Tullett Prebon Inc. vs. Commissioner of Internal Revenue

DECISION

COMMISSIONER OF INTERNAL

REVENUE, To:

Respondent.

OFFICE OF THE SOLICITOR GENERAL

134 Amorsolo Street, Legazpi Village

Makati City

ATTY. SYLVIA A. ALMA JOSE ATTY. AYESHA HANIA B. GUILING-MATANOG ATTY. MARVEEN B. DE LA PAZ

Bureau of Internal Revenue

Room 703, Litigation Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Oiliman, Quezon City

SALVADOR LLANILLO & BERNARDO

8th Floor, Tower One & Exchange Plaza Ayala Triangle. Ayala Avenue

1226 Makati City

GREETINGS:

You are hereby notified by these presents that on June 28, 2024, an Amended Decision was rendered in the above-entitled case, copy of which is attached hereto.

Quezon City, Philippines, July 1, 2024.

Page 1 of I

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SPECIAL FIRST DIVISION

TULLETT PREDON

CTA Case No. 10273 (PHILIPPINES), INC., Petitioner, Members:

DEL ROSARIO, P.J., Chairperson, -versus- MANAHAN, and REYES-FAJARDO, JJ.

COMMISSIONER OF

Promulgated:

INTERNAL REVENUE, Respondent.

)(- - - - - - - - - - - - - - - - - - - - - - - - -

AMENDED DE

MANAHAN, J.:

For resolution of the Court are the following:

1. Motion for Partial Reconsideration (Re: Decision dated 30 January 2024) filed by respondent on February 19, 2024 ("respondent's Motion") , 1 with petitioner's Comment (Re: CIR's Motion for Reconsideration dated February 1 6, 2024) ;2 and

2. Motion for Partial Reconsideration filed by petitioner on February 21, 2024 ("petitioner's Motion"), 3 without respondent's comment. 4 Both Motions assail the Court's Decision dated January 30, 2024 ("Assailed Decision"),s the dispositive portion of which reads:

Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED.

Respondent is hereby ordered to refund petitioner the amount of P6,978, 758.87 representing the latter's excess and unutilized CWTs for the CY ended December 31, 2017.

Respondent's Motion

Respondent Commissioner of Internal Revenue ("CIR")

argues that in a judicial claim for refund or tax credit, it is crucial for the taxpayer to prove that its administrative claim should have been granted in the first place. Here, petitioner allegedly failed to satisfy all the documentary and evidentiary requirements for its administrative claim. It cannot therefore cure the same by presenting the necessary documents before the Court; otherwise, it would be tantamount to circumventing the CIR's role in evaluating the taxpayer's claim. Respondent cites Revenue Memorandum Order (RMO) No. 53-98 which provides the checklist of documents to be submitted by a taxpayer upon audit of its tax liabilities, and Revenue Regulations (RR) No. 2-2006 which require the submission of the Summary Alphalist of Withholding Agents of Income Payments subjected to Withholding Tax (SAWT). According to respondent, there is no record of petitioner submitting the complete documents under the said issuances. In its Comment, petitioner counterargues that respondent did not specify which specific documents it failed to submit. Moreover, it has been settled already that RMO No. 53-98 and RR No. 2-2006 merely enumerates the documents that the Bureau of Internal Revenue ("BIR") may require from the taxpayer. They are not the benchmark in determining whether the documents submitted are sufficient to support a claim for refund of erroneously paid or collected taxes.~,_ __

Tallett Pre bon (Philippines), Inc. u. Commissioner of Internal Revenue

Petitioner's Motion

Petitioner moves that the Court revisit its evidence and reconsider the assailed Decision on the following grounds: First, of the creditable withholding taxes (CWTs) in the amount of P875,606.69 disallowed by the Court based on the findings of the ICPA that the same are unsupported by valid CWT certificates (BIR Forms No. 2307), P17,406.06 are in fact properly supported by CWT certificates forming part of the evidence it submitted.

Second, the amount of P49,751.11 disallowed by the Court due to discrepancies between the amounts stated in the CWT certificates and the amounts per claim was due to the fact that the Court missed to appreciate that the latter are supported by two CWT certificates.

