Roxas Land Corporation vs. Commissioner of Internal Revenue

DECISION

CASANOVA, J.:

Nature of the Case

This is a Petition for Review filed before this Court, praying for the issuance of tax credit certificate in favor of the petitioner for the total amount of P46,848,724.00 representing its excess/unutilized income tax credits for the years ending December 31, 2002 and December 31, 2003.

Statement of the Facts

Petitioner, Roxas Land Corporation, is a corporation duly organized and existing by virtue of Philippine laws, with principal office located at the 31st Floor, Tower One~ f':rt I

' · C.T.A. CASE NO. 7219 Ayala Triangle, Ayala Avenue, Makati City. 1 It is principally engaged in the real estate business, and is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) registered taxpayer with Taxpayer Identification Number (TIN) 004-672-615- 0002 under Certificate of Registration OCN 0000017158 dated April 2, 1996.3 On the other hand, respondent is the duly appointed Commissioner of Internal Revenue vested with the authority to act as such, including the power to decide, approve and grant claims for refunds or issuance of tax credit certificate of overpaid internal revenue taxes as provided by law with office address at the 5 th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.4 On April 15, 2003, petitioner filed with respondent's Large Taxpayers Division its Annual Income Tax Return5 for the year ending December 31, 20026 showing overpayment of income tax in the amount of P21,341,193.00, computed as follows:

Sales/Revenues/Receipts

Less:

Cost of Sales/Services

Gross Income from Operation

Add:

Non-Operating & Other Income

Total Gross Income

Less:

Deductions

Taxable Income (Loss)

Income Tax Due

Less:

Creditable Tax Withheld for the First Three Quarters

Creditable Tax Withheld for the Fourth Quarter

Total Tax Credits

Tax Payable/(Overpayment)

p 528,553,996.00 583,790,017.00 p (55,236,021.00) 51,437,232.00 p (3,798,789.00) 101,138,333.00 P004.937. 122.00)

NIL

p 12,171 ,073.00 9,170,120.00 p 21,341,193.00 p (21.341.193.00) In the same tax return, petitioner indicated its option to be issued a Tax Credit Certificate. 7 ~ 1 Paragraph 1, Joint Stipulation of Facts and Restatement of Issues (JSFRI), CTA Records page 86 2 Paragraph 3, JSFRI, CTA Records page 86 3 Exhibit "A", CTA Records page 128 4 Paragraph 2, JSFRI, CTA Records page 86 5 BIR Form No. 1702

On April 15, 2004, petitioner electronically filed its Annual Income Tax Return for the year ending December 31, 2003 with Filing Reference No. 1204000001396398 showing overpayment of income tax in the amount of P25,468,950.28. However, on April 29, 2004, petitioner filed an amended Annual Income Tax Return9 showing instead an overpayment of income tax in the amount of P25,507,531.00, computed as follows:

Sales/Revenues/Receipts

Less:

Cost of Sales/Services

Gross Income from Operation

Add:

Non-Operating & Other Income

Total Gross Income

Less:

Deductions

Taxable Income (Loss)

Income Tax Due

Less:

Creditable Tax Withheld for the First Three Quarters

Creditable Tax Withheld for the Fourth Quarter

Total Tax Credits

Tax Payable/(Overpayment)

p 423,409,648.00 428,729,618.00 p (5,319,970.00) 4,835,940.00 p ( 484,030.00) 71,188,232.00 p <71.672.262.00)

NIL

p 19,044,152.00 6,463,379.00 p 25,507,53 1.00 p (25,507,531.00) In the same return, petitioner indicated its option to be issued a Tax Credit Certificate10 by marking the appropriate box therein. On April 14, 2005, petitioner filed with respondent's Large Taxpayers Division a written claim for the issuance of a Tax Credit Certificate in the amount of P46,848,724.00 allegedly representing its excess income tax credits for the years ending December 31, 2002 and 2003. 11 To date, petitioner's administrative claim for the issuance of a Tax Credit Certificate for its 2002 and 2003 unutilized/excess tax credit is still pending with the BIRY Thus, petitioner, on April 15, 2005, filed the instant Petition for Review. ~

Page Page 4 of 19

In his Answer filed on May 25, 2005, respondent interposed the following 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 P46,848,724.00 being claimed by petitioner as alleged excess/unutilized income tax credits for the years ended December 31, 2002 and 2003 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 [b ]with disfavor (Western Minolco Corporation vs.

