Jardine Lloyd Thompson Insurance Brokers, Inc. vs. Commissioner of Internal Revenue

DECISION

CASANOVA,].:

The instant Petition for Review,¹ filed by petitioner-Jardine Lloyd Thompson Insurance Brokers, Inc., dated April 14, 2011, seeks the refund or issuance of Tax Credit Certificate (TCC) in the amount of P8,880,039.00, representing its excess and unutilized creditable income taxes withheld for calendar year (CY) 2008. The facts of the case, as culled from the records, are as follows: Petitioner is a domestic corporation duly organized and existing under Philippine laws, with principal office at 25th Floor, Philamlife Tower, 8767 Paseo de Roxas, Makati City² and is primarily engaged in the business of insurance brokerage, and as such, receives commission income from various insurance companies.³#-

Respondent is the duly appointed Commissioner of Internal Revenue empowered to perform the duties of said office including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes and may be served with summons and other legal processes of this Court at 5th Floor, BIR National Office Building, BIR Road, Diliman, Quezon City.⁴ Petitioner is registered with the Bu,reau of Internal Revenue (BIR) and was issued Tax Identification Number (TIN) 000-125-711-000 and BIR Certificate of Registration bearing RDO Control No. 8RC0000019169.⁵ On April 15, 2009, petitioner manually filed with the BIR its Annual Income Tax Return (ITR) for CY 2008, where it reported gross revenues in the total amount of P121,890,522.00, consisting of revenues from commissions, and an income tax due ofP1,394,162.56.⁶ Thereafter, on March 29, 2010, petitioner filed with the BIR Large Taxpayers Service (LTS)-Regular Taxpayers its administrative claim for refund of its excess and unutilized creditable withholding taxes (CWT) for CY 2008 in the amount ofP8,880,039.00.⁷ To this date, respondent has yet to decide on petitioner's claim for refund of excess and unutilized CWT for CY 2008.⁸ Consequently, petitioner filed its Petition for Review before this Court on April14, 2011. In her Answer,⁹ filed on May 24, 2011, respondent averred the following special and affirmative defenses: "5. She reiterates andre-pleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses~

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

7. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected.

8. 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.

9. Taxes remitted to the BIR are presumed to have been made in the regular course of business and in accordance with provisions of law.

10. Petitioner failed to substantiate its claim for refund/issuance of tax credit certificate in the amount of Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00) representing alleged unutilized creditable withholding tax for the taxable year 2008.

11. In the case entitled 'Commissioner of Internal Revenue vs. Rosemarie Acosta', the Supreme Court had the occasion to say:

'xxx Noteworthy, the requirements under Section 230 (now Section 204) for refund claims are as follows:

1. A written claim for refund or tax credit must be filed by the taxpayer with the Commissioner;

2. The claim for refund must be a categorical demand for reimbursement;'

3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be commenced in court within two (2) years from date of payment of the tax or penalty regardless of any supervening cause. ~

In our view, the law is clear. A claimant must first file a written claim for refund, categorically demanding recovery of overpaid taxes with the CIR, before resorting to an action in court. This obviously is intended, first, to afford the CIR an opportunity to correct the action of subordinate officers: and second, to notify the government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure xxx.' (emphasis and underscoring supplied)

12. In order to be entitled to the refund being sought, petitioner must satisfactorily comply with the following requisites:

a.) That the claim for refund was filed within the two-year prescriptive period as provided under Section 204 (c) in relation to Section 229 of the NIRC of 1997;

b.) 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 c.) That the income upon which the taxes were withheld was included in the return of the recipient.

13.

Petitioner must prove that the administrative and judicial claims were filed within the period prescribed by law.

14. Petitioner must prove that it has fully complied with the requirements of Revenue Memorandum Order No. 53-98, for purposes of submission of the supporting documents, otherwise, there would be no sufficient compliance with regard to the filing of an administrative claim for tax creditjrefund,6L which is a condition sine qua non prior to the filing of judicial claim;

15. 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.

16. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation.

17. Basic is the rule that tax refunds are regarded as tax exemptions that are in derogation of sovereign authority and are to be construed in strictissimi juris against the person or entity claiming the exemption (Philippine Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue, G.R. No. 141973,]une 28, 2005). The law does not look with favor on tax exemption and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea Land Service Vs. Court of Appeals, 357 SCRA 444)."

On July 22, 2011, the parties filed their Joint Stipulation of Facts and Issues.10 During trial, petitioner presented the following witnesses: 1) Ms. Ma. Milagros F. Padernal11, Independent Certified Public Accountant (ICPA) and Ms. Maria Esperanza Rosario R. Dellosa12, petitioner's Assistant Vice- President (AVP).

