Melco Resorts Leisure (PHP) Corporation vs. Commissioner of Internal Revenue

DECISION

MANAHAN, J.:

Before the Court is a Petition for Review filed on March 11 , 2022, 1 seeking refund of the amount of P102,337,628.70 representing petitioner's alleged erroneously or excessively paid expanded withh olding tax ("EWT") for taxable year (TY) 2020.

THE PARTIES

Petitioner Melco Resorts Leisure (PHP) Corporation

("Melco") is a corporation organized and existing under the laws of the Philippines, with principal address at Asean cor. Roxas Boulevard, Barangay Tambo, Paraiiaque City.2 It is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification No. 008-362-871-00000. 3 Respondent is the duly appointed Commissioner of Internal Revenue ("CIR") who holds office at th e Bureau of Internal Revenue ("BIR") National Office.4 I Docket - Vol. I. , pp. 6 -38.

2 Joint Stipulation of Facts and Issues (JSI'l), Stipulation of Facts, par. I , Docl<f~t- Vol. II, p. 74 1; Exh ibit "P-1", Docket -· Vol. III, pp. 1068 to 1073. J Exhibit. "P-3", Docket - Vo!. III , pp. l 077 to 1079.

THE FACTS

On March 8, 2022, Melco filed with the Large Taxpayers Service of the BIR a letter dated March 7, 2022,5 with Application for Tax Credits/Refunds (BIR Form No. 1914)6 and supporting documents, for the refund or issuance of tax credit certificate of its alleged erroneously or excessively paid EWT for TY 2020 in the amount ofr102,337,628.70. On March 11, 2022, Me leo filed the present Petition for Review. The CIR filed his Answer on June 6, 2022, 7 and transmitted the BIR Records of the case on July 29, 2022. 8 On August 18, 2022, the Pre-Trial Conference for the case was held. 9 Prior thereto, both parties separately filed their pre- trial briefs on August 15, 2022. 10 The parties submitted their Joint Stipulation of Facts and Issues on September 19, 2022. 11 It was approved by the Court on October 10, 2022,12 thus, the pre-trial was deemed terminated. The Pre-Trial Order was issued on December 5, 2022.13 During trial, Melco presented: (1) Ms. Eunice Rekha P. Pobre, 14 its Tax Manager; (2) Ms. Maria Neriza C. Banaria,15 the Chief Financial Officer of Belle Corporation; and (3) Mr.

Emmanuel

Y.

Mendoza, 16 the

Court-commissioned

independent certified public accountant ("ICPA"). 17 The ICPA Report was filed on February 23, 2023. Meanwhile, counsel for the CIR manifested that he will no longer present evidence. 18 5 Exhibit "P-60", Docket- Vol. 4, pp. 1593 to 1601. ''Exhibit "P-61", Docket- Vol.~. p. 1602. 7 Docket- Vol. ll, pp. 671 to 678.

"Compliance dated July 29, 2022, Docket- Vol. 11, pp. 689 to 691. " Order dated August 18, 2022, Docket- Vol. Jl, pp. 723 to 723-B. 10 Pre-Trial Brief for Petitioner, Docket- Vol. II, 698 to 720; Pre-T1·ial Brief Docket- Vol. II, pp. 694 to 696.

11 Docket- Vol. II, pp. 741 to 754.

l2 Resolution elated October 10, 2022, Docket- Vol. 11, p. 780. 13 Docket- Vol. 11, pp. 819 to 844.

'"Exhibit "P-70", Docket- Vol. 1, pp. 186 to 205; Exhibit "P-70-2", Docket- Vol. Il, pp. 854 to 859; Minutes of the hearing held on, and Order dated, ~January 24, 2023, Docket- Vol. II, pp. 940, and 941 to 943, respectively. "Exhibit "P-71", Docket- Vol. 11, pp. 763 to 776; and Minutes of the hearing held on, and Order elated, January 24, 2023, Docket - Vol. II, pp. 940, and 941 to 943, respectively.

"' Exhtbit "P-126", Docket- Vol. II, pp. 1004 to 1010; nne! Minutes of the hearing hclcl on, and Order dated, March 8, 2023, Docket- Vol. lll, pp. 1012 to 1013-i\. 17 Id.

IR Transcript o( Stenographic Notes, March 8, 2023, p. 15. ~

On March 28, 2023, Melco filed its formal offer of evidence.l9 The CIR did not file comment thereon.2o In a Resolution dated May 26, 2023, 21 the Court admitted all of Melco's exhibits.

On December 6, 2023, the CIR filed a Manifestation stating that he is adopting the arguments contained in his Answer in place of a memorandum. 22 Melco filed its memorandum on April 5, 2024. 23 Thus, the case was submitted for decision on April 24, 2024.24

THE ISSUES

As stipulated by the parties, the issue is whether Melco is entitled to a refund or issuance of tax credit certificate in the amount ofP102,337,628.70 representing its alleged erroneous or excessively paid EWT for TY 2020 under Section 229 of the Tax Code, as amended.

Petitioner's arguments Melco explains that on March 22, 2021, its total rent for 2020 was reduced. Hence, the EWTs it paid on the accrued excess rent is deemed erroneously or excessively paid, since they pertain to taxes which are not legally due. Respondent's counter-arguments The CIR contends that Melco's failure to exhaust administrative remedies before filing the present judicial claim warrants the dismissal thereof. By filing the same merely three

(3) days from the date of its administrative claim, Melco prevented the CIR from verifying the documents in support of its claim. Moreover, according to the CIR, Melco failed to submit the complete documents to prove its entitlement to the claim.

l'J Formal Offer of Evidence with Manifestation [On Offer of Prouisionally Marlced Toxhibit.s P·6 to P·17 and P·30 to P·35 as Originals 11nder Rule 130 oft he Revised Rules ofCour1f, Docket~ Vol. III, pp. 1018 to 1067.

