Citytrust Investment Philippines, Inc. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 42126. June 28, 2002.] CITYTRUST INVESTMENT PHILIPPINES, INC. , petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, ET AL. , respondents. D E C I S I O N ADEFUIN-DE LA CRUZ , B. , J p : This is a petition for review of the decision dated April 25, 1996 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 4958 entitled: "Citytrust Investment Philippines, Inc., petitioner versus The Commissioner of Internal Revenue, respondent," seeking that the petitioner's claim for refund/tax credit for taxable year 1990 be granted. Also assailed is CTA Resolution dated September 18, 1996 denying the motion for reconsideration of the said decision of April 2, 1996. Undisputed by the parties, the antecedent facts are as follows: "This is a claim for the refund of alleged excess creditable withholding tax in the amount of P186,380.00 for the taxable year 1990. "Petitioner is a domestic corporation duly organized and existing under and virtue of the laws of the Philippines. It is engaged in the business of investment banking and it is alleged that creditable taxes were withheld at source from its income by various clients in 1990 in the total sum of P186,380.00. Petitioner claims that this amount was not utilized as it suffered a net loss in 1990 in the amount of P2,901,151.00. Petitioner then sought to apply this unutilized amount of P186,380.00 to the next calendar year as reflected in its final income tax return for 1990, however, this did not materialize because petitioner again suffered a net loss for the taxable year in 1991 in the amount of P2,677,175.00. So in a letter dated June 2, 1992 and received by the respondent on June 5, 1992, petitioner requested for the refund of the amount of P186,380.00, which claim was not acted upon by the respondent. Consequently, petitioner filed a petition for review with this Court on February 19, 1993. "Respondent asserted the following Special and Affirmative Defenses, thus: "5. The petition states no cause of action as it does not allege the date when and the tax sought to be refunded/tax credited was paid (Manufacturer's Bank and Trust Co., as Trustee for Gem Trust Bank vs. Comm. of Internal Rev. C.T.A. CASE NO. 1659, November 19, 1965); "6. Any amount claimed to have been withheld must be shown to have been paid to the government, and in the case at bar, no showing has been made; "7. Certificates of Creditable Income Tax withheld at Source (Annexes 'B' to 'E') accomplished by petitioner's withholding agents (BIR Form 1743.1) Manila Doctors Hospital, University Physician Services Inc., Asset Privatization Trust and PLDT showing amounts deducted and withheld on petitioner's various income payments do not constitute conclusive evidence of payments and remittances do not constitute conclusive evidence of payments and remittances to the Bureau of Internal Revenue, to Section 68 of the Government Auditing Code the same being mere proof of withholding of the Philippines (Pres. Decree No. 1445); "8. Well-settled is the rule that mere allegations or indications of net operating loss in the Income Tax Return do not ipso facto merit a refund and since this is the sole issue and basis of petitioner's claim, the absence of evidence supporting the same must necessarily work against the granting of such claim; "9. Petitioner's cause of action has already prescribed it appearing that payment effected through the withholding tax system are deemed paid when remittance thereof becomes due at the end of the tax year, in this case December 31, 1990. The reason is obvious. The amount of P186,380.00 was allegedly withheld in 1990, but the petition for review was filed only on February 19, 1993, or after the lapse of more than two (2) years as prescribed by Section 230 of the Tax Code; "10. In an action for refund of taxes, it is incumbent upon the petitioner (taxpayer) to show that the taxes paid were erroneously or illegally collected. Failure to sustain said burden is fatal to the action for refund. "11. It is incumbent upon the petitioner to show compliance with the provisions of Section 243 and 246 of the 1986 Tax Code; "12. Claims for tax refund/credit are construed against claimants, the same being in the nature of an exemption from taxation ( Manila Electric Company vs. Comm. of Int. Rev. , 67 SCRA 351)." (CTA decision dated April 25, 1996, pp. 1-3; Rollo , pp. 40-42) On April 25, 1996, the assailed decision was issued by the CTA denying the petition for review filed by the petitioner ( Rollo , p. 40). On May 17, 1996, a Motion for Reconsideration of the aforesaid decision was filed by the petitioner ( Ibid. , p. 77) On September 18, 1996, a Resolution was issued by the CTA denying the motion for reconsideration filed by the petitioner ( Ibid. , p. 50). Hence, this present petition for review. Petitioner interposed the following "ASSIGNMENT OF ERRORS "2.1 The respondent court erred in finding that the petitioner opted/intended to carry over its excess creditable withholding tax in the amount of P186,380.00 from taxable year ending December 31, 1991 to taxable year December 31, 1992. "2.2 The respondent court erred in applying in the instant case the doctrine in the case of Paseo Realty Development Corporation vs. Commissioner of Internal Revenue , CTA Case No. 4693 promulgated October 21, 1993. "2.3 The respondent court erred in finding that it would be incongruous to both mark 'x' the pertinent boxes of Section C (8) of petitioner's Corporate Annual Income Tax Return for the taxable year 1991." (Petition for Review, p. 4; Rollo , p. 27) The crux of the petition is "whether or not the petitioner is entitled to the refund of P186,380.00 as excess creditable withholding tax for the year 1990." The petition is without merit. "It bears stress that tax refunds are in the nature of tax exemptions. As such they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law." ( Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc. , 309 SCRA 87, 108-109) In the present case, the petitioner failed to prove by convincing evidence that it is entitled to the refund of P186,380.00 as excess creditable