CTA Case No. 4518

DECISION

This is a claim for judicial refund of overpaid withholding tax payments at source in the amount of P166,456."¢ for the calendar years 1988 and 1989.

The record shows that petitioner ARBQUATIC FARMS, LTD., is a resident foreign corporation duly organized under the laws of the State of Hawaii U.S.A...

On April 3, 1987, petitioner was granted authority by the Board of Investments under the provisions of Omnibus Investments Code (F.D. No. 1789) as amdnded by RBatas Pambansa Bilang 391 to provide Technology Transfer and Consultancy services in the design, construction, operation and management of Hatcheries and grow-out facilities.

404

-e- In 1988 and 1989, petitioner generated income of i P3,334,529.°° ain the form of consulting services from Hawaiian Hatcheries, Inc. (HHI) for which the latter withheld and remitted to the Bureau of Internal Revenue the S% withholding tax broken down as follows:

Year Withholding Agent Consultancy Fees 3% Tax Withheld

1988 HHI FP 2, 184, 736. O° F 109, 256. 3° JHI 400, O00, 00 20,000, %° 1989 HHI 650, 589. °° 32,529. ** JHI 99,209, °° 4, 960, 02 Total FS, 334, 525. 07 F166, 456. =* However, petitioner claimed that since it started its Philippine Operations, it sustained continued annual losses from 1987 wp to December 1989. The fact is, petitioner temporarily stopped its operation in Tanuary 1990 because of continuous operating ieges. avteing from the absence of contract job projects.

On April 17, 1988 petitioner filed its corporate income returns with the Bureau of Internal Revenue for the year ending December S31, 1988 (Exh. "C") and for the year 1989 on April 16, 1990 indicating a refundable amount for both years in the total amount of F166, 456. °%, On December 3, 1990 petitioner filed with respondent a claim for tax refund in the amount of P166,456."=* for the years 1986 and 1989 (exh. "G"), on the ground that it suffered losses in its operations for said years thereby 409 \ - 3 - it had no liability against which the ct~editable vlithholding taxes could be applied. Said claim was not acted upon by t~e s pondE~ nt, hen c e, this appeal was filed on prescriptive pe r iod of two years In re s pond e nt an s wer to the instant petition he admitted the f a ct of petitionet~'s filing its claim fot~ t~efund but denies petitionet~'s allegation pet~taining to it s claim being a m et~ e opinion and conclusions of f acts a nd law. As s pecial and a f f i t~ mat i v e defenses, t~e s pond e nt stated among others:

a.

That

thr,?

petition does not state <'=' cause of motion;

b.

that petitioner has the burden of pt~ ovin~} th a t it is entitled to tax t~efuncl, hi:\S not s hown that it had complied with the mandatory provisions of Section 2 30 of the Tax Code;

c.

[:h~ anting that the a mount of tax sought to be refunded had actually been paid by petitioner the claim for refund has already pt~esct~ibed with t~espect to the ta>< paid two ( 2 ) yeal ~s pt~ icw to DE~cembet~ 7, -----:r'::JSJO, ptwsuant to Section 230 of the tax Code;

d.

That

the tax amount sought to be ~efunded i s ~ ~ the nature of a creditable 1ncome t a x w1thheld at course.

Since

the cet~tificate doe s no t specify a t~efundable income ta>< wi·thheld, the s ame is deemed to be lost when the petitioner does not have any income tax due ag a in s t which the creditable income tax withheld at source could be applied ; 406

-4- @. The claims for the refund being in the nature af an exemption from taxation, cannot be made to rest on vague implications and must be construed strictly. against petitioner.

The Jucsties submitted for decision is whether or not petitioner is entitled to the refund of F166, 456. =* as alleged overpaid withholding income tax for the years 1988 and 1989.

