Philam Asset Management, Inc. v. Commissioner of Internal Revenue

SEVENTEENTH DIVISION [CA-G.R. No. 69197. December 11, 2002.] PHILAM ASSET MANAGEMENT, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ABESAMIS , J p : This petition for review seeks to annul and set aside the Decision dated October 9, 2001 and the Resolution dated January 29, 2002 of the Court of Tax Appeals in C.T.A. Case No. 5965. The facts, as narrated in the decision of the Court of Tax Appeals, are as follows: "Petitioner, formerly Philam Fund Management, Inc., is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines. It acts as the investment manager of both Philippine Fund, Inc. (PFI) and Philam Bond Fund, Inc. (PBFI), which are open-end investment companies in the same of their shares of stocks and in the investment of the proceeds of these sales into a diversified portfolio of debt and equity securities. Being an investment manager, Petitioner provides management and technical services to PFI and PBFI. Petitioner is, likewise, PFI's and PBFI's principal distributor which takes charge of the sale of said companies' shares to prospective investors. Pursuant to the separate Management and Distribution agreements between the Petitioner and PFI and PBFI, both PFI and PBFI agreed to pay the Petitioner, by way of compensation for the latter's services and facilities, a monthly management fee from which PFI and PBFI withhold the amount equivalent to five percent (5%) creditable tax pursuant to the Expanded Withholding Tax Regulations. "On April 3, 1998, Petitioner filed its Annual Corporate Income Tax Return for the taxable year 1997 representing a net loss of P2,689,242.00. (Consequently, it failed to utilize the creditable tax withheld in the amount of Five Hundred Twenty-Two Thousand Ninety-Two Pesos (P522,092.00) representing tax withheld by Petitioner's withholding agents, PFI and PBFI on professional fees (Exhibit A). "The creditable tax withheld by PFI and PBFI in the amount of P522,092.00 is broken down as follows: PFI P496,702.05 PBFI 25,389.66 Total P522,091.71 (Exhibits C, D, E, F and G) "On September 11, 1998, Petitioner filed as administrative claim for refund with the BIR Appellate Division in the amount of P522,092.00 representing unutilized excess tax credits for calendar year 1997 (Exhibit V). Thereafter, on July 28, 1999, a written request was filed with the same division for the early resolution of Petitioner's claim for refund (Exhibit W). "Respondent did not act on Petitioner's claim for refund, hence, a Petition for Review was filed with this Court on November 29, 1999 to toll the running of the two-year prescriptive period." 1 On October 9, 2001, the Court of Tax Appeals rendered a Decision denying petitioner's Petition for Review for lack of merit. 2 Petitioner's motion for reconsideration was likewise denied in a resolution dated January 29, 2002. Adversely affected by the above decision, petitioner filed the instant petition, raising the following issues: cSCTEH I. WHETHER OR NOT THE PETITIONER IS ENTITLED TO THE REFUND OF P522,002.17, REPRESENTING ITS UNAPPLIED CREDITABLE WITHHOLDING TAX PAID FOR TAXABLE YEAR 1997. II. WHETHER OR NOT THE FAILURE OF THE PETITIONER TO INDICATE IN ITS ANNUAL INCOME TAX RETURN FOR 1997 THE OPTION TO REFUND OR APPLY AS CREDIT TO THE SUCCEEDING YEAR ITS UNAPPLIED CREDITABLE WITHHOLDING TAX IS FATAL TO ITS CLAIM FOR REFUND THEREOF. III. WHETHER OR NOT THE PRESENTATION IN EVIDENCE OF THE PETITIONER'S ANNUAL INCOME TAX RETURN FOR 1998 IS AMONG THE ESSENTIAL LEGAL REQUISITES FOR CLAIMS FOR REFUND OF UNAPPLIED CREDITABLE WITHHOLDING TAX. We find no merit in the instant petition. To support its claim for refund, petitioner presented the following documents: 1. 1997 Corporate Income Tax Return 3 2. 1997 Annual Information Return of Income Tax Withheld on withholding tax 4 3. Various Monthly Remittance Returns 5 4. Written claim for refund dated September 4, 1998 6 5. Letter dated July 21, 1999 7 With the submission of the above documents, it is true that petitioner complied with the basic requirements provided under Revenue Regulations No. 12-94, regarding claims for tax refund. However, these documents only establish the fact that petitioner incurred a net loss of P2,689,242.00 for calendar year 1997 and that there was an excess creditable tax of P522,092.00. These documents do not per se establish petitioner's right to a refund. Sec. 76 of the 1997 NIRC provides that any excess of the total quarterly tax payments over the actual tax due on the entire taxable income of that year, shall either be (a) refunded to the corporation, or (b) credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. 8 After examining the adjusted final corporate annual income tax return for taxable year 1997, we found that petitioner had not signified its intention on whether the tax credit of P522,092.00 shall be refunded or applied as credit to the succeeding year, vis-a-vis the fact that the 1998 annual corporate tax return was not offered by the petitioner as evidence. As correctly found by the Court of Tax Appeals, the failure of petitioner to indicate in its 1997 ITS its option to refund or apply as credit to the succeeding year the tax credit of P522,092.00 and to present its 1998 ITR is fatal to its claim for refund since there is no way by which we can determine with certainty whether or not the claimed 1997 tax credits were not applied against its 1998 tax liabilities . TCDHaE The Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Because of this recognized expertise, the findings of fact of the CTA are binding on this Court, there being no showing of gross error or abuse on their part. 9 In general, there is no disagreement that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. Tax refunds, like tax exemptions, are construed strictly against the taxpayer . 10 WHEREFORE, the petition is hereby DENIED. The assailed decision and resolution of the Court of Tax Appeals are AFFIRMED. SO ORDERED. Enriquez, Jr. and Sundiam, JJ . , concur. Footnotes 1. Pp. 1-2, Decision; pp. 24-25, Rollo ; 2. P. 5, Decision; p. 28, Rollo . 3. Exh. A. 4. Exhs. B and O. 5. Exh. C to N, P to U; 6. Exh. V. 7. Exh. W. 8. Philippine Bank of Communication vs. Commissioner of Internal Revenue, 302 SCRA 241, 255. 9. Philippine Refining Company vs. Court of Appeals, 256 SCRA 667; 10. Citibank, N.A. vs. Court of Appeals, 280 SCRA 459, 471.