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

AMENDED DECISION

CASANOVA, J.:

For resolution is petitioner's Motion for Reconsideration (With Motion to Reopen Trial of the Case and Request for Leave to Submit Details of General Ledgers}, filed through registered mail on February 28, 2014, with respondent's Opposition (Re: Motion for Reconsideration with Motion to Reopen Trial of the Case and Request for Leave to Submit Details of General Ledgers), filed on March 27, 2014. Petitioner moves for reconsideration of the Court's Decision dated February 11, 2014, the dispositive portion of which reads: "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

find petitioner's

Motion

for

Reconsideration

partly meritorious.

In the case of Winebrenner & Ifiigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue, the Supreme Court enumerated the requirements to successfully claim a refund of excess and unutilized CWT, to wit:

"As implemented by the applicable rules and regulations and as interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT must: 1) File the claim with the CIR within the two year period from the date of payment of the tax; 2) Show on the return that the income received was declared as part of the gross income; and 3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax with held.'#.-

At the crux of petitioner's Motion for Reconsideration is its firm belief that it complied with the requirement of showing on the return that the income received was declared as part of the gross income, specifically, for the income payments of P58,332,023.13. Hence, petitioner provided additional supporting documents in the form of Billing Statements and Daily Premium Entries Generation Reports6, Production Reports for CYs 20077, 20088, and 20099; Details of General Ledgers (GL) for CYs 200710, 200811 and 200912; Trial Balance for CYs 200713, 200814 and 200915; reconciliation of the amounts of gross income as reflected in the GLs and in the Annual ITRs for CYs 200716, 200817, and CY 200918 as well as the Judicial Affidavit19 of Ms. Maria Esperanza Rosario R. Dellosa dated October 16, 2014.

In the Supplemental Sworn Statement of petitioner's witness, Ms. Maria Esperanza Rosario R. Dellosa20, she explained why the Court cannot trace with certainty the disputed amount of P58,332,023.13 to petitioner's Production Reports and GL, to wit: "Q15: If all the income in the Production Reports are reported in the GL and all income in the GL are reported as gross income in the Company's Annual ITR, how come Court was not able to trace with.&":

CfA CASE NO. 8273 certainty the amount of income payments of Php58,332,023.13?

A15:

The total income payment of Php97,276,271.79 involved in this case, which includes the Php58,332,023.13, is based on the related CWT certificates the Company received and reported in 2008. It does not represent the total amount of income the Company earned in 2008 and reported as gross income in the 2008 Annual ITR. Some of the CWT certificates received in 2008 pertain to income in 2007 that was already reported as gross income in the Company's 2007 Annual ITR. On the other hand, a portion of the 2008 income reported in the Production Reports and in the GL for 2008 will only be paid in 2009 and the corresponding CWT certificates will only be received and reported in 2009. In short, portion of the Php97,276,271.79 income payment were already reported as gross income in 2007 Annual ITR and does not include income payment already reported as gross income in 2008 Annual ITR but the CWT certificates of which will only be received in 2009. Therefore, if you only compare the Php97,276,271.79 with the income in the 2008 Production Reports and 2008 GL, it will certainly not match because they came from different sources.

They

are not comparable."21 According to petitioner's witness, the Production Report contains the list of transactions, specifically, commission income that the Company earned for the particular taxable year from various clients and from each insurance policy that the Company was able to sell. These are daily transactions of income. The sum of the commission income and fees for the day is then posted in the GL for that day. The GL is effectively a repository of the Company's total revenues for the day. Hence, the total revenues in the Production Reports are included in the total revenues in the GL.22 In sum, it is petitioner's contention that the income reported in the Production Reports formed part of the Company's gross income as shown in its Annual ITR.

2~

CfA CASE NO. 8273

Finally, petitioner presented a breakdown of the income payments shown in the CWT certificates with additional supporting documents. Using the said breakdown found in the Supplemental Sworn Statement of Ms. Dellosa24, the Court summarized the amount of income payment and the corresponding amount of tax withheld, as follows:

Exhibit No. of

Amount of Income

Amount of Tax

Exhibit No. of Additional CWT certificates

Payment

Withheld

Documents

KK1

p 688.04 p 68.80

ZZ to ZZ-3

KK3

2,356.36 235.64

CCC to CCC-3

KK4

2 498.30 249.83

BBB to BBB-4

KK6

3 923.10 392.31

MMM to MMM-1

KKB

15,997.82 1,599.78

BBB to BBB-9

KK10

128 584.45 12 858.44

YY to YY-3

KK13

252 268.65 25 226.87

AAA to AAA-3

KK19

1,506.60 150.66

FFF to FFF-1

KK24

14,921.98 1,492.20

DDD to DDD-3

KK28

58 380.18 5 838.02

EEE to EEE-11

KK31

698.92 69.89

HHH-1

KK32

1,125.68 112.57

HHH and HHH-2

KK34

7 829.88 782.99

III to III-8

KK40

15 146.67 1 514.67

JJJ to JJJ-11

KK43

26 723.18 2 672.32

GGG to GGG-3

KK56

5,835.46 583.55

ITT to ITT-7

KK57

8 838.59 883.86

LLL to LLL-1

KK59

21 569.55 2 156.96

NNN to NNN-3

KK60

45 277.82 4,527.78

KKK to KKK -13

KK64

353,834.91 35 383.49

ZZZZ to ZZZZ-93

KK67

570 313.43 57 031.34 000 to 000-39

KK79

59 330.40 5 933.04

PPP to PPP-13

KK83

1,569.10 156.91

QQQto QQQ-3

KK84

982 434.00 98 243.40

RRR to RRR-22

KK85

59 327.50 5 932.75

SSS to SSS-41

KK93

393 442.49 39 344.25

UUU to UUU-9

KK94

716 861.10 71 686.11

VWtoVW-71

KK98

782 620.10 78 262.01

WWW to WWW-34

KK99

628 335.10 62 833.51

XXX to XXX-57

KK112

954 460.70 95 446.07

BBBB to BBBB-9

KK113

1 038 536.33 103 853.63

DDDD to DDDD-24

KK114

765 808.70 76 580.87

EEEE to EEEE-72

KK119

613 858.06 61 385.81

FFFF to FFFF-29

KK121

719 895.70 71 989.57

GGGG to GGGG-70

KK122

2 373 158.20 237 215.82

HHHH to HHHH-48

KK125

236 160.20 23 616.02

KKKK to KKKK-34

KK129

73 468.60 7 346.86 III! to III! -6

KK130

34 648.82 3 464.88

JJJJ to JJJJ-10

KK139

61 831.60 6 183.16

LLLL to LLLL -6

KK141

19 949.49 16 624.56

MMMM to MMMM-4

KK160

5,352 468.49 535 246.85

NNNN to NNNN-5

KK161

289 603.93 28 960.39 0000 to 0000-11

KK162

2 627 427.11 262 742.71

PPPP to PPPP-32

KK165

1,783 243.40 178 324.34

QQQQ to

-62

KK167

747 151.60 74 715.16

RRRR to RRRR-58

KK168

566 315.30 56 631.53

SSSS to 5555-1

KK184

71 966.80 7 196.68

WWWW to WWWW-10

CfA CASE NO. 8273

KK188

KK190

KK191

KK194

KK197

KK199

KK200

KK201

KK202

TOTAL

733 333.00 2 359,575.50 1 217 525.50 227 283.00 1 700 000.00 366,041.20 166 919.50 1 383 243.68 498,804.00 p 32,144,917.77 14 666.66

YYY to YYY-5

47,191.51 zzz to zzz -11 24 350.51

AAAA to AAAA-9

19 773.62 ecce to cccc-1 170,000.00

XXXX to XXXX-3

6,720.82

UUUU to UUUU-16

3 338.39

YYYY to YYYY -40

27 664.87

TITT to TITT-20

4,988.04

WWtoWW-5

p 2,682,443.28 Contrary to petitioner's allegation that it was able to trace the amount of P34,077,756.7325 from its 2008 Production Report, the above summary shows that only the amount of P32,144,917.77 was supported by petitioner's additional evidence. As a result, out of the total appealed CWT of P5,309,498.52, only the amount of P²,682,443.28 pertaining to income payments supported by additional evidence shall be examined, while the CWT amounting to P2,627,055.24 shall remain disallowed for failure to substantiate. Upon re-examination of the CWTs amounting to P2,682,443.28, it is observed that not all amounts found in the additional supporting documents, particularly in the Production Reports where the debits/credits to Fees and Commissions are reflected, are equal to the amount of income payments shown in the CWT certificates. Hence, the Court cannot ascertain if a particular entry to the Production Report (and subsequently to the GL) truthfully represents the income payment per CWT being supported. The above findings on the examination made by the Court are summarized as follows: Amount of income