20 Records Verification dated April 18, 2023, Docket~ Vol. 4, p. 1707. 21 Docket~ Vol. 4, pp. 17141o 1718.

22 Docket~ Vol. 4, pp. 1751 to 1753.

23 Dockct~Vol. 4, pp. 1761 to 1781.

"'Minute Resolution dated April 24, 2024, Docket~ Vol. 4, p. 1783. ~

THE COURT'S RULING

The present Petition for Review is partly meritorious. Sections 204(C) and 229 of the Tax Code governs the refund of taxes erroneously or excessively paid. Said provisions read:

"SEC.

204. Authority of the Commissioner to Compromise/ Abate and Refund or Credit Taxes. -The Commissioner may - (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority... No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund."25 "SEC. 229. RecovenJ of Tax Erroneously or fllegally 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 excessively 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 filed after the expiration of two (2) 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 a 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 ."26 2s Emphasis supplied.

'" Emphasis supplied.c--- Page .s of 19 The foregoing provisions clearly require that within two

(2) years from the date of payment of the tax, the claimant must first file an administrative claim with the CIR before filing its judicial claim with the Court. Both claims, however, must be filed within the 2-year reglementary period. Timeliness of filing the claims is mandatory and jurisdictional. It bears to stress that for the judicial claim, the Tax Code expressly provides that it be filed within the 2-year reglementary period "regardless of any supervening cause that may arise after payment."27 The foregoing provisions also require that the taxes which are the subject of the claim be erroneously or illegally collected. An "erroneous or illegal tax" is defined as one levied without statutory authority, or upon property not subject to taxation, or by some officer having no authority to levy the tax.2s Hence, for the present claim to prosper, petitioner must establish not only that it timely filed the same; it must likewise prove that the EWT covered by the claim constitutes erroneously paid or illegally collected tax.

Petitioner's

administrative and judicial claims for refund or issuance of tax credit certificate covering the months of February 2020 to

December

2020 were timely filed.

The present claim stems from petitioner's alleged overpayment or over-remittance of EWTs for TY 2020. Below are the pertinent dates relative thereto: 1~ ~----·----

I

TwO-YEAR

I

PERIOD COVERED

DATE OF PAYMENT

I

PRESCI~JPTIVE PERIOD I

i_ ~:: ~~~~ --~~--~-;E-R~~i~~ -~~--=~!~j{1~~~:~: -=1 1 1 ,, quarter 2020

I_

~o::: 27. 202o33 ___ r 1\pr. 21. 2022 _____ i n Commissioner of Internal Revenue u. San Miguel Corporation, G.R. Nos. 180740 and 180910, November 11, 2019 [Per ,J. Hernando, Second Division[. '" Commissioner of Internal Reue~ve v. Pilipinas Shell Petroleum Cmporation, G.R. No. 188497, April 25,2012 [Per J. Villarama, Jr., First Division]. 2<J Exhibits "P-39" and "P-39-1", Docket- Vol. liT, pp. 1384 to 1386. 3° February 12, 2022 fell on a 5aturday. 31 Exhibits "P-40" and "P-40-1", Docket-- Vol. II, pp. 1387 to 1389. 32 March 12, 2022 fell on a Saturdav.

"'Exhibits "P-41" and "P-41-1", Docket- Vol. II, pp. 1390 to 1392. a--- Apr. 2020 May 22, 202087 | May 23, 202235 | [ May 2020 Jun, 15, 2020% Jun. 15, 2022 2nd quarter 2020 Jul. 29, 202037 Jul. 29, 2022 Jul. 2020 ~ Aug. 12,2020% | Aug. 12,2022 | Aug. 2020 | Sep. 15, 2020% | Sep, 15, 2022 3™ Quarter 2020 Oct. 29, 202040 Oct. 31, 202241 Oct. 2020 ‘Nov. 12, 2020 | Nov. 14,20223 _ Nov. 2020 Dec. 14, 20204 | Dec. 14,2022 _ 4th Quarter 2020 | Jan. 28, 202145 Jan. 30, 20234 Petitioner’s administrative claim was filed on March 8, 2022, while its judicial claim was filed on March 11, 2022. Thus, the same were timely filed insofar as the months of February 2020 to December 2020 are concerned. However, with respect to the month of January 2020, petitioner’s claim has prescribed since it should have been filed on February 14, 2022, within two years from the date of its payment on February 12, 2020.

Petitioner argues that since the total EWT due on its final rental payment in 2020 should only be P13,949,801.89, and that such amount was already fully paid by February 2020, then it is the succeeding EWTs in excess of the actual EWT due which are erroneously or excessively paid, illustrated as follows:

Jan. Feb. 12, 2020 | P 9,686,480.33 | P 9,686,480.33 | P . | Feb. ~— |. Mar. 12, 2020 9,686,038.66 | 4,263,321.56| 5,422,717.10 Mar. Apr. 27,2020 | 9,685,901.16 —_ 9,685,901.16 | "Apr. | May 22, 2020 | 9,685,455.33 | | -9685,455.33 | May Jun. 15, 2020 | 9,687,351.16 | “| 9,687,351.16 Jun, | Jul. 29,2020 | 9,686,776.16| | 9,686,776.16 Jul, | Aug, 12,2020 | _9,690,426.16_ 9,690,426. 16 | 34 Exhibits “P-42” and “P-42-1”, Docket ~ Vol. Il, pp. 1393 to 1395. 35 May 22, 2022 fell on a Sunday.

