Samsung SDS Global SCL Philippines Co., et al. vs. Commissioner of Internal Revenue

DECISION

CUI-DAVID, J .:

Before this Court is the Petition for Review dated April 13, 2023, filed by petitioner Samsung SDS Global SCL Philippines Co., Ltd., Inc.

(petitioner) , seeking the refund of P30,208,502.00, representing alleged unutilized creditable withholding taxes (CWT) for the calendar year (CY) 2020.1

THE PARTIES

Petitioner Samsung SDS Global SCL Philippines Co. , Ltd., Inc. is a domestic corporation duly organized under and by virtue of the laws of the Philippines, with principal business address at 101 Bigben Holdings, Elisco Road, Barangay Ibayo Tipas, Taguig City.2 Respondent is the Commissioner of Internal Revenue (CIR or respondent), who is tasked to assess and collect all national internal revenue taxes, fees, and charges, and enforce all Docket - Vol. I, pp. 23-24, Petition for Review, Prayer. 2 /d. at 7 and 244, Petition for Review, Parties, par. 2 vis-a-vis Answer, par. I.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner oflnternal Revenue forfeitures, penalties, and fines connected therewith, and holds office at the Bureau of Internal Revenue (BIR) National Office Bldg., Agham Road, Diliman, Quezon City.3

THE FACTS

On April 15, 2021, petitioner filed its original Annual Income Tax Return (BIR Form No. 1702-RT) (Annual ITR) for CY 2020, 4 which reflected the following tax credits/payments:s

44 Prior Year's Excess Credits Other Than

Minimum Corporate Income Tax (MCIT)

72,018,028.00 48 Creditable Tax Withheld from Previous Quarter Is per BIR Form No. 2307 20,705,307.00 49 Creditable Tax Withheld per BIR Form No. 2307 for the 4th Quarter 11,126,692.00

55 Total Tax Credits/Payments

103,850,027.00 Petitioner's original Annual ITR for CY 2020 also reflected an overpayment of !'98,320,098.00, computed as follows:6

Part II- Total Tax Pavable

Tax Due

5,529,929.00

Less: Total Tax Credits/Pavments

103,850,027.00

Total Amount Payable

(98,320,098.00)

(Overpayment)

In the said original Annual ITR, petitioner chose the option "To be refunded" for the overpayment. 7 On May 17, 2021, petitioner filed an amended Annual ITR for CY 2020,8 which reflected the following:9

44 Prior Year's Excess Credits Other Than

MCIT

48 Creditable Tax Withheld from Previous Quarter/s per BIR Form No. 2307 49 Creditable Tax Withheld per BIR Form No. 2307 for the 4th Quarter

55 Total Tax Credits/Payments

!d. at 498. Joint Stipulation of Facts and Issues (JSFI). par. A. I. Jd at 61-66, Exhibit ··r-4"'.

!d. at 64, Exhibit ''P--1··. Lines 44. 48. 49 and 55. Jd at 63. Exhibit "P-4". Part II- Total Tax Payable. ld at 63. Exhibit ··P-4".

ld at 67-71. Exhibit "P-5".

Jd at 69. Exhibit ··P-5-1".

72,018,028.00 20,705,307.00 9,503,195.00 102,226,530.00

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

Petitioner's amended Annual ITR for CY 2020 reflected an overpayment of'P96,694,539.00, computed as follows:lD

Part II - Total Tax Payable

Tax Due

5,531,991.00

Less: Total Tax

102,226,530.00

Credits/Payments

Total Amount Payable

(96,694,539.00)

(Overpayment)

In the said amended Annual ITR, petitioner also marked the option "To be refunded" for the overpayment. 11 On April 4, 2023, petitioner filed with the BIR Regular Large Taxpayer Audit Division a letter dated March 31, 2023, 12 together with the Application for Tax Credits/ Refunds (BIR Form No. 1914), 13 seeking the refund ofunutilized CWTs for CY 2020, amounting to P30,208,502.00.

PROCEEDINGS BEFORE THE COURT

Claiming inaction on the part of the BIR, petitioner filed the present Petition for Review on April 14, 2023. 14 On July 10, 2023, respondent filed his Answer.1s A Pre-Trial Conference was held on October 12, 2023. 16 Prior thereto, petitioner filed its Pre-Trial Brief on September 21, 2023, 17 while respondent submitted his on October 6, 2023. 18 On November 7, 2023, the parties submitted their Joint Stipulation of Facts and Issues, 19 which was approved by the Court in its Resolution dated December 6, 2023.20 The Pre-Trial Order dated January 25, 2024, was then issued.2 1 1o !d. at 68, Exhibit "P-5-2"".

