CTA Case No. 2990

DECISION -

CTA CKSE NO. 2990 - 2 - in transit" instead of clas si fying them as "purcha.,es" resulting in an ove r statement of ne t income by P306,171.20 as well as the manage- ment bonus which is c omputed on net incom ~ after taxes by P9,637.36.

After prope r adjustments to net profit and manag2ment bonus, a taxable ne t income of P368,969.9l instead o f ~665,504.00 previously reported which shou l d hav e been taxed a t ~11 9 ,1 3 9.00 would result in an over-payment of inc:o:ne tax amounting t o Pl03,787.00. A claim for the refund/credit of Pl03,787.00, representing the differ e nce between the amounts of P222,926.0 0 a n~ ~1 1 9,139.00, was filed together wi th the a me nde d r e turn, which had remained unacted by respondent t o date of fil i ng this petition fo r review on _January 15, 1979.

Peti tione r shore s t he claim on the findi ngs contained in the Report of Inve stigation dated d arch 5 , 19 79 a u t horized by respondent's office, which, insofa r as pertinent, r eads: "'l'he over-payment mentioned above ~ o s c on an error of its auditors in making adjustments in the books of accounts of the claimant by debiting "merchandise in t ran s it" and crediting the c or r espondi ng amount to "purchases" thus reducing the ~o st of goods sold by P308,171.20.

Said er r o r was verified '' r ~ •• J ,") - 3 - by the undersigne d from the Letters of Credii N o s~ R-1272-76 and R-12 71-76

and Central Bank Release Certificates

Nos. 11279-76 and 11410-76 to the effect that while the cash regis t ers i nvolved in the importation were alre ady r e served by Prima Business Machines, I nc., they were treated as "I-1erchandise in Trans i t" in its books. The allega t ions, therefore, of claimant i n its le t ter are true and the refund of the amount of Pl03 , 787.00 is in order."

(Exh. F, p. 47, BIR records) Responden L '·k' c .i.f ical l y assails the legal suffic i ency o f h ie examiner•s report as the sole ba;; is fo r the c laim sans the presen t a tion of augme n t in0 evidences but s ~ ek s a ltern ;tively a d e[ ieiency tax J. iabi l i t y against peU tioner a s r e commended on the s a JH.:; report, thus: "Howe ver, i n th e examination of -he records , i t wa~ found that lhere i s still due from Prima Bus~­ ness Mach ines, I nc . , Pl,095.91 as deficiency advanc sales tax on· importations as computed in the attached wor k ing p a pers which should reduce the amount cla imed."

(Exh.

2-A, p. 47, BIR re ords) Respondent further takes i s sue on the tena- bility of a part of t he claimed r efund in the amount of P25,440.00 representing three install- ments (Exh. 1- A, p. 28 , BIR records) .out of the total income tax p ~ y ments of P222,926.00 for the fiscal year as barred.by the statutory two- year period o f limitat ion, i.e., from the time ) (']· 0 -~ ~ , }

- 4 - of payment b the filing of the petition on January 15, 1979, itemized as follows:

QUl\RTJ:R

. First instal l ment Second in st~llment Th i r d installment Fourth installments:

DATE

February 12, 1976 ~ May 26, 1976 Augus t 18, J 976 January 17r J 977 April 15, 197 7 July 13, 19 77

AMOUNT

6,853.85* 9,127.71* 9,458.44* 65,828.67 68,950.72 62,706.61

TOTAL

••••••••• c •• c ....... P222,926.00 *Allegedly barred by pr~scription (Exh. A, P• 28 , Exh. D, p 25, BIR r ecords) rrhc issue centers therefore on the justification in the use of t he report o£ findings as basis for th , c'<... cermina tion of ll e claim for r efund or tax c red i t o f alleged ovct - payrnent of income tax. The records s hOI\' t hal t'espondent had the peti tioner' s particular claim for refund or tax credit adverted to above illvestigated and verified . It will suffice to point out that an appropriate "exami nation of the books o£ account and o ther related r ecord of Lhe above-named firm for purposes o f verify ing the validity of their claim for refund/ tax credit of income tax ove r-payment amounting, to Ii l03 ,78 7 .00 per its le t ter dated January 16, 1978" (Exh. F, s upra) was conduci..ed. The report, itself, furnishes the best means of its own exposition .

