COL Financial Group, Inc.

vs Commission on Internal Revenue

CTA Case No. 8454
April 15, 2014

This is a petition for Review filed by COL to preserve its right to claim tax refund or secure a tax credit
certificate for additional income tax paid under protest for the taxable period 2009.
The case stemmed from the issuance by the Bureau of Internal Revenue Regulations No. 2-2010 and and
Revenue Memorandum Circular No. 16-2010, effectively amending Section 7 of BIR Revenue and Regulations
No. 16-2008. Said RR 2-2010 and RMC 16-2010 were made to apply retroactively. To avoid the imposition of
penalties, on April 15, 2010, COL was constrained to pay under protest the amount if Eight Million Nine
Hundred and Sixty Thousand Two Hundred and Forty-Five Pesos (P 8, 960,245.00), representing the additional
taxes due should the retroactive effect of said latter issuances be held as valid.
COL, however, maintains its position that RR 2-2010 and the RMC 16-2010 should be given prospective
effect. The case is still pending at the Court of Tax Appeals.

FACTS: COL alleges that during the first three quarters of taxable year 2009, it used the itemized
method of deduction in determining its income tax payable in accordance with Section 7 of the RR No.
16-2008, dated November 26, 2008.
On February 18, 2010, respondent issued RR No. 2-2010 amending Section 7 of RR No. 16-2008,
requiring taxpayers to choose a method of deduction during the first quarter, which will be applied
during the next three three quarters of the taxable year.
On April 12, 2010, the COL filed its Annual Income Tax Return for taxable year 2009 using the
Optional Standard Deduction method and paid the corresponding income tax due.
On April 15, 2010, COL paid under protest an additional income tax amounting to Eight Million
Nine Hundred Sixty Thousand Two Hundred and Forty Five Pesos (Php8,960,245.00), in order to
avoid the imposition of interests, penalties, surcharges and other increments should respondents require
COL to use the itemized method of deduction for its Annual ITR.
On October 11, 2011, COL filed an application for the refund of and/or the issuance of TCCs for
the excess income tax paid during the taxable year 2009 amounting to Php 8,960,245.00
As the prescriptive period to file a judicial claim was about to lapse, and the claim still pending
with the BIR, petitioner filed its Petition for Review on April 3, 2012.
Respondent, in response to the Petition for Review, filed her Answer on June 13, 2012.
ISSUES:
1. WHETHER THE AMENDMENTS TO SECTION 7 OF RR NO. 16-2008 INTRODUCED BY
RR [NO.] 2-2010 AND RMC [NO.] 16-2010, WHICH EFFECTIVELY MOVED THE
PERIOD WITHIN WHICH THE TAXPAYER MUST CHOOSE THE METHOD OF
DEDUCTION TO BE APPLIED FOR THE WHOLE TAXABLE YEAR TO THE FIRST
QUARTER OF SAID YEAR, MAY BE APPLIED FOR THE TAXABLE YEAR 2009
CONSIDERING THAT SAID AMENDMENTS WERE ISSUED IN 2010;

2. WHETHER COL IS ENTITLED TO A TAX REFUND OR A TAX CREDIT CERTIFICATE

AMOUNTING TO EIGHT MILLION NINE HUNDRED SIXTY THOUSAND TWO
HUNDRED AND FORTY FIVE PESOS (PHP 8,960,245.00);

HELD:
1. RR No. 16-2008 applies to filings made for taxable year 2009
In the present case, it is undeniable that during the period wherein petitioner was required to file
its quarterly income tax return for the taxable year 2009, the regulation which was in effect was RR
No. 16-2008. Thus taxpayers could shift from the two deduction methods from quarter to quarter, and
only during the filing of the final adjustment income tax return is the taxpayer required to make a
choice as to what method of deduction it or he shall employ for the purpose of determining its/his
taxable net income for the entire year.
Petitioner bases its claim for refund on the fact that the new issuances cannot apply retroactively to
its returns filed for taxable year 2009, as it would be prejudicial to its interest, which the 1997 NIRC,
as amended, prohibits. On the other hand, respondent posits the theory that the taxpayer's choice of
deduction during the first quarter VAT returns for taxable year 2009, shall be applied to all subsequent
quarterly returns, as well as the final adjustment return.
The Court finds that the stance taken by respondent to be in direct contravention of Section 2463of
the 1997 NIRC, as amended, which protects taxpayers from the retroactive application of a regulation
if it is prejudicial to its interest.

