 dated September 6, 2017. On September 26, 2017, petitioner moved for a reconsideration of the Resolution of September 6, 2017 and prayed for a commissioner's hearing. 34 On December 20, 2017, petitioner filed its Supplemental Formal Offer of Evidence 35 which the Court resolved in its Resolution 36 dated January 9, 2018 by partially granting petitioner's bid for reconsideration. cSEDTC On January 29, 2018, 37 respondent opted not to present any evidence in support of its defense. Consequently, the Court granted the parties thirty (30) days to file their respective memoranda. On April 5, 2018, 38 the case was considered submitted for decision after the parties complied with the Resolution of January 29, 2018. THE ISSUES The lone issue 39 for the Court's resolution is: Whether Petitioner is entitled to its claim for refund of its excess and unutilized creditable withholding taxes for the fiscal year 2013 in the amount of Thirteen Million Nine Hundred Eighty-Two Thousand Four Hundred Thirty-Three Pesos (Php13,982,433.00). THE COURT'S RULING Section 76 of the National Internal Revenue Code of 1997, pertinently provides, as follows: 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: AIDSTE (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 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 tax credit certificate shall be allowed therefor. From the above provision, there are two options available to a corporation whenever it overpays its income tax for the taxable year: (1) to carry over and apply the overpayment as tax credit against the estimated quarterly income tax liabilities of the succeeding taxable years (also known as automatic tax credit) until fully utilized (meaning, there is no prescriptive period);or (2) to apply for a cash refund or issuance of a tax credit certificate within the prescribed period. 40 SDAaTC In Systra Philippines, Inc. vs. Commissioner of Internal Revenue , 41 the Supreme Court held that 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 for a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. However, once the carry-over option is taken actually or constructively, it becomes irrevocable for that taxable period. 42 The phrase "for that taxable period" merely identifies the excess income tax, subject of the option, by referring to the taxable period when it was acquired by the taxpayer. 43 Evidently, a corporate taxpayer is not legally allowed a change of heart once it has chosen an option from the two alternative remedies, for the choice of one precludes the other. This is indicated in the Annual Income Tax Return for the BIR Form 1702 under line 31, which reads, thus: If overpayment, mark one box only: (once the choice is made, the same is irrevocable) In its Original and Amended AITR for FY 2013, petitioner reflected the following income tax overpayments which it marked "To be refunded," viz. : AaCTcI Exhibit "P-4" 44 Exhibit "P-5" 45 Sales/Revenues/Receipts/Fees P324,574,236.63 P324,574,237.00 Less: Cost of Sales/Services 201,521,469.67 192,006,963.00 Gross Income from Operation P123,052,766.96 P132,567,274.00 Add: Non-Operating & Other Taxable Income Not Subject to Final Tax 11,928,661.75 11,928,662.00 Total Gross Income P134,981,428.71 P144,495,936.00 Less: Deductions 38,923,282.99 48,437,790.00 Net Taxable Income (Loss) P96,058,145.72 P96,058,146.00 Income Tax Due (30%) P28,817,443.72 P28,817,444.00 Less: Tax Credits/Payments Prior Year's Excess Tax Credits P63,341,047.90 P26,255,791.00 Creditable Tax Withheld for the First Three Quarters 16,717,046.56 16,717,046.00 Creditable Tax Withheld for the Fourth Quarter 3,815,392.95 3,815,393.00 Foreign Tax Credits 604,024.53 604,025.00 Total Tax Credits P84,477,511.94 P47,392,255.00 Tax Overpayment P55,660,068.22 P18,574,811.00 Per its Amended ITR for FY 2013, petitioner has total tax credits of P47,392,255.00, consisting of the following: acEHCD Prior