CTA Case No. 5082

DECISION

This appeal involves petitioner's claim for refund :.:n tax ct€edit of the sum of P922,311.00, overpaid creditable withholding tax for calondar year ended December 31, 19'31.

Petitioner Oranbo Realty Corporation is ,3 domestic corporation duly organized and existing under the laws of the Philippines with business address at 4th Floor, Sycip Law All Asia Bldg. , Paseo de Roxas, Makati, M?tro Manila.

During the calendar year 1991, petitioner leases its p·ropet‚ties to Atƒis Philippines, Inc.

from which it realized a total rental income amount of P19,761,612.00 broken down as follows:

Inc.

in the

DECISION -

C.T.A. CASE NO. 5082 LEf.:lSEE Al·ais Philippines SehvJan i, Inc.

Totc::d AMCH .. Ji'.!T F•l':J, Lfb:l., SL:::. 00 300 000.00 f';;•l' J, 7b1, i.:: .. :tz::. 90 Petitioner alleged that out of the income payments of Aris Philippines, Inc., a 5L expanded withholding tax was deducted by the latter in the sum of (P19,4b1,612.00 X 5L).

15, l'::Y:J•::, petitionetb filed itž:;

income ta>< return for the calendar year ending December 317 l'YJ 1 reflecting a net taxable income of P145,058.00 with a income t a>< liability of <P145,058.00 x 35%) but with a refundable income tax in the amount of P922,311.00 arising from the unutilized portion of the 5% expanded withholding tax from Aris Philippines, Inc., detailed as follows:

I NCOIYIE:

?-'kis Philippines, Inc.

t:Jehwan i, I r\c.

JYiiscellaneous Total LESS:

DEDUCTIONS NET

TAXABLE INCOME

P1';3, L1C:l, GJ.;:. 00 :.:·;oo, ooo. oo l.f. r\FI(: . . 00 P l'J, 1 G h 1 i1·'J fl .. 0 0 l'J. c.;::· :L 1,1,0 ., (l(l <: • t-L- n . (I

TAX DUE

P 50, T/0. 00 ·J1Ÿ·: . on:t. on '::); =:·..::.;>:_1 2 • (!() LESS:

5%

CREDITABLE WITHHOLDING

TAX AMOUNT REFUNDABLE P This overpaid income tax for 1991 was not utilized by petitioner in the succeeding taxable year 1992.

Instead, DECISION - C.T.A.

CASE NO.

5082 3 it opted to file a written claim for refund with the Bureau of Internal Revenue on 1'-)pt³i 1 ·::•CI L. \..J '1 Howe vet´, the inaction of respondent on its claim for refund/tax credit compelled petitioner to the instant petition for review on March 28, file in ordet´ to preserve its right to judicially claim for the tCefund of excess payment of creditable withholding tax pursuant to Section 230 of the National Internal Code, as amended.

While the case was CC:\USe the immediate investigation of petitioner ' s request by virtue of a Referral Letter No.

G447/4b1 , dated November 14, 1'394, issued to Revenue Enforcement Officer Roberto Baquitµan <Exh.

1 of t¶espondent, p.

i'i·O, CTr-:1 t=cccn>cls).

On November 21, 1'3'34, m·?mot¸;,:ndum of investigation was served by said revenue officer finding the petitione·r· li¹ble for deficiency income tt:.\H in the total amount of P10, 442,959. 84· <Exh.

3 of tBespondent, pp.

142-144, CTA records).

The issues posed before Us are as follows:

1.

Whether or not the revenue examiner's report of investigation can negate petitioner's entitlement for the refund;

and if not, .-.

.:::.

Whether' or' not petitione1·º ha<;

p·r•o v <'n its entitlement thereto.

DECISION -

C.T.A.

CASE NO.

5082 - 4 - Anent the fil·¾st issue.

petitioner is not entitled to the refund or' t a>< c1·¿ed it centering her position of investigation conducted by the revenue examiner on petitioner's income Pertinent portion of quoted as follows:

"FINDINGS:

We disallow the interest expense claimed for the following reasons: 1.

