REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SECOND DIVISION

AG COUNSELORS CORPORATION, CTA CASE NO. 9329

Petitioner,
Members:

- versus - CASTANEDA, JR., Chairperson,

MINDARO-GRULLA and
BACORRO-VILLENA, JJ.

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. M~R fl ·,_ 2020 '· _ , , .
, I-
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

RESOLUTION
-
CASTANEDA, JR., J. :

Submitted before this Court are the following:

1. petitioner's Motion for Reconsideration filed on November

11, 2019 without respondent's comment as per Records Verification
Report dated December 19, 2019; and,

2. respondent's Motion for Partial Reconsideration, filed

through registered mail on November 8, 2019 and received by the
Court on November 19, 2019, without petitioner's comment as per
Records Verification Report dated December 19, 2019.

Both parties seek reconsideration of the Decision promulgated

on October 25, 2019, in fi nding that petit ioner sufficiently proved its
entitlement to refund, in a reduced amount, its excess creditable
withholding taxes (CWT), the dispositive portion of which reads as
follows: 9t---
RESOLUTION
CTA Case No. 9329
Page 2 of 12

WHEREFORE, premises considered, petitioner's

Petition for Review is PARTIALLY GRANTED.
Accordingly, respondent is ORDERED TO REFUND OR
TO ISSUE A TAX CREDIT CERTIFICATE in favor of
petitioner in the reduced amount of Ten Million Nine
Hundred Ninety-Two Thousand Seven Hundred
Eighty-Six and 35/100 Pesos (P10,992,786.35),
representing petitioner's excess and unutilized CWT for
C'( 2013.

SO ORDERED.

Petitioner's Motion for Reconsideration

In its Motion, petitioner raises the following grounds for this

Court's consideration:

I. The Court erred in disallowing P6,111,056.00

representing the Prior Year's Excess Credits in the Annual
ITR of CY 2012;

II. The Court erred in disallowing P2,540,469.74 of 2012

CWT supposedly supported by CWT certificates indicating
a TIN different from petitioner's registered TIN; and

III. The Court erred in disallowing P4,114,886.00 of 2013

CWT supposedly from petitioner's failure to submit CWT
certificates relating thereto.

As to the first ground, petitioner claims that Section 2.58.3(C) 1

of Revenue Regulations (RR) No. 2-98, as amended, automatically
allows the crediting of prior year's excess credits against the income
tax due in the succeeding taxable year. As such, petitioner should no
longer be required to submit its Bureau of Internal Revenue (BIR) ~

1 "SECTION 2.58.3. Claim for Tax Credit or Refund. -

XXX

C) Excess Credits -An individual or corporate taxpayer's excess expanded withholding

tax credits for the taxable quarter/year shall automatically be allowed as a credit against his
income tax due for the taxable quarters/years immediately succeeding the taxable
quarters/years in which the excess credit arose, provided he submits with his income tax
return, a copy of the first page of his income tax return for the previous taxable period showing
the amount of his excess withholding tax credits, and on which return he has not opted for a
cash refund or tax credit certificate."
RESOLUTION
erA Case No. 9329
Page 3 of 12

Form No. 2307 for calendar year (CY) 2012, to substantiate the
P6,111,056.00 prior year's excess credits as declared in its annual
Income Tax Return {ITR) for the same year, because basically the
said amount was not part of its claim for refund for CY 2013.

More so, petitioner also argues that respondent had the full
opportunity during the audit of its books of accounts and accounting
records for CY 2011 to verify the amount of P6,111,056.00 together
with the ONT for the said year, i.e. respondent issued a Letter of
Authority for the audit of petitioner's books of accounts and
accounting records and the verification of its internal revenue tax
liabilities for CY 2011. Notably, in his audit, respondent did not
disallow any of petitioner's CWT for CY 2011, including the
P6,111,056.00 carried forward to 2012. In fact, in the Preliminary
Assessment Notice {PAN) dated January 7, 2015, respondent's basic
deficiency income tax assessment against petitioner for CY 2011 in
the amount of P707,848.38 was later confirmed in the Formal
Assessment Notice (FAN) No. IT-ELA78713-ll-15-208 dated January
23, 2015, thereby supporting the fact that there was no disallowance
made of the P6,111,056.49 ONT excess credits forwarded to 2012.

