Phelps Dodge Philippines, Inc. vs. Commissioner of Internal Revenue

DECISION

This case involves a claim for refund in the amount of P4,630,506.00 representing alleged unutilized tax credits for the calendar year 1997. Petitioner is a corporation duly organized under and existing by virtue of the laws of the Republic of the Philippines with office address at No. 2 Pioneer Street, Mandaluyong City.

On April 15, 1997, Petitioner filed its 1996 Annual Income Tax Return (Exhibit A) which declared the following: Gross Income Less: Deductions Taxable Income Tax Due Less: Tax Credits Tax Payable P353,454, 111.00 336,976,406.00 16,477,705.00 5,767,197.00 4,124,019.00 PI ,643,178.00

Petitioner made a check payment ofthe tax still due in the amount ofP¹ ,643,178.00 as evidenced by the BPI check deposit slip and the BPI Certification dated August 11, 2000 (Exhibits L and M). On November 24, 1998, Petitioner amended its 1996 Annual Income Tax Return (Exhibit B) reflecting the following: Gross Income Less: Deductions Taxable Income Tax Due Less: Tax Credits Tax Payable P353,454,111.00 336,976,406.00 16,477,705.00 5,767,197.00 17,333,970.00 (P11 ,566,773.00) Petitioner's tax credits for the year 1996 in the amount ofP17,333,970.00 consisted of the following:

Prior Year's Excess Credit Quarterly Payments for 1996 Creditable Tax Withheld for 1997 Total Tax Credits p 7,160,242.00 1,643,178.00 8,530,550.00 P17,333,970.00 ================== A second amendment of the 1996 Annual Income Tax Return was later filed by Petitioner on May 28, 1999 (Exhibit C), showing a net loss of P33,522,295.00 and a refundable amount ofP10,173,728, computed as follows: Gross Income Less: Deductions Taxable Income Tax Due P303,454, 111.00 336,976,406.00 (P 33,522,295.00) NIL

Less: Tax Credits/Payments 1.) Income tax paid per original 1996 ITR (Exhibits A & L) P1 ,643,178.00 2.) Creditable taxes withheld for 1996 8,530,550.00 Income Tax Refundable p 10,173,728.00 (P 10,173, 728.00) Petitioner opted to apply the above refundable amount of P10,173,728.00 as tax credit to the succeeding taxable year, 1997. On April 15, 1998, Petitioner filed its 1997 Annual Income Tax Return showing a taxable income of P51 ,104,351.00 and tax payable of P9,775,156.00 (Exhibit D) computed as follows:

Gross Income Less: Deductions Taxable Income Tax Due Less: Tax Credits 1) Quarterly Income Payments P 347,201.00 2) Creditable Taxes withheld for 1997 7,764,166.00 Tax Payable P231 ,004,443.00 179,900,092.00 P51 , 104,351 .00 ------------ --------- --- 17,886,523.00 8,111,367.00 P9,775,156.00 On November 24, 1998, Petitioner amended its 1997 Annual Income Tax Return (Exhibit E) declaring a taxable income of P51 ,104,351.00 and a tax refundable of P6,023,551.00, computed as follows: Gross Income P231 ,004,443.00

Less: Deductions Taxable Income Tax Due Less: Tax Credits 1.) Prior Year's Excess Credits 2.) Quarterly Income Payments 3.) Creditable Tax Withheld for 1997 Tax Refundable P11,566,773.00 347,201.00 11,996,100.00 179,900,092.00 51' 104,351.00 17,886,523.00 23,910,074.00 (P6,023,551.00) A second amendment of the 1997 Annual Income Tax Return was later filed by Petitioner on May 28, 1999 (Exhibit F), showing a taxable income ofP51,104,351.00 and a refundable tax ofP4,630,506.00, computed as follows: Gross Income Less: Deductions Taxable Income Tax Due Less: Tax Credits 1.) Prior Year's Excess Credit 2.) Quarterly Income Payments 3.) Creditable Taxes Withheld

