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."

AEGIS PEOPLESUPPORT, INC. [FORMERLY, PEOPLESUPPORT (PHILIPPINES), INC.] vs Commissioner of

Internal Revenue
CTA EB Case No. 996, August 04, 2014
Cassanova, J.

Facts: Petitioner, Aegis PeopleSupport, Inc., is a domestic corporation duly organized and existing under
and by virtue of the laws of the Republic of the Philippines, with principal office at PeopleSupport
Center, Ayala corner Senator Gil Puyat Avenues, Makati City.
Also, petitioner is registered with the Philippine Economic Zone Authority (PEZA), under its former name
PeopleSupport (Philippines), Inc., as a new Ecozone IT (Export) Enterprise to engage in the establishment
of a contact center which will provide outsourced customer care services and business process
outsourcing (BPO).
On April 15, 2008, petitioner filed with the BIR, through the electronic filing and payment system (eFPS),
its Annual Income Tax Return (ITR) for taxable year 2007. Thereafter, petitioner filed its amended
Annual ITR for taxable year 2007 via the BIR's eFPS.
Subsequently on April 8, 2010, petitioner filed with the BIR Revenue District Office an administrative
claim for refund or issuance of tax credit certificate (TCC) and an Application for Tax Credits/Refunds for
its excess payment of income tax for taxable year 2007 in the amount of P66J 771 830.95. Respondent's
inaction on petitioner's administrative claim for refund prompted the filing of the instant Petition for
Review on April 15, 2010.
Petitioner is of the considered view that since its registered activity is the establishment of a contact
center, then, all activities related to the contact center must be covered by tax incentives. It insists that
the activity that led to the forex gain intrinsically involves: (1) the sale of USD that petitioner earned
through the performance of its registered activity of establishing and operating a contact center; and (2)
the purchase of Pesos needed to pay operational expenses can easily be considered as related to
petitioner's business.
Respondent on the other hand claimed that Petitioner failed to demonstrate that the tax which is the
subject of this case was erroneously or illegally collected; that in an action for tax credit or refund the
burden is upon the taxpayer to prove that he is entitled thereto; and failure to discharge the said burden
is fatal to the claim. Claims for refund are construed strictly against the claimant, the same partake the
nature of exemption from taxation and as such, they are looked upon with disfavor.

Issue: Whether or not the foreign exchange gain derived by petitioner, through its hedging contract with
Citibank, is attributable to petitioner's registered activity with the Board of Investment and PEZA as
contact center.

Ruling: No. We affirm the CTA First Division's ruling in the assailed Resolution and Decision denying
petitioner's Petition for Review for insufficiency of evidence. Records show that while petitioner may
have shown that its earned USD as a contact center is being used to purchase Pesos, through its hedging
contracts with Citibank, in order to pay for the ordinary and necessary expenses of petitioner's
customer-support business, the fact still remains that the subject foreign exchange gains were derived
from the foreign exchange contracts entered into by petitioner with Citibank and not from its registered
activity as a contact center nor necessarily related to it.
Petitioner's hedging activity involves the sale of specified amounts of dollar to the bank on predetermined dates and at pre-determined exchange rates. Considering petitioner's hedging activity is
outside of the registered activity as a contact center, then, the income tax holiday on its registered
activity may not be extended to the said foreign exchange gains.
To enjoy the incentives granted under the PEZA law, the taxpayer's income must be effectively related
with the conduct of its registered trade or business. Likewise, Executive Order No. 226 provides that the
incentives granted under the said law shall only be 'to the extent engaged in a preferred area of
investment.' Thus, for petitioner to enjoy the income tax holiday incentive provided under the PEZA law
and EO No. 226, petitioner's income must be effectively related with the conduct of its registered trade
or business.
An effectively related income may be interpreted to mean as those income derived from the business
activity in which the corporation is engaged in, considering that a taxpayer may also receive income not
directly connected or related to its business activity. Consequently, petitioner must also establish that its
income relating to the subject tax refund is actually gained or received by it in relation to the conduct of
its registered business activity.
Petitioner therefore, has the burden of proving that the foreign exchange gain of P189,079,517.00 is
attributable to its registered activity with the 801 and the PEZA, specifically, the establishment of a
contact center which will provide outsourced customer care services and business process outsourcing
However, petitioner's evidence failed to support its allegation that the activities from which the amount
of foreign exchange gain arose are attributable to activities with income tax incentive, as it failed to
establish the nature of the foreign exchange contracts entered by it with Citibank from which the
subject foreign exchange gains were derived.

ONG BENG GUI (operating under the name and style "MUCH PROSPERITY TRADING") vs Commissioner
of Internal Revenue
CTA Case No. 8410, Sept. 08, 2014
Cassanova, J.

