Citytrust Finance Corporation vs. The Commissioner of Internal Revenue

DECISION

- 2 - P34 3 ~ 3 92.00 and wi.th a withholding ta >: credit of P86~ 2 07.00~ would give a refundable amount of P429 ~ 599. ( H).

On May

11~ 1989 it filed an amended

Corporated

Annual

Income

Tax

Return

to reflect additional creditable withholding tax in the amount of

P5 2

~ (H)9.12 giving rise to a total withholding ta x of P138~216.12 for the year 1984 or total refundable amount of P481~608.00.

During

the taxable year 1985, petitioner likewise alleges that it incurred a net loss of P5~021~975.00 which after applying the prior year's tax credit of P429~599.00 and withholding tax credit of P20~260.00 gave rise to refundable amount of P449 ~ 859.00.

However~ after the corresponding income ta}: return was f i 1 ed ~ petitioner received additional Certificate of Creditable

Income

Tax

Withheld at Source in the amount of P11, 309.84. Hence~ it filed an amended return on May 11, 1989 giving rise to a net overpayment for the year • ending 1985 in the amount of P513,177.96.

Inasmuch

as the amount of P343,392.00 as reflected in the 1984

Annual

Income

Tax

Return

representing prior year ' s excess tax credit is subject of a separate claim for refund~ the instant claim in the total amount of P169,785.96 represents only the c reditable withholding tax at source 52 .¹ ·~

- 3 - reflected in the amended 1984 and 1985 annual income tax return of petitioner. Petitioner filed a claim for refund with respondent in its letter dated February 3~ 1987.

However~ to this date respondent has not acted on said claim for refund, hence this instant petition for review.

Respondent on

his part denies all material allegations of the petitioner pertaining to its claim, alleging lack of information or knowledge sufficient to form a belief as to the truth of the claim.

He admits some uncontestible facts such as to the e :-: istence of the petitioner, the f i 1 ing of the c laim for refund but also alleges that the instant petition for revielf-1 was filed out of time from the date of payment. He further alleges that it is incumbent upon the petitioner to prove compliance with the provisions of Sections 292 and 295 of the Tax Code of 1977. He further alleges that 'the amounts sought to be refunded were paid in • accordance with 1 aw and that c 1 aim for· refund are strictly construed against the claimants. When petitioner presented its formal offer of evidence, respondent admitted most of the evidences but objected to all the Certificates of Withholding Ta)·:es .issued by wi thho 1 ding agent for being self- serving and of no probative value. Respondent did 52?

- 4 - not pr-esent any evidence~ testimonial or- documentar-y~ to r-efute said c 1 aim for- r-efund but instead submitted the case for- decision on the bases of r-ecor-ds and pleadings. Thi s Cour-t has gone over- the var-ious exhibits and found out that of the total claim of F'169~785.96 for- ta}:ab 1 e year-s 1984 and 1985~ petitioner- was able to suppor-t with documentar-y evidences the total amount of P144~861.66 only.

For- ta:·:able year-s .1984 and

1985~ Cer-tificates of

Cr-editable Income Tax Withheld at Sour-ce (BIR Form

1743.1) ~ Statement of Tax 11-J:i.thheld .at Sour-ce (BIR For-m 1743) and Certification of withholding ta:.:es ·fr-om the wi thho 1 ding agents wer-e pr-e sen ted by the petitioner-

as Exhibits

C~

C-1

to C-26 to pr-ove wi thho 1 ding of cr-editable taxes in the total amounts of F'137~428.62 and P7~433.04~ r-espectively. ,)_,J., ~ The only ~eriaL\~ objection re~pondent ha~ over j 1, f I this c 1 aim for- r-efund is the fact that the var-ious exhibits pr-esented wer-e not duly ver-ified by r-espondent's r-evenue enfor-cement officer-s~ hence~ self-ser-ving.

