CTA Case No. 4518 (Decision)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY AQUATIC FARMS LTD . , C.T.A CASE NO. 4518 Petit i onet~ , THE COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - X DEC:XS:XON This is a clai m for judicia l refund of o v e t~ p aid wit h holding tax pay ments at source in the a mo u n t of P166,456. 24 for the c alendar years 1988 and 1989. The t~ ecot~ d s h ows that petitionet~ AQUATIC FARMS, LTD. , i s a t~. e s i d e n t f o t~ e i g n cot~ pot~ at i on d u 1 y o t~ g a n i z e d under the laws of the State of Hawaii U. S.A �� On Apt~ il 3 , 1987, petitionet~ \.'Jas gt~anted aut h o t~it y by t~e Bo~rd of Invest ments under the provisions of Omnibus Inve s tment s Code <P. D. No. 1789) as a mended by Batas Pamban s a Bilang 391 to provide Technolo g y Transfer a n d Con s ultancy services in the design , construct ion , opet~ at ion and manage ment of Hatcheries and gro w- ou t f c.~c i 1 it i e s. 404

DECISION - C.T.A. CASE NO. 4518 - 2- In 1':388 and 1989, petitione~' genet'ated inco me of P3 ,33 4,529 . 08 in the form of consulting services fro m Hawaiian Hat c herie s , Inc. <HHI> for which the latter withheld and t'em itt eel to the Btweau of Int et'nal Revenue the 5% withholding tax broken down as follows: Yea t' Wi t h h o 1 d i n g A g en t Con s u 1t an c y Fe e s 51- Tax Withh eld 1988 HHI P 2,184 ,736. 00 p 10'3, 235. 1.'1 <:> JHI 20, 000. c�c� 1 '389 HHI 400,000. 00 JHI 6:':-jO, 58'3. 09 32, 52r::1. "'�"+ '39 , 200. O<:> 4, 9o(l. O<:> Total 1-�l oweve~', petitj. onet' clai med that since i t stat'ted its Philippine Opet'aticms, it sustained continued annual 1 o s s e s ft' o m 1 9 8 7 up t o Dec e mbe~, 1 9 8 9. The fact is, pet i t i on e ~, t e 111 pot' c:H' i 1 y s t o p p e d i t s o pet' at i on i n Jan u at' y 1 r:3'30 because of co ntinuou s opet' ating losses. _at'ising ft'om the absence of contract job projects. Cln Apl�' i 1 1.7, 19BE3 petit i onet' f i 1 ed its c ot'pOt'at e i n c a me t' e t '-lt' n ~> w i t h t h e B tw e au o f I n t e t' n a 1 Re v en u e f o t' t h e y eat' e r1 d i n g Dec e mbet' 3 J. , 1. 9 8 8 ( Ex h . C 11 11 and f o t' t h e ) year 1.989 on April 1990 indicating a refundable amount for both years in the total amount of P166,455. 04 � On December 3 , 1990 petitioner filed with respondent a clai m fot' tax t'efund in the amou nt of P166, L~55. 24 fat' the ye a�r'S 1988 and 1.9B~3 (exh. 8 11 11 on the qt'ound that it ), suffered losses in its operations for said years thereby 405

DECISION - C.T.A. CASE NO. 4518 - 3- i t had no liability against which the ct~editable vlithholding taxes could be applied. Said claim was not acted upon by t~e s pondE~ nt, hen c e, this appeal was filed on prescriptive pe r iod of two years In re s pond e nt an s wer to the instant petition he admitted the f a ct of petitionet~'s filing i t s claim fot~ t~efund but denies petitionet~'s a l l e g a t i o n pet~taining to it s claim being a met~ e opinion and conclusions of f acts a nd law. As s pecial and a f f i t~ mat i v e defenses, t~e s pond e nt stated among others: a. That thr,? petition does not state <'=' cause of motion; b. that petitioner has the burden of hi:\S pt~ ovin~} th a t i t is entitled to tax t~efuncl, the Tax not s hown that it had complied with mandatory provisions of Section 2 30 of the Code; c. [:h~ anting that the a mount of tax sought to be refunded had actually been paid by petitioner the claim for refund has already pt~esct~ibed with t~espect to the ta>< paid two ( 2 ) yeal ~s pt~ icw to DE~cembet~ 7, -----:r'::JSJO, ptwsuant to Section 230 of the tax Code; d. That the tax amount sought to be ~efunded i s ~ ~ the nature of a creditable 1ncome t a x w1thheld at course. Since the cet~tificate doe s no t specify a t~efundable \ income ta>< wi�thheld, the s ame is deemed to be lost when the petitioner does not have any income tax due ag a in s t which the creditable income tax withheld at source could be applied ; 406