Thereafter, petitioner filed its Formal Offer of Evidence13 (FOE) on August 6, 2012. A Comment (On Petitioner's Formal Offer of Evidence) 14 was filed by respondent on August 17, 2012~

In a Resolution1s promulgated on September 19, 2012, the Court resolved petitioner's FOE and admitted Exhibits "A" to "1", "K", and "R" to "XX", inclusive of their sub-markings, but noted the following discrepancies: "a. Two documents were marked Exhibit MMf-302; and

b. Exhibit 'K-1' described as 'Line 30A of petitioner's Annual ITR for CY 2009 showing prior year's excess credits other than

MCIT

in the amount of Php47.737.418.51 reported by petitioner', actually pertains to the amount of Php47.837.418.51." In the November 14, 2012 hearing16, respondent's counsel manifested the instant case has no report of investigation and that she has no witness to present. Thus, upon motion of the parties' counsels, the Court ordered them to file their respective Memorandum within thirty (30) days from November 14, 2012 or until December 14, 2012. On February 14, 2013, the Court considered the case submitted17 for decision taking into consideration respondent's Memorandum18 filed on December 4, 2012 and petitioner's Memorandum19 filed on January 28, 2013.

On February 14, 2013, petitioner filed a Motion for Additional Time to File Formal Offer of Evidence2o which was denied by this Court in a Resolution21 promulgated on February 15, 2013. Hence, this Decision.pZ--

The following are the parties' jointly stipulated issues22 submitted for this Court's resolution:

1. Whether or not petitioner had unutilized CWT for CY 2008 in the amount of Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00).

2. Whether or not petitioner's unutilized CWT amounting to Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00), for CY 2008 are duly substantiated by documentary evidence.

3. Whether or not the fact of withholding of the CWT for CY 2008, being claimed for refund was established.

4. Whether or not the income from which the subject CWT was withheld was reported as part of petitioner's gross income in its Annual ITR for CY 2008.

5. Whether or not petitioner's unutilized CWT for CY 2008 was applied against its income tax liability for the succeeding taxable year.

6. Whether or not petitioner filed its administrative and judicial claims for refund of excess CWT for CY 2008 within the two-year prescriptive period provided in Sections 204(C) and 229, Tax Code.

7. Whether or not petitioner is entitled to its claim for refund or issuance of Tax Credit Certificates for its excess and unutilized CWT for CY 2008 in the amount ofP8,880,039.00. Pertinent to the resolution of this case is the provision of Section 76 of the 1997 National Internal Revenue Code (NIRC), as amended, which provides:

"SEC. 76. Final 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 pc-

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 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 a tax credit certificate shall be allowed therefor." Based on the afore-quoted provisions, a corporation entitled to a tax credit or refund of the excess income taxes paid in a given taxable year has two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax credit certificate or to claim a cash refund. If the option to carry-over the excess credit is exercised, the same shall be irrevocable for that taxable period and no application for cash refund or issuance of tax credit certificate shall be allowed therefor. The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.2.k_

A perusal of petitioner's manually and electronically filed Annual Income Tax Return for taxable year 200824 shows that petitioner had total tax credits of PS8,111,621.00 which consisted of the prior year's excess credits in the amount of P49,231,582.00 and creditable taxes withheld during the year 2008 in the amount of P8,880,039.00 2S. Petitioner's MCIT in the amount of P1,394,162.56 was paid using a portion of its prior year's excess credits of P49,231,582.00 leaving the prior year's excess credits in the amount of P4 7,837,419.44 and creditable taxes withheld during the year 2008 in the amount of P8,880,039.00 totaling to PS6,717,458.44 unutilized as of December 31, 2008, as shown below:

I

Minimum Corporate Income Tax (MCIT)

I

p I ,394, 162.56

Less: Prior Year's Excess Credits

I

49,23 I ,582.00

Balance of Prior Year's Excess Credits

I

p 47,837,419.44

Add: Creditable Taxes Withheld - 2008

I

8,880,039.00 Excess Creditable Taxes Withheld as of December 31 , 2008 p 56,717,458.44 Inasmuch as petitioner marked the option "To be refunded" in its Annual Income Tax Return for taxable year 200826 and reflected only the amounts ofP40,474,717.00 27 and P47,837,418.512B as "Prior Year's Excess Credits" in its original and amended Annual Income Tax Returns for 2009, respectively, as well as in its Quarterly Income Tax Return for the 1 st,29 2nd3o and 3rd3l quarters of 2009, the unutilized creditable withholding taxes for taxable year 2008 in the amount of P8,880,039.00 may be the subject of a claim for refund under Section 76 of the NIRC of 1997, as amended. However, in addition to the requisite provided under Section 76 of the NIRC of 1997, a taxpayer must satisfY the following requirements in order to be entitled to a refund or issuance of tax credit certificate for excess/unapplied CWT:~ 24 Exhibits "D" and "E".