PAGES On June 2, 1999, Petitioner filed an administrative claim for refund or issuance of a tax credit certificate corresponding to the alleged 1997 excess tax credits of P4,630,506.00 (Exhibit I). On April 4, 2000, Petitioner filed a Petition for Review with this Court since Respondent did not act on the administrative claim. Respondent, in his Answer filed on May 25, 2000, raised the following Special and Affirmative Defenses: "4.) In an action for refund, the taxpayer has the burden to show that the taxes paid were erroneously or illegally collected and failure to do so is fatal to the action; 5.) Claims for tax refund are strictly construed against the taxpayer. Petitioner has no cause of action." To prove his case, Petitioner presented the following exhibits: Exhibit Particulars A, B, C 1996 Annual Income Tax Return (original and amended) D, E, F 1997 Annual Income Tax Return (original and amended) G 1998 Annual Income Tax Return H 3rd Quarterly Income Tax Return for 1997 I Letter claim for refund J&K Summary of Creditable Taxes Withheld for 1996 and 1997 J-1 to J-107 Various Certificates of Creditable K-1 to K-155 Taxes Withheld for 1996 and 1997 L Check deposit slip in the amount ofP1,643,178.00 M BPI Certification dated August 11, 2000

The sole issue for our consideration is whether or not Petitioner is entitled to a refund or issuance of a tax credit certificate in the amount of P4,630,506.00 representing unutilized creditable withholding tax for the year 1997. Revenue Regulations No. 12-94 (amending Revenue Regulations No. 6-85) as affirmed by jurisprudence laid down the following three basic requirements for the refund of excess creditable withholding taxes, thus: 1) That the claim for refund was filed within the two-year prescriptive period provided under Section 204 (3) [now Section 204 (C)] in relation to Section 230 [now Section 229] of the Tax Code, as amended;

2) That the fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee showing the amount paid and the amount of tax withheld therefrom.

3) That the income upon which the taxes were withheld were included in the return of the recipient; Citytrust Finance Corporation vs. The Honorable Commissioner of Internal Revenue, CT A Case No. 4134, November 11, 1991; affirmed by the Court of Appeals in Citytrust 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 Court of Appeals in Commissioner of Internal Revenue vs. Citytrust Finance Corporation (formerly Investor's Finance Corp./FNCB Finance) and the Court of Tax Appeals, C.A. G.R. SP No. 31104, April 18, 1994; Citibank, N.A. vs. Court of Appeals and Commissioner of Internal Revenue, 280 SCRA 459; ACCRA Investments Corporation vs. Court of Appeals, 204 SCRA 957) Records reveal that Petitioner satisfactorily complied with the aforementioned requirements.

The administrative claim for refund was filed on June 2, 1999 and the judicial claim was filed on April 4, 2000. Both dates are well-within the two-year prescriptive period referred to in requirement No. 1. Reckoned from the date when Petitioner filed its original 1997 Annual Income Tax Return on April 15, 1998, both the administrative and judicial claims filed by Petitioner fall within the two-year prescriptive period provided under Section 204(3) [now 204(C)] in relation to Section 230 [now 229] ofthe Tax Code, as amended.

Petitioner presented Certificates of Creditable Tax Withheld at Source issued by various withholding agents in order to comply with the second requirement and to establish the fact of withholding of the reported creditable taxes withheld for the years 1996 and 1997, in the amounts ofP8,530,550.00 and P11 ,996,100.00 (Section E of both Exhibits C and E), respectively. However, only the amounts of P8,444,3 19.77 and P 11,996,100.83 for the years 1996 and 1997, respectively, were substantiated by Certificates of Creditable Tax Withheld, to wit: For taxable year 1996 J-1 J-2 J-3 J-4 J-5 J-6 J-7 J-8 J-9 J-10 J-11 J-12 J-13 J-14 J-15 J-16 Withholding Agent Alaska Milk Corporation ASB Realty Corporation Ayala Land, Inc.

Century Container Corp. Electronic Telephone Sys Inc. First Asia Realty Devt. Corp. lnt'l Wiring Sys Phils. Inc. D.V. Construction, Inc. Phil. Long Distance Tel. Co. Procter & Gamble Phils. Procter & Gamble Phils. Procter & Gamble Phils. Romago Incorporated Rowell Can Corporation Siemens Inc.

Tiffany Tower Realty Corp. Income Payment p 7,184,988.00 p 1,593,472.60 338,880.00 2,408,739.72 41 ,147,835.00 45,257.09 37,863,170.00 4,026,125.83 290,406,138.00 38,181.82 436,772.73 166,745.46 1,834,925.00 16,620,725.00 2,652,740.00 5,916,449.57 Tax Withheld 71,849.88 15,934.73 3,388.80 24,087.39 411 ,478.35 452.57 378,631 .70 40,261 .26 2,904,061.38 381.82 4,367.73 1,667.45 18,349.25 166,207.25 26,527.40 59,164.50

J-17 J-18 J-19 J-20 J-21 J-22 J-23 J-24 J-25 J-26 J-27 J-28 J-29 J-30 J-31 J-32 J-33 J-34 J-35 J-36 J-37 J-38 J-39 J-40 J-41 J-42 J-43 J-44 J-45 J-46 Universal Export Beta Electric Corporation Bicutan Container Corp.