withholding tax for the year 1990. It is to be noted that the amount of P186,380.00, which is the amount sought to be refunded, was never utilized as tax liability of the petitioner during the succeeding taxable years. In petitioner's final income tax return for the year 1990, it reflected petitioner's intention to carry over the unapplied creditable taxes to the succeeding taxable year. However, the year 1991 similarly resulted to a net loss, thus, petitioner's intention to carry over the said amount in the year 1991 did not materialize. Petitioner then opted again to carry over the same amount to the succeeding year 1992 but the same was not acted upon by the respondent Commissioner of Internal Revenue because petitioner failed to present its 1992 corporate income tax return. By reason of such failure, this Court opines and so holds that the same is tantamount to suppression which, if presented, would be adverse to petitioner's claim for tax refund. HIACac Thus, in the ruling of the CTA, it clearly explained that: "As to the merits of the claim for refund, we rule against the petitioner because a review of the evidence presented shows that they are insufficient to convince this Court that the amount of P186,380.00 which is the amount sought to be refunded, was never utilized to satisfy petitioner's tax liabilities for succeeding taxable years. The petitioner's final income tax return for 1990 reflected its intention to carry over the unapplied creditable taxes to the next succeeding taxable year (see Exhibit 'F', No. 10 of the income tax return) which did not materialize as the next taxable year of 1991 similarly resulted in a net loss. However, we find it significant to consider that petitioner again opted to carry over the unapplied excess credit of 1991 to the next succeeding taxable year which included the amount of P186,380.00, an amount that was carried over from the previous taxable year of 1990. Shown hereunder are the figures contained in petitioner's 1991 corporate income tax return: "Gross Income P50,299,701.00 "Deductions 52,976,876.00 "Net Income (2,677,175.00) "Less: Prior year's excess credit P186,380.00 "Creditable Tax withheld at source 30,000.00 "Total amount refundable P216,380.00* * To be applied as tax credit to succeeding taxable year "It is obvious from the aforecited figures that the amount that petitioner intended to carry over to the next succeeding taxable year included in the sum of P186,380.00, the same amount which is the subject of the present claim for refund. We are now left with the question of whether or not the amount of P186,380.00 was utilized to satisfy petitioner's tax liabilities for the taxable year 1992. The records of this case leave such question unanswered because petitioner did not present its 1992 corporate income tax return at any stage during the hearings for this case." (Decision, pp. 6-7; Rollo , pp. 45-46) "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." ( Citibank, N.A. vs. Court of Appeals , 280 SCRA 459, 471) Further, as found by the CTA, it is worth emphasizing that in the 1991 final income tax return of the petitioner, said return clearly shows that in the boxes indicating the choices "to be refunded" and "to be applied to the next succeeding taxable year," both categories are marked with an X ( Rollo , p. 48), which fact was admitted by the petitioner in its petition ( Ibid. , p. 35). Hence, in a similar case of Philippine Bank of Communications vs. Commissioner of Internal Revenue (302 SCRA 241, 255), the High Tribunal had the occasion to rule that: "Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. " 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. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other ." (Ours for Emphasis) Consequently, the CTA correctly observed and ruled in this wise: "It is to be noted that the 1991 final tax return of petitioner shows that the boxes indicating the choices 'to be refunded' and 'to be applied to the next succeeding taxable year' are both marked with an 'x' (Exhibit 'G'). We find this an incongruous situation as one cannot ask that the same amount be refunded and at the same time be applied as tax credit to the succeeding taxable year. However, a close scrutiny of the same tax return for 1991 revealed that what was originally marked with an 'x' was the box referring to the choice 'to be applied as tax credit to the succeeding taxable year' because the marking 'x' has the same typewritten print as the rest of the figures contained in the said return. The other marking of 'x' for the box referring to the choice 'to be refunded' was obviously made with a pen or pencil leading us to give more credence to the option of petitioner of applying the amount to the next succeeding taxable year. So, if the petitioner had indeed applied the same refundable amount to satisfy its tax liabilities for the succeeding year of 1992, then the present claim for refund must be denied because to grant the same would in effect be granting twice the refund of the same amount which is detrimental to the interest of the government ." (Emphasis Ours) (Decision p. 9; Rollo , p. 48) Evidently, "it has been the long standing policy and practice of this Court to respect the conclusions of quasi-judicial agencies, such as the Court of Tax Appeals which, by the nature of its functions, is 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 its authority." ( Afisco Insurance Corporation vs. Court of Appeals , 302 SCRA 1, 11). In this case, nothing was found to have been committed. All told, "factual findings of the CTA are generally not disturbed on appeal when supported by substantial evidence and in the absence of gross error or grave abuse of discretion." ( Commissioner of Internal Revenue vs. B.F. Goodrich Phils., Inc. , 303 SCRA 546, 552) WHEREFORE, premises considered, the present petition for review is hereby DENIED DUE COURSE and accordingly DISMISSED for lack of merit. The assailed decision dated April 25, 1996 of the Court of Tax Appeals (CTA) in C.T.A. Case No. 4958, as well as its Resolution of September 18, 1996, is hereby AFFIRMED in toto. SO ORDERED. Agnir, Jr . and Maambong, JJ . , concur.