Year's Excess Tax Credits P26,255,791.00 Creditable Tax Withheld for the First Three Quarters 16,717,046.00 Creditable Tax Withheld for the Fourth Quarter 3,815,393.00 Foreign Tax Credits 604,025.00 Total Tax Credits P47,392,255.00 Petitioner claims that its FY 2013 income tax due amounting to P28,817,444.00 was paid utilizing P22,416,120.00 of its prior years excess credits of P26,255,791.00 and a portion of its creditable taxes withheld in FY 2013 in the amount of P6,401,324.00. Thus, leaving its prior year's excess credits of P3,839,671.00 (P26,255,791.00 less P22,416,120.00),foreign tax credits of P604,025.00 and creditable taxes withheld in FY 2013 of P14,131,115.00, unutilized as of the end of FY 2013. However, out of the P14,131,115.00 creditable taxes withheld in FY 2013, petitioner is only claiming refund of the amount P13,982,433.00 as computed below: 46 Creditable withholding taxes generated for the fiscal year 2013 as presented in petitioner's 2013 income tax return Creditable tax withheld for the first three quarters P16,717,046.00 Creditable tax withheld per BIR Form No. 2307 for the fourth quarter 3,815,393.00 P20,532,439.00 Less: Portion Utilized for the fiscal year 2013 Income tax due for 2013 P28,817,444.00 Paid through: Prior year's excess credit P26,255,791.00 Prior year's excess credit not used in 2013 3,839,671.00 P22,416,120.00 6,401,324.00 Unutilized fiscal year 2013 creditable withholding taxes P14,131,115.00 Less: Amount not included in the refund 148,682.00 Amount of Refund P13,982,433.00 To support its claim that it has sufficient prior years excess tax credits to cover its income tax due for FY 2013, petitioner presented the related Certificates of Creditable Tax Withheld at Source (BIR Forms No. 2307) 47 which were examined by the ICPA. As summarized by the ICPA, the BIR Forms No. 2307 submitted by petitioner pertain to FYs 2009 to 2012 and reflected a total of P45,448,251.12 CWT, broken down as follows: 48 EcTCAD Period Covered Total CWTs FY 2009 P6,964,516.89 FY 2010 9,871,922.93 FY 2011 1,673,948.80 FY 2012 26,937,862.50 Total P45,448,251.12 A scrutiny of the said BIR Forms No. 2307 shows that the amount of P1,005,899.03, should be disallowed for the following reasons: Client Tax Base ATC Rate Withholding Tax Amount Exhibit Reference A. Period not indicated in BIR Form No. 2307 FCF Mineral Corporation P1,104,644.13 WC011 15% P165,696.62 P-543 FCF Mineral Corporation 942,129.00 WC011 15% 141,319.35 P-544 FCF Mineral Corporation 3,009,599.01 WC011 15% 451,439.85 P-557 FCF Mineral Corporation 1,536,021.40 WC010 15% 230,403.21 P-568 Sub-total P6,592,393.54 P988,859.03 B. BIR Form No. 2307 details unreadable Costa Del Hamilo P85,200.00 WC010 10% P8,520.00 P-556 Costa Del Hamilo 426,000.00 WC120 2% 8,520.00 P-567 Sub-total P511,200.00 P17,040.00 Grand Total P7,103,593.54 P1,005,899.03 In addition, petitioner presented the following CWT Certificates to prove additional CWTs for FYs 2009 to 2011 in the amount of P13,621,469.90, detailed as follows: AScHCD Client Tax Base ATC Rate Withholding Tax Amount Exhibit Berong Nickel Corporation P435,200.00 WC011 15% P65,280.00 P-669 Berong Nickel Corporation 2,068,172.00 WC011 15% 309,925.80 P-670 Berong Nickel Corporation 474,560.00 WC011 15% 71,184.00 P-671 Costa Del Hamilo 565,700.00 WC010 10% 56,570.00 P-672 Costa Del Hamilo 412,200.00 WC010 10% 41,220.00 P-673 Davao Integrated Port & Stevedoring Services Corporation 482,469.60 WC010 10% 48,246.96 P-674 Hedcor, Inc. 19,092.00 WC011 15% 2,863.80 P-675 Intel Tech Phils.,Inc. 28,450.00 WC120 2% 569.00 P-676 Intel Tech Phils.,Inc. 19,200.00 WC120 2% 384.00 P-677 Sunpower Philippines Manufacturing Ltd. 803,221.50 WC120 2% 16,064.43 P-678 Sunpower Philippines Manufacturing Ltd. 681,074.00 WC120 2% 13,621.48 P-679 Sunpower Philippines Manufacturing Ltd. 755,809.00 WC120 2% 15,116.18 P-680 Team Energy Corporation 1,282,972.60 WC051 15% 