Bicutan Container Corp.

Bicutan Container Corp.

Board of Investments Cagayan Elect Power & Light Cagayan Elect Power & Light Cagayan Elect Power & Light Century Container Corp. Century Container Corp. Century Container Corp. Century Container Corp. Concepcion Industries, Inc. Concepcion Industries, Inc. Columbia Wise & Cable Corp. Columbia Wise & Cable Corp. Columbia Wise & Cable Corp. Columbia Wise & Cable Corp. Columbia Wise & Cable Corp. Dagupan Electric Corporation Dagupan Electric Corporation Dagupan Electric Corporation Eng'g & Const. Corp. of Asia Fibertex Corporation Fil-American Hardware Co., Inc. Fil-American Hardware Co., Inc. Fil-American Hardware Co., Inc. Fil-American Hardware Co., Inc. Fil-American Hardware Co., Inc. Inphase Construction Co., Inc. Int'l Communications Corporation Kasamahan Realty Devt. Corp. Manila Bay Spinning Mills, Inc. Manila Electric Company Manila Electric Company Manila Electric Company Manila Electric Company Mitsubishi Corp. (Visayas Proj) Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Oriental Construction Oriental Construction Oriental Construction Oriental Construction Oriental Const. & Electrical Oriental Construction Oriental Tin Can & Metal Sheet Mfg Oriental Tin Can & Metal Sheet Mfg 27,972,000.00 30,508.21 630,917.80 600,700.00 2,484,271.54 42,446.25 534,894.55 30,600.00 175,414.55 5,710,273.92 4,517,285.76 6,602,320.00 5,415,252.26 2,660,658.88 2,265,921.00 736,674.55 1,230,535.40 667,967.26 1,164,118.18 467,290.90 1,333,089.50 81,890.00 132,638.00 166,591.00 40,775.00 881,402.00 101,783.00 168,840.00 174,242.00 212,736.00 67,982.00 6,027 ,255.00 1,800,000.00 81,739.00 3,968, 136.00 10,269,000.00 26,635, 100.00 6,128,200.00 879,054.55 5,040,677.00 631,157.00 3,761,449.00 1,228,384.00 2,216,966.00 1,162,658.00 4,843,594.00 5,336,879.15 8,373,914.04 6,360,061.05 3,904,803.05 26,399,098.41 23, 703,341.26 8,283,593.17 10,933,206.83 279,720.00 305.08 6,309.18 6,007.00 24,842.72 385.88 5,348.95 306.00 1,754.15 57,102.75 45,172.85 66,023.20 54,152.52 26,606.57 22,659.21 7,366.75 12,305.35 6,679.66 11,641.18 4,672.90 13,330.89 818.90 1,326.38 1,665.91 407.75 8,814.02 1,017.83 1,688.40 1,742.42 2,127.36 679.82 60,272.55 90,000.00 817.39 39,681.36 102,690.00 266,351.00 61,282.00 8,790.55 50,406.77 6,311.57 37,614.49 12,283.84 22,169.66 11,626.58 48,435.94 53,368.79 83,739.14 63,600.61 39,048.03 263,990.98 237,033.41 82,835.92 109,332.08

J-71 J-72 J-73 J-74 J-75 J-76 J-77 J-78 J-79 J-80 J-81 J-82 J-83 J-84 J-85 J-86 J-87 J-88 J-89 J-90 J-91 J-92 J-93 J-94 J-95 J-96 J-97 J-98 J-99 J-100 J-101 J-102 J-103 J-104 J-105 J-106 J-107 Oriental Tin Can & Metal Sheet Mfg Oriental Tin Can & Metal Sheet Mfg Oriental Tin Can & Metal Sheet Mfg Philippine Dairy Corporation Philippine Dairy Corporation Philippine Electric Corporation Philippine Electric Corporation Philippine Electric Corporation Philippine Electric Corporation Pointer Enterprises, Inc. Pointer Enterprises, Inc. Pointer Enterprises, Inc. Pointer Enterprises, Inc. Pointer Enterprises, Inc. Pointer Enterprises, Inc. Pointer Enterprises, Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Industries, Inc. Reliable Industries, Inc. Reliable Industries, Inc. Reliable Industries, Inc. Reliable Industries, Inc. Republic-Asahi Glass Corp. Rowell lnd'l Corp. Sanican Div Sta. Lucia Realty & Dev. Inc. Tripower, Inc.