36 Exhibits “P-43” and “P-43-1”, Docket - Vol. II, pp. 1396 to 1398. 37 Exhibits “P-44” and “P-44-1”, Docket — Vol. Il, pp. 1399 to 1401. 38 Exhibits “45” and “P-45-1”, Docket — Vol. II, pp. 1402 to 1404. 39 Exhibits “P-46” and *P-46-1”, Docket - Vol. H, pp. 1405 to 1408. 419 Exhibits “P-47” and “P-47-1”, Docket — Vol. Il, pp. 1409 to 1411. 4Y October 29, 2022 fell on Saturday.

42 Exhibits *P-48” and “P-48-1”, Docket - Vol. Il, pp. 1412 to 1414. 43 November 12, 2022 fell on a Saturday.

4 Exhibits “P-49” and “P-49-1”, Docket — Vol. Il, pp. 1415 to 1417. 45 Exhibits “P-50” and *P-50-1”, Docket ~ Vol. Il, pp. 1418 to 1420. © January 28, 2023 fell on a Saturday. caw

Aug.

Sep 15, 2020 :

9,693,067.83 9,693,067 83 .. ]

f----~P· Oct 29, 202o-fl 9.695,551\6 9,695,551.16~ _ OcL_ ... __ Nov 12, 2020 _1 ___ 'l,C)9_6_,20_~:_1_l' __ . --.. __________ '.),696,2_01_]_6__1 Nov.

, Dec. 14, 2020 I -~~_96,467 ~8~- _____ __ 9,696,467~:3_~ ___ Dec. __ ]_J~_n 28, 2021 j _ -~()97,713_6_()_1---··· 9,697,71~.66 _j

L_ _________

T_O_T_A_L _116,28~,~30 6Cl_j 13,949,801.89 _1. 102,:.l3!,_6_~_1~ The Court disagrees.

In the Supplemental Agreement to Contract to Lease dated March 22, 2021,47 petitioner's total annual rent for calendar year 2020 was reduced to 1"265,046,236.00, net of withholding tax:

Section 2. 2020 Monthly Rent The Parties agree that the total annual Rent for the calendar year 2020 shall be Two Hundred Sixty-Five

Million Forty-Six Thousand Two Hundred Thirty-Six

Pesos (Php265,046,236.00), exclusive of value added tax and net of withholding tax, covering the gaming area only and no rent will he due on the non-gaming area. An overpayment of Three Hundred Eighteen

Million Six Hundred Thirty-Five Thousand Four

Hundred Sixty-Two Pesos (Php318,635,462.00) will be returned and paid by the Lessor to the Lessee no later than five (5) business days from the date of this Agreement without any set-off, condition, restriction, counterclaim, deduction or withholding.

Under the same agreement, said amount was to be paid monthly by petitioner:

RECITALS

(C) The Lessee agreed to pay to the Lessor monthly rent for the Leased Premises as provided in Section 5.01 of the Lease Agreement (the Monthly Rent). Consequently, the monthly rent for 2020 was reduced to 1"22,087,186.33 [1"265,046,236.00 divided by twelve (12) months], net ofEWT ofl"l,l62,483.49. Since petitioner should pay the rent on a monthly basis, the withholding tax thereon

should also be recognized monthly. The alleged overpayments therefore are as follows:

r-M_O_N_T_H_F_O_R--, 1 1---D-AT_E_· o-r-. --,---··---····-,------------,·--A-L_L_CG-.E-·D-·-- 2020

PAYMENT

EWT PAID (5%)

EWT DUE

OVERPAYMENT

Jan.

Feb. 12, 2020 r 9,686,480.33 r 1,162,483.49 r 8,523,996.84 f---·---f----_:_---+-·-··-'-.

·--,--- --f---_:__:_ _____ _ Feb.

Mar. 12, 2020 9,686,038.66 1,162,483.49 8,523,555.17 ~------+------~---~~--~--- __ _:_ _____ 1---~--~---- Mar.

Apr. 27, 2020 9,685,90 1.16 1,162,483.49 8,523,417.67 Apr.

May 22, 2020 9,685,455.33 1' 162,483.49 8,522, 97 J.84

May

Jun. 15. 2020 9,687,351.16 1,162,483.49 8,524,867.67 Jun.

Jul. 29, 2020 9,686,77616 1 '162,483.49 8,524,292.67 Jul.

Aug. 12, 2020 9,690,426.16 1 '162,483.49 8,527,942.67 Aug.

Sep. 15, 2020 9,693,067.83 1 1,162,483.49 8,530,584.34_ 9,695,551.16_1 1,162,483.49 8-'~33,067.67- I Nov. 12,._2 __ 0_2_0_1 __ 9,696,201.16_1 1,162,483.49 I 8,533,717_~~_'7"- Sep.

Oct. 29, 2020 Oct.

Nov.

Dec.

Jan.28,2021 9,697,71366 1,162,48349 8,535,23017 ...~ Dec. 14,2020 9,696,467 83 1,16_:2,483.4fuJ91_ 8,533,984.34 jl ,:---------- [________________

TOTAL

116,287,430.60 ___ 13,949,801.89 1 02,337,62il__7_2 As discussed, both administrative and judicial claims for refund or issuance of a tax credit certificate must be made within two (2) years from the date of payment of the tax, regardless of any supervening cause that may arise after payment. Thus, the claim covering the month of January has prescribed.