2. Petitioner is entitled to a tax refund or a tax credit certificate amounting to Php 8,960,245
Given the circumstances, petitioner's reliance and subsequent application of Section 7 of RR No.
16-2008 is correct. As stated, the regulations allowed petitioner to file quarterly income tax returns
using either deduction method, and choose the final deduction method for its Annual Income Tax
Return. How petitioner chooses is a business/ financial decision.
In this instance, petitioner chose the OSD method to file their final adjustment return, which is
within their right to do so. Any additional payments, like the payment made under protest, are clearly
in excess of what is legally due from petitioner, and is therefore refundable.
 Ong Beng Gui vs Commissioner of Internal Revenue
CTA Case No. 8410
September 8, 2014

FACTS: On December 14, 2009, after resolving to retire his business, petitioner applied with the
Department of Labor and Employment for authority to terminate thirty-seven employees effective
January 16, 2010. Petitioner paid Php1,167,191.00 as separation pay on December 2009.
On January 12, 2010, petitioner filed through Electronic Filing and Payment System ("EFPS") his
monthly Withholding Tax on Compensation Form (BIR Form 1601-C") for the month of December
2009 and paid the corresponding WTC in the amount of P320,099.79 on the separation pay he paid to
the 37 terminated employees. Realizing that the amount of P1,167,191.00 separation pay he paid to his
37 terminated employees should not have been subjected to WTC, petitioner filed and paid through
EFPS on January 19, 2010, an amended BIR Form 1601-C for the month of December 2009, reflecting
the correct WTC of P16,104.82, properly exempting the separation pay of P1,167,191.00 from WTC.
On February 22, 2010, petitioner filed through EFPS the Annual Information of Income Taxes
Withheld on Compensation and Final Withholding Taxes reflecting petitioner's WTC payment of
P16,104.82 for the month of December 2009.
On February 2, 2010, petitioner filed an administrative claim for refund with the Revenue
Accounting Division and Revenue District Office No. 29 (San Nicholas/Tondo) of the BIR through
Metropolitan Bank and Trust Company, the Authorized Agent Bank which handled petitioner's
aforementioned EFPS payment
Due to respondent's inaction on petitioner's claim for refund and, to toll the running of the 2-year
prescriptive period, the instant Petition for Review was filed with this Court on January 11, 2012. On
March 6, 2012, respondent filed her Answer.

ISSUES: Whether or not Petitioner terminated 37 employees, and in the process, paid Separation Pay
of Php1,167,191.00 to 31 employees in full and without any withholding.

HELD: In the case of Commissioner of Internal Revenue v.

SMART Communication, Inc./0 the Supreme Court explained why
the withholding agent may file a refund claim as follows:
"Although such relation between the taxpayer and the withholding agent is a factor that
increases the latter's legal interest to file a claim for refund, there is nothing in the decision
to suggest that such relationship is required or that the lack of such relation deprives the
withholding agent of the right to file a claim for refund. Rather, what is clear in the
decision is that a withholding agent has a legal right to file a claim for refund for two
reasons. First, he is considered a "taxpayer" under the NIRC as he is personally
liable for the withholding tax as well as for deficiency assessments, surcharges, and
penalties, should the amount of the tax withheld be finally found to be less than the
amount that should have been withheld under law. Second, as an agent of the
taxpayer, his authority to file the necessary income tax return and to remit the tax
withheld to the government impliedly includes the authority to file a claim for refund
and to bring an action for recovery of such claim.

Petition for Review is granted but in the reduced amount of P174,460.01 representing excess payment
of WTC for the taxable month of December 2009.