On this point and for- a better- under-standing of the r-equir-ement of the law~ it is impor-tant to quote the• pr-ovisions of law and r-evenue r-egulations applicable in the instant case. 5?~

The applicable provisions are Sections 5%4(a)

(b) (c} (d) (e) and (f) of the National Internal Revenue Code, as amended (now Section S31), quoted hereunder s (a} Quarterly returns and payment of taxes withheld. - Taxes deducted and withheld under Section fifty-three shall be covered by a return and paid to the Revenue District Officer, Collection Agent, or duly authorized Treasurer of the city or municipality where the withholding agent has his legal residence or principal place of business, or where the withholding agent is a corporation, where the principal office is located. The taxes deducted and withheld by the withholding agent shall be held as a seceaveesantanaetsennenmvesaner bussed sunranssnsesasenmnerstrapants seovseesnat/thwesssambasemine tess seuetennnesusasunvett at nt tinue ranges nanan Meee The Commissioner of Internal Revenue may, with the approval of the Minister of Finance, require these withholding agents to pay or deposit the taxes deducted or withheld at more frequent intervals when necessary to protect the interest of the Government. The return for final Tonenmtronnssataaoussangees econ’ sstmnenaueonmmmanritttee nessnnsssnenpeanssnensnnnesanteasaananescnssnreneettnns test etSeean payment. made within 25 days from the close of each calendar quarter, while the return. for creditable withholding taxes (As amended by Batas Fambansa Blg. 41) (Underscoring supplied. )

(b) Penalties for failure to render returns} for rendering false or fraudulent returns: for non-payment of taxes withheld. = The surcharges prescribed in Section seventy-three of this Title in case of failure to render returns, for filing false or fraudulent Pn Sat son Domsaecsunecscnnvonrssveserees sosonapesnans rasteseatensansemnnessnanessaseseneomaneraenneenssneeansteseertesstece tt scrqnansnatimaniounmanssaehtSytmnnr3?4F0ethretenes 0?4 the tax required under this Section. In case the taxes deducted and withheld are not paid within the time prescribed, unpaid tax a surcharge of twenty-five per centum per annum plus interest at the the date the same became due until paid. If the withholding agent is the government or any of its agencies, political subdivisions or instrumentalities, or is a government owned or controlled corporation, the employee thereof responsible for the and remittance of the tax be personally tiable for the arge and interest imposed herein. amended by PD No. L773.)

(Underscoring supplied.)

(c) Statement of income payments made and taxes withheld. = Every withholding agent required to deduct and withhold taxes under Section fifty-three shall. furnish each recipient, in respect to his or its receipts during the ° calendar quarter or year, a written statement. showing the income or other therefrom, simultaneously upon payment at the request of the payee, but not later than the 20th day following the close of the quarter in the case of corporate payee, or not later than March 1 of the following year in the case of individual payee for creditable withholding taxes. For final withholding taxes, the statement should be given to the payee on or before January 71 of the succeeding year. (As amended by Batas Fambansa Blg. 41.) (Underscoring supplied. )

(d) Annual returns. . - Every withholding agent required to deduct and withhold taxes under Section fifty-three shall submit to the Commissioner of Internal Revenue a reconciliation statement of quarterly payments and list

DP 0

= fs of payees and income payments. In the case of final withholding taxes, the return shall be filed on or before January 21 of the succeeding year, and for creditable withholding taxes, not later than March 1 of the year following the year for which the annual report is being submitted. This return, if made and filed in accordance with regulations approved by the Minister of Finance, shall be sufficient compliance with the requirements of Section seventy-seven of this Title in respect to the income payments. (Ibid.)

The Commissioner MAY » by

regulations, grant to any withholding agent a reasonable extension of time to furnish and submit the return required in this subsection. (Jbid.)

(e) Surcharge and interest for failure to deduct and withhold. ~ If the withholding agent, in violation of the provisions of the preceding section and implementing regulatioons thereunder, fails to deduct and withhold the amount of tax required under said section and regulations, he shall be liable to pay in addition to the tax required to be deducted and withheld, a surcharge of fifty per centum if the failure is due to willful neglect or with intent to defraud the Government, or twenty-five per centum if the failure is due to such causes, plus interest at the rate of fourteen per centum per annum from the time the tax is required to be withheld until the date of assessment. (Ibid.)

(f) Income of recipient. - Income upon which any creditable tax is required et sevanerss ecrant setnarsunnenerwnserasasaretseenattss seutearntnemraseacteanteyans msggeneeoveseesseestsstunesesseereatrssisavenanesseeonters ir Section 295: if the income tax collected ob

- 8 - at source is less th~n the tax due on his return~ the difference shall be paid in accordance with the provisions of Section 51.

(As amended by Batas Pambansa Blg.

