Metropolitan Bank & Trust Company vs. Commissioner of Internal Revenue

DECISION

CASTANEDA, JR.,~.:

This case involves the claim of petitioner Metropolitan Bank & Trust Company (Metrobank) filed against respondent Commissioner of Internal Revenue for the refund or issuance of tax credit certificate in the total amount of SEVENTY NINE MILLION SIX HUNDRED THOUSAND SEVENTY SIX AND 83/100 PESOS (P79,600,076.83), allegedly representing petitioner's erroneously withheld and paid final income taxes on the gains realized from its sale or exchange of foreign currency-denominated debt securities, bonds, uebentures or other certificates of indebtedness with a maturity of more than five (5) years for calendar year 2002. ~ r:.T.A. CASE NO. 6923

The facts of the case are stated as follows: Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at Metrobank Plaza, Sen. Gil Puyat Avenue, Makati City. It is engaged in the business of expanded commercial banking and the business of a trust company which includes providing services such as deposit products, loans and trade finance, domestic and foreign fund transfers, treasury, foreign exchange, trading and remittances, trust services incident to its operation as a bank.1 Petitioner is registered with the Bureau of Internal Revenue (BIR) and was issued Tax Identification Number (TIN) 000-477-863-000 on April 6, 1962. On April 15, 2004, its status as a VAT-registered entity was converted to that of a NON- VAT taxpayer and was accordingly issued BIR Certificate of Registration No. 8RC0000016899.2 On the other hand, respondent is the duly appointed Commissioner of Internal Revenue, vested with authority to act as such, including inter alia, the power to decide, approve and grant refunds or tax credit of erroneously or illegally collected internal revenue taxes as provided by law. For calendar year 2002, petitioner filed its Monthly Remittance Returns of Final Income Taxes Withheld (BIR Form No. 1601-F) 3 , with details as follows:

A. SUMMARY OF INFORMATION BASED ON MONTHLY REMITTANCE RETURNS OF FINAL TAXES

WITHHELD PER BIR FORM 1601-F

Date of Filing 20% Final 10% Final Tax on 10% Final Tax on Tax on All 25% Final of Original Interest and Other Interest and Other Kinds of Tax on Calendar Monthly Income Payments Income Payments Royalty Payments to Remittance Total Amount Year 2002 Returns of on Foreign on Foreign Payments to Non-Resident Paid/Withheld Month Final Income Currency Currency Domestic Alien in Taxes Transactions/Loan Transactions/Loan and Resident Trade or Withheld Payable to FCDUs Payable to OBUs Foreign Business Corporations January Feb. 11, 2002 10,129,312.47 1 ,472,257. 78 92,530.80 11 ,694, 101.05 February Mar. 11 , 2002 8,322,281 .84 88,110.68 2,236,872.00 3,908,045.03 14,555,309.55 March Apr. 10, 2002 10,225,868.77 150,314.72 29,866.09 868,356.67 11 ,274,406.25 April May 10, 2002 10,602,364.47 364,676.37 1 0' 967 '040. 84 May June 10, 2002 12,125,217.22 620,858.40 8,012,450.53 20,758,526.15 June July 1 0, 2002 10,296,654.89 1,009,031 .86 927,235.22 12,232,921 .97 July Aug. 12, 2002 10,801,710.64 1,308,707.51 12,110,418.15 August Sept. 10, 2002 6,115,040.33 1,204,848.63 530,836.96 7,850,725.92 September Oct. 10, 2002 5,122,565.43 2,028,610.29 489,025.47 7,640,201 .19 October Nov. 11 , 2002 6,394,787.83 1 ,285, 101.61 10,917,780.65 18,597,670.09 November Dec. 10, 2002 6,144,354.51 1,666,930.94 309,907.92 8,121 '193.37 December Jan. 10, 2003 63,046,370.03 698,507. 16 4,106,694.00 67,851 ,571.1 9 Total 159,326,528.43 11 ,897,955.95 27,560,668.84 4,868,932.50 203,654,085.72 Petitioner, via letter dated February 10, 2004, requested respondent's opinion on whether gains realized by the FCDU of Metrobank from the sale or t::xchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years fall within the ambit of the exclusion from gross income as provided in Section 32(B)(7)(g) of the 1997 NIRC.