Item A:

Loan from BPI was incurred on July 1r:3, 1989 and the P'-wpose of th!} lo.::n was to finance the acquisition by UFJII·lUD (taxpayer) of all outstanding shares of stock of NOIYiA Devt.

CotÀp.

(see Tel·Ám Loan nu•·cewc:nt;

dated July 19, 1989 page 116).

rinanci×l statements from 1990-1991 however, du not tÀeflect these trÀe:•nsaction!;

(ptn·¾chc:Âst.' of !:illicll Ú!Û!;

of stock and its disposition, the proceeds of disposition, gain/loss ftÀom disposition, 12tc.)

This indicates that the loan is not only inexistent but also fictitious 01·Õ siJ.J:.tl.::d;L'cl.

The taxpayetà should be lÄequjyed to submit pl'oof of the transaÅtions above.

Furthermore, the loans obtained greatly exceeds the stock/equity of ORANBO and should have been treated as investment in stock Ôy the creditor bank.

In our jurisdiction we folluw the thin incorporation rule, whereby loanÖ obtained in excess of capit c:ll i z <Ó t i on !>1< .. 11 l::.ie treated as equity contribution (capital investments on the part of the lender) Ønd not as liabilities.

Item B.

Loan from UCPD, for P27,ooo,ooo.oo, was incurred on August 15, 1990 for working capital requirements.

FinÙncial statement for 1990 <Statement of Changes in

DECISION -

C.T.A. CASE NO.

5082 - 5 - Financial Position> showed that the t¢xpayer acquired land in the amount of P25,821,745.00.

Since the proceeds of the loan was used in the purchase of real estate above the correct treatment should be to capitalize the interest expense attributable to the purchase pri ce .

It is a settled rule that the cost of money (interest expense) and all other expenses attending the acquisition of capital a s s e t s is a capital expenditure. Rationale behind this rule is that land do not depreciate, save only on some exceptionQl cases, in fact in most instanc£s it appreciates.

It is thet'efot'e pt'OP(¤i-' tt·,;.:\\:;

tli<::

expenses incurred for the acquisition of said property should be capitalized as part of the cost and not charged to operation as current expenses.

C.

Due to Aris Philippines was series of advances way bad< in 1'384.

(.:.h-is Phil.

U:Hnž:;

for short) is a 40% stockholder of ORANDO.

n11 of this advances were used in the purchased land and in meeting working capital requirements.

The records show t hat dv¡nccs taken are sometimes settled in kind.

(dŸcion en pago) real estate.

ORANBO leases all its land and building to A Fn S.

< S e e Not e s t o 1 '3 '31 r.:.· IS > • ) s can b r s c: en above, financial profile, the company declared a taxable net· income of P1'¥5, O¢SB. 00 f·r-om f,Jl'D!'>S income of 1'3,884,420.00 or measly .00729 or seventh of one-percent. The land and building leased is valued at P95,744,856.00.

The records do not show any lease contract between the parties neither is there a way to establish ot' standat'ds to be used to det e l·'min e INhc:thtœi·' the amount of t'ental being paid by 1%!dS i&;

based on commercial rates.

ORANBO and ARIS are related taxpayers if not commonly owned by one or group of stockholder.

While the taxpayer admits being 40¦ owned by ARIS the document however show otherwise.

In various loan document entered into by ORANBO with third party <BPI & UCPB), it is being J·'ept'esented by l'k.

Huu::- H.

DECISION -

C.T.A. CASE NO. 5082 6 - SCHROEDER as Chairman of

ORANBO REALTY

CORP.

But in ORANBOs transaction with ARIS, this time ORANBO is represented by Mr.

BENILDO G.

HERNANDEZ as President, while ARIS is represented by Mr.

ROLF H.

SHRDEDER, as Pˆ‰esident.

It is a settled rule in this jurisdiction that payment of interest between related taxpayers are not deductible because of <possible) connivance.