Commissioner of Internal Revenue/ 124 SCRA

121[1])."13 During trial, petitioner presented testimonial and documentary evidence while respondent submitted the case for decision without presenting any evidence. The Court directed the parties to file their respective Memoranda within thirty (30) days from June 22, 2007. Petitioner filed its Memorandum14 on July 23, 2007. Respondent did not file his Memorandum. Therefore, the case was submitted for decision on August 6, 2007. Hence, this Decision.

The Issues15

The parties jointly stipulated on the following issues to be resolved, to wit:~ 13 Respondent's Answer, CTA Records page 62

I

Whether or not the claim for the issuance of tax credit certificate is timely filed.

II

Whether or not the claim for refund in the amount of P46,848,724.00 is substantiated by sufficient evidence to show that these are excess income tax credits generated by the petitioner in the years ended December 31, 2002 and December 31, 2003.

III

Whether or not petitioner is entitled to the issuance of a tax credit certificate in the amount of P46,848,724.00.

The Court's Ruling

The records disclosed that the claim of P46,848,724.00 represents the sum of petitioner's unutilized creditable taxes withheld during the taxable years 2002 and 2003, in the amounts of P21,341,193.00 and P25,507,531.00, respectively. Section 76 of the National Internal Revenue Code of 1997, as amended, states: Section. 76. Fiscal Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar 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 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 with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry- over and apply the excess quarterly income tax against income 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 a tax credit certificate shall be allowed therefor~

Page Page 6 of 19

Since petitioner properly marked the option "To be issued a Tax Credit Certificate" in its income tax returns for both years16 and did not carry-over the unutilized tax credits of P21,341,193.00 and P25,507,531.00 to the succeeding years' returns17, the same may be a subject of a claim for tax credit certificate under Section 76 of the NIRC of 1997, as amended. However, it is well settled that the following requisites must be further complied with in order that the subject claim may be granted, viz: 1) That the claim for refund was filed within the two-year prescriptive period provided under Section 204(C) in relation to Section 229 of the NIRC of 1997, as amended;

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 recipient. 18 Claim filed within the two-vear prescriptive period In the computation of the two-year prescriptive period, a "year" is understood to be of twelve (12) calendar months, irrespective of the number of days in a month. This was explained in Commissioner of Internal Revenue and Arturo V. Parcero in his capacity as Revenue District Officer of Revenue District No. 049 (Makati) vs. Primetown Property Group, Inc., 19 as follows: "Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter - the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a lea~

16 Exhibits " B-2" "C-4" and "D-2"

17 Exhibits "C-3": "D-1': and "F-2"

18 Section 2.58, Revenue Regulations No. 2-98, as amended; Citibank N.A. vs. Court of Appeals and CIR, 280 SCRA 459; Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, Court of Tax Appeals, and Commissioner of Internal Revenue, 519 SCRA 93 19 G.R. No. 162155, August 28, 2007

I

year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time respondent filed its final adjusted return 34 on April 14, 1998) consisted of 24 calendar months, computed as follows:

Year 1

1st calendar month April 15, 1998 to May 14, 1998 2nd calendar month May 15, 1998 to June 14, 1998 3rd calendar month June 15, 1998 to July 14, 1998 4th calendar month July 15, 1998 to August 14, 1998 5th calendar month August 15, 1998 to September 14, 1998 6th calendar month September 15, 1998 to October 14, 1998 7th calendar month October 15, 1998 to November 14, 1998 8th calendar month November 15, 1998 to December 14, 1998 9th calendar month December 15, 1998 to January 14, 1999 lOth calendar month January 15, 1999 to February 14, 1999 11th calendar month February 15, 1999 to March 14, 1999 12th calendar month March 15, 1999 to April 14, 1999

Year 2

13th calendar month April 15, 1999 to May 14, 1999 14th calendar month May 15, 1999 to June 14, 1999 15th calendar month June 15, 1999 to July 14, 1999 16th calendar month July 15, 1999 to August 14, 1999 17th calendar month August 15, 1999 to September 14, 1999 18th calendar month September 15, 1999to October 14, 1999 19th calendar month October 15, 1999 to November 14, 1999 20th calendar month November 15, 1999 to December 14, 1999 21st calendar month December 15, 1999 to January 14, 2000 22nd calendar month January 15, 2000 to February 14, 2000 23rd calendar month February 15, 2000 to March 14, 2000 24th calendar month March 15, 2000 to April 14, 2000 We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period."

