JS Steel Corp. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 58838. January 10, 2002.] JS STEEL CORPORATION , petitioner-appellant , vs . COMMISSIONER OF INTERNAL REVENUE , respondent-appellee . D E C I S I O N VASQUEZ , JR. , J p : Petitioner JS Steel Corporation assails the decision of the Court of Tax Appeals promulgated on January 12, 2000 in C.T.A. Case No. 5520 entitled "JS Steel Corporation vs. Commissioner of Internal Revenue" , denying petitioner's claim for refund for insufficiency of evidence. The antecedent facts are as follows. We quote. "Petitioner is a domestic corporation engaged in the manufacture of steel blanks for use by manufacturers of automotive, electrical, electronics in industrial and household appliances. Petitioner filed an Amended Corporate Annual Income Tax Return on June 4, 1996 (Exhibit A) declaring a net taxable income of P9,461,597.00 (Exhibit A-1), tax credits of P6,471,246.00 and tax due in the amount of P3,311,559.00 (Exhibit A-2). Petitioner also reported quarterly payments for the second and third quarters of 1995 in the amounts of P2,328,747.26 (Exhibit C) and P1,082,108.00 (Exhibit B), respectively. It is the proposition of the Petitioner that for the year 1995, several of its clients withheld taxes from their income payments to Petitioner and remitted the same to the Bureau of Internal Revenue (BIR) in the sum of P3,159,687.00 (Exhibit A-3). Petitioner further alleged that due to its income/loss positions for the three quarters of 1996 (Exhibits CA, CB, CC), it was unable to use the excess tax paid for and in its behalf by the withholding agents. Thus, an administrative claim was filed by the Petitioner on April 10, 1997 (Exhibit CD) for the refund of P3,159,687.00 representing excess or unused creditable withholding taxes for the year 1995. The instant petition was subsequently filed on April 18, 1997. Respondent, in his Answer, averred, among others, that: 1) Petitioner has no cause of action; 2) Petitioner failed to comply with the procedural requirements set out in Section 5 of Revenue Regulations No. 12-94; 3) It is incumbent upon Petitioner to prove by competent and sufficient evidence that the tax refund or tax credit being sought is allowed under the National Internal Revenue Code and its implementing rules and regulations; and 4) Claims for tax refund or tax credit are construed strictly against the taxpayer as they partake the nature of tax exemption. To buttress its claim, Petitioner presented documentary and testimonial evidence. Respondent, on the other hand, presented the Revenue Officer who conducted the examination of Petitioner's claim and found petitioner liable for deficiency value added tax (see TSN Feb. 4, 1998 & March 4, 1998 ). Petitioner also presented rebuttal evidence. The sole issue submitted for Our determination is whether or not Petitioner is entitled to the refund of P3,159,687.00 representing excess or overpaid income tax for the taxable year 1995." ( Decision, pp. 1-3, Rollo, pp. 17-19 ) In its decision denying a refund to the plaintiff, the Court of Tax Appeals upheld defendant Commissioner's argument that evidence adduced by the former was insufficient to justify a refund: "WHEREFORE, in the light of the foregoing, the instant Petition for Review is hereby DENIED for insufficiency of evidence." ( Decision, p. 5, Rollo, p. 21 ) Plaintiff's Motion for Reconsideration suffered the same fate in a Resolution dated April 25, 2000 (Annex "B"). Undaunted, petitioner initiates the present petition for review, posing the lone issue on: "ISSUE WHETHER THE HONORABLE COURT OF TAX APPEALS' DECISION DISMISSING THE CLAIM FOR REFUND OF PETITIONER IS JUSTIFIED, AND WHETHER PETITIONER IS ENTITLED TO THE REFUND OF OVERPAID INCOME TAX SOUGHT." ( Petition, p. 3; Rollo, p. 10 ) The petition is bereft of merit. Axiomatic is that the Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Through its expertise, it is undeniably competent to determine the issue of whether petitioner is entitled to a refund through the evidence presented before it ( Philippine Refining Company vs. Court of Appeals, 256 SCRA 667 [1996] as cited in Commissioner of Internal Revenue vs. Court of Appeals , 271 SCRA 605 [1997]). Because of this recognized expertise, the findings of the CTA will not ordinarily be reviewed absent a showing of gross error or abuse on its part ( The Coca Cola Export Corporation vs. Commissioner of Internal Revenue , 56 SCRA 5 [1974]) as cited in Ibid, p. 676 ). The findings of fact of the CTA are binding on this Court and in the absence of strong reasons for this Court to delve into facts, only questions of law are open for determination ( Commissioner of Internal Revenue vs. Tours Specialists, 183 SCRA 402 [1990], Ibid ). But to satisfy petitioner's call for clarification, this Court would have summarily dismissed the instant petition. Generally, tax refunds are allowed under Section 230 of the National Internal Revenue Code of 1977 . "Sec. 