Taking all the above circumstances, we are left with no option but to recommend for the disallowance of the entire interest expenses claimed as deduction. In Š‹ecommend claimed view thereof, we most respectfully that all the interest expenses as deduction be disallowed and assessment based on adjusted taxable income be appˆŒo v ed. "

We shall tackle each item one by one.

Item ll.

Loan with BPI.

Respondent's revenue examiner is of the opinion that not deductible.

1'3'30-1'391 do not The financial rŒefl ect the statements for the pt.ll·Œch as e of i:lll l' ro => the outstanding shares of stock of Development Thus, reaching to a conclusion thi::'lt such loan is fictitious and inexistent. In an earlier case of Oranbo Realty Corporat i on vs.

CIR, CTA Case No.

4820, January 23, 19'35, this Court had the occasion to rule in this wise:

DECISION -

C.T.A.

CASE NO.

5082 - 7 - "(P)etitioner CORANBOJ is a cor¸por·ation duly organized and existing under the laws of the Philippines.

It who l l v owns Noma Development Corporation, a domestic cornnration whose ter¸m of existence \.'Jas —:;hor˜t<™nc;d to December 31, 1988 by an amendment of the Articles of Incorporation duly approved by the Securities and Exchange Commission on September 28, 198'3 <Exh.

C).

A Deed of Conveyance was executed by Noma Development Corporation <Assignor) and Oranbo Realty Corporation <Assignee) on June 2–, 1990 with respect to the transfer of real properties together with its buildings and improvements without any consideration but by way of 1 i q u i d at i n g d i v i d end s i n p tw s u an c e t o t I i e dissolution of Noma Development Corporation (Ex h.

A) •

( Un de t¸ l in in g sup p 1 i e d) " Clear¸ly, the acquisition of shat¹es of stocl·< of' NCW!f:.)

Development cannot in any way reflect in th<» financi.::d statements of petitioner for the calendar years 1990-1991 because NOIYIA Development ear¸ 1 i e1 dissolved on Decemberº 31, 1'388.

As a matter of fact, the shat¸es of stock acquired by petitioner were replaced by estate of NOMA Development liquidating dividends due to its dissolution.

Item B.

Respondent Loan with UCPB.

cant ends that the to the loan from UCPB which was put¸chase land should be capitalized. by h'<:y of e><pense used to behind such statement \.'Jas that "land do not derwec:i.c::"d;e, only [ i J n some exceptional cases, in fact in most

DECISION -

C. T.A.

CASE NO.

5082 - 8 - instances it appreciates.

It is therefore proper that the expenses i ncut't'ed for the acquisition of said property should be capitalized as part of the cost and not chat'ged to operation as cUt't'ent expen{:;es. "

We do not agt'f?e.

In t'efut.::\tion, opinion that the case of

PAPER INDUSTRIES

CORP.

OF THE PHILS.

<PICOP> vs. COURT OF APPEALS, COMMR.

OF INTERNAL

REVENUE AND

COURT OF

TAX APPEALS, G. R.

Nos.

105'34'3-50;

and COMMR.

OF INTERNAL REVENUE vs.

PICOP, THE COURT OF

APPEALS AND

THE COURT OF

TAX APPEALS, G.R.

Nos.

105'384- 85, · December 1, 1995, decided by the Supreme Court En Bane is applicable to the case at nlthough it involves the allowance of interest on l o c\ n s f o 1 .. , t h G purchase of machinery and equipment as a deduction from income, it nevertheless may apply to expense paid on loan contracted by herein petitioner from UCPB since it inv6lves the purchase of capital asset out of a loan obtained from a bank. Said the High Court;

"<1> Whether Picop is entitled to deduct against current income interest payments on loans for the purchase of machinery and equipment. In 1'35'3, 1':372 and 1'3Tl, Picop oiTl:;.::\inr"d loans from foreign creditors in order to finance the purchase of machinery and kquipmlnt needed for its operations.

In its 1977 Income Tax Return, Picop claimed i nt er es t poyments made in 1'377, amounting to P42,840, 131.00, on DECISION - C.T.A.

CASE NO.

5082 these loans as income.

