PNZ:Marketing, Inc. vs. Coi\.-11\-Flssioner of Internal

DECISION

This is a Petition for Review seeking the refund or tax credit of alleged overpaid internal revenue taxes for taxable years 1996 and 1997 in the amount ofP2, 161,726.00. Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws ofthe Philippines with office address at No. 415 Arayat Street, Mandaluyong City.

The case at hand arose from alleged overpaid income taxes for two taxable years ~mlt:d Dt:l;t:mbt:r 31, 1996 and D~q~m}:l~r 31, 1997 . .. :· The antecedent facts are as fq~lqws: ' •, \."·.

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On September 3, 1997t fertii~ner t11ed its 1996 Annual Income Tax Re ·,;

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reflecting an income tax flue of f7~~,,79.00. (Exhibit "E"). It likewise reflected total . :-t i_,,:~;'::':''_<_·.

:.~ .·' :: ~ -~-~~- ~.~ ~<'), cre~~fslpayments in the am~m1t of P4,060,917.00 which consisted pf the 199~ -~~~ quarter income tax payment of P2,672,027.00 and creditable income taxes withheld in 4'71

1996 of P1,388,890.00. For Lhe calemlar year em.led December 31, 1996, PeliLioner had an overpaid income tax in the amount of P3,272,338.00 computed as follows:

Gross Income

Less: Deductions

Taxable Income

Tax Due

Less:

Quarterly Payments

Creditable Taxes

W/held P2,672,027.00 1 ,388,890.00 P13,350,495.00 11.097,413.00 p 2,253,082 00 p 788,579.00 4.060.917.00 (P3 272,338 00) On Apri115, 1998, Petitioner filed a tentative Annual Corporate Income Tax Return for calendar year ended December 31, 1997 (Exhibit "If"). Subsequently, on lvlay 5, 1998, Petitioner filed its Amended Atumal Corporate h1come Tax Retum for calendar year ended December 31, 1997 showing a tax due ofP1,172,579.00 against the total tax credits/payments ofP3,334,305.00. The amount ofP3,334,305.00 represents prior year's (1996) excess tax credits/payments of P3,272,338.00 and creditable income taxes withheld in 1997 in the amount ofP61, 967.00 (Rxhihit "r'). On September 23, 1998, Petitioner filed a formal claim for refimd or issuance of a tax credit certificate in the amo_lmt of P2, 161,726.00 representing alleged overpaid income taxes for the taxable years }~Q6 arid 1997 (Exhibit "L") . .s .• ""'~-~~ '-·. -:;

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As there was no action q~l ~~~ p~t of ftespondent, the instant Petition was filed wit~ . .

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. .. t\ ~~ this Court on April13, ~f99 E~W:~f'~p scC.fion ~30 (now Section 229) ~f~c Tax ~q~~ ... \ -~ ' .

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·,\ -~ Ttl his Answer, Re~pon4ent ·tfJis.%J t4e follow4tg Special and Affumati -~~ Defe li~·. :< .

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That the herein P¥titioner is not entitled to the refimd of the amount prayed for in th~ i.tistant Petition for Review; G.

TI1at as Respondent is still in the process of investigating Petitioner's claim for refimd, the herein Petition for Review is premature as Petitioner has not exhausted the administrative 4 'i'2 ( l· remedies required by law and jurisprudence on action of this natw·e as no decision hai:J as yet heen rendered hy the Respondent." In order to support its claim for refund, Petitioner submitted the following documents as evidence:

Exhibit

A

B

c

E

H

I

L

!vi

N

0 F,G,J,K

Description

Quarterly Corporate Income Tax Return for

1st Quarter of 1996

Quarterly Corporate Income Tax Return for

2nd Quarter of 1996

Quruterly Corporate Income Tax Return for

3 rd Quarter of 1996

Annual Corporate Income Tax Return for

taxable year ending December 31, 1996 Tentative Annual Corporate Income Tax. Return for taxable year ending December 31, 1997

Amended Annual Corporate Income Tax

Return for taxable year ending December :r:-}~ , 1997 U ttef Claim for Refund ·~ ~ t)ru1u.il Corporate Income Tax for taxable

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o~;, .. , y~ar ~,Pding Decem her 3 1, 1998 _,..

