....

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS
QUEZON CITY

SPECIAL SECOND DIVISION

STATELAND, INC., CTA CASE NO. 8633

Petitioner,
Members:

-versus- CASTANEDA, JR., Chairperson and

CASANOVA, JJ.

COMMISSIONER OF Promu lgated:

INTERNAL REVENUE, JAN 1 0 2018
Respondent. /
x----------------------------- - ,7-f,-,~ ~~ .-----x

AMENDED DECISION

CASTANEDA, JR., J.:

For resolution is petitioner's Motion for Reconsideration

( Re: Decision dated 12 July 2016}, filed on July 27, 2016 with
respondent's Opposition, filed on September 7, 2016.

Petitioner seeks reconsideration of this Court's Decision dated

July 25, 2016 (assailed Decision), the dispositive portion of which
reads:

"WHEREFORE, premises considered, the instant

Petition for Review is hereby DENIED for insufficiency of
evidence.

SO ORDERED ."

In the assailed Decision, this Court denied the instant petition

for failure to comply with the requirements for refund or issuance of ~
AMENDED DECISION
CTA Case No. 8633
Page 2 of 19

TCC of unutilized excess Creditable Withholding Tax (CWT), more

specifically, its failure to sufficiently establish that the income from
which the subject taxes were withheld was duly reported in its
Annual Income Tax Return (AITR).

Petitioner in its Motion for Reconsideration asserts that based

on the Independent Certified Public Accountant's (ICPA's) findings, it
had declared in its ITR the income pertaining to the taxes subject of
this claim for refund.

Petitioner also attached additional evidence in the instant

motion, consisting of the breakdown of the total withholding taxes,
the corresponding sales transactions for which these taxes were
withheld, and the schedules of income reported from year 2004 to
2012 and the AITRs for the years 2004 to 2009, and 2011 to 2012, to
prove that the gross income of the sales subject of the withholding
taxes were actually reported in the Income Tax Returns of the said
years. The Affidavit of petitioner's Accounting Head Ann Celeste A.
Mercado was also submitted to corroborate the report previously
submitted by the ICPA.

Petitioner further includes in its motion an alternative prayer to

be allowed to carry-over its unutilized CWT for taxable year 2010 for
its future tax liabilities. 1

On the other hand, respondent, in his Opposition 2 to

petitioner's Omnibus Motion for Reconsideration, avers that petitioner
cannot assume that the ICPA's report should be taken as gospel truth
and the Court has the final determination on whether petitioner is
entitled to a refund based on all the evidence presented and not
based on the ICPA's report alone.

Respondent further argues that petitioner's attempt to present

additional evidence attached to its motion after a decision has
already been rendered by the Court is absolutely obnoxious to a
system of orderly procedure.

In a Resolution dated September 9, 20163, without ruling upon

the merits of petitioner's arguments in its motion, the Court granted
petitioner's prayer to present additional evidence. J--
1
Docket, val. VI, p. 3032.
2
Docket, val. VI, pp. 3323-3330.
3 Docket, val. VI, p. 3332-3335.
AMENDED DECISION
CTA Case No. 8633
Page 3 of 19

On November 16, 20164 , petitioner offered the Direct

Testimony of its witness, Ann Celeste Mercado to establish
petitioner's causes of action and reliefs set forth in the instant
Omnibus Motion for Reconsideration and For Leave To Present/Admit
Additional Attached Evidence With Alternative Relief.

A Commissioner's Hearing was later set on December 5, 2016

and petitioner was granted fifteen (15) days to file its Supplemental
Formal Offer of Evidence. 5

Upon motion of petitioner, another Commissioner's Hearing was

set on December 12, 2016 and petitioner was given fifteen days (15)
from December 12, 2016 to file its Formal Offer of Evidence. 6

On December 22, 20167 and December 27, 20168, petitioner

filed its Supplemental Formal Offer of Additional Evidence and Ex-
Parte Motion to Admit Attached Formal Offer of Evidence,
respectively.

On August 30, 2017, this Court issued a Resolution on

petitioner's Supplemental Formal Offer of Additional Evidence and Ex-
Parte Motion to Admit Attached Formal Offer of Evidence. In the said
Resolution, the Court admitted Exhibits "P-1507" to "P-1541-A",
except Exhibits "P-1509", "P-1512", "P-1509-5", "P-1515", "P-1516",
"P-1508-10", and "P-1516-2", which were denied admission by the
Court.

On September 29, 2017, petitioner filed an Urgent Omnibus

Motion for Partial Reconsideration on the Resolution dated 30 August
2017 and to Admit Attached Amendment to the Amended
Supplemental Formal Offer of Additional Evidence dated 27
December 2016.