The relevant provisions in the NIRC of 1997, as amended, are Sections 204(C) and 229 which provide as follows: $-

Section. 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. (Emphasis supplied)

XXX

XXX

XXX

Section. 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 or 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 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 therefor, 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) Further, in Commissioner of Internal Revenue vs. TMX Sales, Inc.,20 and ACCRA Investments Corporation vs. Commissioner of Internal Revenue,21 th~

20 205 SCRA 184

21 204 SCRA 957

Supreme Court held that the two (2)-year prescriptive period should be counted from the filing of the final adjustment return, because it is only during that date that the exact tax liability or refundability of the tax can be determined. The present claim covers taxable years 2002 and 2003 for which petitioner filed its income tax returns on April 15, 2003 and April 15, 2004, respectivelyY Counting from these dates, petitioner had until April 15, 2005 (notwithstanding year 2004 was a leap year) and April 15, 2006 within which to file its claim for taxable years 2002 and 2003, respectively. Therefore, the administrative claim filed on April 14, 2005 and the Petition for Review filed on April 15, 2005, both covering taxable years 2002 and 2003, are within the two-year prescriptive period required by law. The fact of withholding is established bv a copv of a statement issued bv the pavor to the pavee To establish the fact of withholding of the claimed creditable taxes withheld for taxable years 2002 and 2003 in the respective amounts of P21,341,193.00 and P25,507,531.00 or in the sum of P46,848,724.00, petitioner submitted Certificates of Creditable Tax Withheld at Source23, Withholding Tax Remittance Returns24 and related machine validated bank deposit slips, bank official receipts and miscellaneous receipts25 which were examined by the Court commissioned CPA firm, Constantino Guadalquiver & Co. (CG&Co.).

Based on the review and validation made by CG&Co., the following mdings were noted~

22 Exhibits " B-3" and "C-1"

23 BIR Form No.2307 24 BIR Form No. 1606

Page Page 10 of 19

DESCRIPTION

A. Creditable withholding tax payments supported by original W ithholding Tax Remittance

Returns

(BIR

Form

1606), original Certificates of Creditable Tax W ithheld at Source (BIR Form 2307), and other documents evidencing remittance of taxes withheld:

1. Sale of Condominium Units a.

Creditable

withholding tax payments supported by original Withholding Tax

Remittance Returns (BIR Form

1606) which were machine validated and stamped "received" by bank.

Also

supported by other documents such as original machine validated bank Deposit Slips, original bank Official Receipts and Miscellaneous Receipts.

b.

Creditable

withholding tax payments supported by original Withholding Tax

Remittance Returns (BIR Form

1606) which were machine validated and stamped "received" by bank.

Also

supported by photocopied bank Deposit

Slips)

c.

Creditable

withholding tax payments supported by Withholding Tax Remittance Returns (BIR Form 1606) which were machine validated and stamped "received" by bank.

SUB-TOTAL

2. Lease of Condominium Units a.

Creditable

withholding tax payments supported by original Certifi cates of

Creditable Tax Withheld at Source (BIR

Form 2307).

SUB-TOTAL

TOTAL

AMOUNT

2002 2003

TOTAL

Pl 7,908,329. 14 P20, 177,852.57 P38,086,181.71

Annex K-01

Annex K-02

11 2,794.03 4,592,690.23 4, 705,484.26

Annex K-03

Annex K-04

I ,275,000.00 - I ,275,000.00

Annex K-05

P19,296,123.17 P24, 770,542.80 P44,066,665.97 p - p 394,120.74 p 394,120.74 -

Annex K-06

p 394,120.74 p 394,120.74 P19,296,123.17 p 25,164,663.54 P44,460,786.71 .e. fiV

B.

OTHER FINDINGS

I. Sale of Condominium Units a.

Creditable

withholding tax payments supported by original machine validated bank Deposit Slip but with photocopied

Withholding Tax Remittance Return (BIR

Form 1606)

b.

Creditable

withholding tax payments supported by photocopied Withholding

Tax Remittance Return (BIR Form 1606)

and photocopied bank Deposit Slip.

c. Creditable withholding tax payments with no supporting documents such as Withholding Tax Remittance Return (BIR Form 1606), bank Deposit Slip, Official Receipt or Miscellaneous Receipt.

SUB-TOTAL

2. Lease of Condominium Units a.

Creditable withholding tax payments supported by Certificates of Creditable Tax

Withheld at Source (BIR Form 2307)

which is not issued under the Company's name.

b.

