Filinvest Development Corp. v. Commissioner of Internal Revenue

SEVENTH DIVISION [CA-G.R. SP. No. 56800. August 18, 2000.] FILINVEST DEVELOPMENT CORP. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondent . D E C I S I O N GOZO-DADOLE , J p : This is an appeal by Petition for Review under Rule 43 of the Rules of Court from the Decision dated August 13, 1999 of the Court of Tax Appeals, dismissing petitioner's Petition for Review for tax refund, and the Resolution dated December 23, 1999 of said Court of Tax Appeals, denying petitioner's Motion for Reconsideration in CTA Case No. 5603, entitled "Filinvest Development Corporation vs. Commissioner of Internal Revenue." The antecedent facts as culled from the records: On November 11, 1997, petitioner filed before respondent Commissioner a claim for refund of excess creditable withholding taxes in the total amount of Four Million One Hundred Seventy-Eight Thousand One Hundred Thirty-Four Pesos (P4,178,134.00) for the taxable years ended December 31, 1994, 1995 and 1996. For the taxable year ended December 31, 1994, petitioner incurred a tax loss of Twenty-One Million Six Hundred Thirty-Seven Thousand Four Hundred Fifty Pesos (P21,637,450.00) and creditable taxes withheld from source in the sum of One Million Four Thousand Two Hundred Thirty-Six Pesos (P1,004,236.00). But the claim for refund of these creditable withholding taxes of One Million Four Thousand Two Hundred Thirty-Six Pesos (P1,004,236.00) for the taxable year 1994 was not pursued by petitioner because it was already barred by the two-year prescriptive period. For the taxable year ended December 31, 1995, petitioner incurred a tax loss of One Hundred Fifty-One Million, Seven Hundred Forty-One Thousand, Seven Hundred Sixty-Two Pesos (P151,741,762.00) and creditable taxes withheld from source in the sum of Six Hundred Two Thousand Five Hundred Twenty-Seven Pesos (P602,527.00) which arose from taxes withheld from income payments to petitioner for leasing its real properties, rendering management services and trading sugar products, as evidenced by the Annual Income tax Return for the taxable year ended December 31, 1995, and the Certificates of Creditable Income Tax Withheld at Source for 1995. For the taxable year ended December 31, 1996, petitioner incurred a tax loss of One Hundred Ninety Million Six Hundred Ninety-Five Thousand and Sixty-One Pesos (P190,695,061.00) and creditable taxes withheld from source in the sum of Two Million Five Hundred Seventy-One Thousand Three Hundred Forty-One Pesos (P2,571,341.00) which arose from taxes withheld from income payments to petitioner from management fees, commission incomes and rentals, as evidenced by the Annual Income Tax Return for the taxable year ended December 31, 1996 and Certificates of Creditable Income Tax Withheld at Source for 1996. Petitioner's Annual Tax Return for the taxable year ended December 31, 1996 shows that the amount of the total creditable withholding taxes is Four Million One Hundred Seventy-Eight Thousand One Hundred Thirty-Four Pesos (P4,178,134.00) for the creditable withholding taxes for the taxable years 1994 and 1995 were carried over to 1996. IEHScT Since respondent Commissioner had not resolved petitioner's Claim for Refund and the two-year prescriptive period for recovery of tax erroneously or illegally collected was about to lapse, petitioner filed its Petition for Review (CTA Case No. 5603) before the Court of Tax Appeals on April 7, 1998, praying that respondent Commissioner refund to petitioner the sum of Three Million One Hundred Seventy-Eight Thousand Eight Hundred Sixty-eight Pesos (P3,173,868.00), representing the aggregate creditable income taxes erroneously withheld at source for the taxable years ended December 31, 1995 and 1996, or in the alternative, to issue a tax credit certificate for said amount in favor of petitioner. The claim for creditable withholding taxes in the amount of One Million Four Thousand Two Hundred Thirty-Six Pesos (P1,004,236.00) for the taxable year 1994, was not included in the petition because as stated above it was already barred by the two-year prescriptive period. Respondent Commissioner filed his Answer dated May 26, 1998, resisting petitioner's claim for tax refund solely on the grounds that: 1) the petition had already prescribed and 2) the taxpayer had the burden to prove that the taxes paid were erroneously or illegally collected. On September 3, 1998, petitioner filed its Formal Offer of Evidence, offering for admission Exhibits "A" to "V" in support of its Petition for Review, which were all admitted by the respondent Court of Tax Appeals in its Resolution dated December 4, 1998. On April 7, 1999, petitioner filed its Memorandum for Petitioner dated April 5, 1999, praying that respondent Commissioner refund to petitioner the sum of Three Million One Hundred Seventy-Three Thousand Eight Hundred Sixty-Eight Pesos (P3,173,868.00), the total unutilized creditable income taxes erroneously withheld at source for the taxable years ended December 31, 1995 and 1996, or in the alternative, to issue a tax credit certificate for said amount in favor of petitioner. On August 13, 1999, the Court of Tax Appeals rendered the assailed Decision denying the petition on the sole ground that petitioner failed to present in evidence its Income Tax Return for the taxable year ended December 31, 1997. Thus, the dispositive portion of the aforesaid Decision dated August 13, 1999, reads: "WHEREFORE, in view of all foregoing, the instant Petition for Review is hereby DISMISSED due to insufficiency of evidence. SO ORDERED." On September 29, 1999, petitioner filed its Motion for