According to existing jurisprudence [Commissioner of Internal Revenue (CIR) vs. Mirant], GR No. 171742, in claiming a refund of excess and unutilized Creditable Withholding Tax (CWT), a taxpayer is required to: 1) File the claim with the Bureau of Internal Revenue (BIR) within the two-year period from the date of payment of the tax; 2) Show on his income tax return (ITR) that the income received was declared as part of the gross income; and 3) Establish the fact of withholding via a copy of the withholding tax certificate duly issued by the withholding agent to the taxpayer showing the amount paid and the amount of tax withheld.
However, in a 2013 decision, the Court of Tax Appeals (CTA) ruled that, in addition to the three conditions above, it is also essential for the taxpayer to present the quarterly ITRs of the succeeding year to prove that the excess CWT was not carried over to the succeeding taxable quarters. For failure to present the first, second and third quarterly ITRs for the succeeding year, the taxpayer’s claim for refund was denied by the CTA due to non-substantiation of the CWT. This is despite the taxpayer having offered and submitted the annual ITR/Final Adjustment Return (FAR) for the same year which indicates that the refund claimed was not carried over.
On appeal, the Supreme Court overturned the CTA decision and granted the refund based on the following reasons:
First, Section 76 of the Tax Code does not mandate the submission and presentation of the quarterly ITRs of the succeeding quarters of a taxable year in a claim for refund. The law merely requires the filing of the ITR/FAR for the preceding -- not the succeeding -- taxable year.
Second, Revenue Regulations (RR) No. 6-85 as amended by RR 12-94 merely provides that claims for refund of income taxes deducted and withheld from income payments shall be given due course only (1) when it is shown on the ITR that the income payment received is being declared part of the taxpayer’s gross income; and (2) when the fact of withholding is established by a copy of the withholding tax statement, duly issued by the payor to the payee, showing the amount paid and the income tax withheld from that amount. Even the BIR’s own regulations do not require the presentation of the quarterly ITRs to substantiate a claim for CWT refund.
Interestingly, the Supreme Court clarified that the case of Philam Asset Management, Inc. vs. CIR cannot be cited as a precedent to hold that the presentation of the quarterly ITR is not indispensable in a CWT refund claim. In that case, the quarterly ITRs for the succeeding year were presented when the taxpayer filed an administrative claim for the refund of its excess taxes withheld in 1997.
The logic in not requiring quarterly ITRs of the succeeding taxable years remains true to this day. What the Tax Code requires is proof that the claimant is entitled to the claim, including the fact of not having carried over the excess credits to the subsequent quarters or taxable year. The law, however, does not provide that to prove such a fact, succeeding quarterly ITRs are absolutely necessary.
The court did not make an absolute statement as to the indispensability of the quarterly ITRs in a claim for refund for no court can limit a party to the means of proving a fact for as long as they are consistent with the rules of evidence and fair play.
To reiterate, what the Tax Code merely requires is for the taxpayer to sufficiently prove that the excess CWT being claimed for refund was not carried over.
A refund is in the nature of an exemption and must be construed against the entity claiming the refund and in favor of the taxing authority. Be reminded, however, that once the requirements laid down by the law have been met, the claimant should be considered successful in discharging its burden of proving its right to the refund.
Thereafter, the burden of going forward with the evidence shifts to the opposing party (i.e., the BIR). It is then the turn of the opposing party to disprove the claim by presenting contrary evidence and not burden the claimant to present additional evidence..
Cherry Amor C. Venzon-Ongson is an assistant manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
cherry.amor.ongson@ph.pwc.com.
source: Businessworld
No comments:
Post a Comment