REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

ENBANC

COMMISSIONER OF CTA EB NO. 2053

INTERNAL REVENUE, (CTA Case No. 9298)
Petitioner,

Present:

DEL ROSARIO, P.J.,

CASTANEDA, JR.,
-versus- UY,
FABON-VICTORINO,
RINGPIS-LIBAN,
MANAHAN,
BACORRO-VILLENA, and
MODESTO-SAN PEDRO, fl.
AYALA PROPERTY

MANAGEMENT Promulgated:

CORPORATIO~espondent. JU_1_ ~ _7_~_-? ~ ffl'3t"-·

X- - - - - - - - - - - - - - - - - - - - - - - - - - - -

DECISION

BACORRO- VILLENA, L_:

1
At bar is a Petition for Review filed by petitioner Commissioner ,.
of Internal Revenue (CIR/petitioner) seeking to nullify the Specia_!l(

Rule 8- Procedure in Civil Cases, Section 3(b), RRCTA .

Section 3. Who may appeal; period to file petition. -

(b) A party adversely affected by a decision or resolution of a Division of the Court on a motion
for reconsideration or new trial may appeal to the Court by filing before it a petition for review
within fi ftee n days from receipt of a copy of the questioned decision or resolution. Upon proper
motion and the payment of the full amount of the docket and other lawfu l fees and deposit fo r
costs before the exp iration of the reglementary period herein fixed, the Court may grant an
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 2 of 16
X····················---·····················--···· X

Second Division's Decision dated 21 January 2019 2 in CTA Case No.

9298, entitled Ayala Property Management Corporation v.
Commissioner of Internal Revenue. The dispositive portion of the
assailed 21 January 2019 Decision reads:

WHEREFORE, premises considered, the Petition for Review is

GRANTED. Accordingly, the Final Decision on Disputed Assessment
issued by respondent against petitioner for alleged deficiency income tax
in the amount of P6,929,516.89 and deficiency value-added tax in the
amount of P770,492.81 or in the aggregate amount of P7,700,009.70 for
taxable year 2009 is CANCELLED and SET ASIDE.

SO ORDERED.

The Special Second Division also denied Petitioner's Motion for

Reconsideration (MR) of the above Decision on os April 2019, as
earlier on stated. 3

The antecedent facts follow.

On 26 May 2010, respondent Ayala Property Management

Corporation (APMC/respondent) received Letter of Authority (LOA)
No. 126-201o-oooooo17 dated 14 May 2010, authorizing the concerned
revenue officers to examine respondent's books of accounts and other
accounting records for income tax for the period of 01 January 2009 to
31 December 2009.

On o8 July 2014, respondent received the Preliminary

Assessment Notice (PAN) with Details of Discrepancies dated 21 April
2014.4

On 10 October 2014, respondent received the Formal Letter of

Demand with Details of Discrepancies and Assessment Notices •
(FLD/FAN) 5 dated 25 September 2014, assessing it for allegeo/

additional period not exceeding fifteen days from the expiration of the original period within
which to file the petition for review.
Division Docket, Volume II, pp. 523-542.
!d., pp. 573-576.
4
See Exhibit "R-11", BIR Records, pp. 445-451.
Exhibit "P-1", Division Docket, Volume l, pp. 401-407; Exhibit "R-14", BIR Records, pp. 511-
517.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 3 of 16
X-------------------------------------------------- X

deficiency income tax and Value-Added Tax (VAT), inclusive of

interests, for taxable year (TY) 2009.

On 10 November 2014, respondent sent its Protest Letter dated

07 November 2014, assailing the tax assessments in the FLD/FAN,
together with the documents in support of the same. On 07 January
2015, respondent sent a Letter dated o6 January 2015 to the BIR to
supplement its Protest Letter and submitted documents in support
thereof.

On 17 February 2016, respondent received the Final Decision on

Disputed Assessment (FDDA) 6 with Details of Discrepancies, finding it
liable for deficiency income tax and VAT, inclusive of interests, in the
aggregate amount of f>7,700,009.70 for TY 2009. Hence, it filed a
Petition for Review before this Court.

After trial, the Special Second Division promulgated the assailed

Decision dated 21 January 2019 and later on, its Resolution dated 05
April 2019 denying petitioner's MR. Aggrieved by the Special Second
Division's actions, petitioner filed the instant petition.