With regard to respondent's argument that petitioner failed to exhaust administrative remedies when it filed its judicial claim only three (3) days after filing its administrative claim, the Supreme Court already settled the same in this wise: 48 ... the CIR insists that respondent's claim for refund of the estate tax that the latter had previously paid should be denied for failure to exhaust administrative remedies. According to the CIR, the Estate's filing of its administrative claim with the BIR at 8:00 a.m. and its judicial claim before the CTA at 4:47p.m. both on .June 28, 2017 -just two days prior the lapse of the two-year period, deprived the BIR the opportunity to act on the administrative claim for refund. The CIR argues that, with less than nine hours given to him, he was not "afforded a complete chance to pass upon the matter" nor "given an opportunity to act and correct the errors committed in the administrative forum."

'1H Commissioner of Internal Reuenue u. Estate o_f Mr. Charles Marvin Rom.ig, G.R. No. 262092, October 9, 2024 [Per ,J. Hernando, J'irst Division].~ The contention is untenable.

It is of no moment that there is only a short interval between the filing of the two claims. The law merely requires that both claims are filed within the two·year period. In Commissioner of Intemal Revenue v. Carrier Air Conditioning Philippines, Inc., ... this Court held that, "from the plain language of the law, it does not matter how far apart the administrative and judicial claims were filed, or whether the [CIR] was actually able to rule on the administrative claim, so long as both claims were filed within the two-year prescriptive period." Having established that the instant claim was timely filed except for the month of January 2020, the Court shall now look into whether petitioner sufficiently proved that the subject EWTs paid are erroneous or illegal.

Petitioner erroneously paid EWTs for the months of

February to December 2020

in the aggregate amount of P93,813,631.87 Petitioner leases land and building from Belle Corporation for its gaming and non-gaming operations. 49 As lessee, it pays the monthly rent stipulated in the Contract of Lease. For the months of January to March 2020, petitioner paid the total amount of P583,681,791.28, inclusive of VAT and net of 5% withholding tax.so However, due to the disruptions caused by the COVID-19 pandemic in March 2020, petitioner and Belle Corporation discussed rent modification or reduction for the year 2020.51 While the negotiations were ongomg, Belle Corporation continued to bill petitioner for the rent due for April to December 2020. Having accrued said rent, petitioner remitted the corresponding EWT, despite not paying the rent in view of the pending negotiations.s2 Based on the originally filed Monthly Remittance Form (BIR Form No. 0619-E) and Quarterly Remittance Returns of •19 Contract of Lease, 1~xhibit "P-5", Docket- Vol. III, pp. 1097 to 1198. ' 11 Exhibits "P-30" to "P-35" and "P-30-1" to "P-35-1", Docket- Vol. III, pp. 1344 to 1355. 5I Petition for Review, par. 15-17, Docket- Vol. I, p. 10. 52 Jd.~

Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601-EQ), petitioner remitted EWTs in the total amount of P183,860,885.34 for TY 2020, the details of which are as follows:

PERIOD R ewe | , ne ont RETURN AMOUNT PAID | Jan, 2020 “P-39” to ‘P.30-1" Feb. 12, 2020 0619 P 20,550,652.35 | |__ Feb. 2020 | “P-40" to “P-40-1" | Mar. 12,2020 | 0619E | 19,075,402.30 | Mar. 2020 | “Pal to"P-ai-l" | Apr. 27, 2020 | 1601EQ 20,148,202.45 | _ Apr. 2020 “P-42" to *P-42-1" | May 22, 2020 0619E 14,753,986.75 May 2020 | “P-43" to "P-43-1" | Jun. 15, 2020 0619E | 13,624,024.56 | Jun. 2020. | “P-44"to"P-44-1" | Gut 99, 2020 | 1601EQ 11,213,373.66 | Jul. 2020 “P-45" ta “P-45-1" | Aug. 12, 2020 0619E 14,844,490.90 | Aug, 2020 "P-46" to “P-46-1" | Sep. 15, 2020 0619F i. 13,362,974.22 Sep. 2020 | “P-47" to"P-47-1" | Oct. 29, 2020 | 1601EQ. 15,465,714.13 |__Oct. 2020 | *P-48"to “P-48-1" | Nov, 12, 2020 06198 _| 13,450,393.93 | Nov. 2020 “P-49" to“P-49-1" | Dec, 14, 2020 O619E | 13,370,375.69 | Dec. 2020 “P-50” to “P-50-1" » Jan. 28, 2021 | 1601EQ —_ 14,001,294.40 | - - oo — poran: | P 183,860,885.34 Below is the detailed summary of the withholding taxes remitted, which shows that out of the remitted EWT of P183,8600,885.34, the amount of P117,384,358.65 were related to ATC WC100 or withholding tax on rental:

— ae core | 1st QUARTER 2*° QUARTER | 3"? QUARTER 47 QUARTER ATC Poe en i ~Snortneen cr anel moot _ TOTAL EXHIBIT “P-4 3” EXHIBIT “P-4-1" TEXUTBIT SP-47" FEXtnty “P-50” wceoli™ P 2,076 ,434.69 P 1,021,357.31 P 678,101.10 P 668,262.23 P 4,144,155.33 WCO5155 309,449.88 0.00 | 0.00 32,142.92 341,592.80 | WC100% | 29,423,528.98 | 29,062,682.65 | 29,540,619.35 29,357,527.67 | 117,384,358.65 WC1205" 3,624 ,258.05 2,131,219.99 2,815,226.79 3,126,490.42 11,697,195.25 WC140"" 92,470.61 44,021.38 8,891.13 65,435.98 210,819.10 + WC158% 3,318,540.02 698.541.08 j 1,674,4 16.0] 2,911,207.88 10,202,704.99 | 53 Docket — Vol. Til, pp. 1384 to 1420.

