Agp Industrial Corporation vs. Commisstoner of Internal

DECISION -

- - and financial statements; (Exhs. *p™ to "R-tTS" and

b. Certificate of Creditable Income Tax Withhald at Source issued by Royal Undergarment Coiporation of the Philippines; (Exh. "A"™) and

c. the letter claim for refuad dated December 29, 199% vecetved by the respondent on the sane date with twenty-eight pages attachments. (Bubs. "R™ te "N-28") Respondent, on the other hand, Failed to csubwih way documentary evidense duc to the absense of the proport of investigation on petitioner’s claim fou vefund. Tustead she submitted the case based on the pleadings and tho documents adduced by petitioner.

Both parties, submitted their te iv ocmoranda.

Respondent contended that petitioner can ne longer claim for the refund of P465,424.09, representiag ita alleged overpaid creditable withholding tax feroth: yor 1091. The said amount was includes! in the anonnt oof P1,37€,089.00 which petitioner sought to be refunded in the year 1992 as shown in Exhibit "D-24" of petitioner. Thus, respondent reasoned that “in the absence af evidence to show that petitioner abandoned its ctaim for refund of the said sum of P1,378,083.99, the instant

TON -

. CASE NO. 5053.

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=> claim for refund must be dismissed, otherwise, petitioner vill be granted the refund twice for the same amount, to the damage and prejudice of the Government". TInivemuch ac we want to give credence on the argument of othe respondent , the same is defcated when we examined the pending dockets of this Court and found cout t petitiener Filed a separate claim for refund fer the i} excess ereditable withholding tax ith tha ocum oF P912,659.00 for year 1992 alone. This claim for refund was docketsd as C.T.A. Case Noe. 5239, Theyofers, wits government will not be prejudiced if upon chamdnation petitioner will be found entitled to its 1997 aor ereditable withholding taxes.

Respondent urther arguec tha eb btdon sr ts clotm Respondent furtth ing 1 that boeit ’ 1 for tos refund of PAGS,424.00 has neo hasis ta Last and in Taw, and must necessarily be dented. Petitdencr clid act setually incur losses durtiag the tanatds yea, 1977 Sh pointed out that petitioner deducted an enpence whieh Les not related to its business. (Respondent is referring te the interest and financing charges in the amount sf P34,182,370.000 (Exh. >"B-2") which petitioner dodusted from its gross incomegof P10,496,512.00). She analyned that since the bulk of ‘its. income was derived [From A. CASE NO. 5053.

rendorins taunagement services to Royal Voudergarment Corporation of the Philippines in the amount of P9,308,470.20, the interest and financing charges shout be disallowed since it is not related tvs its business. She then cited Section 29(a) of the Tax Code which provides:

Scction 29. Deductions from gross inceowe.

4+ Tu computing taxable income subject } under Sec. 21(a); 24a), (by) and (Ce); sd 25¢a) C1), there shall be allowed as deductions the items specified in paragraphs (a) ts (41) of AAX NK eAILik

(a) Expenses. - (1) Business cap (A) In general. - All ordinery and mace expenses paid or incurred during the tanable year in carrying on any trade oor business, including a reasonable allowance Fe: alorios or other compensation for persensl Seo bus actually cendered; travelling capo mere ahi de away Frou home in the pursuit oF a ot te, professten or business, rontale oo thes payments coquieed ta be made as yo conditton te the continued Une Or possessiou, Coy Purpos. of the trade, profession or business ef property to which the taxpayer har not taton or is mot taking title or in which he har nas equity.

ARK MAR Mle

tharoooan

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te elear from the above-cited provise expanse te ba deductible from gross income, Pema!

cequirements, to wi!

DECTSION -

(1) the expense must be both ordinary and

(2) the expense must be paid er tucurred within the rcar; and

(3) ths expense must be incurred in carrytug on Expenes is considered ordinary when it te cs emon bs inetr in the trade or business of the taxpayer. Te ts cunsidered necessary if it is appropriate and helpful bee - ta i) 4 the taxpayer’s trade or business or occupation. Tt is mandatory that all expenses be both ordinary and necessary expenditures. An expense to be ordinary omer be reasonahtc in ameunt (€1955 CCn. Fed. Course, por. 10%, as cited iu the National Taternal Revenue Codec, Annotate:? by Arafias, p. 193, Vol. 1; NW. Newton Whittlesesoy, The., 9 & 700 (1947); Acthur A. Ballantine, Jr., ‘GG TO 27.

