Shangri-La Plaza Corporation vs. Commissioner of Internal Revenue

DECISION

This is a petition for review instituted by petitioner, Shangri-la Plaza Corporation to seek from respondent a Tax Credit Certificate in the amount of P4, 251,768.00 representing a I I eged excess w i thho I ding tax for the taxable year 1993. It appears from the records of the case that on November 12, 1992, petitioner acquired the Shangri-la Plaza shopping mal I through a property-for-shares swap transaction with Shangri-la Properties, Inc.

(SLPI)(TSN dated August 21, 1996, pp.

14-15, Exhibit "D"l.

On January

1993 ,

petitioner commenced its operations, assumed the obI i gat ions of

SLP I

entered into with different store operators at the mall.

Accordingly, the lessees paid their rentals and withheld the tax due therefrom in favor of the petitioner.

However, although the tenants of the shopping mall were notified of the agreement between Shangri-la Properties, Inc.

and Shangri-la Plaza Corporation, most of them sti I I issued a certificate in the name of the former so it appears that some of the documents presented were in the name 01)

- 2 - Shangri-la Properties, Inc. and not in the name of the petitioner Shangri-la Plaza Corporation, (TSN dated August 21, 1996, pp. 14-15). From the financial audit conducted by Sycip Gorres Velayo and Co., petitioner alleges that its a I I ow a b I e deductions of P157,603,202.00 exceeded the total gross income earned during the taxable year 1993 which is P115,242,439.00, thereby incurring a net loss of P42,360,763.00.

Pursuant to Revenue Regulations No.

6-85, petitioner's lessees withheld and remitted during the first quarter of 1993 the total creditable income tax withheld at source in the amount of P4,251,768.00.

Inasmuch as there was no tax due in view of the net loss from operations, petitioner alleges that it paid excess income taxes in the amount of P4,251,768.00 which it chose to be refunded in its favor. On March 1, 1996, petitioner filed its written request for issuance of Tax Credit Certificate for the net creditable income taxes withheld at source in the amount of P4,251,768.00 for taxable year 1993 <Exhibit E).

On Apr i I 11 , 1996 as respondent had not granted nor acted upon petitioner's request or claim for tax credit certificate, petitioner was constrained to elevate its

- 3 - case to this Honorable Court by way of Petition for Review.

Petitioner reasserts its stance a quo and adds that it has not claimed the overpaid income tax as credit against income tax I iabi I ities for any succeeding taxable quarters or taxable year. Respondent, on the other hand, asseverates in her Answer, inter alia, the special and affirmative defenses that petitioner's claim for refund/tax credit are strictly construed against the taxpayer and petitioner has no cause of action. The lone issue to be resolved before Us is whether or not petitioner is entitled to its claim for issuance of tax credit certificate in the amount of P4,251,768.00 for the taxable year 1993. We answer in the affirmative. Under Section 230 of the National Internal Revenue Code, the claim for refund/tax credit must be filed with the Bureau of Internal Revenue <BIR) within two years from the payment of the tax.

It further provides that when the two year period is about to expire and the claim for refund/tax credit with the Commissioner of Internal Revenue has not been acted upon, the taxpayer should file a petition for review with the Court of Tax Appeals within the said two-year period, otherwise, if the decision of the Commissioner is adverse to the tax pay~

- 4 - and it was made after the reglementary period he can no longer appeal the same to the Court of Tax Appeals (Martinez, Summary of 1995 Supreme Court Rulings, January to June, 1995 part p.

651' citing Gonzalez and Gonzalez, National Internal Revenue Code, 1 988 ed. , p.

384, Gibbs vs. Collector of Internal Revenue and Court of Tax Appeals, 107 Phi I. 232; Johnston Lumber Co. vs.

CTA 101 Phil. 151).