192,445.89 P-681 Team Sual Corporation 2,405,108.27 WC011 15% 360,766.24 P-682 2009 P10,433,228.97 P1,194,257.78 BL Oombury Investments Holding, Inc. P150,825.00 WC051 15% P22,623.75 P-683 Int'l. Container Terminal Services, Inc. 27,178,887.36 WC120 2% 543,577.75 P-684 Manila Water Company 16,048,136.20 WC011 15% 2,407,220.43 P-685 Team Energy Corporation 1,282,972.47 WC051 15% 192,445.87 P-686 The Asia Foundation 460,557.50 2% 9,211.15 P-687 2010 P45,121,378.53 P3,175,078.95 Asian Terminals, Inc. P241,970.00 WC011 15% P36,295.50 P-688 Asian Terminals, Inc. 5,681,450.00 WC011 15% 852,217.50 P-689 Far Southeast Gold Resources, Inc. 233,840.00 WC160 2% 4,676.80 P-690 FCF Minerals Corporation 772,115.00 WC011 15% 115,817.25 P-691 FCF Minerals Corporation 197,220.00 WC011 15% 29,583.00 P-692 FCF Minerals Corporation 1,150,746.26 WC011 15% 172,611.94 P-693 FCF Minerals Corporation 1,415,851.79 WC011 15% 212,377.77 P-694 Holcim Philippines, Inc. 190,000.00 WC120 2% 3,800.00 P-695 Holcim Philippines, Inc. 1,330,000.00 WC160 2% 26,600.00 P-695 Int'l. Container Terminal Services, Inc. 11,638,827.51 WC120 2% 232,776.55 P-696 Int'l. Container Terminal Services, Inc. 18,348,512.13 WC120 2% 366,970.24 P-697 Int'l. Container Terminal Services, Inc. 10,766,916.49 WC120 2% 215,338.33 P-698 Int'l. Container Terminal Services, Inc. 22,899,080.01 WC120 2% 457,981.60 P-699 Manila Water Company 11,359,234.20 WC011 15% 1,703,885.13 P-700 Manila Water Company 11,423,793.90 WC011 15% 1,713,569.09 P-701 Manila Water Company 8,653,832.00 WC011 15% 1,298,074.80 P-702 Mariveles Grain Corporation 660,000.00 WC051 15% 99,000.00 P-703 Maynilad Water Services, Inc. 1,865,580.80 WC011 15% 279,837.12 P-704 Maynilad Water Services, Inc. 1,865,580.80 WC011 15% 279,837.12 P-705 Quezon Power (Philippines) Ltd. Co. 180,714.00 WC011 15% 27,107.10 P-706 Sagittarius Mines, Inc. 189,750.00 WC011 15% 28,462.50 P-707 Taganito HPAL Nickel Corporation 393,000.00 WC011 15% 58,950.00 P-708 Taganito HPAL Nickel Corporation 6,026,080.00 WC120 2% 120,521.60 P-709 Team Energy Corporation 3,138,327.47 WC051 15% 470,749.12 P-710 Team Sual Corporation 2,967,287.47 WC051 15% 445,093.12 P-711 2011 P123,589,709.83 P9,252,133.18 GRAND TOTAL P179,144,317.33 P13,621,469.90 Note however, that there is a discrepancy between the prior year's excess CWTs being claimed by petitioner as deduction from its income tax due for FY 2013 (P26,255,791.00) and the total CWTs reflected in the BIR Forms No. 2307 presented by petitioner for FYs 2009 to 2012 (P58,063,821.99). 49 Hence, there is a doubt as to whether the examined BIR Forms No. 2307 included those which were already claimed as deduction in petitioner's corresponding prior year's. The Court however was unable to verify the same as petitioner failed to present its AITRs for the prior year's covered by said CWTs ( i.e. ,FYs 2009 to 2012).Thus, the Court cannot ascertain whether the CWTs in the amount of P58,063,821.99 as represented by said CWTs pertain to petitioner's total excess tax credits over its income tax liabilities for FYs 2009 to 2012. HESIcT Since petitioner failed to prove that it had prior years excess credits, petitioner's current year's creditable withholding taxes of P20,532,439.00 are not sufficient to cover its income tax due for FY 2013 in the amount of P28,817,444.00, as illustrated below: Income Tax Due for FY 2013 P28,817,444.00 Paid through: Prior year's excess credits - Current year's CWT credits, before ICPA and Court disallowances 20,532,439.00 Income Tax Still Due P8,285,005.00 Given that there are no excess CWTs for FY 2013 which may be the subject of a claim for refund under Section 76 of the NIRC of 1997, as amended, petitioner's claim for refund of excess and unutilized creditable income taxes withheld for FY 2013 must be denied. AcICHD Further, in order to be entitled to the refund sought, petitioner must prove compliance with the following requirements of the law, to wit: 1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax; 2) The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld; and 3) It must be shown on the return that the income received was declared as part of the gross income. 