Stateland, Inc. vs. Commissioner of Internal Revenue

AMENDED DECISION

CASTANEDA, JR., J.:

For resolution is petitioner's Motion for Reconsideration (Re: Decision dated 12 July 2016}, filed on July 27, 2016 with respondent's Opposition, filed on September 7, 2016. Petitioner seeks reconsideration of this Court's Decision dated July 25, 2016 (assailed Decision), the dispositive portion of which reads:

"WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for insufficiency of evidence.

Parte

Motion to Admit Attached

Formal

Offer of Evidence, respectively.

On August 30, 2017, this Court issued a Resolution on petitioner's Supplemental Formal Offer of Additional Evidence and Ex- Parte Motion to Admit Attached Formal Offer of Evidence. In the said Resolution, the Court admitted Exhibits "P-1507" to "P-1541-A", except Exhibits "P-1509", "P-1512", "P-1509-5", "P-1515", "P-1516", "P-1508-10", and "P-1516-2", which were denied admission by the Court.

On September 29, 2017, petitioner filed an Urgent Omnibus Motion for Partial Reconsideration on the Resolution dated 30 August 2017 and to Admit Attached Amendment to the Amended

Supplemental

Formal

Offer of Additional

Evidence dated 27 December 2016.

Subsequently, in a Resolution dated October 12, 2017, the Court granted petitioner's Urgent Omnibus Motion for Partial Reconsideration and admitted Exhibits "P-1509", "P-1512", "P-1509- 5" "P-1515" "P-1516" "P-1508-10" "P-1516-2" "P-1536-A" "P- ~ ' ' ' ' ' ' rG..--

1537", "P-1537-A", "P-1538", "P-1538-A", "P-1539", "P-1539-A" and "P-1540".

Accordingly, in the same Resolution, the Court submitted for resolution petitioner's Motion for Reconsideration (Re: Decision dated 12 July 2016).

The main issue of this case is whether petitioner is entitled to a refund or an issuance of tax credit certificate for its unutilized excess CWT for the taxable year 2010 in the amount of P13,654,157.00. In the assailed Decision, it has been discussed that petitioner was able to comply with the first and second requisites in order for a taxpayer to be entitled to a refund or an issuance of tax credit certificate for its unutilized excess CWT.9 Petitioner's claim for refund was filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended and the fact of withholding the amount of P13,654,157.00 was established. In view thereof, the Court shall now discuss petitioner's compliance with the third requisite wherein the income upon which the taxes were withheld must be declared as part of the gross income of the recipient.

The Court shall first ascertain whether the total amount of sale of goods and services which were booked/recorded by petitioner in its sales register and general ledger (GL) for the taxable year 2010 tally with the sale of goods and services declared as taxable gross income per petitioner's AITR for the same year. In the instant motion, petitioner explains that being a real estate company, it follows, for "accounting purposes", the Percentage of Completion Method. In this method, the gross profit from sale is realized based on percentage of completion of the inventories or house and lots sold to its customers. While for tax purposes, income recognition varies and depends on the terms of payment and actual collection of the sales; whether the sale is considered under "cash basis" or "installment plan". 5k--

Petitioner claims that it adheres with Section 2.57.2 of BIR Revenue Regulations (RR) No. 02-98, as amended by RR No. 17-03 by way of practice in recognizing income from sale for tax purposes. Petitioner explains the following scenarios arising from its installment sales:

1) where income from installment sales were already reported in the prior year ITR/s but the payments of CWTs were made only in 2010, upon receipt of the final installments; 2) the situation where sales are booked on installment plan and the gross income corresponding to the installment payment is already recognized in 2010 and prior years but the withholding tax is not paid until the payment of final amortization is made by the buyer in subsequent years coinciding with the end of installment period.

Petitioner also explains that for sales under cash basis, there is also a timing difference on the recognition of sales for income tax purposes and the payment of withholding as the requirement of payment of the withholding tax falls on the 10th day of the month following the month when the payment of more than 25°/o of the contract price is reached.

For sales with collected amount of more than 25°/o of the selling price for the months of January to November of the year, the withholding taxes are remitted to the BIR in the months February to December of the same year. While sales with more than 25°/o collection in the month of December and which gross income reported for income tax purposes in the same year, the related withholding taxes are remitted to the BIR in January of the following year.