In the herein Petition, petitioner raises the following errors:

I.
WHETHER THE HONORABLE COURT IN DIVISION ERRED IN
RULING ON MATTERS THAT WERE NEVER SUBSTANTIATED IN
THE ADMINISTRATIVE LEVEL;

II.
WHETHER THE HONORABLE COURT ERRED IN ASSUMING
JURISDICTION OVER AN ISSUE WHICH HAS ALREADY BECOME
FINAL; AND,

Ill.
WHETHER THE HONORABLE COURT IN DIVISION ERRED IN
PARTIALLY CANCELLING RESPONDENT'S DEFICIENCY
ASSESSMENT ON INCOME TAX AND VALUE[-]ADDED TAX/

6
Exhibit "R-15", BIR Records, pp. 582-584.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 4 of 16
X-------------------------------------------------- X

In support of his petition, petitioner belabors on the contention

that respondent never refuted the disallowance of tax credit
amounting to ~68,437,216.00 in its protests in the administrative level
and in the Petition for Review (CTA Case No. 9298) it filed before this
Court. He thus insists that he was denied procedural and substantive
due process as he was not given the opportunity to be heard on the
particular issue of "disallowed tax credit in relation to the deficiency
income tax assessments".

Apropos to the above argument, petitioner also posits that, since

he issued the FDDA, the Court's jurisdiction is strictly appellate in
nature. Citing Pilipinas Total Gas, Inc. v. Commissioner of Internal
Revenue7 , it insists that the jurisdiction of the Court shifts from a trial
court to a court exercising judicial review. Furthermore, since a judicial
review is not a de novo trial, the only proper inquiry should be whether
the findings of the administrative body are consistent with law,
supported by evidence and fraud-free. Hence, for petitioner, it was
erroneous for the Court to rule on matters that were never
substantiated in the administrative level. Put differently, since there
were available remedies to respondent but it did not make any
disputes, the issue on the disallowed excess tax credit is
uncontroverted (since respondent never questioned it in the first
place).

Petitioner adds that, as regards the assessment for deficiency

income tax and VAT arising from unaccounted income resulting from
matching of Summary List of Purchases (SLP) of Third Parties vis-a-vis
the Summary List of Sales (SLS) of respondent, he maintains that the
assessment is with due basis and not just mere presumptions.

Lastly, petitioner maintains that the creditable income tax

withheld in the amount of ~2,574,599.19 was properly disallowed since
respondent failed to substantiate its claim that the said amount
corresponds to the income recognized in year 2008 but was claimed
only in 2009. Thus, petitioner insists that the assessment for deficiency
income tax ~rising from the disallowed creditable income tax withheld
was proper.~

G.R. No. 207112,08 December2015.

CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 5 of 16
X-------------------------------------------------- X

Respondent, however, counters that, with respect to the

disallowed excess tax credit totalling to ~68,437,216.oo, it is not
actually a disallowance of tax credits or an item of the assessment. It is
presented in the deficiency income tax computation merely to show
the distribution or usage of respondent's available tax credits for that
year. Respondent points out that such is evident from the deficiency
income tax computation itself and supported by the fact that it was not
included in the Details of Discrepancies appended to the FDDA.
Respondent then insists that no further proof, discussion, or
documentation on the said item should be expected from it.

On the assessment arising from unaccounted income,

respondent remains firm that it is not questioning petitioner's power
to obtain information from third persons, rather it is casting doubt on
the correctness of the same as the data gathered were not validated
from external data or third parties.

Finally, respondent maintains that it is allowed to claim the

creditable withholding tax for income earned in 2008 as credit for 2009
considering that the certificates of withholding tax (BIR Form No.
2307) were received only in 2009; hence, it cannot be expected to claim
the credit in 2008.

The Court En Bane's ruling follows below.

After an assiduous review of the records, the Court En Bane finds

the petition partly meritorious. The reasons are essayed below, in
seriatim.

DISALLOWED EXCESS TAX CREDITS

NOT AN ITEM OF THE ASSESSMENT

Petitioner's first two assigned errors pertain to the

~68,437,216.oo disallowed excess tax credits carried over to the
succeeding year. In this respect, the Court En Bane finds no reason to
reverse the ruling of the Special Second Division. Indeed, it is not an
item of the assessment that should be substantiated. As respondent
correctly pointed out, the disallowed tax credit was not included in the
Details of Discrepancies, hence, petitioner was in no way deprived of
procedural and substantial due process.,
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 6 of 16
X-------------------------------------------------- X

Concomitantly, petitioner heavily hinges his argument before

the Court En Bane on respondent's alleged failure to refute the
disallowed tax credits at the administrative level and even in the
Petition for Review before the Division, hence, petitioner believes that
the Court erred in assuming jurisdiction over something that has
become final.

