Commissioner of Internal Revenue vs Doosan Heavy Industries &

Construction Co. LTD. (Philippine Branch)

CTA EB Case No. 1090, August 04, 2014
Del Rosario, PJ.

Facts: Respondent is foreign a company licensed to do business in the Philippines

and has its principal office at KEPCO Power Plant, Colon, City of Naga, Cebu.
On April 14, 2010, Doosan filed with the BIR its annual Income Tax Return for the
year 2009 which shows a net loss of P387,622,107 and an overpayment of income
tax of P38,380,606. It there opted to be issued a tax credit certificate and filed a
written claim for issuance of a TCC and a petition for review before the court in
division.
On May 23, 2012, petitioner filed her Answer and raised that respondent Doosan
failed to demonstrate that the tax subject of the case at bar was erroneously or
illegally collected; that Section 76 of the National Internal Revenue Code (NIRC) of
1997, as amended, explicitly states that once a taxpayer chooses the option of
carry-over, it shall be irrevocable for the taxable period and no application for a tax
refund or TCC shall then be allowed; that taxes paid and collected are presumed to
have been made in accordance with law and regulations, hence, not refundable; and
that the burden of proof is on the taxpayer to establish its right to refund and failure
to adduce sufficient proof is fatal to the action for tax/credit.
In insisting that respondent Doosan is not entitled to its claim for refund of its
alleged unutilized creditable withholding taxes for taxable year 2009, petitioner CIR
argues that proof of actual remittance to the BIR of the withheld taxes and
testimonial evidence of the payors and withholding agents are required to prove the
withholding of said taxes. Petitioner CIR stressed that the best proof of remittance is
the certification from the Revenue Accounting Division (RAD) of the BIR. Since
respondent Doosan did not present the payor and withholding agent and
considering that it did not present a certification from BIR RAD, petitioner CIR
concludes that respondent Doosan failed to prove the fact of withholding and the
remittance made to the BIR. Respondent point out that the Certificates of Creditable
Withholding Tax at Source were identified by a person other than the one who
issued them; hence, such should not have been given probative value for being
hearsay pursuant to Section 3 6, Rule 13 0 of the Rules of Court.
Respondent Doosan posits that proof of actual remittance to the BIR and the
testimony of the withholding agent are not necessary to prove withholding of tax
under the law and settled jurisprudence. Respondent Doosan stresses that it was
able to prove that the income payments from which taxes were withheld was
included in its gross income as reflected in the income tax return as shown by the
evidence it presented in court.

Issue: Whether respondent is entitled to a tax refund.

Ruling: Yes. In the assailed Decision, the Court in Division aptly declared that aside
from compliance with Section 76 of the 1997 NIRC, as amended, a taxpayer must
satisfy the following requisites to be entitled to a refund or issuance of a TCC
representing excess CWTs, to wit:
1. The claim must be filed with the CIR within the two-year period from the date of
payment of the tax;
2. It must be shown on the return that the income received was declared as part of
the gross income; 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 amount of tax
withheld.

In the instant petition for review, petitioner CIR in esse questions respondent
Doosan's compliance with the above-stated second and third requisites.
Petitioner CIR insists that respondent Doosan's failure to present documents such
as, but not limited to, official receipts, sales invoices, detailed general ledger, sales
register, reconciliation schedules or any other documents whereby the income
payments related to the claimed creditable withholding taxes may be traced and
confirmed as forming part of the taxable income reflected in the Annual Income Tax
Returns, is fatal to its claim. With regard to the second requisite, petitioner CIR
insists that respondent Doosan's failure to present documents such as, but not
limited to, official receipts, sales invoices, detailed general ledger, sales register,
reconciliation schedules or any other documents whereby the income payments
related to the claimed creditable withholding taxes may be traced and confirmed as
forming part of the taxable income reflected in the Annual Income Tax Returns, is
fatal to its claim.
A scrutiny of the evidence on record shows that respondent Doosan presented
documentary and testimonial evidence to prove that income from which taxes were
withheld forms part of its gross income. The Court En Banc concurs with the findings
of the Court in Division that respondent Doosan was able to prove that the subject
income payments were declared as part of its gross income for CY 2009.
As pronounced by the Court in Division in the assailed Resolution, respondent
Doosan need not prove that there was an actual remittance of the taxes withheld, to
the BIR. Pursuant to Section 2.58.3 of RR No. 2-98, the remittance of the taxes
withheld to the BIR is the responsibility of the withholding agent and not the payee.
On this point, the pronouncement of the Supreme Court in CIR vs Asian
Transmission Corporation, is instructive.