Petitioner states that due to the nature of its business, it cannot fall within the general rule that the income or sales amount to which the CWT relates should be shown as forming part of the gross income of the taxpayer AITR on the same year the Withholding Tax is withheld.

The instant motion is meritorious. ~

The relevant figures are as follows:

Realized Gross Profit

Gross profit on Sales during the year 2010

of Real Estate per

(per books)10

Audited FS 201011

p 184,574,274.00 __ P 190,627,713.00 ~--

Sales Revenue per

Income Tax Return

201012 p 200,434,138.00 Petitioner reconciled these three figures in the following manner, to show that whatever was recorded per books as Realized Gross Profit for taxable year 2010, formed part of Gross Income per ITR for taxable 2010 to wit13:

Amount

Reference

Gross Profit (net of sales discount) from 2010 bookings p 184 574,274.00

Annex A-1-2

Add:

Gross profit of unconstructed units under percentage of completion deferred per books but already taxed in 2009 and realized per books in 2010 6 053 439.00

Annex A-1-3

Gross Profit on Sales per Audited Financial

Statements

p 190 627 713.00 Realized gross profit from prior years' sales 42 279 839.00

Annex A-1-4

Gross profit of unconstructed units under percentage of completion deferred per books this year but already taxable in 2010 9 673 231.00

Annex A-1-5

Gross profit of lot sales in Washington Place deferred per books but taxable in 2010 4 830 777.00

Annex A-1-6

Gross profit of unconstructed units under percentage of completion deferred but already taxed in 2009 and recognized in 2010 _Q_er books (6 053 429.00}

Annex A-1-3

Interest income earned from socialized housing

(Summer Crest Village)

(24 195.00)

Annex A-1-7

Gross Profit and Interest Income earned from BOI

I

I

registered _m-ojects (14 393,935.00)

AnnexA-1·8

i Unrealized Gross Profit on current year's sale with less than 25% principal collection (78 745,136.00)

Annex A-1-9

Total realized gross profits shown as Net

Sales/Revenues/Receipts per 2010 Income Tax

Return

148 194 865.00

Interest Income

p 38 019 341.00

Other Income

14,219 943.00 52 239_L_284.00

Total Gross Income per 2010 ITR

p 200_L434,149.00

Annex A-1

The groupings of the different kinds of sales revenues that petitioner earned during taxable year 2010 yielded the following)!:- 10 Exhibit "P-1508-2", docket, val. VIII, pp. 3766-3771. 11 Exhibit "P-887", docket, val. V, p. 2719. 12 Exhibit "P-5", Line 21 C, docket, val. V, p. 2693. 13 Exhibit "P-1508-1", docket, val. VIII, p. 3765.

I

CWT14 and the corresponding basis from the schedules provided by petitioner:

#

Type of Sales Transactions

Amount of CWT

BasisofCWT

1

Cash Basis

p 7,693,130.47 Selling Price (net of

VAT)

2

Installment Method -

Fully Settled

2,933,235.02 Selling Price (net of Accounts in 2010 which Gross Profits

VAT)

were recognized in 2010 and prior years (Individual Buyers) 3

Installment Method- Last Collection

2,160,852.69 Selling Price (net of was made in 2010 but gross profit

VAT)

was already fully recognized in Income Tax Returns prior to 2010 4

Installment - Corporate Buyers

292,550.00 Installment Pa_yment 5 Installment - Accounts under Home 266,518.10 Selling Price (net of

Development Mutual Fund (HMDF)

VAT}

6

Installment Sales of Prior Years

148,660.71 Selling Price (net of which were fully settled in 2011

VAT)

7

Installment

-

Bank

Financing

159,210.00 Selling Price (net of

Accounts

VAT)

Total

p 13,654,157.00 Applicable to the case at hand is Section 2.57 .2 of RR No. 02- 98, as amended by RR No. 06-01, further amended by RR No. 17-03, which provides for the imposition of Creditable Withholding Tax on Real Property sales, to wit:

