Appellate court affirms P127-M tax credit in favor of Ayala Corp.

THE Court of Tax Appeals affirmed the grant of tax credit certificate (TCC) to Ayala Corp. worth P127 million over its unutilized creditable withholding tax (CWT) for 2012 and 2013.

In a 10-page decision, the court, sitting en banc, denied the appeal of the Bureau of Internal Revenue, saying the arguments raised replicated those in its motion for partial reconsideration in the special first division.

The court said Ayala Corp established the fact of withholding and its entitlement to a TCC with presentation of Summary Alphalist of Withholding Agents of Income Payment Subjected to Withholding Tax (SAWT) and other relevant certificates of CWT at source, which are provided by withholding agents as proof of tax withheld.

“Therefore, respondent should no longer be burdened to show proof of actual remittance in his claim for the issuance of such TCC,” the court said.

“Wherefore, the foregoing considered, petitioner Commissioner of Internal Revenue’s Petition for Review filed on 23 August 2019 is denied,” it added.

The bureau claimed that the court erred in ruling that Ayala Corp. is entitled to refund of unutilized excess CWT “despite no evidence of actual remittance” to it. It said that taxpayer-claimant has to prove that the taxes withheld were actually remitted to the BIR by the withholding agents.

It argued that Revenue Regulations No. 2-2006 requires the submission of SAWT and monthly alphalist of payees.

Ayala Corp., claimed that it has “sufficiently proven its entitlement to its claim for issuance of a TCC.” It also noted that the withholding agents are the bureau’s agents

The court also cited a previous Supreme Court decision which favored the appellate court’s decision, rejecting the bureau’s contention that “proof of actual remittance is required before a refund of excess or unutilized creditable withholding taxes may be granted.”

The court said that the withholding agent’s receipt of tax withheld is tantamount to the BIR’s receipt. It added that failure on the part of the withholding agent to remit the amount withheld to the bureau “is a breach on the part of the agent and not by the taxpayer.”

The court’s division in February 2018, partially granted the claim of Ayala Corp, allowing only the amount of P81.7 million as tax credit certificate out of its P128.7 million claim.

On March 29, the court increased the grant to P127.3 million after the company filed its appeal. The court upheld the decision in July last year. — Vann Marlo Villegas