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, ~ ~-:/ · ~f~~~We qf~~les ~or taxable ye~,.J~~ With i}tfacheij tnVOlCeS (Nos. 72~~.74j) :{ :_::;.

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:;{lf;J- ::·~­ Schedule of Creditable Withhof4iftg . ., for taxable year 1996 with attached invoices (Nos. 720 and 724 to 738)

Various Certificates of Creditable Tax

\Vithhcld at Source for taxable year 1996 and 1997 473 .;

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Re!!pondent failed to suhmit his Memorandum and opted not to present controverting evidence in order to substantiate his defenses. The sole issue for the consideration of this Court is whether or not the Petitioner is entitled to the refund or issuance of a tax credit certificate in the amount ofP2,161, 726.00 arising from unutilized income tax credits for taxable years ended December 31, 1996 and 1997.

We resolve to grant the Petition. The following basic requirements provided under Revenue Regulations No. 12-94 and the prevailing jurisprudence on the matter must he complied with hy the Petitioner in order that its claim for refund of excess creditable withholding taxes may be granted: 1.

That the claim for refund was flied within the two-year prescriptive period provided under Section 230 ofthe Ta" Code; 2.

That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3.

That the income upon which the taxes were withheld were included in the return of the recipi~P,t IJhwenue Regulations No. 12-94) (amending Revenue Regulation~· No, 6-85); Citibank, NA vs. Court of Appeals and CIR, 280 SCRA 459,?ACCRA Investment Corporation vs. CA, 204 SCR4 957].

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..~ \, The evidence pre~~nte1 f~ ~fs :c oun · ~isclosed that Petitioner has c?mplied_ '1,!~t :

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requirement No. 1.

P~t:itioller ha¥ flJeci' !l$ a4ntinistrative claim for T~flmd witf{ '' ... · .: :r~:· . !~) ,;,s·'· ;-~t'::

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. ':._. ~.;-~ -- Bureau of Internal Reveque on September 23, 1998 and its judicial claim' fa'···refur( ~ifr ..

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.t . ~ this Court on April 13, 1999.

Thus, both filing dates are well within the two-year prescriptive period for filing the administrative and judicial claims for refund counted 4 'i'4 from lhe dale;; of lhe filing of its 1996 and 1997 Corporation Annual Income Tax Returns on September 3, 1997 and April15, 1998, respectively. To prove the fact of withholding of creditable withholding taxes for the years 1996 and J ()07 :1s rr:-flected in its income tax returns for the same years, Petitioner presented the r: .:: ... '-z. ('prtihl"'.>tPC! nf' r'rPrlitable Tax Withheld at Source: f-(" JSov

Income

Tax

Exh

Withholding Agent

Payment

Withheld

G

Kawsek, Inc.

p 135,661 ,059.95 p 1,356,610 59 For1997

J

lnt'l Marketing Corp.

p 707,528.48 p 35,376.42

K

PNZ Packers, Inc.

531 818.19 26,590.89 ~ j ,239,346 6Z P 61 967.31

Total for 1996 & 1997

~ 1 ,4j 8,5ZZ 90 It is noted, however, that the total creditable withholding taxes as reflected in the certificates is lesser than that repm1ed in Petitioner's 199o and 1997 income tax returns, details of which are shown as follows: As per Certificates of Cr~dit<!ble Tax Withheld at Sow·ce ' · ·. · '

Total Creditable

Withholding Ta,"'{es

(For Taxable Years 1996 & 1997)

p 1,418,577.90 ·.-- As per Income T~ Return . ::_ 1,450,8 ~7.00 · ~ ,;

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~ perused from the re~~fqS ~r t.N~ C(J~e, the gross in com~· · ,~' . r3, 1 ~ . ·:;:; ;•:. ·' ' '

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• :/ *clarcd by Pelitioner in ils 1996.income lax return (Schedule 1, Section C of E ·. ~~~..;· :" is lesser by P12,546,245.95 when compared with the gross income ofP135,661,059.95 as reflected in the certificate issued by Kawsek, Inc. (Exhibit G). 4'(5 An ~x; uninalion of lh~ dot;umt:nls submillt:d shows lhal oul of lht: amount of P1,356,610.59 claimed as creditable withholding taxes, the amount of P596,697.35 represents withholding tax on Petitioner's sales to Kaw~ek, Inc. for the taxable year 1995 amounting to P59,669, 734.85 which were paid by Kawsek, Inc. only in 1996. It is concJuded that the claimed (lffiOlmt of P1,356,610.59 represents withholding taxes on Petitioner's income pattly earned in taxable year 1995 amounting to 1'59,669, 734.S5 and partly earned in taxable year 1996 amounting to P75,991,325.13 (Exhibits N and 0 ).