"(J) Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset- A creditable withholding tax based on the gross selling price/total amount of consideration or the fair market value determined in accordance with Section 6(E) of the Code, whichever is higher, paid to the sellerjpwner for the sale, transfer or exchange of real property, other than capital asset, shall be imposed upon the withholding agent/buyer, in accordance with the following schedule: A. Where the seller/transferor is exempt from creditable withholding tax in accordance with Sec. 2.57.5 of these regulations B. Upon the following values of real property where the seller/transferor is habitually engaged in real estate business:~

Exempt

14 Q&A No. 25, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3351.

I

I

I

I

I

I

With a selling price of five hundred thousand pesos (P500,000.00) or less With a selling price of more than five hundred thousand pesos (P500,000.00) but not more than two million pesos (P 2,000,000.00) With selling price of more than two million pesos (P2,000,000.00) C. Where the seller/transferor is not habitually engaged in the real estate business

XXX XXX

1.5% 3% 5% 6% Gross selling price shall mean the consideration stated in the sales document or the fair market value determined in accordance with Section 6(E} of the Code, as amended, whichever is higher. In an exchange, the fair market value of the property received in exchange, shall be considered as the consideration. (Emphasis supplied) If the buyer is an individual not engaged in trade or business, the following rules shall apply: i.

If the sale is a sale of property on the installment plan (i.e payments in the year of sale do not exceed 25% of the selling price), no withholding of tax is required to be made on the periodic installment payments. In such a case, the applicable rate of tax based on the gross selling price or fair market value of the property at the time of the execution of the contract to sell, whichever is higher, shall be withheld on the last installment or instalments immediately prior to such last installment, if the last installment is not sufficient to cover the tax due, to be paid to the seller until the tax is fully paid. ii.

If on the other hand, the sale is on a "cash basis" or is a "deferred payment sale" and not on the installment plan (that is, payment in the year of sale exceed 25% of selling price), the buyer shall withhold the tax based on the gross selling price or fair market value of the property whichever is higher on the first installment. However, if the buyer is engaged in trade or business, whether a corporation or otherwise, the following rules shall apply:~ # 1 2 3 4 5 6 7 i.

If the sale is a sale of property on the installment plan (i.e payments in the year of sale do not exceed 25% of the selling price), the tax shall be deducted and withheld by the buyer on every installment which tax shall be based on the ratio of actual collection of the consideration against the agreed consideration appearing in the Contract to Sell applied to the gross selling price or fair market value of the property at the time of the execution of the Contract to Sell whichever is higher.

XXX XXX

ii.

If on the other hand, the sale is on a "cash basis" or is a "deferred payment sale" and not on the installment plan (that is, payment in the year of sale exceed 25% of selling price), the buyer shall withhold the tax based on the gross selling price or fair market value of the property whichever is higher on the first installment. (Emphasis ours) The Court finds that petitioner correctly adhered to the foregoing, when it comes to the timing and basis of remittance of CWT. For cash basis and installment transactions with non-corporate buyers, the basis is the gross selling price net of VAT, whereas, for installment sales with corporate buyers, the basis is the installment payments made during each year.

The number of accounts for each type of sale transaction and the corresponding income in 2010, prior years and succeeding years are also summarized as follows15 :

Gross Income

Gross Income

Reported in

No. of Buyers

Gross Income in

reported in prior succeeding

(Transactions)

Amount of CWT

2010 ITR

years years 98 p 7 693 130.47 p 85 026 958.97 - 71 2 933 235.02 20 771 866.58 p 16 362 534.12 82 2 160 852.69 0.00 34 139 557.12 - - - 38 292 550.00

1986 089.93

1,600 830.49 p 2 557,168.28 12 266 518.10 2 601 081.65 319 188.45 771 009.57 2 148 660.71 186 987.92 331 416.73 1 047 522.68 2 159 210.00 354 417.23 1 723 066.14 p 13 654L¹~.00 p 110 927,402.28 p 52,753,526.91 p 6 098 766.67 -------- The Court noted the CWT relating to each kind of sales transaction to the Schedule of Gross Profit (Net of Sales Discount) in

2010 per Books16• ~

15 Exhibit "P-888", docket, vol. IV, p.2396; Q&A No. 27, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3352. 16 Exhibit "P-1508-2", docket, vol. VIII, pp. 3766-3771.

