Tullet Prebon Inc. vs. Commissioner of Internal Revenue

DECISION

RINGPIS-LIBAN, J.

STATEMENT OF THE CASE

The case involves the Petition for Review filed by Tullett Prebon (Philippines) Inc., praying for the refund or issuance of tax credit certificate (TCC) in the amount of Fifteen Million Two Hundred Twenty-Six Thousand Seven Hundred Eighteen Pesos and 45/100 (P15,226,718.45) allegedly representing excess and unutilized creditable withholding taxes (CWT) for calendar year (CY) 2013.

STATEMENT OF FACTS

Petitioner Tullett Prebon (Philippines) Inc. is a domestic corporation duly organized and existing under Philippines laws, with principal office at zsrh Floor, Rufino Pacific Tower, 6784 Ayala Avenue, Makati City. 1 It is registered with the Bureau of Internal Revenue (BIR) Large Taxpayers District Office f<

(LTDO), Revenue District Office (RDO) No. 122, with Taxpayer Identification No. 004-653-622-000.2 Petitioner is engaged in the business of operating as a broker market participant in transactions involving, but not limited to, foreign exchange, deposits, interest rates instruments, fixed income securities, bonds/bills, repurchase agreements of fixed income securities, certificates of deposit, bankers acceptances, bills of exchange; over-the-counter options of the afore- mentioned instruments, lesser developed country (L.D.C.) debt, energy, and stock indexes and all related, similar or derivative products other than acting as a broker for the trading of securities.3 On the other hand, respondent Commissioner of Internal Revenue is sued in his official capacity, having been duly appointed and empowered to perform the duties of his office, including among others, the duty to act on and approve claims for refund as provided by law. He may be served with summons, notices and other court processes at his office at the BIR National Office Building, BIR Road, Diliman, Quezon City. On April 14, 2014, petitioner ftled with the BIR, through the electronic filing and payment system (eFPS), its Annual Income Tax Return (ITR) for CY 2013. 4 Petitioner reported a Regular Corporate Income Tax (RCIT) liability of P7,676,632.00. After deducting its RCIT liability against its income tax credits for CY 2013, petitioner purportedly had tax overpayment of P42,428,486.00 as of December 31, 2013.

Petitioner indicated on the face of its Annual ITR for CY 2013 its option to be issued a TCC for its alleged excess and unutilized CWT for CY 2013. On April 30, 2015, petitioner ftled with the BIR LTDO-Makati an administrative claim for refund of or issuance of TCC for its alleged excess and unutilized CWT for CY 2013 in the amount ofP15,226,718.45. 5 In view of respondent's inaction on petitioner's administrative claim for refund, petitioner ftled the instant Petition for Review before this Court on March 31,2016.

Respondent ftled his Answer6 on May 24, 2016, interposing the following Special and Affirmative Defensefv 2 Exhibit "P-2", docket, vol. 2, p. 940. 3 Exhibit "P-1", docket, vol. 2, p. 934. 'Exhibit "P-3", docket, vol. 2, pp. 941-953.

"4. Taxes collected are presumed to be in accordance with laws and regulations.

5.

Petitioner's alleged claim for refund is subject to administrative routinary investigation/ examination by the Bureau of Internal Revenue. A claim for refund is not ipso facto granted because respondent CIR still has to investigate and ascertain the validity of the claim.

6. Taxes are essential to government's very existence; xxx hence, the dictum that 'taxes are the lifeblood of the government.' For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority. xxx Since tax refunds are regarded as tax exemptions therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. xxx

7. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications. xxx The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. xxx

8. Petitioner must prove that it filed the corresponding administrative and judicial claim for refund within the two-year prescriptive period pursuant to Sections 204 and 229 of the National Internal Revenue Code of 1997, as amended. 9.

The amount of Php15,226,718.45 being claimed by petitioner as alleged excess and unutilized Creditable Withholding Taxes for the calendar year ended December 31, 2013 is not properly documented.

10. In the foregoing case, it should be noted that nowhere in the petition did petitioner aver that it complied with the required submission of supporting documents to justify its claim for refund.

11. In relation thereto, petitioner must prove compliance with the prescribed checklist of requirements to be submitted involving claims for Creditable Withholding Tax pursuant to Revenue Memorandum Order (RMO) No. 53-98 (Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Ti-l

Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue Officer, all of which comprise a Complete Tax Docket), otherwise there would be no sufficient compliance with the filing of an administrative claim for refund, the administrative claim thereof being merely pro-forma.

12. RMO No. 53-98 was issued to identify the documents required from a taxpayer during audit of the application for refund.

For Income Tax/Withholding Tax, the specific documents that need to be submitted are as follows:

INCOME TAX/WITHHOLDING TAX

A) Requirements from Taxpayer 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)

Certified

Financial

Statements, including comparative Profit and Loss Statement with

Statement of Cost of Goods Manufactured

and Sold, if applicable.

Proof of claimed tax credit if applicable. Proof of the claimed 'Interest Expense', if applicable.

Proof of claimed Bad Debts/worthlessness of credits, if applicable.

Reconciliation of 'Book Income' and 'Taxable

Income'.

Certificate of Registration issued by the appropriate regulatory agency, together with the conditions attached to such registration. If applicable.

Proof of Exemption under special laws, if applicable.

Certification of the appropriate regulatory agency as to taxpayer's entitlement to tax incentives, if applicable.