In response to petitioner's Request for a Ruling on the matter, the BIR ruled in BIR Ruling No. DA-124-20044 dated March 22, 2004, that the "gains realized by Metrobank on its FCDU transactions, from the sale, exchange or retirement of bonds, debentures or other certificate of indebtedness with a Jik--

maturity of more than five (5) years shall be excluded from gross income as prescribed in Section 32(B)(7)(g) of the Tax Code of 1997 and consequently from the final income tax of 10% imposed under Section 27(0)(3) of the same Code."

Relying on the said Ruling, petitioner then filed on April 5, 2004 a written claim for refund of the ten percent (10%) final income taxes withheld and paid in the amount of P79,600,076.83.5 On April 6, 2004, petitioner elevated this instant Petition before it could be barred by prescription. On May 4, 2004, respondent filed his Answer, raising the following as his Special and Affirmative Defenses: "4.

Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau;

5. The amount of P79,600,076.83 being claimed by petitioner as allegedly representing erroneously paid withholding final income taxes for taxable year 2002 was not properly documented;

6. In an action for refund , the burden of proof is on the taxpayer to establish its right to refund , and failure to sustain the burden is fatal to the claim for refund/credit;

7. 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 claiming tax refund/credit;

8. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. VS.

Commissioner of Internal a Revenue, 124 SCRA 1211)." V"'---- 5 Exhi bit "CC"

Considering that petitioner had filed its Memorandum within the period given, this case was submitted for decision on March 5, 2007, without any Memorandum being filed by respondent. The issues6 as stipulated by the parties for the consideration of the Court are as follows: "1.

Whether or not Petitioner is entitled to a tax refund or a tax credit certificate in the amount of Seventy Nine Million Six Hundred Thousand Seventy Six Pesos and 83/1 00 (P79,600,076.83) representing erroneously paid withholding final income taxes for calendar year 2002;

2. Whether or not Petitioner realized gains from the sale or exchange of its investments in foreign currency-denominated debt securities, bonds, debentures or other certificates of indebtedness with a maturity of more than five (5) years amounting to P796,000,768.28 for calendar year 2002;

3. Whether or not Petitioner erroneously withheld and remitted to the Bureau of Internal Revenue final income taxes amounting to P79,600,076.83 erroneously withheld on the gains from the sale or exchange of foreign currency- denominated debt securities, bonds, debentures or other certificate of indebtedness with a maturity of more that five

(5) years of P796,000,768.28 for calendar year 2002; and

4. Whether or not Petitioner had duly filed the administrative claim for the refund or issuance of a tax credit certificate for overpaid withholding taxes for calendar year 2002 amounting to P79,600,076.83."

This Court addresses first the issue of whether or not the administrative and judicial claims for refund or issuance of a tax credit certificate for its lleged erroneously paid final income taxes for calendar year 2002 amounting to P79,600,076.83 had been timely filed by petitioner, pursuant to Section 204(C) in relation to Section 229 of the NIRC of 1997, as amended, which provide that: 9Z-

"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, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. XXX XXX xxx" "SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- XXX XXX XXX In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date 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 therefore, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) In order to prove its timely remittance and payment of its final income taxes, petitioner presented in evidence its Monthly Remittance Returns of Final Income Taxes Withheld 7 for calendar year 2002, with the following details:

