Benguet Management Corp. v. Commissioner of Internal Revenue

FOURTH DIVISION [CA-G.R. SP No. 52737. October 29, 1999.] BENGUET MANAGEMENT CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N CALLEJO , SR . , J p : This is a " Petition for Review " the Decision of the Court of Tax Appeals dated January 27, 1999, which denied the claim for tax refund filed by Benguet Management Corporation, the Petitioner in the present recourse, on the ground that Petitioner failed to show that its claim for tax refund filed with the Commissioner of Internal Revenue and the "Petitioner for Review" filed with the Court of Tax Appeals, the Public Respondent in the present recourse, were filed within the mandatory two-year prescriptive period prescribed under Section 230 of the National Internal Revenue Code (now Sec. 229 NIRC of 1997). LibLex The Petition at bench stemmed from the following factual milieu: Petitioner, a domestic corporation duly organized and existing under the laws of the Philippines, is engaged in foundry business with principal office located at No. 391 J.P. Rizal Street, Mandaluyong City. On March 14, 1997, Petitioner filed a claim for refund with the Bureau of Internal Revenue (BIR) in the total amount of P12,129,567.88 representing the alleged overpaid creditable withholding taxes of the Petitioner withheld at source for the calendar years 1994 and 1995. ( at page 13, Rollo ) On April 10, 1997, Petitioner filed its Amended 1995 Corporation Annual Income Tax Return reflecting a net loss, and income tax liability, and a refundable tax of P2,612,844 arising from and consisting of creditable taxes withheld at source by various payors of income to the Petitioner during the calendar year ending December 31, 1996. ( at page 13, Rollo ) On June 19, 1997, Petitioner files its Amended 1994 Corporation Annual Income Tax Return reflecting also a net loss from its business operations in the amount of P9,516,718, arising from and consisting of creditable taxes withheld at source by various payors of income to the Petitioner during the calendar year ending December 31, 1994. ( at page 12, Rollo ) Pending investigation of its claim by the Commissioner of Internal Revenue ("Commissioner" for brevity), Petitioner, on April 11, 1997, filed a "Petition for Review" with the Public Respondent to conform with the two-year reglementary period prescribed under Section 230 of the NIRC ( at page 13, Rollo ). In support of its claim for refund, Petitioner presented, among others, the various Certificates of Creditable Withholding Taxes at source (BIR Form 1743.1). The Commissioner, in his Answer, alleged inter alia that Petitioner's claim for refund is still undergoing administrative routinary investigation; that the amount of tax sought to be refunded was paid pursuant to law, hence, not refundable; that Petitioner must prove that the alleged refundable taxes were neither automatically applied as tax credit for the succeeding taxable years; and that Petitioner must likewise prove that it has complied with the provisions of Section 230 of the NIRC ( at pages 13-14, Rollo ). However, on January 27, 1999, the Public Respondent rendered its Decision denying Petitioner's " Petition for Review " for lack of merit ( at page 18, Rollo ). Petitioner forthwith filed its "Motion for Reconsideration" which was likewise denied by the Public Respondent in a Resolution, dated April 14, 1999 ( at pages 19-21, Rollo ). LibLex Hence, this " Petition for Review " under Rule 15 of the Rules of Court anchored on the following error, thus: "WHETHER OR NOT THE CTA (PUBLIC RESPONDENT) IS CORRECT IN ITS FINDING THAT PETITIONER FAILED TO SHOW THAT THE CLAIM FOR REFUND IT FILED WITH THE RESPONDENT AND THE PETITION FOR REVIEW WITH THE TAX COURT WERE FILED WITHIN THE TWO-YEAR REGLEMENTARY PERIOD, AND, AS A CONSEQUENCE THEREOF, IN DENYING THE CLAIM FOR REFUND." ( at pages 3-4, Rollo ). The sole and decisive issue to be resolved in the present recourse is whether or not the Petitioner files its claim for tax refund with the Commissioner and its " Petition for Review " with the Public Respondent, within the two-year prescriptive period prescribed under Section 230 of the NIRC. The petition is unmeritorious. Indeed, basic is the principle that taxes are the lifeblood of the nation. The primary purpose is to generate funds for the State to finance the needs of the citizenry and to advance the common weal. ( Phil. Bank of Communication vs. Commissioner of the Internal Revenue, G.R. No. 112024, January 28, 1999 ). Parenthetically, claims for tax refund or tax credit should be exercised with utmost caution. As repeatedly ruled by the Supreme Court , a claim for refund is in the nature of a claim for exemption and should be construed in strictissimi juris against the taxpayer. ( Citibank, N.A. vs. Court of Appeals, 280 SCRA 439, at page 471[1999] ). Therefore, the claimant has the burden of proof to establish the factual basis of his claim for tax refund. Tax refunds are allowed under Section 230 of the National Internal Revenue Code, thus: "SECTION 230. 