Upon a second hard look on the proceedings before the Court in

Division, it is noteworthy that both parties did not dwell on the excess
tax credits from prior years. Instead, they only focused on the alleged
unaccounted income resulting from the matching of the SLP of Third
Parties vis-a-vis respondent's SLS and the disallowed creditable
withholding tax. It is thus more logical to conclude that both parties
were aware that the excess credits from prior years is indeed not an
item of an assessment to be refuted.

Moreover, as stated in LOA-126-2o10-ooooo0178 dated 14 May

2010, the coverage of the assessment is "for the period from January 1,
2009 to December 31, 2009". Considering that the tax benefit from the
said excess tax credits will be in the succeeding year 2010, at most,
respondent may only be assessed for the said succeeding year.

In the case of Commissioner of Internal Revenue v. Sony

Philippines, Inc. 9 , the Supreme Court emphasized that the assessment
must be done within the scope/coverage of a valid LOA; otherwise, the
deficiency tax assessment arising therefrom is a nullity. It held:

Based on Section 13 of the Tax Code, a Letter of Authority or

LOA is the authority given to the appropriate revenue officer
assigned to perform assessment functions. It empowers or enables
said revenue officer to examine the books of account and other
accounting records of a taxpayer for the purpose of collecting the
correct amount of tax. The very provision of the Tax Code that the

I
CIR relies on is unequivocal with regard to its power to grant
authority to examine and assess a taxpayer •

8
Exhibit "R-1", id., p. 5.
9
G.R. No. 178697, 17 November 2010.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 7 of 16
X-------------------------------------------------- X

SEC. 6. Power of the Commissioner to Make Assessments and

Prescribe Additional Requirements for Tax Administration and
Enforcement. -

(A) Examination of Returns and Determination of tax

Due. - After a return has been filed as required under the
provisions of this Code, the Commissioner or his duly
authorized representative may authorize the examination
of any taxpayer and the assessment of the correct
amount of tax: Provided, however, That failure to file a
return shall not prevent the Commissioner from authorizing
the examination of any taxpayer. x x x

Clearly, there must be a grant of authority before any revenue

officer can conduct an examination or assessment. Equally important
is that the revenue officer so authorized must not go beyond the
authority given. In the absence of such an authority, the assessment
or examination is a nullity.

As earlier stated, LOA 19734 covered "the period 1997 and

unverified prior years." For said reason, the CIR acting through its
revenue officers went beyond the scope of their authority because
the deficiency VAT assessment they arrived at was based on records
from January to March 1998 or using the fiscal year which ended in
March 31, 1998. As pointed out by the CTA-First Division in its April
28, 2005 Resolution, the CIR knew which period should be covered
by the investigation. Thus, if CIR wanted or intended the
investigation to include the year 1998, it should have done so by
including it in the LOA or issuing another LOA.

Upon review, the CTA-EB even added that the coverage of

LOA 19734, particularly the phrase "and unverified prior years,"
violated Section C of Revenue Memorandum Order No. 43-90 dated
September 20, 1990, the pertinent portion of which reads:

3· A Letter of Authority should cover a taxable period not

exceeding one taxable year. The practice of issuing L/As
covering audit of "unverified prior years["] is hereby
prohibited. If the audit of a taxpayer shall include more
than one taxable period, the other periods or years shall be
specifically indicated in the L/A.'"

Applying the doctrine laid down in the afore-cited case that the
examination of books must be limited to the period indicated in the ..
LOA, the Court could only conclude that a disallowance in excess ta_/ll

10
Emphasis in the original text and underscoring supplied.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 8 of 16
x--------------------------------------------------x

credits carried over to the succeeding year is improper because it

would already involve a period beyond the coverage of the assessment. 11

Moreover, as found by the Special Second Division, even

assuming arguendo that the disallowance of tax credits carried over is
an item of the assessment, such is still void for petitioner's failure to
indicate the legal and factual bases of the same.

With foregoing disquisitions, the Court En Bane cannot lend

credence to petitioner's argument that the Court erred in assuming
jurisdiction over an issue which has become final. The disallowed tax
credits from prior years, not being an item of the assessment, can
never become final in the administrative level. We reiterate that it is
not one of those items that need to be substantiated or refuted by
respondent in its protests.

