Columbian Motors South Super, Inc. v. Commissioner of Internal Revenue

THIRTEENTH DIVISION [CA-G.R. SP No. 63013. May 27, 2002.] COLUMBIAN MOTORS SOUTH SUPER, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N GOZO-DADOLE , J p : This is a petition for Review under Rule 43 of the 1997 Rules of Civil Procedure, as amended, seeking the reversal of: (a) the Decision of the Court of Tax Appeals (CTA for brevity) promulgated September 4, 2000 in CTA Case No. 5779, entitled, "Columbian Motors South Super, Inc. vs. Commissioner of Internal Revenue," dismissing petitioner's Petition for Review for failure to comply with the requirements for the refund of excess creditable withholding taxes; and (b) the Resolution promulgated January 19, 2001 denying reconsideration of said Decision of September 4, 2000. The antecedent facts: On April 15, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Corporate Annual Income Tax Return for calendar year 1996. On September 16, 1998, petitioner filed with the BIR its Amended Corporate Annual Income Tax Return for the same calendar year. The said Amended Corporate Annual Income Tax Return reported a creditable withholding tax in the total amount of P6,092,693.00, computed as follows: "Gross Income P113,266,200.00 Less: Deductions 102,125,859.00 Net Income P11,140,741.00 Tax Rate 35% Income Tax Due P3,899,259.00" Less: Tax Credits/Payments P6,965,842.00 Prior Year's Excess Credits Tax Credits/ Withheld/Payments For First Three Quarters 3,026,110.00 9,991,952.00 Tax Payable (Overpayment) (P6,092,693.00)" The creditable withholding tax for the calendar year 1996 in the amount of P9,991,952.00 represented creditable tax withheld from various income derived from contractor's fees, sale of goods and rental of equipment. Since petitioner only had an income tax due in the amount of P3,899,259.00 for the calendar year 1996, it had an excess creditable withholding tax in the amount of P6,092,693.00, computed as follows: "Net Taxable Income P11,140,741.00 Amount of Tax Due P3,899,259.00 Less Creditable Withholding Tax P9,991,952.00 Amount Refundable P6,092,693.00" In its 1996 Corporate Annual Income Tax Return, petitioner had indicated its intention not to carry over its unutilized creditable income tax, and instead, file an application for refund of the same amount. llcd On July 2, 1999, petitioner filed its Amended Corporate Annual Income Tax Return for CY 1997, which showed that its unutilized creditable withholding tax for 1996 and prior years was no longer carried over to the succeeding year. On April 8, 1999, petitioner filed with the Bureau of Internal Revenue an administrative claim for refund in the amount of P6,092,693.00, which represents its unutilized or excess creditable withholding tax for Calendar Year 1996. The above-said administrative application for refund/issuance of tax credit was filed within the two-year reglementary period under Section 16 of Revenue Regulations No. 5-87, as amended by Revenue Regulations No. 3-88. To date, respondent CIR has not finally acted upon the aforestated application. On April 13, 1999, petitioner filed its Petition for Review with the CTA pursuant to Section 230 of the Tax Code, praying that after due hearing, judgment be rendered by the CTA ordering respondent CIR to refund and/or issue a tax credit certificate in favor of herein petitioner in the amount of P6,092,693.00. Respondent CIR, after having requested an extension of time to file responsive pleading, filed his Answer on June 2, 1999. On October 5, 1999, counsels for petitioner and respondent appeared before the CTA for the pre-trial conference of the instant case for purposes of stipulating facts and admissions, as well as simplifying the issues that need to be resolved. On October 14, 1999, counsel for petitioner appeared before the Executive Clerk of Court for the pre-marking of documentary evidence, and reserved his right to present the originals of the documents for comparison during the hearing of said case before the CTA, to wit: (a) "Administrative claim for refund of Columbian Motors South Super, Inc. of unutilized creditable withholding tax for the year 1996 in the amount of P6,092,693.00, dated and duly filed with the Bureau of Internal Revenue (BIR) on April 8, 1999; (b) Tentative Corporation Annual Income Tax Return (BIR Form No. 1702) of Columbian Motors South Super, Inc. for 1996, duly signed and filed with the BIR on April 15, 1997; (c) Amended Corporation Annual Income Tax Return (BIR Form No. 1702) of Columbian Motors South Super, Inc. for 1996, duly signed and filed with the BIR on September 16, 1998; (d) Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307) issued by clients/customers of Columbian Motors South Super, Inc. as withholding agent for 1996; and (e) Final Corporation Annual Income Tax Return (BIR Form No. 1702) of Columbian Motors South Super, Inc. for 1997, duly signed and filed with the BIR." (pp. 31-32, Rollo ) On November 4, 1999, counsels for petitioner and respondent filed their Joint Stipulation of Facts and Issues which stipulated, among others, the following: (a) "That petitioner is a corporation organized and existing under and by virtue of the laws of the Philippines and is primarily engaged in the assembly and manufacture of automobiles, including the sale and distribution of automotive spare parts, with business address at Km. 16 West Service Road, South Super Highway, Paraaque City; (b) That on April 15, 1997, petitioner filed its Tentative Corporate Annual Income Tax Return for calendar year ended December 31, 1996, which reflected a total refundable or overpaid income tax in the amount of P26,206,530.00; (c) That on September 16, 1998, petitioner filed its Amended Corporate Annual Income