Subsequently, in a Resolution dated October 12, 2017, the

Court granted petitioner's Urgent Omnibus Motion for Partial
Reconsideration and admitted Exhibits "P-1509", "P-1512", "P-1509-
5" "P-1515" "P-1516" "P-1508-10" "P-1516-2" "P-1536-A" "P- ~
' ' ' ' ' ' rG..--

4
Docket, val. VII, pp. 3342-3402.
5 Order dated November 21, 2016, docket, val. VII, pp. 3717-3718.
6 Docket, val. VII, p. 3731.
7 Docket, val. VIII, pp. 3742-3753.
8 Docket, val. VIII, pp. 4126-4146.
AMENDED DECISION
CTA Case No. 8633
Page 4 of 19

1537", "P-1537-A", "P-1538", "P-1538-A", "P-1539", "P-1539-A" and

"P-1540".

Accordingly, in the same Resolution, the Court submitted for

resolution petitioner's Motion for Reconsideration (Re: Decision dated
12 July 2016).

The main issue of this case is whether petitioner is entitled to a

refund or an issuance of tax credit certificate for its unutilized excess
CWT for the taxable year 2010 in the amount of P13,654,157.00.

In the assailed Decision, it has been discussed that petitioner

was able to comply with the first and second requisites in order for a
taxpayer to be entitled to a refund or an issuance of tax credit
certificate for its unutilized excess CWT. 9

Petitioner's claim for refund was filed within the two-year

prescriptive period as provided under Sections 204(C) and 229 of the
National Internal Revenue Code (NIRC) of 1997, as amended and the
fact of withholding the amount of P13,654,157.00 was established.

In view thereof, the Court shall now discuss petitioner's

compliance with the third requisite wherein the income upon which
the taxes were withheld must be declared as part of the gross
income of the recipient.

The Court shall first ascertain whether the total amount of sale
of goods and services which were booked/recorded by petitioner in
its sales register and general ledger (GL) for the taxable year 2010
tally with the sale of goods and services declared as taxable gross
income per petitioner's AITR for the same year.

In the instant motion, petitioner explains that being a real

estate company, it follows, for "accounting purposes", the Percentage
of Completion Method. In this method, the gross profit from sale is
realized based on percentage of completion of the inventories or
house and lots sold to its customers. While for tax purposes, income
recognition varies and depends on the terms of payment and actual
collection of the sales; whether the sale is considered under "cash
basis" or "installment plan". 5k--
9 Assailed Decision, docket, val. V, pp. 3002 to 3011.
AMENDED DECISION
CTA Case No. 8633
Page 5 of 19

Petitioner claims that it adheres with Section 2.57.2 of BIR

Revenue Regulations (RR) No. 02-98, as amended by RR No. 17-03
by way of practice in recognizing income from sale for tax purposes.

Petitioner explains the following scenarios arising from its

installment sales:

1) where income from installment sales were already reported

in the prior year ITR/s but the payments of CWTs were made
only in 2010, upon receipt of the final installments;

2) the situation where sales are booked on installment plan and

the gross income corresponding to the installment payment is
already recognized in 2010 and prior years but the withholding
tax is not paid until the payment of final amortization is made
by the buyer in subsequent years coinciding with the end of
installment period.

Petitioner also explains that for sales under cash basis, there is
also a timing difference on the recognition of sales for income tax
purposes and the payment of withholding as the requirement of
payment of the withholding tax falls on the 10th day of the month
following the month when the payment of more than 25°/o of the
contract price is reached.

For sales with collected amount of more than 25°/o of the

selling price for the months of January to November of the year, the
withholding taxes are remitted to the BIR in the months February to
December of the same year. While sales with more than 25°/o
collection in the month of December and which gross income
reported for income tax purposes in the same year, the related
withholding taxes are remitted to the BIR in January of the following
year.

Petitioner states that due to the nature of its business, it cannot

fall within the general rule that the income or sales amount to which
the CWT relates should be shown as forming part of the gross
income of the taxpayer AITR on the same year the Withholding Tax
is withheld.

The instant motion is meritorious. ~

AMENDED DECISION
CTA Case No. 8633
Page 6 of 19

The relevant figures are as follows:

Realized Gross Profit Gross profit on Sales Sales Revenue per

during the year 2010 of Real Estate per Income Tax Return
(per books) 10 Audited FS 2010 11 201012
p 184,574,274.00 ~--
__P 190,627,713.00 p 200,434,138.00

Petitioner reconciled these three figures in the following

manner, to show that whatever was recorded per books as Realized
Gross Profit for taxable year 2010, formed part of Gross Income per
ITR for taxable 2010 to wit13 :

Amount Reference
Gross Profit (net of sales discount) from 2010
bookings p 184 574,274.00 Annex A-1-2
Add: Gross profit of unconstructed units under
percentage of completion deferred per
books but already taxed in 2009 and realized
per books in 2010 6 053 439.00 Annex A-1-3
Gross Profit on Sales per Audited Financial
Statements p 190 627 713.00
Realized gross profit from prior years' sales 42 279 839.00 Annex A-1-4
Gross profit of unconstructed units under percentage
of completion deferred per books this year but
already taxable in 2010 9 673 231.00 Annex A-1-5
Gross profit of lot sales in Washington Place deferred
per books but taxable in 2010 4 830 777.00 Annex A-1-6
Gross profit of unconstructed units under percentage
of completion deferred but already taxed in 2009 and
recognized in 2010 _Q_er books (6 053 429.00} Annex A-1-3
I
Interest income earned from socialized housing
(Summer Crest Village) (24 195.00) Annex A-1-7
I
Gross Profit and Interest Income earned from BOI
registered _m-ojects (14 393,935.00) AnnexA-1·8 i