- 9 - a deduction from its 1977 gross The CIR disallowed this deduction upon the ground that, because the loans had bŽn incurred for the purchase of machinery and equipment, the interest payments on those loans should have been capitalized instead and claimed as a depreciation deduction taking into account the adjusted basis of the machinery and equipment (original acquisition cost plus interest charges) over the useful life of such assets.

Both the CTA and the Court of Appeals sustained the position of Picop and held that the interest deduction claimed by Picop w0s proper and allowable.

In the instant Pelition, the CIR insists on its original position. We begin by noting that interest payments on loans incurred by a taxpayer (whether DOl­ registered or not) are allowed by the NIHC as deductions against the taxpayer's gross income.

Section 30 of the 1977 Tax Code provided as follows:

'Section 30.

Gross Income.

The deducted from gross (a) Expenses:

XXX (b) Interest:

Deduction from following may be income:

(1) In general.

The amount of interest paid within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations the interest upon which is exempt frum taxation as income under this Title:

x x x' (Underscoring supplied) Thus, the general rule is that interest expenses are deductible against gross income and this certainly includes interest paid under loans incurred in connection with the carrying DECISION - C.T.A.

CASE NO.

5082 - 10 - on of the business of the taxpayer.

In the instant case, the CIR does not di s pute that the interest payments were made by Pic o p on loans incurred in connection with the carrying on of the t·egistet¸ed opet¹ations of Picop,

i. f!. , ·UHc financing of the purchase of machinery and equipment actually used in the re¹istered operations of Picop.

Neither does the CIR deny that such intel·¹est payments wel·ºe lf?q.::dlv d•.t<¶ and demandable under the terms of such loans, and in fact paid by Picop during the tax year 1977.

The CIR has been unable to point to provision of the 1977 Tax Code or any statute that requires the disallowance of intet'est payments made by Picop.

Til<:µ invokes Section 79 of Revenue Regulations as amended which reads as follows: 'Section 79.

Interest on Capital.

Intel·'est calculated fol' cos-keeping or other purposes on account of capital surplus invested in the business, which does not represent a charge arisinq under an interest-beat¹ing oblir»ation, is nnt allowable deduction from gross income.' <Emphases supplied) any 0 t h c: )·' the CIR l\lo.

;:;.

We read the above provision of Revenue Regulations No.

2 as referring to so called "theot¹etical intel¼est," thr.:\t J.!?> tn s.:y, intet'est "calc•.llated" ot¹ computed L:\ncl not incut't'ed or pi::\id) fot' the put'po¸.;e of detet'mining the "oppot'tunity• cost" of investing funds in a given business.

Such "thr-ot'<.t ic.::d " o t' i m put e d in t e t' e s t does not at· i s e f i' CHtl a legally demandable interest-bearing obligation incurt'ed by the taxpaye1·' who howeve1··· ·.oJisl;<!s to find out, e.g., whether he would have been better off by lending out his funds and earning intet'est t'athet' than investing such f•Jncls :i.n his business.

One thing that Section 79 quoted above makes clear is that interest which does constitute a charge arising under an interest­ beat'ing obligation .i2_ an allovJable decluct:i.on from gross income.

DECISION - C.T.A.

CASE NO. 5082 11 - It is claimed by the CIR that Section 79 of Revenue Regulations 1\io.

2 was "p<.ltt<1l-2nc3d afterÄ" parÄar;waph 1.255-:L (b), entitled "l<-)He:£ and Carrying Charges Chargeable to Capital Account and TrÄeated as Capital ltlÅms" of the

U • S •

I n c o m e T a x R e g u 1 at i o n s , w h i c h fhHŸ <.\ l 1·ž "'- ph reads as follows:

·(B) Ta><es and CarÄrying Char¤qe!i.

the items thus chargeable to capital accounts are ( 11) In the case of J·¢e.::ll p·rÄoperÄty, whetherÄ imprÄovrÆcJ Ul' unimproved and whether productive or nonproductive.