h ge 7 of 18 Calendar Year 2002 January February March April May June July August September October November December TOTAL Date of Filing of Original Monthly Remittance Returns of Final Income Taxes Withheld February 11 , 2002 March 11 , 2002 April10, 2002 May 10, 2002 June 10, 2002 July 10, 2002 August 12,2002 September 10, 2002 October 10, 2002 November 11 , 2002 December 10, 2002 January 10, 2003 Amount of Withholding Taxes Remitted on Gains Realized from the Sale or Exchange of Investments in Foreign Currency-Denominated Debt Securities, Bonds, Debentures or Other Certificate of Indebtedness with a Maturity of More Than Five (5) Years 142,263.90 92,132.68 1,068,032.66 3,101 ,001.38 3,455,840.82 2,022,279.04 1,700,644.09 4,167,242.52 2,318,078.89 480,976.05 3,410,379.90 57,641 ,204.90 79,600,076.83 Based on the aforementioned information, petitioner should have filed both its administrative and judicial claims for refund/issuance of tax credit certificate on February 10, 2004 for the entire claim to fall within the two (2)- year prescriptive period allowed by law;8 otherwise, any amount not timely claimed shall be barred. In this instant case, petitioner filed its administrative claim and Petition for Review on April 5 and 6, 2004, respectively. Effectively, rafund claims of its final tax payments made prior to April 6, 2002 is thus barred by prescription. In this regard , petitioner's claim of erroneous final tax remittance and payment for the months of January and February 2002, which were correspondingly filed and remitted on February 11 , 2002 and March 11 , 2002, in the total amount of P234,396.58, has already prescribed for petitioner' failure to timely claim the same. {jk- 8 Section 229, National Internal Revenue Code of 1997

As regards the other issues raised , this Court will discuss them together inasmuch as they are interrelated. For the year ended December 31 , 2002, petitioner's FCDU realized a total gain of US$15,087,926.42, which is equivalent to P796,000,768.28, from the sale of its investments in foreign currency denominated bonds with maturities of more than five years. 9 Relative to such sales, petitioner filed its Monthly Remittance Returns of Final Income Taxes Withheld (BIR Form No.1601-F) 10 for withholding income taxes on February 11 , 2002; March 11 , 2002; April 10, 2002; May 10, 2002; June 10, 2002; July 10, 2002; August 12, 2002; September 10, 2002; October 10, 2002; November 11 , 2002; December 10, 2002 and January 10, 2003, respectively.11 Pursuant to Section 27(D)(3) of the National Internal Revenue Code (NIRC) of 1997, as amended, and implemented by Revenue Regulations No. 10-98, petitioner withheld and remitted a ten percent (1 0%) final income tax on its gross income payments for the said debt securities. Section 27(D)(3) provides thus: "SEC. 27. Rates of Income Tax on Domestic Corporations.- XXX XXX XXX (D) Rates of Tax on Certain Passive Incomes.- XXX XXX XXX

(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System.-lncome derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with local commercial banks, including branches of foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with foreign currency depository system units and other depository cfl- 9 Exhibit "UU" with sub-marki ngs, Annex Ill 10 Exhibits "C" to "N" 11 Paragraph 11 , Joint Stipulation of Facts and Issues banks under the expanded foreign currency deposit system, including interest income from foreign currency loans granted by such depository banks under said expanded foreign currency deposit system to residents, shall be subject to a final income tax at the rate of ten percent (1 0%) of such income. Any income of nonresidents, whether individuals or corporations, from transactions with depository banks under the expanded system shall be exempt from income tax. " Petitioner withheld and remitted the amount of 10% from the total amount of P796,000,768.28 gains, or an amount of P79,600,076.83. However, on April 5, 2004, petitioner filed an administrative claim for refund/issuance of a tax credit certificate with the Office of respondent laying as basis Section 32(8)(7)(g) of the NIRC of 1997, as amended, which provides that gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years are excluded from gross income. Section 32(8)(7)(g) of the NIRC of 1997 is hereunder quoted: "SEC. 32. Gross Income.- (B) Exclusion from Gross Income.-The following items shall not be included in gross income and shall be exempt from taxation under this Title:

XXX XXX XXX

(7) Miscellaneous Items.- XXX XXX XXX

(g) Gains from the Sale of Bonds, Debentures or other Certificate of lndebtedness.-Gains realized from the same or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years." This Court finds for petitioner.