Unrealized Gross Profit on current year's sale with I

less than 25% principal collection (78 745,136.00) Annex A-1-9

Total realized gross profits shown as Net
Sales/Revenues/Receipts per 2010 Income Tax
Return 148 194 865.00
Interest Income p 38 019 341.00
Other Income 14,219 943.00 52 239_L_284.00
Total Gross Income per 2010 ITR p 200_L434,149.00 Annex A-1

The groupings of the different kinds of sales revenues that

petitioner earned during taxable year 2010 yielded the following)!:-

10 Exhibit "P-1508-2", docket, val. VIII, pp. 3766-3771.

11 Exhibit "P-887", docket, val. V, p. 2719.
12 Exhibit "P-5", Line 21 C, docket, val. V, p. 2693.
13 Exhibit "P-1508-1", docket, val. VIII, p. 3765.
AMENDED DECISION
CTA Case No. 8633
Page 7 of 19

CWT14 and the corresponding basis from the schedules provided by

petitioner:

# Type of Sales Transactions Amount of CWT BasisofCWT

1 Cash Basis p 7,693,130.47 Selling Price (net of
VAT)
2 Installment Method - Fully Settled 2,933,235.02 Selling Price (net of
Accounts in 2010 which Gross Profits VAT)
were recognized in 2010 and prior I
years (Individual Buyers)
3 Installment Method- Last Collection 2,160,852.69 Selling Price (net of I

I
was made in 2010 but gross profit VAT)
was already fully recognized in
Income Tax Returns prior to 2010 I

4 Installment - Corporate Buyers 292,550.00 Installment Pa_yment

5 Installment - Accounts under Home 266,518.10 Selling Price (net of I

Development Mutual Fund (HMDF) VAT}

6 Installment Sales of Prior Years 148,660.71 Selling Price (net of
I
which were fully settled in 2011 VAT)
7 Installment - Bank Financing 159,210.00 Selling Price (net of
Accounts VAT)
Total p 13,654,157.00

Applicable to the case at hand is Section 2.57 .2 of RR No. 02-

98, as amended by RR No. 06-01, further amended by RR No. 17-03,
which provides for the imposition of Creditable Withholding Tax on
Real Property sales, to wit:

"(J) Gross selling price or total amount of consideration or its

equivalent paid to the seller/owner for the sale, exchange or
transfer of real property classified as ordinary asset- A creditable
withholding tax based on the gross selling price/total amount of
consideration or the fair market value determined in accordance
with Section 6(E) of the Code, whichever is higher, paid to the
sellerjpwner for the sale, transfer or exchange of real property,
other than capital asset, shall be imposed upon the withholding
agent/buyer, in accordance with the following schedule:

A. Where the seller/transferor is exempt Exempt

from creditable withholding tax in
accordance with Sec. 2.57.5 of these
regulations

B. Upon the following values of real

property where the seller/transferor is
habitually engaged in real estate
business:~

14 Q&A No. 25, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached

Judicial Affidavit, docket, val. VII, p. 3351.

AMENDED DECISION
CTA case No. 8633
Page 8 of 19

With a selling price of five hundred

thousand pesos (P500,000.00) or less 1.5%
With a selling price of more than five
hundred thousand pesos (P500,000.00)
3%
but not more than two million pesos (P
2,000,000.00)

With selling price of more than two

5%
million pesos (P2,000,000.00)

C. Where the seller/transferor is not

habitually engaged in the real estate
business
6%

XXX XXX

Gross selling price shall mean the consideration

stated in the sales document or the fair market value
determined in accordance with Section 6(E} of the Code, as
amended, whichever is higher. In an exchange, the fair market
value of the property received in exchange, shall be considered as
the consideration. (Emphasis supplied)

If the buyer is an individual not engaged in trade or

business, the following rules shall apply:

i. If the sale is a sale of property on the installment

plan (i.e payments in the year of sale do not exceed 25%
of the selling price), no withholding of tax is required to
be made on the periodic installment payments. In
such a case, the applicable rate of tax based on the gross
selling price or fair market value of the property at the time
of the execution of the contract to sell, whichever is higher,
shall be withheld on the last installment or instalments
immediately prior to such last installment, if the last
installment is not sufficient to cover the tax due, to be paid
to the seller until the tax is fully paid.

ii. If on the other hand, the sale is on a "cash basis"

or is a "deferred payment sale" and not on the
installment plan (that is, payment in the year of sale exceed
25% of selling price), the buyer shall withhold the tax based
on the gross selling price or fair market value of the property
whichever is higher on the first installment.