Creditable withholding tax payments supported by photocopied Certificate of

Creditable Tax Withheld at Source (BIR

Form 2307)

c. Creditable withholding tax payments without supporting Certificate of Creditable Tax

Withheld at Source (BIR Form 2307)

SUB-TOTAL

TOTAL

GRAND TOTAL

p I ,459, 767.27 p - p 1,459,767.27

Annex K-07

585,302.99 84,922.98 670,225.97

Annex K-08

Annex K-09

- 42,461 .49 42,461.49

Annex K- 10

p 2,045,070.26 p 127,384.47 p 2,172,454.73 p - p 93,186.60 p 93,186.60

Annex K-11

- 81,387.00 81,387.00

Annex K-12

- 40,909.09 40,909.09

Annex K-06

p - p 215,482.69 p 215,482.69 p 2,045,070.26 p 342,867.16 p 2,387,937.42 P21 ,341,193.43 p 25,507,530.70 P46,848. 724.13 r -\

Page Page 12 of 19

Upon further verification against the Certifications issued by the Revenue Accounting Division of the BIR in Quezon City dated October 5, 200626 of the creditable withholding taxes supported by photocopied Withholding Tax Remittance Returns in the amounts of P1,459,767.27 and P670,225.97 totaling P2,129,993.24 referred to above as "B. Other Findings", specifically letters "a" and "b" under the caption "1. Sale of Condominium Units", the commissioned independent CPA submitted a supplemental report dated October 11, 2006/7 stating the following:

Findings

Sale of Condominium Units

I.

Creditable withholding tax payments supported

Withholding Tax Remittance Return (BIR Form

1606) which were traced to the Certifications issued by Revenue Accounting Division of the BIR in Quezon City dated October 5, 2006 a.

Creditable

withholding tax payments supported by original machine validated bank Deposit Slip but with photocopied

Withholding Tax Remittance Return (BIR

Form 1606) (to be presented as Exhibit K- Annex K-07; Exhibit L-161 and Exhibit

M-156

during the hearing of the Company's case) b.

Creditable

withholding tax payments supported by photocopied Withholding Tax

Remittance Return (BIR Form 1606) and

photocopied bank Deposit Slip (to be presented as Exhibit K-Annex K-08;

Exhibit L-162 to 165 and Exhibit M-157

to 160, during the hearing of the Company's case)

Sub-total

II.

OTHER FINDING

Creditable withholding tax payments supported by photocopied Withholding Tax Remittance Return (BIR Form 1606) which

26 Exhibits "X" and "X-01"

27 Exhibit "W"

2002 PI ,459,767.27 585,302.99 P2,045,070.26

Amount

2003

Total

p - P1 ,459,767.27 - 585,302.99 p - P2,045,070.26 ?J

' C.T.A. CASE NO. 7219 cannot be traced to the certifications issued by

Revenue Accounting Division of the BIR in

Quezon City dated October 5, 2006

a. Creditable withholding tax payments supported by photocopied Withholding Tax

Remittance Return (BIR Form 1606) and

photocopied bank Deposit Slip (to be presented as Exhibit K-Annex K-09;

Exhibit L-166 to 167 and Exhibit M-161

to 162, during the hearing of the Company's case)

Sub-total

Total

p - P84,922.98 p 84,922.98 p - P84,922.98 p 84,922.98 P2,045,070.26 P84,922.98 P2,129,993.24 However, after carefully examining the reports presented by the commissioned independent CPA, this Court finds that creditable withholding taxes which do not have valid supporting documents in the amount of P342,867.16 should be disallowed from petitioner's claim, to wit:

Sale of Condominium Units

a.

Creditable withholding taxes supported by photocopied Withholding Tax Remittance Return (BIR Form 1606) and photocopied bank Deposit Slip which cannot be traced to the certifications issued by Revenue

Accounting Division of the BIR in Quezon

City dated October 5, 2006 b.

Creditable withholding taxes with no supporting documents such as Withholding Tax Remittance Return (BIR Form 1606),

Exhibits K-

Annex K-09;

L-1 66, L-1 67,

M-1 61 & M-

162 bank Deposit Slip, Offi cial Receipt or

Exhibit K-

Miscellaneous Receipt

Annex K-10

Lease of Condominium Units

a.

Creditable withholding taxes supported by

Creditable Tax Withheld at Source (BIR

Form 2307) which is not issued under the name of petitioner

Exhibits K-

Annex K-11

& L-1 68

b.

Creditable withholding taxes supported by

Exhibits K-

photocopied Certificate of Creditable Tax

Annex K-1 2

Withheld at Source (BIR Form 2307)

& L-169

c.