Tht: amounl of crt:dilablt: laxt:s wilhhdd of P596,697.35 rdaling Lo Lht: incom~:: earned in the taxable year 1995 of P59,669, 734.85 should be deducted from the total creditable taxes withheld amounting to P1,356,610.59. Therefore, the resulting net creditable taxes withheld corresponding to the 1996 income of P75,991,325.13 should only be P759,913.24.

The income earned by Petitioner for taxable year 1996 in the amount of P75,991,325.13 was sufficiently proven to have been declared in its 1996 income tax return as part of its gross income of P 123, 114,814.00 for the same year. However, such inL:ome pertaining lo laxable year 1995 in lht: amount of P59,669, 734.85, from whit;h creditable withholding taxes amounting to P596,697.38 relate, was not proven to have been declared in Petitioner's 1995 fmal adjustment retun1. Petitioner's alJeged 1996 ftrst quarter incc me tax r ayment of P2,672,027.00 which is included in its 1996 total tax credit! payment c •:- P4, 060,817.00, was actual} y paid in the amount ofP2,672,026.72 (Exhibit A). 4'76

For lhe laxable year 1997, Petitioner reported in ils 1997 amended inwme lax return (Exhibit D an amount of P1,459,235.00 as rental income which is more than the rental income ofP1,239,346.67 from which creditable taxes ofP61,967.31 were withheld (Exhibits J & K). Thus, the creditable taxes withheld was proven to have been declared by Petitioner in its 1997 income tax return. As can be gleaned from Petitioner's 1998 income tax return, the claimed excess tax credits/payments for taxable years 1996 and 1997 were no longer carried-over to the succeeding year, 1998 (Exhibit "1Vf'). Pt:Litioner has suffi~;iently subslanlialed ils claim for refwtd of overpaid income lax for taxable years 1996 and 1997 but only to the extent of P1,532,749.27 computed as follows:

For taxable year 1996

Gross Income

Less: Deductions

Taxable Income

Tax Due (Exh. E)

Less: Tax Credits/Payments

1.) Prior year's excess 9J:~g!t 2.) 1996 1st qtr income -~lf'i)~yment (Exh. A) 3 ) Creditable in co .. me !.~)~s wi~I · eld in 1996 by Kawsek, lne: o~ pepJion• s 1996 income of P7~ 1 ~Q1-,:!;~lil : 13 { hs. G & 0) l~:·: ,,'.·J.·> :....~~· ,:~·· ·· ~\ . ·;:·~

Tax Refundable

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Gross Income

Less: Deductions

Taxable Income

Tax Due (Exh. I)

Less: Tax Credits/Payments

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4 ~('( P2,672,026. 72 pi 3,350,495.00 11,097,413.00 p 2,253,082 00 p 788,579.00 p 7,729,656 oo:

4,379.431.00 p 3,350,225 00 p 1 '172,579.00

1.) Prior year's (1996) excess credit P2,643,360.96 2.) Creditable income taxes withheld in 1997 (Exhs. J & K) 61,967.31 2,705, 328.27 Tax Refundable P (1,532,749,.27)

WHEREFORE, in view of all the foregoing, Respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND to Petitioner the amount of P1,532,749.27 representing overpaid/excess income taxes for taxable years 1996 and 1997,

J CONCUR:

(os Conk ERNESTO D. ACOSTA

Presiding Judge

\. ERTIFICATION Thereby certify that the abut = decisiyn was reached after due consultation with th:

members of the Court of Tax Apyesais'in accordance with Section 13, Article VII of re a

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Constitution. ; 7 a ERNESTO D. ACOSTA

Presiding Judge

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