Xerox copy of used Tax Credit Certificate with annotation of issued TDM at the back, if applicable.

Proof of payment of deficiency tax, if any/ applicable.

a.

current year/period b.

previous year/period Reports submitted to applicable regulatory agency that reflects the financial condition and result of operation of the taxpayer e.g., Annual Statement prepared by 1nsuranc/' companies submitted to the

Insurance

Commission etc., if applicable.

13. Further, Revenue Regulations (R.R.) 2-2006 (Mandatory Attachments of the Summary Alphalist of Withholding Agents of Income Payments Subjected to Tax Withheld at Source (SA WT) to Tax Returns with Claimed Tax Credits due to Creditable Tax Withheld At Source and of the Monthly Alphalist of Payees

(MAP) Whose Income Received Have Been Subjected to

Withholding Tax to the Withholding Tax Remittance Return Filed by the Withholding Agent/Payor of Income Payments) proves: Section 2.

MANDATORY SUBMISSION OF

SUMMARY ALPHALIST OF WITHHOLDING

AGENTS

OF

INCOME

PAYMENTS

SUBJECTED

TO

CREDITABLE

WITHHOLDING TAXES (SAWT)

BY THE

PAYEE/INCOME

RECIPIENT

AND

OF

MONTHLY ALPHALIST OF PAYEES (MAP)

SUBJECTED TO WITHHOLDING TAX BY

THE

WITHHOLDING

AGENT

INCOME

PAYOR AS ATTACHMENTS TO THEIR FILED

RETURNS.

A.

XXX ... XXX ... XXX ...

B. Persons required to submit Summary Alphalist of

Withholding

Agents of Income

Payments

subjected to Withholding-Taxes (SAWT)

1. All persons claiming refund or applying their creditable tax withheld at source against the tax due with not more than ten (10) withholding agents-payor of income payment per return period are stricdy required to submit SA WT in hard copy as attachment to the required tax return;

2. All persons claiming for refund or applying their creditable tax withheld at source against the tax due with more than ten (10) withholding agents-payor of income payment per return period are stricdy required to submit SA WT electronically in 3.5 inch floppy diskette following the format to be prescribed

by the BIR/J

XXX ... XXX ... XXX .•.

14. In its claim for refund for the calendar year ended December 31, 2013, petitioner clearly failed to submit the pertinent documents required pursuant to RMO No. 53-98 and R.R. 2-2006.

15.

Likewise, petlUoner must prove that it has fully complied with the requisites to sustain a claim for refund or tax credit of excess and unutilized Creditable Withholding Tax as ruled by the Supreme Court in Citibank N.A. vs. Court of Appeals, et al. quoted herewith, to wit: 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.

c.)

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

16. Petitioner must also prove that it did not carry-over the excess Creditable Withholding Taxes against the Quarterly and Annual Income Tax Returns in the succeeding taxable years as provided under Section 7 6 of the 1997 Tax Code.

17. For ease of reference, Sections 76 of the NIRC, as amended is quoted herewith as follows:

XXX

XXX

XXX

18. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to the claim/

Respondent filed his Pre-Trial Brief on September 9, 2016, while petitioner's Pre-Trial Brief! was flled on September 22, 2016. The pre-trial conference was held on September 27, 2016.9 In compliance with the order of the Court during the pre-trial conference, the parties filed their Joint Stipulation of Facts and Issues10 on October 11, 2016, which the Court adopted in the Pre-Trial Order 11 dated November 11, 2016.

During trial, petitioner presented Mr. Philip G. Arabia, its Finance Manager,12 and Ms. Katherine B. Constantino, the Court-commissioned Independent Certified Public Accountant (ICPA),13 as its witnesses. After presentation, marking and identification, petitioner formally offered its documentary evidence on April17, 2017, consisting of Exhibits "P- 1" to "P-13-a" and "P-21" to "P-2499-a", inclusive of submarkings.14 All the formally offered exhibits were admitted as part of petitioner's documentary evidence pursuant to Resolutions dated September 28, 201715 and February 1, 201816 except for Exhibits "P-255" "P-256" "P-257" "P-258" "P-259" "P- ' ' ' ' ' ' 260" "P-261" "P-262" "P-263" "P-269" "P-273" "P-274" "P-275" "P- ' ' ' ' ' ' ' ' 276" "P-277" "P-278" "P-279" "P-280" "P-281" "P-282" and "P-283" ' ' ' ' ' ' , .

During the hearing held on February 5, 2018, respondent, through counsel, manifested that he will no longer present evidence. Thus, upon motion of both counsels, the parties were granted thirty (30) days to file their respective memoranda. 17 Petitioner filed its Memorandum18 on April 6, 2018, while respondent failed to flle his Memorandum as per Records Verification Report19 issued by the Court's Judicial Records Division dated March 8, 2018. Hence, the Court declared the case submitted for decision as of April13, 2018. 2~ 7 Docket, vol. I, pp. 115-119. 8 Docket, vol. I, pp. 120-136. 9 Minutes of the Hearing held on September 27,2016, docket, vol. I, p. 247. 10 Docket, vol. 1, pp. 251-257. 11 Docket, vol. 1, pp. 288-294. 12 Minutes of the Hearing held on February 27, 2017, docket, vol. 2, p. 567. 13 Minutes of the Hearing held on March 27, 2017, docket, vol. 2, p. 911. 14 Docket, vol. 2, pp. 914-929. IS Docket, vol. 3, pp. 1034-1035. 16 Docket, vol. 3, pp. 1055-1056. 17 Minutes of the Hearing, docket, vol. 3, p. 1057. IS Docket, vol. 3, pp. 1065-1084.

