SECOND DIVISION
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COMMISSIONER OF INTERNAL REVENUE, Petitioner, - versus - ASIAN TRANSMISSION CORPORATION, Respondent. |
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G.R. No. 179617 Present: CARPIO, J., Chairperson, CARPIO
MORALES,* PERALTA, ABAD,
and MENDOZA, JJ. Promulgated: January 19, 2011 |
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D E C I S I O N
MENDOZA, J.:
This case is a petition for review on certiorari
under Rule 45 of the Rules of Court filed by petitioner Commissioner of Internal Revenue (CIR) seeking to reverse and set
aside the July 16, 2007 Decision[1]
of the Court of Tax Appeals En Banc (CTA-En Banc), in C.T.A. EB No. 205 and its September
11, 2007 Resolution[2] denying its motion for
reconsideration.
Through
the assailed issuances, the CTA-En Banc affirmed
in toto the Decision[3]
and the Amended Decision[4]
of its First Division (CTA-First Division) in CTA Case No. 9282 ordering
the CIR to refund or issue a tax credit certificate in favor of respondent
Asian Transmission Corporation (ATC) for unutilized creditable
withholding taxes for the taxable year 2001.
From the records, it appears that ATC is a domestic corporation
engaged in the manufacture of automotive parts. It filed its annual Income Tax Return (ITR)
for the year 2000[5] on P370,532,082.00, a net loss of P279,926,225.00 and a minimum corporate income tax (MCIT) of P7,410,642.00. The MCIT due was offset against the P38,301,198.00
existing tax credits and creditable taxes withheld of the ATC, thereby leaving
an excess tax credit or overpayment of P30,890,556.00, as shown below:
MCIT P 7,410,642.00
Less: Tax Credits/Payments
a. Prior
Year’s Excess Credits P23,250,734.00
b. Creditable
Tax Withheld for
First Three Quarters 11,868,132.00
c. Creditable
Tax Withheld for
the Fourth Quarter 3,121,256.00
d. Foreign Tax Credits 61,076.00 38,301,198.00
Total Overpayment P30,890,556.00
For
the P30,890,556.00 overpayment, ATC opted “To be
issued a Tax Credit Certificate.”
In its ITR for the year 2001,[6]
ATC declared a gross income of P322,839,802.00, a net loss of P37,869,455.00,
and MCIT of P6,456,796.00. After deducting its MCIT due against its
existing tax credits and creditable taxes, ATC was left with a total tax credit
of P51,760,312.00 detailed as follows:
MCIT
P 6,456,796.00
Less: Tax Credit/Payments
a. Prior Year’s Excess Credits P 30,890,556.00
b. Creditable Tax Withheld for
First Three Quarters 12,405,573.00
c. Creditable Tax Withheld for
the Fourth Quarter
14,920,979.00 58,217,108.00
Total Overpayment P51,760,312.00
ATC,
however, applied part of its unutilized creditable taxes for the year 2000
amounting to P7,639,822.00 to its MCIT due of P6,456,796.00 for
the year 2001. Left unapplied of its 2000 creditable taxes, therefore, was the
amount of P1,183,026.00 as shown in the following computation:
Creditable Tax Withheld for the First
Three Quarters of 2000 P 11,868,132.00
Creditable Tax Withheld for the Fourth
Quarter of 2000 P 3,121,256.00
Foreign Tax Credits for 2000 61,076.00
Total P 15,050,464.00
Less: 2000 MCIT
7,410,642.00
Unutilized 2000 Creditable Taxes Withheld P 7,639,822.00
Less: 2001 MCIT P 6,456,796.00
Remaining Unutilized 2000 Creditable
Taxes Withheld P 1,183,026.00
Again,
ATC opted “To be issued a Tax Credit Certificate” for the excess income tax
payment.
On P28,509,578.00,
representing excess/unutilized creditable income taxes withheld as of
Remaining Unutilized 2000 Creditable
Taxes Withheld P1,183,026.00
Unapplied 2001 Creditable Taxes
Withheld:
a. Creditable Tax Withheld
for the First Three Quarters
of 2001 P 12,405,573.00
b. Creditable Tax Withheld
for
the Fourth Quarter of 2001
14,920,979.00 27,326,552.00
Total P28,509,578.00
The next day, on
On
1. Whether petitioner’s claim for refund was
filed within the two-year prescriptive period as prescribed under Section 204
and 229 of the NIRC;
2. Whether the income upon which the creditable
taxes withheld were included and reported as income in the income tax returns
of petitioner for both years;
3. Whether the creditable taxes are duly
substantiated by the necessary statement issued by the withholding agent to the
petitioner, showing the amount paid and the amount of the tax withheld
therefrom;
4. Whether petitioner incurred a net loss of P279,926,225.00 and P37,869,455.00
during the taxable years 2000 and 2001, respectively; and
5. Whether petitioner is entitled to the refund and/or
credit of the amount of 28,509,578.00 representing its excess/unutilized
creditable income taxes as of
After the CTA-First Division approved the Joint Stipulation
of Facts and Issues, the case was submitted for decision.[9]
On
WHEREFORE, the instant petition for review is hereby
PARTIALLY GRANTED. Respondent is
ordered to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced
amount of P24,325,856.58 representing the unutilized creditable withholding
taxes for the taxable year 2001.