With regard to the second ground, petitioner maintains that it

has sufficiently proven its entitlement to the ONT of P2,540,469.74
notwithstanding that the said ONT certificates indicated a TIN
different from petitioner's registered TIN for the following reasons:
(a) the ONT certificates were issued by respondent's withholding
agents, i.e., these were not generated by petitioner itself and other
than the erroneous TIN indicated, the ONT Certifications issued by
respondent's own withholding agents substantially comply the form
prescribed by Section 2.58(8) 2 of RR No. 02-98; (b) in the CTA case
of Jardine Lloyd Thompson Insurance Brokers, Inc. v. Commissioner
of Internal Revenue (CTA Case No. 8471, dated April 14, 2015), this
Court gave credence and probative value to ONT Certificates
notwithstanding incorrect TIN where the payee/taxpayer's name and ,..._

2 "SECTION 2.58. Returns and Payment of Taxes Withheld at Source. -

XXX

B) Withholding tax statement for taxes withheld- Every payor required to deduct and
withhold taxes under these regulations shall furnish each payee, whether individual or
corporate, with a withholding tax statement, using the prescribed form (BIR Form 2307)
showing the income payments made and the amount of taxes withheld therefrom, for every
month of the quarter within twenty (20) days following the close of the taxable quarter
employed by the payee in filing his/its quarterly income tax return. Upon request of the payee,
however, the payor must furnish such statement to the payee simultaneously with the income
payment. For final withholding taxes, the statement should be given to the payee on or before
January 31 of the succeeding year."
RESOLUTION
CTA case No. 9329
Page 4 of 12

address are indicated therein; and (c) the disallowed P2,540,469.74

represents 2012 ONT and is not among the P24,130,218.00 excess
or unutilized CWT for 2013 sought to be refunded or issued a tax
credit certificate.

Lastly, as to the third ground, petitioner asserts that it is

erroneous to require it to further prove the fact of withholding of the
remaining P4,114,886.00 ONT, out of the aggregate amount of
P28,243,967.00 for CY 2013, given that its claim was only for
P24,130,217.00. Petitioner no longer submitted the ONT certificates
for the remaining P4,114,886.00 inasmuch as that these already
were applied against petitioner's income tax liability for 2013 in
addition to the Pl3,189,614.00 prior's year's excess credits and,
hence, may no longer be the subject of a claim for refund or issuance
of tax credit certificate.

Petitioner submits that despite its non-submission, it does not

mean that the P4,114,886.00 was not appropriately substantiated
because when it filed its ITR for CY 2013, it submitted all the CWT
certificates for the said year, i.e., for the aggregate amount of
P28,243,967.00.

After due consideration, this Court does not agree with

petitioner.

As to petitioner's first and third contentions, it must be stressed

that the cases filed before this Court are litigated de novo, thus,
party-litigants should prove every minute aspect of their cases. 3
Accordingly, there should be no room for inconsistencies, especially
on the part of petitioner-claimant, who has the burden of proof to
establish the factual basis of its claim for tax refund.

In the CTA case of Commissioner of Internal Revenue vs.

Philippine National Ban!(l, the CTA En Bane, explained the need to
substantiate prior year's excess credit in claims involving excess CWT
in this wise, viz.:

"Petitioner contravenes the above findings and

insists that the submission of its Annual ITR for taxable
year 2009 and the Schedule of Creditable Withholding fl.-

3 Rafael Arsenio S. Dizon v. Court of Tax Appeals, eta!., G.R. No. 140944, April 30, 2008.
4 CTA EB Nos. 1615 & 1617 (CTA Case No. 8636}, April 25, 2018.
RESOLUTION
CTA case No. 9329
Page 5 of 12

Taxes for years 2000 to 2009, 2011 and 2013 are

sufficient to prove the existence of prior year's excess
credit that may be refundable in 2010.

We do not agree with petitioner PNB's contentions.

The Court En Bane agrees with the decision of the

Court in Division that there is a need to substantiate prior
year's excess credit in claims involving excess CWT hence
the petitioner has the burden to prove that it had indeed
sufficient prior year's excess CWT to cover its income tax
liability for 20 10, otherwise, the income tax liability for
2010 shall be offset against the substantiated unutilized
CWT for 2010.

It is clear that the subject claim pertains to

'overpaid taxes' which the petitioner/ taxpayer would like
to refund based on the relevant provisions of the law.