‘ Professional fees for corporation - gross income exceeded P720,000.00. 5S Management and technical consultants corporation - gross income exceeded P720,000.00.

56 Gross rental or lease for the continued use or possession of personal property in excess of P 10,000.00 annually and real property used in business which the payor or obligor has not taken title or is not taking title, or in which has no equity; poles, satellites, transmission facilities and billboards.

57 Income payments to certain contractors.

58 Gross Commission of service fees of customs, insurance, stock, immigration and commercial brokers, fees of agents of professional entertainers and real estate service practitioners (RESPs){i.e. real cstate consultants, real estate appraisers and real estate brokers - gross income exceeds P720,000.00.

59 Income Payment made by top withholding agents to their local/resident suppliers of goods other than those covered by other rates of withholding tax. @a—

Page 1i of 19 | we160» 17,420,398.91 | _6,162,601.43 | 6,332,990.52 | _4,254,951.08 | _34,170,891.94 | wCsi6e 33,600.00 0.00 0.00 0.00 33,600.00 I wioio | 900; -~20.00 "3,675.00 0.00 ~~ 3,675.00 WIO11s 1,475,575.96 470,961.13 [ 2,619,309.35 | 806,045.84 5,37 1,892.28 TOTAL | 59,774,257.10 | 39,591,384.97 | 43,673,179.25 | 40,822,064.02 | 183,860,885.34 | Further review of the monthly alphalists®* provided by petitioner reveals that out of the P117,384,358.65 EWTs on rental payments, P116,287,430.60 were for the account of Belle Corporation. A list of income payments with ATC WC100 from the alphalist is presented below:

. ae SUPPLIER . ~ . —_ TAX . re - | EXHIBIT No, TIN Name PERIOD AMOUNT Rate | TAX WITHUELD ee a —-- ~-. - “P-S1", Line 57, 000-156- | Belle Jan. 2020 | P 193,729,606.60 5% I 9,686,480.32 Docket — Vol. UI, 011 Corporation p.1421. { ; “P-51°, Line 244-706- | Digichive | Jan, 2020 525,000.00 5% 26,250.00 111, Docket - 303 Philippines Vol. Il, p.1422, Corp | ———1.. _ os __ _- : °P.517, Line 000-664- Hotel and Jan, 2020 9,600.00 5% 480.00 | 235, Docket - 386 Restaurant Vol. Til, p.1423. Association of

the Phils Inc (

“P.51", Line 000-387- | Kooler | Jan. 2020 340,521.40 5% 17,026.07 278, Docket — 423 Industries Inc | Vol. Ill, p.1424, | } “P-51>, Line 009-110- | Planogram Jan. 2020 | 250,000.00 2% 12,500.00 | 389, Docket - 822 Events Vol. II, p.1425. Incorporated j 1 “p-51", Line 003-058- | SM Prime Jan. 2020 96,700.00 a% 4,835.00 431, Docket - 789 Holdings Inc Vol. UI, p. 1426.

“P-51-1", Line 000-156- | Belle Feb. 2020 193,720,773.20 5% 9,686,038.66 3 55, Docket - Vol. 011 Corporation Ul, p. 1429 “P-51-1", Line 244-706- | Digichive Fel. 2020 } 525,000.00 5% 26,250.00 i 114, Docket - 303 Philippines Vol. WI, p. 1430. Corp “P-51-1", Line 100-06G6- | EM david ~ Feb, 2020 970,350.00 5% 28,517.50 129, Docket - 430 Electronics Vol. lil, p. 1430. Enterprise | i “P-S1-1", Line 202-726- Nandings Feb. 2020 41,017.80 9% 200.89 | 310, Docket — 661 Steel Beds { Vol. Tl, p. 1433. | Enterprises | “P-S1-17, Line 003-058- | SM Prime Feb. 2020 87 342.00 5% 4,367.10 | 411, Docket - 789 Holdings Inc Vol. HI, p. 1434. i i “P-S1-1", Line 004-677- Wizard of Ads ; Feb. 2020 88,000.00 5% 4,400.00 | 497, Docket - 871 Inc Vol. WI, p. 1435. L i 6° Income Payment made by top withholding agents to their local/resident suppliers of services other than those covered by other rates of withholding tax. 5t Commissions, rebates, discounts and other similar considerations paid/granted to independent and/or exclusive sales representatives and marketing agents and sub- agents of companies, including multi-level marketing companies - gross income is more than P3M.

62 Professional fees of individuals - gross income for the current year did not exceed P3M.

63 Professional fees of individuals - gross income is more than P3M. 6+ Exhibits “P-51” to “P-51-11”, Docket - Vol. II], pp. 1421 to 1485, ae

1 “°P-§1-27, Line ! 900-156- | Belle Mar, 2020 | 193,718,023.20 5% 9,685,901.16 ! 47, Docket - Vol. O11 | Corporation t } Ill, p. 1436. { H “P-51-2", Line 244-706- | Digichive | - 2020 | 525,000.00 7 5% 26,250.00 94, Docket - Vol. 303 Philippines Ni, p. 1437. Corp | | “P-51-2", Line 276-580- Greencare Mar. 2020 12,500.00 5% 625.00 166, Docket - 995 Trading and Vol. I, p. 1438. Services | “P-51-2", Line 202-726- | Nandings Mar. 2020 | 113, 571,20 5% 5,678.56 278, Docket -— 661 Steel Beds Vol. I, p. 1439. Enterprises “P-S1-2°, Line 236-114- | OMD Mar. 2020 } 3,071,250.00 5% 153,562. 50. 290, Docket - 753 Philippines Vol. Il, p. 1439. ; Inc “p-51-2°, Line 003-058- | SM Prime Mar. 2020 87,342.00 5% 4,367.10 369, Docket -: 789 Holdings Inc | Vol. Ul, p. 1440. | “P-$1-2", Line 007-30 1- | Tunog at. Mar. 2020 995,982.20 a% 49,799.11 417, Docket — 378 Liwanag sa \ Vol. Til, p. 1441. Teatro 1 “P-51-3", Line 8, | 000-156- | Belle Apr. 2020 193,709,106.60 5% 9,685,455.33 Docket — Vol. Ill, O11 Corporation