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 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." Yet because taxes are the lifeblood of the nation, statutes that allow exemptions, or tax refunds for that matter, are construed strictly against the grantee and liberally in favor of the government. Otherwise stated, a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund ( Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332 [1995] as cited in Citibank, N.A. vs. Court of Appeals, 280 SCRA 459 [1997] ). A careful perusal of the records, however, would reveal that other than the three quarterly returns for 1996 submitted to the CTA as well as the bare allegation that petitioner was entitled to tax credits or tax refund by virtue of the principle of solutio indebiti , no other evidence was adduced to prove that, indeed, excess tax payments were made considering that at the time of the filing of the instant case up to the time of the formal offer of evidence, the 1996 income tax return was deemed to have already been filed with the Bureau of Internal Revenue ( Resolution, p. 2; Rollo, p. 23 ). It bears reiterating at this point that in civil cases, the burden of proof rests upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of the issue ( Ramcar, Inc. vs. Garcia, 4 SCRA 1087 [1962] as cited in P.T. Cerna Corporation vs. Court of Appeals, 221 SCRA 19 [1993] ). In this case, the burden lies in the petitioner, who is duty bound to prove allegations in its complaint. He who alleges a fact has the burden of proving it as mere allegation is not evidence ( Rodriguez vs. Valencia, 81 Phil 787 [1948] as cited in Ibid, p. 25 ). Ruefully, evidence submitted was not enough. Notably, only three quarterly returns for the year 1996 were submitted as proof. Verily, this implies that he was only able to make a payment of quarterly income taxes. Thus, as judiciously ruled by the court a quo : "However, it appears on record that Petitioner submitted only the three quarterly returns for the year 1996. It is emphasized that these are insufficient proofs that indeed the excess tax credits of 1995 were not utilized in 1996 due to its major loss position on the third quarter thereof. There still remained the fourth quarter of 1996, which would reflect the financial position of the company for that particular period. We clearly note that the claim for refund involves the year 1995 and this case was filed only on April 18, 1997. It is logical to assume that the 1996 Annual Corporate Income Tax Return had already been filed on April 15, 1997, at the latest. Furthermore, Petitioner finished the presentation of its evidence only on September 25, 1997. It had therefore more than sufficient time to study its case and to know what documents need to be submitted to fully substantiate its case. Besides, this is not a case of first impression and Petitioner should likewise know or be aware of the evidence necessary to prove its claim. In short, the evidence submitted by the Petitioner was not sufficient. We have no way of determining if the amount of P3,159,687.00, subject of this claim, remain unutilized in the succeeding taxable year of 1996 ( Decision, pp. 4 to 5; Rollo, pp. 20 to 21 ). Correspondingly, in Commissioner of Internal Revenue vs. TMX Sales, Inc., 205 SCRA 184 [1992] , the Supreme Court had occasion to rule that the payment of quarterly income taxes ( per Section 68, NIRC ) should be considered mere installments on 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 of fiscal year. Also worth emphasizing is that income taxes remitted partially on a periodic or quarterly basis should be credited or refunded to the taxpayer on the basis of the taxpayer's final adjusted returns, not on such periodic or quarterly basis ( Commissioner of Internal Revenue vs. TMX Sales, Inc., 244 SCRA 446 [1995] ). The final determination of the corporate income tax liability is provided in Section 69 of the 1977 Tax Code , to wit: "SEC. 69. Final Adjustment Return. Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net 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 net income of that year that 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 on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." In resum, the burden of proof is upon petitioner to establish the factual basis of his or her claim for tax credit or refund inasmuch as a claim for refund is in the nature of a 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 [1995] as cited in Citibank, N.A. vs. Court of Appeals, 280 SCRA 459 [1997] ). Sadly, petitioner failed in his task. Without proof of the fourth quarterly return for the year 1996, it would indeed be difficult to determine whether the excess tax credits of 1995 were not utilized in 1996 due to its major loss position on the third quarter thereof. IN VIEW OF ALL THE FOREGOING, the instant petition is DISMISSED and the assailed Decision and Resolution are AFFIRMED. Costs against Petitioner. SO ORDERED. Reyes, Jr. and Tolentino, JJ . , concur.