Tripower, Inc.

Tripower, Inc.

United Container Corp. United Container Corp. Universal Export Universal Export For taxable year 1997 Withholding Agent K-1 Alaska Milk Corporation K-2 APO Cement Corporation K-3 APO Cement Corporation K-4 APO Cement Corporation K-5 ASB Devt. Corporation K-6 ASB Devt. Corporation K-7 Asiaphil Manufacturing Industries K-8 Cagayan Electric Power & Light Co. 8,160,140.91 81 ,601.41 11 '193,845.46 111 ,938.46 7,288,581.82 72,885.82 2,400.00 24.00 2,400.00 65.45 7,832,753.00 78,327.53 17,675,322.00 176,753.22 30,917,026.00 309,170.26 17,009,737.00 170,097.37 204,736.47 2,047.37 976,886.00 9,768.85 1,243,431 .68 12,434.30 1,431 ,147.54 14,311.45 822,609.76 8,226.09 749,292.84 7,492.92 165,480.74 1,654.81 1,353,474.64 13,534.75 724,863.11 7,248.63 519,215.38 5,192.15 18,103,478.54 181 ,034.79 1,610,986.61 16,109.87 1,968,165.75 19,681.66 6,647,065.00 66,470.65 6,805, 758.00 68,057.58 2,449,901 .00 24,499.01 4,525,032.00 45,250.32 6,589,728.00 65,897.28 1,545,454.43 15,454.55 3,556,988.00 35,569.88 4,067,544.05 40,675.44 4,166,412.85 37,876.38 100,563.10 914.21 220,230.22 2,002.09 528,659.09 5,286.59 3,786,893.18 37,868.93 7,560,000.00 75,600.00 7, 182, ooo.oo __ ...!_7_!.J1 .~82~0~ . o~o p 837.639.636.01 p 8 444 319 77 p Income Payment 4,149,989.77 p 3,514,333.15 36,861 .36 1,513,681 .82 2,241 ,454.22 20,621 .70 2,932,365.90 153,650.00 Tax Withheld 41,499.90 35,143.33 368.61 15,136.82 22,414.55 206.21 29,323.65 1,536.50