p. 1445, — - . = | ——— oo eee eee "P-51-4", Line 7, } 000-156- | Belle May 2020 193,747 023.20 9% 9,687,351.16 | Docket - Vol. IIL, | Oli Corporation |

p. 1447.

“P-S1-5°, Line 000-156- | Belle Jun. 2020 | 193,735,523.20 5% 9,686,776.16 34, Docket - Vol. 011 Corporation MI. p. 1449.

“Pp- 51-5 *, Line 214-456- | Preconcept | Jun. 2020 | 62,000.00 5% 3,100.00 ; 209, Docket . 231 Designs and H Vol. Sil, p. 1451. Display |

Works

| ‘“P-51-6", Line 000-156- | Belle Jul. 2020 193,808 523.20 5% 9,690,426.16 32, Docket ~ Val. 011 Corporation lil, p. 1455. ! _ _ 7 “P-$1-6", Line | 202-726- | Nandings : Jul. 2020 27,455.60 5% 1,372.78 | 214, Docket - { 661 Steel Beds i | Vol, Wl, p. 1457. Enterprises | j en ——— 4 “P-51-77, Line 000-15G6- | Belle Aug. 2020 193,86) ,356.60 5% 9,693 ,067.83 26, Docket -- Vol. 011 Corporation Il, p. 1460. | | “P-51-7", Line 244-706- | Digichive ! Aug. 2020 2,100,000,00 3% 105,000. re 53, Docket - Vol. | 303 Philippines lll, p. 1460. Corp 1 \ ; _P-51-8", Line 000-156- | Belle Sep. 2020 193,911,023.20 5% | 9,695,551.16 36, Docket -- Vol. 011 Corporation 1, D. 1464.

“p. 51-8", Line 244-706- Digichive » Sep. 2020 1,050,000.00 5% 52,500.00 70, Docket - Vol. 303 Philippines :

HI, p. 1464. | Corp “P-5S1-87, Line 276-580- | Greencare Sep. 2020 42,750.00 5% 2,137.50 121, Docket - 995 Trading and Vol. Ui, p. 1465. | Services 1 :

“Pp-51-8", Line 008-949- MWM Sep. 2020 621,178.40 o% 33,058.92 | 207, Docket - 141 Terminals Inc | i Vol. IU, p. 1466. i “P-51-8", Line 236-114- | OMD \ Sep. 2020 5,390,100.00 5% 269,505.00 | 218, Docket — 753 Philippines | ; Vol. TI, p. 1466. Inc | ;

“P-51-9", Line 000-156- | Belle Oct. 2020 193 924,023.20 5% 9,696,201.16 | 29, Docket ~ Vol. | 011 Corporation | Ill, p. 1471. i i ee | ““P-5}-9", Line Q00-387- | Kooler Oct. 2020 681,042.80 5% 34, 052.14 | 176, Docket - 423 Industries inc ' Vol. UII, p. 1473. | | | “P-51-9", Line 008-949- MWM Oct, 2020 32,000.00 5% 1,600.00 } 217, Docket — 141 Terminals Inc | | Vol. fl, p. 1473. j ft \ ~p-51-9", Line 202-726- } Nandings Oct. 2020 61,607.60 5% | 3,080.38 218, Docket - 661 Steel beds | Vol. Il, p. 1473. Enterprises | “p.51-9", Line 236-114- | OMD Oct. 2020 2,079,000.00 5% 103,950.00 230, Docket - 753 Philippines | Vol. III, p. 1474 + Inc “P-51-10", Line 009-873- | Bay City Nov. 2020 295,400.00 5% 14,770.00 28, Docket - Vol. 397 Comrnercial III, p. 1476, Ventures

Corp

“P-51-10", Line 000-156- {| Belle Nov. 2020 193,929, 356.60 3% 9,696 467.83 32, Docket ~ Vol. 011 | Corporation =;

Ill, p. 1476.

—--~_- —~— “P-51-10", Line 008-949- MWM Nov. 2020 32,000.00 5% 1,600.00 206, Docket - 141 Terminals Inc | Vol. Il, p. 1478. | “P-51-11", Line . 000-156- Belle | Dec. 2020 193,954 ,273.20 5% 9 697,713.66 38, Docket - Vol. Oli Corporation | I, p. 1481. | “P-51-117, Line 008-949- MWM Dec. 2020 32,000.00 5% 1,600.00 210, Docket - 141 Terminals Inc Vol. Hl, p. 1483.

“Pp-51-11°, Line 236-114- | OMD Dec. 2020 2,129,850.00 5% 106,492.50 225, Docket ~ 753 Philippines | Vol. III, p. 1484. Inc f TOTAL | 2,347,687,173.00 117,384,358.65 | On March 22, 2021, petitioner and Belle Corporation finalized and signed the Supplemental Agreement to Contract of Lease®> which adjusted the total annual rent for TY 2020 to P265,046,236.00, exclusive of value added tax and net of withholding tax, covering only the gaming area and no rent will be due on the non-gaming area. The parties agreed that since petitioner already paid the amount of P583,6081,791.28, Belle Corporation will return the overpayment to petitioner.