STATEMENT OF ISSUES

The parties submitted the following mam 1ssue for this Court's resolution:

21 Whether or not petitioner is entided to its claim for refund of or issuance of TCC allegedly representing excess and unutilized CWT for CY 2013 in the amount ofl'15,226,718.45. This issue may be broken down into the following sub-issues:

1. Whether or not petitioner's alleged excess and unutilized CWT for CY 2013 in the amount of 1'15,226,718.45 are duly substantiated by documentary evidence.

2. Whether or not the alleged income from which the CWTs being claimed for refund were withheld was purportedly reported as part of the revenues declared in petitioner's annual ITR.

3. Whether or not petitioner exercised the option to carry over its alleged excess and unutilized CWT for CY 2013 to the succeeding taxable periods.

4. Whether or not petitioner filed its administrative and judicial claims for refund of its alleged excess and unutilized CWT for CY 2013 within the two-year prescriptive period provided under Sections 204(C) and 229 of the National Internal Revenue Code of 1997.

RULING OF THE COURT

Based on relevant jurisprudence and BIR Revenue Regulations, in order for a taxpayer to be en tided to a refund of or an issuance of TCC for unutilized excess CWT, the following three (3) basic requisites must be sufficiendy established:

1. The claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the Tax Code, as amendedy

2. The fact of withholding must be 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. The income upon which the taxes were withheld must be included in the return of the recipient.22 Anent the first reqms1te, the pertinent proV1slons are Sections 204(C) and 229 of the NIRC of 1997, as amended, which 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 flies 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 EIToneous!J or Illegal!J 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 flied 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." The above-stated provisions mandate that the administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two years from the date of payment of the tax. For actions for refund of excess corporate income tax, the Supreme Court ruled that the two- 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.23 The present claim pertains to taxable year 2013 for which petitioner filed its Annual ITR24 on April 14, 2014. Counting from this date, petitioner had until April 14, 2016 within which to file a claim for refund of its excess CWT both in the administrative and judicial levels. Thus, petitioner timely filed with the BIR its administrative claim25 for refund on April 30, 2015 and its judicial claim for refund through the instant Petition for Review on March 31,2016. With regard to the second and third requisites, Section 2.58.3(B) of Revenue Regulations (RR) No. 02-98, as amended, states: "SECTION 2.58.3. Claim for Tax Credit or Refund. -

XXX

XXX

XXX

(B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom." (Emphasis supplie~ 23 Commissioner qf Internal &venue vs. TMX Sales, Inc. and the Court rifT ax Appeals, G.R. No. 83736, January 15, 1992; ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta!., G.R. No. 96322, December 20, 1991.

24 Exhibit "P-3".

2S Exhibit "P-7".

1.

2.

3.

4.

5.

6.

7.

8.

Page II of23

To prove the fact of withholding of the claimed CWT of P15,226,718.45, petitioner presented its Schedule26 of Creditable Withholding Tax and the related Certificates27 of Creditable Tax Withheld at Source (BIR Forms No. 2307) for CY 2013. Upon examination of these documents, the Court-commissioned ICP A summarized her findings as follows: 28

Per Schedule of

Creditable

Per creditable withholding tax

Withholding Tax

certificates

for CY 2013

(Exhibits P-50 to P-284, . (Exhibit P-22)

P-1434 to P-1589)

Annex

Reference to

!CPA cwr amount per

CWTamount

Particulars

Report29

schedule

Income Payment

Creditable Withholding Tax (CWf) duly supported by original Certificate of Creditable Tax Withheld at

Source (BIR Form 2307)

Annex 2-a

1'9,617,233.79 !'95,713,483.11 1'9,617,233.79 CWf duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307). cwr amount per certificate is lower than amount in the schedule/income tax return Annex 2-b I ,027,304.42 9,499,756,25 993,660.40 Creditable Withholding Tax (CWI') duly supported by original Certificate of Creditable 'l'ax Withheld at Source (BIR Porm 2307). CWT amount per certificate is higher than amount in the schedule/income tax return Annex 2-c I ,990,786.29 34,620,693.92 2,348,168.09 Creditable Withholding Tax (CWl) duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307) but the Petitioner's name is different, the Petitioner's TIN number is wrong or not indicated and CWT amount per certificate is lower than amount in the schedule/income tax return Annex 2-d 88,039.87 878,617.63 87,861.76 CWJ' duly supported by original Certificate of

Creditable Tax Withheld at Source (BIR Form 2307)

not dated within CY 2013 and CWT amount per certificate is lower than amount in the schedule/income tax return Annex 2-e 25,262.84 1,022,211.69 24,702.07 CWf duly supported by original Certificate of

Creditable Tax Withheld at Source (BIR Form 2307)

with no date indicated or not dated within CY 2013, and Petitioner's TIN number is wrong or not indicated Annex 2-f 105,607.19 1,056,074.99 105,607.50 CWI' duly supported by photocopied Certificate of Creditable Tax Withheld at Sourc~ (BIR l'orm 2307) Annex 2-g 609,087.40 15,510,444.25 1,080,989.17 cwr without available supporting documents at the time of verification Annex 2-h 1,763,396.65 - -

TOTAL

1'15,226, 718.45 158,301,281.84 14,258,222.78 Only the above claims which are classified under numbers 1 to 3 and summarized under Annexes 2-a to 2-c of the ICPA Report are properly supported with BIR Forms No. 2307. However, it was noted that there were instances wherein the cwr per certificates exceeded those reflected per schedule/ITR or vice-versa.