(a) Interest on a loan (but not theoretical interest of a taxpayer using his own funds).' The trÄ•Jncated excerÄpt of the U.S.

Incomr::> Tax Regulations quoted by the CIR needs to be related to the relevant provisions of the U.S.

Internal Revenue Code, which provisions deal with the general topic of adjusted ba4is or deterÄmining allowable gain oi·Ä loss on \;,,_dc:s o1Ä exchange of property and allowable depr¥¦iation and depletion of capital a5;6;ct7;

oi ..

tl1e ta><payerÄ:

'Present Rule.

The Internal Revenue Code and the Regulations promulgated thereunder provide that "No deduction shall be allol.oJed "fn·r"· amounts paid or accrued for such taxes and carÄrÄying charÄqcÇs as.1 undciÄ rÄegulations Sec1·Äet atÄy chaJ·Ägeabl e y·espect to elects, in prescribed by the or his delegate, are to capital account with prÄoperÄty, if th£¡ t;.?IXP''-'ic-:l·Ä accotÄd.omce with \;w:h rÄegulat ions charÄges as so to treat such taxes or chargeablP."

At the same time, under the adjustment of basis pl·Äovisions v-Jhich have just been discussed, it is provided that adjustment shall be made for all 'expenditures, receipts,

DECISION -

C.T.A. CASE NO.

5082 - 12 losses, or other items' properly chargeable to a capital account, thus including taxes and carrying charges;

however, an exception exists, in 1-'lhich event such adjustment to thtÌ capital account is not made with respect to taxes and carrying charges which the taxpayer has not e l ecte d tn capitalize but fot´ which a ded•tct:inn!µ instead has been <Underscoring supplied) The 'carrying charges' which may be capitalized undet¶ the above quoted pt´ovisions of th!?

LJ. H.

Intet´nal F·evenue Code include, <3s the LJIÎ hi::1s pointed out, intet´est on a loan ·.(but not theoretical interest of a taxpayer usinÍ his own funds)'.

What the CIR failed to point out is that such 'cat¶t¶ying chat¸qes' mc.\y, ei-l;he·rÓ he (a) capitalized in which case the cost b0sis of the capital assets, e.g., machinery and equipment, will be adjusted by i:Òdcl:inÑJ tiHË amount of such interest payment5 or, alte)· ... natively, be (b) deduct<:Õd fy'om q,· ... oc .s income of the taxpayer.

Should the taxp0yer elect to deduct the interest payments auainst it s g t¶ o s s inc om fJ, the tax pay e i·Ê cr.: THl o t .:·d;

t: I i - same time capitalize the interest paym e n t s .

In other words, the taxpayer is not entitlecl to both the deduction from gross income Ðnrl th0 adiusted (increased) basis for determinin6 g0in or loss and the allowable depreciation char¹e.

The U.S.

Intet¶nal Revenue Coclt?

clnuÏ;

not prohibit the·deduction of interest on a lo0n obtained for purchasing machinery and equipment against gtºoss income, unless the ta><payey· ha.s also or previously capi ta l i z ed the same interest payments and thereby adjust»d the cost basis of such assets. We have already noted that out 1977 NIRC does not prohibit the deduction of interest on a loan incut¶tºed for¼ acqui1·½ing m.::1chine·r"·y <:HHJ equipment.

Neither does our 1977 NIHC compel the capitalization of interest payments on such a loan.

The 1977 Tax Code is simply silent on a t ax p a y e t¾' s t¿ i g h t t o e 1 e c t o n e o l Ó t h Q o \.; i l 2 l tax treatment of such interest pÔyments.

Accot´dingly, the genet¶al j·´ule thi:.d;

ir,tr:l-·est -

DECISION -

C.T.A. CASE NO.

5082 - 13 payments on C.'\ deductible fr-om legally demandable loan are gross income must be applied.

The CIR argues finally that to allow Picop to deduct its interest paym•nts agains– its gross income would be to encourage fraudulent claims to double deductions from gross income: ' [t] 0 allow a deduction incidental expense/cost incun·-ed in the purchase of fixed C."\sset in the:

year it was incurred would invite taK e v a s i o n t h 1·' o u g h f Y' ;:\ 'J d u l c n \; aplication of double deductions frum gross income.' <Emphases supplied) The Court is not persuaded.