50 Anent the first requisite, Sections 204 (C) and 229 of the NIRC of 1997, as amended, relevantly provide: 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. caITAC 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 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. (emphases supplied) Pursuant to the above provisions, the two-year prescriptive period for claiming a refund commences to run from the date of filing of the FAR. 51 It is only when the FAR 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. 52 TAIaHE In the instant case, petitioner claims that it had excess and unutilized CWT for FY 2013. Petitioner filed its Original ITR for FY 2013 on January 15, 2014 through the BIR's EFPS with EFPS Reference No. 121400008364242. 53 Petitioner had two years from the filing of the FAR within which to file a claim for refund of excess CWT, both in the administrative and judicial levels. Counting from January 15, 2014, petitioner had until January 15, 2016, within which to file both administrative and judicial claims for refund of its excess and unutilized CWT for FY 2013. Hence, its administrative claim for refund filed on January 13, 2016 54 via a request letter to BIR Revenue District Office No. 44, together with its Application for Tax Credits/Refunds (BIR Form No. 1914) 55 and the Petition for Review filed before this Court on January 14, 2016 56 were seasonably filed. As for the second and third requisites, Section 2.58.3 (B) of Revenue Regulations (RR) No. 02-98, as amended, states: "SECTION 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) ICHDca As to the fact of withholding of the subject claim, the audit conducted by the ICPA revealed that out of the P20,532,439.00 reported CWTs for FY 2013, only the amount of P20,408,534.47 is properly supported by BIR Forms No. 2307, detailed as follows: Qtr. Client TIN Number Tax Base WTC Tax Rate Withholding Tax Amount per BIR Form No. 2307 Exh. Ref. 2 APCC 208-134-558-0000 5,302,642.00 WC160 2% 106,052.84 P-71 4 APCC 208-134-558-0000 4,150,634.00 WC160 2% 83,012.68 P-72 4 APCC 208-134-558-0000 1,318,464.00 WC011 15% 197,769.60 P-73 4 ASIAN TERMINALS, INC. 000-132-413-0000 4,980,005.40 WC011 15% 747,000.81 P-74 4 ASIAN TERMINALS, INC. 000-132-413-0000 4 ASIAN TERMINALS, INC. 000-132-413-0000 4 ASIAN TERMINALS, INC. 000-132-413-0000 4 ASIAN TERMINALS, INC. 000-132-413-0000 4 ASIAN TERMINALS, INC. 000-132-413-0000 3 ASIAN TERMINALS, INC. 000-132-413-0000 4,099,177.27 WC011 15% 614,876.59 P-75 3 ASIAN TERMINALS, INC. 000-132-413-0000 3 ASIAN TERMINALS, INC. 000-132-413-0000 3 ASIAN TERMINALS, INC. 000-132-413-0000 2 ASIAN TERMINALS, INC. 000-132-413-0000 4,821,131.07 WC011 15% 723,169.66 P-76 2 ASIAN TERMINALS, INC. 000-132-413-0000 2 ASIAN TERMINALS, INC. 000-132-413-0000 2 ASIAN TERMINALS, INC. 000-132-413-0000 2 ASIAN TERMINALS, INC. 000-132-413-0000 2 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 4,534,068.53 WC011 15% 680,110.28 P-77 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 ASIAN TERMINALS, INC. 000-132-413-0000 1 FAR SOUTHEAST GOLD RESOURCES, INC. 000-158-973-0000 8,327,613.47 WC010 15% 1,249,142.02 P-78 1 FCF MINERALS CORPORATION 238-154-069-0000 852,427.28 WC011 15% 127,864.09 P-79 1 FCF MINERALS CORPORATION 238-154-069-0000 987,452.49 WC011 15% 148,117.87 P-80 2 FCF MINERALS CORPORATION 238-154-069-0000 555,704.00 WC011 15% 83,355.60 P-81 2 FCF MINERALS CORPORATION 238-154-069-0000 23,940.00 WC011 15% 3,591.00 P-82 2 FCF MINERALS CORPORATION 238-154-069-0000 310,872.00 WC011 15% 46,630.80 P-83 3 FCF MINERALS CORPORATION 238-154-069-0000 389,160.83 WC011 15% 58,374.12 P-84 3 FCF MINERALS CORPORATION 