Page 10 ofl8 The exclusion from gross income of the gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years, and its corresponding exemption thereof from income tax, has consistently been confirmed by the Office of respondent. In fact, respondent declared in BIR Ruling No. DA-124-200412 dated March 22, 2004, that: "xxx. Gains realized from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years are excluded from gross income by clear provision of Section 32(B)(7)(g) of the Tax Code of 1997 xxx. XXX XXX XXX IN VIEW OF THE FOREGOING, this Office holds that gains realized by Metrobank on its FCDU transactions, from the sale, exchange or retirement of bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years shall be excluded from gross income as prescribed in Section 32(B)(7)(g) of the Tax Code of 1997 and consequently from the final income tax of 10% imposed under Section 27(0)(3) of the same Code." Moreover, in support of his findings, respondent held that "the exemption does not distinguish as to the type of currency the bond, debentures or other certificate of indebtedness is made nor does it discriminate as to the nature of the business of the taxpayer involved in the transaction. Accordingly, the exemption in Section 32(B)(7)(g) applies to the transaction itself regardless as to who derives the gains such that, as long as the gain is derived from the sale or exchange or retirement of bonds, debentures or other certificate of indebtedness, it is exempt from income tax without qualification." ~

Page I I of 18 In this regard, this Court finds that petitioner has sufficiently proven that it had realized gains from the sale or exchange of its investments in foreign currency-denominated debt securities, bonds, debentures or other certificate of indebtedness with maturities of more than five years; taking into consideration petitioner's Sales Confirmation Form, Fixed Income Transactions Taking Value, Self Responding Ticket and FCDU Fixed Income Daily Gain/Loss Report13. The amount of P796,000,768.28 was declared as part of petitioner's total gross onshore income of P3,783,697,999.00 for calendar year 2002.14 More specifically, the amount of P796,000, 768.28 is shown as part of the line gain (loss) on securities amounting to P863,803,09515 under column D for Gross Onshore Income. The total gross onshore income of P3,783,697,999.00 formed part of the total gross income of P5,874,718,895 16 under the Schedule of Onshore and Offshore Income and the Corresponding Income Tax for Calendar Year Ended December 31 , 2002. In turn, this total gross income of P5,874,718,895 is included in the net profit before taxes of P3,367,132,943 17 under the same schedule. The net profit before taxes of P3,367, 132,943 was also shown under the line Income Before Provision of Income Tax of P3,367, 132,943 18 in petitioner's Comparative Statements of Income and Expenses for the years ended December 31 , 2002 and 2001 , which were attached to its Annual Income Tax Return 19. Thus, in relation to the provisions of Section 32(8)(7)(g) of the NIRC ?<--- 13 Exhibits "QQI -364," Exhibits "SS 1-3 18," Exhibits "RR 1-219" and Exhibits "TTI-350 14 Exhibit "8-1 " 15 Exhibit "8-2" 16 Exhibit "8-3'' 17 Exhibit "8-4" 18 Exhibit "8-5'' ~>' Exhibit "A" of 1997, as amended, there was indeed an erroneous withholding and payment of the final income taxes amounting to P79,600,076.83. As correctly presented by the Report of the Court Commissioned Independent Certified Public Accountant (CPA), the following tables pertaining to petitioner's investments in bonds with maturities of more than five years provide this Court with information necessary for the evaluation of petitioner's claim, thus:

A. SUMMARY OF INFORMATION BASED ON MONTHLY REMITTANCE RETURNS OF FINAL TAXES WITHHELD PER

BIR FORM 1601-F

Date of 20% Final Filing of 10% Final Tax on 10% Final Tax on Tax on All 25% Final Original Interest and Other Interest and Other Kinds of Tax on Calendar Monthly Income Payments Income Payments Royalty Payments Remittance to Non- Total Amount Exhibit Year2002 Returns of on Foreign on Foreign Payments to Resident Paid/Withheld No.