Facts: Petitioner is a Filipino, married, of legal age and is residing at 565 Muelle de Binondo, Manila. He
is operating a wholesale and general merchandise business under the name and style "MUCH
PROSPERITY TRADING", which has applied for and in the process of cessation/retirement.
On December 14, 2009, after resolving to retire his business, petitioner applied with the Department of
Labor and Employment ("DOLE'') for authority to terminate thirty-seven (37) employees effective
January 16, 2010. Petitioner paid P1,167,191.00, as separation pay, to the 37 terminated employees in
December 2009.
On January 12, 2010, petitioner filed through Electronic Filing and Payment System ("EFPS") his monthly
Withholding Tax on Compensation ("WTC") for the month of December 2009 and paid the
corresponding WTC in the amount of P320,099.79 on the separation pay he paid to the 37 terminated
employees. Realizing that the amount of P1,167,191.00 separation pay he paid to his 37 terminated
employees should not have been subjected to WTC pursuant to Sec. 32 (B)(6)(b) of the Tax Code and
Sec. 2. 79 (B) of Revenue Regulations No. 2-98, as amended, petitioner filed and paid through EFPS on
January 19, 2010, an amended BIR Form 1601-C for the month of December 2009, reflecting the correct
WTC of P16,104.82, properly exempting the separation pay of P1,167,191.00 from WTC.
On February 2, 2010, petitioner filed an administrative claim for refund with the Revenue Accounting
Division and Revenue District Office No. 29 (San Nicholas/Tondo) of the BIR through Metropolitan Bank
and Trust Company ("MBTC''), the Authorized Agent Bank which handled petitioner's aforementioned
EFPS payment.
Due to respondent's inaction on petitioner's claim for refund and, to toll the running of the 2-year
prescriptive period, the instant Petition for Review was filed with this Court on January 11, 2012.
Respondent, in his answer, raised the defense of lack of cause of action. In order to qualify for an
exemption from income taxes, the official or employee must be actually separated from the service for
any of the causes aforementioned and the official or employee receives separation pay or benefits from
the employer as a consequence of such separation. It follows therefore, that in order to be entitled to a
claim for refund of overpaid or erroneously paid withholding taxes on separation pay, petitioner must
prove that:
(1) its employees were actually separated from employment due to causes beyond their control;
(2) its employees actually received separation pay and other benefits as a consequence of such
involuntary separation;
(3) it actually withheld income taxes on the employees' separation pay/other benefits; and

( 4) it actually remitted to the BIR the withholding taxes on the employees' separation pay/other
benefits.
Petitioner's bare allegations on full compliance with the requirements of law for entitlement to claim a
tax refund for payment on tax-exempt separation pay of the alleged terminated employees is selfserving at its best. And assuming without admitting that Petitioner indeed filed for retirement from
business, the self-serving allegation by Petitioner that the affected employees were properly paid their
separation pay in accordance with law in the month of December 2009 is fatal to the Petition.
There is no actual proof of the alleged payment of separation pay and the amount of separation pay
paid by Petitioner to the dismissed employees. Clearly therefore, the failure of Petitioner to establish
actual payment of separation pay to his affected employees casts doubt on whether the Petitioner
withheld the correct amount of income tax and that the correct amount was remitted.

Issue: Whether Petitioner can validly claim tax exemption and claim refund for overpayment of taxes.

Ruling: Yes. According to the cited law, any amount paid by an employer to his employees as separation
pay, wherein the separation resulted from the latter's involuntary termination from service (i.e.
cessation of business), is exempt from income tax and consequently from withholding tax.
Records show that on December 14, 2009, petitioner resolved to retire his business and applied to
terminate thirty seven (37) employees with the Department of Labor and Employment (DOLE) effective
January 16, 2010.
Consequently, petitioner paid separation pay, in full, to 31 of his employees in the total amount of
P1,167,191.00 as indicated in the notarized statements of waiver and quitclaim entitled "PAGPAPALAYA
SA LAHAT NG OBLIGASYON" duly executed and signed by the said employees in the presence of two (2)
DOLE Labor Employment Officers.
Petitioner avers that, while the separation pay was disbursed in full, his accountant erroneously
withheld withholding taxes on compensation on separation pay, which he paid in behalf of his
employees. Realizing that separation pay is exempt from withholding tax, petitioner filed his amended
BIR Form for the month of December 2009 and paid WTC in the amount of P16,104.82 without
deducting his previously remitted tax.
However, the amount P161,744.60 taxes withheld and remitted for the year 2009 per the amended
Computation of Withholding Taxes for 2009 does not tally with that reflected in petitioner's Annual
Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes while
petitioner reported in his BIR Form No. 1604-CF the amount of P181,906.05 as total taxes withheld and
remitted for the year 2009, which is of higher amount, the same cannot be considered to include the
amount due of P161,744.60 since petitioner did not provide the Monthly Remittance Returns of Income
Taxes Withheld on Compensation for January to November 2009 to ascertain the amounts withheld and
remitted for the said months.

As such, petitioner may be entitled to a refund only to the extent of what was paid per his BIR Forms No.
1601-C (original and amended) for December 2009 in excess of what was due.
Basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimi
juris against the entity claiming the same. The burden of proof rests upon the party claiming exemption
to prove that it is, in fact, covered by the exemption so claimed.