(1956) Taw of Federal Income Taxation, 1, Val. "A, 25.54.2015.

Thus, respondent opined that instead of ner tare from operations petitioner has a taxahle income of P1,2?49,956.990 computed as follows:

Grasn tneome PIN LANG ETP AA Leos go oaciod aud administrative expenses OO, 21e S77 OO Net income : Po1,279,937.900 -162—

BECISTON -

However, to the Court’s mind, reependent contention isc out of issue. The deductibility or non deductibility of an sxpense should be raised assessment case or at. the time when vespoicdent euthorteed by Jaw to examine petitidener’s borts fn the Tevel. This Court is not ao proper Forum for 3% pesponudecnt tao tackle cuch an iseac IF the obeen: 3 at bee fa!

—— moaturcd assessment which will call for tte jus rs ay This is a gudicial claim For vefund of an execs.

creditable vithholding tax at source and time and age we hrold firm en eur rule that in the phew nee o£ aa contrary evidence .a tanpayer nocd onty he per compliance with the following three basic ypu emotes:

(1) chat it Filed a oclaim For vefaad within the two (2) year perted an prev eritos under Seetion 292 (new 230) of — th: Matis sl

Tnternal Revente Carles

(2) that the income upon whieh the were withheld wersc included in the 1 the recipient; and (3 the fact of withholding ic established by a copy of statement (PTR Porm 1743.1) duly issued by the payor (withh-tdinag ageut) te the payee, showing the amcunt paid and the ameunt of tax withheld there f: (See. 10, Rev. Regs. 6-85; Gitytrust PFluascac Corporation ov. The Commisstonesc of Taternal Reveonuc, CTA Case No. 4134, November V1, peor, Thtyhesuot Pinanes Corporat for CE re NS Investors Finance Corporation/fNCP Pinanss) Ve LOL i ssioner of Internal Revenuc, CTA Case No.

- 9 - AO4G, Pebruary 24, 1993; and Paseo Realty and Development Corporation Vv. Conmisstioner of Internal Revenuc, CTA Case No. A254, August 10, 1993; Commissioner of Internal Revenuc v. Court

of Tax Appeals and Paseo Realty and Development

Corporation, CA-G.R. SP No. 32927, February 28, 1994).

Based on the records and evidence of the case, petitioner met all the three. requircments we herein oot forth. Fivot, the claim For refund was timely Filed within the two-year period from the date of payment of the tax which is bolstered under Sec. 230 of the Mations!

Internal Revenue Code, as amended. T1 Cited it: ely iis for vefund with the Bureau of Tnuternul Reveiuc ov Decembor 20, 1993 (Exh. "D-29") and with this Court on December 2°, 1999, The two-year peiiod, in the fistaist case, commcucos to atart on April 15, 1992, ttre Limes requires bo law for the petitioner be File fio fF taat Lacombe bap potur. (Commissioner of Tnternad Rewecnus ve THX Gales, Tac. et al., G.R. No. &37 736, Jankary 15, 1992). Seeond, petitioner dectared tno Ets annual Papesosine c bas return, for the year 1991, the tnsome upon which the tax sought to be refunded was withheld. This is shewn in Exh. "B-16" wherein the amount of PO ,308 A7O.09, representing hanagement fee, received from Royal Undergarmeu’ Corporation of the Philipp! .:s van feedar ot as part of petitioner’s gross income. Aud lastly, the

DECISION

C.T.A. CASE WO. 5055.

proof of withholding is well esteblichod

Presentation of Certificate of Creditable Ineome Tan

Withheld At Source (Exh. "A").

In the absence of a contrary ovirlosee which respondent miserably failed to iutvoduce, this Court Finds for the petitioner.

WHEREFCRE, in view of all the foregoing, responds ul is hereby cidered to refund in favor Gf petitjener sam of P’!65,%23.53 representing overpaid eraditah withholding tax at sources for the calendar year 1°91, 50 ORDFRED.

Once (2+ Dente

ERNESTO Y)., ACAstTA

Treosidina

Tylan

WE CONCUR:

GRUBA

Judge

RANON O. DE VEY

Noouwedlate Judge

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