DECISION - C.T.A. CASE NO. 4518 - 4- e. The claims fa~~ the ~~efund being in the nature of an ex e mption from taxation , can n o t be mad e t o ~~ e s t on vag u e i mp 1 i cat i on s and must be construed strictly against petitionet~. The questic>n submitted for~ decision is whet h er~ or not petitioner~ is e n t i t l e d to the r~efund of Plbb,L~55.'"' 4 as alleged ov e rpaid withholding income tax for the years 1'388 and 1'38'3. T h e a 1 J. e gat i on o f ~~ e s pond en t i n h e r~ an ~;we~~ that t h e Petitioner~ does not state a cause of action was a last ditch attempt on the pa1���t of ,.~espondent to mislead the c o tlt"' t , c o n t r~ a~~ y t o ~~ e s p o n d e n t ' s c 1 a i m� Respondent was furnished pertinent returns and other related papers both i n t h e ad mi n i s tt~ at i v e 1 e v e 1 s and J u d i c i a 1 tt~ i a 1 s � We find the alle~~ation of petitioner~ which t~espondent i s denying for lack of knowledge or infor mation to be w i thi n the competence of respondent to determine and the mea n s of i n formation concerning the sa me is readily accessi b le to hi m. Respondent's allegation of lack of k n ow led g e or i n f o t' mat i on can n o t t h e r�� e f o t' e be con s i d e ~~ e d as a s p e c i f i c denial <Standard Chartered Bank v s . Commissioner of Internal Reven ue, CTn CAS E 1\10. Ll-272, Mat~ch 17, 1':392, see also the cases of J.P. J uan and S ons, Inc., v s . Leanga Indus trie s Inc ., 2 8 SCRA 807; Philippines Advertising Counselors Inc. , v s. Revill a, 52 SCRA 245.) 40 7

DECISION - C.T.A. CASE NO. 4518 - 5- Th e a 1 1 e ~l a t i on o f r' e s pond en t t hat " t h e c 1 a i m fen� t� e fu n d h as al 1�� ea d y pr��e s cr� ibed" i s unavailing i:\ nd the same ha s no b a s i s in l a w a s rul e d by the S upreme Court in the Ca se o f ACCRA Investments Corporation vs. The Honorable Court of Appeals, Commissioner of Internal Revenue and the Court of Tax Appeals, G. R. No . L - 9E32C::, December� ;:=.:o, 1 r::3':H , 2 0'~ SC f~A 957 , pe r-t inent por� tion of which is quoted beloi-'J S : " SEC. 70<b> T.im e o F Filing the .income r�e t u r �n --Th e c cwpor�� at e q uar� t er' 1 y dec 1 at� at ion s h a ll be filed within s i><t y((-)0) d a ys following th e c 1 o s e of each of the f i 1��s t thr� e e quar� t er� s of th e taxabl e y e ar� . The final adjustment r etur n s h a ll be filed on or before the 15th day of the 't t h month following th e c lose of the fi sca l ye at� , as th e c a s e may ' be." Th e pet i t i on e r�� cor' pot' at i on ' s t a>< a b 1 e y (;!at' i !:; on a c a 1 end at' y eat' bas i s , h en c e , w i t h t' es pect t o t l e l r:3fH taxable? year�, ACCF~AIN had unt lil , 15 April 1 98 2 with i n which to file its f i n e:\1 adj u s - ment r� et twn. ____,.,.-c- The petition et' c orporation duly complied with this r' e q u i r' e men t � 0 n t h e bas i s o f t h e cor' p or' at e incom e t ax r� etut�n which ACCRAIN filed on 15, ~ipt' i 1 1 9 8 ;:~ �, it r' E?_pot� t e_s;l" a net 1 o s s of t' e f 1 ect ed Pi=: , r:35 7 , 1LI� i~~ . <>�:> . �., Con seqUent 1 y, as after� due \ thet�eon, the p e titioner' C OI�' pot�ation, c omputation , had no tax liability fot' the yeat' 1 r:38 1. 1-�lad thet' e be e n any, payment thet� eof wo uld h a ve b ee n du e a t the ~ime the t� etur�n wa s filed ptw s uan t to s�.tbpat�agt�aph (c) of the aforementi o n e d cod a l provi s ion whi c h read s : SEC. 70(c ) Tim e oF payment oF the in c om e t ax --The in c ome tax due on the cot� pot�at e qu a t� t e t� l y t� etur�n s and the final income t a >< t� e t ur� n s c omputed in a cc cn�dance with Section E. B and 5 r:3 shall be paid ,3t the time the 40