Likewise, the Court En Bane is inclined to uphold the Special

Second Division's ruling relative to the unverified information that
resulted in unaccounted income. It finds no reversible error to disturb
the exhaustive discussion in the assailed Decision. We quote in
agreement the assailed Decision, viz:

Without the confirmation from third parties, the findings

casts doubts as to the reliability and correctness of the assessment on
the alleged unaccounted income.)/

II
See also East Asia Power Resources, Corp. v. Commissioner of Internal Revenue, CTA Case No.
8182, 15 January 2014. There, we held:

Respondent did not explain why petitioner's excess tax credits for the year 2006
amounting to 1'26, I 05,588.00 which was carried over to the succeeding period was deducted from
the total available tax credits. This Court could only surmise that respondent intends to regain the
benefit in the form of tax credit that has been forwarded by petitioner to the succeeding taxable
year given that respondent's audit of petitioner resulted in a deficiency income tax assessment for
the year 2006.

Respondent's disallowance of the P26, I 05,588.00 excess tax credits carried over to the
succeeding year is improper because any tax benefit derived by petitioner from the carry-over of
the said amount redounds to the succeeding year 2007. Since the tax benefit will be in the
succeeding year, at most, petitioner may only be assessed in the said succeeding year.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 9 of 16
X-------------------------------------------------- X

While it is true that tax assessments have the presumption of

correctness and regularity in its favor, it is also equally true that
assessments should not be based on mere presumptions no matter
how reasonable or logical the presumption might be. This principle
was thoroughly discussed by the Supreme Court in the case of
Commissioner of Internal Revenue v. Hantex Trading Co., Inc., the
pertinent portions of which are quoted hereunder:

"We agree with the contention of the petitioner

that, as a general rule, tax assessments by tax
examiners are presumed correct and made in good
faith. All presumptions are in favor of the correctness
of a tax assessment. It is to presumed, however, that
such assessment was based on sufficient evidence.
Upon the introduction of the assessment in evidence, a
prima facie case of liability on the part of the taxpayer
is made. If a taxpayer files a petition for review in the
CTA and assails the assessment, the prima facie,
presumption is that the assessment made by the BIR is
correct, and that in preparing the same, the BIR
personnel regularly performed their duties. This rule
for tax initiated suits is premised on several factors
other than the normal evidentiary rule imposing proof
obligation on the petitioner-taxpayer: the presumption
of administrative regularity; the likelihood that the
taxpayer will have access to the relevant information;
and the desirability of bolstering the record-keeping
requirements of the NIRC.

However, the prima facie correctness of a tax

assessment does not apply upon proof that an
assessment is utterly without foundation, meaning it is
arbitrary and capricious. Where the BIR has come out
with a 'naked assessment,' i.e., without any foundation
character, the determination of the tax due is without
rational basis. In such a situation, the U.S. Court of
Appeals ruled that the determination of the
Commissioner contained in a deficiency notice
disappears. Hence, the determination by the CTA must
rest on all the evidence introduced and its ultimate
determination must find support in credible evidence."

Accordingly, the assessment cannot be sustained since it was

based merely on unverified amounts extracted from respondent's
own database./
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 10 of 16
X-------------------------------------------------- X

Note [further] that Revenue Memorandum Order (RMO) No.

04-03 requires the verification of the amounts reflected in the
quarterly report with other externally sourced data in ascertaining
the taxpayer's underdeclaration of revenues or overstatement of
costs and expenses, if any.

TAX CREDITS RELATING TO INCOME

RECOGNIZED IN 2oo8 PROPERLY
DISALLOWED

With regard to the out-of-period creditable taxes withheld, the

Court En Bane is likewise convinced that petitioner correctly
disallowed the same. Respondent is obviously aware of the rule that
the amount of creditable taxes withheld must be claimed as credit
against the income tax liability of the payee in the same quarter of the
taxable year in which it was earned. In the same vein, it admitted that
the withholding taxes it is claiming as credit pertains to income earned
in prior year. On the other hand, petitioner is not disputing the
recognition of income in 2008 in its assessment.