25 P6,900,68 1.00 plus P1 ,979,358.00, Lines 28C and 280 , Exhibits "D" and "E". 26 Exhibits "D" and "E".

27 Amount carried over is lower by P7,362,702.44, Line 28A, E~i b it "I" (original 2009 Annual Income Tax Return).

1.) That the claim for refund was filed within the two-year prescriptive period as provided under Section 204(C) in relation to Section 229 of the NIRC of 1997; 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.32 Anent the first requisite} the applicable provisiOns are Sections 204(C) and 229 of the 1997 NIRCJ as amended} which respectively provide: "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.}} "SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- No suit or proceeding shall be maintained in any ~ 32 Section 2.58, Revenue Regulations No. 2-98, as amended; Citibank N.A. vs. Court of Appeals and CIR, G.R. No. I 07434, October I 0, 1997; ACCRA Investment Corporation vs. CA, et al., G.R. No. 96322, December 20, 199 1.

Page II of 24

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."

In the case of ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta/., 33 the Supreme Court held that the reckoning of the two- year prescriptive period for the filing of a claim for refund or tax credit of excess income tax paid/withheld provided in the above-quoted provisions should commence from the date of filing of the final adjustment return. Applying the foregoing ruling to the case at bench, records show that petitioner manually filed its Annual Income Tax Return on April 15, 200934. Counting from this date, it can be inferred that the administrative claim3s filed by petitioner on March 29, 2010, as well as the Petition for Review filed on April 14, 2011, fell within the two-year prescriptive period. Thus, the first requirement has been complied with. In compliance with the second requisite, petitioner presented its Schedule of Creditable Taxes Withheld for 200836 and Certificates of __

Creditable Tax Withheld at Source37 [BIR Form 2307] issued to it by various withholding agents for the year 2008 which were examined by the Court- commissioned independent CPA, Uy Singson Abella & Co., through its partner, Ms. Ma. Milagros F. Padernal. In her report dated February 17, 2012, Ms. Padernal summarized her findings38 as follows:

Exhibit

Amount of

Amount of

No.

BIR Form No. 2307

Income Payment

Taxes Withheld

KK

Supported with original BIR Form No. 2307 in the Petitioner's name p 97,270,01 9.30 p 8,879,416.89

LL

Not supported with original BIR Form No. 230r 3,252.49 325.25 Error in recording 3,000.00 300.00 p 97,276,271.79 p 8,880,042.14 The ICPA explained that the error in recording pertains to a certificate of creditable tax withheld at source (BIR Form No. 2307) from Insurance Company of North America wherein the amount of tax withheld was reported in the summary prepared by petitioner39 as P1,838.24 but the actual BIR Form No. 2307 reflects only P1,538.24.40 The Court finds the !CPA's report in order. The total amount of P625.25 (P325.25 plus P300.00) requires a downward adjustment to the petitioner's claim. Therefore, out of the total claimed CWT of P8,880,039.00, petitioner was able to substantiate by proper withholding tax certificates only the creditable withholding taxes in the amount of P8,879,416.89 (Exhibit KK) for taxable year 2008. This brings us to the third requireme t of whether or not the income upon which the subject taxes were withheld were included and reported by petitioner in its Annual Income Tax Return for the taxable year 2008~

In the Supplemental Sworn Statement of Ms. Maria Esperanza Rosario R. Dellosa, petitioner's Assistant Vice-President, she explained the recording of petitioner's revenues in this wise:41 "The Company's income is derived from its commissions and service fees.

For the commission income, when a premium falls due, our insurer issues a billing statement to the Company for a particular policyholder. Upon receipt of the billing statement, the Company prepares a separate billing statement to be issued to the policy holder for the set-up of the receivables due from the client and the commissions earned by the Company for the particular billing. For service fees, a billing statement is likewise issued to our client.

Once the Company has prepared the billing statements, for both commission income and service fees, a Production Report is prepared which summarizes, among others, the amount of the commission income and the service fees for that particular day. The total commission income and service fees reflected in the Production Report are thereafter posted in the Company's General Ledger.