DECISION - C.T.A. CASE NO. 4518 -6 declaration or return is filed as prescribed by the Commissioner of Internal Revenue. If we were to uphold the re s pondent a p p e l l at e c o I.W t i n ma k i n g t h e " d at e o f pay men t " coincide with the "end of the t axa ble year~," t h e pet i t i on e t' co q ) o t' at i on at t h e end o f t h e 1981 taxable year' was in no position then to detel�' min e whether' it Wc:\S liable Ot' not for' the payment of its \981 income tax. XXX X><X XXX It br~a t� s emphasis at this point that the rationa l e in co mputing t he two - year pre s criptive per iod with r e s pect to the p e t i t i o n e r' c o t ' p o t' at i o n ' s c 1 a i m f o r' t' e f u n d f o t~ m the time it filed its final a djustment r�et ur� n i s the fa ct that it was only that ACCRAIN could a scer�t a in whether' it ma de pt'O fits or~ i ncUt't' ed los ses in it s busine ss o~H~r�a tions. The "date of payment", ther� efor�e, in ACCRAIN' s ca s e wa s when it s ta x liability, if any, fell due upon its f i 1 i n ~l o f i t s f i n a 1 ad j .u s t me n t r~ e t m~ n o n Apt' i 1 15, 19'38;:::. II XX>< XXXI -, 1 XXX The "tet� m"/ :i.n the �~... case ' ' .. of domestic coq.Jor� ation like Acc: RfHN 1�'ef er's to . the final adjust ments r~etur' n s as m.entio ned i n S ection 5'3 of the Tax Code of 1 ':38&~-~ amended which par~tly r� ead s: "SEC. 69 . Final Rdj u s tment f?et<.wn. E v e �r� y co r' pot' at i on 1 i a b 1 e t o t ax u n d e t' Sect i on ;:::4 s hall file a final adjustment t�etw-n covering the total taxab l e inco me for the pr-eceding cale nd a r�� ot' fis cal year~. If the s um o F t h e q u at' t e r' 1 y t ax pay men t s mad e d ut' i n g t h e said taxable year i s not equal to the total tax due on t he entir'e taxable income of that yeat' the corporation s hall either: (a) Pay t he excess tax still due; ot' (b) Be r'e func:lecl th e excess amou n t paid, as the case may be. " 409

DECISION - C.T.A. CASE NO. 4518 -7 C leat'ly, t h et� e is the need to file a ret u rn first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own t�ul es and t� egulat ions mandates that the corporate taxpayer opting to ask for a 1��efund must show in its final adjust ment 1��et�.tt'n the in c om e it received from all sources and the amount of withholding taxes remitted by its withholding agents to the But�eau of Intet�na l Re v en u e � T h e pet i t i on e t' cot' pot' at i on f i l e d i t s f i n ;~ l ad j us t men t t' e t '-tt' n f <H' i t s 1 '3 81. t ax a b l e year' on n~wil 1 5 ., 1'382. In OUt' Resolution dated April 1.0, 1'38'3 in the case of Comm issi oner of Internal Revenue vs. Asia Au s tl"a l i a Ex pr ess, Ltd. <G. H. No. 85'356 ) , we t' '-11 e d t h at t h e t wo ( 2 ) y e a r' p r' e s c t' i p t i v e p e r' i o d within which to claim a refund co mm e n ces to run at the ea1�� J.iest on the date of the filing of the adjusted final tax return. Hence, the petition e r' cor� pot�ation h;~d until Apt�il 15, 1'384 within which to file its cli::dm for' r�efund." Following th e doctrine laid down in the case of Asia Au s t ra l i a Ex pr e ss Lt d., v s. Commissioner of Internal Revenue , CT~1 C.:::\ s e No. 35'35, S eptembet' ;:::'3, 1~38B ( affit� me d o n Appeal by the Sup1� eme Cout� t in G. R. No. L 85'355 Apr�il 10, 1'3B'3 . ) it \.'l as h e ld that "the two(2) year' pt�esc r�iptive period within which to claim a refund comme n ces to run at the earlie s t on the date of filing of the adjusted fi n al t .:o< t' e t tn-n , rw t it i on e t' ' s c J. a i m i s t i me 1 y. In t h e case at bar petitioner filed it s final adjustment returns for its 1 '::113 B t a ){ a b l e y e at' o n n p r' i 1 1 7 , 1 '::18 '3 , h e n c e p e t i t i o n e t' h ad until Apr� il 1. 5 , 1.'3'31, within which to file its claim for t� efund, With r e spect to t a xable year 1'38'3 petitioner filed it s fol'' mal a djustment l�' etm�-n s on 1=-)pr�il 1~1, 1'392, 410