As stated above, upon further consideration of the arguments

and pieces of evidence proffered by the parties, the Court En Bane
finds that petitioner's disallowance of the creditable withholding tax
for the year 2008 (but was belatedly claimed in 2009) was proper and
in accordance with Section 2.58.3 of Revenue Regulations (RR) 2-9812,
VIZ:

Section 2.58·3· Claim for tax credit or refund-

(A) The amount of creditable tax withheld shall be allowed as a tax

credit against the income tax liability of the payee in the
quarter of the taxable year in which income was earned or
received.

(B) Claims for tax credit or refund of any creditable income tax which
was deducted and withheld on income payments shall be given
due course only when it is shown that the income payment has -
been declared as part of the gross income and the fact o~

12
Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code, as
Amended" Relative to the Withholding on Income Subject to the Expanded Withholding Tax and
Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable
Value-Added Tax and Other Percentage Taxes.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 11 of 16
x--------------------------------------------------x

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 amount of tax withheld therefrom.'3

In ruling for respondent, the Court in Division relied only on

Section 2.58.3(B) above and found it sufficient to allow the claiming of
tax credits as long as the income relating to it was declared as part of
the gross income. However, it can be gleaned from the above-cited
provision that it is not enough that the related income earned or
received be declared as part of the gross income. Equally important in
claiming the tax credits is proof that the declaration of income earned
or received is made in the same period with the claiming of the related
tax credit.

The aforementioned rule finds support in the expanded concept

of the matching principle which states that, when an entity claims a
deduction, another entity must include the deducted amount in its
income.'4 Since respondent has already recognized the revenues in
2008, respondent's customers should have also claimed the
corresponding expenses in 2008 and subjected the same to
withholding tax in 2008. As such, under normal circumstances,
respondent should have also claimed the tax credits arising from the
2oo8 income in 2008. The apparent rationale for this rule is to prevent
double or multiple claiming of tax credits arising from the same
revenue.

The Court En Bane cannot also give full credence to respondent's

contention that the receipt of the certificates of withholding is not
within its control. While it is true that the issuance of certificates of
withholding is incumbent upon the payor as withholding agent,
respondent, as payee, can ask for its copy within twenty (20) days from
the close of the taxable quarter or simultaneous with the income ,
payment. This is in consonance with Section 2.58(B) ofRR 2-98, to wi~

13
Emphasis supplied.
14
Larry Maples. "Matching Deductions to Payments: Payer/payee Rules Are Not Always Clear'",
Journal of Accountancy. Vol. 202, No.4 (2006).
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 12 of 16
X-------------------------------------------------- X

Section 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD

AT SOURCE.

(B) Withholding tax statement for taxes withheld- Every payor

required to deduct and withhold taxes under these regulations
shall furnish each payee, whether individual or corporate, with a
withholding tax statement, using the prescribed form (BIR Form
2307) showing the income payments made and the amount of
taxes withheld therefrom, for every month of the quarter within
twenty (20) days following the close of the taxable quarter
employed by the payee in filing his/its quarterly income tax
return. Upon request of the payee, however, the payor must
furnish such statement to the payee simultaneously with the
income payment. For final withholding taxes, the statement
should be given to the payee on or before January 31 of the
succeeding year.

Respondent cannot likewise conveniently point finger at the

withholding agent and petitioner. Other than its allegation that the
certificates were received only in 2009, it offered no proof that, at the
very least, it requested from its clients (payors) the said certificates so
it could claim the credit in the proper period. It is primarily the duty of
the taxpayer payee to prove that the income was recognized in the
same period that the related credit was claimed, lest the disallowance
of such tax credit!5 With this, the consequential disallowance of the
tax credit is for respondent to bear.

Well-settled is the rule that tax refunds and tax credits partake
in the nature of exemption, which cannot be allowed unless granted in
the most explicit and categorical language and strictly construed
against the claimant who must discharge such burden convincingly.'6

Furthermore, upon matching of the documents, some of

respondent's BIR Form No. 2307 did not tally with the official receip,ts
(ORs) and the Statement of Account (SOA) it submitted, as followj1\

15
See RR No. 2-98, Section 2.58.3(A) and (B).
16
The Commissioner of Internal Ri!Venue v. Acesite (Philippines) Hotel Corporation, G.R. No.
147295, 16 February 2007.
 CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 13 of 16
X------------------------------------------------- -X