To our collective minds, we believe that

overpayment must be proven. The excess credits
may be sourced from prior year's excess credits
and those that may have been withheld in the
current year. The remaining balance after these
tax credits have been applied to the current
income tax liability is, strictly speaking, the
overpaid and refundable amount. Hence, if the
Court requires the substantiation of the current
year's tax credit as discussed earlier, the same
requirement should be similarly applied to the
prior year's excess credit.

This, petitioner failed to do so as correctly

determined by the Court in Division. The Schedule of
Creditable Withholding Taxes for the years 2000 to 2009
and 2011 to 2013 submitted by petitioner is an
incomplete proof of its prior year's excess credits to
substantiate its claim for refund for taxable year 2010."
(Emphasis supplied)

Furthermore, this Court also finds the CTA case of Marionnaud

Philippines_ Inc. vs. Commissioner of Internal Revenu& as instructive 3---

5 CTA case No. 8807, February 8, 2017.

RESOLUTION
CfA Case No. 9329
Page 6 of 12

on the matter that Section 2.58.3(C) of RR No. 2-98 should only be

applied at the administrative level, not at the judicial level, to wit:

"As a necessary consequence of the doctrine that

'(a)s cases filed before it are litigated de novo, party
litigants should prove every minute aspect of their cases;
Section 2.58.3(C) of RR No. 2-98, as it is being invoked
by petitioner, should be interpreted in light of the said
doctrine. Said provision states:

'SECTION 2.58.3. Claim for Tax Credit or

Refund.-

XXX

(C) Excess Credits - An individual or

corporate taxpayer's excess expanded
withholding tax credits for the taxable
quarter/year shall automatically be allowed as
a credit against his income tax due for the
taxable quarters/years immediately
succeeding the taxable quarters/years in
which the excess credit arose, provided he
submits with his income tax return, a copy of
the first page of his income tax return for the
previous taxable period showing the amount
of his excess withholding tax credits, and on
which return he has not opted for a cash
refund or tax credit certificate.'

Thus, the above-quoted Section 2.53.3(C)

finds application only from the administrative
stand point, i.e., only insofar as the Bureau of
Internal Revenue is concerned, when the taxpayer
is claiming before it a tax refund or credit; and not
when proving a tax refund or credit before this
Court. This is especially true in that the said
administrative agency has all the administrative
machinery available to it to easily determine
whether the supposed excess credits do exist. This
is not so in the case of this Court wherein it has to
rely only on all the evidence presented/offered by
the parties and admitted by the Court, subject only
to the rules of judicial admissions and judicial j'L
RESOLUTION
CTA Case No. 9329
Page 7 of 12

notice, to dispose of a refund case." (Emphasis

supplied)

Hence, for petitioner to properly claim that it has enough

creditable tax withheld to cover the income tax liabilities for CY 2013
in the amount of Pl7,303,364.00, it has the duty to prove the validity
of its excess CWT not only those incurred in CY 2013 but also those
incurred in prior years.

As to the last remaining ground raised by petitioner - that it

has sufficiently proven its entitlement to the P2,540,469.74
notwithstanding that the said CWT certificates indicated a TIN
different from petitioner's registered TIN, this Court is not swayed.
This is for the simple reason that CWT bearing a different TIN should
be deemed not belonging to petitioner, thus, the disallowance of the
corresponding CWT of P2,540,469.74 must remain.

It is well settled, that the Court simply cannot go beyond what

is indicated on the documents, which the taxpayer-claimant itself
presented, lest it shall violate the elementary rule that judgments
must be based on the evidence presented before the court. 6 Verily,
the sufficiency of a claimant's evidence and the determination of the
amount of refund, as called for in this case, are questions of fact,
which are for the judicious determination by the CTA of the evidence
on record. 7 In fine, the determination by the CTA must rest on all the
evidence introduced and its ultimate determination must find support
in credible evidence. 8

Besides, the taxpayer claiming the tax credit or refund like

petitioner has the burden of proving that it is entitled to the refund or
credit, by submitting evidence that it has complied with the
requirements laid down in the tax code and the BIR's revenue
regulations under which such privilege of credit or refund is
accorded. 9