Creditable

withholding taxes without

Certificate of Creditable Tax Withheld at

Exhibits K-

Source (BIR Form 2307)

Annex K-06

2002 p -

Total

p

Amount of Claim

2003

Total

?84,922.98 p 84,922.98 42,46 1.49 42,461.49 93, 186.60 93,186.60 81 ,387.00 81,387.00 40,909.09 40,909.09 P342,867.16 p 342,867.16

C

\

Page Page 14 of 19

Likewise, creditable taxes withheld in the amount of P2,349,627.02 pertaining to taxable years 2001 and 2004, which were outside the period of claim must be denied:

Included in

Exhibit

Date

Payor/Withholding Agent

2002 2003

Total

Sale of Condominium Units

L-01

Dec-O I

Beatriz Susana Zobel de Ayala

p 42,263.52 p 42,263.52

L-02

Dec-O I

Angelino Z. Villanueva 684,650.9 1 684,650.9 1

L-142

Dec-O I

Patricia Zobel de Ayala

42,461.47 42,461.47

L- 143

Dec-O I

VRJ Holdings, Inc.

20, 151.52 20,15 1.52

L-1 61

Dec-O I

Patrick D. Johnson/Yolanda I ,459, 767.27 I ,459, 767.27

Johnson

L- 162

Dec-O I

SM Investment Corp.

6,656.13 6,656.13

Lease of Condominium Units

L-158

Jan-Dec '04

Dominique C. Gormand - ?93,676.20 93,676.20

Total

P2. 2<;<;_ Q<;O R2 P93.671i.20 P2.1.li.O_Il27 02 In sum, out of the claimed creditable taxes withheld for taxable years 2002 and 2003 in the respective amounts of P21,341,193.00 and P25,507,531.00 totaling P46,848,724.00, petitioner was able to substantiate only the amounts of P19,085,242.18 and P25,070,987.64 or in the sum of P44,156,229.82, computed as follows: 2002 2003

Total

Amount of Claimed Creditable Taxes Withheld

P21 ,34 1, 193.00 P25,507,531 .00 ?46,848, 724.00

Less:

Disallowances

Creditable withholding taxes without ?~867.16,..... ..-r--342,867.16 valid supporting documents Creditable withholding taxes which fall outside the period of claim p 2,255,950.82 93,676.20 2,349,627.02

Total Disallowances

p 2,255,950.82 p 436,543.36 p 2,692,494.18

Validly Substantiated Creditable Taxes Withheld

p 19,085,242.18 P25,070,987.64 P44,156,229.82 The income was included in the return of the recipient

The income was included in the return of the recipient As to whether or not petitioner declared the income related to the above substantiated creditable withholding taxes in its income tax returns for taxable years 2002 and 2003, the commissioned independent CPA, CG&Co., summarized its findings

Amount

Description

2002 2003

Total

A. Creditable withholding tax payments with related income included in the

Company's Income Tax Return

1. Sale of Condominium Units

a. Creditable withholding tax payments with related income included in the Company's Annual Income Tax Return as traced either to Contract to Sell, Deed of Absolute Sale or Deed of Cancellation, Company-prepared Sales Report, General

Ledger and Annual Income Tax Return

P18,982,623.9 1 p 19,090,830.94 P38,073,454.85

Annex N-01

Annex N-02

b. Creditable withholding tax payments with related income included in the Company's income tax return as traced to either Contract to Sell or Deed of Absolute Sale,

Company-prepared

Sales

Report, Computation Sheet, General Ledger and Annual Income Tax Return. The selling price reflected in the Company-prepared

Schedule

of

Monthly

Creditable

withholding tax payments was based on the selling price before adjustment on sales discount and other charges. Selling price included in Contract to Sell or Deed of Absolute Sale, Sales Report, General Ledger and Annual Income Tax Return is net of sales discount.

