Pilipinas Hino Inc. vs. Commissioner of Internal Revenue

DECISION

BAUTISTA, L., J.:

This Petition for Review under Section 7 of Republic Act No. 1125 as amended by Republic Act No. 9282, seeks the refund of the amount of Five Hundred Twenty Nine Thousand Three Hundred Sixty Nine Pesos (P529,369.00) allegedly representing unutilized creditable withholding taxes for the calendar year ending December 31, 2001. Pilipinas Hino Incorporated ("petitioner'') is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with office address at Pilipinas Hino Manufacturing Plant, Industrial Park Road, Canlubang Industrial Estate, Canlubang, Calamba City.

It exclusively assembles and distributes Hino Buses in the Philippines.

C. T .A. CASE NO. 681)1

The Commissioner of Internal Revenue ("respondent'') is the duly designated authority to collect all taxes under the National Internal Revenue Code, grant refunds, issue and abate assessments, examine books of accounts, among others, with office address at BIR National Office Building, BIR Road, Diliman, Quezon City. On April 15, 2002, petitioner filed its Annual Income Tax Return (ITR) covering the taxable year 2001.1 On May 2, July 5 and December 12, 2002, it further amended said Annual ITR.2 The amended tax return filed on December 12, 2002 reflects a gross income of P92,903,596, a net loss cl P1,053,143.00 and Minimum Corporate Income Tax ("MCIT'') due of P1,858,071.92.

Petitioner applied the MCIT against the total tax credits of P2,387,441.00 resulting to an overpayment of P529,369.00, computed as follows:3

Sales

Cost of Sales

Gross Income from Operation

Add:

other Income

Total Gross Income

Less:

Deductions

Taxable Income

Minimum Corporate Income Tax (MCIT)

Less:

Tax Credits

Prior Year's Excess Credits

Creditable Tax W/held for the First Three Quarter Creditable Tax W/held for the Fourth Quarter

Total Tax Credits/ Payments

Tax Payable/(OVerpayment)

p 541,014,690.00 456.0;2§).424.00 p 84,985,266.00 7.918.330.00 p 92,903,596.00 93.956.739.00 p (1 053 143 om p 1.858.071.92 p 1,512,826.00 ~74.2l~.QQ p 2,387,441 .00 e ,~,2.~§~.Q~l Petitioner manifested its option to be issued a tax credit certificate cl the excess tax credit in the amount of P529,369.00 by marking the appropriate box in the return. In a letter addressed to BIR Deputy Commissioner Estelita C. Aguirre, petitioner requested for the issuance of a tax credit certificate of its unutilized income taxes withheld for taxable year 2001 in the amount ri P529,369.00." Respondent's inaction on its claim prompted petitioner to file a Petition for Review before this Court on March 2, 2004 to toll the running of the prescriptive period.

1 Exhibit A

1 Exhibits B, C &: D 'ExhibitD

•Exhibit E

In his Answer filed on May 7, 2004, the respondent raised the following Special and

Affirmative and Defenses:

"6.

Petitioner's alleged claim for refund is subject to administrative rout/nary Investigation/examination by the Bureau; 7.

The amount of P529,369.00 being claimed by petitioner as alleged excess creditable withholding taxes as of December 31, 2001 was not properly documented; 8.

In action for refund the burden of proof is on the taxpayer ID establish its right ID refund and failure ID sustain the burden Is fatal to the dalm for refund/credit; 9.

Petitioner must show that It has complied with the provisions of Sections 204 (C) and 229 of the Tax Code on the prescriptive period for daimlng tax refund/credit; 10.

Claims for refund are construed strictly against the da/mant for the same partake the nature of exemption from taxation. 16 During trial, petitioner presented Ms. Visitadon A. Mejia as its witness and proffered the following documentary evidence: 1.

Income Tax Return for taxable year 2001 with amended returns 2.

Letter dated December 10, 2003 3.

Various Certificates of Creditable Tax Withheld for taxable year 2001 4.

Summary/Breakdown of Creditable Tax Withheld at Source for the year ended December 31, 200r After petitioner submitted its memorandum, the case was submitted for decision sans the memorandum cr respondent. The parties jointly stipulate the following issues for the consideration of the Court: "1. Whether or not petitioner is entitle::/ to a refund in the amount of P529,369.00 representing excess or overpaid income tax for the year 2001; and

2. Whether or not petitioner's daim for rtfund is properly substantiate::/. " 7 Petitioner invokes its right to the issuance of a tax credit certificate pursuant to the provision of Section 76 of the 1997 National Internal Revenue Code (''NIRCj which reads: SEC. 76. Final Adjustment Retum. - Every corporation liable fD tax under Section 27 shall file a final adjustment retum covering the total taxable income for the preceding calendar fiscal year. If the sum of the quarterly tax payments made during the said taxable ~ Rollo, p. 101 • Rollo, pp. 133·261

year Is not equal to the total tax due on the entire taxable income of that year, the corporation shall either: {A} Pay the balance of tax still due; or (B) carry-over the excess credit; or (C) Be credited or refunded the excess amount paid, as the case maybe.