11 /d., Exhibit ··P-5-3'".

12 /d. at 213-215. Exhibits ··P-20" and "21". 13 /d. at 212. Exhibit ··P-19"'.

14 /d. at 6-28.

15 !d. at 244-253.

16 /d. at 255-257. Notice of Pre-Trial Conference dated July 13. 2023; 489-492. Minutes of the hearing held on. and Order dated. October 12. 2023.

17 !d at 259-267.

IS

fd. at48\-483.

19 !d. at 498-506.

20 ld at 511.

21 !d. at 518-526.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner oflnternal Revenue

On March 5, 2024, respondent transmitted the BIR Records, consisting of one ( 1) folder consecutively numbered from 1 to 130.22 During the trial, petitioner presented its testimonial and documentary evidence, including the testimonies of: (1) Ms. Lileth L. Quiros,23 Finance Manager; and (2) Ms. Mae Cristina Galanza, 24 Court -commissioned Independent Certified Public Accountant (ICPA).2s The !CPA Report was submitted on March 25, 2024.26 On April 19, 2024, petitioner filed its Formal Offer of Evidence, 27 to which respondent submitted his Comment (On Petitioner's Formal Offer of Evidence) on April 24, 2024.28 In a Resolution dated June 28, 2024, 29 the Court admitted petitioner's exhibits, except:

• Exhibits "P-35" "P-36-1" "P-42" "P-43'' "P-64" "P-65"

' ' ' ' ' ' "P-66" "P-67" "P-68" "P-69-1" to "P-69-12" "P-70" "P- ' ' ' ' ' 71" "P-72-1" to "P-72-2" "P-73-1" to "P-73-13" and "P- ' ' 7 4-1" to "P-7 4-5", for not being identified by petitioner's witnesses; and • Exhibits "P-62-1" to "P-62-21", as the documents submitted were mere e-mail attachments and not what is offered as "Summary Alphalist of Withholding Taxes for the period January 1 to December 31, 2020." On July 11, 2024, respondent filed a Manifestation, 30 stating that he would no longer present testimonial evidence. Thereafter, upon petitioner's Motion for Reconsideration to the Resolution dated June 28, 2024, which was filed on July 12, 2024,3 1 to which respondent filed his Comment/Opposition (Re: Motion for Reconsideration dated 11 July 2024) on August 12, 2024,32 the Court, in its Resolution dated December 4, 2024,33 22 /d. at 547-549, Comp!iance dated March 5. 2024. 23 /d. at 275-288, Exhibit "P-28"; 480 (for the Attestation); 540-542. Order dated February I, 2024. 24 Docket- Vol. II, pp. 608 to 626. Exhibit "P-79"; 628-629, Order dated April4. 2024. 25 Docket- Vol. I, p. 538, Oath of Commission dated February I, 2024; 540-542, Order dated February I, 2024. 26 Docket- Vol. II. pp. 588-604. Exhibit "P-26". 27 /d. at 638-645.

28 Id at 747-749.

" ld at 755-757.

30 !d. at 758-760.

31 /d.at762-767.

32 !d. at 773 to 775 .

.ll ld at788to791.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue admitted Exhibits "P-35", "P-36-1", "P-42", "P-43", "P-62-1" to "P-62-21", "P-64", "P-65", "P-66", "P-67", "P-68", "P-69-1" to "P- 69-12", "P-70", "P-71", "P-72-1" to "P-72-2", "P-73-1" to "P-73- 13" and "P-74-1" to "P-74-5."

On August 16, 2024,34 respondent filed a Manifestation stating that he would adopt the arguments stated in his Answer in lieu of a memorandum.