Inasmuch as the basis of the instant claim for refund is the amount reflected in the Annual ITR as ftled, the Court shall consider only the lesser of the two amounts. Thus, petitioner complied wi~ 2() Exhibit ''P-22".

27 Exhibits "P-50" to "P-254", "P-264" to "P-268", "P-270" to "P-272", "P-284" and "P-1434" to "P-1556", "P-1558" to "P-1562", and "P-1564 to "P-1589". 28 Exhibit "P-2499", pp. 12-13, docket, vol. 2, pp. 585-586. 29 Exhibit "P-2499", docket, vol. 2, pp. 616-681.

1.

2.

3.

the second requisite but only to the extent of P12,601,680.48, broken down as follows:

Per Schedule of

Per creditable withholding tax

Creditable

certificates

Withholding Tax

(Exhibits P-50 to P-284,

for CY 2013

ValidCWf

P-1434 to P-1589\

(llKbibitl'-~

Annex

Income

Particulars

Reference

Pavment

CWT amount

CWTamount

Creditable Withholding Tax

(CWI) duly supported by original

Certificate of Creditable Tax

Withheld at Source (BIR 11orm 2307\

Annex 2-a

P95,713,483.11 P9,617,233.79 P9,617 ,233. 79 P9,617 ,233. 79 cwr duly supported by original

Certificate of Creditable Tax

Withheld at Source (BIR Form

2307). cwr amount per certificate is lower than amount in the schedule/income tax return Annex 2-b 9,499,756,25 993,660.40 1,027,304.42 993,660.40

Creditable Withholding Tax

(CWI) duly supported by original

Certificate of Creditable Tax

Withheld at Source (BIR Form

2307). cwr amount per certificate is higher than amount in the schedule/income tax return Annex 2-c 34,620,693.92 2,348,168.09 1,990,786.29 1,990,786.29

TOTAL

130,334,177.03 12,959,062.28 12,635,324.50 12,601,680.48 This brings us to the third requisite, which is whether or not the income upon which the subject taxes were withheld was included and reported by petitioner in its Annual ITR for CY 2013. The certificates show that the claimed CWT were withheld on mcome payments amounting to P158,301,281.84 representing gross commissions or service fees to customs, insurance, stock, real estate, immigration and commercial brokers.

On the other hand, petitioner's Audited Financial Statements (AFS) 30 for CY 2013 disclosed that the principal activity of petitioner is to operate as a broker between market participants in foreign exchange, deposits and fixed income securities, among others. Brokerage fees derived from such activity in 2013 amounted to P169,032,655.00 31 • This is the same amount reflected as "Net Sales/Revenues/Receipts/Fees" from Sales of Services32 in petitioner's Annual ITR for CY 2013.

As ascertained by the ICPA, petitioner's revenue account subjected to withholding tax was lodged under "Account 60055 - Gross Brokerage Na~ 30 Exhibit "P-3-a", Note 15, docket, vol. 2, p. 988. 31 Exhibit "P-3-a", Statement of Comprehensive Income for the year ended December 31,2013, docket, vol. 2,

p. 960. 32 Exhibit "P-3", Schedule 1, docket, vol. 2, p. 945.

I.

2.

Give Up" which shows a total amount of P169,032,655.28 per petitioner's general ledger, broken down as follows:33

Particulars

Amount

AR 48127 Receivables 5949462

p 25,613,720.19

Receivables A 994457 8594298

22,242,604.99

Receivables A 1027 487 8684 794

24,886,759.36

Receivables A 1057486 8783742

19,738,074.27

Receivables A 1090678 8874819

12,441,834.73

Receivables A 1118724 8963518

9,455,681.48

Receivables A 1149738 9063960

12,745,631.09

Receivables A 1181935 9172018

6,745,290.16

Receivables A 1208935 9257242

10,081,327.77

Receivables A 1241966 9366771

11,250,648.31

Receivables A 1267956 9478957

8,174,959.49

Receivables A 1300985 9608532

5,656,123.44

Total

P169,032,655.28 To verify that the P158,301,281.84 gross income per certificates was included in the P169,032,655.28 gross income reported in petitioner's Annual ITR, the ICPA traced in the revenue general ledger34 of "Account 60055 - Gross Brokerage Name Give Up" the corresponding income amount of the creditable withholding tax claim based on petitioner's Schedule35 of Creditable Withholding Taxes, billing invoices 36 and official receipts 37 for CY 2013. The ICP A's detailed analysis is presented as follows:

Per Schedule of Creditable

Withholding

Per creditable withholding Tax forCY tax certificates

Per 2013 Gross Brokerage

2013 (Exhibit

(Exhibits P~SO to P-284,

Account General Ledger

P-22)

P-1434 to P-1589)

(Exhibit P-28)

CY2012

Particulars

Creditable

Withholding Tax

(CWI) duly supported by original Certificate

of Creditable Tax

Withheld at Source

(BIR Form 2307)

CWfduly

supported by original Certificate of Creditable Ta.."'

Withheld at Source

(BIR eorm 2307).

n Exhibit "P-28".