The
CTA-First Division found that, contrary
to the contentions of the CIR, ATC was able to establish the factual basis for
its claim for refund or for the issuance of a tax credit certificate, and that
the same was filed within the period prescribed under Section 229 of the Tax
Code. Thus, it was written:
In the case of Citibank N.A. vs. Court of Appeals, the Supreme Court emphasized that the
burden of proving the factual basis of his claim for tax credit or refund is
upon the claimant. Thus, for a claim [for] tax credit or refund be granted, the
taxpayer must establish that:
(i) The claim for
refund was filed within two years as prescribed in Sec. 230 (now 229) of the
Tax Code;
(ii) The income upon which the taxes were withheld were included in the
return of the recipient; and
(iii) The fact of withholding is
established by a copy of statement (BIR Form 1743-A) duly issued by the payer
(withholding agent) to the payee showing the amount paid and the amount of tax
withheld therefrom.
Applying the above rule, the following are evident:
One, the
petitioner complied with the first requirement. The claim for refund of
petitioner for the calendar years ended
Two, petitioner
was able to establish its qualified compliance with requirement numbers two and
three. In the admitted 2000 and 2001 Certificates of Creditable Withholding at
Source, the following amounts of income payments and withholding taxes were
reflected –
x x x x x x
We have traced the income payments in the 2000 and
2001 income tax returns and found out that petitioner declared the same. It
should be noted though that the substantiated 2000 and 2001 creditable taxes
amounted only to P14,986,640.75
(instead of P15,050,464.00) and P24,325,856.58
(instead of P27,326,552.00) respectively. Hence we recomputed the
supported unapplied creditable taxes withheld as of
Amount
2000 Supported Creditable Taxes Withheld P14,986,640.75
Less: 2000 MCIT 7,410,642.00
Unutilized 2000 Creditable Taxes Withheld P
7,575,998.75
Less: 2001 MCIT 6,456,796.00
Remaining Unutilized 2000 Creditable
Taxes Withheld P 1,119.202.75
Add: 2001 Supported and Unapplied
Creditable Taxes Withheld 24,325,856.58
Supported Unapplied Creditable Taxes Withheld
as of P25,445,059.33
As to the losses declared by ATC for the years 2000
and 2001, the CTA-First Division opined that ATC was not required to prove
them. It explained:
Lastly, we do not agree with the respondent that
petitioner is required to prove that it incurred a net loss for the years 2000
and 2001. The implied allegation of irregularity in the declared operational
losses is a matter which must be proven by competent evidence. And the burden
of proof as to whether petitioner incurred net losses from its operations rests
on the respondent. This is the reason why respondent is authorized by law to
examine the books and accounting records to ascertain the truthfulness of
petitioner’s declaration in its income tax return. In the absence of any
showing that there is irregularity in claimed losses for 2000 and 2001 business
operations and taking into account that income tax returns are prepared under
penalty of perjury, We consider the returns of petitioner to be accurate and
regular. [10]
The CTA-First Division, however, noted that ATC could
not be issued a tax credit certificate for the remaining 2000 unutilized
creditable taxes pursuant to Section 78 of the Tax Code, considering that ATC
initially declared that it would opt “To be Issued a Tax Credit Certificate”
for its 2000 creditable taxes, but never really exercised this option. Instead,
it made use of the option to carry-over its excess income tax payments, when it
applied the same in reducing its 2001 MCIT.
Thus, the CTA-First Division ordered the CIR to issue a tax credit certificate in favor of ATC in the reduced amount
of P24,325,856.58 representing
the unutilized creditable withholding taxes for the taxable year 2001 based on
its own computation, to wit:
Income ______________
Payment Tax Withheld Withholding Agent Exh.