Third, the amount of P6,969.86 disallowed by the Court because the exhibit reference for the purported supporting CWT certificate does not pertain to the client per the schedule of claim was due to the fact that the Independent Certified Public Accountant (ICPA) inadvertently marked the CWT certificate issued to First Metro Investment Corp. as Exhibit "P-61" instead of Exhibit "P-62."

Fourth, the amount of P106,108.72 disallowed by the Court, because the exhibit references for their supporting CWT certificates already pertained to other CWT amounts, was due to erroneous exhibit markings.

Fifth, contrary to the Court's findings, the CWTs in the amount ofP289,926.03 are in fact properly supported by CWT certificates.

We now resolve. O'h.,.,.. __

Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue

Section 8 of RA No. 1125,6 as amended by RA No. 9282,7 describes the Court as a court of record. It is already well- settled that cases before the Court are litigated de novo, therefore party litigants should prove every minute aspect of their cases. 8 The Court's decision should be "solely based on the evidence formally presented before it, notwithstanding any pieces of evidence that may have been submitted (or not submitted) to the CIR."9 Respondent's contention therefore that petitioner should have first submitted the complete documents under RMO No. 53-98 and RR No. 2-2006 in support of its administrative claim deserves scant consideration. Aside from the fact that respondent did not even indicate which specific documents petitioner failed to submit, Section 229 of the Tax Code clearly expresses that the only requirement for a judicial claim of refund to be maintained is that an administrative claim had been filed. The law does not require that the latter be acted upon before a judicial claim may be filed. 10 Moreover, RMO No. 53-98 and RR No. 2-2006 do not provide that non-submission of the documents enumerated therein ipso facto results in the denial of the taxpayer's refund claim. This was already addressed by the Supreme Court in Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue: 11 " ... RMO No. 53-98 is addressed to internal revenue officers and employees, for purposes of equity and uniformity, to guide them as to what documents they may require taxpayers to present upon audit of their tax liabilities. Nothing stated in the issuance would show that it was intended to be a benchmark in determining whether the documents submitted by a 6 AN ACT CREATING THE COURT OF TAX APPEALS. 7 AN ACT EXPANDING THE JURISDICTION OF THE COURT OF TAX APPEALS (CTA), ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBERSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT No. 1125, AS AMENDED, OTHERWISE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES.

8 Commissioner of Internal Revenue v. Jerry Ocier, G.R. No. 192023, November 21, 2018 [Per J. Bersamin, First Division].

9 Commissioner of Internal Revenue v. Philippine Bank of Communications, G.R. No. 211348. February 23, 2022 [Per J. Hernando, Second Division]. Emphasis supplied. 10 Commissioner of Internal Revenue v. Univation Motor Philippines, Inc. iformerly Nissan Motor Philippines, Inc.), G.R. No. 231581, April 10, 2019 [Per J. Reyes Jr., Second Division].

Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue taxpayer are actually complete to support a claim for tax credit or refund of excess unutilized excess VAT." Accordingly, we deny respondent's Motion. Meanwhile, the Court finds partial merit m petitioner's Motion.

To recapitulate, aside from compliance with Section 76 of the National Internal Revenue Code, as amended ("NIRC"), the following requisites must be met for the successful claim of refund of excess unutilized CWTs:

1. The claim must be filed within the two-year prescriptive period under Sections 204(C) and 229 of the NIRC;

2. The fact of withholding must be 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; and

3. The income upon which the taxes were withheld must be included in the return of the payee or recipient.

Here, for the reconsideration of the subject disallowances, petitioner must convince the Court that the second and third requisites have in fact been met.

Below is a summary of the Court's findings on petitioner's compliance with the second requisite: Per assailed Decision

I

!

Client Name

Amount

Ground for

Disallowed

Ground for

Reconsideration

(PhP)

Disallowance

CHINA BANKING

763.20

N/A

CORPORATION

JP MORGAN CHASE BANK NA

1,050.00

N/A

--- Without BIR Form

No. 2307 per Duly covered by BIR

CITIBANK NA

12,197.47 !CPA's findings Form No. 2307 per

Exhibit "P-46"

INTERNATIONAL NEDERLAND

2,487.85 Duly covered by BIR

BANK

Form No. 2307 per .,.

Tullett Prebon (Philippines), Inc. u. Commissioner of Internal Revenue

Exhibit "P-64," except the amount of1'149.50

RIZAL COMMERCIAL

Duly covered by BIR BANKING CORP.