Furthermore, actions for tax refund, as in this case, are in the

nature of a claim for exemption and the law is not only construed in ;..-
6 Robert F. Mal/ilin v. Luz G. Jamesolamin and the Republic of the Philippines, G.R. No. 192718,
February 18, 2015.
7 Fortune Tobacco Corporation v. Commissioner of Internal Revenue, G.R. No. 192024, July 1,
2015.
8 Commissioner ofInternal Revenue v. Hantex Trading, G.R. No. 136975. March 31, 2005.
9 Microsoft Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 180173, April 06,
2011.
RESOLUTION
CTA Case No. 9329
Page 8 of 12

strictissimi juris against the taxpayer, but also the pieces of evidence
presented entitling a taxpayer to an exemption is strictissimi
scrutinized and must be duly proven. 10

Since petitioner failed to present sufficient evidence to prove it

entitlement to the disallowed ONTs, i.e., the unsubstantiated prior
year's excess credits (P6,111,056.00), the unsubstantiated ONTs
incurred in CY 2013 (P4,114,886.00), and the cwrs supported by
certificates bearing a different TIN (P2,540,469.74), such
disallowances are therefore proper.

Respondent's Motion for Partial Reconsideration

In his Motion, respondent raises the following grounds in

support of arguments, viz.:

I. The testimonies of the petitioner's witnesses cannot be

given probative value for being hearsay.

II. Petitioner failed to present documents to prove that the

amount claimed was actually remitted and paid to the
BIR.

III. Proof of actual remittance to the BIR of the withheld

taxes and testimonial evidence of the payors and
withholding agents are required.

Respondent claims that petitioner failed to present any

competent witness who could testify on the veracity and authenticity
of the documentary exhibits that were offered by the petitioner in
this case. He continues that, petitioner's witnesses namely, Ms.
Victoria D. Frejas, Ms. Katrina Piacente and the court-commissioned
Independent Certified Public Accountant (ICPA) do not have any
personal knowledge as to the execution of the documents that were
identified in their respective judicial affidavits. In fact, their
testimonies were merely based on records which is contrary to the
rules of evidence, thus, it is imperative that the maker/s of the
document must take the witness stand. :;<---

10 Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue,

G.R. No. 159490, February 18, 2008.
RESOLUTION
CTA Case No. 9329
Page 9 of 12

Respondent also requests that this Court take a second look at

petitioner's compliance with the requirement as to whether the
income from which the taxes were withheld was included as part of
its gross income. He cites the CTA decisions of Jardine Lloyd
Thompson Insurance Brokers, Inc. vs. CIR (CTA Case No. 7916,
September 2~ 2011) and of Havi Food Service~ Phils., Inc. vs. CIR
(CTA Case No. 7735, February 28, 2011), wherein the Court found
discrepancies between the gross income per annual ITR vis-a-vis the
total income per BIR Form No. 2307, and that petitioners therein
failed to reconcile the said discrepancies. Consequently, it was held
that petitioners should have submitted documents such as, but not
limited to, invoices, official receipts, general ledger, sales journal, and
other documents whereby the Court can verify that it properly
reported such discrepancies.

Pursuant to the foregoing cases, respondent submits that the

failure of the petitioner to present documents such as, but not limited
to, official receipts, sales invoices, detailed general ledger, sales
register, reconciliation schedules or any other document whereby the
income payments related to the claimed creditable withholding taxes
may be traced and confirmed as forming part of the taxable gross
income reflected in the annual ITR, is fatal to its claim for refund.

Lastly, respondent submits that the certificates of creditable

taxes withheld, accomplished by the withholding agents, allegedly
showing the amount deducted and withheld from its income in
support of the tax refund, do not constitute conclusive evidence of
payment and remittance of the withheld taxes to the BIR. The act of
withholding is one thing while the act of remittance is another. The
best evidence or proof of remittance is the certification from the
BIR's Revenue Accounting Division as to the fact of remittance of the
tax withheld. As borne out by the records of this case, no such
certification was proffered by the petitioner. Thus, the failure to
prove that the creditable taxes withheld by the payors were indeed
remitted to the BIR is fatal to its claim for refund.

This Court finds respondent's arguments bereft of merit.