Revenue Regulations No. 6-85 provides the following requirements for the refund of excess creditable withholding taxes, to wit: 1) That it filed a claim for refund/tax credit within the two-year period from date of payment of the tax as prescribed under Section 230 of the National Internal Revenue Code, as amended;

2) That the income upon which the taxes were withheld were included as part of the income declared in the income tax return of the recipient, 3) The fact of withholding is estab I i shed by a copy of a statement < B I R Form 1743-1) duly issued by the payor (Withholding ~gent) to the payee showing the amount paid and the amount of tax withheld therefrom. A perusal of the evidence presented by petitioner revealed that it has satisfactorily proven its claim for refund/tax credit.

Petitioner has filed its claim for refund/tax credit within the two-year period with the Bureau of Internal Revenue and with this Court.

Petitioner filed its Final Adjustment Return on April

- 5 - 1994 and subsequently filed its claim for refund/tax credit with the respondent on March 1, 1996.

F ina I I y, this petition was filed on Apri 1 1 , 1996, both claims f i I ed within the two-year reglementary period.

Obviously, the petitioner filed this petition on time.

Numerous evidence were presented by petitioner that showed that it did file with respondent Bureau, a request for issuance of tax credit certificate. The letter claim for Tax Credit Certificate was filed with the BIR on March 1 , 1996 (Exhibit "E", p. 21, CTA records).

It is unrebutted that petitioner incurred a loss in its business operations for the taxable year 1993, thus, has no tax liability. <Exhibits "A" and "B").

As such, the Annual Tax Return for taxable year 1993 reflected that the total amount to be refunded is P4,251 ,768.00 <Exhibit

"A" ) •

The total amount of creditable income taxes withheld at source was supported by the BIR Form 1743-1 submitted by petitioner's lessees and duly reported with the BIR <Exhibits "C-1" to "C-108", inclusive, pp.

86- 209, CTA records).

Furthermore, as testified by petitioner's witness, Mr. Edgardo Laylo, the income upon which these creditable withholding taxes were paid were included in petitioner's income tax return <TSN, Hearing on August 21, 1996, pp. 9-13).

Thus, petitioner has satisfactorily proven its claim for refund/tax credit.

Therefore, there is no reason why we should not petitioner’s prayer. However, after computing the total amount of creditable income taxes withheld at source excluding Exhibit "C-65" since a period was not indicated therein and Exhibit "C-85" because the payee indicated therein is not the petitioner, We made a conciusion that the total amount withheld was only P4,216,819.23 as opposed to the original claim of P4,251,768.00. The computation of the final refundable amount is detailed as follows:

Anount of Anount of Withholding Agent Exh. Income Payment Tax Wittheld 2001 Flavor Creator, Inc. C-1 Po «926,781.80 16,339.09 Wary Grace R. Potenciano ¢-2 574,000.00 28,700.00 Alfredo P. Guerrero dr, ¢-3 60,313.00 3,045.68 Almeda Vision Specialists, Inc. ¢-4 $92,704.00 29,635.20 Ambassador Appliances, Inc. C-5 452,570.22 22,628.51 Andy & Karen Fashion Trading C-6 412,800.00 20,640.00 Azcor Lighting Systems, Inc. C-7 399,600.00 19,980.00 Backstage, Inc. C-8 1,283, 046.06 64,152.30 Bank of Philippine Island C-9 656, 208.00 32,810.40 Bento Go C-10 192,785.00 6,639.25 Better Than lce Cream, Inc. C-11 21,000.00 1,050.00 Better Than lce Cream, Inc. C-12 21,000.00 1,050.00 Better Than Ice Cream, Inc. C-13 23,333,338 1,166.66 Better Than Ice Cream, Inc. C-14 48,000.00 2,400.00 Cala Foods Corporation C-45 {, 648,992.20 82,449.61 Casa De Moda Inc, C-16 220,125.00 11,006.25 Chippy Chews Foods, Inc. C-17 72,000.00 3,600.00 Chowcity Foods Corporation C-18 908,497.80 45,424.89 CiDI Jewelry C-19 297,000.00 14,850.00 Cindy Carol Collection ¢-20 358,419.80 17,920.99 Citifashion Speciaity Store C-21 625,183.91 31,259.19 Cosmo Fashion, !nc. C-22 98,700.00 4,935.00 Crispino Aquino C-23 98 , 400.00 4,920.00 Crispino Aquino C-24 1,180, 800.00 §9,040.00 Expression Fabric Square Br. | C-25 30,208.40 1,510.42 Far East Bank & Trust Co. C-26 11,000.00 550.00 Fil-American Hardware Co., (nc, C-27 245,015.00 12,250.79 Fragrant Green inc. C-28 244,166.60 12,208.93 Frances L Corporation C-29 Fun Field Amusement Center ¢-30 >< 269,610.00 7,353.00 / a z eh 278,924.80 13,946.24 \ 2 WU

