Philippine National Bank v. Commissioner of Internal Revenue

SPECIAL FIRST DIVISION [C.T.A. CASE NOS. 7355 & 7588. April 5, 2011.] PHILIPPINE NATIONAL BANK , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . RESOLUTION CASANOVA , J p : For resolution of this Court is the petitioner's Motion for Partial Reconsideration (with Prayer to Admit Attached Income Tax Return), filed on July 30, 2010, praying for reconsideration of this Court's Decision promulgated on July 12, 2010 and for the issuance of an Amended Decision: 1. Admitting the attached Income Tax Returns of GOTESCO for the taxable year 2003; or in the alternative, allowing the formal presentation and identification of the said Tax Returns; and 2. Amending the Decision dated July 12, 2010 in CTA Case No. 7355 and ordering the respondent to refund petitioner the amount of P12,400,004.70, representing petitioner's claim for refund of excess tax withheld for the year 2003. In its motion, petitioner argues that it is entitled to the refund of the 1% excess creditable tax in the amount of P12,400,004.70 that it withheld and remitted on behalf of GOTESCO in the taxable year 2003 on the ground that the latter did not utilize the said tax credit as shown in the Annual Income Tax Returns that it filed for the taxable year 2003. The respondent did not file her comment on the said Motion for Partial Reconsideration. After a careful study of the arguments proffered by the petitioner in its Motion for Partial Reconsideration, as well as a thorough examination of the documentary and testamentary evidence that it submitted, this Court finds that the petitioner still was not able to clearly establish its right to the refund of the excess creditable tax withheld on behalf of GOTESCO. ASCTac In the case of Far East Asia Bank and Trust Company vs. Court of Appeals, Court of Tax Appeals and Commissioner of Internal Revenue , 1 the Supreme Court held that in order to successfully process a claim for tax refund, a taxpayer must declare the payments, from which taxes were withheld, as part of his gross income and clearly establish the fact of withholding of the taxes sought to be refunded. The Supreme Court further held that there are requisites for the grant of a claim for refund of creditable withholding tax. In the case of Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, Court of Tax Appeals and Commissioner of Internal Revenue , 2 the Court held that: "There are three conditions for the grant of a claim for refund of creditable withholding tax: 1) the claim is filed with the CIR within the two-year period from the date of payment of the tax; 2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income; and, 3) the fact of withholding is 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 therefrom. The third condition is specifically imposed under Section 10 of Revenue Regulation No. 6-85 (as amended), thus: Sec. 10. Claim for tax credit or refund. (a) Claims for Tax Credit or Refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received 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)" In our decision dated July 12, 2010, this Court held that petitioner was able to sufficiently establish the fact of withholding and the payment of withholding tax. However, since petitioner is claiming the refund of the excess creditable taxes it withheld from GOTESCO, it is necessary to prove that GOTESCO did not use the said excess tax payments to pay for its liabilities. In the aforementioned decision, it was noted that petitioner failed to present evidence to prove that GOTESCO did not utilize the taxes withheld to settle its tax liabilities, thus petitioner's claim for refund was denied for insufficiency of evidence. Petitioner attached to its Motion, income tax returns of GOTESCO for the taxable year 2003, to prove that the latter did not utilize the taxes withheld by petitioner. The returns were submitted without any attachment regarding its creditable taxes withheld. Except for GOTESCO's Unadjusted Schedule of Prepaid Tax for the taxable year 2003, there were no other documents or schedules presented before this Court to support the figures reported in the tax returns of GOTESCO for the same year under Lines 27 (C), (D) and (G) or the Creditable Taxes Withheld. aScIAC We note that the amounts reported by GOTESCO as creditable taxes withheld for the year 2003 were just P6,014,433.00 in total, which is less than P74,400,028.49, the creditable taxes withheld from it by the petitioner. In fact, it is less than the P12,400,004.70 excess creditable taxes withheld being claimed by petitioner in its present motion. However, this Court deemed that such observation alone, without any supporting document or schedule, is not enough to convince us that no part of the creditable withholding tax sought to be refunded is included in the total tax credits reported by GOTESCO in its tax returns for the taxable year 2003 which was used, in part, for the settlement of its tax liabilities for the same year. To sufficiently prove that GOTESCO did not utilize the creditable taxes it withheld, petitioner should have likewise presented the BIR Forms No. 2307 issued to GOTESCO in relation to the creditable taxes withheld reported in its 2003 tax returns. Doing so will dispel any doubt as to the composition of GOTESCO's creditable taxes withheld for 2003. This will settle once and for all that the amount being claimed by petitioner was not utilized by GOTESCO, and thus the claim should be granted. Until then, this Court will stand by its decision and deny the claim. It is a well-settled rule that tax refunds are in the nature of tax exemptions and thus are construed strictly against the taxpayer and liberally in favor of the government. 3 In the case at bar, petitioner was not able to sufficiently establish its right to the refund of excess creditable taxes it withheld and remitted on behalf of GOTESCO. WHEREFORE , premises considered, petitioner's Motion for Partial Reconsideration (With Prayer to Admit Attached Income Tax Return) is hereby DENIED for lack of merit. SO ORDERED. (SGD.) CAESAR A. CASANOVA Associate Justice Ernesto D. Acosta, P.J. and Lovell R. Bautista, J., concur. Footnotes 1. G.R. No. 129130, December 9, 2005. 2. G.R. No. 155682, March 27, 2007. 3. Ibid. Note 1, Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc. , 309 SCRA 87; Commissioner of Internal Revenue v. Tokyo Shipping Company, Ltd. , 244 SCRA 332; and Commissioner of Customs v. Court of Tax Appeals , 328 SCRA 822.