Thus, the new gross monthly rent of petitioner is P23,249,6069.82, while the corresponding withholding tax is P1,162,483.49, computed below:

Annual Rent, net of withholding tax P 265,046,236.00 Divided by: 95% to derive gross amount 0.95

Gross Annual Rent

" 278,996,037.89 Divided by: 12 months 12 /Monthly Rent : OO 23,249,669.82 | Multiplied by: EWT Rate ~ Rental Payment. 7 - 3% | Withholding Tax on New Monthly Rent 1,162,483.49 Since the claim for the month of January 2020 has already prescribed, the EWT remitted for such month can no the amount of longer be refunded. Accordingly, only

P93,813,631.87 may be the proper subject of a claim for refund, as detailed below:

Original Monthly vu Should be Tax . ° Tax Withheld New Monthly Rent : Refundable Period Rent (B)=(A) x 5% (C) Withheld (B) - (D) (A) “sre (D) =(C} x S% TM 5305 193,729 ,606.60 9,686,480.33 23,249,669.82 1,162,483.49 =o 5050 193,720,773.20 9,686 ,038.66 23,249,669.82 1,162,483.49 8,523,555.17 5000 | 193,718,023.20 9,685,901.16 | 23,249,669.82 1,162,483.49 8,523,417.67 — . |. . ; _. _ aes 193,709,106.60 9,685,455.33 23,249,669.82 | 1,162,483.49 8,522,971.84 sony 193,747 ,023.20 9,687,351.16 23,249 ,669.82 1,162,483.49 8,524,867.67

Po _

ee 193,735,523.20 9,686,776.16 23,249,669.82 1,162,483.49 8,524,292.67 | Oo 193,808,523.20 9,690,426.16 23,249 ,669.82 1,162,483.49 8,527,942.67 I, 7 - _ [ oe 193,861,356.60 9,693.067.83 23,249,669.82 1,162,483.49 8,530,584.34 bya 193,911,023.20 | 9,695,551,16 23,249,669.82 1,162,483.49 8,533,067.67 oe 193,924 023.20 9,696 ,201.16 23,249,669.82 1,162,483.49 8,533,717.67 _ 1 | ae 193,929,356.60 9,696 ,467.83 23,249,669.82 1,162,483.49 8,533,984.34 | 3 i ns - ee t won - J. a a D000 193,954,273.20 9,697,713.66 1 23,249,669.87%" 1,162,483.43°8 8,535,230.18"" 2,325,748,612.00 116,287,430.60 | 278,996,037.89 P13,949,801.89 93,813,631.87 _————— Petitioner’s declared rental expense for TY 2020 is only the reduced amount of P278,996,037.89

Pursuant to the Supplemental Agreement to Contract of

Lease, petitioner returned to Belle Corporation the originally issued SOAs’? and ORs’! for the cancellation and issuance of a new SOA’? and OR’ with the reduced amount of rent. Petitioner then adjusted its records by reversing the unpaid portion of the accrued rent from April to December 2020.74 Petitioner’s witness, Ms. Eunice Rekha P. Pobre, testified to prove that Belle Corporation issued a new SOA and OR 66 Barred by prescription.

67 Adjusted to correspond the total amount.

68 Adjusted to correspond the total amount.

69 Adjusted to correspond the total amount.

70 Exhibits “P-6” to “P-17” and “P-6-1” to “P-17-1”, Docket - Vol. UJ, pp. 1199 to 1282. “1 Exhibits “P-30” to “P-35” and “P-30- 1” to “P-35-1", Docket — Vol. UI, pp. 1344 to 1355. 72 Exhibit “P-63”, Docket — Vol. 4, pp. 1604 to 1605.

73 Exhibit “P-64”, Docket — Vol. 4, p. 1606.

“4 Exhibit “P-95”, USB, marked as Exhibit “P-125-2.” 2-7 showing the billings and collection of the reduced rentals for the TY 2020. The relevant portion of her testimony are as follows:75 "Q-7 Why were the originals of the previously issued SOAs returned to Belle?

A-7

The previously issued SOAs were returned to Belle in order to implement the negotiated reduction of rentals for the year 2020.

Q-9

What happened after petitioner returned the SOAs to Belle?

A-9

Belle

stamped the original

SOAs

as 'cancelled'.

Q-11

What happened, if any, after the cancellation of the previously issued SO As, marked as Exhibits 'P- 6-1' to 'P-17-1'?

A-ll

Belle issued a new SOA dated December 31, 20202 in the amount of P278, 996,073.89 to reflect the reduced rental for the period of January to December 2020. The new SOA is marked as Exhibit 'P-63'.

Q-14

What happened, if any, after the cancellation of the previously issued ORs, marked as Exhibits 'P- 30' to 'P-35 '?

A-14

As previously mentioned, Belle issued a new OR dated December 29, 2020 in the net amount of P265,646,236, net of 5% withholding tax. The reduced gross rental amount of P278,996,073.89 was also indicated in the new OR. The new OR dated December 29, 2020 is marked as Exhibit 'P-64'."