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 excessive 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 begun after the expiration of two 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 a written 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." (Emphasis supplied). Petitioner asseverates that it need not present in the original copies of its 1995 Corporate Annual Income Tax Return since Section 70 (b) of the Tax Code provides that " the final adjustment return (which is the Corporation Annual Income Tax Return) shall be filed on or before the 15th day of April, or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be ." Accordingly, the earliest date that the Petitioner could have filed its calendar year 1995 annual income tax return is any date between January 2, 1996 and April 15, 1996, and definitely, March 14, 1997, when the claim for refund was filed with the Commissioner, and April 11, 1997, when the " Petition for Review " was filed with the Public Respondent are well within the two-years from any date between January 2, 1996 and April 15, 1996 ( at page 6, Rollo ). As to its 1994 Corporate Annual Income Tax Return, Petitioner contends that the fact that it filed its 1994 Annual Income Tax Return on April 15, 1995, was testified to by its Chief Accountant, Ms. Lina Fernandez, during the hearing before the Public Respondent on October 16, 1997, thus: "Q: Did the Petitioner file its income tax return for the year 1994? A: Yes, Sir. Q: When was the return for the year 1994 filed? A: We filed it last April 15, 1995. But there was an amended income tax return which we filed later. The amended income tax return was filed June 19, 1997 (p. 10, TSN, October 16, 1997)." ( at page 7, Rollo ). The Public Respondent, however, ruled that Petitioner failed to show that the claim for refund with the Commissioner and the " Petition for Review " were filed within two years from the date of payment of the taxes sought to be refunded as prescribed under Section 230 of the Tax Code. In denying the " Petition for Review ", Public Respondent declared, thus: "Petitioner failed to present the original Corporation Annual Income Tax Returns for the calendar years 1994 and 1995 to enable Us to verify if the claim for refund was made within the two-year reglementary period. Both documents are needed for the purpose of determining whether petitioner filed the claim for refund with the respondent and the petition for review with this Court within the two-year prescriptive period, reckoned from the actual date of filing of the original final adjustment returns ( Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 244 SCRA 446 ). The mere allegation by the Counsel of petitioner that the 1994 and 19995 income tax returns were filed in April, 1995 and April, 1996, respectively and that the claim for refund was filed within the two-year period have to be verified. We could not see the reason why such important documents were not presented by the petitioner during the trial of the case. In the absence of these material documents, the Court is constrained, to deny petitioner's prayer. Well settled is the rule that a claim for refund is in the nature of claim for exemption and should be construed in strictissimi juris against the taxpayer ( Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332 ) ( at page 6, Rollo ) Claims for tax refund should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters. The Tax Code provides that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in the Court of Tax Appeals is commenced. The two-year prescriptive period provided for under Section 230 of the Tax Code should be computed from the time of filing the Adjustment Return and final payment of the tax for the year. ( Philippine Bank of Communications vs. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999 ). Section 230 of the Tax Code was further explained by the Supreme Court in " Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 117254, January 21, 1999 " thus: llcd "Petitioner (the Commissioner of Internal Revenue) disagrees with the foregoing decision of the Court of Appeals. He contends that the two-year prescriptive period should be computed from April 2, 1984, when the final adjustment return was actually filed, because that is the time of payment of the tax within the meaning of Sec. 230 of the NIRC. We agree. The conclusions reached by the appellate court are contrary to the very rulings cited by it. In Commissioner of Internal Revenue v. TMX Sales, Inc. (205 SCRA 181, 192 [1992]). this Court, in rejecting the contention that the period of prescription should be counted from the date of payment of the quarterly tax, held: . . . [T]he filing of a quarterly income tax return required in Section 85 [now Section 68] and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 [now Section 69] which provides for the filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive period provided in Section 292 [now Section 230 of the Tax Code should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final payment of Income tax . On the other hand in ACCRA Investments Corporation v. Court of Appeals (204 SCRA 957 [1991]), where the question was whether the two-year period of prescription should be reckoned from the end of the taxable year (in that case December 31, 1981), we explained why the period should be counted from the filing of the final adjustment return, thus: Clearly, there is the need to file a return first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its withholding agents to the Bureau of Internal Revenue. The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15, 1982. In our Resolution dated April 10, 1989 in the case of Commissioner of Internal Revenue v. Asia Australia Express Ltd. (G.R. No. 85956), we ruled that the two-year prescriptive period within which to claim a refund commences to run, at the earliest, on the date of the filing of the adjusted final tax return. Hence, the petitioner corporation had until April 15, 1984 within which to file its claim for refund. . . . It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation's claim for refund from the time it filed its final adjustment return is the fact that it was only then that AACRAIN could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore, in AACRAIN's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on April 15, 1982 . Finally, in Commissioner of Internal Revenue v. Philippine American Life Insurance Co ., (244 SCRA 416, 453 [1995]), we held: Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished . In the present case this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period. Private respondent being a corporation, Section 292 [now Section 230] cannot serve as the sole basis for determining the two-year prescriptive period