TRULLY NATURAL FOOD CORP. vs Department of Finance

CTA EB No. 1077, September 08, 2014
Cotangco-Manalastas, J.

Facts: Petitioner operates a dried tropical fruit processing facility located at National Highway, Brgy.
Glamang, Polomolok, South Cotabato. Its primary business is to process and market high quality
dehydrated tropical fruits for domestic and export consumption.
In 2006 and 2007, various shipments of printed plastic rolls were imported and entered by petitioner
through the customs port in General Santos City. Petitioner alleges that on May 30, 2007, it received a
letter from the Chief, Assessment Division Officer of the BOC, General Santos City, duly noted by then
Collector of Customs, Atty. Elvira Cruz, collecting the duties, taxes, including penalties and surcharges
due on its importations of printed plastic rolls on the basis of its failure to present the DOF exemptions.
In view thereof, petitioner requested for ten (10) days to present the DOF exemption under the belief
that its Manila office must have copies thereof.
For petitioner's failure to present its DOF exemption, the Collector of Customs refused to sign
petitioner's export documents. However, petitioner managed to have the shipments released and
liquidated from the customs warehouse in General Santos City without paying taxes and duties. Also,
petitioner submitted documents showing its alleged exemption from duties and taxes after the
shipments were released from the customs warehouse.
Petitioner received a demand letter dated August 14, 2007 from then BOC Commissioner Napoleon L.
Morales reiterating the collection of duties and taxes as previously demanded by then Collector of
Customs Atty. Elvira Cruz on petitioner's importation of printed plastic rolls. In response, Petitioner filed
an Answer to Commissioner Morales' demand letter on September 7, 2007 reiterating its exemption
from customs duties and taxes.
Meanwhile, the DOF Indorsements, which previously classified petitioner's subject imported plastic rolls
as conditional-free importations under Section 105 (m) of the TTCP, have been ratified by then DOF
Undersecretary Gaudencio A. Mendoza, Jr., through an Indorsement dated February 27, 2008.
The case was endorsed to the Secretary of Finance and feeling aggrieved by the decision of the latter,
the petitioner filed this instant case.

Issues:
(1) Whether or not the Special Second Division erred in affirming the assessment made by the
Department of Finance over the subject imported plastic rolls despite being conditionally-free
importations under Section 105(m) of the Tariff and Customs Code; and
(2) Whether or not the Special Second Division erred in not finding that the collection of duties and
taxes by the Bureau of Customs has prescribed.

Ruling:
No. The above-mentioned issues can be summarized into one main issue, i.e., whether or not petitioner
failed to comply with the conditions set forth under Section 105 (m) of the TCCP and Customs
Administrative Order No. 7-72, as amended, for it plastic rolls to be classified as conditionally-free
importations.
Based on the foregoing provision, the articles shall be exempt from the payment of import duties upon
compliance with the formalities prescribed in, or with, the regulations which shall be promulgated by
the Commissioner of Customs with the approval of the Secretary of Finance.
Also, based on the foregoing provisions and contrary to respondent's allegation, "documents from the
DOF proving the validity and existence of petitioner's exemption from duties and taxes" (i.e., DOF
exemption) is not included in the list of documents required to be presented for the articles to be
considered conditionally-free importations. Thus, as correctly held by the Court in Division, there is no
legal basis for respondent to require petitioner to present the same upon entry of the said articles.
With regard to the other documentary requirements, the Court in Division observed that while
petitioner was able to post a bond, the required Certificates of Identification and the corresponding
Affidavits of the Importer did not bear the stamped receipt of the BOC nor the signature or initials of the
receiving officer thereof showing the dates when such documents were respectively filed. Thus, the
Court in Division concluded that there is really no way to determine if, indeed, said documents were
presented at the time of entry of the subject shipments.
Despite having posted a bond and presenting the Certificates of Identification, We agree with the
conclusion of the Court in Division that petitioner failed to comply with the implementing rules with
regard to the submission of the Affidavits of the Importer.
First, the affidavits did not bear the stamped receipt of the BOC nor the signature or initials of the
receiving officer thereof showing the dates when such documents were filed. Thus, there is no way to
determine if, indeed, said documents were presented at the time of entry of the subject shipments.
Second, the affidavits failed to state the value of the imported printed plastic rolls in violation of CAO
No. 11-74, as amended.
Lastly, the affidavits were not properly notarized. The jurat in the affidavits failed to state the true dates
when the same were signed and sworn to before the Notary Public.
From all the foregoing, the Court finds that petitioner failed to substantially comply with the
documentary requirements provided under CAO No. 7-72, as amended, particularly, on the submission
of the Affidavit of the Importer. Thus, petitioner's importation of printed plastic rolls for 2006 and 2007
cannot be considered as conditionally-free importations and consequently, subject to payment of
import duties. For failure of petitioner to pay the corresponding import duties on its importation,
respondent had a ground to suspend petitioner's accreditation and access to the ASYCUDA/ ACOS.