Furthermore, as ascertained by the ICPA, the rent paid to Belle Corporation by petitioner was declared in its Annual Income Tax Return (BIR Form No. 1702-MX) ("ITR")76 as an expense forTY 2020, included in the total cost of sales/ services 75 F;xhibit "P-95", USB, marked as !exhibit "P-125-2". 7" Exhibit "P-57'', Docket- Vol. III, pp. 1510 to 1512 . ........--- amounting to P9,004,792,282.00, under Line 477 of Schedule 2 of the annual ITR, viz:’8

PARTICULARS EXEMPT REGULAR

TOTAL

Direct charges — salaries, wages, P1,837,224,820.22 162,805,217.55 2,000,030,037.77 and benefits a ee Direct charges — materials, 102,380,114.75 73,497,175.85 175,877,290.60 supplies, and facilities Direct charges - depreciation 694,170,396.43 287 ,418,304.42 981,588,700.83 Direct charges — 281,796,549.89 58,792,150.28 340,588,700.17 Direct charges - “ re 978,232.19 17,209,731.39 18,187,963.58 outside services oirect charges - 5,441,734,299.07 46,785,289.78 | 5,488,519,588.85 “Ty Fr Total cost of sales/services | 8,358,284,412.53| 646,507,869.27 | 9,004,792,281.80

per ITR Z

The reduced actual rent expense of P278,996,037.89 was reported as reconciling item in line 6.1, Schedule 10 of the annual ITR. Thus, only such reduced amount was claimed by petitioner as rent expense during the TY 2020.

Petitioner did not carry over the erroneous EWT payment in its subsequent filing Petitioner amended its BIR Form No. 1601-EQ returns’? for the four (4) quarters of TY 2020, in order to reflect the over remittance amounting to P102,337,628.70, which is the subject of the present claim. On the amended BIR Form No. 1601EQ for the 4 quarter of TY 2020,®° petitioner checked the option “To be refunded.” In order to prove that it did not carry over the amount of claim, petitioner submitted in evidence the BIR Forms 1601-EQ for the years 2021 and 20228! and BIR Form No. 0619-E for January 2023.82 Based on these pieces of evidence, the over-remittance of P 102,337 ,6028.70 was, indeed, not carried over to the succeeding periods.

77 Exhibit “P-57-1”, Docket — Vol. Ifl, at p. 1511.

78 Exhibit “P-125”, Docket — Vol. II, p. 980.

7S Exhibits “P-53” to “P-56”, Docket — Vol. IIT, pp. 1502 to 1509.

There

is no double utilization on the part of the lessor Pursuant to Section 58(B) of the Tax Code as implemented by Revenue Regulations No. 2-98, as amended, taxes withheld under the withholding tax system must be covered by withholding tax certificates, which are to be issued by the withholding agent or payor to the income recipient or payee. Taxes withheld which are supported by said certificates shall be allowed as tax credit against the payee's income tax liabilities.

Here, the initially issued withholding tax certificate (BIR Form No. 2307) to Belle Corporation was returned to petitioner. Petitioner replaced the same with a new BIR Form No. 2307 bearing the tax withheld in the amount off'13,949,801.89.83 To establish that the creditable withholding tax claimed for the year by Belle Corporation was based on the recent BIR Form No. 2307, petitioner presented as evidence the following documents:

1. BIR Form No. 1702-RT of Belle Corporation for TY 2020;84

2. Summary Alphalist of Withholding Tax (SA WT) for the months January to March 2020 of Belle Corporation;ss

3. SAWT for the months May to June 2020 of Belle Corporation;B6

4. SAWT for the months July to September 2020 of Belle Corporation; 87

5. SAWT for the month of October 2020 of Belle Corporation;ss

6. SAWT for the month of November 2020 of Belle Corporation;S'l and

7. SAWT for December 2020 of Belle Corporation9o Verification of Belle Corporation's SA WT for the year 2020 reveals that the total creditable withholding taxes amounts to R1 Judicial 1\ffidauit of Mw-ia Neriza C. Banaria, Exhibit "P-71 ", Docket- Vol. II, p. 770. 84 Exhibit "P-66", Docket- Vol. 4, pp. 1689 to 1695. 8c Exhibits "P-115" to "P-117", USB, marked as l0:xhibit "P-125-2". 86 Exhibits "P-119" to "P-120", USB, marked as Exhibit "P-125-2". Rt Exhibits "P-121" to "P-123", USB, marked as Exl1ibit "P- 125-2". "Exhibit "P-124", USB, marked as Exhibit "P-125-2". 80 Exhibit "P-90", USB, marked as r~xhibit "P-125-2". no Exhibit "P-94", USB, marked as Exhibit "P-125-2". ~ P231,467,391.00, which tied up with the tax credits reported in Belle Corporation's ITR. Further review of the SAWTS reveals that of the total claimed tax credits of '1'231,467,391.00, the amount of !'13,949,801.89 pertains to the tax credit withheld by petitioner, which was reflected and evident on the December 2020 SA WT only. Thus, there is no double utilization of the subject claim on the part of petitioner and Belle Corporation. In view of the foregoing, the Court finds that petitioner is entitled to refund the amount ofP93,813,631.87, representing its erroneously or excessively paid withholding tax related to its rental payment to Belle Corporation forTY 2020. ACCORDINGLY, the present Petition for Review filed on March 11, 2022 is PARTIALLY GRANTED. Respondent CIR is

ORDERED

TO

REFUND

OR ISSUE A

TAX

CREDIT

CERTIFICATE for the amount of P93,813,631.87 in favor of petitioner.

WE CONCUR:

c~r~-~ CATHERINE T. MANAHAN

Associate Justice

~ ~ r ~ -ra1a,cA-o MARIAN 1v#. REYiS-FAJARDO

Associate Justice

HENRY d{lANGELES

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~

7. A.w~·--~'M.t..---..... CATHERINE T. MANAHAN

Associate Justice

Chairperson

CERTIFICATION

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

Presiding Justice