The total income posted in the Geneual Ledger will be the basis for the Company's Annual Income Tax Return." A perusal of petitioner's 2008 Annual Income Tax Return and Audited Financial Statements reveals that petitioner reflected revenues from its sale of services amounting to P121,890,522.0042. On the other hand, the valid withholding tax certificates showed that the creditable income taxes of P8,879,416.89 for taxable year 2008 were withheld on gross income payments ofP97,270,019.30, broken down as follows: ~

CTA CASEN

0. 8273

Nature of Income Payments

Commission Income and Service Fees

Other Income

Total

p p

I

Per Certificates

[~come

Income Tax

Payments

Withheld

96,184,699.30 p 8,825,150.89 I ,085,320.00 54,266.00 97,270,019.30 p 8,879,416.89 The ICPA compared the total amounts of income payments relating to commission income and service fees indicated in the "Schedule of Production Report Generated from the Petitioner's BOSS System" for the calendar years 200843 and 200744 against the amounts of income per Summary of General Ledger account classification for the years 2008 and 200745.

The results of ICPA's comparison are summarized in the following table:46

GL Amount

Exhibit

GL Amount

Particu Iars

Classification

Exhibit No.

(C

2008) No.

(CY 2007)

Commission

Production Reports

income

MMa-1

P74,893,566.46

MMb-1

P55,867,499.62 Fees and other

to MMa-1308 to MMb-472

income 47,916,584.78 43,587,562.50

Total Production

Reports

122,81 0,151.24 99,455,062.12

General Ledger

NN

122,136,315.86

NN

I 01,086,280.96

Difference

(P 673,835.38) Pl,631,218.84 The petitioner explained that the difference is due to the following:

Particulars

Foreign exchange differences Adj ustment made on estimated claims handling cost Accumu lated small differences adjusted in the current ear Unaccounted difference

Difference

43 Exhibits "MMa-1 " to "MMa-1308". 44 Exhibits "MMb-1" to "MMb-472". 45 Exhibit "NN".

46 Par. 7 (c) ofExhibit "UU", p. 10 of 15. 2008 P745,793.77 (1,418,835.86) (663.19) (130.10) (P 673,835.38) 2007 P677, I 56.17 951 '794.49 2,268.18 P1 ,631,218.84

DEClSION

Accordingly, the foreign exchange differences relate to foreign exchange gains or losses arising from foreign currency denominated transactions which are recorded separately in the general ledger under Account Number 14049947.

The claims handling cost are provided in the accounts by the petitioner based on the expectation of future servicing requirements for which an element of income is deferred to cover the associated contractual obligation. The adjustment in 2008 pertains to the lower provision set up in the accounts compared to the expected future servicing requirements while the 2007 adjustment relates to the higher accrued provision compared to the expected future servicing requirements. The ICPA also compared the amounts of commission income and service fees per general ledger for the calendar years 2008 and 2007 with the commission income and service fees declared as revenue per 2008 and 2007 Annual Income Tax Returns as follows:4B Exhibit No.

Particulars

NN

Total per General Ledger

D

Per Annual Income Tax Return

Difference

CY 2008

P 122,136,3 15.86 121,890,522.00 p 245,793.86

CY 2007

PI 0 I ,086,280.96 98,957,330.00 p 2,128,950.96 The petitioner's explanations for the above difference are summarized as fo llows: Foreign exchange gain per GL account no. 140499 included as reconciling item in the Annual

Income Tax Return

Accrual (reversal) of contingent profit commission Non-deductible handling cost for tax purposes Rounding-off difference

CY 2008

P745,793 .77 (500,000.00) 0.09 P245,793.86

CY 2007

P677, 156.00 500,000.00 95 1,794.00 0.96 P2, 128,950.96 To show that petitioner's commission income and service fees of P96,184,699.30 formed part of petitioner's gross income of P121,890,522.00 and P98,957,330.0049 in its 2008 and 2007 Annual Incom~

Tax Returns, respectively, petitioner offered the following documents: Summary of Income Payments with Tax Withheld Traced to Production Reports, Remittance Reports, Payment Vouchers and Official Receipts50; Schedule of Production Report Generated from BOSS System for taxable years 200851 and 200752; Remittance Reports53; Payment Vouchers for Premiums54 and Creditable Withholding Tax55; official receipts56; billing statements for 200857; Summary of General Ledger Account Classification5B; General Ledger Balance Detail- Income for 200859 and 200760; Account No. 100001 - Brokerage and Others61; Account No. 120003 -

Profit

Commissions62; Account No. 140499- Exchange Difference63; and, Account No. 150506- Input64.

Upon examination of the aforesaid documents, the Court finds that petitioner has proven that the income payments of P96,184,699.30 upon which the valid creditable taxes of P8,825,150.89 were withheld were declared in its 2007 and 2008 Annual Income Tax Returns except for the amount of P58,332,023.13 the corresponding creditable tax withheld of which amounts to P5,309,498.52, to wit:

Exhibit

Period

I

Amount of

Amount of

No.