Month Final Currency Currency Domestic Alien in Income Transactions/Loans Transactions/Loans and Resident Trade or Taxes Payable to FCDUs Payable to OBUs Foreign Business Withheld Corporations February January 11,2002 10,129,312.47 1,472,257.78 92,530.80 11 ,694, 101 .05 "C" March 11 , February 2002 8,322,281 .84 88,110.68 2,236,872.00 3,908,045.03 14,555,309.55 "D" April10, March 2002 10,225,868.77 150,314.72 29,866.09 868,356.67 11 ,274,406.25 "E" May 10, April 2002 10,602,364.47 364,676.37 10,967,040.84 "F" June 10, May 2002 12,125,217.22 620,858.40 8,012,450.53 20,758,526.15 "G" July 10, June 2002 10,296,654.89 1,009,031 .86 927,235.22 12,232,921 .97 "H" August 12, July 2002 10,801 ,710.64 1,308,707.51 12,110,418.15 "I" September August 10, 2002 6,115,040.33 1,204,848.63 530,836.96 7,850,725.92 "J" October 10, September 2002 5,122,565.43 2,028,610.29 489,025.47 7,640,201 .19 "K" November October 11 , 2002 6,394,787.83 1 ,285, 101.61 10,917,780.65 18,597,670.09 "L" December November 10, 2002 6,144,354.51 1,666,930.94 309,907.92 8,121 ,193.37 "M" January 10, December 2003 63,046,370.03 698,507.16 4,106,694.00 67,851 ,571 .19 "N" Total 159,326,528.43 11 ,897,955.95 27,560,668.84 4,868,932.50 203,654,085.72 Jz-

B. SUMMARY OF MONTHLY REMITTANCE OF 10% FINAL INCOME TAXES REMITTED 10% Final Tax 10% Final Tax Total Amount of on Gains on Gains Taxes Withheld Total Amount of Realized from Realized from on Gross Income Taxes Withheld on Calendar 10% Final the Sale or the Sale or on Foreign Gross Income on Exhibit Year 2002 Tax on FCDU Exchange of Exchange of Currency Foreign Currency No.

Month Income (A) Investment with Investment with Transactions Paid Transactions Paid Maturity of Five Maturity of More to FCDUs per to FCDUs per BIR Years or Less than Five Years Form 1601-F

(PHP) (B)

(Php) (C) Books (D=A+B+C) January 9,705,482.91 281,565.66 142,263.90 10,129,312.47 10,129,31 2.47 "0" February 7,551,873.33 678,275.83 92,132.68 8,322,281.84 8,322,281.84 "P" March 8,424,421.15 733,414.97 1 ,068,032.66 10,225,868.78 10,225,868.78 "Q" April 7,250,073.56 251,289.54 3,101 ,001 .38 10,602,364.48 10,602,364.48 "R" May 8,429,684.92 239,691.48 3,455,840.83 12,125,217.23 12,125,217.23 "S" June 7,885,383.55 388,992.29 2,022,279.04 10,296,654.88 10,296,654.88 "T" July 8,91 3,042.00 188,024.54 1,700,644.09 10,801 ,710.63 10,801 ,710.63 "U" August 1,828,579.36 119,218.45 4,167,242.52 6,115,040.33 6,115,040.33 'V" September 2,669,442.53 135,044.01 2,318,078.89 5,122,565.43 5,122,565.43 'W" October 5,759,029.75 154,782.03 480,976.05 6,394,787.83 6,394,787.83 "X" November 2,680,257.21 53,717.40 3,410,379.90 6, 144,354.51 6,144,354.51 "Y" December 5,386,087.85 19,077.29 57,641 ,204.90 63,046,370.04 63,046,370.04 "Z" Total 76,483,358.12 3,243,093.49 79,600,076.83 159,326,528.44 159,326,528.44 C. SUMMARY OF MONTHLY GAIN ON SALE OF INVESTMENTS WITH MATURITIES OF MORE THAN FIVE YEARS Gains Realized 10% Final Tax on 10% Final Tax on from the Sale or Gains Realized from Gains Realized from Gains Realized from Calendar Exchange of Current the Sale or the Sale or the Sale or Exchange Year 2002 FCDU with Month Exchange of FCDU Exchange of FCDU of FCDU with Maturity Month Maturity of More Exchange with Maturity of with Maturity of of More than Five Rate More than Five More than Five than Five Years Years (Php) (C) Years (Php) per Years (Php) per (USD) Books Schedule January $ 27,784.29 51.20 p 1,422,639.00 p 142,263.90 p 142,263.90 February 17,965.89 51.28 921 ,326.77 92,132.68 92,132.68 March 209,024.70 51.10 10,680,326.58 1,068,032.66 1,068,032.66 April 613,027.85 50.59 31 ,010,013.79 3,101 ,001 .38 3,101 ,001 .38 May 690,698.50 50.03 34,558,408.25 3,455,840.83 3,455,840.83 June 400,126.44 50.54 20,222,790.40 2,022,279.04 2,022,279.04 July 332,189.48 51.20 17,006,440.94 1,700,644.09 1 '700,644.09 August 804,052.35 51 .83 41 ,672,425.20 4,167,242.52 4,167,242.52 September 442,297.06 52.41 23,180,788.91 2,318,078.89 2,318,078.89 October 90,371 .66 53.22 4,809,760.49 480,976.05 480,976.05 November 636,561 .84 53.57 34,103,798.97 3,410,379.90 3,410,379.90 December 10,823,826.36 53.25 576,412,048.98 57,641 ,204.90 57,641 ,204.90 Total $ 15,087,926.42 p 796,000,768.28 p 79,600,076.83 p 79,600,076.83 ~

