Banco Filipino Savings and Mortgage Bank v. Commissioner of Internal Revenue

FIRST DIVISION [CA-G.R. SP No. 55470. May 28, 2002.] BANCO FILIPINO SAVINGS AND MORTGAGE BANK , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE & COURT OF TAX APPEALS , respondents . D E C I S I O N GARCIA , J p : Via this verified petition for review under Rule 43 of the 1997 Rules of Civil Procedure, petitioner Banco Filipino Savings and Mortgage Bank urges Us to reverse and set aside the decision dated October 5, 1999 of the respondent Court of Tax Appeals ordering its co-respondent Commissioner of Internal Revenue to refund to the petitioner, or, in the alternative, to issue to the latter a tax credit certificate in the amount of only P18,884.40 , representing income tax withheld for the taxable year 1995. Petitioner claims that "the total amount refundable to it is P1,622,576.00" . As found by the respondent tax court in the decision under review, the material facts are as follows: ". . . on April 12, 1996, petitioner filed its annual income tax return covering the year 1995 declaring a net operating loss of P211,476,241.00 and a total tax credit of P13,103,918.00 representing the prior year's excess tax credit of P11,481,342.00 and creditable withholding taxes of P1,622,576.00 (Exhs. A, A-2). Inasmuch as Petitioner has incurred losses, the tax credit was never utilized. On February 4, 1998, Petitioner filed an administrative claim for refund with the Bureau of Internal Revenue covering the aforesaid amount (Annex B). However, Respondent Commissioner failed to act on the said claim, thus prompting the Petitioner to elevate its case to this Court on April 13, 1998 to toll the running of the prescriptive period to file a claim for refund. In its Answer, Respondent (Commissioner of Internal Revenue) assailed the validity of Petitioner's claim and interposed the following Special Affirmative Defenses, to wit: xxx xxx xxx 4. The amount of P1,622,576.00 being claimed by the Petitioner with the BIR and the subject matter of the instant case was not properly documented. xxx xxx xxx On November 23, 1988, Petitioner filed its Formal Offer of Evidence to substantiate its claim consisting, among others, of the following relevant documents, to wit: a) Corporate Annual Income Tax Return for taxable year 1995 (A, A-1, A-2); b) Monthly Remittance Return of Income Tax withheld. In addition thereto, Petitioner offered in evidence the testimony of its lone witness, Mrs. Roberta Afable, the Assistant Manager of its Accounting Department. On December 16, 1998, Respondent filed its Comment to the Formal Offer of Evidence where he interposed to have no objection as to the existence of Petitioner's exhibits with the observation, however, that the same are not concrete, eloquent or much less sufficient pieces of evidence to prove erroneous payment of taxes". In the decision under review, the respondent tax court formulated the issue, thus: "whether or not Petitioner was able to substantiate its claim for refund of the amount of P1,622,576.00 through the presentation of material and relevant evidence" . Citing Section 10 of Revenue Regulations No. 6-85 which reads: "Sec. 10. 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 was declared as part of the gross income and the fact of withholding is established by a copy of the statement duly issued by the payor to the payee (BIR Form No. 1743.1) showing the amount paid and the amount of tax withheld therefrom" (Emphasis supplied), the respondent tax court ruled that "only the certificates of creditable tax withheld at source (BIR Form No. 1743-75) can be given full credence" and accordingly rejected petitioner's certificates of income tax withheld on compensation (Exh. II) and the monthly remittance returns of income taxes withheld (Exhs. "C" to "Z") "because these are not the proper BIR forms required pursuant to Sections 6 and 10 of Revised Revenue Regulations No. 6-85" , citing in support thereof the earlier cases of Far East Bank vs. Commissioner of Internal Revenue , CTA Case No. 4972, Jan. 24, 1996 and PDCP Development Bank, Inc. vs. Commissioner of Internal Revenue , CTA Case No. 5237, March 25, 1997. In the same decision, the respondent tax court concluded that the only documents which may be included in the final computation of the refundable amount are petitioner's exhibits "AA", "BB", "CC", "DD", "EE", "FF", "GG" and "HH" to "HH-2", the details of which are indicated below, thus: "WITHHOLDING AGENT EXHIBIT INCOME TAX PAYMENT WITHHELD AGUIRRE LOAN CO. INC. AA P233,688.00 P11,684.40 SOCIAL SECURITY SYSTEM BB 7,500.00 375.00 SOCIAL SECURITY SYSTEM CC 7,500.00 375.00 SOCIAL SECURITY SYSTEM DD 7,500.00 375.00 SOCIAL SECURITY SYSTEM EE 7,500.00 375.00 DAVAO WHITELIGHTING FF 30,000.00 1,500.00 DAVAO PAINT SHOP GG 30,000.00 1,500.00 ACEBEDO INT'L. SHOP HH to HH-2 54,000.00 2,700.00 TOTAL P377,688.00 P18,884.40" ========= ========= On the basis of the above, the respondent tax court, in the decision subject hereof, ruled that only the amount of P18,884.40 may be refunded to the petitioner, and accordingly rendered judgment, as follows: "WHEREFORE, in view of all the foregoing, Respondent (Commissioner of Internal Revenue) is hereby ORDERED to REFUND or in the alternative to ISSUE a Tax Credit Certificate in the amount of EIGHTEEN THOUSAND EIGHT HUNDRED EIGHTY FOUR PESOS AND FORTY CENTAVOS (P18,884.40) in favor of the Petitioner, representing overpaid income tax for the year 1995. SO ORDERED." (Rollo, pp. 027-034). Hence, petitioner's present recourse. The petition must fall. Petitioner itself admits that the rejected documents "are not the proper BIR forms" (Petition, p. 9). Nonetheless, it argues that the requirement of proving its withholding of refundable taxes and their remittance "should not be so truncated and shrouded in a wall of strictness" (Petition, pp. 8-9), arguing that it is enough if the claim for tax refund has been proven by competent evidence. In short, petitioner contends that the respondent tax court should have given full credence to its other documentary evidence purporting to establish the fact of withholding of the refundable taxes. Well-settled is the rule that a claim for tax refund, being in the nature of a tax-exemption, must be construed strictissimi juris against the taxpayer. In the words of the High Court in Commissioner vs. Court of Tax Appeals , L-115344, April 18, 1997: ". . . the general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws". This is, as it should be. For taxes are the very lifeblood of the nation. As such, tax exemptions are construed against the taxpayer and liberally in favor of the government ( Commissioner vs. Algue, Inc. [158 SCRA 9]). To stress, no less than the herein petitioner admits that its rejected documents to justify its claim for tax refund in the amount of P1,622,576.00 "are not the proper BIR Forms" . In this connection, Section 10 of Revenue Regulations No. 6-85, supra , emphatically provides that claims for refund of income tax deducted and withheld "shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income, and the fact of withholding is established by a copy of the statement duly issued by the payor to the payee (BIR Form 1743.1) showing the amount paid and the amount of tax withheld therefrom" . Here, petitioner makes no issue of the fact that most of the documents it adduced to establish its claim for refund in the total amount of P1,622,576.00 are not the proper BIR form, namely, BIR Form No. 1743.1. As earlier pointed out, petitioner merely appeals for a liberal application of the pertinent provision of the existing revenue regulations. This cannot be done without departing from the time-honored rule that tax exemptions are generally frowned upon and that tax laws and regulations are construed strictly against the taxpayer and liberally in favor of the government. WHEREFORE, the instant petition is hereby DENIED and is accordingly DISMISSED. SO ORDERED. Buzon and De los Santos, JJ . , concur.