Tax Return for calendar year ended December 31, 1996, reflecting a total refundable or overpaid income tax in the amount of P6,092,693.00; (d) That the administrative claim for refund as well as the judicial claim for refund were filed within the two-year prescriptive period prescribed under Section 229 of the Tax Code, as amended; and (e) That to date, the respondent has not approved the administrative claim for refund." (p. 32, Rollo ) On December 1, 1999 and January 13, 2000, counsel for petitioner presented Ms. Isabel Castillo, the Accounting Supervisor for petitioner, where she identified the necessary documents submitted and testified on the following matters: (a) "The petitioner's excess or unutilized creditable withholding tax as of December 31, 1996, amounting to P6,092,693.00; (b) The necessary documentary substantiation for petitioner's excess or unutilized creditable withholding tax as of December 31, 1996; (c) The fact of withholding of the said creditable withholding taxes as evidenced by the certificates of creditable withholding tax at source; (d) The fact that petitioner's excess or unutilized creditable withholding taxes as of December 31, 1996 were not applied as tax credit against the petitioner's tax liability for the succeeding taxable years; and (e) The fact that petitioner's excess or unutilized creditable withholding taxes as of December 31, 1996 represents tax on income which was reported in the Corporate Annual Income Tax Return of the petitioner for calendar year ended December 31, 1996." (pp. 32-33, Rollo ) After having presented all the necessary evidence for the instant case, petitioner moved for a period of thirty (30) days within which to file its Formal Offer of Evidence which motion was granted by the CTA and on February 11, 2000, petitioner filed its Formal Offer of Evidence which was admitted by the CTA in its resolution dated April 11, 2000. Respondent did not present any evidence and after the parties submitted their memoranda, the case was considered submitted for decision. On September 12, 2000, petitioner received the Decision of the CTA on the instant case, dated September 4, 2000, denying petitioner's claim for refund or prayer for issuance of Tax Credit Certificate in the sum of Six Million Ninety Two Thousand Six Hundred Ninety Three Pesos (P6,092,693.00) representing excess or unutilized creditable withholding taxes for the year 1997, the dispositive portion of which reads: "IN THE LIGHT OF ALL THE FOREGOING, for failure on the part of the Petitioner to fully comply with the requirements for the refund of excess creditable withholding taxes, the same is hereby DENIED." (p. 34, Rollo ) On September 27, 2000, petitioner filed, through personal service, a Motion for Reconsideration of said decision, which was heard and submitted for resolution of the CTA on October 6, 2000 after respondent had filed his Opposition and petitioner filed its Comment thereto. On October 30, 2000, petitioner received respondent's Opposition through registered mail to which petitioner filed its Comment thereto on November 9, 2000. On January 22, 2001, petitioner received the resolution promulgated on January 19, 2001 denying petitioner's Motion for Reconsideration thereby affirming its denial of the claim for refund, the dispositive portion of which reads: "IN VIEW OF ALL THE FOREGOING, the instant motion filed by petitioner is hereby DENIED for lack of merit." (p. 34, Rollo ) Hence, this petition assigning the following error: "The Court of Tax Appeals erred in denying petitioner's claim for refund or issuance of Tax Credit Certificate." This petition lacks merit. Petitioner contends that the discrepancy in the amount of creditable taxes withheld is not an indication of failure to report income payments. In fact, even if there is a discrepancy between the amount of creditable taxes reflected in the annual income tax return and the account information form, it does not necessarily follow that the income from which this creditable taxes withheld was not reported to and such a discrepancy should not be made to merit the denial of the entire claim. Petitioner's contention is unmeritorious. On the basis of the evidence submitted by petitioner, it shows that petitioner has not declared all the income corresponding the creditable taxes withheld because in accordance with the testimony of petitioner's witness, the discrepancy was due to the timing difference which means that some of the income has been declared in 1995 but the certificates were only issued in 1996. But then, if indeed such income payments were declared in 1995, there was no way of exactly determining the alleged income payments declared in 1995 but certificates thereof were only issued in 1996 since no income tax return for 1995 was submitted, hence, the total denial of the claim, because there was no basis therefor. Petitioner also argued that the non-disclosure of the income payments in the certificates of creditable taxes withheld is not fatal in the determination of the amount of income from which the taxes were withheld. This argument is devoid of merit. There being no disclosure of income payments in the certificates of creditable tax withheld, there could be no basis for the creditable taxes to be withheld nor could there be basis for determining if correct withholding was made. Petitioner further argued that the correctness of the amount of tax withheld is immaterial for the claim of refund of excess or unutilized creditable withholding tax. This argument is without merit. The amount of creditable taxes withheld is the very subject of petitioner's claim, thus, if at the end of the taxable year the taxpayer finds out that its tax due is less than its creditable taxes withheld