238-154-069-0000 389,160.83 15% 58,374.12 3 FCF MINERALS CORPORATION 238-154-069-0000 658,301.66 WC011 15% 98,745.25 P-85 3 FCF MINERALS CORPORATION 238-154-069-0000 389,160.83 15% 58,374.12 3 FCF MINERALS CORPORATION 238-154-069-0000 229,847.28 15% 34,477.09 1 FILINVEST LAND, INC. 000-553-224-0000 165,178.60 WC050 15% 24,776.79 P-86 4 FILINVEST LAND, INC. 000-553-224-0000 1,321,428.60 WC051 15% 198,214.29 P-87 3 FILINVEST LAND, INC. 000-553-224-0000 225,714.27 WC011 15% 33,857.14 P-88 3 FILINVEST LAND, INC. 000-553-224-0000 1,706,000.00 WC051 15% 255,900.00 P-89 3 FILINVEST LAND, INC. 000-553-224-0000 660,714.27 WC051 15% 99,107.14 P-90 2 FILINVEST LAND, INC. 000-553-224-0000 642,857.13 WC011 15% 96,428.57 P-91 2 FILINVEST LAND, INC. 000-553-224-0000 950,000.00 WC050 15% 142,500.00 P-92 2 FILINVEST LAND, INC. 000-553-224-0000 760,000.00 WC050 15% 114,000.00 P-93 2 FILINVEST LAND, INC. 000-553-224-0000 964,285.73 WC011 15% 144,642.86 P-94 1 FILINVEST LAND, INC. 000-553-224-0000 216,294.67 WC050 15% 32,444.20 P-95 2 FILINVEST LAND, INC. 000-553-224-0000 330,357.13 WC050 15% 49,553.57 P-96 1 FILINVEST LAND, INC. 000-553-224-0000 330,357.13 WC050 15% 49,553.57 P-97 4 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 231,758.16 WC120 2% 4,635.16 P-98 4 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 2,941,062.66 WC120 2% 58,821.25 P-99 3 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 3,964,992.38 WC120 2% 79,299.85 P-100 3 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 96,296.21 WC120 2% 1,925.92 P-101 3 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 7,921,356.32 WC120 2% 158,427.13 P-102 2 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 14,325,684.02 WC120 2% 286,513.68 P-103 2 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 2 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 2 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 1 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 641,633.12 WC120 2% 12,832.66 P-104 1 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 20,158,166.56 WC120 2% 403,163.33 P-105 1 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 1 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 3 INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. 000-323-228-0000 418,683.00 WC120 2% 8,373.66 P-106 3 MANILA WATER COMPANY 005-038-428-0000 2,851,228.67 WC011 15% 427,684.30 P-107 3 MANILA WATER COMPANY 005-038-428-0000 3 MANILA WATER COMPANY 005-038-428-0000 3 MANILA WATER COMPANY 005-038-428-0000 3 MANILA WATER COMPANY 005-038-428-0000 2 MANILA WATER COMPANY 005-038-428-0000 956,292.26 WC011 15% 143,443.84 P-108 2 MANILA WATER COMPANY 005-038-428-0000 1 MANILA WATER COMPANY 005-038-428-0000 12,235,364.07 WC011 15% 1,835,304.61 P-109 1 MANILA WATER COMPANY 005-038-428-0000 1 MANILA WATER COMPANY 005-038-428-0000 1 MANILA WATER COMPANY 005-038-428-0000 1 MANILA WATER COMPANY 005-038-428-0000 4 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 815,507.53 WC011 15% 122,326.13 P-110 4 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 4 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 993,981.33 WC011 15% 149,097.20 P-111 3 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 3 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 1 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 2,664,480.00 WC011 15% 399,672.00 P-112 1 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 1 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 1 MAYNILAD WATER SERVICES, INC. 005-393-442-0000 4 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 571,900.00 WC011 15% 85,785.00 P-113 3 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 345,231.00 WC120 2% 6,904.62 P-114 3 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 1 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 1,802,138.05 WC120 2% 188,083.21 P-115 1 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 