Tax credits per SOA

Tax credits per BIR
(dated 2oo8) and OR
Name of the Company Form No. 2307 (dated Difference
(dated 2009)
2009) submitted
submitted
Glensworth 1'5,814.04 17
1'75,094-43 1'-
Development, Inc. 69,280.39
The Residences At 135-475-20
Greenbelt 18
135.475-20 9·03!.68
9.03!.68
Condominium
14,300.91 19
Ceci Realty, Inc. 39,219.07 -
24,918.16
Avida Residences 28,627.20 20 -
28,627.20
Avignon Tower 21
147.846.60 182,539-72 (34.693-12)
Condominium Corp.
Ayala Life FGU Center 22
6,918.47 133.748.88 (126,830-41)
Condominium Corp.
Ayala Westgrove
104,849-41 104,849-4123 -
Heights Homeowners
Citibank N.A. 24
227-403-52 216,J72.18 n,03!.34
Citibank Square 25
66,137-29 51,590.14 14,547-15
Condominium Corp.
Citigroup Business 26
35.62!.87 35.62!.87 -
Process Solutions
One Dela Rosa Property 27
141,051.64 211-474-16 (70-422-52)
Development
One Legazpi Park 28
43,678.55 58-734.72 (15,056.17)
Residential Condo Corp.
'!27-49
Roxas Triangle Towers 19,622.23
Condominium Corp. 5.324-31 29
186,197-44 (152,993.89)
3·924-45
Roxas Triangle Towers
4,005.07
Condominium Corp.
The Asia Tower 30
41.555-49 138-484-49 {96.929.00)
Condominium Corp.
Verdana Homes
Homeowners 30-492.00 31 (53,206.14)
83,698.14
Association
The Columns Ayala
Avenue Condominium 32 •
57,120.00 7.329.17 49.790.8~~

17
BIR Records, Folder 4, pp. 547 and 555.
18
ld., p. 565.
19
ld., Folder 5, pp. 1047 and 1050.
20
Id., Folder 4, p. 559.
21
ld.,Folder5,pp. 1061, 1064and 1085.
22
Id., pp. I 054 and I 057.
23
Id., p. 842.
24
Id., Folder4, pp. 709-714.
25
Id., Folder 5, p. 103 I.
26
Id., Folder 4, p. 57 I.
27
Id., Folder 5, pp. I 003 and I 02 I.
28
ld., p. 997.
29
ld., p. 848.
30
ld., pp. 988 and 991.
31
Id., p. 973.
32
ld., p. 982; Tagged in the BIR Form No. 2307 as 2008 income payments.
 CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 14 of 16
X-------------------------------------------------- X

Tax credits per SOA

Tax credits per BIR
(dated zooS) and OR
Name of the Company Form No. ZJ07 (dated Difference
(dated zoo9)
zoo9) submitted
submitted
Woodside Homes 33
23.405.24 59.374·24 (35,969.00)
Condominium Corp.
Ayala Land, Inc. 647.837·18 34 (2,377-847·59)
3,025,684·77
Universal Re 35
10,489·53 58,734.72 (48,245·19)
Condominium Corp.

Subtotal 1"1,905,057·92 ,. 4·8)2,849·95 ,. (2,927,792.03)

Serendra Condominium 36
191,865.71 - 191,865.71
Corporation
Verdana Homes
Homeowners' 49.464.81 -
37 49·464.81
Association
Dusit Thani Manila 38 46.)60.95
46,360.95 -
International School 39
16,638·44 16,638·45 -
Manila, Inc.
One Legazpi Park I
I
Residential Condo Corp. 40 (65,585.28)
123,946.03 189,531.31

Fort Bonifacio
84,075·70 541,890.2341 (457,814·53)
Development Corp.
Bonifacio Estate 42
12,250.00 - 12,250.00
Services Corp.
Ceci Realty Inc. 36,846.8o -
43 36,846.80
Others 108,092.83 -
44 108,092.83
Subtotal 1'669,<;41.27 1'748,059·99 ,. (78,<;J8.7J.)
TOTAL p Z,S74>599·19 P s,s8o,9o9.94 p (J,006,JI0.74)

From the above, the Court En Bane could then not ascertain
whether the BIR Form No. 2307 submitted pertains to the withholding
on the ORs as respondent had so claimed.

