G.R. No. L-7019 - Eusebio vs. Valmores

The petitioner is the Commissioner of Internal Revenue (CIR), vested with the authority to decide, approve, and grant refunds or tax credits on overpaid taxes.
The respondent is Team (Philippines) Operations Corporation (formerly Mirant (Philippines) Operations Corporation), a licensed corporation engaged in designing, constructing, operating, and managing power generating facilities, principally gas turbine and other power plants.

The respondent entered into Operating and Management Agreements with two corporations—Mirant Pagbilao Corporation (MPagC) and Mirant Sual Corporation (MSC)—to provide services for the operation, construction, and commissioning of coal-fired power stations in Quezon and Pangasinan respectively.
Payments rendered to the respondent for these services were subject to creditable withholding tax.
For the taxable year 2002, the respondent filed its Annual Income Tax Return (ITR) indicating:

A gross income of P82,905,652.00 (detailed by adding operating and non-operating incomes).
Zero taxable income after deductions, resulting in a computed income tax due of P1,658,113.00.
Excess creditable withholding tax amounting to P23,108,689.00, as shown by figures reflecting tax withheld (P24,766,802.00) versus tax due.

The respondent opted for a tax refund by marking its ITR under the appropriate refund option box.

On April 15, 2003, the respondent filed its Annual Income Tax Return, indicating unutilized tax credits for 2002.
On March 17, 2004, the respondent filed an administrative claim for a refund or issuance of a tax credit certificate with the Bureau of Internal Revenue (BIR) amounting to P23,108,689.00.
Approaching the two-year prescriptive period under Section 229 of the National Internal Revenue Code (NIRC) of 1997, the respondent elevated its case to the Court of Tax Appeals (CTA) by filing a Petition for Review on April 27, 2004.

On August 29, 2007, the CTA First Division partially granted the claim by refunding or issuing a tax credit certificate for P23,053,919.22 after deducting P54,769.78 due to a discrepancy between declared income (P247,120,318.00) and the income basis for withholding taxes (P247,668,015.80).
Petitioner’s motion for reconsideration was denied in a February 4, 2008 Resolution.
The CTA En Banc, on August 27, 2008, affirmed the decision of the CTA First Division, ruling that the respondent was entitled to the refund or credit in the specified amount.
The petitioner further appealed by filing a subsequent petition, arguing that the respondent failed to comply with the requirements for refund because it did not present original certificates but only photocopies tested by a court-commissioned independent CPA (ICPA), Mr. Henry Tan.

The petitioner contended that the presentation of photocopies, even if executed under the penalties of perjury, did not satisfy the best evidence rule since the original certificates were not personally examined in court.
In contrast, the respondent maintained that the original certificates were properly submitted to the court-commissioned ICPA for verification under the procedures of CTA Circular No. 1-95 (amended by CTA Circular No. 10-97) and that the ICPA’s certification of their faithfulness sufficed for evidentiary purposes.
Petitioner admitted the availability of the original documents at respondent’s office but failed to request their examination during the proceedings, thereby not challenging their authenticity at the proper time.

Whether the respondent complied with the statutory and regulatory requisites for claiming a refund or issuance of a tax credit certificate for excess creditable withholding taxes.

Specifically, whether the procedural requirements under Section 229 of the NIRC and Section 10 of Revenue Regulation No. 6-85 were satisfied, including:

Timely filing of the claim (within the two-year period).
Proper declaration of the income as part of the gross income on the ITR.
Establishing the fact of withholding through an authentic certificate (or its valid reproduction).

Whether the presentation of photocopied certificates, as certified by the court-commissioned independent CPA, adequately establishes the authenticity of the withholding tax evidence in lieu of the original evidentiary documents.