41. ) (Underscoring supp 1 ied. ) In accordance with the said provisions of law~ the ta:·:es deducted and withheld by the withholding agent as required of him under Section

53 of the Ta>:

Code shall be held in trust as a spec ia 1 fund for the government. The withholding agent is required to file the corresponding withholding tax return and pay to the

BIR

the wi thhe 1 d ta>:es on a quarter 1 y basis. For failure to render a return or for rendering false or fraudulent return and for non-payment of taxes withheld~ the corresponding surcharges and penalties shall be imposed against the withholding agent in addition to holding him personally liable for the sur-charge and interest. The withholding agent is required to file an annual return to reconci le the quarterly payments.

Pursuant

to • Section 54(c)~ the withhold ing agent is required to "fur·nish each recipient~ in respect to his or .its receipts during the calendar quarter or year~ a written statement showing the income or other payments made by the withholding agent during such quarter or year and the amount of t he tax deducted ' 5?7 - 9 - and withheld therefrom". This is the statement which the petitioner in the case at bar has produced during the hearing and properly marked e>:hibits

A~

C~ C- 1 to

C-26~ E, E-1 to E-2.

In accordance vii th subsection (F) of Section 54~ the income upon which any creditable tax is required to be withheld at source shall be included in the income ta>~ return of the recipient bLit any e>:cess of the amount of tax so withheld over the tax due on his return sha 11 be refunded to him subject to the provisions of Section 295. If the income tax collected at source is less than the tax due on his return~ the difference shall be paid to the BIR in accordance with Section 51. Please note that the aforequoted provisions of law dealt mostly on the obligation and responsibility of the withholding agent to collect and to remit the taxes wi thhe 1 d by him.

Pending

actual remittance he is to treat the taxes as a • trust fund for the government. On a quarterly and annual basis he is under obligation to account for all the taxes withheld by him from various taxpayer by filing the corresponding withholding tax returns and paying the ta xes to the BIR.

As proof of withholding, the vii thholding agent is reqLiired to 5?R

- 10 - furni s h the recipient of the income a written statement showing the income or other payments made by the wi thho 1 d inq agent during such quarter or year and the amount of the tax deducted and withheld therefrom.

This is the same requirement provided under Revenue Regulation No.

6 - 85~ Revised

and

Consolidated

E>:panded

Withholding

TaH

Regulations~ the implementing regulations issued by the Secretary of Finance upon recommendation by the Commissioner of Internal Revenue.

Under Section 6

of the said regulation the aforementioned written s tatement of withholding is called BIR Form 1743 .1. The only other requirement as provided under Section 7 is that this statement is verified under the penalties of perjury.

Under Section 10 of the

requlations, quoted hereunder: "Sec . 10. "Claims for ta:·: c r-edit or refund of income tax deducted and withheld on income payments shall be g]._Y-gD.._.9 .. 1::.L~ ...... ~::; . .Q.qr: .§..~_ .... .QnJ_y __ ~ .. b.g_o._ ;tt __ .. J . .§ ...... ~.hg~_n_ .. _on .t.!:t~ ···-·-·.r. .. fi?. .. t.!::~r..D __ . __ .J:. b. .~ .. t .......... -.t.bg __ ...... JDJ; .. Q.f.!:L~-·- ·P .~YJ!.lg .r:.:Lt. rg(; ~! .Y._fi?<;L .·_ .. \'"J~? .......... 9.§l_<;J.~r.f!?..!;L .... ~.~ ........ ..P..~.r.:l ....... J:~ .. f_ ..... _ .. t_b.g. gr:.9§? ....... :t!J.<;: .. 9.ffi.~L .. i:':\.IJ...Q. ___ tb.~---.f-~<: t ... Sl...L.J1.!.t.JJ.b..Ql.9.! .. !lQ j,_!!iL ...... !!?.?J: ~ .P. .. Li..?.tJ.g_Q_ ...... .J?.X': ____ § ___ .. _c;: .. QPY.. .. _ Q.f__ ........ ?_t..§'_ t e_fT.I.?..O.t . Q.'=.! .. ~.Y ......... t?.?.!-lfi?._q ... _ . .PY_ . .t .. b.f!?. __ p~_yp r _ t _g _ _tb e _ .R ~~-~ (BIR For·m No. 1743 .1) showing the amount paid and the amount of tax withheld therefrom."

(Underscor.ing supplied) The l a w and the implementing regulations provide no other r·equ i remen ts such as the pr oduc tion of the quarterly and annual returns and 5 ? ~

- 11 - the cor-r-esponding

Centr-al

Bank

confirmation r-eceipts or any other proof of actual ~emittance as commonly r·aised by counsels of the r-espondent in this case and in other- similar- cases. Neither does the la"'J r-equire that the statement of "'Jithholding taxes be verified by the r-espondent's r-evenue enfor-cement officer-s.