All told, notwithstanding the disallowance of the out-of-period

creditable taxes withheld, respondent's excess prior year tax credit is '
more than sufficient to cover for the said disallowance, hence~

33
ld., Folder 4, p. 836.
34
ld., Folder 5, pp. 865 and 866.
35
ld., p. 978.
36
BIR Form No. 2307 not found in the records.
37
BIR Form No. 2307 not found in the records.
38
BIR Form No. 2307 not found in the records.
39
BIR Records, Folder 3, p. 236.
40
Id., p. 168.
41
ld., pp. 156-159.
42
ld., p. 145; Admitted by the respondent as double take-up.
43
Id., p. 138; Admitted by the respondent as incorrect claiming.
44
BIR Form No. 2307 not found in the records.
CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 15 of 16
X-------------------------------------------------- X

respondent still has no deficiency income taxes due for 2009, as shown
below:

Taxable income/(loss) per ITR 45 p 29>425,307.00

Basic Income Tax Due at Regular Rate
p 8,827,592.00
(Jo%)
Less: Allowable tax credits/payments:
Prior year's excess credits other than
P53.735,027.oo
MCIT
Creditable tax withheld per return 23,529,781.00
Less: Disallowed out of period tax credits 2,574.599·19 74.690,208.81
Total Basic Deficiency Income Tax
P (6 5,862,616-81)
Due

WHEREFORE, premises considered, the instant Petition for

Review is PARTIALLY GRANTED. Petitioner's disallowance of out-of-
period tax credits is AFFIRMED with MODIFICATION. Accordingly,
respondent's income tax overpayment for the taxable year 2009 is
REDUCED by ~2,574,599.19 corresponding to the said out-of-period
tax credits.

SO ORDERED.

'
JEAN Ml\.IUJ!I

WE CONCUR:

ROMAN G. DEL ROSARIO

Presiding Justice

45
BIR Records, Folder I. pp. 401-403.
 CTA EB NO. 2053 (CTA Case No. 9298)
CIR v. AYALA PROPERTY MANAGEMENT CORPORATION
DECISION
Page 16 of 16
X-------------------------------------------------- X

C2."-<-z;-c .cra-So6:/ 9.
Jt£{NITO C. CASTANEDA, .fR.'
Associate Justice
ERL~.UY
Associate Justice

~. ~ Af .........
'ABON-VICTORINO MA. BELEN M. RINGPIS-LIBAN
Associate Justice

~-7-~- ..~ -
(With due respect, please see my Dissenting Opinion)
CATHERINE T. MANAHAN MARIA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.

Presiding Justice
 REPUBLIC OF THE PHILIPPINES
COURT OF TAX APPEALS
QUEZON CITY

ENBANC

COMMISSIONER OF INTERNAL CTA EB NO. 2053

REVENUE, (CTA Case No. 9298)
Petitioner,
Present:

DEL ROSARIO, P.J.,

CASTANEDA, JR. ,
UY,
-versus- FABON-VICTORINO,
RINGPIS-LIBAN,
MANAHAN,
BACORRO-VILLENA, and
MODESTO-SAN PEDRO , JJ.

Promulgated:
AYALA PROPERTY
JUl 0 7 2020
CORP~esponde~t. -~"'!~' !'Y,_"';l·
RATION
MANAGEMENT - -
x- - - - - - - - - - - - - ~;S-S~~~~~~ ~~I~~ON

MANAHAN,J.:

With due respect to my esteemed colleague and

consistent with my position in the earlier case of Ayala
Property Management Corporation v. Commissioner of Internal
Revenue (CTA Case No. 9298), I respectfully disagree with the
disquisition on the reduction of the tax overpayment claimed
by respondent for taxable year 2009 by Php2,574,599.19.

The ponente posits that since the respondent has already

recognized the revenues in 2 008, its customers should have
also claimed the corresponding expenses in 2008 and
subjected the same to withholding tax in 2008. Thus,
respondent should have also claimed the tax credits arising
from the 2008 income in 2008.

Such position is predicated on the premise that the

related income earned or received by the taxpayer be declared d-4.-
DISSENTING OPINION
CTA EB No. 2053 (CTA Case No. 9298)
Page 2 of 4

as part of the gross income and more so, that the claim for tax
credit should be made within the same period that the income
was earned or received.

It should be noted that the assailed decision explicitly

mentioned therein that petitioner Commissioner of Internal
Revenue (CIR) "acknowledged in the FDDA that the amount
ofP2,574,599.19 was being claimed only in 2009 even if it
represented creditable income tax withheld on income
recognized in 2008. In other words, respondent was able
to verify: (a) income recognition in 2008; and (b) use of the
certificate of creditable taxes withheld only in 2009." 1
Hence, there was proof that indeed the amount was recognized
as income in 2008 and that the certificates for said
withholding taxes having been made available to respondent
only in 2009 and were utilized during the same year.