907.54 Form No. 2307 per

Exhibit "P-428"

Subtotal

17,406.06 SECURITY BANK CORP.

The amount per claim is (P29,603.68 per claim less 14,759.84 duly supported by fl4,843.84 per 2307)

Exhibit "1 03"

.. - --·-------·

AUSTRALIA & NEW ZEALAND

The CWT amounts The amount of 1'6,423.37

BANKING GROUP LTD

6,423.37 per BIR Form No.

is duly covered by (P82,991.85 per claim less 2307 are lower another BIR Form No.

f76,568.48 per 2307) than the CWT 2307 per Exhibit "!31" amounts per claim The amount per claim is SECURITY BANK CORP.

duly supported by (P48,397.23 per claim less 28,567.90 fl9,829.33 per 2307) Exhibit "210," except the amount of 1'250.97

Subtotal

49,751.11 The supporting

FIRST METRO INVESTMENT

BIR Form No. 2307 Duly covered by BIR CORP.

6,969.86 does not pertain to Form No. 2307 per the client per

Exhibit "P-62"

schedule of claim

Subtotal

6,969.86 Duly covered by BIR SECURITY BANK CORP.

38,393.61 Form No. 2307 per The supporting Exhibit "P-1 03" except the amount of1'315.16 - BIR Form No. 2307 already pertains to Duly covered by BIR SECURITY BANK CORP.

36,755.80 other income Form No. 2307 per payments and

Exhibit "P-210"

- CWT amounts Duly covered by BIR

INTERNATIONAL NEDERLAND

30,959.31 Form No. 2307 per

BANK

Exhibit "P-172"

Subtotal

106,108.72 Duly supported by BIR

CITIBANK NA

22,129.94 Form No. 2307 per

Exhibit "P-46"

METROPOLITAN BANK &

61,622.52

TRUST COMPANY

METROPOLITAN BANK &

Duly supported by BIR

TRUST COMPANY

57,183.37 Form No. 2307 per

Exhibit "P-76"

METROPOLITAN BANK &

73,790.73

TRUST COMPANY

Without BIR Form

-- -~---~ -----~---- ·---·· SECURITY BANK CORP.

5,400.00 No. 2307 per Court Duly supported by BlR verification Form No. 2307 per SECURITY BANK CORP.

14,429.31

Exhibit "P-209"

AUSTRALIA & NEW ZEALAND

16,041.91 Duly supported by BIR BANKING GROUP LTD.

- ··-- Form No. 2307 per

AUSTRALIA & NEW ZEALAND

8,005.72

Exhibit "P-352"

BANKING GROUP LTD.

RIZAL COMMERCIAL

Duly supported by BIR BANKING CORP.

41,255.00 Form No. 2307 per

Exhibit "P-428"

Subtotal

299,858.50

TOTAL

480,094.25

Tullett Pre bon (Philippines), Inc. v. Commissioner of Internal Revenue

I. Of the P 17,406.06 CWTs disallowed by the Court for not being supported by BIR Form No. 2307 per ICPA Report, P15,443.26 is pro- perly substantiated.

In the !CPA Report, the CWTs in the amounts of P763.20 and Pl,OSO.OO listed in Annex 3, "Schedule ofCWT Certificates that are scanned/ photocopies only", were disallowed because the supporting documents thereof are mere scanned copies or photocopies of the BIR Forms No. 2307. Meanwhile, the CWTs in the amounts of Pl2,197.47, P2,487.85, and P907.54 found in Annex 4, "Schedule of CWT subject for refund without certificates (BIR Form 2307)", were disallowed because there are no exhibit references for the corresponding BIR Forms No. 2307 in support thereof.

Upon verification, the Court finds that the CWTs listed in Annex 3 in the total amount of P1,813.20 are properly disallowed. Their supporting documents are in fact scanned copies or photocopies, therefore, the same cannot be given probative value by the Court.

The CWTs listed in Annex 4, on the other hand, are found to be properly substantiated by Exhibits No. "P-46," "P-64," (except for Pl49.50 withheld by the International Nederland Bank) and "P-428."

