G.R. No. 155682 March 27, 2007
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, Respondents.

FACTS

Petitioner Banco Filipino Savings and Mortgage Bank filed an administrative claim for a tax refund of ₱1,622,576.00, representing creditable taxes withheld for the fiscal year 1995. As the Commissioner of Internal Revenue failed to act, the petitioner filed a Petition for Review with the Court of Tax Appeals. To substantiate its claim, the petitioner submitted various documents, including a Certificate of Income Tax Withheld on Compensation (BIR Form No. W-2) and Monthly Remittance Returns of Income Taxes Withheld (BIR Form No. 1743W).
The CTA partially granted the claim, ordering a refund of only ₱18,884.40. It disallowed the remaining ₱1,603,691.60 on the ground that the supporting documents (the W-2 Form and the 1743W Forms) lacked probative value. The CTA ruled that these were not the BIR Form No. 1743.1 (Certificate of Creditable Tax Withheld at Source) expressly required by revenue regulations to prove the fact of withholding. The Court of Appeals affirmed this disallowance.

ISSUE

Whether the Court of Appeals erred in affirming the disallowance of the refund claim on the ground that the petitioner’s documentary evidence did not comply with the prescribed form required by revenue regulations.

RULING

The Supreme Court denied the petition and affirmed the rulings of the lower courts. The legal logic is anchored on strict compliance with the conditions for a tax refund, which are construed against the taxpayer as a refund partakes of the nature of a tax exemption. One essential condition, under Section 10 of Revenue Regulations No. 6-85, as amended, is that the fact of withholding must be established by a copy of the withholding tax statement duly issued by the payor to the payee.
The prescribed form for this statement is BIR Form No. 1743.1. The Court held that the petitioner’s submitted forms—BIR Form No. W-2 and BIR Form No. 1743W—do not satisfy this mandatory requirement. While they may indicate remittance of taxes, they are not the specific certificates issued to the payee that detail the income payment and the exact tax withheld therefrom, as required to substantiate a payee’s claim for credit or refund. The Court rejected the plea for liberality, citing its prior ruling in Far East Bank and Trust Company v. Court of Appeals, which emphasized that the absence of the prescribed certificate is fatal to the claim. The regulations provide a clear and specific procedure, and the submission of alternative documents, even if official, does not constitute substantial compliance. Therefore, the petitioner failed to discharge its burden of proving the factual basis for the refund with the required evidence.