1 OCEANAGOLD PHILIPPINES, INC. 004-870-171-0000 1,013,603.00 WC011 15% 4 ROCKWELL LAND CORPORATION 004-710-062-0000 265,178.50 WC160 2% 5,303.57 P-116 4 SAGITTARIUS MINES, INC. 002-914-398-0000 10,403,095.07 WC011 15% 1,560,464.26 P-117 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 4 SAGITTARIUS MINES, INC. 002-914-398-0000 3 SAGITTARIUS MINES, INC. 002-914-398-0000 7,613,575.47 WC011 15% 1,142,036.32 P-118 3 SAGITTARIUS MINES, INC. 002-914-398-0000 3 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 10,943,345.87 WC011 15% 1,641,501.88 P-119 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 2 SAGITTARIUS MINES, INC. 002-914-398-0000 1 SAGITTARIUS MINES, INC. 002-914-398-0000 7,418,535.09 WC011 15% 1,112,780.26 P-120 1 SAN MIGUEL CORPORATION 000-060-741-0000 582,330.00 WC011 15% 87,349.50 P-121 3 SHELL PHILIPPINES EXPLORATION B.V. 000-662-551-0000 9,656,298.18 WC160 2% 193,125.96 P-122 3 SHELL PHILIPPINES EXPLORATION B.V. 000-662-551-0000 3 SHELL PHILIPPINES EXPLORATION B.V. 000-662-551-0000 2 SHELL PHILIPPINES EXPLORATION B.V. 000-662-551-0000 2,179,852.03 WC160 2% 43,597.04 P-123 1 SILANGAN MINDANAO MINING CO. 000-283-731-0000 2,864,824.00 WC011 15% 429,723.60 P-124 4 SILANGAN MINDANAO MINING CO. 000-283-731-0000 1,432,412.00 WC011 15% 214,861.80 P-125 2 SILANGAN MINDANAO MINING CO. 000-283-731-0000 2,864,824.00 WC011 15% 429,723.60 P-126 2 ST. LUKE'S MEDICAL CENTER 003-058-089-0000 100,000.00 WC010 10% 10,000.00 P-127 3 ST. LUKE'S MEDICAL CENTER 003-058-089-0000 350,000.00 WC010 10% 35,000.00 P-128 1 STA. CLARA INTERNATIONAL CORPORATION 000-385-981-0000 2,130,000.00 WC050 15% 319,500.00 P-129 1 SURESTE PROPERTIES, INC. 002-417-577-0000 565,900.00 WC051 15% 84,885.00 P-130 1 SURESTE PROPERTIES, INC. 002-417-577-0000 4 SURESTE PROPERTIES, INC. 002-417-577-0000 257,175.00 WC051 15% 38,576.25 P-131 4 TAGANITO MINING CORPORATION 000-145-459-0000 581,268.00 WC011 15% 87,190.20 P-132 3 TAGANITO MINING CORPORATION 000-145-459-0000 189,580.00 WC011 15% 28,437.00 P-133 2 TEAM ENERGY CORPORATION 001-726-870-0000 2,520,000.00 WC051 15% 378,000.00 P-134 2 TEAM ENERGY CORPORATION 001-726-870-0000 2,228,335.07 WC011 15% 334,250.26 P-135 2 TEAM ENERGY CORPORATION 001-726-870-0000 2 TEAM ENERGY CORPORATION 001-726-870-0000 1 TEAM ENERGY CORPORATION 001-726-870-0000 1,080,000.00 WC051 15% 162,000.00 P-136 1 TEAM ENERGY CORPORATION 001-726-870-0000 728,275.00 WC011 15% 109,241.25 P-137 s3 TEAM ENERGY CORPORATION 001-726-870-0000 909,992.53 WC011 15% 136,498.88 P-138 3 TEAM ENERGY CORPORATION 001-726-870-0000 4 TEAM SUAL CORPORATION 003-841-103-0000 2,190,924.40 WC051 15% 328,638.66 P-139 2 TEAM SUAL CORPORATION 003-841-103-0000 4,362,042.93 WC051 15% 654,306.44 P-140 3 TRANS AIRE DEVELOPMENT HOLDINGS CORPORATION 237-463-097-0000 4,247,930.05 WC120 2% 84,958.60 P-141 4 TRANS AIRE DEVELOPMENT HOLDINGS CORPORATION 237-463-097-0000 1,213,694.30 WC120 2% 24,273.89 P-142 205,421,696.30 20,408,534.47 Less: TOTAL per ITR 57 and SAWT 20,532,439.00 Without Proper Creditable Withholding Tax Certificates (BIR Form No. 2307) (123,904.53) However, the Court noted that BIR Form No. 2307 marked as Exhibit P-78, representing CWT amounting to P1,249,142.02, is not legible, hence, should be disallowed. Consequently, petitioner complied with the second requisite, but only to the extent of P19,159,392.45 (P20,408,534.47 less P1,249,142.02). In relation to the third condition, viz. ,that the return of the recipient must show that the income payment received was declared as part of its gross income, the ICPA performed the following indicated in his Report: cDHAES "I traced the income payments in the Company's books of accounts, i.e. ,Tax Recovery General Ledger account ( Exhibit ' P-283 ') and Project Status Report (PSR) Books of Account for 2013 and 2012 and Reimbursements Ledger ( Exhibits ' P-508 ',' P-509 ' and ' P-510 ',respectively),and audited financial