However, if the buyer is engaged in trade or business,

whether a corporation or otherwise, the following rules shall
apply:~
 AMENDED DECISION
CTA Case No. 8633
Page 9 of 19

i. If the sale is a sale of property on the installment

plan (i.e payments in the year of sale do not exceed
25% of the selling price), the tax shall be deducted and
withheld by the buyer on every installment which tax
shall be based on the ratio of actual collection of the
consideration against the agreed consideration appearing
in the Contract to Sell applied to the gross selling price
or fair market value of the property at the time of the
execution of the Contract to Sell whichever is higher.

XXX XXX

ii. If on the other hand, the sale is on a "cash basis" or is a

"deferred payment sale" and not on the installment plan (that
is, payment in the year of sale exceed 25% of selling price), the
buyer shall withhold the tax based on the gross selling price or fair
market value of the property whichever is higher on the first
installment. (Emphasis ours)

The Court finds that petitioner correctly adhered to the

foregoing, when it comes to the timing and basis of remittance of
CWT. For cash basis and installment transactions with non-corporate
buyers, the basis is the gross selling price net of VAT, whereas, for
installment sales with corporate buyers, the basis is the installment
payments made during each year.

The number of accounts for each type of sale transaction and

the corresponding income in 2010, prior years and succeeding years
are also summarized as follows 15 :

Gross Income
Gross Income Reported in
No. of Buyers Gross Income in reported in prior succeeding
# (Transactions) Amount of CWT 2010 ITR years years
1 98 p 7 693 130.47 p 85 026 958.97 - -
2 71 2 933 235.02 20 771 866.58 p 16 362 534.12 -
3 82 2 160 852.69 0.00 34 139 557.12 -
4 38 292 550.00 1986 089.93 1,600 830.49 p 2 557,168.28
5 12 266 518.10 2 601 081.65 319 188.45 771 009.57
6 2 148 660.71 186 987.92 331 416.73 1 047 522.68
7 2 159 210.00 354 417.23 1 723 066.14
--------
p 13 654L1~.00 p 110 927,402.28 p 52,753,526.91 p 6 098 766.67

The Court noted the CWT relating to each kind of sales

transaction to the Schedule of Gross Profit (Net of Sales Discount) in
2010 per Books16 • ~

15
Exhibit "P-888", docket, vol. IV, p.2396; Q&A No. 27, Direct Testimony of Petitioner's Witness,
Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3352.
16
Exhibit "P-1508-2", docket, vol. VIII, pp. 3766-3771.
 AMENDED DECISION
CTA Case No. 8633
Page 10 of 19

The Court's verification resulted to the following:

I. Under the Sale on Cash Basis

1. Transaction categorized as Unrealized Gross Profit

Upon tracing the related income to the reported Realized Gross

Profit per Books (as reconciled to the Annual Income Tax Returns) 17 ,
the Court noted the following transactions were categorized under
the column "Unrealized Gross Profit per Books", and hence, did not
form part of the total Realized Gross Profit (RGP) per Books of
P184,574,274.00:

Unrealized Gross
Period Payor /Withholding Gross Income Exhibit Profit per 2010
Covered
1stQu.t!t,er
Ajtents
Shervll P. Alvarez
·~· ...
,.
Tax Withheld
20 760.00
(Tax Base)
,. 692000.00
No.
nP•299"
Books
183 057.00
Sales Type
HDMFSales

2nd~_!lt!t.el' · Michael L. De Jesus 21,230.52 101,684.00 '"P~300" 313 644.00 HDMFSales

Sps. Jaime C.
Callano &: Lina S.
2nd Quarter Callano 1~650.96 655,032.00 "P-301" 390282.00 HDMFSales
SPS.·RUTH&
2ndQuat!t.er At.RitT ROMANO 17604.00 586,800.00 "P•302" 14.1203.• 00 HDMFSales
,1,:,/
,.S~. ROMEO & ·:···
2nd Qutfter , 'lftATRidA RACAL 17,955~00 59$,500.00.•, .....~303" ·, 275 173.00 HDMFSales
·':" <··; ; $1'&\~I)WIN & ''··• \

3rd'tluarter;; · RQNflYN ASTORGA 7~471.28 · 498,0SS.OO . "P-3M"' 129,305.00 HDMFSales

Sub-total 1.04 67:1.76 3,na,iti:L:oo :1 432;664.oo
SPS. GLADYS &
4th Quarter MICHAEL NIELES 22,176.00 739,200.00 "P-89" 240,870.00 Cash Basis
4th Quarter Elias C. Arnoco 42 851.79 1 428 392.86 "P-90" 396 943.00 Cash Basis
JOY & JOY LIN
4th Quarter PAROHINOG 31 980.90 1 066 030.00 "P-88" 296 730.00 Cash Basis
SPS. ARLAN RAYMUND
4th Quarter & RHIA REYES 25 620.00 854 000.00 "P-81" 254 200.00 Cash Basis
SPS. SALVACION &
4th _Quarter TOBIAS CORDOVALES 104,352.15 2,087,043.00 "P-104" 971,016.00 Cash Basis
SPS. ROLANDO &
4th Quarter ALEXIS BINAS 19,575.00 652 500.00 "P-404" 180,596.00 Cash Basis
4th Quarter AIZA J. DOMINGO 29 767.50 992 250.00 "P-103" 220 500.00 Cash Basis
MYP GBY PHILIPPINE
4th Quarter CORPORATION 1 339.29 26 785.71 "P-82" Cash Basis · - - ·
MYP GBY PHILIPPINE
4th Quarter CORPORATION 25 027.45 500 548.94 "P-101" Cash Basis
MYP GBY PHILIPPINE
4th Quarter CORPORATION 87 936.84 1 758 736.78 "P-102" 979 842.00 Cash Basis
Sub-total 390,626.92 :10 :105,487.29 3 540,697.00
TOTAL p 495.298.68 p 13.843.588.29 p 4.973,361.00