The factual findings are

DECISION -

C7A CASE NO. 2990 - 5 - not short of specific support in terms of tractable pertinent d r ta a11 relevant recor d s openly la id and fully disc l sed by the peti- tioner.

As such, the re p0 · t deserves the credence t hat should ·norma l l y be accorded in the absence o f co11tr ary e vide nc e . Respondent poin ~ s t o no factual errors and su~erfluities which need to be cu red and abridged.

And , no t that t he examiner's c · eden tials are impeccable but to his favor muo t be conce~ e d the presumption of r egularity in t he p e rformance of official duties (Sec . m-5, Rule 131, Revised Rules of Co u r t~ u. s . vs. Esca l ante, 36 Phil. 743~ 31 C.J.S.

799) _whic 1 has no l be e n disp r oved by any affirm- a t ive evide nc e of irre~ularity or unlawful conduct. Accordingly, we feel compelled to affirm the import and force of the report of findings which may not be su f fe re d to petrify in futility . Mor eover, i t adds no strength to respondent's posit ion as certainly it would be an absurd i ty o n hi s p ar t to repudi a te the report by squir ming out of a disadvantageous situation insofar as it su s tain s the refund and then, on the same breath, invok i ng the same findings -on the deficiency tax liabili t y again s t peti t ioner . Such a fluctuating 4 01 _.

- 6 - l ux ur 1ance of expediency would cast respondent in a role who does not comport with the standards of fairplay.

We apprehend that the report of inve s tigat i on \hich r espondent himself had occasioned s hould no t serve nar row purposes in construing the rights and obligations of t he par tie s ~ f ~ ec ted ther e by.

The inter e s t of government i s not that it shall win a case but that justice s hall be d o n~ .

Turning t u p et it i o n~ ''s objection ag a i s t the ded uction from its reiundable claim the sum of ~1,095.91 re present 1ng de f iciency advance s ales tax liability uncovered in the investi yation, su f fice i t t o slctte tha t as implied in the hold i ng in Comm1ssioner o-t= ltlte rnetl Revenue vs. Itugon·- Su:z·oc case, (G.R. No .

L- 2~2 ~9, July 29, 1969, 28 SCRA 871) .allowing the taxpayer the right t o apply its refundable claim from its existi ng tax l i ab i lity, the gover nment , in the same token a nd for rea s0ns deemed hardly l ess imperative and impor tant, should not be pr ecluded in availing of the same.

In the case at bar, respondent deserves no differen t treatwent and must be ex- tended the right to deduct · petitioner's tax liabili ty fr om its refundable c l aim.

- 7 - As t o the question r ~ ised by respondent relative to the prescript i0n of action on the three installments in the amoun t of P25,440.0 0 out of the total income tax payments of P222,926.00 the same must be answered in the negative as it was squarely met 1n the cases of Collector of Internal Revenue v s . P r i e to , G . R . 1 :.) • L -119 7 6 , Aug u s t 2 9 , 1961, 2 SCRA 1007 and Co:.tH1 .i. s sioner of Internal Revenue vs. Palanca, G.r~. No. L-16626, Octobe r 29, 1966, 18 SCRA 496, that , whe r e the tax account was paid by installmen , the computation of the two- year prescriptive peLiod under Section 306 (now · Sec. 292) .of the T x Code should be from the date of the final payment.

In the instant case, less than two yea r s h0 elapsed from the time petitioner made its f inal income tax payment on July 13, 1977 to ' the time it filed the petition for review on January 15, 1979.

The determination of the . pr~scriptive period of two years for recovery of

I

tax erroneously or illegally collected, rests on well-settled jurisprudence which application may not be tinkered by any such sort of idiosyncratic aberration.

ln f i ne, we hold that ·th petitioner is en- titled to the r e fund or tax credit of an overpaid

- 8 - income tax for the fiscal period ended September 30, 1976 in the amount 'f Pl03,787.00 with no install- ment payments thereo f ba rred by prescription, but shall be subject to the deficiency advance sales tax liabili ty 1~ the amount of Pl,09 5 .91, deduct- ible from -he refundable amount. WHE. EFORE, respondent is hereby ordered to r e fund or credit t o the r:c titioner the net amount ' - of Pl02,691.09 witho p ronouncement as to costs.

AMANTE~

Presiding,Judge

CON~~QUIN

As soc ia t't" Judge Z. REYES

Associate Judge