- 7 - Games Corporation C-31 2,887,579.80 144,378.99 Gifts, Gadgets & Collectible C-32 430,417.50 21,970.88 Golden Arches Development Corp. C-33 175,811.25 8, 790.56 Gourmet Cookery & Services Corp C-34 453,598.20 22,679.90 Groom Pad C-35 344,467.80 17,223.39 Han 's Infinite Tools-Br. I I C-36 420,000.00 21,000.00 Jacinte Jewelry Inti. Co., Inc. C-37 85,977.71 3, 715.73 Jeanetics Industrial Corp. C-38 324,478.00 16,223.90 Jeanette V. Tan C-39 461,908.27 23,095.41 Ji-pan Corporation C-40 178,560.00 8,928.00 Joseph s. Paredes C-41 358,334.80 17,916.74 K. Velayo Pawnshop & Jewelry C-42 826,231.46 41,311.57 Kameraworld, Inc.

C-43 381,672.00 19,083.60 Kito Food Corporation C-44 778,233.00 38,911.65 Koguryo Korean Gri I I House C-45 195,291.52 9,764.59 Kusina Sa EDSA C-46 472,981.60 23,649.08 La Mirabella, Inc.

C-47 839,629.00 41,981.45 Lea Fashion (Phils.) Inc. C-48 104,663.80 5,233.19 Lincoln L. Yao C-49 136,950.00 6,947.50 Lugawan sa Makati, Inc. C-50 194,310.00 9, 715.50 Maison D'Horloges Suisses, Inc. C-51 717,600.00 35,880.00 Makati Skyline, Inc.

C-52 7 7 1 2 77 o 00 3,863.85 Marissa Espartero (Qui I in) C-53 115,500.00 5, 775.00 Mary I indbert International Inc. C-54 855,874.80 42,793.74 Rujo Link Food Corp.

C-55 907,253.37 45,362.64 Mico Group of Co., Inc. C-56 111, 720. 00 5,586.00 Mondragon Group Sales, Inc. C-57 427,500.00 21,375.00 National Book Store, Inc. C-58 5,639,059.26 281,952.98 Food & Commercial Ent. C-59 72,000.00 3,600.00 Oceanic Escolta Gifts & Jewe l. C-60 168,912.67 8,445.63 Omnivision Inc.

C-61 278,400.00 13,920.00 One Stop Photo Center Corp. C-62 1,022,223. 77 51,111.19 Panciteria At the Mal I C-63 217,809.80 10,890.49 Pangon Trading Corporation C-64 197,400.00 9,870.00 Edgar Ortega/Paripassu & Co. C-66 875,354.59 43,767.72 PCIB C-67 128,355.00 6,417. 75 Andrew Michael S. Sevi I Ia C-68 191 I 100,00 9,555.00 PNB Shangri-La Plaza Branch C-69 2,024,949.91 101,247.54 Philippine Nationa Bank- ATM C-70 33,638.71 1, 681. 93 Ph i 111 o I a Market i n g Corp. C-71 1,682,856.00 84,142.80 Platinum Comics C-72 300,000.00 15,000.00 Plum Boutique, Inc.