Such proof had complied with Section 2.58.3(B) of

Revenue Regulations No. 2-98 dated April 17, 1998 as
mentioned in the assailed decision, to wit:

Section 2.58.3(8) of RR No. 02-98 provides that claims

for tax credit or refund of any creditable income tax, which
was deducted and withheld on income payments, shall be
given due course only when it is shown that (1) the income
payment has been declared as part of the gross income, and
(2) the fact of withholding is established by a copy of the
withholding tax statement duly issued by the
payor /withholding agent to the payee/recipient, known as
the Certificate of Creditable Tax Withheld at Source or 8IR
Form No. 2307, showing the amount paid and the amount of
tax withheld therefrom.

Respondent admits that the income payments related

to the creditable withholding taxes of P2,574,599.19 were
already declared by petitioner in its income tax return for the
year 2008. Likewise, the amount of P2,574,599.19 is duly
supported by BIR Forms No. 2307 issued in the year 2009.
Thus, pursuant to Section 2.58.3(8) of RR No. 02-98,
petitioner may validly claim the amount of P2,574,599.19 as
tax credits for the year 2009.

Further, as shown above, petitioner CIR admitted already

that the income payments related to the creditable withholding
taxes of P2,574,599.19 were already declared by petitioner in
its income tax return for the year 2008 as evidenced by BIR

'Rollo, CTA EB Case No. 2053, Decision dated January 21, 2019, pp. 48-49 . ....,.-
DISSENTING OPINION
CTA EB No. 2053 (CTA Case No. 9298)
Page 3 of4

Form No. 2307 issued in 2009. The evil that is being nipped
here is the potential double claim of tax deduction by
respondent, which, as acknowledged in the FDDA, did not
exist. How could the respondent claim the tax overpayment in
2008 when there was no Certificate of Withholding Tax (BIR
Form 2307) available to substantiate it?

Besides, every business entity has its own accounting

method and respondent's customers may adopt accounting
methods different from that of the respondent. Hence, the
timing factor in the recognition of revenue and/ or expenditure
will simply differ. The application therefore to the instant case
of the "expanded concept of the matching principle" under the
Rules of Accountancy must fail.

As held in the case of Commissioner of Internal Revenue v.

Lancaster Philippines, Inc.2, when there is an apparent conflict
between the provision of the Tax Code and the generally
accepted accounting principle, the former shall prevail, viz:

Even if we were to accept the notion that applying the

1998 purchases as deductions in the fiscal year 1998
conforms with the generally accepted principle of matching
cost against revenue, the same would still not lend any
comfort to the CIR. Revenue Memorandum Circular (RMC)
No. 22-04, entitled "Supplement to Revenue Memorandum
Circular No. 44-2002 on Accounting Methods to be Used by
Taxpayers for Internal Revenue Tax Purposes" dated 12 April
2004, commands that where there is conflict between the
provisions of the Tax Code (NIRC), including its
implementing rules and regulations, on accounting methods
and the generally accepted accounting principles, the former
shall prevail. The relevant portion of RMC 22-04 reads:

II. Provisions of the Tax Code Shall Prevail.

All returns required to be filed by the Tax

Code shall be prepared always in conformity with the
provisions of the Tax Code, and the rules and
regulations implementing said Tax Code. Taxability
of income and deductibility of expenses shall be
determined strictly in accordance with the provisions
of the Tax Code and the rules and regulations issued
implementing said Tax Code. In case of difference
between the provisions of the Tax Code and the rules
and regulations implementing the Tax Code, on one
hand, and the general(v accepted accounting
principles (GAAP) and the generally accepted
accounting standards (GAAS), on the other hand, the

'G.R. No. 183408, July 12, 2017.~

DISSENTING OPINION
CTA EB No. 2053 (CTA Case No. 9298)
Page 4 of4

provzswns of the Tax Code and the rules and

regulations issued implementing said Tax Code shall
prevail. (italics supplied)

WHEREFORE, I shall maintain my vote in cancelling and

setting aside in toto the Final Decision on Disputed
Assessment issued by Petitioner CIR for the respondent's
alleged deficiency income tax and value-added tax liabilities for
taxable year 2009.

t:.4--/ 7- ~~:e-......~'111""~~--­
CATHERINE T. MANAHAN
Associate Justice