On January 9, 2025, petitioner filed its Memorandum.35 The case was submitted for decision on January 27, 2025.36

THE ISSUE

The parties submit the following 1ssue for this Court's resolution:

WHETHER OR NOT PETITIONER IS ENTITLED FOR TAX

REFUND OF THE UNUTILIZED CREDITABLE WITHHOLDING

TAX (CWT) FOR THE YEAR 2020 AMOUNTING TO THIRTY

MILLION

TWO

HUNDRED

EIGHT

THOUSAND

FIVE

HUNDRED TWO PESOS (PHP30,208,502.00).37

PETITIONER'S ARGUMENTS

Petitioner maintains that the claim for a refund should be granted because all necessary elements are present. It argues that:

1. Both the administrative and judicial claims for refund were filed within the two-year prescriptive period;

2. The fact of withholding was duly established through the Certificates of Creditable Taxes Withheld at Source, which were formally offered as evidence; and

3. The income upon which the taxes were withheld was included in the return of the recipient. " /d. at 778· 780.

35 Id at 792-820.

36 !d. at 822, Notice of Resolution dated January 27. 2025.

Sam sung SDS Global SCL Philippines Co., Ltd. lnc. v. Commissioner of Internal Revenue

RESPONDENT'S ARGUMENTS

In his Answer, respondent contends that petitioner miserably failed to exhaust administrative remedies before elevating the matter to the Court; and that petitioner is not entitled to its claim for refund of CWTs. Respondent asserts that it is incumbent upon the claimant to prove actual remittance of the alleged withheld taxes to the BIR.

He claims that petitioner should have presented evidence to prove actual remittance of the alleged taxes to the BIR. He emphasizes that it is not respondent's duty to prove before the Court non-remittance of taxes withheld.

THE COURT'S RULING

The instant Petition for Review is unmeritorious.

Petitioner

complied with

Section 76 of the National

Internal Revenue Code (NIRC)

of 1997, as amended, and did not carry over the excess

CWTs

being claimed for refund.

Central to the resolution of this case is Section 76 of the NIRC of 1997, as amended, which provides: SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either:

(A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. Under the foregoing provision, a corporation whose total quarterly income tax payments exceed its total income tax due for a given taxable year may either: (1) carry over the excess amount to succeeding taxable quarters or years until fully utilized, or (2) claim a refund in the form of cash or a tax credit certificate. However, once the carry-over option is exercised, actually or constructively, it becomes irrevocable for that taxable period.38 The phrase 'for that taxable period' refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.39 To exercise either option, the corporation must indicate its choice on its annual corporate adjustment return by marking the appropriate option box on the BIR form, either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative, and the choice of one precludes the other.4o A perusal of petitioner's amended Annual ITR for CY 202041 shows that it had income tax credits in the total amount of P102,226,530.00, consisting of: (i) prior year's excess tax credits in the amount of P72,018,028.00; and (ii) CWTs accumulated during the four (4) quarters of CY 2020, in the aggregate amount of P30,208,502.00 (the sum of P20,705,307.00 and P9,503,195.00).42 Petitioner claims that its Minimum Corporate Income Tax (MCIT) due for CY 2020, amounting to P5,531,991.00, was paid using a portion of its prior year's excess credits of P72,018,028.00.

After deducting the said MCIT against the 38 Rhombus Energy, Inc. v. Commissioner of Internal Revenue. G.R. No. 206362, August I, 2018 [Per J. Bersamin, V Third Division]. citing Republic v. Team (Phils.) Energy Corporation (formerly Mirant (Phi/s.j Energy Corporation), G.R. No. 188016. January 14, 2015 [Per J. Bersamin. First Division]; Systra Philippines, Inc v. Commissioner of Internal Revenue. G.R. No. 176290. September 21. 2007 [Per J. Corona, First Division]; Phi/am Asset Aianagement, Inc. v. Commissioner of Internal Revenue, G.R. Nos. 156637 & 162004, December 14. 2005 [Per J. Panganiban, Third Division].

39 Republic v. Team (?hils.) Energy Corporation (formerly Mirant (?hils.) Energy Corporation), G.R. No. 188016, January 14.2015 [Per J. Bersamin, First Division}; Commissioner of Internal Revenue v. Bank of the Philippine Islands, G.R. No. 178490, July 7. 2009 [Per J. Chico-Nazario. Third Division].