K-9 K-10 K-11 K-12 K-13 K-14 K-15 K-16 K-17 K-18 K-19 K-20 K-21 K-22 K-23 K-24 K-25 K-26 K-27 K-28 K-29 K-30 K-31 K-32 K-33 K-34 K-35 K-36 K-37 K-38 K-39 K-40 K-41 K-42 K-43 K-44 K-45 K-46 K-47 K-48 K-49 K-50 K-51 K-52 K-53 K-54 K-55 K-56 K-57 K-58 K-59 K-60 K-61 K-62 CIPER Engineering Corp. Columbia Wire & Cable Corp. COMSYS Philippines, Inc. Concepcion Industries, Inc. Concepcion Industries, Inc. Dagupan Electric Corporation Dagupan Electric Corporation Dagupan Electric Corporation EL Realty Development Corp. Electronic Telephone Systems, Inc. Essilor Mfg. Phils. Inc. Fii-American Hardware Co. Inc. Fii-American Hardware Co. Inc. Fii-American Hardware Co. Inc. Global Universal Export, Inc. Global Universal Export, Inc. Global Universal Export, Inc. Global Universal Export, Inc. Hansei Corporation lnt'l Container Terminal Serv Inc lnt'l Wiring Sys Phils. Lucent Technologies Phils. Inc. Manila Electric Company Metro Kidapawan Tel Corp Neltex Development Co., Inc. Neltex Development Co., Inc. Neltex Development Co., Inc. Neltex Development Co., Inc. Nestle Philippines, Inc. Nestle Philippines, Inc. Nestle Philippines, Inc. Nestle Philippines, Inc. North Negros Marketing, Inc. North Negros Marketing, Inc. Oriental Tin Can & Metal Sheet Mfg. Oriental Const. & Elec'l Supply Philippine Electric Corporation Phil. Long Distance & Tel. Co. Philnet Ericsson, Inc. Pirelli General PLC Pointer Enterprises, Inc. Procter & Gamble Phils. Procter & Gamble Phils. Reliable Electric Co. Inc. Reliable Industries, Inc. Reliable Industries, Inc. Rizal Cement Co., Inc. Rizal Cement Co., Inc. Romago Incorporated Rowell Can Corporation SM Prime Holdings, Inc. Toledo Power Company Vernida Realty Devt. Corp. Vernida Realty Devt. Corp. 5,050,500.00 36,211 ,046.02 2,687,796.91 55,063.08 1,381 ,040.00 478,880.00 896,422.90 295,385.00 2,616,500.00 2,039,735.00 336,090.45 302,918.00 296,630.00 238,046.00 2,268,000.00 3,492,720.00 3,492, 720.00 9,073,228.00 266,872.00 947,067.00 5,265,310.00 542,487.27 9,744,000.00 709,767.63 262,129.00 101 ,350.00 837,525.00 1,610,960.00 897,283.00 2,685,656.00 1,696,929.00 3,785,033.00 2,448,889.00 971 ,919.00 12,536,660.91 28,403,273.29 17,613,139.00 38,386,677.59 41 ,863,655.00 3,732,507.00 2,311 ,490.90 207,463.64 1,454,263.64 7,481 ,682.00 4, 115,199.00 3,465,775.00 365,409.10 101 ,914.00 8,792,040.00 10,639,332.00 19,772,491 .00 16,000.00 1 '945, 708.28 375,079.71 50,505.00 362,110.46 26,877.97 550.63 13,810.38 4,788.80 8,964.22 2,953.85 26,165.00 20,397.35 3,360.90 3,029.18 2,966.30 2,380.46 22,680.00 34,927.20 34,927.20 90,732.28 2,668.72 9,470.67 52,653.10 5,424.88 97,440.00 7,169.37 2,621 .29 1,013.50 8,375.25 16,109.60 8,972.83 26,856.56 16,969.29 37,850.33 24,488.89 9,719.19 125,366.61 284,032.73 176,131 .39 383,866.78 418,636.55 37,325.07 21 ,013.54 2,074.64 14,542.64 74,816.82 41 '151 .99 34,657.75 3,654.09 1,019.14 87,920.40 106,393.32 197,724.91 800.00 19,457.09 3,750.81

K-63 Yazaki-Torres Mfg., Inc. 17,386,139.00 173,861.39 K-64 Yazaki-Torres Mfg., Inc. 6,809,515.00 68,095.15 K-65 Yazaki-Torres Mfg., Inc. 17,264,470.00 172,644.70 K-66 Yazaki-Torres Mfg., Inc. 59 743,594.91 597,435.95 K-67 Asian Telecommunications, Inc. 4,925,000.00 49,250.00 K-68 Cagayan Electric Power & Light Co. 210,316.82 2,103.17 K-69 Cagayan Electric Power & Light Co. 213,880.00 2,138.80 K-70 Cagayan Electric Power & Light Co. 407,840.00 4,078.40 K-71 Cagayan Electric Power & Light Co. 194,727.27 1,947.27 K-72 Cagayan Electric Power & Light Co. 428,958.18 4,289.58 K-73 Cavite Coll of Arts & Trade 224,838.00 6,745.14 K-74 Century Container Corporation 1,240,741.81 12,407.41 K-75 Century Container Corporation 3,098, 106.20 30,981.06 K-76 COMSYS Philippines, Inc. 18,156,895.15 181,568.99 K-77 COMSYS Philippines, Inc. 3,643,396.95 36,433.96 K-78 COMSYS Philippines, Inc. 482,572.73 4,825.73 K-79 COMSYS Philippines, Inc. 258,955.27 2,989.55 K-80 Concepcion Industries, Inc. 5,983,297.02 59,832.96 K-81 Cyan Management Corp. 960,042.98 9,600.43 K-82 Concepcion Industries, Inc. 3,225,820.86 32,258.20 K-83 EEI Corporation 40,727.27 407.27 K-84 Fil-American Hardware Co. Inc. 241,615.00 2,416.15 K-85 Fil-American Hardware Co. Inc. 304,857.00 3,048.57 K-86 ITALTEL S.P.A. Phil. Branch 28,760,566.57 287,605.66 K-87 Jobbers Merchandising Corp. 1,830,317.79 16,639.19 K-88 Manila Electric Company 16,400.00 164.00 K-89 Manila Electric Company 5,228,000.00 52,280.00 K-90 Mitsubishi Corporation 3,496,272.63 34,962.73 K-91 Mitsubishi Corporation 4,602,817.27 46,028.17 K-92 Mitsubishi Corp. (Visayas Proj) 3,143,863.64 31,438.64 K-93 Nestle Philippines, Inc. 4,505,792.00 45,057.92 K-94 Nestle Philippines, Inc. 4,055,782.00 40,557.82 K-95 Nestle Philippines, Inc. 951,636.00 9,516.36 K-96 Nestle Philippines, Inc. 1,333,739.00 13,337.39 K-97 Nestle Philippines, Inc. 3,732,392.00 37 323.92 K-98 Oriental Const. & Elec'l Supply 7,805,215.30 78,052.15 K-99 Oriental Const. & Elec'l Supply 15,275,301.08 152,753.01 K-100 Oriental Construction 10,049,192.73 100,491.93 K-101 Oriental Construction 7,175,862.98 71,758.63 K-102 Oriental Construction 5,729,276.20 57,292.76 K-103 Oriental Construction 7,747,989.04 77,479.89 K-104 Oriental Construction 12,618, 742.80 126,187.43 K-105 Oriental Construction 6,835,676.11 68,356.76 K-106 Oriental Construction 4,936,490.37 49 364.90 K-107 Oriental Const. & Elec'l Supply 8,276,357 .66 82,763.58 K-108 Oriental Construction 17,810,536.92 178,105.37 K-109 Oriental Construction 20, 104,895.34 201,048.95 K-110 Oriental Construction 24,930,986.62 249,309.87 K-111 Oriental Construction 18,324, 561.54 183,245.62 K-112 Oriental Tin Can & Metal Sheet Mfg. 6,764,770.47 67,647.72 K-113 Oriental Tin Can & Metal Sheet Mfg. 10,300,053.66 103,000.56 K-114 Oriental Tin Can & Metal Sheet Mfg. 7,832,441.00 78,324.41 K-115 Oriental Tin Can & Metal Sheet Mfg. 7,280,805.45 72,808.05 K-116 Panay Electric Company, Inc. 290,651.08 2,898.61