P
300,603,978.00 P 3,006,039.78 Mitsubishi Motors Phils. Corp. S
195,263.12
1,952.63 Nidec-Shimpo Philippines Corp. T
363,266,839.00 3,632,668.39 Mitsubishi Motors Phils. Corp. U
137,659.10 1,376.59 Nidec-Shimpo Philippines Corp. V
576,146,311.00 5,761,463.11 Mitsubishi Motors Phils. Corp. W
137,659.10 1,376.59 Nidec-Shimpo Philippines Corp. X
488,449,635.00
4,884,496.35 Mitsubishi Motors Phils. Corp. Y
103,611.44 2,072.23
Nidec-Shimpo Philippines
Corp. Z
44,663,912.73 6,702,586.91 MMC Sittipol Co. Ltd. AA
22,212,158.06 331,824.00
MMC Sittipol Co. Ltd. BB
P1,795,937,026.55 P24,325,856.58
Both parties sought reconsideration. On one hand, CIR
insisted that ATC failed to establish the net loss it incurred and the tax
credits due it.[11] On
the other hand, ATC averred that the CTA-First Division erred in: a) crediting only the amount of P331,824.00 as the amount withheld by
MMC Sittipol Co. Ltd. instead of the P3,831,824.00 it actually withheld from ATC; and b) in
ordering the issuance of a Tax Credit Certificate in the amount of P24,325,856.58.[12]
Finding merit only in the motion for reconsideration
of ATC, the CTA-First Division issued the Amended Decision[13]
on
WHEREFORE, petitioner’s Motion is hereby GRANTED while
respondent’s Motion is hereby DENIED for lack of merit. Accordingly, respondent
is ORDERED TO REFUND or in the alternative, ISSUE A TAX CREDIT CERTIFICATE in
favor of the petitioner the amount of TWENTY SEVEN MILLION THREE HUNDRED TWENTY
FIVE THOUSAND EIGHT HUNDRED FIFTY SIX & 58/100 PESOS (P27,325,856.58) representing unutilized creditable withholding taxes for
taxable year 2001.
On appeal, the CTA-En Banc was convinced that ATC
was able to provide sufficient evidence to establish its claim for refund or
issuance of a tax credit certificate.[14]
Thus, it rendered its
WHEREFORE, premises considered, the instant petition
is hereby DENIED DUE COURSE, and, accordingly, DISMISSED for lack of merit.
Hence this petition .
The CIR raises the sole issue of:
WHETHER
OR NOT RESPONDENT IS ENTITLED TO REFUND IN THE AMOUNT OF P27,325,856.58
REPRESENTING THE ALLEGED UNUTILIZED CREDITABLE WITHHOLDING TAXES FOR THE
TAXABLE YEAR 2001.[15]
The petition has no merit.
The CIR argues that while the certificates of withholding
taxes and the annual income tax returns for the years 2000 and 2001 submitted
by ATC may prove the inclusion of income payments which were the bases of the
withholding taxes and the fact of withholding, they are not sufficient to prove
entitlement to the tax refund requested. According to the CIR, since Section
2.58.3 (B) of Revenue Regulation provides that “claims for refund or tax credit
shall be given due course upon showing that income payment has been declared as
part of gross income and the fact of withholding is established,” the mere
submission of the withholding tax statements shall only mean that ATC’s claim
shall be given due course, i.e., heard or considered. Accordingly, the CIR posits that ATC still has
to show that it is entitled to the refund requested by proving not only the
income payments made but also the reported losses.
It should be pointed out that the arguments
raised by the CIR in support of its position have already been thoroughly
discussed both by the CTA-First Division and the CTA-En Banc. Notwithstanding, the CIR comes to this Court
insisting that the same be once again reviewed. Oft-repeated is the rule that the Court will not lightly set aside
the conclusions reached by the CTA which, by the very nature of its function of
being dedicated exclusively to the resolution of tax problems, has accordingly
developed an expertise on the subject, unless there has been an abuse or
improvident exercise of authority.[16] In Barcelon,
Roxas Securities, Inc. (now known as UBP Securities, Inc.) v. Commissioner of
Internal Revenue,[17]
this Court more explicitly pronounced:
Jurisprudence
has consistently shown that this Court accords the findings of fact by the CTA
with the highest respect. In Sea-Land Service Inc. v. Court of Appeals [G.R. No.
122605, 30 April 2001, 357 SCRA 441, 445-446], this Court recognizes
that the Court of Tax Appeals, which by the very nature of its function is
dedicated exclusively to the consideration of tax problems, has necessarily
developed an expertise on the subject, and its conclusions will not be
overturned unless there has been an abuse or improvident exercise of
authority. Such findings can only be disturbed on appeal if they are not
supported by substantial evidence or there is a showing of gross error or abuse
on the part of the Tax Court. In the absence of
any clear and convincing proof to the contrary, this Court must presume that
the CTA rendered a decision which is valid in every respect.