Based on the Court's review, all the 4th Quarter Cash Basis sales
in the above table can be traced to Exhibit "P-1508-6" representing
the "Gross Profit of Lot Sales in Washington Place Deferred per Books
but Taxable in 2010 in the amount of P4,830,777.00"18 . The same is fo-

17 !d.
18 Docket, val. VIII, p.3785.
 AMENDED DECISION
CTA Case No. 8633
Page 11 of 19

one of the reconciling items added to the RGP per Books to arrive at
the Gross Income per ITR19, as can be seen in the earlier table. The
aforementioned RGP included the RGP of P3,540,697.00 relating to
the CWT amount of P390,626.92 is found to have formed part of the
2010 Annual ITR of petitioner.

As for the 1st to 3rd Quarter Cash Basis sales in the above table
which are HDMF Sales in the total amount of P104,671.76 (P
495,298.68 less P390,626.92), according to the ICPA report, the
revenue of P3, 738,101.00 (P13,843,588.29 less P10, 105,588.29) to
which those CWTs relate must have been reported in the years when
the petitioner received the loan proceeds. 20 However, despite
submission of petitioner's Schedules for the years 2011 21 and 2012 22 ,
the Court cannot trace or verify the realizations of income on these
CWTs.

Hence, the CWT on these HDMF Sales in the sum of

P104,671.76 is disallowed, since the related income was not
recorded in petitioner's books during the year 2010, and did not form
part of the Gross Income in the ITR for taxable year 2010.

2. !CPA s Findings2 3
The ICPA noted a transaction with Air Insurance Agency, Inc.
which was categorized by petitioner under cash basis transaction.
However, the transaction pertains to commission given by the former
to the latter in exchange for client referral. Petitioner treated the
commission income received as deduction from related insurance
expense incurred from Air Insurance Agency, Inc.

The details of the transaction are as follows 24 :

TIN LAST NAME TAX BASE TAX

WITHHELD
004-521-292- AIR INSURANCE AGENCY, p 13,389.65 p 1,338.96
000 INC.
L__ ~--
- - ------------ --

A-

19
Exhibit "P-5", Section E, Line 121, docket, vol. V, p. 2694.
20 Exhibit "P-1414", docket, vol. IV, p. 2554.
21
Exhibit "P-1516-1", docket, vol. VIII, p. 3990.
22
Exhibit "P-1515-1", docket, vol. VIII, p. 3959.
23
Exhibit "P-1414", docket, vol. IV, p. 2533-2556.
24
Exhibit "P-1414", docket, vol. IV, p. 2550.
AMENDED DECISION
CTA Case No. 8633
Page 12 of 19

With regard to the rest of the items under Cash Basis, the
Court finds the same in order.

II. Installment Sales

These are fully settled accounts in 2010 wherein the last

collection was made in 2010 but the Gross Profit was realized in prior
years.

These accounts pertain to installment sales from prior years

wherein buyers are individuals not engaged in trade or business. The
payments in the year of sale do not exceed 25°/o of the selling price.

The final installments on these sales were recognized in prior

years corresponding to payments and the last realization of gross
profit was in 2010, the same year when the CWT was withheld and
remitted to the BIR. 25

Meanwhile the category "Last Collection Made in 2010 but

Gross Profit Realized in Prior Years" contains accounts which were
already recognized in full as taxable income in prior years but the full
payment of the outstanding balance only happened in 2010. 26

To reiterate, the timing of withholding for individual buyers not

engaged in trade or business, is upon final payment, and the basis is
the entire Gross Selling Price, net of VAT, if any, whereas the timing
of recognition of gross profit is based on the installment collection
made every year.

In addition, the Court finds the following per verification of the

GL schedules provided in the Supplemental ICPA Report and Motion
for Reconsideration:

1. Traced to 2010 GL Schedules

The same procedure was done with the income payments

falling under Category 2 (2010 Sales - Fully settled accounts in 2010, -j-z..

25 Q&A No. 51, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached
Judicial Affidavit, docket, val. VII, p. 3361.
26 Q&A No. 80, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached

Judicial Affidavit, docket, val. VII, p. 3377.

 AMENDED DECISION
CTA Case No. 8633
Page 13 of 19

and Gross Profit Realized in 2010) of the CWT Summary, being

traced to Exhibit "1508-4'127 which is the breakdown of the reconciling
item "Realized GP from Prior Year's Sales".