The first table, or the "Summary of Information Based on Monthly Remittance Returns of Final Income Taxes Withheld per BIR Form 1601-F20", shows that petitioner, in accordance with Revenue Regulations (RR) No. 10- 98, duly withheld and remitted the total final taxes due on its onshore income in the amount of P203,654,085.72 for calendar year 2002. Out of the P203,654,085.72, P159,326,528.43 represents the 10% final income taxes on foreign currency transactions payable to FCDUs, which was duly remitted to respondent. The taxes were filed and paid within ten (1 0) days following the end of each of the corresponding month or on the date it was due, as prescribed under Section 2.58(A)(2)(a) of RR No. 2-98, to wit: Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD

AT SOURCE

(A) Monthly return and payment of taxes withheld at source- XXX XXX XXX

(2) WHEN TO FILE-

(a) The withholding tax return, whether creditable or final, shall be filed and payments should be made within ten (1 0) days after the end of each month except for taxes withheld for December which shall be filed on or before January 25 of the following year. (Emphasis supplied) Based on the second table, the total amount of P159,326,528.44, representing 10% final income taxes on foreign currency transactions payable to FCDUs, is composed of the 10% final tax on FCDU income, the 10% final tax on gains realized from the sale or exchange of investment with maturity of five (5) years or less, and 10% final tax on gains realized from the sale or ?z-

exchange of investment with maturity of more than five

(5) years (P76,483,358.12 + P3,243,093.49 + P79,600,076.83). The third table shows that the amount of P79,600,076.83, which is the subject claim for refund/issuance of a tax credit certificate, represents the 10% of the gains realized from the sale or exchange of foreign currency denominated debt securities, bonds, debentures or other certificate of indebtedness with a maturity of more than five (5) years of P796,000,768.28, which, as explained above, is shown as part of petitioner's total gross onshore income of P3,783,697,999.00. After considering that petitioner is entitled to the refund claimed, this Court now examines whether or not the total amount of P79,600,076.83 is refundable. It is ascertained that out of the total claim of P79,600,076.83, the amount of P6,072,553.41 should be disallowed since the same represents petitioner's investment with maturity of five years and less, thus: Current Deal No.

Exhibits Amount Month Peso Value 10% Final Exchange Tax Rate MAY 1003775 QQ-76/ RR-53/ SS-89m-77 173,586.12 50.03 8,684,513.58 868,451 .36 1003812 QQ-77/ RR-54/ SS-92m-79 8,870.38 50.03 443,785.11 44,378.51 1003842 QQ-79/ RR-56/ SS-97m-83 10,210.06 50.03 510,809.30 51 ,080.93 1003859 QQ-80/ RR-57/ SS-99m-85 6,917.86 50.03 346,100.54 34,610.05 1003936 QQ-92/ RR-66/ SS-113m-97 3,580.14 50.03 179,114.40 17,911 .44 1003925 QQ-93/ RR-67/ SS-115m-99 6,409.76 50.03 320,680.29 32,068.03 1003649 QQ-94/ RR-68/ SS-115m -99 5,710.90 50.03 285,716.33 28,571 .63 JUNE 1004066 QQ-99/ RR-71/ SS-127m-107 12,049.65 50.54 608,989.31 60,898.93 1004176 QQ-107/ RR-76/ SS-137m-115 40,241 .05 50.54 2,033, 782.67 203,378.27 JULY 1004222 QQ-111/ RR-80/ SS-1 43m-119 13,109.72 51 .20 671 ,217.66 67,121.77 1004223 QQ-112/ RR-80/ SS-143m-119 13,109.72 51 .20 671 ,217.66 67,121.77 1004229 QQ-115/ RR-82/ SS-145m-121 18,758.74 51 .20 960,447.49 96,044.75 lL ~0

