THE Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to return P290 million in excess withholding tax paid by SM Investments Corp. (SMIC) for the year 2014.
In a 26-page decision penned by Associate Justice Erlinda Uy, the CTA’s Third Division partially granted SMIC’s petition for a tax refund after it lowered its claim from P330.55 million to P290 million.
“To recapitulate out of the total claimed CWT of P330,559, 574, petitioner has sufficiently proven its entitlement to the refund or issuance of a TCC [tax credit certificate], representing unutilized excess CWT [creditable withholding tax] for calendar year 2014 in the reduced amount of P289,755,163.16,” the ruling read.
The SMIC filed the case before the CTA after the BIR failed to respond and act on its letter dated September 14, 2015 for a refund or issuance of TCC for its excess and unutilized CWT.
It argued that the failure of the BIR to resolve its administrative claim for refund amounts to a denial of due process.
For its part, the BIR argued that the case should be dismissed due to the failure of the SMIC to exhaust administrative remedies before bringing the issue to the CTA.
The petitioner’s claim, according to the BIR, is subject to administrative examination by the agency and pending closure of such investigation, no grant of refund may be given to petitioner based on the filed claim.
Furthermore, the BIR asserted that SMIC is not entitled to the claim for a tax refund because it did not provide supporting documents to show that income from which creditable withholding tax being claimed was declared in the Annual Income Tax Return (AITR).
The government’s tax collecting agency pointed out that SMIC did not just fail to comply with mandatory requirements but it had also failed to show a direct link between the claimed CWTs and the related income.
The CTA held, however, that there was no violation of the doctrine of exhaustion of administrative remedies even if the SMIC did not wait for the action of the BIR on its refund claim before filing its judicial claim with this court.
“In this case, there is no showing that respondent ever acted upon petitioner’s administrative claim for refund from the time it was filed on September 21, 2015, up to the filing of its judicial claim on April 7, 2017,” the CTA declared.
“Considering that the two-year prescriptive period is about to end, it was correct on the part of petitioner to have elevated its judicial claim within the said two-year prescriptive period under Section 229 of the NIRC [National Internal Revenue Code] of 1997,” it added.
The CTA also held that the non-submission of supporting documents by SMIC cannot be used as a ground to deny its plea for a tax refund.
“The question of whether the evidence submitted by a party is sufficient to warrant the granting of its prayer lies within the sound discretion and judgment of the Court.”