Period

The Court's verification resulted to the following: I. Under the Sale on Cash Basis

1. Transaction categorized as Unrealized Gross Profit Upon tracing the related income to the reported Realized Gross Profit per Books (as reconciled to the Annual Income Tax Returns)17, the Court noted the following transactions were categorized under the column "Unrealized Gross Profit per Books", and hence, did not form part of the total Realized Gross Profit (RGP) per Books of P184,574,274.00:

Unrealized Gross

Payor /Withholding

Gross Income

Exhibit

Profit per 2010

Covered

Ajtents

Tax Withheld

(Tax Base)

No.

Books

Sales Type

1stQu.t!t,er Shervll P. Alvarez ,. 20 760.00 ,.

692000.00 nP•299" 183 057.00

HDMFSales

·~· ...

2nd~_!lt!t.el' · Michael L. De Jesus 21,230.52 101,684.00 '"P~300" 313 644.00

HDMFSales

Sps. Jaime C.

Callano &: Lina S.

2nd Quarter

Callano

1~650.96 655,032.00

"P-301"

390282.00

HDMFSales

SPS.·RUTH& 2ndQuat!t.er At.RitT ROMANO 17604.00 586,800.00

"P•302"

14.1203 .• 00

HDMFSales

,1,:,/ ,.S~. ROMEO & ·:··· 2nd Qutfter , 'lftATRidA RACAL 17,955~00 59$,500.00 .• , ..... ~303" ·, 275 173.00

HDMFSales

·':"

<··; ; $1'&\~I)WIN & ''··• \ 3rd'tluarter;; · RQNflYN ASTORGA 7~471.28 · 498,0SS.OO ..

"P-3M"'

129,305.00

HDMFSales

Sub-total

1.04 67:1.76 3,na,iti:L:oo :1 432;664.oo SPS. GLADYS & 4th Quarter

MICHAEL NIELES

22,176.00 739,200.00

"P-89"

240,870.00

Cash Basis

4th Quarter Elias C. Arnoco 42 851.79 1 428 392.86

"P-90"

396 943.00

Cash Basis

JOY & JOY LIN

4th Quarter

PAROHINOG

31 980.90 1 066 030.00

"P-88"

296 730.00

Cash Basis

SPS. ARLAN RAYMUND 4th Quarter

& RHIA REYES

25 620.00 854 000.00

"P-81"

254 200.00

Cash Basis

SPS. SALVACION & 4th _Quarter

TOBIAS CORDOVALES

104,352.15 2,087,043.00

"P-104"

971,016.00

Cash Basis

SPS. ROLANDO & 4th Quarter

ALEXIS BINAS

19,575.00 652 500.00

"P-404"

180,596.00

Cash Basis

4th Quarter AIZA J. DOMINGO 29 767.50 992 250.00

"P-103"

220 500.00

Cash Basis

MYP GBY PHILIPPINE

4th Quarter

CORPORATION

1 339.29 26 785.71

"P-82"

Cash Basis ·--·

MYP GBY PHILIPPINE

4th Quarter

CORPORATION

25 027.45 500 548.94

"P-101"

Cash Basis

MYP GBY PHILIPPINE

4th Quarter

CORPORATION

87 936.84 1 758 736.78

"P-102"

979 842.00

Cash Basis

Sub-total

390,626.92 :10 :105,487.29 3 540,697.00

TOTAL

p 495.298.68 p 13.843.588.29 p 4.973,361.00 Based on the Court's review, all the 4th Quarter Cash Basis sales in the above table can be traced to Exhibit "P-1508-6" representing the "Gross Profit of Lot Sales in Washington Place Deferred per Books but Taxable in 2010 in the amount of P4,830,777.00"18. The same is fo- 17 !d.

one of the reconciling items added to the RGP per Books to arrive at the Gross Income per ITR19, as can be seen in the earlier table. The aforementioned RGP included the RGP of P3,540,697.00 relating to the CWT amount of P390,626.92 is found to have formed part of the 2010 Annual ITR of petitioner.

As for the 1st to 3rd Quarter Cash Basis sales in the above table which are HDMF Sales in the total amount of P104,671.76 (P 495,298.68 less P390,626.92), according to the ICPA report, the revenue of P3, 738,101.00 (P13,843,588.29 less P10, 105,588.29) to which those CWTs relate must have been reported in the years when the petitioner received the loan proceeds. 20 However, despite submission of petitioner's Schedules for the years 201121 and 201222, the Court cannot trace or verify the realizations of income on these CWTs.