2, 124,3 77.25 3,583,866.95 5, 708,244.20

Annex N-03

Annex N-04

c. Creditable withholding tax payments with related income included in the Company's income tax return as traced to Contract to Sell, Computation Sheet, Sales Report,

General Ledger and Annual Income Tax

Return. Selling price stated in Contract to Sell is net of discount but gross of rebate while that in Sales Report, General Ledger and Annual Income Tax Return is net of

Page Page 16 of 19

Sub-total

2. Lease of Condominium Units

a. Creditable withholding tax payments with related income reported per Certificate of

Creditable Tax Withheld at Source (BIR

Form No. 2307) reconciled with that reported in Company-prepared Schedule of Lease Income, General Ledger and

Annual Income Tax Return

b. Creditable withholding tax payments which related income reflected in Certificate of

Creditable Tax Withheld at Source (BJR

Form 2307) have lesser amounts than those stated in the Schedule of Lease Income, General Ledger and Annual

Income Tax Return

Sub-total

TOTAL

B. OTHER FINDINGS

1. Sale of Condominium Units a.

Creditable

withholding tax payments representing additional taxes paid as adjustment to previously paid taxes (amount still due after adding all previously paid taxes) with related income traced to Deed of Absolute Sale and Company-prepared Sales Report but not determined to be fully included in the

General Ledger and Annual Income Tax

Return. The General Ledger in 1996 was not available during verification.

b. Creditable withholding tax payments with related income not determined to be fully included in the Company's income tax return. Selling price per Deed of Absolute Sale is higher than that refl ected in the Sales Report, General Ledger and Annual Income Tax Return.

Sub-total

2. Lease of Condominium Units

Annex N-05

P21 ,107,001. 16 P24,897,927.27 P46,004,928.43 - p 90,090.00 p 90,090.00

Annex N-06

- 25 1,263.63 25 1,263.63

Annex N-07

- p 341,353.63 p 341,353.63 P21,107,001.16 P25,239,280.90 P46,346,282.06 p 6,656. 13 - p 6,656. 13

Annex N-08

227,536.14 - 227,536. 14

Annex N-09

p 234,192.27 - p 234,192.27 ......

(f" 2. Lease of Condominium Units a.

Creditable

withholding tax although traced to Schedule payments

of Lease

Income, General Ledger and Annual Income Tax Returns, the related Official

Receipt

was not issued under the withholding agent's name

b. Creditable withholding tax payments which related income reflected in Certificate of

Creditable Tax Withheld at Source (BIR

Form No. 2307) have higher amounts than those stated in Schedule of Lease Income

and Annual Income Tax Return

Sub-total

TOTAL

GRAND TOTAL

p 93,186.60 p 93,186.60

Annex N-10

- 175,063.20 175,063.20

Annex N- Il

- p 268,249.80 p 268,249.80 p 234,192.27 p 268,249.80 p 502,442.07 P21,341,193.43 P25,507 ,530. 70 P46,848,724.13 From the foregoing, the creditable withholding taxes in the amounts of P6,656.13 and P227,536.14 which related income were not determined to be fully included in the general ledger and income tax return of petitioner, and the creditable withholding taxes in the amount of P175,063.20 which related income reflected in the certificate were higher than those shown in the return, failed to satisfy the third requisite.

However, since the creditable withholding taxes of P6,656.1329 and P175,063.2030 were already disallowed earlier for being outside the period of claim or without valid proof of withholding, only the creditable withholding taxes of P227,536.14 shall be denied for non-compliance with the third requisite. Consequently, out of the creditable withholding taxes with valid proof of withholding in the amounts of P19,085,242.18 and P25,070,987.64 for taxable year~

C.T.A. CASE NO. 7.219

2002 and 2003, respectively (totaling to P44,156,229.82) only the creditable withholding taxes of P18,857,706.04 and P25,070,987.64 for taxable years 2002 and 2003, respectively (in the sum of P43,928,693.68), which were verified to have been recorded in petitioner's general ledger and reported in petitioner's income tax returns, have complied with the third requisite computed as follows: 2002 2003

Total

Claimed creditable taxes withheld with valid proof of withholding p 19,085,242. 18 P25,070,987.64 P44, 156,229.82

Less:

Creditable taxes withheld with related income not determined to be fully included in petitioner's income tax return 227,536.14 227,536.1 4

Refundable Excess Creditable

Taxes W ithheld Pl8,857,706.04 P25,070,987.64 P43,928,693.68 In view of the foregoing, this Court finds the Petition for Review partly meritorious.

WHEREFORE, the Court hereby ORDERS respondent to issue a Tax Credit Certificate in the amount of P43,928,693.68 in favor of herein petitioner representing its unutilized excess creditable taxes withheld for taxable years 2002 and 2003.

WE CONCUR:

~ V0.:\12 .

t....-.A- ERNEST.O D. ACOSTA ~ CAESAR A. CASANOVA

Associate Justice

CERTIFICATION

Pursuant to Article 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.

A:\9• ~

NESTO D. ACOSTA

Presiding Justice

Chairman, First Division