In the case the corporation is entitled to a tax credit or refund of the excess estimamd quarterly Income taxes paid, the excess amount shown on Its final adjustment retum may be carried over and credimd against the estlmamd quarterly Income tax liabilities for the taxable quarters of the sucreeding taxable years. once the option to carry over and apply the excess quarterly income tax against Income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered Irrevocable for that taxable period and no application for cash refund or Issuance of tax credit certificate shall be allowed therefor.

Thus, the law allows the taxpayer three (3) options if the sum of its quarterly tax payments made during the taxable year is not equal to the total tax due for that year: (a) pay the balance cl the tax still due; (b) carry-over the excess credit; or (c) be credited or refunded the amount paid. If the taxpayer has paid excess quarterly income taxes, it may be entitled to a tax credit or refund as shown in its final adjustment return which may be carried over and applied against the estimated quarterly income tax liabilities for the taxable quarters cl the succeeding taxable years. In the present case, petitioner claims that it has excess or unutilized creditable withholding taxes amounting to P529,369.00 for taxable year 2001. Therefore, the onus in proving entitlement to excess tax credits in the sum cl P529,369.00 rests on petitioner. It must first prove compliance with the following requisites: 1.

The claim for refund was filed within two (2) years as prescribed by Section 229 of the 1997 NIRC; 2.

The fact of withholding is established by a copy of statement duly Issued by the payor 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 retum of the recipient! Petitioner satisfied all the above requirements. 1 Citibank, N.A. VI. Coort of Appeala, 280 SCRA 45~, Revenue Regulation No. 2-98, a5 amended

The two-year period requirement for the filing administrative and judicial actions for refund is in consonance with the provisions of Sections 204 (C) and 229 of the 1997 NIRC which decree:

SEC

204. Authority of the Commissioner to COmpromise, Abate, and Refund or Credit Taxes. - The Commissioner may-

XXX

XXX

XXX

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, xxx No credit or refund of taxes or penalties shall be allowed unless the taxpayer files In writing with the commissioner a dalm for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a retum filed showing an overpayment shall be considered as a written claim for credit or refund. SEC 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained In any court 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 excessively or In any manner wrongfully collected, until a claim for refund for credit has been duly filed with the Commissioner;

but such suit or proceeding may be maintained, whether or not such tax, penalty or sum has been paid under protest or duress.

In any case, no such suit proceeding shall be filed after the expiration of two (2) years from the date of the payment of the tax or penalty regardless of any supervening cause that may arise after payment. X X X Petitioner's administrative claim for refund and the Petition for Review filed with respondent and this Court on December 10, 2003 and March 2, 2004, respectively, were well within the two-year prescriptive period counted from April 15, 2002, the filing of the 2001 Annual ITR. The two-year prescriptive period for the filing of a claim for refund or issuance of a tax credit certificate is reckoned from the date of filing of the final adjustment return.9 The rationale being that it is only at this period when it can be finally ascertained if the taxpayer has still to pay additional income tax or it is entitled to a refund of overpaid income tax. 10 ' ACCRA Investments C..orporation vs. Court of Appeals, 204 SCRA 957 1° Couunisl.ioner of Int(!ltlal Revem.te vs. The American Ufe lnsurmce co., 244 SCRA 446

C. T .A. CASE NQ. 6881

The fact of withholding was established by petitioner's presentation of Certificates of Creditable Tax Withheld at Source issued by various withholding agents for the year 2001. Thus, proving that the amount of P2,387,441.31 has been withheld, detailed as follows:

Withholding

H

~ Q M (;

p !.

y

M

(;

ti T s

Tax

§!.!12.1!!!1:[ Slf filt~Dil2 BJntal 2f Paxment t2

AQm1

S!.!l..