So far as the records of the instant cases show, Picop has not claimed to be entitled to double ciocl•Jcl;:i.nn of its 1'377 intel—est payments.

TI·H?

CJII li<;,:.:;

neither' alleged not' pr-oved that Picop hD.d previously adj usted its cost basis or t he machinery and equipment purchased and cla1m,

e. g. , incr-eased deductions fol·' depl·-·ecic:\tion. We conclude that the CTA and th e Court of Appeals did not err in allowing the deductions of Picop's 1977 interest payments on its loans for capital equipment against its gross income fol·' 1'977. "

Item C.

Due to f:lri s Phi 1 i ppi nes.

Hespondent alleges petition ei··· Philippines are related taxpayers.

In which, i r found true would disallow the deduction of the subject interest expense pur-suant to Section 29(b) (2) (ii) of the TaH Code, as amended.

Section 29(b) (2) (ii) in r'elation to Section 30(b) of the Tax Code, as amended, provide as follows:

- DECISION - C.T.A.

CASE NO.

5082 xxx.

- 14 - "SEC.

29.

Deductions from gross income.

(a) E >< pE• n 5 e s :

X X X X X X <2) No deduction shall be respect of interest under the sub-patvagtvaphs:

allo‘\IE·d in !; ucce i)d in I] (i) X X >< (ii) If both the taxpa)l!0iw .:.md the petvson to whom the p;c·,'t'liltenl:

h<:.\s been made otv is to 1:-Je 111•':\Cit:• i.:n'e persons specified under Soctinn 30 (b) • II "SEC.

30.

Items not deductible.

(a) Gener-al r'ul “;•.

deduction shall rwespect of In computing taxable income no in any c::-ase be in X X X X X X X X >< (b) pr0oper-t y.

deduction tvespect ptwopetxty, Losses tJ·1om sal L'5 OJ-' I"'Hchanges In computing net incom’ shyll in any case be allowed of losses from sales or exchanzcs directly or indirectly - of no :i.n of (1) Between purposes of this individual shall sistetws <whetherv spouse, ancestors, members of a family.

For the paragraph, the family of an include only his brothers and by the whole or half blood), and lineal descendants; (2) Except in the case of distributions in liquidation, between an individual and a corporation more than fifty per centum in value of the outstanding stock of which is uwncJ, directly or indirectly, by or f or such individual;

- DECISION - C.T.A.

CASE NO. 5082 that - 15 (3) Except in the case of distributions in liquidation, between two corporations more than fifty per centum in value nq th0 o u t s t and i n g s t o c f< o f e ,: c h o f w h :i. c h i '' _ ,., n < 3 r.l...:._ ditpectly otp indirectly, by ent f<nu tiFs 6:;;,·.rr.(> individual, if either one of such corporamions, with respect to the taxable ye;:n ci' ·\;h<v corporation preceding the date of the sale or exchange was, undetp the la1-J applici::'\ble to L:;uch taxable year, a personal holding company or a foreign personal holding company; (It) Between a grantor and a fiduciary of any trust;

(5) Between the fiduciary of a trust and the f:iduciatoy of anothetp ttqust, if the Sic\lliE?

person is a grantor with respect to each trust;

otp (6) Between a fiduciary of a trust and a beneficiatry of such ttqust. " (LJndetrscotsinq oui·Ms) This Colwt noted, based on Atp is Philippines, Inc.

only 0\-'JnS nf outstanding stock of petitioner-Oranbo.

r;:i. nee Philippines, Inc.

does not own of 'l; hE?

the outstanding stock of petitionetp then it is not cove1·Med under the items not deductible as a business expense.

Cha i tqman of Ptpesident of Ro 1 f H.

petitioner-Oranbo Aris Philippines, and at Inc.

doet;

the cotupotpations he Respondent should have vital evidence contention.

beinl] the time not mean that t i·:\ H puye 1·M •;. to 45 I,\ p p 0 tq t:;

-

DECISION -

C.T.A. CASE NO.