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner oflnternal Revenue prior year's excess tax credits, a balar1ce of P66,486,037.00 allegedly remained. It further claims that it had creditable taxes withheld for CY 2020 in the amount of P30,208,502.00. Taken together, it argues that these amounts constitute P96,694,539.00 in unutilized tax credits as of December 31, 2020, as shown below:

Prior Year's Excess Credits other than MCIT p 72,018,028.00

Less: Tax Due (MCIT)

5,531,991.00

Balance of Prior Year's Excess Credits

p 66,486,037.00

Add: Creditable Taxes Withheld - CY 2020

30,208,502.00

Excess Creditable Taxes Withheld as of

December 31, 2020 1'96,694,539.00 Pursuar1t to Section 2.58.3 of Revenue Regulations (RR) No. 2-1998, the submission of petitioner's Annual ITR for CY 2019 sufficiently proves its prior year's excess credits other than MCIT, viz.:

Sec. 2.58.3. Claim for Tax Credit or Refund.- (C) Excess Credits. - An individual or corporate taxpayer's excess expanded withholding tax credits for the taxable quarter jyear shall automatically be allowed as a credit against his income tax due for the taxable quarters/years immediately succeeding the taxable quarters/years in which the excess credit arose, provided he submits with his income tax return, a copy of the first page of his income tax return for the previous taxable period showing the amount of his excess withholding tax credits, and on which return he has not opted for a cash refund or tax credit certificate. (Emphasis supplied) Based on the above provision, excess CWTs of a taxable year, which were opted to be carried over to the succeeding taxable year, are automatically applied as credits against income tax due in the succeeding taxable year, provided that such excess CWTs are evidenced by the ITR for the taxable year when such excess credits arose.

Verily, pursuar1t to Section 2.58.3 of RR No. 2-1998, the submission of petitioner's amended Annual ITR for CY 20 1943 reflecting excess tax credits amounting to P110,262,271.00, which consisted of pnor year's excess credits of

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

P72,018,028.00, and CWTs for CY 2019 in the amount of !"38,244,243.00, is sufficient to prove its "Prior Year's Excess Credits other than MCIT" in the amount ofP72,018,028.00. Hence, the balance of the prior year's excess tax credits as of the end of CY 2019 in the amount of P72,018,028.00, per petitioner's 2019 Annual ITR, was more than enough to cover petitioner's

MCIT

due for

CY

2020, amounting to !"5,531,991.00. Thus, the reported CWTs for CY 2020 in the amount ofP30,208,502.00 remained unutilized as of the end of CY 2020.

Furthermore, petitioner marked the box corresponding to the option "To be refunded" in both its original and amended Annual ITR for CY 2020. 44 Notably, only the amount of P66 ,486,037.00 was reflected in petitioner's Quarterly ITRs45 and amended Annual ITR 46 for CY 2021 as "Prior Year's Excess Credits other than MCIT". The CWTs withheld during CY 2020 in the amount of !"30,208,502.00 were not carried over to the succeeding taxable periods.

Thus, the unutilized CWTs for CY 2020 in the amount of !"30,208,502.00 may properly be the subject of a claim for refund under Section 7 6 of the NIRC of 1997, as amended. Requisites for a claim for refund or tax credit of excess and unutilized CWT.

In addition to the requisites provided under Section 76 of the NIRC of 1997, as amended, jurisprudence and the pertinent provisions of RR No. 2-1998 require that the following requisites be established before a taxpayer may be entitled to a refund or the issuance of a tax credit certificate for unutilized or excess

CWTs:

1. The claim for refund must be filed within the two- year prescriptive period provided under Sections 204(C) and 229 of the NIRC of 1997, as amended;

2. The fact of withholding must be established by a copy of a statement duly issued by the payor y

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

(withholding agent) to the payee, showing the amount paid and the tax withheld therefrom; and

3. The income upon which the taxes were withheld must have been included in the income tax return of the recipient. 47 Thus, it behooves petitioner to establish compliance with the foregoing requisites.

Petitioner's

administrative and judicial claims for refund were timely filed.

Anent the first requisite, the pertinent provtswns are Sections 204(C) and 229 of the NIRC of 1997, as amended, which provide:

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, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. 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. (Emphasis supplied) SEC. 229. Recovery 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 v 47 Republic v. Team (Phils.) Energy C01poration (formerly ;\Iirant (Phils.) Energy Cotporation). G.R. No. 188016, January 1 if. 20 I 5 [Per .1. 11crsamin. Pirst Divisinn]: { lnitcd fntcmatirmal Pictures .1 B v. lommissioner of Internal Revenue, G.R. No. 168331. October II, 2012 [Per J.Peralta. October II. 2012]; Citibank N.A. v. Court of Appeals, G.R. No. 107434, October 10, 1997 [Per 1. Panganiban, Third Division]; ACCRA Investments Corporation v .. The Honorable Court of Appeals. G.R. No. 96322. December 20, 1991 [Per J. Gutierrez, Jr .. Third Division]; Section 2.58. Revenue Regulations No. 2-98, as amended.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner oflnternal Revenue

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. (Emphasis supplied) The foregoing prov1s1ons require that both the administrative and judicial claims for refund of erroneously or excessively paid taxes must be filed within two (2) years from the date of payment of the tax.