11 that is r-equired is for the wi thho 1 ding agent to issue it under- pen a 1 ties of perJury .') An analysis of the provisions of law .invo 1 ved wi 11 show that the gr-ant of tax r-efund when the creditable withholding ta>t is in excess of the amount of the tax due~ depends on three ·factors:

( 1 ) that the claim is filed with the

Commissioner-

of Inter-nal Revenue within the two- year- per-iod fr-om the date of payment of the tax as ( requir-ed under- Sec t .ion 295 of the Tax Code ( no"'J / Section 204)~ (2) it must be shown on the return of the r-ecipeint that the income payment r-~ceived was declar-ed as par-t of the gross income~ and (3) the fact of withholding is established by a copy of the statement duly issued by the payor- to the payee showing the amount paid and the amount of tax withheld ther-efrom.

The first two requirements are embodied in Section 54(f) of the Tax Code while the last is a r-equirement under- Section 54(c). 530

- 12 - To these requirements~ petitioner has complied with requirement number one (1) when it filed subj •?c t c 1 aim for refund dated Feb. 3 ~ 1987 \.Ali th the Appellate Division of the BIR on Feb. 18~ 1987 (E:·:h.

"F").

It likewise substantially complied with requirement number three ( 3) when petitioner submitted Statements of Tax Withheld at Source (BIR Form 1743) ~ Certificates of Creditable Income T.:n:

Withheld at Source

(BIR

Form

1743.1)~ and other certifications showing the taxes withheld from petitioner by various withholding agents.

However~

,~-----------____, petitioner ·failed to comply the second

I

t 1(,-----=":7':;==-=--

I

evidence to show that for the ta>:ab 1 e years 1984 t failed to present documentary and 1985~ petitioner included in its income tax return the particular income from which the various c: red i tab 1 e taxes were wi thhe 1 d. l>Je have e:-:amined E:·:h.i.bi ts "B" ~

"D"

~'- "G" pertaining to the annual income tax returns and the amended income tax • retur·ns o ·f the petitioner for ta>:ab 1 e years 1984 and .19_85 ~ nothing were sho\.o'm that the partiCLil ar income subject of the wi thho 1 ding ta:·:es were in fact Jnc 1 uded in the tot a 1 gross Jncome dec 1 a red. Those annual returns were presented to prove merely the total gross income declared~ the total 5~ 1

- 13 - deductions claimed and the resulting net loss incurred \-'lhi le the amended returns were presented to show only the refundable amount and the additional withholding credit.

This

requirement of the law is fair and just~ if the ta :·:payer is claiming ta>:

credit from those withholding ta>:es it is but equitable that he shou 1 d

stand of this Court in the cases of The Philippin American Life Insurance Corporation VS.

scent sgateesesunssseosesssseeeteacacreresanmassngrocsesnsctouaneainaesaseesnensrertasontteroreteesedtessatennersnhtenuasecenteccermmmnnansenseenenins enn emassncteents sionamenscneseseatee tt of Internal Revenue. CTA Case No.

4018, Sept. 16, 1991; A. Soriano Corporation vs.

ommisioner of Internal Revenue, CTA Case No. 4201, Ltd. vs, Commissioner of Internal Revenue, CTA Case No. 2952, Auqust 15, 1982; & Ateneo de Manila vs.

‘C-sanevsnmmenns soenecervorasqveresenecs cates orsenntzhia satheass+tentatnventnnneSeinaresseerenssesometantccss Commissioner. of Internal Revenue, CTA Case No. 2213, July 28, 1989.

Therefore, failure on the part of the petitioner to show that the income from which the withholding tax has been withheld is included in the gross income declared is fatal to its claim for refund. This notwithstanding the success on the part of the petitioner to prove that there have been excess creditable withholding taxes applied against its 1984 and 1985 income tax returns showing net loss. Aso

WHEREFORE, in view of all the foregoing, petiitoner’s claim for refund is here denied.

Associate Judge

BAR

- 15 -

WE CONCUR:

~-~ F'residj ?;'g Judge A;;A# ~ CONJ{l~~C. R~AQUIN A4sociate

Judge

I

CERTIFICATION

I

hereby certify that this decision was reached after due consultation among the members of the

Court

of

Tax

Appeals

in accordance with

Section

13~ Article VIII of the Constitution. • ~~

Presiding Judge

Court of Tax Appeals

5~ 4