DECISION - C.T.A. CASE NO. 4518 - 8- so petitionE1t' ha s until (.~)pt' il 1 !:5~ 199L~ within whi c h to file its claim for refund. As to r' e s pond en t argument "that si nce the certificate does not specify a ref undable income tax withheld, the same is deemed to be lost when the petition er does not h ave a ny income tax due against which i nco me t ax w i t h h e l c.i at s o u r' c e co ul d be a p p 1 i e c.i , " i s t o our mind unavailing. We are of the persuasion that it is no longer' n e c e s s a r' y f o r' p e t i t i o n e t' t o d o s o � The r'ecor'ds sho w t hat t h e pet i t i on e r' s u b mi t t e d t h e f o J. 1 ow i n g d o cum en t at' y e v i d en c e s par't i c ul a r' 1 y e x h s . " C-2 " , " E-2 " , " H " , " I " , " L " , "L-1" and "M" wher-ein specific r-efundable tax withheld at so urce were c learly indicated. petitioner' ha s sub mitted as e v ide n ce cer-tificates of cr-editable income tax withheld at sotwce <BIR For'm 1743 ) Annual Retm-n of Cr-editable Income tax withheld <Expanded withholding tax syste m <BIR For-m 171+3- B>; and petitioner's Corporate Income tax return for the yeat' in question. <Exhibits "H", "I", "1-{", "M", II Jll' "L", and exhs. r�c;u., II E II) ' to s uppot' t its claims - -for r-efund. We agree with respondent that claim for refund being in the natu re of tax exempti on mu s t be stric tly co nstrued 411

DECISION C.T.A. CASE NO. 4518 - 9- aL~':::\inst the claimant. 1�-fowevet~, whet~e the law i s cleat~ and unambiguou s the law must be taken as it is devoid of judicial ad dition or s ubtr ac tion s <Acting Co�missioner of Customs vs. Manila Electric Company, 77 scr~A 46'3>. In the case at bar we believe that petitioner has ably pt~ esented a nd defended i t s c laim fa t~ t~efunc;l with valid s up p IH~ t 1 e a v i n g n o t~ o o m f <H~ an y o t h e t~ i n t e t~ p t~ e t at i on but to g rant the same. It mu s t al s o be s tt~e sse d that after petitioner s ubmi tted its evide n ce whi c h wet�'e a ll admitted by this court, respondent submitted h er case on the basis of t~ e cot~ d s a nd p 1 e a d i n g s , w i t h o u t o f f e t~ i n g p t~ o o f as t o t h e t t~ u t h o f .h e t~ o wn a J. 1 e g at i o n i n h e t~ an s we t~ � Re s pondent failed to present her evide n ~ e, in s up p or~ t o f h i s c a s e � <Warner-La�bert Philippine, Inc. vs. Commissioner of Internal Revenue, CTA CASE No . 3'325, Ar.wil 2 1, 1'39�=::> He spo ndent, th e l ~ efot~e, may be c on s idet~ed to h a ve no ~erious objection or opposition to petitioner e ntitlement to the ref und <Dataprep [Phil], Inc, vs. Commissioner of Internal Revenue, CTA CASE NO. 3600 March 20 , 1'3H4. Well set tled i s t h e r~uJ.e that one who pr~ays for judr~ment on the pleading s without offer~ ing pr~o of as t o the tr~uth of hi s plead ing mu s t be undet~stood to have 41 2

DECISION - C.T.A. CASE NO. 4518 - 10 - admitted the truth of all the material and relevant allegations of the oppo s ing party and to rest his mot ion fot' .Judgement on the allegation taken togethet' with such of his own as admitted <Bauerman vs. CASA , 10 Phil. 385; Evangelista vs. De La Rosa, Et ~=11.., 76 Phil. 115> The fact that petit i onet' suffet� ed 1 o sse s ft'O m l '387 up to De c embet' 1'38':3 t'emained uncontt�ovet�ted and as it appears, Jamandie Hatcheries, Inc. , withheld from the petitioner the amount of P155,455.a4 and re mitted to the Bureau of Internal Revenue. Hence, nothing is left fat' t h i s co tw t t o d o but t o g t' ant t o pet i t i on e t' t h e am o u n t claimed. In fact, we believe that cases of this nptUt'e should have been alt� eady t'e s olved in the ad minist t�ative level. WHEREFORE, Judgement i s hereby rendered directing respondent Commi ss ioner of Internal Revenue to refund to pet it i onet' ~iquat ic Fat� ms, Ltd. the amount of Pl. 55,4-56. a 4 representing overpaid withholding taxes. SO ORDERED. / Quezon City Metro Manila, 8 June 1994. GRUBA Judge 41 3

. �� ' DECISION - - 11 - C.T.A. CASE NO. 4518 WE CONCUR: I CERT:XF:XCAT:XON I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, At'ticle VIII of the Constitution. C:.a;;~ ~ ERNESTO D. ACOSTA Pt'esiding Judge Court of Tax Appeals 414