Covered

Payor

Income Payment

Taxes Withheld

KK1

1st quarter

Asalus Corporation

p 688.04 p 68.80

KK2

1st quarter

Asalus Corporation

1,560.30 156.03

KK3

1st quarter

Asalus Corporation

2,356.36 235.64

KK4

1st quarter

Asalus Corporation

2,498.30 249.83

KK6

1st quarter

Asalus Corporation

3,923.10 392.31

KK8

1st quarter

Asalus Corporation

15,997.82 1,599.78

KK9

1st quarter

Asalus Corporation

48,823.01 4,882.30

KK10

1st quarter

Asalus Corporation

128,584.45 12,858.44

KK13

1st quarter

Asalus Corporation

252,268.65 25,226.87

KK15

1st quarter

Asalus Corporation

2,551,426.20 255,142.62

KK18

2nd quarter

Asalus Corporation

1,288.37 128.84

KK19

2nd quarter

Asalus Corporation

1,506.60 150.66

KK24

2nd quarter

Asalus Corporation

14,921.98 1,492.20

KK28

2nd quarter

Asalus Corporation

58,380.18 5,838.02

KK31

3rd quarter

Asalus Corporation

698.92 69.89

KK30

2nd quarter

Asalus Corporation

18,786.92 1,878.74

KK32

3rd quarter

Asalus Corporation

1,125.68 112.57

KK34

3rd quarter

Asalus Corporation

7,829.88 782.99

KK40

3rd quarter

Asalus Corporation

15,146.67 1,514.67

KK43

3rd quarter

Asalus Corporation

26,723.18 2,672.32

KK52

4th quarter

Asalus Corporation

2,246.42 224.64

KK46

4th quarter

Asalus Corporation

KK50

4th quarter

Asalus Corporation

KK53

4th quarter

Asalus Corporation

KK54

4th quarter

Asalus Corporation

45.36 4.54

KK42

3rd quarter

Asalus Corporation

29.47 2.95

KK45

3rd quarter

Asalus Corporation

166,965.21 16,696.53

KK56

4th quarter

Asalus Corporation

5,835.46 583.55

KK57

4th quarter

Asalus Corporation

8,838.59 883.86

KK59

4th quarter

Asalus Corporation

21,569.55 2,156.96

KK60

4th quarter

Asalus Corporation

45,277.82 4,527.78

KK61

4th quarter

Asalus Corporation

246.01 24.60

KK63

1st quarter

Asia Insurance (Philippines) Corporation

225.21 22.53

KK64

1st quarter

Asia Insurance (Philippines) Corporation

353,834.91 35,383.49

KK65

2nd quarter

Asia Insurance (Philippines) Corporation

785.13 78.43

KK66

3rd quarter

Asia Insurance (Philippines) Corporation

I

1,969.11 1,579.07

KK67

1st quarter

Asianlife and General Assurance Corporation

570,313.43 57,031.34

KK68

1st quarter

Asianlife and General Assurance Corporation

24,877.61 2,487.76

KK69

3rd quarter

Asianlife and General Assurance Corporation

146,546.81 14,654.68

KK70

4th quarter

Asianlife and General Assurance Corporation

28,725.51 2,872.55

KK71

2nd quarter

BPI/MS Insurance Corporation

829,127.58 82,913.86

KK72

2nd quarter

BPI/MS Insurance Corporation

1,053,410.57 105,341.69

KK73

3rd quarter

BPI/MS Insurance Corporation

754,728.67 76,765.00

KK74

4th quarter

BPI/MS Insurance Corporation

I

753,918.08 75,392.53

KK75

1st quarter Federal Phoenix Assurance Company, Inc. 213,755.40 21,375.54

KK76

2nd quarter Federal Phoenix Assurance Company, Inc. 922,059.40 92,205.94

KK77

3rd quarter Federal Phoenix Assurance Company, Inc. 87.89 8.83

KK78

4th quarter Federal Phoenix Assurance Company, Inc.

I

215,643.54 21,564.35

KK79

1st quarter First Guarantee Life Assurance Company, Inc. 59,330.40 5,933.04 -= ~

KK83

2nd quarter

Fortune General Insurance Corporation

1,569.10 156.91

KK84

2nd quarter

Fortune General Insurance Corporation

982,434.00 98,243.40

KK85

4th quarter

Fortune General Insurance Corporation

59,327.50 5,932.75

KK86

3rd quarter Fortune Medicare Inc.

34,746.30 3,474.63

KK87

3rd quarter Fortune Medicare Inc.