Therefore, the Court affirms the disallowance of CWTs only in the amount ofP1,962.70. The amount ofP15,443.3612 shall be allowed by the Court as it was established by petitioner to be properly substantiated by BIR Forms No. 2307. II. Of the P49,751.11 CWTs disallowed by the Court due to the amounts per BIR Form No. 2307 being lower than the amounts per claim, the amount of P49,500.14 is properly substantiated.

"P12,197.47 + (P2,487.85- P149.50) + P907.54. ~ Tullett Prebon (Philippines), Inc. v. Commissioner of Internal Revenue To support its allegation that the discrepancies between the amounts stated in the BIR Forms No. 2307 and the amounts per claim was due to the fact that the latter are supported by two CWT certificates, petitioner submits the following exhibit references:

Exhibit

Exhibit No. of No.

Client Name

Additional BIR Form

CWT Amount

2307

P-102

Security bank Corp.

Please refer to Exhibit 1" 14,759.84

P-103

-·

P-132

Australia & New Zealand

Please refer to Exhibit 6,423.37 Banking Group Ltd.

P-131

P-209

Security Bank Corp.

Please refer to Exhibit 28,567.90

P-210

TOTAL

,. 49,751.11 - ...

Verification of the above exhibits confirm that the CWTs withheld by Australia & New Zealand Banking Group Ltd. is indeed duly supported by another BIR Form No. 2307 per Exhibit No. "P-131."

As to the CWTs withheld by Security Bank Corp., further verification reveals that Exhibits No. "P-1 02" and "P-209" do not actually pertain to the CWTs from which the amounts of P14,759.84 and P28,567.90 are respectively derived. In any case, Exhibits No. "P-1 03" and "P-21 0" do support the latter amounts, save for the amount of P250.97 which is still in excess of the CWT covered by Exhibit No. "P-210." Thus, the CWTs in the amount of P49,500.1413 shall be allowed by the Court.

III.

The P6,969.86

CWTs

disallowed by the

Court

because the supporting BIR Form No.

2307 does not pertain to the client is properly supported.

Examination of the supporting documents for the CWTs in the amount of P6,969.86 reveal that the ICPA indeed erred 13 P6,423.37 + P14,759.84 + (P28,567.90- P250.97) ~

Tullett Pre bon (Philippines}, Inc. v. Commissioner of Internal Revenue in indicating Exhibit "P-61" as supporting reference therefor, although the BIR Form No. 2307 issued by First Metro Investment Corp was correctly marked as Exhibit "P-62." Verily, Exhibit "P-62" supports the "Tax Withheld For the Quarter" amounting to P32,022.61 which includes the amount of P6,969.86 corresponding to the income payment of P69,698.63 for the 3rd month of the quarter. IV. Of the P 1 06, 1 08. 72 CWTs disallowed by the

Court

because the supporting BIR Form No. 2307 pertains to another period or income payments and CWTs, the amount of P105, 793.56 is supported.

To support its claim that the CWTs in the amount of P106,108.72 disallowed by the Court due to their supporting exhibits pertaining to other CWT amounts was simply due to erroneous exhibit markings, petitioner points to the following correct exhibits:

Correct

CWT

Exhibit

Client

Exhibit

amount No.

name No.

(PhP)

"P-100"

SECURITY BANK CORP.

"P-103"

38,393.61

"P-100"

SECURITY BANK CORP.

"P-210"

36,755.80

"P-169"

INTERNATIONAL NEDERLAND BANK

"P-172"

30,959.31 ·- Upon validation of the above exhibits, the Court finds that the amount of P315. 16 withheld by Security Bank Corp. was not covered by Exhibit "P-1 03." The amount of P105, 793.5614 is properly substantiated and shall therefore be allowed by the Court.

V. The P299,858.50 CWTs disallowed by the Court for lack of supporting BIR Form No. 2307 are in fact properly supported.

' 4 (P38,393.61- P315.16) + P36,755.80 + P30,959.31. ~ Tullett Pre bon (Philippines), Inc. v. Commissioner of Internal Revenue Petitioner insists that the following CWTs in the total amount of P289,926.03 15 are properly supported by BIR Forms No. 2307:

Client Name

BIR Form No. 2307

Amount

(Exhibit No.)

CITIBANK NA

Included in P-46

12,197.47

METROPOLITAN BANK & TRUST COMPANY

P-76

61,622.52

METROPOLITAN BANK & TRUST COMPANY

P-76

57,183.37

METROPOLITAN BANK & TRUST COMPANY

P-76

73,790.73 SECURITY BANK CORP.