Further, it is noted that Court was able to match all of the

accounts in the CWT summary to Exhibit "1508-2'128 which means
that petitioner was able to sufficiently prove that the CWT being
claimed for refund met the third requisite, hence, may be entitled to
the refund of CWT in connection with the income payments under
Category B in the amount of P 2,933,235.02.

However, the Court found that the Tax Base used per
withholding tax certificates (BIR Form No. 2307) and remittance
forms (BIR Form No. 1606) on the following accounts is not the same
as the Gross Selling Price, net of VAT (if any) as per GL Schedules:

Tax Gross Selling

Withheld Price per Should-be Realized
Tax Base per forming part Annex"A-1- Tax Difference Gross Profit
NAME CWT Schedule of the Claim 2"* Withheld (Tax Withheld) in 2010
JONATHAN BULAQUENA p 500,000.00 p 7,500.00 p 632,256.00 p 18,967.68 p (11,467.68) p 832.21
SPS. RICARDO &
JOCELYN GALLEGO 500,000.00 7,500.00 739,754.00 22,192.62 (14,692.62) 108,920.08
SPS. RIONEL & IMELDA
DITAN 500,000.00 7,500.00 624,002.00 18,720.06 11,220.06 6,644.25
ELMA ALMOSA 500,000.00 7,500.00 792,338.00 23 770.14 (16 270.14) 13,262.19
MARICEL GARCIA 500 000.00 7 500.00 766 660.00 22 999.80 (15 499.80) 52 357.65
LUCITO JUNIOR REGIS 554,331.00 16,629.93 766 660.00 22,999.80 (6,369.87) 81,767.54 I

SOLEDAD CAJEFE & i

FELISA YOUNGBERG 500,000.00 7,500.00 699,998.00 20 999.94 (13,499.94) 7,413.10
SPS. LEMUEL & JULIET
DALISAY 375 000.00 5 625.00 530 853.00 15 925.59 (10 300.59) 14 001.63
DIGNA & ROMULO
TORRES 375 000.00 5 625.00 482 635.00 14 479.05 (8 854.05) 35 979.69
ERNEST RAMIREZ 500,000.00 7,500.00 708,478.00 21,254.34 (13,754.34) 117,891.97
SPS. REYNALDO & JOSIE
SOTELO 500,000.00 7,500.00 778,614.00 23,358.42 (15,585.42) 68,641.84
SPS. ROLLY & BEVERLY
LACSE 450 000.00 6 750.00 435 694.00 13 070.82 (6 320.82) 51 776.40
TOTAL p 5,754,331.00 1'94,629.93 P7,957,942.00 P238,738.26 P(121,395.21) P559,488.55
*Computed as Selling Price less VAT, if any.

For the foregoing accounts, the income payments on which the

taxes withheld were based had a different Selling Price per GL
schedules compared to the Gross Selling Price per Exhibit "1508-2".

It is noted that the difference in amount does not correspond

to the VAT component of the items. In this instance, petitioner was
not able to provide the Court with an explanation or reconciliation of
the difference in recording and reporting of the same.fo-

27 Docket, vol. VIII, pp. 3773-3783.

28 Docket, vol. VIII, pp. 3766-3771.
AMENDED DECISION
CTA Case No. 8633
Page 14 of 19

In view of the foregoing, the Court disallows the sum of

P94,629.93 representing an under-withholding of CWT.

In addition, as correctly found by the ICPA29 , the amount of

P27,219.33 CWT pertaining to the account of Sps. Romulo and Merly
Daraug with corresponding tax base of P907,311.00 should be
disallowed because there was still outstanding balance as of 2010.

2. Traced to Prior Years GL Schedules

Out of the P2,160,852.69 CWT related to Installment Method -

Last Collection was made in 2010 but gross profit was already fully
recognized in Income Tax Returns prior to 2010, the ICPA aptly
noted certain item which petitioner erroneously classified as a Fully
Settled Account in 2010, but, upon examination turned out to still
have an outstanding balance. Hence, the related amount withheld
subject for refund is disallowed. Details of this account are as
follows:

TIN LAST NAME FIRST NAME TAX BASE TAX

WITHHELD
117-519-983- GUERRERO SPS. RODGER p 3,992,044.64 p 199,602.23
000 & LUZ

3. Installment - Corporate Buyers

The following represent the CWT withheld from petitioner's

corporate buyers, wherein the tax withheld by the buyer is based on
every installment payment. The ICPA obtained all available official
receipts and application of payment (AoP) to support installment
income payments of corporate buyers, and these have been taken
into consideration in the assailed Decision: 30