It is well settled that the two-year prescriptive period for claims for refund of overpaid income tax or CWTs commences to run from the date of filing of the Annual ITR, which is also referred to as the Final Adjustment Return (FAR). 48 This is because it is only when the FAR covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 49 In other words, it is only logical to reckon the two- year prescriptive period from the time the FAR or the Annual ITR was filed, since it is only at that time that it would be possible to determine whether the corporate taxpayer paid an amount exceeding its annual income tax liability. 5° Here, petitioner filed its original Annual ITR on April 15, 2021.51 Counting from April15, 2021, petitioner had until April 15, 2023, within which to file both its administrative and judicial claims for refund.

Records show that petitioner filed its administrative claim for refund with the BIR on April 4, 2023,52 and its judicial claim before this Court on April 14, 2023.53 Clearly, both claims f~ 48 Commissioner of Internal Revenue v. T}v[( Sales, Inc .. G.R. No. 83736, January 15, 1992 fPer 1. Gutierrez, Jr., En Bane]; ACCRA Investments Corporation v. The Honorable Court ojAppeals, G.R. No. 96322. December 20, 1991 [Per J. Gutierrez, Jr., Third Division]; Commissioner of Internal Revenue v. The Philippine American Ltfe Insurance Co .. G.R. No. 105208. May 29. 1995 [1. Romero, Third Division]. 49 Commissioner of Internal Revenue v. TMX Sales Inc .. G.R. No. 83736. JanUaJ)' 15. 1992 [Per J. Gutierrez. En Bane]. , 0 Metropolitan Bank & Trust Company''· The lommissioncr of Internal Rewnue. G.R. No. 182582, April 17, 2017 [Per J. Perlas-Bernabe. First Division]. 51 Docket- Vol. I. pp. 61-66, Exhibit "P-4". 52 !d. at 212. Exhibit "P-19"; 21 3. Exhibit "P-20"; 214-215. Exhibit "P-21". 53 Id at 6-28.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue refund of unutilized or excess CWTs were seasonably filed within the two-year prescriptive period. Respondent, however, insists that petitioner failed to exhaust administrative remedies before elevating the case to the Court. He points out that petitioner filed its administrative claim with the BIRon April 4, 2023, and then filed the present judicial claim only ten (10) days later, on April 14, 2023. Respondent maintains that such a short interval did not afford the BIR sufficient opportunity to evaluate and act on the claim, nor to verify or correct any errors, if necessary. The Court is not persuaded.

In Commissioner of Internal Revenue v. Estate of Mr. Charles Marvin Romig (Romig),S4 the Supreme Court ruled as follows:

Sections 204 and 229 of the 1997 NIRC provide for the refund of erroneously or illegally collected taxes. Section 204 applies to administrative claims for refund, while Section 229 to judicial claims for refund. Said provision state: Based on the above-quoted provisions, it is manifestly clear that an administrative claim for refund must precede the filing of a judicial claim and that both claims must be filed within the two years from the payment of the tax. In the instant case, the two-year period to file a claim for refund is reckoned from June 30, 2015, the date respondent paid the estate tax amounting to PHP 4,565,439.07. Since the Estate first filed its administrative claim at 8:00 a.m. on June 28, 2017, and thereafter its judicial claim at 4:47 p.m. on even date, both claims were filed on time or within the two-year prescriptive period provided by law. 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 Internal Revenue v. Carrier Air Conditioning Philippines, Inc., 55 where therein petitioner similarly argued that the judicial claim for refund, which was filed barely 10 days from the filing of the administrative claim, was premature and violative of the doctrine of exhaustion of administrative remedies, this Court held that, "from the plain language of the law, it does not matter how far apart the administrative and

Sam sung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue 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."

Moreover, the Court agrees with the finding of the CTA Second Division and CTA En Bane that the Estate's immediate resort to court action was justified, considering that the prescriptive period was about to expire.

