Tiffany Tower Realty Corporation vs. The Commissioner of Internal Revenue

DECISION

This is a petition seeking for the refund or Issuance of tax credit cet1ificate amounting to P3, 752,527.00, allegedly representing overpaid income tax payments for the calendar year ended December 31, 1994.

The antecedent facts are as follows:

Petitioner is a domestic coqJoration duly organized and existing under Philippine laws and is engaged in the development, sale and rental of real estate. On April 17, 1995, Petitioner filed its Annual Income Tax Return for the year 1994 showing a net refundable income tax of P7,823,012.00 (Exb. A). However, said return was subsequently amended on September 24, 1996, this time reflecting a refundable amount of P3,752,527.00 after adjusting its prior year's excess credit fi·om P6,349,991.00 to only P2,279,506.00 (Exh. B), detailed as follows:

Taxable Income

p 14,904,925.00 Tax due 5.216. 724.00 102 '

Less: Tax Credits/Payments

Prior Year's Excess Credit

Quarterly Payments

Creditable Tax Withheld

Tax Payable (Refundable)

P2,279,506.00 , 6,689, 7:l5.00 8.969,251.00 (P3,752,527.00) Petitioner opted to can-y over to the succeeding year 1995 its 1994 excess tax payments ofP3,752,527.00 but failed to do so as it ended up in a net loss position in that year (Exh. C). Thus, on March 31, 1997, Petitioner, tlu·ough counsel, filed with the Bureau of Internal Revenue a letter-claim for the refund or issuance of a tax credit cettificate in the amount of P3,752,527.00 (Exh. E). Petitioner anchored its claim on Sections 69 and 230 of the Tax Code, to state: "Sec. 69 Final Adjustment Return. -Every corporation liable to pay tax under Section 24 shall file a fmal acljustment return covering the total net income for the preceding calendar year 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 net income of that year the cotvoration shall either:

(a) Pay the tax still due; or

(b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment retum may be credited against the estimated qum1erly income tax liabilities for the taxable quarters of the succeeding taxable year."

"Sec. 230 Recovery of tax eJToneously o1· illegally collected­ No suit or proceeding shall be maintained in any comt for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collectecÎ until a claim for refund or credit has been duly filed with the Commissioner, but such suit or proceeding may be maintained, luv

PAGEJ

whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shail be begun after the expiration of two years from the elate of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on face of the retum upon which payment was made, such payment appears clearly to have been erroneously paid."

As there was no i1mnediate action on the part of herein Respondent, the instant Petition was filed on April 11, 1997.

Respondent, in his Answer, raised the following Special and Af u·mative Defenses.

"4. Petitioner's claim for refund was filed on March 31, 1997 whereas the instant petition was filed on April 11, 1997; BlR needs reasonable period of time to process the claim;

5. The alleged tax withheld must be shown to have been paid and remitted to the respondent's Bureau . TI1e best evidence of payments and remittance of the alleged taxes withheld are the official receipts;

6. In a claim for refund, it is incumbent upon petitioner to prove that it is entitled to it. Failure to do so is fatal to its claim for refund;

7. Claims for refund of taxes are construed strictly against claimant, the same being in the nature of exemption from taxes (ClR vs. Ledesma, 31 SCRA 95 (1970); Manila Electric Co. vs. C.IR, 67 SCRA 35 (1975);

8. It is incumbent upon petitioner to show that it has complied with the provision of Section 230 of the Tax Code."

The sole issue for resolution is whether or not Petitioner has complied with all the requirements for a valid claim for refund so as to be entitled to the relief sought. Petitioner, to supp011 its case, offered the following in evidence:

Exhibit<ii

A

B

c

D

E

Description

/

Corporation/Partnership Annual Income Tax Refund

of Tiffany Tower Realty C01voration for the taxable year 1994 Amended Corporation/Partnership i\nnual Income

Tax Retum of Tiffany Tower Realty CoqJoration for

the taxable year 1994 with the attached audited financial statements Amended Coxvoration!Partnership Annual Income Ta--x Retum of Tiffany Tower Realty CoqJoration fpr the taxable year 1995 with the attached audited fmancial statements C01voration!Partnership Annual Income Tax Retum of Tiffany Tower Realty Corporation for the ta..\:able year 1996 with the attached audited fmancial statements Letter Claim for Refund of Overpaid Income Tax for the taxable year 1994 filed by SGV & Co. with the Bureau of Intemal Revenue on behalf of Tiffany

Tower Realty Coxvoration

Petitioner

likewise presented a

Summary

of mcome payments with the conesponding taxes withheld (Exh. I-Illl-IH) and various supporting documents such as the Monthly Remittance Returns of Income Taxes Withheld,

Certificates of Creditable

Tax 'Vith.held at Source, Cettificates Authorizing Registration and official receipts. Respondent, on his part, submitted the following: Exhibit<ii 1 and 1-a 2, 2-a to 2-c

Description

Letter of Authority No. 137590 dated September 11, 1997 and name and signature of RDO Hemani S. Arboleda.

l\1emorandum For:

The Revenue District Officer, Revenue District No. 47, East Makati City, dated l<P:hm:rv ?0

1 QQR

PAGES

After exammmg the evidence presented by the par1ies, \Ve mle m favor of Petitioner.