The allegation of respondent in her answer that the Petitioner does not state a cause of action was a last ditch attempt on the part of respondent to mislead the court, cantrary to respondent’s claim. Respondent was furnished pertinent hetuews and other related papers both in the administrative levels and Judicial trials. We find the allegation of petitioner which respondent is denying for lack of knowledge or information to be within the competence af respondent to determine and the means of information cancerning the same is readily accessible to him. Respondent’s allegation of lack of knowledge or information cannot therefore be considered as a specific denial (Standard Chartered Bank vs. Commissioner of Internal Revenue, CTA CASE NO. 4272, March 17, 1992, see also the cases of J.P. Juan and Sons, Inc., vs. Leanga Industries Ine., #8 SCRA 807; Philippines Advertising Counselors Inc., vs. Revilla, 62 SCRA £46.)

407

- 5 - The allegation of respondent that "the lain for refund has already prescribed" is unavailing and the same has no basis in law as ruled by the Supreme Court in the Case of ACCRA Investments Corporation vs. The Honorable Court of Appeals, Commissioner of Internal Revenue and the Court of Tax Appeals, G.R. No. L-96SEE, December 20, 1991, 204 SCRA 957, pertinent portion of which is quoted belows:

"GEC. 7O(b) Time af Filing the income return-The corporate quarterly declaration shall be filed within sixty(60) days following the close of each of the first three quarters of the taxable year. The final adjustment return shall be filed on or before the iSth day of the 4th month following the close of the fiscal year, as the case may be."

The petitioner corporation’s taxable year is on a calendar year basis, hence, with respect to the 1961 taxable year, ACCRAIN had unt) ,15 apy 1982 within which to file its , Final adjustment return. U-The petitioner corporation duly complied with this requirement. On the basis of the corporate income tax return which ACCRAIN filed on 15, April 1982, it reported: a net loss of P2,957,142,0°. | Conséquently, as reflected thereon, the petitioner corporation, after due computation, had no tak liability for the year 1981. Had there been any, payment thereof would have been due at the time the return was filed pursuant. to subparagraph (c) of the aforementioned codal provision which reads:

SEC. 7O(c) - Time af payment of the inceme tax-The income tax due on the corporate quarterly returns and the final income tax returns computed in accordance with Section 68 and 69 shall be paid at the time the 408

DECISION —

C.7.A. CASE NO. 4518 - 6 - declaration or return is filed as prescribed by the Commissioner of Internal Revenue.

If we were to uphold the respondent appellate court in making the "date of payment" coincide with the "end of the taxable year," the petitioner corporation at the end of the 1981 taxable year was in no position then to determine whether it was liable or not for the Payment of its 1981 income tax.

KKK . x KX KKK It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation’s. claim for refund form the time it filed its final adjustment return , is the facet that it was only that ACCRAIN could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore, in ACCRAIN’s case was when its tax liability, if any, fell due upon its Filing of its final adjustment return on April 15, 19982."

xKX i xXx KX The ee | in the™ case “of domestic corporation like ACCRAIN refers to. the final adjustments returns as mentioned in Section 69 of the Tax Code of 1986-as amended which partly reads: 7 "SEC. 69. Final Adjustment Return. a Every corporation liable to tax under Section 24 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 af that year the corporation shall either:

(a) Fay the excess tax still due; or (b>) Be refunded the excess amount paid, as the case may be."

409

-7F-

Clearly, there is the need to file a return first before a claim for refund = can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its Withholding agents to the Bureau of Internal Revenue, The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15, i982. In our Resolution dated April 10, 1989 in the case of Commissioner cof Internal Revenue VS. Asia Australia Express, Ltd. (G.R. No. 85956), we ruled that the two(@) year prescriptive period within which to claim a refund commences to run at the earliest on the date of the filing of the adjusted final tax return. Hence, the petitioner corporation had until April 15, 1984 within which to file its claim for refund."

