Commissioner of Internal Revenue v. Court of Tax Appeals

[CA-G.R. SP No. 32927. February 28, 1994.] (C.T.A. Case No. 4254) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HON. COURT OF TAX APPEALS, and PASEO REALTY AND DEVELOPMENT CORPORATION , respondents . D E C I S I O N TAYAO-JAGUROS , J p : Before the Court is a petition for review filed by the Commissioner of Internal Revenue from the decision of the Court of Tax Appeals in C.T.A. Case No. 4254 entitled "Paseo Realty and Development Corp. v. Commissioner of Internal Revenue" for Tax Refund. The decretal portion of said decision reads: "WHEREFORE, in view of the foregoing circumstances, respondent is hereby ordered to REFUND in favor of petitioner the amount of P73,960.23, representing its excess creditable withholding tax for the year 1985. No costs." (p. 11, Rollo). The respondent Court of Tax Appeals has summarized the facts of this case, as follows: "The case at bar invokes petitioners claim for the tax refund of P254,000.00 representing alleged overpaid income tax for the calendar year ending December 31,1985. Petitioner, Paseo Realty and Development Corporation, is a corporation duly organized and existing under Philippine laws with principal office in Makati, Metro Manila. On April 14, 1986, petitioner filed its Income Tax Return for 1985, with the Bureau of Internal Revenue, declaring a refundable income tax in the amount of P254,999.00, detailed as follows: Income (Schedule 4 Rentals/Lease) P1,855,000.00 Less: Deductions 1,779,842.00 _____________ Net Income P75,158.00 ============ Tax due P18,790.00 Less: Prior year's excess credit P181,039.00 _____________ Balance of Tax Due (P162,249.00) Less: Tax credit 5% expanded withholding tax on rentals 92,750.00 ____________ TOTAL AMOUNT OF TAX DUE / REFUNDABLE (P254,999.00) =========== A separate claim for refund or tax credit was filed on April 13, 1987 with respondent's office regarding petitioner's prior years excess credit in the amount of P181,039.00. Subsequently, petitioner filed on October 1, 1987 a written claim for refund or tax credit of P73,960.23, representing excess creditable withholding taxes for the year 1985. The claim for refund of P73,960.23 was arrived at after deducting the 1985 tax liability of P18,790.00 from the current year (1985) withholding tax on rentals amounting to P92,750.00. On April 15, 1988, there being no action on the claim for refund or tax credit, petitioner filed the instant judicial claim for refund of the amount of P254,999.00 instead of P73,960.23. Respondent alleged as special and affirmative defenses lack of cause of action for failure of petitioner to state the date when the tax was paid. Furthermore, the income tax return standing alone is not sufficient to prove entitlement to the claim being sought. Moreover, in actions for refund, the burden is on the petitioner-taxpayer to show entitlement thereto. Petitioner offered in evidence, the following documents: a. 1985 Income Tax Return (BIR Form No. 1702) together with the auditor's report and its financial statement; b. Statements of Tax Withheld at Source (BIR Form No. 1743) issued by Citibank, N.A. as withholding agent; and c. Letter dated September 24, 1987 filed with the respondent's office on October 1, 1987 seeking the tax refund or credit of the amount of P73,960.23 as alleged excess creditable withholding taxes for the year 1985. Respondent maintains that the petition states no cause of action for failure of petitioner to allege the date of payment of the tax being claimed for refund. Respondent for his part waived his right to present any evidence. Instead, he submitted the case based on the pleadings." (pp. 18-21, id .) After hearing on the merits, the respondent court rendered the above judgment. Hence, the instant petition filed by respondent Commissioner of Internal Revenue. The only issue posed in this appeal is whether or not the respondent court erred in issuing the appealed decision granting private respondent corporation the tax refund in question. The petition lacks merit. We cannot agree with the Commissioner of Internal Revenue that the tax refund in question is not duly substantiated by evidence. On this issue the respondent court correctly ruled, as follows: "Respondent further argued that petitioner failed to present as proof of payment and remittance the Official Receipts or Central Bank Confirmation Receipt issued by respondent, that the presentation of Statement and Certificate of Withholding although establishing a prima facie evidence of withholding is not enough to prove that the taxes withheld were in fact remitted to the Bureau of Internal Revenue, and likewise, the income tax return is insufficient proof of refundability. Time and again this Court has ruled that in claims for refund of excess withholding taxes petitioner-taxpayers need only prove the following: (1) that if filed a claim for refund within the two (2) year period as prescribed under Section 292 (now 230) of the National Internal Revenue Code; (2) that the income upon which the taxes were withheld were included in the return of the recipient; and (3) the fact of withholding is established by a copy of statement (BIR Form 1743.1) duly issued by the Payroll (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. The law and/or the implementing revenue regulations do not require the production of Central Bank Confirmation Receipts or the Withholding Tax Return or the verification by the revenue enforcement officer of the statement of withholding taxes. All that is required to show proof of withholding is the presentation of Statement of Tax Withheld at Source (BIR form 1743.1) showing the income received and the amount of tax withheld therefrom and that the income was included to form part of petitioner's gross income as stated in its income tax return. The reason for this is simple. The withholding agents are not within the control of the payee taxpayer but are the tax agents of the Commissioner of Internal Revenue. The withholding agents merely hold the amount in trust for the government. It appears from the documents presented by petitioner that only the amount of P73,960.23 was asked for in its claim for refund/tax credit filed in the administrative level. But in the petition brought before this Court petitioner prays for the refund of the whole amount reflected as income tax refundable in the income tax return for 1985 or the amount of P254,999.00. Subsequently it its memorandum petitioner admitted that it was merely asking for the refund of p73,960.23 representing the excess withholding taxes paid for the year 1985. In fact, respondent also admitted that in the event petitioner is entitled to the refund claimed it must only be for the amount of P73,960.23 and not P254,999.00 as prayed for in the petition." (pp. 24-27, id .). Reminding the Court of the rule that claim for refund is strictly construed against the claimant, the Commissioner of Internal Revenue would want us to set aside the respondent Court of Tax Appeals' decision. In the case of ITEMCOP v. Commissioner of Internal revenue, 136 SCRA 549, the Supreme court reiterated another familiar rule that the findings of fact of the Court of Tax Appeals in its appealed decision, unless shown as unsupported by substantial evidence, must be left undisturbed by the appellate court. Likewise, in the relatively recent case of Luzon Stevedoring Corporation v. Court of Tax Appeals, 163 SCRA 647, the Supreme Court reminds us of the rationale as to why the decision of the tax court is not usually disturbed on appeal. Said the Supreme Court: "As a matter of principle, this Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority (Reyes v. Commissioner of Internal Revenue, 24 SCRA 199 (1981). which is not present in the instant case." Similarly, We do not find abuse of authority of the respondent Court of Tax Appeals in issuing the appealed decision, as We also find said decision to be supported by substantial evidence. WHEREFORE, the instant petition for review is hereby DISMISSED for lack of merit. The appealed decision of the respondent Court of Tax Appeals in C.T.A. Case No. 4254 is hereby affirmed by the Court. Costs de oficio against petitioner. SO ORDERED. Mendoza and Elbinias, JJ ., concur.