K-117 Phelps Dodge Phils Energy Prods Corp K-118 Phelps Dodge Phils Energy Prods Corp K-119 Phelps Dodge Phils Energy Prods Corp K-120 Philippine Electric Corporation K-121 Phil. Long Distance Tel. Co. K-122 Phil. Long Distance Tel. Co. K-123 Phil. Long Distance Tel. Co. K-124 Phil. Long Distance Tel. Co. K-125 Phil. Long Distance Tel. Co. K-126 Pointer Enterprises, Inc. K-127 Pointer Enterprises, Inc. K-128 Pointer Enterprises, Inc. K-129 Pointer Enterprises, Inc. K-130 Pointer Enterprises, Inc. K-131 Reliable Electric Co., Inc. K-132 Reliable Electric Co., Inc. K-133 Reliable Electric Co., Inc. K-134 Reliable Industries, Inc. K-135 Reliable Industries, Inc. K-136 Republic-Asahi Glass Corp. K-137 Republic-Asahi Glass Corp. K-138 Rowell Can Corporation K-139 Rowell Can Corporation K-140 Shoemart Inc.

K-141 Shoemart Inc.

K-142 Shoemart Inc.

K-143 Shoemart Inc.

K-144 Smart Communication, Inc. K-145 Sta. Lucia Realty & Devt. Inc. K-146 Sta. Lucia Realty & Devt. Inc. K-147 Tripower, Inc.

K-148 United Container Corp. K-149 United Container Corp. K-150 United Container Corp. K-151 United Container Corp. K-152 United Container Corp. K-153 United Container Corp. K-154 Universal Export K-155 Yazaki-Torres Mfg., Inc. 1,500,000.00 1,200,000.00 500,000.00 2,310,753.00 35,388,897.30 78,227,730.06 60,707,080.12 28,200,733.14 37,371 ,613.43 2,640,209.66 3,887,455.54 1,630,042.68 10,541 ,941 .68 6,709,028.93 12,460,074.31 17,851 '159.20 11,698,767.00 2,728,540.00 865,277.00 3,462,251 .00 111 ,924.00 3,479,938.00 5,100,811 .00 14,064,650.00 4,782,376.00 3,386,781 .00 981 ,940.00 673,159.91 4,067,544.05 11 ,244,112.41 269,060.67 1,018,977.27 2,230,081 .81 400,000.00 896,254.55 2,247,872.00 345,713.64 1,512,000.00 95.637.089.00 15,000.00 12,000.00 5,000.00 23,107.53 353,888.83 782,277.46 606,809.84 282,007.33 373,716.24 24,001 .81 35,342.40 16,300.45 95,835.94 60,991 .13 124,600.75 178,511.60 116,987.67 27,285.40 8,652.77 34,622.51 1,119.24 34,799.38 51 ,008.11 140,646.50 47,823.76 33,867.81 9,819.40 6,731 .60 40,675.44 112,441 .13 2,690.60 10,189.77 22,300.81 4,000.00 8,962.55 22,478.72 3,457.14 15,120.00 956,370.89 p 1 201 654 149 27 p 11 .996 100,83 Upon further verification, it was noted that the creditable taxes withheld for the year 1995 in the amounts of P1,216,456.19 and P316,591.75 were included in the creditable taxes withheld for the years 1996 and 1997, respectively, detailed as follows: For taxable year 1996