Included in P-209

5,400.00 SECURITY BANK CORP.

Included in P-209

14,429.31

AUSTRALIA & NEW ZEALAND BANKING

P-352

16,041.91 GROUP LTD.

AUSTRALIA & NEW ZEALAND BANKING

P-352

8,005.72 GROUP LTD.

RIZAL COMMERCIAL BANKING CORP.

P-428

41,255.00

Total

289,926.03 The Court notes that the disallowed CWT withheld by Citibank N .A. in the assailed Decision is in the amount of P22,129.94, 16 not Pl2,197.47. Hence, the total CWTs without supporting BIR Forms No. 2307 for reconsideration 1s P299,858.50, not P289,926.03.

Upon verification of the specified exhibit references which were already offered in evidence and admitted by the Court, the Court confirms that the CWTs in the amount of P299,858.50 is duly substantiated.

In sum, out of the P480,094.25 total disallowed CWTs, the amount of P477,565.42 is duly substantiated.

GROUND FOR

AMOUNT OF

UNSUPPORTED

RECONSIDERED

DISALLOWED

CWTS UPON

CWTs SUPPORTED

DISALLOWANCE PER

CWTs FOR

FURTHER

BY BIR FORMS NO.

ASSAILED DECISION

RECONSIDERATION

VERIFICATION

2307 Without BIR Form No. 2307 Pl7,406.06 Pl,962.70 Pl5,443.36 per !CPA's findings The CWT amounts per BIR Form No. 2307 are lower than P49, 751.11 P250.97 P49,500.14 the CWT amounts per claim ·------- The supporting BIR Form No.

2307 does not pertain to the P6,969.86 - P6,969.86 client per schedule of claim ---~-- 15 Incorrect total due to incorrect input of CWT amount withheld by Citibank N.A.

Tullett Prebon (Philippines}, Inc. v. Commissioner of Internal Revenue

The supporting BIR Form No.

2307 already pertains to other P106, 108.72 P315.16 P105,793.56 income payments and CWT amounts Without BIR Form No. 2307 P299,858.50 - P299,858.50 P480,094.25 P2,528.83 P477,565.42 Nonetheless, petitioner still has to establish the third requisite for the valid claim of refund of excess unutilized CWTs-i.e. that the income upon which the taxes were withheld must be included in the return of the recipient. Upon further scrutiny of the documents for income tracing, the Court finds that out of the validly substantiated CWTs amounting to P477,565.42, the amount of P259.50 withheld by Security Bank Corp. corresponding to the income payment of P2,594.97 should still be disallowed. The said income payment is not traced to the revenues (net brokerage) per Annex 7 "Summary of Revenue Ledger" of the ICPA Report that were included in petitioner's gross income in its annual income tax return for calendar year (CY) 2017. Consequently, only the amount of P4 77,305.921 7 satisfied the third requisite. In view of the above findings, the Court finds that petitioner sufficiently proved its entitlement to the refund of its excess and unutilized CWTs for CY 2017 in the adjusted amount of P7,456,064.79, as computed below: Valid CWTs granted per p 6, 978,758.87 assailed Decisiont8 Add: Total reconsidered 477,305.92 valid CWTs Adjusted valid CWTs p 7,456,064.79 ACCORDINGLY, respondent's

Motion

for

Partial

Reconsideration (Re: Decision dated 30 January 2024) filed on February 19, 2024 is DENIED for lack of merit, while petitioner's Motion for Partial Reconsideration filed on February 21, 2024 is PARTIALLY GRANTED. The dispositive portion of the Decision dated January 30, 2024 is hereby AMENDED to read as follows:

17 P477,565.42 - P259.50.

Tullett Pre bon (Philippines), Inc. v. Commissioner of Internal Revenue

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED.

Respondent is hereby ordered to refund petitioner the amount of 1"7,456,064.79 representing the latter's excess and unutilized CWTs for the CY ended December 31, 2017.

WE CONCUR:

~~

T-

/I<~(.C..C..,U ... C~~---­ CATHERINE T. MANAHAN

Associate Justice

Presiding Justice

(on leave) MARIAN IVY F. REYES-FAJARDO

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

Presiding Justice