Hence, the CWT on these HDMF Sales in the sum of P104,671.76 is disallowed, since the related income was not recorded in petitioner's books during the year 2010, and did not form part of the Gross Income in the ITR for taxable year 2010.

2. !CPA s Findings23 The ICPA noted a transaction with Air Insurance Agency, Inc. which was categorized by petitioner under cash basis transaction. However, the transaction pertains to commission given by the former to the latter in exchange for client referral. Petitioner treated the commission income received as deduction from related insurance expense incurred from Air Insurance Agency, Inc. The details of the transaction are as follows24 :

TIN

LAST NAME

TAX BASE

004-521-292- AIR INSURANCE AGENCY, p 13,389.65

L__

000 INC.

~-- - - ------------ -- 19 Exhibit "P-5", Section E, Line 121, docket, vol. V, p. 2694. 20 Exhibit "P-1414", docket, vol. IV, p. 2554. 21 Exhibit "P-1516-1", docket, vol. VIII, p. 3990. 22 Exhibit "P-1515-1", docket, vol. VIII, p. 3959. 23 Exhibit "P-1414", docket, vol. IV, p. 2533-2556. 24 Exhibit "P-1414", docket, vol. IV, p. 2550.

TAX

WITHHELD

p 1,338.96

A-

With regard to the rest of the items under Cash Basis, the Court finds the same in order.

II. Installment Sales These are fully settled accounts in 2010 wherein the last collection was made in 2010 but the Gross Profit was realized in prior years.

These accounts pertain to installment sales from prior years wherein buyers are individuals not engaged in trade or business. The payments in the year of sale do not exceed 25°/o of the selling price. The final installments on these sales were recognized in prior years corresponding to payments and the last realization of gross profit was in 2010, the same year when the CWT was withheld and remitted to the BIR. 25 Meanwhile the category "Last Collection Made in 2010 but Gross Profit Realized in Prior Years" contains accounts which were already recognized in full as taxable income in prior years but the full payment of the outstanding balance only happened in 2010. 26 To reiterate, the timing of withholding for individual buyers not engaged in trade or business, is upon final payment, and the basis is the entire Gross Selling Price, net of VAT, if any, whereas the timing of recognition of gross profit is based on the installment collection made every year.

In addition, the Court finds the following per verification of the GL schedules provided in the Supplemental ICPA Report and Motion

for Reconsideration:

1. Traced to 2010 GL Schedules The same procedure was done with the income payments falling under Category 2 (2010 Sales - Fully settled accounts in 2010, -j-z.. 25 Q&A No. 51, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3361. 26 Q&A No. 80, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3377.

and Gross Profit Realized in 2010) of the CWT Summary, being traced to Exhibit "1508-4'127 which is the breakdown of the reconciling item "Realized GP from Prior Year's Sales". Further, it is noted that Court was able to match all of the accounts in the CWT summary to Exhibit "1508-2'128 which means that petitioner was able to sufficiently prove that the CWT being claimed for refund met the third requisite, hence, may be entitled to the refund of CWT in connection with the income payments under Category B in the amount of P 2,933,235.02. However, the Court found that the Tax Base used per withholding tax certificates (BIR Form No. 2307) and remittance forms (BIR Form No. 1606) on the following accounts is not the same as the Gross Selling Price, net of VAT (if any) as per GL Schedules:

Tax

Gross Selling

Withheld

Price per

Should-be

Realized

Tax Base per

forming part

Annex"A-1-

Tax

Difference

Gross Profit

NAME

CWT Schedule of the Claim

2"*

Withheld

(Tax Withheld)

in 2010

JONATHAN BULAQUENA

p 500,000.00 p 7,500.00 p 632,256.00 p 18,967.68 p (11,467.68) p 832.21 SPS. RICARDO &