Gross Amount Realized Gross Profit

NAME of Income Tax Withheld in 2010
Open Mission in the Philippines Inc. p 7 986.61 p 239.60 p 6 379.12
Open Mission in the Philippines Inc. 8 106.41 243.19 6 474.80
Open Mission in the Philippines Inc. 8 228.00 246.84 6 571.92
Open Mission in the Philippines Inc. 8 351.42 250.54 6 670.50
Open Mission in the Philippines Inc. 716 531.78 21 495.95 49 580.77
Open Mission in the Philippines Inc. 55 861.71 1 675.85 44 244.18
Open Mission in the Philippines Inc. 28 014.75 840.44 22 188.54
Open Mission in the Philippines Inc. 8 673.59 260.21 6 869.75
Open Mission in the Philippines, Inc. 19,285.24 578.56 15,274.50
)L_
29 Exhibit "P-1414", docket, vol. IV, p. 2551.
30
Exhibit "P-1507", p. 7, docket, vol. VII, p. 3409.
AMENDED DECISION
CTA Case No. 8633
Page 15 of 19

Open Mission in the Philippines Inc. 27 958.83 838.76 22 144.25

Open Mission in the Philippines Inc. 27 958.83 838.76 22 144.25
St. Mary's School of Novaliches Inc. 6 540.24 327.01 2 394.07
St. Mary's School of Novaliches Inc. 13 409.41 670.47 1 227.04
St. Mary's School of Novaliches Inc. 6 872.79 343.64 1 247.50
St. Mary's School of Novaliches Inc. 6 987.34 349.37 3 868.63
St. Mary's School of Novaliches Inc. 1 595 504.20 79 775.21 279 912.25
Youngji International School 6 927.71 346.39 3 713.16
Youngji International School 2 050.87 61.53 1 650.71
Youngji International School 7,868.58 236.06 6 284.85
Youngji International School 7 043.17 352.16 3 775.05
Youngji International School 7 986.61 239.60 6 379.12
Youngji International School 2 085.05 62.55 1678.23
Younqji International School 8 106.41 243.19 6 474.80
Youngji International School 2 119.80 63.59 1 706.20
Youngji International School 8 228.00 246.84 6 571.92
Youngji International School 735 982.85 22 079.49 580 964.45
Youngji International School 724 883.20 21 746.50 563 855.32
Younqji International School 7 160.55 358.03 7 739.89
Youngji International School 14 681.12 734.06 8,000.04
Lightlife Baptist Church Inc. 120 833.35 3 625.00 80 887.12
Lightlife Baptist Church Inc. 19 166.65 575.00 1 868.39
Lightlife Baptist Church Inc. 3 233.82 97.01 1 897.98
Lightlife Baptist Church Inc. 3 285.03 98.55 1 928.03
Liqhtlife Baptist Church Inc. 3 337.04 100.11 1 958.55
Lightlife Baptist Church Inc. 3 389.87 101.70 1989.56
Lightlife Baptist Church Inc. 3 443.55 103.31 2 021.06
Lightlife Baptist Church Inc. 3 498.07 104.94 2 053.07
St. Mary's School of Novaliches Inc. 2 640 000.00 132 000.00 195 500.36
TOTAL P6,881,582.45 p 292,550.01 P1,986,089. 93

Here, the only relevant realized gross profits are the ones
related to installment payments made during the year 2010.
However, the amount of realized gross profit related to supposed
installment payments were not found in any of the GL schedules for
taxable year 2010.

Hence, the CWT claimed relating to Corporate Buyers for the

amount of P292,550.01 should be disallowed.

4. Installment - HDMF Accounts

These represent sales to buyers availing themselves of Pag-

Ibig/HDMF Financing. HDMF requires submission of title in the name
of the buyers before the release of the loan proceeds. Hence, CWTs
were paid in advance for the purpose of securing Certificate
Authorizing Registration (CAR) from the BIR, being a requirement by
the Register of Deeds to process title transfer. As such, the
corresponding income will only be reported in the year when full
payments are made upon receipts of the loan proceeds from the
concerned financial institution. There are also CWTs under this
category which pertain to installment buyers who later converted to
HDMF financing. Hence, for the latter accounts, there were portions )k-
AMENDED DECISION
CTA Case No. 8633
Page 16 of 19

of income realized and reported in the prior years' ITR, and final
realization of income is made when the account is fully paid from the
proceeds of the HDMF loans. 31

Amount of Tax
Name Tax Base Withheld

1 EUNICE SALON 658 800.00 19 764.00

2 SPS. FERLINETTE & RONNIE VERGUELA 707 684.00 21 230.52
3 SPS. ARIEL & SHERYLL JANE PACA 740 000.00 22 200.00
4 SHERYLL ALVAREZ 692 000.00 20 760.00
1ST
QUARTER 2 798 484.00 83,954.52

5 MICHAEL DE JESUS 707 684.0.0 21230.52

6 SPS. JAIME.&UNA CALLANO •· 655 032.00 19 650.96
.:7·· SPS. RUTH & ALBERT ROMANO •586,800.00 <·1:7 604.00
·a SPS. ROMEO & PATRICIA RACAL 598,500.00 J 17 955.00
2ND
QUARTER 2 548 016.00 76,440.48

9 SPS. EDWIN & RONALYN ASTORGA 498,085.00 7 471.28

10 SPS. LEA & JERRY MEDRANO 808 400.00 24 252.00
11 SPS. LUZVIMINDA & EDGARDO PEREY 814 000.00 24 420.00
3RD
QUARTER 2,120,485.00 56,143.28

12 SPS. WILLIAM & MINDA AGOJO 1 665 994.00 49 979.82

4TH
QUARTER 1665 994.00 49,979.82

TOTAL 9,132,979.00 266,518.10

However, not all of the above accounts can be traced to any of

the Realized Gross Profit Schedules provided by petitioner, hence, we
cannot ascertain the fact of its forming part of petitioner's Gross
Income for tax purposes in any given taxable year.