Commissioner of Internal Revenue vs Isuzu Philippines Corporation

CTA EB No. 1005, August 04, 2014
Ringpis-Laban, J.

Facts: Respondent Isuzu Philippines Corporation, in January 14, 2009, received a

formal letter of demand dated January 13, 2009, together with two final assessment
notices, assessing petitioner for alleged EWT and withholding tax on compensation,
respectively for taxable year 2005, in aggregate amount of P20,129,406.70.
Respondent protested the assessments and submitted documents in support of its
protest. On December 19,2009, petitioner received respondents final decision on
disputed assessment dated December 1, 2009, together with the revised final
assessment notice and schedule per final assessment notice and FDDA. According
to the latter documents, petitioner is still liable to a deficiency EWT in the reduced
and aggregate amount of P6,464,280.71 for taxable year 2005.
Consequently, respondent filed the instant Petition for Review on January 15, 2010,
claiming among other things, that the right of the Commissioner to assess it has
prescribed and that the assessment is illegal and invalid. Meanwhile, Petitioner, in
defense, alleged that petitioner miserably failed to discharge its duty to prove that
respondents deficiency EWT assessment is illegal and invalid. Further, petitioner
states that it is a settled rule that the burden of proof is on the taxpayer contesting
the validity or correctness of assessment to prove not only that the Commissioner of
Internal Revenue (CIR) is wrong but petitioner is right, otherwise, the presumption in
favor of the correctness of tax assessment stands. As regards the matter of
prescription, respondent alleges that the right to assess the respondent does not
prescribed in accordance with Sec. 222 of the NIRC.

Issue: Whether respondent is liable to pay deficiency withholding taxes for the
taxable year 2005.

Ruling: No. The petitioner CIR does not dispute the First Division's factual findings.
It opted to stake its case on the proposition that the withholding agent's liability for
expanded withholding tax (EWT) never prescribes.

Petitioner's invocation of CIR vs. Court of Appeals, CTA, and A. Soriano Corporation
is wholly misplaced, like fitting a square peg into a round hole. In that case, the
issue was the inclusion of deficiency withholding tax in the tax amnesty application
of A. Soriano Corporation as taxpayer. The tax amnesty law categorically provided
that the amnesty does not cover withholding tax at source. There, the Supreme
Court held that any doubt in the application of the amnesty law should be resolved
in favor of the taxing authority, because amnesty, like tax exemption, must be
construed strictly against the taxpayer and liberally in favor of the taxing authority.
The opposite rule, however, applies in the matter of prescription under Section 203
of the NIRC, where it has been held that the statute of limitations on assessment
and collection of taxes is for the protection of the taxpayer and, thus, shall be
construed liberally in his favor.
Petitioner's literal and strict interpretation of Section 203 does not find support in
jurisprudence. As pointed out earlier, the jurisprudence cited by the petitioner are
off-tangent. The jurisprudence cited by the First Division in its Decision, on the other
hand, included withholding taxes and EWT in the coverage of Section 203. In
another case, the ambit of Section 203 was even extended to deficiency
documentary stamp tax.
The Court thus cannot give credence to the unsupported theory of the petitioner
that the assessment and collection of deficiency EWT under Section 203 of the NIRC
are "imprescriptible."