JOCELYN GALLEGO

500,000.00 7,500.00 739,754.00 22,192.62 (14,692.62) 108,920.08 SPS. RIONEL & IMELDA

DITAN

500,000.00 7,500.00 624,002.00 18,720.06 11,220.06 6,644.25

ELMA ALMOSA

500,000.00 7,500.00 792,338.00 23 770.14 (16 270.14) 13,262.19

MARICEL GARCIA

500 000.00 7 500.00 766 660.00 22 999.80 (15 499.80) 52 357.65

LUCITO JUNIOR REGIS

554,331.00 16,629.93 766 660.00 22,999.80 (6,369.87) 81,767.54 I

SOLEDAD CAJEFE &

FELISA YOUNGBERG

500,000.00 7,500.00 699,998.00 20 999.94 (13,499.94) 7,413.10 SPS. LEMUEL & JULIET

DALISAY

375 000.00 5 625.00 530 853.00 15 925.59 (10 300.59) 14 001.63

DIGNA & ROMULO

TORRES

375 000.00 5 625.00 482 635.00 14 479.05 (8 854.05) 35 979.69

ERNEST RAMIREZ

500,000.00 7,500.00 708,478.00 21,254.34 (13,754.34) 117,891.97 SPS. REYNALDO & JOSIE

SOTELO

500,000.00 7,500.00 778,614.00 23,358.42 (15,585.42) 68,641.84 SPS. ROLLY & BEVERLY

LACSE

450 000.00 6 750.00 435 694.00 13 070.82 (6 320.82) 51 776.40

TOTAL

p 5,754,331.00 1'94,629.93 P7,957,942.00 P238,738.26 P(121,395.21) P559,488.55 *Computed as Selling Price less VAT, if any. For the foregoing accounts, the income payments on which the taxes withheld were based had a different Selling Price per GL schedules compared to the Gross Selling Price per Exhibit "1508-2". It is noted that the difference in amount does not correspond to the VAT component of the items. In this instance, petitioner was not able to provide the Court with an explanation or reconciliation of the difference in recording and reporting of the same.fo- 27 Docket, vol. VIII, pp. 3773-3783. 28 Docket, vol. VIII, pp. 3766-3771. i

In view of the foregoing, the Court disallows the sum of P94,629.93 representing an under-withholding of CWT. In addition, as correctly found by the ICPA29, the amount of P27,219.33 CWT pertaining to the account of Sps. Romulo and Merly Daraug with corresponding tax base of P907,311.00 should be disallowed because there was still outstanding balance as of 2010.

2. Traced to Prior Years GL Schedules Out of the P²,160,852.69 CWT related to Installment Method - Last Collection was made in 2010 but gross profit was already fully recognized in Income Tax Returns prior to 2010, the ICPA aptly noted certain item which petitioner erroneously classified as a Fully Settled Account in 2010, but, upon examination turned out to still have an outstanding balance. Hence, the related amount withheld subject for refund is disallowed. Details of this account are as follows:

TIN

LAST NAME

FIRST NAME

TAX BASE

TAX

WITHHELD

117-519-983-

GUERRERO

SPS. RODGER p 3,992,044.64 p 199,602.23 000

& LUZ

3. Installment - Corporate Buyers The following represent the CWT withheld from petitioner's corporate buyers, wherein the tax withheld by the buyer is based on every installment payment. The ICPA obtained all available official receipts and application of payment (AoP) to support installment income payments of corporate buyers, and these have been taken into consideration in the assailed Decision:30

Gross Amount

Realized Gross Profit

NAME

of Income

Tax Withheld

in 2010 Open Mission in the Philippines Inc. p 7 986.61 p 239.60 p 6 379.12 Open Mission in the Philippines Inc. 8 106.41 243.19 6 474.80 Open Mission in the Philippines Inc. 8 228.00 246.84 6 571.92 Open Mission in the Philippines Inc. 8 351.42 250.54 6 670.50 Open Mission in the Philippines Inc. 716 531.78 21 495.95 49 580.77 Open Mission in the Philippines Inc. 55 861.71 1 675.85 44 244.18 Open Mission in the Philippines Inc. 28 014.75 840.44 22 188.54 Open Mission in the Philippines Inc. 8 673.59 260.21 6 869.75 Open Mission in the Philippines, Inc. 19,285.24 578.56 15,274.50 29 Exhibit "P-1414", docket, vol. IV, p. 2551. 30 Exhibit "P-1507", p. 7, docket, vol. VII, p. 3409.