C-73 366,366.00 18,318.30 Padden Inti. Phils., Inc. C-74 54,000.00 2, 700.00 Prime Tech Ent. Phils., Inc. C-75 309,600.00 15,480.00 Pro I i ne Sports Center, Inc. C-76 445,520.30 22,276.00 Ouoru11 International Inc. C-77 713,279.00 35,663.95 Retai I Specialist, Inc. C-78 479,871.41 23,993.58 Reyes Develop11ent Corporation C-79 208,740.00 10,437.00 Rizal Co11ml. Banking Corp. C-80 1,518,335.00 75,916 .75 Roasts at Jell St. Corp. C-81 316,061.60 15,803.08 Rustan Coamercial Corporation C-82 18,562,106.70 928,105.36 Rustan Supermarket C-83 5,674,084.74 283,704.23

Salad Days Sande I Food Corporation Sandosenang HaloiSarap Sandosenang HaloiSarap Sizzler Barbecue Restaurant S i zz I i ng Seafoods Smack Food Corporation SME Food Corporation Steak & Spahetti Factory Stores Specialists, Inc. Susana Securit ies & Oev. Corp. Tesoro's Marketing Corporation TFB, Inc.

The Big & Smal I Co.

Manuel R. Paterno Jr. Ma. Aurora S. Tanseco Tr igem, Inc.

Tri1ec Trading Corporation Tropical Stitch, Inc. Un ited Coconut Planters Bank Universal Far East Corporation Vemezia Art Glass Victoria Marketing Wenphi I Corporation

T 0 T A L

C-84 C-86 C-87 C-88 C-89 C-90 C-91 C-92 C-93 C-94 C-95 C-96 C-97 C-98 C-99 C-100 C-101 C-102 C-103 C-104 C-105 C-106 C-107 C-108 - 8 - 241,766.43 289,668.00 301,717.20 87,231.40 672,685.86 597,445.80 1,308,224.80 882,917.25 367,867.85 4,891,974.21 1,293,600.00 1,205,319.60 423,644.80 482,160.00 675,648.00 353,430.00 251,076.00 72,000.00 137,143.30 1,341, 141.21 640,802.58 43,050.00 885,000.00 679,053.20 P84,459,597. 75 12,088.32 14,483.40 15,085.86 4,361.57 33,634.24 29,872.29 65,411.24 44,145.86 18,393.39 244,598.70 64,680.00 60,265.98 21,182.24 24,108.00 33,782.40 17,671.50 12,553.80 3,600.00 6,857.18 67,057.06 32,040.13 2,152.50 44,250.00 33,952.66 P4,216,819.23 Respondent failed to manifest any reasonable effort to rebut or controvert the oral and documentary evidence presented by petitioner's counsel. Respondent's defense which is anchored as usual on the principle that claims for refund are strictly construed cannot possibly withstand as it is always vulnerable to overwhelming evidence which petitioner was able to present before this Court to prove its claim.

As has always been stated in the number of cases decided by this Court, respondent cannot be allowed to defeat an otherwise valid claim for refund on the strength alone of her denials of petitioner's allegations in its petition.

More so, when the evidence presented by the petitioner were

- 9 - disputed by the Commissioner <Van Melle [Phils.], Inc.

vs. Commissioner of Internal Revenue, CTA Case No. 4783, February 6, 1995, citing Sanitary Wares Mfg.

vs.

Commissioner of Internal Revenue, CTA Case No.

4150, August 21, 1992; Sunlife Insurance Office Ltd. vs.

The Acting Commissioner of Internal Revenue, CTA Case No.

3205, June 23, 1989). In conclusion, We find that petitioner has adequately proven its case before this Court.

WHEREFORE, premises considered, finding the petition meritorious and in accordance with law, justice and equity, the same is hereby GRANTED and respondent is hereby ORDERED to ISSUE a Tax Credit Certificate in the amount of P4,216,819.23 representing overpaid taxes for the taxable year 1993.

VI I I

of the Constitution.

., 0 ":-QL~ ~ D. ACOSTA Presiding Judge Court of Tax Appeals