1004211

QQ-118/ SS-148/TT-125

16,127.81 51 .20 825,743.87 82,574.39 1004262 QQ-124/ RR-85/ SS-153ffi-129 5,038.80 51 .20 257,986.56 25,798.66 1004296 QQ-130/ SS-159ffi-137 39,325.65 51 .20 2,013,473.28 201 ,347.33 AUGUST 1004368 QQ-139/ RR-94/ SS-170ffi-151 228.884.31 51.83 11 ,863,073.79 1,186,307.38 1004381 QQ-140/ RR-95/ SS-171ffi-155 150,517.83 51 .83 7,801 ,339.13 780,133.91 1004390 QQ-141/ RR-96/ SS-173ffi-155 8,280.26 51 .83 429,165.88 42,916.59 1004399 QQ-144/ RR-97/ SS-175ffi-159 4,310.72 51.83 223,424.62 22,342.46 1004429 QQ-145/ RR-98/ SS-176ffi-161 1,177.67 51 .83 61 ,038.64 6,103.86 1004431 QQ-146/ RR-98/ SS-177ffi-161 1,265.99 51.83 65,616.26 6,561.63 1004450

SS-179/ TT-163

61 ,586.82 51 .83 3,192,044.88 319.204.49 1004461 QQ-150/ RR-99/ SS-180ffi-167 2,110.15 51 .83 109,369.07 10,936.91 SEPTEMBER 1004462 QQ-153/ RR-101/ SS-183ffi-172 2,285.42 52.41 119,778.86 11 ,977.89 1004479

QQ-1 SS-189/TT-181

20,011 .02 52.41 1,048,777.56 104,877.76 1004486 SS-189ffi-180 51,471 .00 52.41 2,697,595.11 269,759.51 O':TOBER 1004701 SS-225ffi-234 38.38 53.22 2,042.58 204.26 1004703

QQ-244/ SS-225/ TT-235

39,930.85 53.22 2,125,119.84 212,511 .98 NOVEMBER 1004866 SS-246ffi-267 (0.02) 53.57 (1.07) (0.11 ) 1004868

QQ-269/ SS-247/ TT-268

46,485.75 53.57 2,490,241.63 249,024.16 1004891

QQ-273/ SS-252/ TT-274

144,143.97 53.57 7,721 ,792.47 772,179.25 1004892

QQ-274/ SS-253/ TT-277

36,616.33 53.57 1,961 ,536.80 196,153.68 TOTAL 60,725,534.10 6,072,553.41 In view of the above findings, petitioner's claim for refund or issuance of tax credit certificate in the amount of Seventy Nine Million Six Hundred Thousand Seventy Six Pesos and 83/100 (P79,600,076.83) representing its erroneously paid final income taxes for the calendar year 2002 should be granted, less the prescribed and disallowed claims.

WHEREFORE, this instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in the reduced amount of SEVENTY

THREE MILLION TWO HUNDRED NINETY THREE THOUSAND ONE

HUNDRED TWENTY SIX AND 84/100 PESOS (P73,293, 126.84), 9c- representing petitioner's erroneously withheld and paid final income taxes, computed as follows:

Claimed Refund/Tax Credit Less:

Barred by Prescription Maturity of less than Five (5) years Total

WE CONCUR:

p 234,396.58 6,072,553.41 p 79,600,076.83 6,306,949.99 p 73.293.126.84 Q__ .v Q_ -~~ ~- 0'u"ANITO c. CASTANEDA,'rR. Associate Justice ~~~~~

OLGA PALANCA-ENRIQUEZ

Associate Justice ATTESTATION I attest 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.

§.?.:~ Q -~~ .

\:)___ JUANITO C. CASTANEDA;' .IF[" , Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, 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.

D~~~ Q__

ERNESTO D. ACOSTA Presiding Justice