)L_

Open Mission in the Philippines Inc. Open Mission in the Philippines Inc. St. Mary's School of Novaliches Inc. St. Mary's School of Novaliches Inc. St. Mary's School of Novaliches Inc. St. Mary's School of Novaliches Inc. St. Mary's School of Novaliches Inc.

Youngji International School

Youngji International School

Youngji International School

Youngji International School

Youngji International School

Youngji International School

Younqji International School

Youngji International School

Youngji International School

Youngji International School

Youngji International School

Younqji International School

Youngji International School

Lightlife Baptist Church Inc.

Lightlife Baptist Church Inc.

Lightlife Baptist Church Inc.

Lightlife Baptist Church Inc.

Liqhtlife Baptist Church Inc.

Lightlife Baptist Church Inc.

Lightlife Baptist Church Inc.

Lightlife Baptist Church Inc.

St. Mary's School of Novaliches Inc.

TOTAL

27 958.83 27 958.83 6 540.24 13 409.41 6 872.79 6 987.34 1 595 504.20 6 927.71 2 050.87 7,868.58 7 043.17 7 986.61 2 085.05 8 106.41 2 119.80 8 228.00 735 982.85 724 883.20 7 160.55 14 681.12 120 833.35 19 166.65 3 233.82 3 285.03 3 337.04 3 389.87 3 443.55 3 498.07 2 640 000.00 P6,881,582.45 838.76 22 144.25 838.76 22 144.25 327.01 2 394.07 670.47 1 227.04 343.64 1 247.50 349.37 3 868.63 79 775.21 279 912.25 346.39 3 713.16 61.53 1 650.71 236.06 6 284.85 352.16 3 775.05 239.60 6 379.12 62.55 1678.23 243.19 6 474.80 63.59 1 706.20 246.84 6 571.92 22 079.49 580 964.45 21 746.50 563 855.32 358.03 7 739.89 734.06 8,000.04 3 625.00 80 887.12 575.00 1 868.39 97.01 1 897.98 98.55 1 928.03 100.11 1 958.55 101.70 1989.56 103.31 2 021.06 104.94 2 053.07 132 000.00 195 500.36 p 292,550.01 P1,986,089. 93 Here, the only relevant realized gross profits are the ones related to installment payments made during the year 2010. However, the amount of realized gross profit related to supposed installment payments were not found in any of the GL schedules for taxable year 2010.

Hence, the CWT claimed relating to Corporate Buyers for the amount of P292,550.01 should be disallowed.

4. Installment - HDMF Accounts These represent sales to buyers availing themselves of Pag- Ibig/HDMF Financing. HDMF requires submission of title in the name of the buyers before the release of the loan proceeds. Hence, CWTs were paid in advance for the purpose of securing Certificate Authorizing Registration (CAR) from the BIR, being a requirement by the Register of Deeds to process title transfer. As such, the corresponding income will only be reported in the year when full payments are made upon receipts of the loan proceeds from the concerned financial institution. There are also CWTs under this category which pertain to installment buyers who later converted to HDMF financing. Hence, for the latter accounts, there were portions )k- of income realized and reported in the prior years' ITR, and final realization of income is made when the account is fully paid from the proceeds of the HDMF loans.31

Amount of Tax

Name

Tax Base

Withheld

1

EUNICE SALON

658 800.00 19 764.00 2 SPS. FERLINETTE & RONNIE VERGUELA 707 684.00 21 230.52 3 SPS. ARIEL & SHERYLL JANE PACA 740 000.00 22 200.00 4

SHERYLL ALVAREZ

692 000.00 20 760.00

1ST

QUARTER

2 798 484.00 83,954.52 5

MICHAEL DE JESUS

707 684.0.0 21230.52 6 SPS. JAIME.&UNA CALLANO •· 655 032.00 19 650.96 .:7·· SPS. RUTH & ALBERT ROMANO • 586,800.00 <·1:7 604.00 ·a SPS. ROMEO & PATRICIA RACAL 598,500.00 J 17 955.00

2ND

QUARTER

2 548 016.00 76,440.48 9 SPS. EDWIN & RONALYN ASTORGA 498,085.00 7 471.28 10 SPS. LEA & JERRY MEDRANO 808 400.00 24 252.00 11 SPS. LUZVIMINDA & EDGARDO PEREY 814 000.00 24 420.00