Reconsideration which was denied per Resolution dated December 23, 1999 because the 1997 Income Tax Return of petitioner could have been presented during the marking of its exhibits on August 5, 1998, or the filing of its Formal Offer of Evidence on September 3, 1998, but petitioner neglected to do so. The Court of Tax Appeals, held, thus: "The factual milieu of this case reveals that the marking of petitioner's exhibits was made on August 5, 1998 and its Formal Offer of Evidence, on September 3, 1998. In all these dates, the 1997 Tax Return of the Petitioner was already evidently available. Thus, petitioner has all the opportunity to present the said document in evidence to support its claim for refund. . . . In the light of petitioner's inexcusable neglect, We deem it proper to deny the motion. xxx xxx xxx WHEREFORE, in the light of all the foregoing the Motion For Reconsideration is hereby DENIED. SO ORDERED." (p. 7, Rollo ) Hence this petition assigning the following errors: "1. Whether or not the respondent CTA committed reversible error in dismissing the petition below and in not holding that petitioner is entitled to its claim for tax refund in the sum of Three Million One Hundred Seventy-Three Thousand Eight Hundred Sixty-Eight Pesos (P3,173,868.00), representing the unutilized creditable withholding taxes for the taxable years 1995 and 1996. 2. Whether or not respondent CTA committed reversible error in not holding that petitioner's Annual Income Tax Return for the taxable year ended December 31, 1997 is material to petitioner's claim for refund. 3. Whether or not the respondent CTA committed reversible error in refusing to admit and consider not petitioner's Annual Income Tax Return for the taxable year ended December 31, 1997 attached to its Motion for Reconsideration dated September 22, 1999 as part of petitioner's evidence." (p. 8, Rollo ) and since these assigned errors are interrelated with each other, they will be discussed jointly. Petitioner, in its claim for tax refund or tax credit relies for legal support on Sections 230 and 69 of the National Internal Revenue Code (NIRC) before its amendment (R.A. No. 8424) in relation to Section 10(a) of Revenue Regulations No. 12-94. The aforesaid Section 230 and 69 of the NIRC read as follows: "Sec. 230. Recovery of tax erroneously or illegally collected . No suit or proceedings 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 any penalty claimed to have been collected without authority, or 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 face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. xxx xxx xxx "Sec. 69. Final adjustment return . Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year the corporation shall either: a) Pay the excess tax still due; or b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown in its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." (pp. 9-10, Rollo ) Corollary thereto, Section 10(a) of the Revenue Regulations No. 12-94 provides that: "Section 10(a) 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 has been declared as part of the gross income and the fact that the withholding is established by a copy of the Withholding Tax Statement duly issued by the payor to the payee, allowing the amount paid and the amount of tax withheld therefrom." (p. 10, Rollo ) because accordingly, it has filed its claim for refund with the respondent Commissioner on November 11, 1997, which is well within two (2) years from the date of payment of the tax or from the time petitioner filed its Annual Income Tax Return for the taxable year 1995 on April 1996 and its Annual Income Tax Return for the taxable year 1996 on April 15, 1997. However, since the respondent Commissioner had not acted on petitioner's Claim For Refund and the two-year prescriptive period was about to prescribe, petitioner filed a petition for review before the Court of Tax Appeals on April 7, 1998, which was also within two (2) years from the date of payment of the tax as above stated. In the case of Commissioner vs. TMX Sales, Inc . , 205 SCRA 184, the Supreme Court held that the two-year prescriptive period should be counted from the filing of the income tax return. Petitioner further contends that it has clearly established its right to a refund or tax credit since it had incurred net losses for the years 1995 and 1996 and despite such fact, withholding taxes had been remitted to the BIR for the said years. Petitioner's Annual Income Tax Return for the taxable year ended December 31, 1995 shows that it incurred a net loss of One Hundred Fifty-One Million, Seven Hundred Forty-One Thousand, Seven Hundred Sixty-Two Pesos (P151,741,762.00) but remitted a creditable withholding tax of Six Hundred Two Thousand Five Hundred Twenty-Seven Pesos (P602,527.00). On the other hand, petitioner's Annual Income Tax Return for the taxable year ended December 31, 1996, shows that it incurred a net loss of One Hundred Ninety Million Six Hundred Ninety-Five Thousand and Sixty-One Pesos (P190,695,061.00) but remitted a creditable withholding tax of Two Million Five Hundred Seventy-One Thousand Three Hundred Forty-One Pesos (P2,571,341.00). The creditable withholding taxes for the years 1995 and 1996 thus totaled the amount of Three Million One Hundred Seventy-Three Thousand Eight Hundred Sixty-Eight Pesos (P3,173,868.00) which is the subject of the petitioner's claim for tax refund or tax credit. These unutilized creditable income taxes of Three Million One Hundred Seventy-Three Thousand Eight Hundred Sixty-Eight Pesos (P3,173,868.00) represent the taxes withheld on petitioner's income and were remitted to the BIR pursuant to Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations. The aforementioned Annual Income Tax Returns of petitioner indicate that the income payments received were declared as part of the gross income, and the fact of withholding is established by the respective Certificates of Income Tax Withheld at Source submitted by petitioner as Exhibits "D" to "V" before the court below. In fact, it has accordingly complied with all the requirements to sustain a claim for tax refund in accordance with the case of F. Jacinto Group, Inc. vs. Commissioner of Internal Revenue (CTA Case No. 4971, April 5, 1995) wherein the Court of Tax Appeals has laid down the requirements which a taxpayer must have to comply with before a claim for refund would be sustained and which requirements were affirmed by the Supreme Court in the case of Citibank, N.A. vs. CA, the Commissioner of Internal Revenue, G.R. No. 107434, October 10, 1995, to wit: "1) That the claim for refund was filed within two years as prescribed under Section 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) That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee showing the amount paid and the amount of tax withheld therefrom." (p. 29, Rollo ) And so, having clearly established and proven that the amounts withheld in the sum of Three Million One Hundred Seventy-Three Thousand Eight Hundred Sixty-Eight Pesos (P3,173,868.00) were actually remitted to the BIR and the final adjustment returns, petitioner's Annual Income Tax Returns for 1995 and 1996 showed that for 1995 and 1996 no income taxes from petitioner were due, and as such, it is entitled to the refund of the said amount. We are not persuaded with these contentions of petitioner considering that petitioner has the burden of proving that it is entitled to the refund sought for because taxes are presumed to have been collected in accordance with laws and regulations (Caltex, Phils., Inc. vs. CIR, CTA Case No. 2871, January 29, 1986) and a refund partakes of the nature of an exemption, and the same cannot be allowed unless granted in the law explicitly and in a categorical language (Resins, Inc. vs. Auditor General, L-17888, October 29, 1968, 25 SCRA 754). Petitioner fails to discharge the burden of being entitled to the tax refund sought for considering that evidence on hand shows that although petitioner was able to comply with the requirements which a taxpayer must have to comply before a claim for a refund would be sustained, yet, it has failed to present vital documents, its Income Tax Return for the year 1997, which would show whether or not petitioner has applied or credited the refundable amount sought for in its 1997 tax liability, if there be any, since per its 1996 Income tax Return, it readily revealed that petitioner opted to carry over the excess income tax paid to the succeeding year and it is only from petitioner's Income Tax Return for the year 1997 that this fact can be determined with certainty and the non presentation of this vital document proved fatal to the petitioner's cause of action. Thus, in the cases of AF Holdings and Management Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4529, March 16, 1993; Philippine Bank of Communications vs. Commissioner of Internal Revenue, CTA Case No. 4309, May 20, 1993; BPI Data Systems Corporations (formerly Filipinas Management and Leasing Services, Inc.) vs. Commissioner of Internal Revenue, CTA Case No. 4691, December 6, 1993; BPI Family Savings bank, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 4694, December 25, 1993; Anscor Hagedorn Securities, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 4947, January 30, 1995; and Pasig Land Corporation vs. Commissioner of Internal Revenue, CTA Case No. 4773, May 30, 1995, the Supreme Court ruled: "when the taxpayer has opted to apply the amount refundable as a tax credit for the succeeding year it is important to present as evidence the succeeding year's Income Tax Return for verification if the amount was credited against its income tax liability for that year. Failure on the part of the taxpayer to sustain his claim is fatal to its cause of action." (p. 30, Rollo ) Finally, petitioner contends that its Annual Income Tax Returns for the taxable year ended December 31, 1997 is not material to its claim for tax refund of creditable income taxes erroneously withheld at source for the taxable years 1995 and 1996, considering that it has already presented sufficient documentary evidence to establish the existence of all the requirements to sustain the tax refund sought and since it is not material, it was not fatal if such document was not presented in evidence. And even assuming for the sake of argument that its Annual Income Tax Return for the taxable year ended December 31, 1997 is material for the purpose of proving its claim for refund, it was an error on the part of the court below in not admitting the copy of the said document which was attached to its Motion for Reconsideration dated September 22, 1999 as part of the petitioner's evidence. Again, We are not persuaded considering that petitioner has forgotten that evidence not formally offered shall not be taken into consideration (Section 34, Rule 132, Rules of Court). In fact, petitioner has all the opportunity to present the said document in evidence to support its claim of refund since at the time when it offered its evidence, its 1997 Income Tax Return was already available. WHEREFORE, FOREGOING PREMISES CONSIDERED, the petition is hereby DENIED for lack of merit. The assailed Decision dated August 13, 1999 of the Court of Tax Appeals is affirmed . Costs against petitioner. SO ORDERED. Guerrero and Aquino, JJ . , concur.