675,253.30 65,809.44

KK89

4th quarter Fortune Medicare Inc.

I

395,557.25 39,555.72

KK90

1st quarter Generali Pilipinas Insurance Company, Inc. 33,378.84 3,337.89

KK93

4th quarter Generali Pilipinas Insurance Company, Inc. 393,442.49 39,344.25

KK94

1st quarter Generali Pilipinas Life Assurance Company, Inc. 716,861.10 71,686.11

KK95

2nd quarter Generali Pilipinas Life Assurance Company, Inc.

KK96

2nd quarter Generali Pilipinas Life Assurance Company, Inc. 253.54 25.41

KK97

3rd quarter Generali Pilipinas Life Assurance Company, Inc. 500,676.50 50,067.65

KK98

3rd quarter Generali Pilipinas Life Assurance Company, Inc. 782,620.10 78,262.01

KK99

4th quarter Generali Pilipinas Life Assurance Company, Inc. 628,335.10 62,833.51

KK101

2nd quarter

Insurance Company of North America

46.84 4.69

KK102

3rd quarter

Insurance Company of North America

137,162.40 13,716.24

KK103

3rd quarter

Insurance Company of North America

246,449.10 24,644.91

KK105

4th quarter

Insurance Company of North America

60.81 6.08

KK107

4th quarter

Insurance Company of North America

104,277.74 10,427.77

KK108

4th quarter

Insurance Company of North America

47,014.76 4,701.48

KK109

2nd quarter MAA General Assurance Phils., Inc. 74,419.10 7,441.91

KKllO

3rd quarter MAA General Assurance Phils., Inc. 71.90 7.20

KK111

4th quarter MAA General Assurance Phils., Inc. 14,754.75 1,475.47

KK112

1st quarter Malayan Insurance Company, Inc.

954,460.70 95,446.07

KK113

2nd quarter Malayan Insurance Company, Inc.

1,038,536.33 103,853.63

KK114

3rd quarter Malayan Insurance Company, Inc.

765,808.70 76,580.87

KK115

4th quarter Malayan Insurance Company, Inc.

1,843, 708.69 184,370.87

KK119

1st quarter Maxicare Healthcare Corp.

613,858.06 61,385.81

KK120

2nd quarter Maxicare Healthcare Corp.

788,710.29 78,871.03

KK121

3rd quarter Maxicare Healthcare Corp.

719,895.70 71,989.57

KK122

4th quarter Maxicare Healthcare Corp.

2,373,158.20 237,315.82

KK124

3rd quarter Medicard Philippines, Inc.

110.42 11.04

KK125

3rd quarter Medicard Philippines, Inc.

236,160.20 23,616.02

KK126

4th quarter Medicard Philippines, Inc.

6,609.98 661.00

KK127

1st quarter

New Hampshire Insurance Company

70,000.00 7,000.00

KK128

2nd quarter

New Hampshire Insurance Company

1,245,609.40 124,560.94

KK129

1st quarter PGA Sompo Japan Insurance Inc.

73,468.60 7,346.86

KK130

2nd quarter PGA Sompo Japan Insurance Inc.

34,648.82 3,464.88

KK131

3rd quarter PGA Sompo Japan Insurance Inc.

14,395.62 1,439.43

KK133

1st quarter Philam Insurance Company, Inc.

2,937,260.65 293,726.07

KK136

4th quarter Philam Insurance Company, Inc.

128,637.10 12,863.72

KK137

1st quarter Philamcare Health Systems, Inc.

271,068.40 27,106.84

KK138

2nd quarter Philamcare Health Systems, Inc.

58,746.40 5,874.64

KK139

3rd quarter Philamcare Health Systems, Inc.

I

61,831.60 6,183.16

KK140

3rd quarter

Philippine AXA Life Insurance Corporation

37,530.27 3,350.92

KK141

3rd quarter

Philippine AXA Life Insurance Corporation

19,949.49 16,624.56

KK142

4th quarter

Philippine AXA Life Insurance Corporation

61,366.25 5,479.13

KK143

1st quarter

Philippine Charter Insurance Corporation

95,402.56 9,540.24

KK145

3rd quarter

Philippine Charter Insurance Corporation

18.94 1.70

KK146

4th quarter

Philippine Charter Insurance Corporation

6,924.96 692.48

KK147

2nd quarter

Pioneer Insurance and Surety Corporation

348,401.44 34,840.27

KK148

3rd quarter

Pioneer Insurance and Surety Corporation

40,035.27 5,477.15

KK149

3rd quarter

Pioneer Insurance and Surety Corporation

1,388,528.26 138,761.70

KK150

4th quarter

Pioneer Insurance and Surety Corporation

27,825.03 2,782.92

KK151

4th quarter

Pioneer Insurance and Surety Corporation

1,009,556.40 100,955.64

KK152

1st quarter PNB General Insurers Co., Inc.