Under the

circumstances, if the Estate had waited for the CIR to act on its administrative claim knowing fully well that the two-year period was about to lapse, it would have resultantly forfeited its right to seek judicial recourse, thereby suffering irreparable damage. Hence, respondent cannot be faulted for acting in such a manner to protect its interest and right to recover the taxes it erroneously paid to the government. While the Court recognizes that the CIR may not have had the proper chance to act on the matter within their jurisdiction because of the short period of time between the filing of the two claims, the silence or insufficiency in the law on what is to be considered a reasonable period for the CIR to resolve a claim for refund of taxes is one that can be addressed not by judicial pronouncement, but by appropriate legislation. (Emphasis and underscoring supplied) The foregoing jurisprudential pronouncements establish that the law does not prescribe any minimum interval between the filing of the administrative and judicial claims. What is controlling is that: (1) the administrative claim precedes the judicial claim, and (2) both are filed within the two-year prescriptive period.

Thus, even where the administrative and judicial claims are filed only days or even hours apart, as in the Romig case, the judicial claim remains valid and may be taken cognizance of by the Court, provided the statutory period is complied with. Accordingly, petitioner properly and timely sought judicial relief within the two-year prescriptive period, which was about to lapse, notwithstanding that its administrative and judicial claims were filed only 10 days apart. Given this circumstance, petitioner cannot be deemed to have failed to exhaust administrative remedies before elevating the matter to this Court.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner oflnternal Revenue

Petitioner proved that it withheld

CWTs

in the amount of P30,208,502.00 for CY 2020.

Petitioner was able to prove that CWTs in the amount of P30,208,502.00 were withheld for Calendar Year (CY) 2020. Pertinent to the second and third requisites, Section 2.58.3(8) of RR No. 2-1998, as amended, provides: Sec. 2.58.3. Claim for tax credit or refund.- (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. (Emphasis supplied) The second requisite requires the taxpayer to establish the fact of withholding the claimed CWTs through a statement duly issued by the payor, i.e., the withholding agent, to the payee showing the names of the payor and payee, the income payment, and the amount of tax withheld. In Commissioner of Internal Revenue v. Philippine National Bank (PNB), 56 the Supreme Court held that a Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307), when complete in all material particulars, constitutes competent proof of the fact of withholding.

To establish compliance with this requirement, petitioner submitted the relevant BIR Forms No. 2307 57 issued by its clients, together with its CWT Schedule for taxable year 2020. 58 A perusal of the submitted documents shows that the claimed CWTs for CY 2020, in the amount of P30,208,502.00, were duly supported by BIR Form No. 2307. Thus, in compliance with the second requisite, petitioner sufficiently established the fact of withholding of CWTs for CY 2020. t1V

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

Proof of actual remittance is not indispensable.

In his Answer, respondent contends that it is incumbent upon the claimant to prove actual remittance of the withheld taxes to the BIR. Hence, respondent claims that petitioner should have presented evidence to prove actual remittance of the alleged taxes to the BIR, and it is not the duty of respondent to prove before the Court non-remittance of taxes withheld. The Court disagrees.

In the PNB case, the Supreme Court categorically ruled that proof of actual remittance is not a condition to claim a refund of unutilized tax credits. Under Sections 57 and 58 of the NIRC of 1997, as amended, it is the payor-withholding agent, not the payee-taxpayer, who is charged with the responsibility of withholding and remitting income taxes to the government:

Petitioner's posture that respondent is required to establish actual remittance to the Bureau of Internal Revenue deserves scant consideration. Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits. Under Sections 57 and 58 of the 1997 National Internal Revenue Code, as amended, it is the payor- withholding agent, and not the payee-refund claimant such as respondent, who is vested with responsibility of withholding and remitting income taxes.

This court's ruling in Commissioner of Internal Revenue

v. Asian Transmission Corporation, 59 citing the Court of Tax Appeals' explanation, is instructive:

. . . proof of actual remittance by the respondent is not needed in order to prove withholding and remittance of taxes to petitioner.