At any rate, the CIR is correct in stating that the taxpayer
bears the burden of proof to establish not only that a refund is justified
under the law but also that the amount that should be refunded is correct. In
this case, however, the CTA-First Division and the CTA-En Banc uniformly found
that from the evidence submitted, ATC has established its claim for refund or
issuance of a tax credit certificate for unutilized creditable withholding
taxes for the taxable year 2001 in the amount of P27,325,856.58. The Court finds no cogent reason to rule
differently. As correctly noted by the
CTA-En Banc:
x x x proof
of actual remittance by the respondent is not needed in order to prove
withholding and remittance of taxes to petitioner. Section 2.58.3 (B) of
Revenue Regulation No. 2-98 clearly provides that proof of remittance is the
responsibility of the withholding agent and not of the taxpayer-refund
claimant. It should be borne in mind by the petitioner that payors of
withholding taxes are by themselves constituted as withholding agents of the
BIR. The taxes they withhold are held in trust for the government. In the event
that the withholding agents commit fraud against the government by not
remitting the taxes so withheld, such act should not prejudice herein
respondent who has been duly withheld taxes by the withholding agents acting
under government authority. Moreover, pursuant to Section 57 and 58 of the NIRC
of 1997, as amended, the withholding of income tax and the remittance thereof
to the BIR is the responsibility of the payor and not the payee. Therefore,
respondent, x x x has no control over the remittance of the taxes withheld from
its income by the withholding agent or payor who is the agent of the
petitioner. The Certificates of Creditable Tax Withheld at Source issued by the
withholding agents of the government are prima facie proof of actual payment by
herein respondent-payee to the government itself through said agents. We stress
that the pertinent provisions of law and the established jurisprudence
evidently demonstrate that there is no need for the claimant, respondent in
this case, to prove actual remittance by the withholding agent (payor) to the
BIR.
In
this regard, We do not agree with petitioner’s allegation that respondent failed
to prove that creditable withholding taxes were duly supported by valid
Certificates of Creditable Tax Withheld at Source. As aptly ruled by the Court
in Division, and We reiterate, the evidence on record in which petitioner
interposed no objection to its admission and was subsequently admitted by the
Court in Division, show that respondent was able to substantiate its claim
through the presentation of Exhibits “J” to “P” and “R” to “Z”, the
Certificates of Creditable Tax Withheld At Source. The documentary evidence
presented were sufficient to establish that respondent was withheld taxes and
that there was an excess which remain unutilized and now subject of refund.
With
respect to the losses incurred by the ATC, it is true that the taxpayer bears
the burden to establish the losses, but it is quite clear from the evidence
presented that ATC has fulfilled its duty. Moreover, other than the bare
assertion that ATC must establish its losses, the CIR fails to point to any
circumstance or evidence that would cast doubt on ATC’s sworn declaration that
it incurred losses in 2000 and 2001.
Curiously, in its petition, the CIR further adds that ATC
cannot claim a cash refund or tax credit for the unutilized withholding tax for
the year 2000 as this would be violative of Section 76 of the Tax Code. This matter, however, was already acted upon in
favor of the CIR, when the CTA-First Division only partially granted ATC’s petition
by disallowing its claim for cash refund or tax credit for the unutilized
withholding tax for the year 2000. This reiteration by the CIR of this argument
despite the fact that it has already been acted favorably by the tax court
below, only shows that the appeal has not been thoroughly studied.
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL
Associate Justice
WE CONCUR:
ANTONIO
T. CARPIO
Associate Justice
Chairperson
CONCHITA CARPIO MORALES DIOSDADO
M. PERALTA
Associate Justice Associate Justice
ROBERTO A. ABAD
Associate Justice
A T T
E S T A T I O N
I attest that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate
Justice
Chairperson, Second Division
C E R
T I F I C A T I O N
Pursuant to Section 13,
Article VIII of the Constitution and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
RENATO
C. CORONA
Chief Justice
* Designated as an additional member in lieu
of Associate Justice Antonio Eduardo B. Nachura per Raffle dated
[1] Rollo, pp.
42-53. Penned by Associate Justice Erlinda P. Uy, with Associate Justices
Ernesto D. Acosta, Juanito C. Castañeda, Jr., Lovell R. Bautista, Caesar A.
Casanova and Olga Palanca-Enriquez, concurring.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
Decision, CTA-First Division,
p. 10, rollo, p. 63.
[11]
[12]
Amended Decision, p. 2, id. at 66.
[13]
[14]
Rollo, p.51.
[15]
[16] Toshiba
Information Equipment (Phils), Inc. v. Commissioner of Internal Revenue,
G.R. No. 157594
[17] G.R.
No. 150764,