Following the doctrine laid down in the case of Asia Australia Express Ltd., vs. Commissioner of Internal Revenue, CTA Case No. S695, September £9, 1988 (affirmed on Appeal by the Supreme Court in G.R. No. L &5956 April 19, 1989.) it was held that "the two(@) year prescriptive period within which to claim a refttnd commences to run at the earliest on the date of filing of the adjusted final tax return, petitioner’s claim is timely. In the case at bar petitioner filed its final adjustment returns for its 1988 taxable year on April 17, 1989, hence petitioner had until April 15, 1991, within which to file its claim for refund, With respect to taxable year 1989 petitioner Filed its formal adjustment returns on April 15, 1992, 410 - = s0 petitioner has until April 15, 1994 within which to file its claim for refund.

AS to respondent argument "that since the certificate does not specify a refundable income tax withheld, the same is deemed to be lost when the petitioner does not have any income tax due against which income tax withheld at source could be applied," is to our mind unavailing.

We are of the persuasion that it is no longer necessary for petitioner to do so. The records show that the petitioner submitted the following documentary evidences particularly exhs. "C-2#", "E-2", "H", wi, sl PL "Ei" and "M" wherein specific refundable tax withheld at source were clearly indicated.

Moreover, petitioner has submitted as evidence certificates of creditable income tax withheld at source (BIR Form 1743)3 Annual Return of Creditable Income tax withheld (Expanded withholding tax system (BIR Form 1743- B)s and petitioner’s Corporate Income tax return for the year in question. (Exhibits "H", "Ir", "K", "M", "J", "L") and exhs. "OC", "E"), to support its claims. for refund.

We agree with respondent that claim for refund being in the nature of tax exemption must be strictly construed ~ 411

-~ 9 = against the claimant. However, where the law is clear and unambiguous the law must be taken as it is devoid of judicial addition or subtractions (Acting Commissioner of Customs vs. Manila Electric Company, 77 SCRA 469). In the case at bar we believe that petitioner has ably presented and defended its claim for refund with valid support leaving no room for any other interpretation but to grant the same.

It must also be stressed that after petitioner submitted its evidence which were all admitted by this court, respondent submitted her case on the basis of records and pleadings, without offering proof as to etre truth of wher awn allegation in her answer. Respondent failed to present her evidence, oral or otherwise in support of sae case, (Warner—-Lambert Philippine, Inc. vs. Commissioner of Internal Revenue, CTA CASE No. 3925, April fi, 1992) Respondent, therefore, may be considered to have no serious objection or opposition to petitioner entitlement to the refund (Dataprep {Phili, Ine, vs. Commissioner of Internal Revenue, CTA CASE NO. 3600 March ZO, 1984.

Well settled is the rule that one who prays for judgment on the pleadings without offering proof as toa the truth of his pleading must be understood to have 41e

- 10 - admitted the truth of all the material and relevant allegations of the oppo s ing party and to rest his mot ion fot' .Judgement on the allegation taken togethet' with such of his own as admitted <Bauerman vs.

CASA, 10 Phil. 385;

Evangelista vs. De La Rosa, Et ~=11.., 76 Phil. 115> The fact that petit i onet' suffet· ed 1 o sse s ft'O m l '387 up to De c embet' 1'38':3 t'emained uncontt•ovet·ted and as it appears,

Jamandie

Hatcheries, Inc. , withheld from the petitioner the amount of P155,455.a4 and re mitted to the Bureau of Internal Revenue.

Hence, nothing is left fat' t h i s co tw t t o d o but t o g t' ant t o pet i t i on e t' t h e am o u n t claimed.

In fact, we believe that cases of this nptUt'e should have been alt· eady t'e s olved in the ad minist t·ative level.

WHEREFORE,

Judgement

i s hereby rendered directing respondent Commi ss ioner of Internal Revenue to refund to pet it i onet' ~iquat ic Fat· ms, Ltd. the amount of Pl. 55,4-56. a 4 representing overpaid withholding taxes.

GRUBA

Judge

/ •• . '

- 11 -

WE CONCUR:

I

CERT:XF:XCAT:XON

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, At'ticle VIII of the Constitution.

414 C:.a;;~ ~ ERNESTO D. ACOSTA

Pt'esiding Judge

Court of Tax Appeals