34 Exhibit "P-28".

35 Exhibit "P-22".

Annex

CWTamount

Income

Reference

per schedule

Payment

Annex 2-a

9,617,233.79 95,713,483.11 Annex 2-b 1,027,304.42 9,499,756,25 36 Exhibits "P-599" to "P-1054" and "P-1976" to "P-2262". 37 Exhibits "P-1055" to "P-1483" and "P-2263" to "P-2498".

Correspondin

Correspondin

gCWf gCWf cwr

Revenue

amount per amount per amount amount schedule schedule 9,617,233.79 (87,194,097.76) 9,025,938.50 591,295.29 (9,068,699. 10) 971,290.20 56,014.?2 3.

4.

5.

6.

7.

8.

cwr amount per certificate is lower than amount in the schedule/ income tax return

Creditable

Withholding Tax

(CW!) duly supported by original Certificate

of Creditable Tax

Withheld at Source

(HIR Form 2307).

cwr amount per certificate is higher than amount in the schedule/ income tax return Annex 2-c

Creditable

Withholding Tax

(CWI) duly supported by original Certificate of Creditable Ta.'\

Withheld at Source

(BIR Form 2307)

but the Petitioner's name is different, the

Petitioner's TIN

number is wrong or not indicated and cwr amount per certificate is lower than amount in the schedule/ income tax return Annex 2-d

CWfduly

supported by original Certificate

of Creditable Tax

Withheld at Source

(BIR Form 2307)

not dated within

CY 2013 and CWT

amount per certificate is lower than amount in the schedule/ income tax return Annex 2-e

CWl'duly

supported by original Certificate of Creditable Ta.'\

Withheld at Source

(RIR Form 2307)

with no date indicated or not dated within CY 2013, and

Petitioner's TIN

number is wrong or not indicated Annex 2-f

CWJ'duly

supported by photocopied

Certificate of

Creditable Tax

Withheld at Source

(BIR Forrn 2307)

Annex 2-g cwr without available supporting documents at the time of verification Annex 2-h 993,660.40 1,990,786.29 34,620,693.92 2,348,168.09 (32,314,493.74\ 1,964,214.94 2b,S71.35 88,039.87 878,617.63 87,861.76 (771 533.72\ 77,072.04 10,967.¹:13 25,262.84 1,022,211.69 24,702.07 - 25,262.1:14 105,607.19 1,056,074.99 105,607.50 - 105,607.19 609,087.40 15,510,444.25 1,080,989.17 (8,800,910.72) 469,976.85 139,110.55 1 '763,396.65 - 15,226,718.45 158,301,281.84 14,258,222.78 (138,149,735.04) 12,508,492.53 954,829.27

However, the Court observed that petitioner's general ledger does not show the billing invoice number corresponding to the revenue/income amount recorded therein except for "AR 48127 Receivables 5949462". Thus, the Court was able to trace to the general ledger only the income payments related to the following claimed cwr oft'1,952,059.85, detailed as follows:

Date

Invoice No.

