G.R. No. 230112, May 11, 2021
GLOBAL MEDICAL CENTER OF LAGUNA, INC., PETITIONER, VS. ROSS SYSTEMS INTERNATIONAL, INC., RESPONDENT.

[G.R. No. 230119, May 11, 2021]
ROSS SYSTEMS INTERNATIONAL, INC., PETITIONER, VS. GLOBAL MEDICAL CENTER OF LAGUNA, INC., RESPONDENT.

FACTS

Global Medical Center of Laguna, Inc. (GMCLI) engaged Ross Systems International, Inc. (RSII) for a hospital construction project under a Construction Contract valued at P248,500,000.00. The contract stipulated that all taxes on services rendered were for RSII’s account and included an arbitration clause. On April 12, 2015, RSII submitted Progress Billing No. 15, claiming 79.31% accomplishment (P9,228,286.77). GMCLI evaluated the accomplishment at 78.84% (P7,043,260.00). GMCLI, having previously failed to withhold and remit the 2% Creditable Withholding Tax (CWT) on Progress Billings Nos. 1 to 14, withheld the 2% CWT from the cumulative amount of all Progress Billings Nos. 1 to 15 (P197,088,497.01) instead of only from Progress Billing No. 15. Consequently, GMCLI paid RSII only P3,101,491.00 for Progress Billing No. 15. RSII demanded payment of P4,884,778.92, arguing that GMCLI’s outstanding obligation was P8,131,474.83 and that the 2% CWT should only have been withheld from Progress Billing No. 15. The dispute was brought to the Construction Industry Arbitration Commission (CIAC). The CIAC ruled that GMCLI had no authority to withhold the 2% CWT on the cumulative billings but that RSII was not entitled to the release of P4,884,778.92 because the tax had already been remitted to the BIR and RSII had not yet paid income taxes on the payments. The CIAC also denied both parties’ claims for damages and attorney’s fees. The Court of Appeals affirmed with modification, holding that RSII was entitled to P1,088,214.83 after deducting the 2% CWT on all billings and the payment made. Both parties filed petitions for review.

ISSUE

1. Whether GMCLI was authorized to withhold and remit the 2% CWT on the cumulative amount of Progress Billings Nos. 1 to 15.
2. Whether RSII is entitled to the release of the amount equivalent to the 2% CWT withheld on the cumulative billings.
3. Whether RSII is entitled to the balance of P1,088,214.83 as determined by the Court of Appeals.

RULING

1. GMCLI was not authorized to withhold and remit the 2% CWT on the cumulative amount of Progress Billings Nos. 1 to 15. The obligation to withhold the 2% CWT arises at the time of each payment. GMCLI’s belated withholding on the cumulative billings, spanning at least three years, contravened Revenue Regulation No. 2-98, which requires withholding at the time of payment. Thus, GMCLI’s action was improper.
2. RSII is not entitled to the release of the amount equivalent to the 2% CWT withheld on the cumulative billings (P3,815,996.50). The 2% CWT on Progress Billings Nos. 1 to 14 had already been remitted to the BIR by GMCLI. Requiring GMCLI to effectively shoulder this tax would be unjust, as RSII has the legal duty to pay income taxes on these payments. The doctrine of last clear chance applies analogously: RSII, knowing of GMCLI’s remittance, had the opportunity to avoid double payment by not declaring the same income for tax purposes. RSII’s subsequent declaration of the income on March 22, 2016, after GMCLI’s remittance, resulted in double payment, for which RSII is accountable.
3. RSII is entitled to the balance of P1,088,214.83. The Court of Appeals correctly computed this amount by deducting from RSII’s submitted billing at 78.84% accomplishment (P8,131,474.83) the payment already made (P3,101,491.00) and the 2% CWT on Progress Billings Nos. 1 to 15 (P3,941,769.00). This balance represents the correct amount due to RSII after accounting for the proper deductions.
The petitions are denied. The Court of Appeals Decision is affirmed.