Roxas Land Corp. v. Commissioner of Internal Revenue

EIGHTH DIVISION [CA-G.R. SP No. 74442. December 19, 2005.] ROXAS LAND CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N GUARIA III , J p : Roxas Land Corporation, a realty firm, filed with the Court of Tax Appeals on April 12, 2000 a petition for review claiming refund of its excess and unutilized tax credits in the amount of P16,073,141 derived from the sale of its condominium units during the taxable years 1997 and 1998. 1 Culled from the petition are these background facts: The petitioner filed in April 1998 with the Bureau of Internal Revenue a corporate annual income tax return for 1997 reflecting an overpaid or refundable income tax of P2,442,217. The amount was carried over to the succeeding year 1998 as the prior year's excess credit. In April 1999, the petitioner filed its income tax return for 1998 with an overpaid or refundable income tax of P16,073,141. The annual tax return was amended in August 1999 to indicate therein that the overpayment of P16,073,141 was to be refunded. On April 4, 2000, the petitioner filed with the BIR an application for the refund of P16,073,141.38 as unutilized creditable withholding tax paid in accordance with Section 204 @ of the Tax Code 2 which provides inter alia that no credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for refund within two years after payment of the tax or penalty. Believing that the claim could not be acted prior to the lapse of the two-year prescriptive period under Section 229, it went on to file the petition with the Court of Tax Appeals 8 days later on April 12. On August 29, 2002, the CTA rendered a decision partially granting the claim for refund and ordering the Commissioner of Internal Revenue to refund to the petitioner the amount of P11,642,222.37 as excess or unutilized creditable taxes for the years 1997 and 1998. 3 What it ruled out was the amount of P4,430,902 representing the alleged 1997 3rd quarter income tax payment which, together with the allowed creditable tax withheld of P11,642,222.37, would have accounted for the petitioner's total claim of P16,073.141. The reason for the disallowance was stated by the court in these words: As to its quarterly income tax payments in the amount of P4,430,902 forming part of the present claim for refund, the petitioner failed to present its quarterly income tax returns. Thus, the court could not verify the quarterly payments allegedly made by petitioner. Consequently, the same amount should be deducted or disallowed from its total claim . More details from the record show that the overpaid tax of P2,442,217 set forth in the petitioner's 1997 income tax return was supposed to be the difference between total tax credits and payments of P20,463,418 and the tax due of P18,021,201. 4 The figure P20,463,418 in turn appears to be the total of the creditable withheld tax of P16,032,516 and the claimed third quarter tax payment of P4,430,902 . The excess of P2,442,217 was thus carried over to the taxable year 1998, but since a net loss was declared, this tax credit was left unutilized. For 1998, additional tax credits of P13,630,924 were reported, raising the total claim for refund to P16,073,141. 5 The petitioner amended its 1998 income tax return to indicate its choice for a refund which it failed to do in the original return. The CTA held that the petitioner would be entitled to a refund of the unutilized amounts upon a showing of compliance with the substantiality requirements laid down by the Supreme Court in Citibank NA vs. Court of Appeals 280 SCRA 459. These requisites for a refund are: (a) the claim for refund has been filed within the 2-year reglementary period under Section 229 , (b) the income upon which the taxes were withheld are included in the gross income declared in the income tax return , and (c) the fact of withholding is established by a copy of the statement duly issued by the payor as withholding agent showing the amount paid and the amount of tax withheld . The CTA easily found that the petitioner has complied with the first two requirements. It was with respect to the third that some sticking points emerged. In the court's view, the petitioner could not claim a refund of the alleged quarterly tax payment of P4,430,902 on the ground that it has failed to present the quarterly income tax return to prove that such an amount was paid. The court thus limited the refund to the excess or unutilized creditable taxes of P11,642,222.37. 6 The crux of the petition for review is in the more precise and narrow question of whether it is necessary for the petitioner to produce the income tax return for the 3rd quarter of 1997. The petitioner argues that the amount representing its 3rd quarter tax liability has already been included and reflected in its 1997 final and adjusted Corporation Income Tax Return which posts a tax payment of P4,430,902. 7 The final 1997 return does then show an unutilized tax credit of P2,442,217 which was carried over to 1998. In a nutshell, the final return is sufficient evidence to determine whether the petitioner is liable to pay any additional tax or entitled to a refund or tax credit. The petitioner claims that the amount of income tax liability or refundable excess income tax payment appearing in the final return should be the operative basis for fixing the payment of an additional tax or granting the refund. 8 In saying that it is enough to show through the 1997 final return that it was entitled to a refund, the petitioner blithely ignores the thrust of the ruling of the tax court. One of the requirements for a refund as laid down in Citibank is actual proof of payment or withholding. That is why the CTA faulted the petitioner for not presenting the quarterly income tax return to prove that the tax of P4,430,902 has been paid. The onus on the petitioner to prove payment is not discharged by a simple entry in the final return that the amount was paid. Citibank adverts to the copy of the statement issued by the withholding agent as evidence of payment. There are for sure other equivalent legal proofs, but what needs to be stressed is that payment must be proved as judicial doctrine recognizes. The refundable amount is always the figure appearing in the final adjusted return and not in the quarterly returns, Commissioner of Internal Revenue vs. Philippine American Life Insurance Company 244 SCRA 446, but it behooves the taxpayer to show proof that it had paid the quarterly taxes in order to claim the refund under the final return. DHITcS In Paseo Realty and Development Corporation vs. Court of Appeals 440 SCRA 235, a corporation's claim for refund was denied because it failed to present its tax return for a particular year which would have enabled it to show that the excess tax credit was not applied to its tax liabilities for that year. As the High Court admonished, without the tax return, it would be virtually impossible to determine if the proper taxes had been assessed and paid. It would be equally a problem to ascertain the payment of a third quarter tax liability sans the return. The CTA saw through the failure of the corporation to produce the quarterly tax return and applied the legal presumption that evidence willfully suppressed would be adverse if produced. 9 It is axiomatic that a claimant for tax relief or benefit has the burden of proving the basis for the privilege. As stated in Paseo Realty , a claim for tax credit or refund must be construed strictly against the taxpayer. The CTA is justified in disallowing any claim whose every legal requisite has not been satisfactorily proved. In coming to terms with its findings, we acknowledge the primacy of the role of the tax court in the review of tax cases. Unless there is an abuse or improvident exercise of its authority, we will respect the conclusions the CTA has reached in the exercise of its highly specialized functions under the law. With the disallowance of the unproved 1997 quarterly tax payment, the amount of the refund has been correctly reduced to the amount stated in the assailed decision. IN VIEW OF THE FOREGOING, the petition for review is DISMISSED. SO ORDERED. Barrios and Javier Ranada, JJ., concur. Footnotes 1. Rollo , at 14-19. The case was docketed as CTA case 6063. 2. As amended by the Comprehensive Tax Reform Act. 3. Rollo , at 20-29. 4. Ibid ., at 41-43 for the 1997 income tax return. 5. Ibid ., at 21. 6. The CTA denied the motion for reconsideration on November 13, 2002. See rollo , at 38-40. 7. See note 4. 8. Rollo , at 9. < 9. See Section 3 (e), Rule 131, Rules of Court.