Client's Name

Income Payment

cwr Amount

Annex2-a

2/12/2013

INV#101596

Phi§rpinc V etcrans Hank !' 97,600.00 !' 9,760.00 2/12/2013

INV#101601

Mizuho Corporate Bank Ltd

88,651.88 8,865.31 2/12/2013

INV#101631

Philippine Veterans Bank

6,506.56 650.67 2/12/2013

INV#101637

Planters Rank

8,960.00 896.00 2/13/2013

INV#101608

United Coconut Planters Bank

104,308.29 9,820.84 2/19/2013

INV#101566

Eastwest Banking Corp - Man

93,836.80 99,428.82 2/20/2013

INV#101584

Bdo Private Bank Inc- Man

52,093.15 6,809.41 2/20/2013

INV#101593

Philippine Savings - Man

64,000.00 6,400.00 2/20/2013

INV#101594

Philippine Bk Of Com - Man

377,073.98 37,707.40 2/20/2013

INV#101603

Philippine Bk Of Com - Man

12,850.45 1,285.07 2/20/2013

INV#101619

Phil Business Bank - Man

64,000.00 6,400.00 2/20/2013

INV#101633

Ph~ne Sa vi~- Man 14,639.76 1,464.01 2/20/2013

INV#101635

Phil. Commercial Cap - Man 93,200.00 9,320.00 2/20/2013

INV#101650

Ucpb2 ·Man

24,000.00 2,400.00 2/20/2013

INV#101653

Phil Business Bank - Man

4,066.60 406.67 2/21/2013

INV#101597

Rcbc SavinJ!S Bank - Man 738,750.00 73,878.55 2/21/2013

INV#101618

Philippine Nat Bank - Man

422,625.00 42,262.50 2/21/2013

IN\'#101652

Pnb-2- Man

11,250.00 1,125.00 2/22/2013

INV#101644

United Coconut Pltrs - Man

274,560.00 27,456.00 2/22/2013

IN\'#101645

Std Chart Bk 1 ,td - Man 294,915.25 100,269.45 2/25/2013

INV#101579

Hongkong & Shang Be - Man

206,583.28 29,977.61 2/25/2013

INV#101646

International Ncdcr- Man

9,868.54 986.85 2/26/2013

INV#101580

Union Bk Philippines - Man

253,165.72 110,570.07 2/27/2013

IN\'#101578

Asia United Bk Corp - Man

52,865.80 1,857.38 2/28/2013

INV#101567

Sterli~g Bank - Man 74,012.12 7,462.38 2/28/2013

INV#101571

Bank Of Commerce - Man

189,300.23 18,930.36 2/28/2013

INV#101576

International Neder- Man

549,600.55 77,149.99 2/28/2013

INV#101598

Bank Of Commerce - Man

288,000.00 28,800.00 2/28/2013

INV#101604

Botm-Ufi Ltd - Man

129,317.88 12,931.93 2/28/2013

INV#101626

Sterling Bank- Man

228,400.00 23,640.00 2/28/2013

INV#101639

Sterling-2 - Man

81,361.60 8,136.16

Chinatrust (Philippines) Commercial

3/5/2013

INV#101582

Bank Corp

120,981.35 12,098.27 3/6/2013

INV#101649/101586/1 01613

H..izal Commercial Banking Corp 387,007.70 14,895.44 3/7/2013

INV#101589

First Metro Investment Corp

1,108,799.39 110,879.94

Mdropolitan Bank & Trust

3/8/2013

IN\'#1 01621/101600/101573

Conpany

39,465.36 141,835.57 3/15/2013 INV#l01622/101709 I •:astwcst Banking Corporation 142,331.00 112,944.17 3/19/2013

IN\'#101615

Chinatrust (Philippines) Commercial

523,035.05 51,705.29

3/21/2013

INV#101577/101642/101591

Sub-total

Annex2-b 03/20/2013

INV#101627

03/12/2013

INV#101570

2/7/2013

INV#101568

2/11/2013

INV#101636

03/21/2013 INV#l01612 !NV#1 01617/101607/ 03/27/2013 101575/101624

Sub-total

Annex2-c 2/12/2013

INV#101648

2/12/2013 !NV#101643 2/12/2013

INV#101614

2/12/2013 !NV#101572 2/20/2013

INV#101587

2/12/2013

INV#101581

2/13/2013

INV#101647

2/12/2013

INV#101585

2/28/2013

INV#101590

2/14/2013

INV#101609

2/11/2013

INV#101629

2/11/2013 INV#l01634 2/28/2013

INV#101625

2/28/2013

INV#101569

2/20/2013

INV#101595

2/19/2013

INV#101602

Sub-total

Total

Bank Corp

Citibank Na

Jp Morgan Chase Bank Na

Jp Morgan Chase Bank Na

Allied Banking Co']J

Allied Banking Coq>

Australia & N cw Zealand Banking

Group Ltd

AustraJia & New Zealand Banking

Gro~J.td

Deutsche Bank Ag

Deutsche Bank Ag

Deutsche Bank Ag

Deutsche Bank Ag

Development Bk Phili - Man

Philippine National Bank

Bank Of The Phlfu1pinc Islands

Bank Of The Philippine Islands

Bk Of Philippine lsi - Man Bk Of Philippine lsi- Man

Security Bank Corp

Security Bank Corp 2

Security Rk Corp - Man

Security Rk Corp - Man

Land Bk Philippines - Man

Land Bk Philippines - Man

29,310.25 135,696.66 P7,261,293.54 P1,347,103.77 !' 62,958.09 !' 6,295.82 238,140.09 23,814.41 1,796,827.21 179,683.94 72,000.00 7,200.00 187,876.92 21,433.34 389,702.24 90,059.50 P2,747,504.55 p 328,487.01 !' 58,062.86 !' 5,806.29 67,418.10 6,741.81 116,298.27 11,629.83 414,880.02 41,487.92 147,568.66 22,314.01 189,910.22 18,991.43 61,534.80 1,230.70 226,916.26 4,538.32 1,375,187.50 27,503.75 330,233.28 6,604.16 461,400.00 46,140.00 93,000.00 9,300.00 145,461.41 14,546.13 266,626.63 26,662.66 1,573,650.00 25,733.51 72,385.48 7,238.55 P5,600,533.49 p 276,469.07 P1,952,059.85 In sum, petitioner complied with the three basic requisites for refund of excess CWT for CY 2013 to the extent of only P1,952,059.85. The Court shall now proceed to determine whether the aforesaid CWT of P1,952,059.85 are unutilized and may be the proper subject of a claim for refund or issuance of tax credit certificate pursuant to Section 76 of the NIRC of 1997, as amended, which reads: "SEC. 76. Final Acijustment Return. - Every corporation liable to tax under Section 27 shall flle 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: ;4"

(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 entided 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 tax credit certificate shall be allowed therefor."

Based on Section 76, in case of overpayment of income taxes, a taxable corporation has two options, it may file a claim for refund, either in the form of cash or TCC, or it may carry over the same to the succeeding taxable quarters/years until it is fully utilized. However, once the carry-over option is taken, actually or constructively, it becomes irrevocable for that taxable period.38 The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer.39 In exerc1s1ng its option, the corporation must signify in its Annual Corporate Adjustment Return (by marking the option box provided in the BIR Form) its intention, either to carry over the excess credit or to claim a refund. To ease the admirllstration of tax collection, these remedies are in the alternative and the choice of one precludes the other.40 A perusal of petitioner's Annual ITR41 for CY 2013 shows that petitioner had income tax credits in the total amount of f'50,105,118.00 consisting of the (a) prior year's excess tax credits in the amount of f'34,878,400.00, and (b) CWT accumulated during the four quarters of CY 2013 in the aggregate amount of f'15,226,718.00 (the sum of f'12,611,705.00 and f'2,615,013.00).