Section

2.58.3(B) of

Revenue

Regulations No. 2-98 clearly provides that proof of remittance is the responsibility of the withholding agent and not of the taxpayer- refund claimant. It should be borne in mind by the petitioner that payors of withholding taxes are by themselves constituted as withholding agents of the BIR. The taxes they withhold are held in trust for the government. In the event that the withholding agents commit fraud against the government by not remitting the taxes so

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue withheld, such act should not prejudice herein respondent who has been duly withheld taxes by the withholding agents acting under government authority. Moreover, pursuant to Section 57 and 58 of the NIRC of 1997, as amended, the withholding of income tax and the remittance thereof to the BIR is the responsibility of the payor and not the payee. Therefore, respondent ... has no control over the remittance of the taxes withheld from its income by the withholding agent or payor who is the agent of the petitioner. The Certificates of Creditable Tax Withheld at Source issued by the withholding agents of the government are prima facie proof of actual payment by herein respondent-payee to the government itself through said agents. (Emphasis and underscoring supplied) Thus, respondent's contention that it is incumbent upon the claimant to prove actual remittance of the withheld taxes is devoid of merit.

Petitioner failed to establish that the income on which CWTs were withheld was reported as part of its gross income in its CY 2020 Annual ITR.

Be that as it may, petitioner failed to prove compliance with the third requisite, that the income payments upon which the CWTs were withheld formed part of its gross income declared in its Annual ITR for CY 2020.

To satisfy this requirement, petitioner must prove that the income payments of !'1,449,533,227.67, 60 from which the substantiated CWTs of !'30,208,502.00 were withheld, were reported as part of its gross income.

To this end, petitioner presented its Audited Financial Statements (AFS) for taxable year 2020, 6! SAP Extracted Sales, 62 Cello System Extracted Data (SEC), 63 Samsung Electronics Philippines Co. (SEPCO)-Provided Schedule of

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

Income Payments from which Taxes were Withheld,64 Samsung

Electro-Mechanics

Philippines

Corporation

(SEMPHIL)-

Provided Schedule of Income Payments from which Taxes were Withheld, 65 Cello System Extracted Freight Billing Invoices for SEPC0,66 and Cello System Extracted Freight Billing Invoices for SEMPHIL. 67 These documents were all examined by the ICPA.

As gleaned from its AFS for taxable year 2020,68 petitioner reported revenues amounting to '!'2,627,090,744.00, which tallied with the amount of '!'2,627,090,744.00 reflected in its amended Annual ITR for CY 2020.69 According to the ICPA, petitioner uses an integrated logistics solution known as the "CELLO Billing Management System" (Cello System), which was developed based on logistics business, that integrates the SAP version 6.0. The Cello System manages petitioner's accounts receivable and accounts payable arising from logistics transactions. A billing invoice is generated upon the posting of a transaction, which is then integrated into SAP's financial books.7o To check whether the revenues from logistics services per SAP books were properly reported in the AFS, the ICPA compared the total revenues from logistics services per SAP books against the total amount per AFS for CY 2020. Based on this comparison, the !CPA inferred that the total revenues from logistics services per

SAP

books in the amount of '!'2,625,573,211.32 were properly carried over to the amounts reported in the AFS for CY 2020. 71 Moreover, the ICPA presented schedules of its tracing of income payments per the provided schedule of sales to SEPCO and SEMPHIL to the Cello System, where it allegedly traced income payments to the revenues per SAP books to the extent of '!'644,386,273.30 for SEPCO and '!'628,864,681.24 for SEMPHIL, which corresponds to CWTs ofr14,042,905.00 and '!'12,577,053.62, respectively.72 64 /d., Exhibit ''P-40".

" !d., Exhibit "P-75".

66 !d .. Exhibits "P-37-1" to "P-37-9".

67 !d.. Exhibits "P-69-1" to "P-69-12".

68 !d. F::xhihit "P-50 ... Note 13. Prtgc n 0f 47. " Docket- Vol. I. p. 69. Exhibit "P-5-4". Line 27.

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue

However, it was noted that the SAP Extracted Sales73 submitted by petitioner did not contain the sum totals. Hence, the amounts comprising the alleged P2,625,573,211.32 total revenues per SAP books found by ICPA as properly carried over to the amounts reported per AFS cannot be confirmed. Nevertheless, even granting that the said amount of P2,625,573,211.32 indeed pertained to revenues per petitioner's SAP books, which were reported in AFS, what must still be established is that such amount includes the income payments ofP1,449,533,227.67 upon which the claimed CWTs ofP30,208,501.64 were withheld.

In this respect, petitioner failed to prove that the income payments of P1,449,533,227.67 formed part of the revenues reported in its SAP books and Annual ITR.