Exhibit J-18 J-19 J-20 J-22 J-26 J-27 J-28 J-30 J-32 J-33 J-37 J-38 J-40 J-41 J-42 J-43 J-48 J-50 J-51 J-52 J-56 J-57 J-58 J-59 J-69 J-70 J-71 J-74 J-75 J-76 J-80 J-87 J-88 J-89 J-91 J-92 J-93 J-94 J-98 J-100 J-101 J-102 J-103 J-104 Withholding Agent Beta Electric Corporation Bicutan Container Corp.

Bicutan Container Corp.

Board of Investments Century Container Corp. Century Container Corp. Century Container Corp. Concepcion Industries, Inc. Columbia Wise & Cable Corp. Columbia Wise & Cable Corp. Dagupan Electric Corporation Dagupan Electric Corporation Eng'g & Const. Corp. of Asia Fibertex Corporation Fil-American Hardware Co., Inc. Fil-American Hardware Co., Inc. Int'l Communications Corporation Manila Bay Spinning Mills, Inc. Manila Electric Company Manila Electric Company Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Nestle Philippines, Inc.

Oriental Tin Can & Metal Sheet Mfg Oriental Tin Can & Metal Sheet Mfg Oriental Tin Can & Metal Sheet Mfg Philippine Dairy Corporation Philippine Dairy Corporation Philippine Electric Corporation Pointer Enterprises, Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Electric Co. Inc. Reliable Industries, Inc. Reliable Industries, Inc. Republic-Asahi Glass Corp.

Sta. Lucia Realty & Dev. Inc. Tripower, Inc.

Tripower, Inc.

Tripower, Inc.

United Container Corp.

For taxable year 1997 Exhibit Withholding Agent K-74 Century Container Corporation Income Payment P 30,508.21 630,917.80 600,700.00 42,446.25 5,710,273.92 4,517,285.76 6,602,320.00 2,660,658.88 736,674.55 1,230,535.40 1,333,089.50 81,890.00 166,591.00 40,775.00 881,402.00 101,783.00 6,027 ,255.00 81,739.00 3,968, 136.00 10,269,000.00 5,040,677.00 631,157.00 3,761 ,449.00 1,228,384.00 8,283,593.17 10,933,206.83 8,160,140.91 2,400.00 2,400.00 7,832,753.00 204,736.47 1,353,474.64 724,863.11 519,215.38 1,610,986.61 1,968,165.75 6,647,065.00 6,805, 758.00 1,545,454.43 4,067 ,544.05 4,166,412.85 100,563.10 220,230.22 528,659.09 P__ 122,053,270.88 Income Payment P 1,240,741.81 Tax Withheld P 305.08 6,309.18 6,007.00 385.88 57,102.75 45,172.85 66,023.20 26,606.57 7,366.75 12,305.35 13,330.89 818.90 1,665.91 407.75 8,814.02 1,017.83 60,272.55 817.39 39,681.36 102,690.00 50,406.77 6,311.57 37,614.49 12,283.84 82,835.92 109,332.08 81,601.41 7,248.63 5,192.15 16,109.87 19,681.66 66,470.65 68,057.58 15,454.55 40,675.44 37,876.38 914.21 2,002.09 5,286.59 P_1.216,456.19 —_—— Tax Withheld P 12,407.41

K-75 Century Container Corporation K-140 Shoemart Inc.

K-141 Shoemart Inc.

K-1 42 Shoemart Inc.