3RD

QUARTER

2,120,485.00 56,143.28 12 SPS. WILLIAM & MINDA AGOJO 1 665 994.00 49 979.82

4TH

QUARTER

1665 994.00

49,979.82

TOTAL

9,132,979.00 266,518.10 However, not all of the above accounts can be traced to any of the Realized Gross Profit Schedules provided by petitioner, hence, we cannot ascertain the fact of its forming part of petitioner's Gross Income for tax purposes in any given taxable year. Considering the foregoing, as it has been discussed in Item # I (Cash Basis), the Court disallows P104,671.76 for refund.

5. Installment Sale of Prior Years And Bank Financing Accounts,

Fully Settled in 2011

The following are prior years' installment sales which were settled in 2011, hence, recognized in 2011 but the corresponding CWT were paid in 2010 as required for early transfer of titles for bank take-out purposes or before the release of the loan proceeds: 329-- 31 Q&A No. 107, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3386. 32 Q&A Nos. 118 and 125, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3388-3389.

Name

Loan

Proceeds

Received

Date

Amount of

Tax Withheld

perCWTin 2010

PRIOR YEARS' INSTALLMENT SALES

Culla, Sps. June &

Flordeliza

2011 p 126,160.71 Suspene, Sps.

Alejandro & Vannessa

2011 22,500.00

Sub-total

p 148,660.71

BANK FINANCING ACCOUNTS

Terrenal, Sps. Efren &

Lilibeth

2011 116 010.00 Lindog, Sps. Maria

Leonor & Raul

2011 43,200.00

Sub-total

159,210.00

TOTAL

p 307,870.71

Realized

Exhibit

Gross Profit in

Reference

Succeeding

Year(2011)

p 838,269.00 "P-1516-2", p.333 p 15,599.00 p 853868.00 "P-1516-2", p 1,061,259.00 p.634 "P-1516-2", p 661,807.00 p.83s p 1,723,066.00 A scrutiny of the supporting documents reveals that indeed these accounts have been recognized as income in the succeeding year 2011 when the loan proceeds were received by the petitioner based on the bank credit memos presented by petitioner and the journal vouchers booking the corresponding income. In view of the above, the Court allows the refund of the tax credits in the amount of P307,870.71 in connection with 2010 Installment Sales of Prior Year Fully Settled in 2011 and Bank Financing Accounts.

Lastly, the Court found that the schedules of Realized Gross Profit per Books for each prior taxable year are reconcilable to the Annual ITRs of the respective taxable years, hence, the Court can be certain that the realized gross profit per books were reported accordingly in the Gross Income for Annual Income Tax Return purposes.

In sum, petitioner has sufficiently proven its entitlement to a refund or issuance of tax credit certificate representing its unutilized excess CWT for the taxable year 2010, in the modified amount of P12,934,749.05, computed as follows: Total CWT claimed per Petition P13,654,761.27 ~:

~

CfA Case No. 8633

1) !CPA's Findings

Cash Basis

Installment Method - Last Collection in 2010 but RGP in Prior Years

Installment Method - Last Collection in 2010 but RGP in 2010

2) Court's Findings

Cash Basis

Corporate Accounts

HDMF

Total refundable CWT for the taxable year 2010 1,338.96 199,602.23 27,219.33 94,629.93 292,550.01 104,671.76 P12,934,749.05

WHEREFORE, premises considered, petitioner's Motion for Reconsideration (Re: Decision dated 12 July 2016), is PARTIALLY GRANTED. Accordingly, the assailed Decision dated July 12, 2016 is hereby amended to read as follows: "WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED.

Accordingly, respondent is

ORDERED TO REFUND or ISSUE TAX CREDIT

CERTIFICATE to petitioner in the reduced amount of P12,934,749.05 for its unutilized excess CWT for the taxable year 2010.

I CONCUR:

~'hC-~.Q.

iUANITO C. CASTANEfiA, JR.

Associate Justice

~ CAESAR A. CASANOVA

Associate Justice

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. Q:T'~ok. t' g,__ JlJANITO C. CASTANEDA/JR

CERTIFICATION

Associate Justice

Chairperson

Pursuant to Section 13, Article VIII 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