To be entitled to a refund, the following requirements have to be met: 1.

That the claim for refund was filed \Vithin the two (2) year period prescribed under Section 230 of the National Intemal Revenue Code; 2.

That the income upon which the taxes were withheld were included in the retum of the recipient; and 3.

That the fact of withholding is established by a copy of statement (BIR Fonn 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. [Section 10, Rev. Regs. No. 6-85; see Citytrust Finance Corporation vs. The Honorable Commissioner of Internal Revenue, CTA Case No. 4134, November 11, 1991; affirmed by the Comi of Appeals in Cit}irust Finance Corporation vs. Court of Tax Appeals and the Commissioner of Internal Revenue, C.A.

G.R.

SP No, 28239,

:March

14, 1994;

and

Citytrust

Finance

Corporation

(formerly

Investor's

Finance

Corporation/FNCB Finance) vs.

Commissioner of Internal Revenue, CTA Case No. 4046, February 24, 1993; affirmed by the Comi of Appeals in Commissioner of Internal Revenue vs. Citytrust Finance Corporation (formerly Investor's Finance Corp./FNCB Finance) and the Comi of Tax Appeals, C. A. G.R. SP No. 31104, April 18, 1994]. The aforementioned requirements were aff1rmecl by the Supreme Comi in the case entitled Citibank, N.A. vs. Court of Appeals and Conunissioner of Internal Revenue 280 SCRA459.

Petitioner's claim for refund filed with the Bureau of Intemal Revenue on l\1arch 31, 1997 as well as its Petition for Review filed with this Court on April 11, 1997 are both within the h:vo-year period from the date of the filing of the return on April 17, 1995. Second, the Amended Income Ta.x Retum of Petitioner for 1995 (Exh. B) likewise revealed that the income upon which the taxes were withheld was included in said retum. lub

I

l

And third, the fact of withholding was also established by Petitioner's submission of the Certificates of Creditable fucome Tax Withhel9 at Source, Monthly Remittance Retums of fucome Taxes Withheld and Certificates Authorizing Registration of real property.

Moreover, since in this case Petitioner is seeking for the refund of its creditable taxes withheld for 1994 which it was not able to fully apply against its tax liability for the said year and in the succeeding years, its 1995 and 1996 fucome Tax Retums were likewise submitted by Petitioner to prove that during those years, Petitioner did not utilize the amount sought to be refunded.

However, while this Court rmds for the Petitioner, We concur with Respondent's rmding (Exh. 2) that Petitioner is not entitled to the full amount sought. Except for the amount of P2,344. 82 where Petitioner was able to present supporting docwnents (Exhs. R and R-3), the latter failed to substantiate the rest of its prior year's excess credit of P2,279,506.00 which was applied by Petitioner against its tax liability for 1994. Likewise, the amount ofP66,288.00 is disallowed for reasons stated hereunder:

REASON

EXHIBIT

CLIENT

AMOUNT

(1) Recorded twice

BBBBB

Sps. Gregory & P42,923.90

Adrienne Torres

(2) Denied exlribits ccccc

Pancake House

3,285.72

per Resolution

DDDDD

Pancake House

3,319.24 dated 11125/98

EEEEE

Pancake House

3,206.00

FFFFF

Excelfoods

6,683.14

GGGGG

C.indivic Corp.

6,870.00

TOTAL

£66128.00 Thus, a recomputation of Petitioner's excess income tax payments would show its entitlement to a reduced amount ofP1,022, 291.75, detailed as follows:

TAXABLE INCOME

P14,904,925.00 lu't'

TAX DUE

LESS: TOTAL TA.X CREDITS

(a) Prior years' excess credit

(b) Creditable tax withheld

M10UNT REFlJNDABLE

5,216,724.00 p 2,344.82 6,236,670.93 6,239,015.75 p 1,022.291.7:'

WHEREFORE, in view of all the foregoing, this Court fmds the instant petition meritoriow; and in accordance with law.

Respondent is hereby ORDERED to REFUND or to ISSUE a TA.X CREDIT CERTIFICATE in favor of Petitioner the reduced amount ofP1,022,291. 75 representing overpaid income tax for the calendar year ended December 31, 1994.

·Jr

RM10N 0. DE VE A.

Associate Judg

1Uo

. ERNESTO D. ACOSTA

Presiding Judge

CERTIFICATION

I hereby certify that this decision was reached after due consultation with the members of the Com1 of Tax Appeals in accordance with Section 13, i\rticle VIII of the Constitution.

lu Q_._. 0' OY ERNESTO D. ACOSTA

Presiding Judge

Court of Tax Appeals