551,868.09 55,186.93

KK153

2nd quarter PNB General Insurers Co., Inc.

124,237.07 12,423.71

KK154

3rd quarter PNB General Insurers Co., Inc.

18.42 1.71

KK155

4th quarter PNB General Insurers Co., Inc.

102,246.85 9,897.80

KK160

1st quarter Prudential Life Healthcare Inc.

5,352,468.49 535,246.85

KK161

2nd quarter Prudential Life Healthcare Inc.

289,603.93 28,960.39

KK162

3rd quarter Prudential Life Healthcare Inc.

2,627,427.11 262,742.71

KK163

4th quarter Prudential Life Healthcare Inc.

40,469.60 4,046.96

KK164

4th quarter Prudential Life Healthcare Inc.

997,298.70 99,729.87

KK165

1st quarter QBE Insurance Phils., inc.

1,783,243.40 178,324.34

KK166

2nd quarter QBE Insurance Phils., inc.

469,402.80 46,939.90

KK167

3rd quarter QBE Insurance Phils., inc.

747,151.60 74,715.16

KK168

4th quarter QBE Insurance Phils., inc.

566,315.30 56,631.53

KK169

4th quarter QBE Insurance Phils., inc.

828,827.30 82,882.73

KK170

1st quarter Standard Insurance Co., Inc.

384,038.55 38,403.86

KK172

3rd quarter Standard Insurance Co., Inc.

62,545.66 6,254.57

KK174

1st quarter Sunlife of Canada (Philippines) Inc. 43,012.61 4,301.26

KK175

3rd quarter Sunlife of Canada (Philippines) Inc. 114,710.69 11,471.07

KK176

2nd quarter Sunlife of Canada (Philippines) Inc.

I

149,059.39 14,905.95

KK178

1st quarter

Philippine American Life and General Insurance Company

27,500.00 550.00

KK179

2nd quarter Tokio Marine Malayan Insurance Company, Inc. 493,087.87 49,308.78

KK180

1st quarter Tokio Marine Malayan Insurance Company, Inc. 689,043.60 68,904.36

KK181

1st quarter UCPB General Insurance Company, Inc. 101,100.50 10,110.05

KK182

3rd quarter UCPB General Insurance Company, Inc. 9,183.00 918.30

KK183

4th quarter UCPB General Insurance Company, Inc. ' 10,342.84 1,058.62

KK184

3rd quarter

United Coconut Planters Life Assurance Corporation

71,966.80 7,196.68

KK185

4th quarter

United Coconut Planters Life Assurance Corporation

128,319.30 12,831.93

KK186

3rd quarter

BPI/MS Insurance Corporation

219,306.77 51,961.30

KK188

1st quarter Glaxosmithkline Philippines, Inc. 733,333.00 14,666.66

DECJSJON

KK190

3rd quarter Glaxosmithkline Philippines, Inc. 2,359,575.50 47,191.51

KK191

4th quarter Glaxosmithkline Philippines, Inc. 1,217,525.50 24,350.51

KK193

2nd quarter HMC Inc.

27,782.51 2,778.25

KK194

1st quarter lntertek Testing Services Phils., Inc. 227,283.00 19,773.62

KK197

3rd quarter

Manila North Tollways Corporation

1, 700,000.00 170,000.00

KK199

1st quarter Sara Lee Philippines Inc.

336,041.20 6,720.82

KK200

2nd quarter Sara Lee Philippines Inc.

166,919.50 3,338.39

KK201

3rd quarter Sara Lee Philippines Inc.

1,383,243.68 27,664.87

KK202

3rd quarter Subic Water and Sewerage Company Inc. 498,804.00 4,988.04

KK203

4th quarter Subic Water and Sewerage Company Inc.