5082 - 16 - As regards the second issue, petitioneY' must its entitlement to the refund sought.

I t t h e r% e f olİ e , m u s t comply with the following three basic requisites, to wit:

" 1.

That it f i 1 e d a c li::\ i m f m·ĭ within the two ( 2) year period from payment of the tax as prescribed under 299 (now 230) of the National Internal Code, as amended;

1·$<0 fund ci t::t t {:.' () ·r-· Ucction V<cvcĴ·nuf?

2.

That the were withheld at included as part income tax return income upon which the taxes sotwce undel·' EJect i Dn ĸi::

wel·'e of the income decl.::u&ecl in theĮ of the recipient;

and 3.

The fact o f withholdinn is established by a copy of statement (L\lH l·$tH.'Iil 1 7 4 3 • 1) d u 1 y i s s u e d b y t h e p a y o r' ( \ J .i. t h h u 1 eli n !:! i:\gent) to the payee, showindl the .::1mnunt JE.\:t.cJ and t h e am o u n t o f t ax w i t h h e 1 d t h e r' c r ·r"' u m • " [Sec.

10, Rev.

Regs.

6-85;

see Cityijrust Finance Corporation vs.

The CommissiDr;::!rķ of Internal Revenue, CTA Case No.

4134, NGvIJmbEr 11, 1991;

affirmed by the Court of Appeıls in Cit ytrust Finance Corporation vs.

Coulįt of' -L1H Appeals and the Commissioner of I;l:;C?rnal Revenue, CA-G.R. SP No. 28239, March 14, ijk0;

and Citytrust Finance Corpo rat i o n c:.olĵ>T.elĶly Investor's Finance Corporation/FNCD Finance) vs.

Commissioner of Internal Revenue, CTi-1 Ci:1se No.

4046, February 24, 1993;

affirmed by the Court of Appeals in Commissioner of In·:;l%i&n,-:11 Revenue vs.

Citytrust Finance Corporation <Formerly Investors Finance C O lp O lat i on/FI'!CD Finance) and the Court of Tax Appeel s, C>1-G. H.

SP No.

31104, April 18, 1994J.

A perusal of the evidence p f# t i t: i o n <" 1·' t'evealed that it has satisfactorily proven its claim fo·r' refund or tax credit.

Petitioner has filed :i.ts cld:i.m fo·r' refund/tax credit within the two-year per i od with the BIR

DECISION —

C.T.A. CASE NO. S082 and with this Court. The letter-claim for refund/tax credit was filed with the BIR on April #8, i993 (Exh. E of petitioner; pp. 191-102, CTA records) and the petition for review was filed on March £8, 1994. The twa-year period, in the instant case, commences to wun on April is, 1992, the actual date of filing petitiener’s 1991 Annual Income Tax Return which is also the tine required by law for a taxpayer to file the final income tax return (Commissioner of Internal Revenue v. TMX sales, Inc. et al., G.R. No. 8357736, January 15, 1992). The certificate of creditable withholding tax at source CET Form 1743.1), offered in evidence by petitioner (Exh. Bo of petitioner, p. Ve, CTA records), sufficiently established the amount of creditable withholding tax ferthe year 1991. Furthermore, as testified by petitioner’s witness, Ms. Zaida Agutaya, the income upon which these creditable withholding taxes were paid were included in petitioner's income tax return (TSN, Hearing of October &, igue, frp. 8-3). THUS, petitioner has satisfactorily preven its Claim for refund or tax credit. Therefore there is no reason why We should not grant petitioner’s prayer,

WHEREFORE, in view of the all the Forenoing, respondent is hereby ORDERED to REFUND or in the alternative to ISSUE A TAX CREDIT CERTIFICATE in favor of om @) DECISION - C.T.A. CASE NO.

5082 - 18 - petitionei·N the sum of P922,31l.OO, representing overpaid income tax for the year 1991.