~ ~ctoui

Real Properb

P[()fenlooa!s

Withheld

Abbott Laboratories

F

p 601,598.00 p 30,079.90

Abbott Laboratories

G

17,311.00 173.11

Abbott Laboratories

H

412,532.80 20,826.64

Abbott Laboratories

I

2,727.00 27.27

Asia Brewery

J

p 695,454.55 6,954.55

Asia Brewery

K

573,637.34 5,736.40

Asia Brewery

L

""1,899.81 4,419.01

Asia Brewery

M

2"",206.14 2,""2.06

Asia Brewery

N

282,983.24 2,629.64

Cabanatuan City

0 209,486.00 2,094.86

Cabanatuan City

p 3,486.00 34.88

Cabanatuan City

a 181,542.00 1,815.42

Cabanatuan City

R

127,533.00 1,275.33

Cabanatuan City

s 578,015.00 5,780.15

Cabanatuan City

T

681 ,918.00 6,819.18 Loc. Gollt -

Ozamls

u 6,050,000.00 60,500.00

Coca-cola Bottlers

v 73,955.00 739.55

Coca-cola Bottlers

w 43,894.00 438.94

Coca·Cola Bottlers

X

100,804.00 1,008.04

Dart Philippines

y 110,270.00 1,102.70

Dart Philippines

z 86,615.00 866.15

Dart Philippines

AA

103,540.00 1,035.40

Dart Philippines

BB

67,263.00 672.63 Dept. of ~riculture cc 4,950,000.00 49,500.00

LBP Leasing Corp

DO

1,000,000.00 10,000.00

Mirant Pagbilao

EE

Mun. Gollt of 3,923.00 39.23

Balayan

FF

8,211 .00 223.94

Pangaslnan Five

Star

GG

16,215.00 182.15

Pangasinan Five

Star

HH

5,700,000.00 57,000.00

Pangasinan Five

Star

II

26,885.00 268.85

Philippine Postal

JJ

28,595.70 259.96

Philippine Postal

KK

33,735.65 306.99

Philippine Postal

LL

4,901 .95 ""·56

Philippine Postal

MM

55,253.40 502.30

Philippine Postal

NN

41 ,958.55 381 .44

Philippine Postal

00 10,999.00 99.99 Philtra nco pp 175,334.00 1,753.34 Philtra nco

QQ

687,735.00 6,8n.35 Philtra nco

RR

42,000.00 420.00

PHhino Sales

ss p 724,002.00 36,200.10

PHhino Sales

ss 34,117,367.00 341,173.67

PUhlno Sales

TT

724,002.00 36,200.10 P~h ino Sales

TT

48,260,181 .00 482,601 .81

Pilhino Sales

uu

PHhino Sales

w

Pilhlno Sales

\NoN

P~hino Sales

XX

Pilipinas

Automotive

yy

Pilipinas

Automotive

zz.

PWipinas

Automotive

AAA

Pilipinas

Automotive

BBB

Pilipinas Transport

CCC

Pilipinas Transport

CCC

Pilipinas Transport

CCC

Iloilo Prov. Govt

DOD

Iloilo Prov. Govt

EEE

Iloilo Prov. Govt

FFF

Iloilo Prov. Govt

GGG

Iloilo Prov. Govt

HHH

Radix Systems

Ill

Radix Systems

JJJ

Radix Systems

KKK

Radix Systems

LLL

Suzuki Phils.

MMM

Suzuki Phlls.

MMM

TOTAL

25,272,245.00 n2,2as.2o 796,402.80 46,074,114.00 45,389.48 45,476.97 34,321 .48 12,010.50 72,799.32 23,115,063.00 120,896.00 444,652.00 236,146.00 386,104.00 275,486.00 250,268.48 375,402.72 375,402.72 500,536.96 4,545.46 __20.Z!).2.QQ ~1l1 :1~.1511 ~li li§§,fi1M.55 ~ P10,692.36 P10fi~ 252,722.45 38,613.46 39,820.14 460,741 .14 2,289.47 2,273.85 1,716.08 600.54 3,936.95 312,967.73 1,425.62 1,099.06 4,042.30 2,146.79 3,512.n 2,754.86 12,513.42 1a.no.13 18,n0.13 25,026.84 227.27 __ --.-2Q2.t!Z e_2,38Z 441 31 We have also ascertained that the income upon which the creditable taxes were withheld of P529,369.00 was reported in the 2001 Annual ITR. Moreover, the Certificates of Creditable Taxes Withheld at Source show that income payments in the gross amount ci P177,113.261.58 which has corresponding creditable taxes withheld of P1,811,680.22 were declared by petitioner as part of sales of goods in its 2001 return. Inasmuch as petitioner has already offset a portion of the P2,387,441.31 creditable taxes withheld in the amount of P1,858,071.92 as payment for its MCIT due for the year 2001, the remaining unutilized income tax payment of P529,369.39 (P2,387,441.31 less P1,858,07.92) is indeed excessive. It must be stressed also that petitioner did not carry over its 2001 excess creditable withholding taxes in the amount of P529,369.0811 to the succeeding year 2002. 12 Therefore, the amount claimed should be refunded to the petitioner pursuant to Section 76 in relation to Section 229 of the National Internal Revenue Code of 1997 in a form of a tax credit 11 The difference it due to the rounding off of figures 11 Recorda, pages 283-28S

DEOSION

PaQe 8

certificate as per the option indicated in petitioner's 2001 income tax return and in its daim for refund with the respondent.

WHEREFORE, the Petition is hereby GRANTED. The respondent is ORDERED to ISSUE a Tax Credit Certificate in favor of the petitioner in the amount of P529,369.00 representing unutilized tax credits for taxable year 2001.

WE CONCUR:

(L;;--. t, Q_ ~ ERNESTO D. ACOSTA

Presiding Justice

CAESAR A. CASANOVA

Associate Justice

CERTIFICATION

R. BAUTISTA -

Associate Justice

Pursuant to Artide VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~~ ERNESTO D. ACOSTA Chairperson, First Division

Presiding Justice