I

261,856.00 2,618.56

TOTAL COMMISSION INCOME AND SERVICE FEES

p 58,332,023.13 p 5,309,498.52 The Court, however, cannot trace with certainty from the production report, general ledger and Annual ITR, the income payments of P58,332,023.13. We note that the Annual ITR merely provides summarized data without the supporting schedule or notes that will enlighten the Court as to the detailed items included therein. As for the amount of Pl,085,320.00, with a corresponding withholding taxes of P54,266.00 classified as Other Income, petitioner submitted before this Court documents such as the Lease and Sub-lease Agreements entered into by petitioner during the CY 200865; Lease Contracts (Philamlife Tower-Head Office66 and Kepwealth Property Phils., Inc., Cebu Branch67); Contracts of Sub-lease with Jardine Davies Investment, Inc.6s and York Philippines, lnc.69; Schedule of Rent Expense for 200870; Journal Vouchers on Rental and Other Charges to Jardine Davies Investment Inc.71 and York Philippines, lnc.72; Journal Voucher for the Reversal of Accrual of Rent Expense73; General Ledger of Rent Expense - Account No. 23000174; and, official receipts of rent income collected7S to support the same. According to petitioner, rental income is recorded as a reduction against the rent expense account in the general ledger. The ICPA reviewed.6_

the "rent expense based on the provisiOns of the agreements and JVs examined as summarized in the Schedule of Movements of Rent Expense"76 and "traced the income shown as deductions from the amount of rent expense reflected in the generalledger."77 Upon verification, the Court finds that petitioner was able to prove that the income payments in the amount of P1,085,320.00, upon which the withholding taxes of P54,266.00 were withheld, were indeed reported in its Annual ITR for the year 2008.

In sum, petitioner has complied with the three (3) aforementioned substantiation requirements but only in as much as the CWT of P3,569,915.23 out of the total claim ofP8,880,039.00, as determined below:

Amount of

Amount of

Income Payments

CWT

Claim for Refund/TCC

I

p 97,276,271.79 p 8,880,039.00 Less: Disallowed (No supporting BJR Form 2307 and error in recording) 6,252.49 625.25 Income payments cannot be traced from the GL 58,332,023.13 5,309,498.52

Substantiated CWT

p 38,93 7' 996.17 p 3,569,915.23

I

In order to prove that no amount of the subject claim was utilized to pay for its 2008 MCIT liability of P1,394,162.5678, petitioner presented various Certificates of Creditable Tax Withheld at Source for the years 1999 to 200779• Records show that the Prior Year's Excess Credits of P49,231,582.00 reflected in petitioner's 2008 Annual Income Tax Return represents the balance of petitioner's excess and unutilized tax credits from 1999 to 200780. For taxable years 1999 to 2007, petitioner's creditable withholding taxes amounts to P57,314,802.00, tax payments of P550,819.00 and MCIT liability /income taxes due in the aggregate amount of P8,634,039.64, leaving the unapplied tax credits from 1999 to 2007 in the amount ofP49,231,581.36, detailed as fbllows: -GL-

Exhibit

Year

w 1999

X

2000 y 200 1 z 2002

AA

2003

BB

2004 cc 2005

DD

2006

EE

2007

Total

Creditable Tax

Withheld

p 3,076,766.00 2, 182,038.00 4,022,813.00 9,257,991.00 8,342,787.00 13,724,663.00 9,345,042.00 To be refunded 7,362,702.00 p 57,314,802.00

MCIT/

Balance of

Tax

Income Tax

Prior Years

Payments

Due

Excess Credits

p 876,804.00 p 2, 199,962.00 4,382,000.00 8,404,81 3.00 I ,337,722. 16 16,325,081.84 1,651,372.16 23,0 16,496.68 I ,341 ,007.48 35,400,152.20 I, 148,624.84 43,596,569.36 1,226,485.32 42,370,084.04 p 550,8 19.00 I ,052,023.68 p 49,231,581.36 p 550,819.00 p 8,634,039.64 Out of the reported creditable withholding taxes for the years 1999 to 2007 of PS7,314,802.00, petitioner substantiated the amount of PS7,015,99S.SS which were summarized in the Schedule of Prior Years' Creditable Taxes Withheld on Commission Income and Service Fees supported by original BIR form 2307 for the taxable years 1999 to 200781. Therefore, the substantiated creditable tax withheld for the years 1999 to 2007 ofPS7,015,99S.SS are more than enough to cover the tax liabilities for years 1999 to 2007 in the aggregate amount of P8,634,039.64. Thus, petitioner has sufficiently proven that it has excess tax credits as of December 31, 2007 against which the tax liability of P1,394,162.56 for the year 2008 may be offset or credited. In fine, the Court finds the evidence adduced by petitioner to be sufficient for it to be entitled to its claim for refund or issuance of tax credit certificate in the reduced amount of P3,569,915.23, representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2008.

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P3,569,915.23, representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2008.~

WE CONCUR:

~ c~CAc;{~A.il. -

Associate Justice

(On Leave)

CIELITO N. MINDARO-GRULLA

Associate Justice

Associate Justice

ATTESTAT ON

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.

;;;z~~ Ll. ~~-o4 . Q JUAN ITO C. CASTANEDA, }If. '

Associate Justice

Chai person, Second Division

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.

Presiding Justice