Contrary to respondent's first allegation, petitioner's

documentary exhibits were substantially identified by its witnesses,
including the court-commissioned ICPA. It should be noted that the
documents alleged to be hearsay evidence are voluminous
documents examined and verified by the Court-commissioned ICPA;...
RESOLUTION
CTA Case No. 9329
Page 10 of 12

in accordance with Section 5 of Rule 12 in relation to Rule 13 of the

Revised Rules of the Court of Tax Appeals11 • More so, this Court has
already conducted a thorough examination of the documents
presented by petitioner and scrutinized the contents thereof.
Accordingly, this Court made specific factual findings which became
the basis of the ruling to partially grant the present Petition for
Review.

Further, in the case of Commissioner of Internal Revenue vs.

Philippine National Bank12, the Supreme Court held that it is not
necessary for the person who executed and prepared the certificate
of creditable tax withheld at source to be presented in court and to
testify personally to prove the authenticity of the certificates. The
certificate is complete in the relevant details that would aid the
courts in the evaluation of any claim for refund of excess creditable
withholding taxes. Thus, upon presentation of a withholding tax
certificate complete in its relevant details and with a written
statement that it was made under the penalties of perjury, the
burden of evidence then shifts to the Commissioner of Internal
Revenue to prove that (1) the certificate is not complete; (2) it is
false; or (3) it was not issued regularly.

As to respondent's second ground, the Court finds petitioner

to have sufficiently proven its compliance with the third requirement
for refund of ONT i.e., that the income upon which the taxes were
withheld must be included in the return of the recipient

In the assailed Decision, the Court has verified the findings of

the ICPA that the total income payments per ONT certificates can
be traced to petitioner's submitted Statement of Accounts (SOA),
"General Journal Book't1 3 for CYs 2009, 2012 and 2013 and
"Summary of Income Payments Traced from SOA to Summary of
Expenses Accounts to Out-of-Pocket Expenses CYs 2012 and
2013''1 4 and Schedule of Revenue for the CYs 2009, 2012, and
2013 15 . Thus, notwithstanding the noted difference of
P2,121,038.17, with an equivalent CWT of P318,135.75, which the
Court disallowed, petitioner has sufficiently proven its entitlement to
a refund of its excess CWT for CY 2013 net of disallowances.~

11
A.M. No. 05-11-07-CTA, November 22, 2005.
12
G.R. No. 180290, September 29, 2014.
13 Exhibit "P-18".
14 Exhibit "P-20".
15
Exhibit "P-16-1", "P-16-2", and "P-16-3", respectively.
RESOLUTION
CfA Case No. 9329
Page 11 of 12

Finally, this Court also does not agree with respondent's

contention that proof of actual remittance to the BIR of the
withheld taxes is required.

Again, the Supreme Court held in the case of Commissioner of

Internal Revenue vs. Philippine National Bank16 that the certificate
of creditable tax withheld at source is competent proof to establish
the fact that taxes are withheld, the pertinent portion of the
decision is quoted herein as follows:

"Petitioner's posture that respondent is required to

establish actual remittance to the Bureau of Internal
Revenue deserves scant consideration. Proof of actual
remittance is not a condition to claim for a refund of
unutilized tax credits. Under Sections 57 and 58 of the
1997 National Internal Revenue Code, as amended, it is
the payor-withholding agent, and not the payee-refund
claimant such as respondent, who is vested with the
responsibility of withholding and remitting income taxes.

This court's ruling in Commissioner of Internal

Revenue v. Asian Transmission Corporation, citing the
Court of Tax Appeals' explanation, is instructive:

. . . 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 ... has no control over the remittance of the jl-
16
Supra No. 12.
 RESOLUTION
CTA case No. 9329
Page 12 of 12

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." (Citations
omitted)

Thus, petitioner does not need to prove actual remittance of

the taxes to the BIR. As such, by presenting in evidence the CWT
certificates, petitioner has sufficiently established that the taxes were
indeed withheld.

In view of the foregoing, this Court finds no compelling reason

to reverse, set aside or modify the Decision promulgated on October
25, 2019.

WHEREFORE, premises considered, petitioner's Motion for

Reconsideration and respondent's Motion for Partial Reconsideration
are both DENIED for lack of merit.

SO ORDERED.

~C-~~"~
Jt:iANITO C. CASTANED~ JR.
Associate Justice

We Concur:
'-

~NM~~c~
CIELITO N: MINDARO-~RULLA JEAN I"'MI"[".L, BACORRO-VILLENA
Associate Justice