Trinity Franchising and Management Corp. v. Commissioner of Internal Revenue

EIGHTH DIVISION [CA-G.R. SP No. 60269. April 4, 2001.] TRINITY FRANCHISING AND MANAGEMENT CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N ABESAMIS , J p : Before Us is a petition for certiorari from the Decision 1 , dated May 30, 2000, of the Court of Tax Appeals as well as its Resolutions 2 , dated August 2, 2000, in CTA Case No. 5605, entitled: "Trinity Franchising and Management Corporation vs. Commissioner of Internal Revenue," which granted petitioner's claim of tax refund or tax credit based on the "cost" of acquisition and disallowed the refund of the amount of P78,886.77. As gathered from the pleadings submitted, the antecedents of the instant case are as follows; During the year 1995, petitioner granted 20% discounts to senior citizens on their purchase of medicines pursuant to Republic Act 7432 and its implementing rules and regulations. However, in preparing petitioner's Income Tax Return for the year 1995, petitioner treated the 20% sales discounts as deduction from its gross sales in compliance with Revenue Regulation 2-94 instead of as tax credit under Section 4, R.A. 7432 3 . Upon the discovery of their mistake, petitioner filed with the commissioner of Internal Revenue (CIR) on December 27, 1996, a claim for tax refund or credit of the full amount of twenty percent (20%) sales discounts it granted for the year 1992 totalling P89,999.00. But, because the two (2) year prescription period under Section 230 of the National Revenue Code would soon expire with the respondent not acting thereon, petitioner filed a petition for review with the Court of Tax Appeals on April 7, 1998. After presenting petitioner's evidence, petitioner filed its Formal Offer of Documentary Evidence on December 22, 1998. On May 30, 2000, the Court of Tax Appeals rendered the assailed Decision, the dispositive portion of which reads: "WHEREFORE, in view of the foregoing, the instant Petition for review is PARTIALLY GRANTED. Respondent is hereby ORDERED to ISSUE a CREDIT CERTIFICATE in the amount of P5,273.00 to the petitioner immediately. No costs. SO ORDERED." 4 Because of the adverse Decision, petitioner filed a motion for reconsideration of said Decision. Thus on August 2, 2000, the CTA rendered the assailed Resolution, the dispositive portion of which reads: "WHEREFORE, in view of the foregoing, Petitioner's Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED." 5 Undaunted, petitioner now comes to this Court for solace. In its petition, petitioner raises the following issues: Whether or not the Court of Tax Appeals erred in denying the Motion of Petitioner to offer as documentary evidence the inadvertently omitted cash slips. Whether or not the Court of Tax Appeals erred in denying the Motion of Petitioner to consider the original cash slips as documentary evidence supporting the sales discount. Whether or not the Court of Tax Appeals erred in relying on the cash slips in determining the total amount of sales discount granted to senior citizens. Whether or not the term "cost" under paragraph (a) section 4 of Republic Ac t 74 32 is equivalent to direct cost. We find the petition to be devoid of merit. At the outset, it should be noted that tax refunds or tax credits are construed strictly against the taxpayer. Hence, the burden of proving the same lies on the claimant. Failure to do so will necessarily negate the claim for refund or credit. In the instant case, the Court of Tax Appeals (CTA) has made the following findings: "In conformance with CTA Circ ular No. 1-9 5, petitioner availed of the audit services of Vicente E. Reyes and Associates through the person of Mr. Rene Amby Reyes who was then commissioned by this Court to submit a report on his findings with regard to Petitioner's alleged 20% Sales Discount to Senior Citizens. After a special audit, Mr. Reyes came out with the required report (Exh. "R") stating the detailed audit procedures performed and the total Senior Citizens 20% discount amounting to P139,010.48. . . . xxx xxx xxx Per Mr. Reyes verification and using the income tax benefit differential formula earlier mentioned, the overpaid income tax arrived at amount to P90,750.71, . . . xxx xxx xxx However, a cursory review of the above computation by Mr. Reyes showing the recommended amount of P90,750.71 as differential would show that it exceeds the amount being claimed in the instant petition amounting to P89,999.00. Such a bigger amount cannot be allowed inasmuch as the administration claim for refund as well as the instant petition only prays for the lesser amount of