or if there is no tax liability altogether, claiming a refund for the excess or unutilized taxes withheld is proper. So, how can petitioner maintain that the correct amount of taxes withheld is not material or how then does it determine the exact amount to claim as refund? Finally, petitioner asserts that it has faithfully complied with the requirements to claim refund of excess or unutilized creditable taxes withheld. This assertion is misplaced. It must be noted that petitioner did not comply with the second and third of the three (3) basic requirements in cases of refund or excess of unutilized creditable taxes withheld as initiated in the case of Citibank, N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459. Moreover, the duty of ascertaining on whether or not petitioner has fully substantiated its claim is with the court ( Atlas Consolidated Mining and Development Corp. vs. Commissioner of Internal Revenue, CTA Case No. 5205, January 5, 1998). Furthermore, tax refunds are in the nature of tax exemptions and as such, they are regarded as in derogation of sovereign authority and to be construed in strictissimi juris against the person or entity claiming the exemption ( Commissioner of Internal Revenue vs. S.C. Johnson & Sons, Inc., 309 SCRA 87). Failure on the part of the taxpayer to sustain his claim is fatal to its cause of action. A taxpayer 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 the laws and regulations. ( Rondel Management, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 4787, promulgated on January 3, 1996 ). HcaDIA It is clear, therefore, that cases involving claims for refund, unlike in ordinary civil cases, cannot be decided in favor of the claimant by a mere preponderance of evidence. And when in doubt, the Court of Tax Appeals is not prevented to seek for other evidence which will remove, once and for all, the doubts, otherwise, such doubts must be resolved against petitioner ( Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121; Sea-Land Service vs. Commissioner of Internal Revenue, CA-G.R. SP No. 36796, October 26, 1995). While on the other hand, public respondent correctly denied petitioner's claim for tax refund because of the 3 basic requirements for refund of excess or unutilized creditable taxes withheld, to wit: "1) that it filed a claim for refund within the 2-year period as prescribed under Sec. 230 of the NIRC; 2) that the income upon which the taxes were withheld was included in the return of the recipient (Revenue Regulation 6-85); and 3) the fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued by the Payer (withholding agent) to the Payee, showing the amount paid and the amount of tax withheld therefrom (Sec. 10, Rev. Re. 6-85, as amended by Rev. Reg. 12-94)." only requisite no. 1 has been complied with by petitioner. Thus, as ratiocinated by the Court of Tax Appeals, in its Decision dated September 4, 2000 which We quote with approval, it states: "An examination of the evidence will reveal that petitioner claimed as creditable tax for 1996 the amount of P258,166.57 withheld from the payment of rental of equipment. But nowhere in petitioner's 1996 income tax return nor in its audited financial statements was the income from rental of equipment declared. In fact, it was clearly stated in the notes to petitioner's financial statements, that it is not the lessor of machinery and equipment but the lessee thereof. Furthermore, petitioner did not declare all the income corresponding to the creditable taxes withheld of P29,991,952.00 in its annual income tax return for the calendar year 1996. Petitioner disclosed in its account information form, the amount of P9,282,445.00 as the creditable taxes withheld corresponding to the declared gross income. Based on the testimony of petitioner's witness, the discrepancy was due to timing difference, meaning, some of the income had been declared in 1995 but the certificates were issued only in 1996. In other words, not all of the income from which the subject taxes were withheld was declared by petitioner in 1996. The third requirement provides for proof of withholding by virtue of the certificates of income taxes withheld at source wherein the amount of income payments and taxes withheld are shown. Petitioner, to prove the fact of withholding, submitted several certificates (Exhs. D, E, F, H and I). Yet, no amount of income payments can be found from said certificates contrary to Revenue Regulations No. 6-85, as amended. How did petitioner come up with the particular withheld taxes for such specific period when there were no income payments to base their withholding from? Revenue Regulations No. 6-85, as amended, required that both the amount paid and the taxes withheld therefrom, the taxpayer and the government are informed if the correct amount of taxes are being withheld by the agent. Also, by reflecting the amount of income paid to the payor (taxpayer), this Court can verify the total amount of income payments made from which the taxes withheld formed a part of. Hence, with the non-disclosure thereof in the case at bar, it cannot be determined with certainty the actual amount of total income from which the taxes were withheld and allegedly forming part of the gross income of herein petitioner." (pp. 162-164, Rollo ) Settled is the rule that factual findings of the Court of Tax Appeals are generally not disturbed on appeal when supported by substantial evidence and in the absence of gross error or grave abuse of discretion. ( Commissioner of Internal Revenue vs. BF Goodrich, Phils., Inc., 303 SCRA 546 ). WHEREFORE, PREMISES CONSIDERED, this petition is DENIED DUE COURSE and accordingly DISMISSED for lack of merit. SO ORDERED. Valdez, Jr . and Tolentino, JJ . , concur.