Considering the foregoing, as it has been discussed in Item # I

(Cash Basis), the Court disallows P104,671.76 for refund.

5. Installment Sale of Prior Years And Bank Financing Accounts,

Fully Settled in 2011

The following are prior years' installment sales which were

settled in 2011, hence, recognized in 2011 but the corresponding
CWT were paid in 2010 as required for early transfer of titles for
bank take-out purposes or before the release of the loan proceeds: 329--

31 Q&A No. 107, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her

attached Judicial Affidavit, docket, vol. VII, p. 3386.

32 Q&A Nos. 118 and 125, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per

her attached Judicial Affidavit, docket, vol. VII, p. 3388-3389.

AMENDED DECISION
CTA Case No. 8633
Page 17 of 19

Name Loan Amount of Realized Exhibit

Proceeds Tax Withheld Gross Profit in Reference
Received perCWTin Succeeding
Date 2010 Year(2011)
PRIOR YEARS' INSTALLMENT SALES
Culla, Sps. June &
Flordeliza 2011 p 126,160.71 p 838,269.00 "P-1516-2",
Suspene, Sps. p.333
Alejandro & Vannessa 2011 22,500.00 p 15,599.00
Sub-total p 148,660.71 p 853868.00

BANK FINANCING ACCOUNTS

Terrenal, Sps. Efren & "P-1516-2",
Lilibeth 2011 116 010.00 p 1,061,259.00 p.634
Lindog, Sps. Maria "P-1516-2",
Leonor & Raul 2011 43,200.00 p 661,807.00 p.83s
Sub-total 159,210.00 p 1,723,066.00
TOTAL p 307,870.71

A scrutiny of the supporting documents reveals that indeed

these accounts have been recognized as income in the succeeding
year 2011 when the loan proceeds were received by the petitioner
based on the bank credit memos presented by petitioner and the
journal vouchers booking the corresponding income.

In view of the above, the Court allows the refund of the tax
credits in the amount of P307,870.71 in connection with 2010
Installment Sales of Prior Year Fully Settled in 2011 and Bank
Financing Accounts.

Lastly, the Court found that the schedules of Realized Gross

Profit per Books for each prior taxable year are reconcilable to the
Annual ITRs of the respective taxable years, hence, the Court can be
certain that the realized gross profit per books were reported
accordingly in the Gross Income for Annual Income Tax Return
purposes.

In sum, petitioner has sufficiently proven its entitlement to a

refund or issuance of tax credit certificate representing its unutilized
excess CWT for the taxable year 2010, in the modified amount of
P12,934,749.05, computed as follows:

Total CWT claimed per Petition P13,654,761.27

~: ~

33 Docket, val. VIII, p. 3993.

34 Docket, val. VIII, p. 3996.
35 Docket, val. VIII, p. 3998.
AMENDED DECISION
CfA Case No. 8633
Page 18 of 19

1) !CPA's Findings
Cash Basis 1,338.96
Installment Method - Last Collection in 2010
but RGP in Prior Years 199,602.23
Installment Method - Last Collection in 2010
but RGP in 2010 27,219.33
2) Court's Findings
Cash Basis 94,629.93
Corporate Accounts 292,550.01
HDMF 104,671.76
Total refundable CWT for the taxable year
2010 P12,934,749.05

WHEREFORE, premises considered, petitioner's Motion for

Reconsideration (Re: Decision dated 12 July 2016), is
PARTIALLY GRANTED. Accordingly, the assailed Decision dated
July 12, 2016 is hereby amended to read as follows:

"WHEREFORE, the instant Petition for Review is

PARTIALLY GRANTED. Accordingly, respondent is
ORDERED TO REFUND or ISSUE TAX CREDIT
CERTIFICATE to petitioner in the reduced amount of
P12,934,749.05 for its unutilized excess CWT for the
taxable year 2010.

SO ORDERED."

SO ORDERED.

~'hC-~.Q.
iUANITO C. CASTANEfiA, JR.
Associate Justice

I CONCUR:

~
CAESAR A. CASANOVA
Associate Justice
AMENDED DECISION
CTA Case No. 8633
Page 19 of 19

ATTESTATION

I attest that the conclusions in the above Amended Decision

were reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

~---.:~c. Q:T'~ok. t' g,__

JlJANITO C. CASTANEDA/JR
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson•s Attestation, it is hereby certified that the
conclusions in the above Amended Decision were reached in
consultation before the case was assigned to the writer of the opinion
of the Court.

Presiding Justice