4~

Petitioner claims that its RCIT due for CY 2013 in the amount of P7,676,632.0043 was paid using a portion of its prior year's excess credits of P34,878,400.00. This leaves the prior year's excess tax credits in the amount of P27,201,768.00 and creditable taxes withheld during CY 2013 in the amount of P15,226,718.00 totaling P42,428,486.00 unutilized as of December 31, 2013, as shown below:

Prior Year's Excess Credits other than MCIT p 34,878,400.00

Less: Tax Due (RCIT)

7,676,632.00

Balance of Prior Year's Excess Credits

27,201,768.00

Add: Creditable Taxes Withheld- CY 2013

15,226,718.00 Excess Creditable Taxes Withheld as of December 31, 2013 P42,428,486.00 Petitioner indicated on its Annual ITR for CY 2013 its option to be issued a TCC for its excess and unutilized CWT for CY 2013.44 Consequently, only the prior year's excess tax credits of P27,201,768.00 were carried over in petitioner's Quarterly ITRs45 and Annual ITR46 for CY 2014. To prove the existence of its prior year's excess credits of P34,878,400.00, petitioner presented BIR Forms No. 2307 for the years 2011 47 and 201248, which were accounted for by the ICPA as follows: 49

Summary of Findings for CY2011

CWT duly supported by original Certificate of

BIR Form 2307

CWT duly supported by original Certificate of BIR Form 2307 CWT amount per Certificate is lower than the amount in the schedule/income tax return CWT duly supported by original Certificate of BIR Form 2307 CWT amount per Certificate is higher than the amount in the schedule/income tax return CWT duly supported by original Certificate of BIR Form 2307 but with different income payment CWT duly supported by original Certificate of BIR Form 2307 but the Petitioner's name and A TC are different 43 Exhibit "P-3", Line 16, docket, vol. 2, p. 942. 4"'" Exhibit "P-3".

"5 Exhibits "P-8", "P-9" and "P-10", Line 31A.

Annex

Reference to

ICPA

Report"

5-a 5-b 5-c 5-d 5-e 46 Exhibit "P-1!", Schedule 7, Line I, docket, vol. 2, p. 1024. 47 Exhibits "P-461" to "P-598" and "P-1779" to "P-1978". 48 Exhibits "P-285" to "P-460" and "P-1590" to "P-1778".

Income Payment

1"83,061,907.76 15,983,805.99 31,637,732.27 32,922.36 181,288.50 49 Exhibit "P-2499", Annexes 5 and 4, docket, vol. 2, pp. 832-832 and 754-755, respectively. so Exhibit "P-2499", docket, vol. 2, pp. 833 to 885.

CWT Amount

_p_er GL 1"8,642,632.50 1,598,380.60 2,824,594.16 32,922.35 3,625.77 CWT duly supported by original Certificate of BIR Form 2307 but the Petitioner's name is different, the Petitioner's TIN number is wrong or not indicated, C\VT amount per Certificate is lower than the amount in the schedule/income tax return CWT duly supported by original Certificate of BIR Form 2307 but the Petitioner's name is different, the Petitioner's TIN number is wrong or not indicated, cwr amount per Certificate is higher than the amount in the schedule/income tax return CWT duly supported by original Certificate of BIR Form 2307 but the Petitioner's name is different and the Petitioner's TIN number is wrong or not indicated and with different A TC per certificate CWT duly supported by original Certificate of BIR Form 2307 with no date indicated or not dated within CY 2011 and Petitioner's name is different CWT duly supported by original Certificate of BIR Form 2307 with no date indicated or not dated within CY 2011, but the Petitioner's TIN number is wrong or not indicated CWT duly supported by original Certificate of BIR Form 2307 but with different income payment and CWT amount per Certificate is lower than the amount in the schedule/income tax return cwr duly supported by photocopied

Certificate of BIR Form 2307

Over claim of CWT amount per income tax return vs. certificate for Annex 5-b, 5-f and 5-k cwr without available supporting documents at the time of verification

Total- CY 2011

Summary of Findings for CY2012

CWT duly supported by original BIR Form 2307.

CWT duly supported by original BIR Form 2307. CWT amount per Certificate is lower than the amount in the schedule/income tax return CWT duly supported by original BIR Form 2307. CWT amount per Certificate is higher than the amount in the schedule/income tax return CWT duly supported by original BIR Form 2307 but the Petitioner's name is different, Petitioner's TIN number is wrong or not indicated, and with different A TC per certificate 5-f 5-g 5-h 5-i 5-j 5-k

5-I

5-m

Annex

Reference to

ICPA

Report51

4-a 4-b 4-c 4-d 51 Exhibit "P-2499", docket, vol. 2, pp. 756 to 830. 826,081.50 16,521.63 11,355,370.50 163,568.96 236,800.00 23,680.00 376,703.09 37,670.31 331,697.10 17,489.71 21,405.45 21,405.45 4,208,977.00 420,897.72 72,617.01 3,682,543.61 P148,254,691.52 P17 ,558,549. 78

Income Payment

cwr Amount p 98,672,311.13 p 10,072,251.48 31,784,809.09 2, 194,132.4 7 23,071,678.88 1,617,552.04 118,623.79 11,862.36

CWT duly supported by original BIR Form 2307 but the Petitioner's name is different, the Petitioner's TIN number is wrong or not indicated, and without ATC per certificate cwr duly supported by original BIR Form 2307 without date indicated or not dated within CY 2012, Petitioner's name is different, and cwr amount per Certificate is higher than amount in the schedule/income tax return cwr duly supported by original BIR Form 2307 with no date indicated or not dated within CY 2012, Petitioner's name is different, cwr amount per Certificate is higher than amount in the schedule/income tax return, and without ATC.l'er Certificate CWT duly supported by original BIR Form 2307 but the Petitioner's name is different, CWT amount per Certificate is higher than amount in the schedule/income tax return, without ATC per Certificate cwr duly supported by original BIR Form 2307 not dated within CY 2012 and Petitioner's name is different CWT duly supported by original BIR Form 2307 not dated within CY 2012, Petitioner's name is different, and without ATC per Certificate.