K-145 Sta. Lucia Realty & Devt. Inc. K-148 United Container Corp. p 3,098,106.20 30,981 .06 14,064,650.00 140,646.50 4,782,376.00 47,823.76 3,386,781 .00 33,867.81 4,067,544.05 40,675.44 1 018 977.27 10 189.77 31,659,176.33 p 316,591 .75 Total1995 creditable withholding taxes P 153 712 447,21 P 1.533.047 94 Pursuant to Section 69 of the Tax Code, as amended, the excess tax credits of a given taxable year may only be credited or applied to the succeeding year (Paseo Realty and Development Corporation vs. Commissioner of Internal Revenue and the Court of Tax Appeals, CA-G.R. SP No. 33589 promulgated on October 14, 1994 and reiterated in the case of Belle Corporation vs. Commissioner of Internal Revenue, CTA Case No. 6070, dated April10, 2001). It follows then that the excess creditable withholding taxes for the year 1995 can only be applied against Petitioner's 1996 income tax liability. Considering that Petitioner incurred a net loss and had no income tax liability for the year 1996, it should have filed a claim for refund of the 1995 excess creditable withholding taxes within the two year prescriptive period provided under Section 230 (now 229) of the Tax Code, as amended. The creditable value added tax {VAT) ofP6,745.14 which was withheld in 1996 by the Cavite College of Arts and Trade (Exhibit K-73) was likewise, disallowed and reduced from Petitioner's claim. The said creditable VAT must be credited against its output VAT liability as provided under Section 110 (C) [now 114(C )] ofthe Tax Code, as amended, and not against its income tax liability. Thus, only the amounts of P7,221 ,118.44 and P11,679,509.08 corresponding to the taxable years 1996 and 1997, respectively, were properly supported by Certificates of Withholding Taxes, to wit:

For taxable year 1996 Creditable taxes withheld w/ certificates Less: Creditable taxes withheld in 1995 Creditable VAT withheld Creditable taxes withheld w/ proper certificates For taxable year 1997 Income Payment Tax Withheld p 837,639,636.01 p 8,444,319.77 ( 122,053,270.88) ( 1 ,216,456.19) ( 2241838. 00) =--'"( ---=--=-=-"6:.J..!,7:-'-4.::"5 .-':-14..!J.) p 715 361 .527,13 p 7 221118 44 Creditable taxes withheld w/ certificates P 1 ,201 ,654,149.27 P 11 ,996,100.83 Less: creditable taxes withheld in 1995 ( 31.659. 176.33) ( 316.591 . 75) Creditable taxes withheld w/ proper certificates P 1.169.994 972 94

P 11 679 509 08

Anent the third requirement, Petitioner has sufficiently complied with the same. The income corresponding to the substantiated amounts of creditable withholding taxes of P7,221 ,118.44 and Pl1,679,509.08, for the years 1996 and 1997, respectively, were proven to be included as part of the gross sales of P²,830,126,895.00 for 1996 and P2,772,729,521.00 for 1997. Moreover, the income tax payments of P1 ,643,178.00 and P347,201.00 for the years 1996 and 1997, respectively, were actually paid as evidenced by the 1996 original income tax return (Exhibit A), BPI Certification (Exhibit M) and the machine validated 3rd quarterly income tax return for the year 1997 (Exhibit H). In sum, Petitioner has sufficiently substantiated its claim for refund of unutilized creditable withholding taxes for the taxable year 1997 but only to the extent of P³,004,483.52, computed as follows: Taxable year 1997 Gross Income Less: Deductions Taxable Income p 231 ,004,443.00 179.900.092.00 p 51 104.351 00 Income Tax Due P 17,886,523.00 Less: Tax Credits/Payments 1.) Prior year's (1996) excess credits a.) Income tax paid per original1996 ITR P 1 ,643,178.00 b.) Creditable taxes withheld in 1996 2.) 1997 3rd qtr income tax payment 3.) Creditable taxes withheld in 1997 Income Tax Refundable 7,221,118.44 347,201 .00 11.679,509.08 . - 20,891,006.52 p 3.004 483,52

WHEREFORE, in the light of all the foregoing, the instant Petition for Review is PARTIALLY GRANTED. Respondent is hereby ORDERED to REFUND in favor of Petitioner the amount of P3,004,483.52 representing unutilized creditable withholding taxes for the taxable year 1997.

WE CONCUR:

~~ Associate Judge aA~ a .~, a .

d'ruANITO C. CASTANEDA, nt . Associate Judge CL::--n-~ ERNESTO D. ACOSTA Presiding Judge CERTIFICATION I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution.

~ fa -~ ERNESTO D. ACOSTA Presiding Judge