for refunds. As we have earlier stated in the TMX Sales case, Sections 68, 69, and 70 on Quarterly Corporate Income Tax Payment and Section 321 should be construed in conjunction with it. Sec. 49 (a) of the NIRC provides that Sec. 49. Payment and assessment of income tax for individuals and corporations. (a) Payment of tax (1) In general . The total amount of tax imposed by this Title shall be paid by the person subject thereto at the time the return is filed. On the other hand, Sec. 70 (b) of the same code provides that Sec. 70 (b) Time of filing the income return . The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three quarters of the taxable year. The final adjustment return shall be filed on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be. Thus, it can be deduced from the foregoing that in the context of Section 230, which provides for two-year period of prescription counted "from the date of payment of the tax" for actions for refund of corporate income tax, the two-year period should be computed from the time of actual filing of the Adjustment Return of Actual Income Tax Return . This is so because at that point, it can already be determined whether there has been an overpayment by the taxpayer. Moreover, under Sec. 49(a) of the NIRC, payment is made at the time the return is filed ( idem., supra; emphasis supplied ) Clearly, the time or date of actual filing, by the Petitioner of its 1994 and 1995 Annual Income Tax Returns with the BIR, can well be verified from its duplicate copies since all income tax returns filed with the BIR are stamped "Received" on the date they are filed which also shows the date of its actual filing. Thus, there is no gainsaying why the Public Respondent deemed it necessary for the Petitioner to present copies of its original 1994 and 1995 Annual Income Tax Returns for them to verify if, indeed, the claim for refund with the BIR and the " Petition for Review " with them, were made within the two-year reglementary period. We are in full accord with the findings and disquisitions of the Public Respondent, thus: "Both documents are needed for the purpose of determining whether petitioner filed the claim for refund with the respondent and the petition for review with this Court within the two-year prescriptive period reckoned from the actual date of filing of the original final adjustment returns ( Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 244 SCRA 446 ). The mere allegation by the Counsel of petitioner that the 1994 and 1995 income tax returns were filed in April 1995 and April 1996, respectively and that the claim for refund was filed within the two-year period have to be verified. We could not see the reason why such important documents were not presented by the petitioner during the trial of the case. In the absence of these material documents, the Court is constrained to deny petitioner's prayer." ( at page 17, Rollo ). Moreover to determine the reckoning date of the mandatory two-year prescriptive period for purpose of resolving the issue as to whether Petitioner's claim for refund were filed within the time fixed by law, it is likewise necessary for this Court to verify the actual date of filing of the original 1994 and 1995 Final Adjustment Returns. Hence, it is incumbent upon the Petitioner to show proof that it filed its claims for tax refund within the two-year reglementary period. The Petitioner cannot merely insist on this Court to rely on its contention that under Rule 129 of the Rules of Court, the Court can take judicial notice of the fact that Petitioner filed its 1994 and 1995 Final Adjustment Income Tax Returns on April 15, 1995 and April 15, 1996, respectively, on the ground that these matters are capable of unquestionable demonstration since, under Section 70(b) of the Tax Code, the final adjustment returns of all corporate taxpayers must be filed on or before the 15th day of April or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be. As earlier pointed out, the burden of proof with respect to claims for tax refunds, rests upon the claimant to show that it filed its claim for refund with the BIR and the " Petition for Review " with the Court of Tax Appeals within the two-year prescriptive period, otherwise, such claim must fall. The Petitioner did not even bother to adduce justifiable reasons why it failed to present said documents. There is no reason why the Petitioner cannot ask with facility Certified True Copies of its original 1994 and 1995 income returns from the BIR. Besides, the unexplained failure or refusal of the Petitioner to produce such relevant and competent documentary evidence which would tend to throw light on the issues authorizes, under the circumstances, an inference or a presumption unfavorable to it ( Evidence, Rules 131-134, Francisco, Vol., 171, 1997 Ed., at page 91 ). There is a presumption that an evidence willfully suppressed would be adverse if produced. ( Section 3 (e). Rule 131 Revised Rules of Court ) Hence no error can be attributed against the Public Respondent when it ruled adversely against the Petitioner for its failure to present copies of its original 1994 and 1995 income tax returns. It is axiomatic that, in the absence of a clear showing of palpable error or grave abuse of discretion, as in the present recourse, this court is prescribed from tampering with the factual findings of the Court of Tax Appeals ( Afisco Insurance Corp., et.al., vs. Court of Appeals, G.R. No. 112675, January 25, 1999 ). Factual findings of the Court of Tax Appeals are binding upon this Court and can only be disturbed on appeal if not supported by substantial evidence. ( Commissioner of Internal Revenue vs. Tours Specialists, Inc., 183 SCRA 402, at page 407 ) LexLib IN VIEW OF ALL THE FOREGOING, the Petition is hereby DISMISSED and the Decision, dated January 27, 1999, of the Court of Tax Appeals is hereby AFFIRMED. SO ORDERED. Abad Santos , Jr . and Umali , JJ ., concur.