P89,999.00, this, notwithstanding the fact that petitioner's memorandum (found on pages 68 to 75) raised the claimed amount to P90,750.71. The amount claimed by petitioner in the administrative level which is P89,999.00 is still the reference point as said amount was the one brought to the attention of the Commissioner of Internal Revenue. This stand is consistent with the clear wordings of section 230 of the 1995 T ax Co de . . . . xxx xxx xxx It must be noted likewise that upon a scrutiny of petitioner's letter claim for refund or tax credit submitted to the Commissioner of Internal Revenue, together with its ledger of sales discounts as offered before this Court (Exhibits "C" & "F"), only the amount of P138,460.00 was stated to be the 90% discount given to senior citizens. Multiplying the same amount with the differential rate of 65% the amount of P89,999.00 as stated in the present petition is obtained. Finally, a re-examination of Mr. Reyes report based on the evidence on record reveals that some exhibits (cash slips) should be disallowed due to the following reasons: a) not among those admitted by the Court in a Resolution, dated March 04, 1999. xxx xxx xxx b) not formally offered as evidence. xxx xxx xxx c) original cash slips xxx xxx xxx The aforementioned original cash slips are being disallowed on account of the fact that what was examined by the independent auditor, Mr. Reyes were duplicate and triplicate copies thereof. (Exhibit "H"). Also, such original slips are copies for the customers. Their being in the possession of the Petitioner is tantamount to non-issuance of receipt and gives rise to a reasonable doubt on whether purchases had indeed been transacted. It is the observation of this Court that the nearly three hundred original cash slips are consecutively numbered. Taken as it is, it is quite unbelievable that not one of the nearly 300 consecutive customer-purchasers of the petitioner did not bother to get his or her original copy as receipt of purchase. It is the considered opinion of this Court thus that the original cash slips present themselves as preponderant evidence of the real probability that no purchase of medicines ever transpired. It appears thus that only the amount of P59,573.28 represents the valid amount of 20% sales discounts that were granted to qualified senior citizens. . . . " 6 The alleged inadvertence theory of the petitioner to include the cash slips in their Formal Offer of Evidence is an afterthought to avail of the tax credit. However, the said failure or "inadvertence" is tantamount to negligence. Anent the issue on the interpretation of the term "cost" where the 20% discount shall be applied, this Court had earlier ruled in Commissioner of Internal Revenue vs. Elmas Drug Corporation 7 that the proviso "Provided, that private establishments may claim the Cost as tax credit" does not intend to treat the entire amount of 20% discount as tax credit. WHEREFORE, the petition is hereby DENIED DUE COURSE and DISMISSED. The Decision dated May 30, 2000 of the Court of Tax Appeals as well as its Resolution dated August 2, 2000 are hereby AFFIRMED in toto . SO ORDERED. Jacinto and Delos Santos, JJ . , concur. Footnotes 1. pp. 26-40, Rollo 2. pp. 41-43, Rollo 3. SECTION 4. Privileges for the Senior Citizens . The senior citizens shall be entitled to the following: a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services, hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicine anywhere in the country. Provided, That private establishments may claim the cost as tax credit; b) a minimum of twenty percent (20%) discount on admission fee charged by theaters, cinema houses and concert halls, circuses, carnivals and other similar places of culture, leisure and amusement; c) exemption from the payment of individual income taxes: Provided, That their annual taxable income does not exceed the property level as determined by the National Economic and Development Authority (NEDA) for that year: d) exemption from training fees for socio-economic programs undertaken by the OSCA as part of its work; e) free medical and dental services in government establishment anywhere in the country, subject to guidelines to be issued by the Department of Health, the Government Service Insurance System and the Social Security System; f) to the extent practicable and feasible, the continuance of the same benefits and privileges given by the government Service Insurance System (GSIS), Social Security System (SSS) and PAG-IBIG, as the case may be, as are employed by those in actual service. 4. supra 5. p. 43, Rollo 6. pp. 32-35, Rollo 7. CA-GR. SP No. 49946, October 19, 1999.