Amount of Tax

Findings of this Court:

payment

Withheld

1. Income payments properly supported by Production Reports that are traced to GL in exact amounts (see Schedule 1) p 2 245,690.79 p 221 614.42

2. Income payments supported by Production Reports but are not equal to amount shown in the ONT certificates 29 899 226.98 2 460 828.86

TOTAL

p 32,144,917.77 p 2,682,443.28 Schedule 1 - Income payments properly supported by Production Reports that were traced to GL in exact amounts Exhibit No. of CWT

Amount of Income

Amount of Tax

Exh. No. of Supporting

Certificate

Payment

Withheld

Documents

KK³

p 2 356.36 p 235.64

CCC to CCC-3

KK⁴

2 498.30 249.83

BBB to BBB-4

KK6

3 923.10 392.31

MMM to MMM-1

KK13

252 268.65 25 226.87

MAtoMA-3

KK19

1 506.60 150.66

FFF to FFF-1

KK24

14 921.98 1 492.20

DOD to DDD-3

KK32

1125.68 112.57

HHH and HHH-2

KK34

7 829.88 782.99

III to Ill-S

KK57

8 838.59 883.86

LLL to LLL-1

KK59

21 569.55 2 156.96

NNN to NNN-3

KK83

1 569.10 156.91

QQQtoQQQ-3

KK194

227 283.00 19 773.62 ecce to cccc-1

KK197

1 700 000.00 170 000.00

XXXX to XXXX-1

TOTAL

.. 2 245 690.79 ..

221 614.42 Since there is no way to determine the truthfulness of petitioner's allegations, the Court cannot see the exact amounts of income payments in the CWT certificates when traced to the Production Reports and General Ledgers. Since the withholding agent per CWT and the named payee per billing statements and Production Reports are not the same, then the Court cannot verify that the income payment per CWT pertains to Commission and Fees income reported as part of petitioner's gross income. As explained by petitioner earlier, the CWT certificates are provided by the withholding agents upon payment of Commission Income and Service and Other Income. Petitioner could have provided additional reconciliations for those income payments per CWT that were not exactly reflected in the GL and supported the same with official receipts and/or invoices. Even petitioner's witness admitted that they were not able to trace some income payments to the Production Report, to wit: "A21: Some of the issuers of the CWT certificates identified by the Court did not give the Company a breakdown of which insurance policies the income payments pertain to. Hence, it is difficult, if not impossible, to trace them to the Production Report. We have requested a breakdown from the withholding agents who issued those

CWT

certificates but they were unable to provide us the breakdown." 26 The burden of proof to establish entitlement to refund is on the claimant taxpayer. Being in the nature of a claim for exemption, refund is construed in strictissimi juris against the entity claiming the refund and in favor of the taxing power. This is the reason why a_....

CfA CASE NO. 8273 claimant must positively show compliance with the statutory requirements provided for under the NIRC in order to successfully pursue one's claim.27 For failure to adequately substantiate the entire appealed amount, petitioner is entitled to a refund in the amount of P221,614.42 only, representing unutilized excess creditable income taxes withheld for taxable year 2008, in addition to the amount of P3,569,915.23 originally granted in the assailed Decision dated February 11, 2014.

WHEREFORE, petitioner's Motion for Reconsideration is PARTIALLY GRANTED. Accordingly, the dispositive portion of the assailed Decision dated February 11, 2014 is hereby amended to read, as follows:

"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 THREE

MILLION

SEVEN

HUNDRED

NINETY

ONE

THOUSAND FIVE HUNDRED TWENTY NINE PESOS

and 65/100 (P3,791,529.65), representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2008.

WE CONCUR:

Sk~·A:, C? .Q.;f-.,._u~ 1 ~ · fuANITO C. CASTANEDA, JR.

Associate Justice

._# CAESAR A. CASANOVA

Associate Justice

~N.M~ .. 6~ CIELITO N. MINDARO-GRULLA

Associate Justice

27 Winebrenner & Inigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue, G.R. No. 206526, January 28, 2015.

ATTESTATION

I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~ C. C. ;:tv G;.t.. . g_ iUANiro C. CASTANEtfA, 'JR.

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 Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Presiding Justice