statements for 2013 and 2012 ( Exhibits ' P-144 ' and ' P-145 ' respectively) and ascertained that the income payments as well as the creditable withholding tax were properly reported therein. In order to ultimately trace the income payments from the Certificates of Tax Withheld to Company's Audited Financial Statements and Income Tax Returns, it is necessary to consider the method of income recognition of the Company. Please note that the Company recognizes income based on the percentage of completion method as stated in page 9, note 1 of the Notes to Financial Statements. Under this method, income is generally recognized based on the services performed to date as a percentage of the total services to be performed. Hence, income is booked as follows: TCAScE Account/Particulars Debit Credit Work in Progress (WIP) xxxx Revenue xxxx Accordingly, clients are billed (invoiced) based on milestones indicated in the construction agreement (Project Contracts).Thus, there is a timing difference between revenue recognition and billing. The billing (invoice) is generally booked as: Account/Particulars Debit Credit Accounts Receivable xxxx Work in Progress xxxx When the receivables are collected, the collection is generally booked as: Account/Particulars Debit Credit Cash xxxx VAT Deferred xxxx Tax Recovery (Creditable Withholding Tax) xxxx Accounts Receivable xxxx VAT Output xxxx In view of the above-described method by the Company, after ascertaining that the income payments from the Certificate of Tax Withheld (BIR Form No. 2307) are properly supported by Official Receipts, I traced the same to the 2013 and 2012 Work in Progress Account or Revenue Account and Reimbursements Ledger ( Exhibits ' P-508 ',' P-509 ',' P-510 ').The results of procedures are noted in Annex ' F '. ASEcHI The Company also provided the invoices ( Exhibits ' P-284 ' to ' P-473 ') and project contracts ( Exhibits ' P-474 ' to ' P-507 ') in relation to income payments received in FY 2013. I traced the Official Receipts to the invoices available. Thereafter, I traced the invoices to the project contracts. The results of procedures are noted in Annex ' E '. As mentioned earlier, each invoice is traceable to a project contract, and the Work in Progress and Revenue Books of Accounts of the Company known as the Project Status Report (PSR) of FY 2013 and 2012 and Reimbursement Ledger. The results of this procedure is noted in Annex ' F '. The variance noted in Annex ' F ' is due to the forex gain and forex loss on some of the accounts paid for in foreign currency since the time of recording of the income is at the time when the services were performed and the collections were booked at the time of collection. While, the other variance reported is due to rounding off and minimal discrepancy/ies which would not affect the overall presentation of the financial statements." Guided by the foregoing, to ascertain whether the income corresponding to the excess CWTs being claimed were reported in the year of claim, the Court must trace the income payments from the CWT certificates to the related Official Receipts and Invoices and the recording thereof to the Tax Recovery General Ledger (Creditable Withholding Tax Ledger) to Accounts Receivable and Work in Progress Account or Revenue Account and Reimbursements Ledger ( Exhibits "P-508","P-509",and "P-510"). Using Annex "F" of the ICPA Report, the Court attempted to trace each CWT to the alleged recording in petitioner's books. However, the tracing proved futile as the scanned copies of the supporting ledgers ( i.e. ,Exhibits "P-283" and "P-508" to "P-510") were hardly readable. Moreover, the Court was unable to verify whether the total income recorded per petitioner's books tallies with that reflected in its 2013 ITR. Hence, petitioner failed to prove that the income upon which the taxes were withheld were included in the return of the recipient. In