While the ICPA

presented schedules (Annexes 5 to 7 and 14 to 16)74 purporting to trace income payments from SEPCO and SEMPHIL- provided schedule to the Cello System, the amounts per SEPCO and SEMPHIL - the provided schedules cannot be verified as traced to the Cello System since the references indicated therein per the Cello System are only Exhibits "P-38" and "P-39." They do not specifically identify to which Cello System Extracted Data, ranging from Exhibits "P-38-1" to "P-38-12" and Exhibits "P-39- 1" to "P-39-8", such references pertain. As such, the alleged tracing could not be verified.

In Tullett Prebon (Philippines}, Inc. v. Commissioner of Internal Revenue, 75 the Supreme Court underscored that although there are no rigid evidentiary rules for proving the third requisite in CWT refund claims, taxpayers must still establish every material aspect of their claim. Thus, they must present evidence linking the specific income payments subjected to withholding to the revenues reported in their ITRs, VlZ.:

Indisputably, there exists no hard and fast standards as to the kind of evidence needed to prove the third requisite.

Evidently, unlike the second requisite, i.e., the fact of withholding- which is proved by 'a copy of the withholding tax statement duly issued by the payor to the payee showing " USB (Exhibit "P-26-2"). Exhibits "P-36-1" to "P-36-14". " USB (Exhibit "P-26-2").

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue the amount paid and the amount of tax withheld therefrom'- there is no prescribed evidence to prove that the income payment has been declared as part of the gross income. Similarly, the Court is not inclined to adopt as doctrine that the third requisite may be proved by the mere fact that the income from which CWT is withheld is less than the total income reported by the taxpayer- claimant. This goes against the elementary principle that cases before the CTA are litigated de novo and that parties 'should prove every minute aspect of their cases.' This is particularly true in refund cases as tax refunds are strictly construed against the taxpayer. Even so, while not absolutely determinative of the third requisite, when the total reported sales/income is greater than the income corresponding to the CWT withheld, this should prompt the CTA to be more circumspect in its valuation of the evidence on record, especially when there is other evidence that could point to the breakdown of the gross income reported, as in this case.

The CTA Special Third Division also erred in not allowing Tullett Prebon to submit the expanded ledger in its motion for reconsideration of its April 12, 2019 Decision, especially when the crux of its Decision rested on the insufficiencies of the earlier ledger.

Accordingly, the case should be remanded and Tullett Prebon should be allowed to present and submit the expanded general ledger as evidence to prove the third requisite. The Court leaves the determination of the extent of the effects thereof on the amount of CWT to be refunded to the CTA. (Emphasis and underscoring supplied) Here, petitioner's failed to prove that the income payments totaling Pl,449,533,227.67, from which the claimed CWTs of P30,208,501.64 were withheld, were included in the gross income declared in its Annual ITR for CY 2020. Consequently, the third requisite was not satisfied. Therefore, petitioner's claim for CWT refund must necessarily fail.

It bears emphasis that it is the taxpayer-claimant that has the burden of proof to establish the factual basis of its claim for tax credit or refund. 76 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of

Samsung SDS Global SCL Philippines Co., Ltd. Inc. v. Commissioner of Internal Revenue sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund.77 Thus, an applicant for a tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements.78 Strict adherence to the conditions prescribed by law is required of the taxpayer. Refunds need to be proven and their application raised in the right manner as required by law.79

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is DENIED for lack of merit.

~1M~

LANEE S. CUI-DAVID

Associate Justice

I CONCUR:

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 . .........

77 Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., et a!., G.R. No. 127105, June 25. 1999 [Per J. Gonzaga-Reyes, Third Division].

7R

F:asf('l"!1 Tr/('communimtions PhilljJpfn('S, !nc. 1'. lonnnis.'doncr of Internal RC'W!nue. G.R. No. 183531. March 25. 2015 [Per J. Reyes, Third Division), cilingJ.R.A. Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 171307, August 28, 2013 [Per J .Per las-Bernabe, Second Division J. 79 Steag State Power, Inc. (Formerly State Power Development Corporation) v. Commissioner of Internal Revenue, G.R. No. 205282, January 14,2019 [Per J. Leonen, Third Division].

Samsung SDS Global SCL Philippines Co., Ltd.lnc. v. Commissioner of internal Revenue

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the Special First Division Acting 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.

Pv. ~

I

------- MA. BELEN M. RINGPIS-LIBAN

Presiding Justice