Banco Filipino Savings and Mortgage Bank v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Banco Filipino Savings and Mortgage Bank (petitioner) filed its Corporation/Partnership Annual Income Tax Return for fiscal year 1995, declaring a net operating loss and a total tax credit. On February 4, 1998, petitioner filed an administrative claim for refund of creditable taxes withheld for 1995 amounting to ₱1,622,576.00. As the Commissioner of Internal Revenue (CIR) failed to act, petitioner filed a Petition for Review with the Court of Tax Appeals (CTA). Procedural History: The CTA granted only a portion of the claim, ordering a refund or tax credit of ₱18,884.40, representing taxes covered by BIR Form No. 1743-750. The CTA disallowed the remaining ₱1,603,691.60 because the supporting documents (Exhibit "II" - BIR Form No. W-2, and Exhibits "C" through "Z" - Monthly Remittance Return of Income Taxes Withheld) were not in the prescribed BIR Form No. 1743.1 required by Revenue Regulations No. 6-85, as amended by Revenue Regulation No. 12-94. The Court of Appeals (CA) affirmed the CTA's decision. The Petition: Petitioner assailed the CA's decision, arguing that its submitted exhibits should have the same probative value as BIR Form No. 1743.1 and that liberality should be applied.
Issue(s)
Whether the Court of Appeals erred in affirming the disallowance of ₱1,603,691.60 of petitioner’s claim for tax refund on the ground that its supporting exhibits lacked probative value. Whether Exhibits "II" (BIR Form No. W-2) and Exhibits "C" through "Z" (Monthly Remittance Return of Income Taxes Withheld) are sufficient to establish the fact of withholding for a claim of refund of creditable withholding taxes.
Ruling
The petition is denied for lack of merit. The Court of Appeals committed no error in affirming the disallowance of ₱1,603,691.60 of petitioner’s claim for tax refund.
Ratio Decidendi
On the issue of the disallowance of the tax refund claim due to lack of probative value of supporting exhibits: The Court found that petitioner's Exhibit "II" (BIR Form No. W-2) and Exhibits "C" through "Z" (Monthly Remittance Return of Income Taxes Withheld) did not meet the required standard. Exhibits "C" through "Z" were issued by petitioner as the payee, not by the alleged payors, and they did not identify the payors or the nature of their transactions. Exhibit "II", while issued by a payor, did not state the amount and nature of the income payment, making it impossible to verify the correctness of the tax withheld. The Court noted that petitioner was aware of the proper form, as its approved claim for ₱18,884.40 was supported by Exhibits "AA" through "HH," which were all in BIR Form No. 1743-750, the prescribed form for withholding taxes from rental income. The Court also dismissed Exhibit "B" (a list of sold assets prepared by petitioner's own department) as being of doubtful credence and lacking linkage to the disputed tax claims. The Court rejected the plea for liberality, stating that petitioner's negligence in submitting insufficient evidence made it undeserving of such leniency, citing Far East Bank and Trust Company v. Court of Appeals. On the issue of the sufficiency of Exhibits "II" and "C" through "Z" to establish the fact of withholding: The Court reiterated the three conditions for the grant of a claim for refund of creditable withholding tax: (1) the claim must be filed within the two-year period from the date of payment of the tax; (2) the income payment received must be declared as part of gross income in the recipient's return; and (3) the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the tax withheld. This third condition is specifically imposed under Section 10 of Revenue Regulation No. 6-85, as amended, which requires a "Withholding Tax Statement duly issued by the payor to the payee." The Court emphasized that this statement must emanate from the payor itself and must indicate the name of the payor, the income payment basis of the tax withheld, the amount of the tax withheld, and the nature of the tax paid. In this case, Exhibits "II" and "C" through "Z" were deemed insufficient.
Main Doctrine
A claim for refund of creditable withholding tax requires strict compliance with the third condition: the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom, typically in the prescribed BIR Form No. 1743.1 or its equivalent for rental income (BIR Form No. 1743-750).