sum, since petitioner failed to prove that it had prior years excess credits, there are no excess CWTs for FY 2013 which may be the subject of a claim for refund under Section 76 of the NIRC of 1997, as amended. Moreover, even assuming arguendo that petitioner had enough prior year's excess CWTs and has excess and unutilized CWTs for FY 2013, it failed to prove that the income upon which the taxes were withheld were included in the return of the recipient. In other words, petitioner failed to prove its entitlement to a refund of its alleged excess and unutilized creditable income taxes withheld for FY 2013. On a final note, a tax refund claimant has the burden of proving the factual basis of his or her refund claim. This is because tax refunds are in the nature of tax exemptions, the statutes of which are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Taxes are the lifeblood of the nation, therefore statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government. 58 ITAaHc WHEREFORE ,the instant Petition for Review filed by petitioner Aecom Philippines, Inc. on January 14, 2016, is hereby DENIED ,for lack of merit. SO ORDERED. (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Ma. Belen M. Ringpis-Liban, J. ,concurs. Footnotes 1. Vol. 1 Docket, pp. 10-20. 2. Exhibit "P-3". 3. Exhibit "P-1". 4. Exhibit "P-2". 5. Exhibit "P-4". 6. Exhibit "P-5". 7. Exhibit "P-5". 8. Exhibits "P-13" and "P-14",docket, vol. 2, pp. 662-667 and 668. 9. Docket, vol. 1, pp. 10-24. 10. Docket, vol. 1, pp. 68-72. 11. Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue ,518 SCRA 425, 432. 12. Commissioner of Internal Revenue vs. Ledesma ,31 SCRA 95. 13. Western Minolco Corp. vs. Commissioner of Internal Revenue ,124 SCRA 121. 14. Minutes of the Hearing, vol. 1 docket, p. 242. 15. Vol. 1 Docket, pp. 276-280. 16. Exhibits "P-65" to "P-65-a". 17. Exhibits "P-1" and "P-2". 18. Exhibit "P-3". 19. Exhibit "P-5". 20. Exhibit "P-6". 21. Exhibit "P-7". 22. Exhibit "P-8". 23. Exhibit "P-9". 24. Exhibit "P-10". 25. Exhibits "P-11" and "P-12". 26. Exhibit "P-13". 27. Exhibit "P-14". 28. Exhibits "P-712" and "P-712-a". 29. Exhibits "P-713" and "P-713-a". 30. Exhibits "P-722" and "P-722-a". 31. Exhibits "P-714" to "P-721". 32. Docket, vol. 2, pp. 522-535. 33. Docket, vol. 2, pp. 920-921. 34. Docket, vol. 2, pp. 922-927. 35. Docket, vol. 2, pp. 941-949. 36. Docket, vol. 2, pp. 973-975. 37. Minutes of the Hearing, docket, p. 976. 38. Docket, vol. 2, p. 1014. 39. Statement of the Issue, JSFI, docket, vol. 1, p. 248. 40. University Physicians Services, Inc.-Management, Inc. v. Commissioner of Internal Revenue ,G.R. No. 205955, March 7, 2018. 41. G.R. No. 176290, September 21, 2007. 42. Philam Asset Management, Inc. v. Commissioner of Internal Revenue ,G.R. Nos. 156637 and 162004, December 14, 2005; Systra Philippines, Inc. v. Commissioner of Internal Revenue, Ibid. 43. Commissioner of Internal Revenue v. Bank of the Philippine Islands ,G.R. No. 178490, July 7, 2009. 44. Exhibit "P-4". 45. Exhibit "P-5". 46. Q&A No. 16, Exhibit "P-65". 47. Exhibits "P-511" to "P-668". 48. Exhibit "P-712". 49. P45,448,251.12 plus P13,621,469.90 less P1,005,899.03. 50. Commissioner of Internal Revenue v. Mirant (Philippines) Operations Corporation ,G.R. No. 171742, June 15, 2011 and Mirant (Philippines) Operations Corporation (Formerly: Southern Energy Asia-Pacific Operations (Phils.), Inc.) v. Commissioner of Internal Revenue ,G.R. No. 176165. 51. ACCRA Investments Corporation v. The Honorable Court of Appeals, et al. ,G.R. No. 96322, December 20, 1991. 52. Commissioner of Internal Revenue v. TMX Sales, Inc., et al. ,G.R. No. 83736, January 15, 1992. 53. Exhibit "P-4". 54. Exhibits "P-13" to "P-13-b". 55. Exhibits "P-14" to "P-14-a". 56. Docket, vol. 1, p. 10. 57. Exhibit "P-5",docket, vol. 2, p. 571. 58. Philippine Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue ,G.R. No. 141973, June 28, 2005.