CWT duly supported by original BIR Form 2307 but the Petitioner's name is different and without ATC per Certificate.

CWT duly supported by original BIR Form 2307 without date indicated or not dated within CY 2012, with different income payment and with different ATC per

Certificate

CWT duly supported by original BIR Form 2307 with different income payment and ATC j>er Certificate CWT duly supported by original BIR Form 2307 with CWf amount per Certificate is higher than the schedule and with different

ATC per Certificate

Over claim of C\VT amount per income tax return vs. certificate for Annex 4-b cwr without available supporting documents at the time of verification

Total- CY 2012

4-e 679,320.90 67,932.13 4-f 475,149.13 47,512.39 4-g 3,369,433.08 75,857.07 4-h 1,591,047.90 154,102.49 4-i 1,071,599.54 106,597.78 4-j 470,928.80 26,469.12 4-k 1,321,578.27 132,158.97 4-1 39,227.48 39,314.54 4-m 34,452.28 34,452.28 4-n 2,937,592.17 23,601.20 82,293.71 4-o 3,309,649.86 P165,637,752.44 P17,995,739.89 Based on the preceding tables, only the CWT of P13,065,607.26 and P13,883,935.99 for CYs 2011 and 2012, respectively, totalling P26,949,543.25, were properly supported by BIR Forms No. 2307, to wit: 2011 2012

Particulars

Income Payment

cwr

Income Payment

CWT

cwr duly supported by original Certificate of BIR Form 2307.

p 83,061,907.76 p 8,642,632.50 p 98,672,311.13 p 10,072,251.48 cwr duly supported by original Certificate of BIR Form 2307. CWT amount per Certificate is lower than the schedule (amount indicated pertains to certificate amount)_.

cwr duly supported by original Certificate of BIR Form 2307. CWT amount per Certificate is higher than the schedule (amount indicated pertains to schedule amount)_ Total properly substantiated 15,983,805.99 I ,598,380.60 31,784,809.09 2,194,132.47 31,637,732.27 2,824,594.16 23,071,678.88 1,617,552.04 P130,683,446.02 P13,065,607 .26 Pl53,528, 799.10 P13,883,935.99 However, these CWTs do not represent petitioner's excess CWTs for CYs 2011 and 2012 since petitioner reflected in its Annual ITRs for the said years, income tax due in the respective amounts of P14,233,716.0052 and P12,400,630.5053 or in the sum of P26,634,346.50. Deducting this total income tax liabilities of P26,634,346.50 from the CWT of P26,949,543.25 yields an amount of only P315,196.75 excess tax credits as of the end of CY 2012, as shown below:

Total Income Tax Due for 2011 and 2012

P26,634,346.50

Less: TotaiValidCWTsfor2011 and2012

Valid CWT for 2011

P13,883,935.99

Valid CWT for 2012

P13,065,607.26 26,949,543.25

Excess Tax Credits Carried Forward to 2013

(P315,196.75) As stated earlier, petitioner's properly substantiated CWT for CY 2013 amounted only to P1,952,059.85, which when added to the prior year's excess credits of P315,196.75 yields an aggregate tax credits of P2,267 ,256.60. Considering that petitioner's income tax due for CY 2013 in the amount of P7,676,632.00 is a lot higher than the tax credits of P2,267,256.60, petitioner has no excess CWT available for refund, computed below: Total Income Tax Due for CY s 2011 and 2012 Less: Total Valid CWTs for CYs 2011 and 2012

Valid CWT for CY 2011

Valid CWT for CY 2012

Excess Tax Credits Carried Forward to CY 2013

Total Income Tax Due for CY 2013

Less: TaxCreditsforCY 2013

Prior Year's Excess Tax Credits

Valid CWTs for CY 2013

Tax Payable (Overpayment)

j2 Exhibit "P-36", Line 32.

53 Exhibit "P-32", Line 32.

P26,634,346.50 P13,883,935.99 13,065,607.26 26,949,543.25 (P315,196.75) p 7,676,632.00 p 315,196.75 1,952,059.85 2,267,256.60 P5,409,375.40

It bears stressing that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 54 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund. 55

WHEREFORE, premises considered, the instant Petition for Review is DENIED.

I CONCUR:

~. ~ ~,.

MA. BELEN M. RINGPIS-LIBAN

Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

. FABON-VICTORINO ssociate Justice

Acting Chairperson

54 Citibank, NA. vs. Court of Appeals, et aL, G.R. No. 107434, October 10, 1997. ss Commissioner qflnterna/ Revenue vs. S.C. johnson & Son, Inc., et aL, G.R. No. 127105,June 25, 1999.

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Acting Division Chairperson's Attestation, is it 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.