TAX.7.1. Consolidated Mines Inc. v.

CTA and CIR

FACTS: The Company, a domestic corporation engaged in mining, had filed its income tax returns for 1951, 1952, 1953
and 1956. In 1957 examiners of the BIR investigated the income tax returns filed by the Company because its auditor,
Felipe Ollada, claimed the refund of the sum of P107,472.00 representing alleged overpayments of income taxes for the
year 1951. After the investigation the examiners reported that (A) for the years 1951 to 1954 (1) the Company had not
accrued as an expense the share in the company profits of Benguet Consolidated Mines as operator of the Company's
mines, although for income tax purposes the Company had reported income and expenses on the accrual basis; (2) depletion
and depreciation expenses had been overcharged; and (3) the claims for audit and legal fees and miscellaneous expenses
for 1953 and 1954 had not been properly substantiated; and that (B) for the year 1956 (1) the Company had overstated its
claim for depletion; and (2) certain claims for miscellaneous expenses were not duly supported by evidence.

In view of said reports the Commissioner of Internal Revenue sent the Company a letter of demand requiring it to pay
certain deficiency income taxes for the years 1951 to 1954, inclusive, and for the year 1956. Deficiency income tax
assessment notices for said years were also sent to the Company. The Company requested a reconsideration of the
assessment, but the Commissioner refused to reconsider, hence the Company appealed to the Court of Tax Appeals.

On May 6, 1961 the Tax Court rendered judgment ordering the Company to pay the amounts of P107,846.56, P134,033.01
and P71,392.82 as deficiency income taxes for the years 1953, 1954 and 1956, respectively.

However, on August 7, 1961, upon motion of the Company, the Tax Court reconsidered its decision and further reduced
the deficiency income tax liabilities of the Company to P79,812.93, P51,528.24 and P71,382.82 for the years 1953, 1954
and 1956, respectively. Both the Company and the Commissioner appealed to this Court. The Company questions the rate
of mine depletion adopted by the Court of Tax Appeals and the disallowance of depreciation charges and certain
miscellaneous.

ISSUE: Whether the Court of Tax Appeals erred with respect to the rate of mine depletion.

RULING: The Tax Code provides that in computing net income there shall be allowed as deduction, in the case of mines,
a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof which has
been mined and sold during the year for which the return is made [Sec. 30(g) (1) (B)].

The formula for computing the rate of depletion is:

Cost of Mine Property

---------------------- = Rate of Depletion Per Unit Estimated ore Deposit of Product Mined and sold.

The Commissioner and the Company do not agree as to the figures corresponding to either factor that affects the rate of
depletion per unit. The figures according to the Commissioner are:

P2,646,878.44 (mine cost) P0.59189 (rate of

------------------------- = depletion per ton)
4,471,892 tons (estimated ore deposit)

while the Company insists they are:

P4,238,974.57 (mine cost) P1.0197 (rate of
------------------------- - = depletion per ton)
4,156,888 tons (estimated
ore deposit)

They agree, however, that the "cost of the mine property" consists of (1) mine cost; and (2) expenses of development before
production.

As an income tax concept, depletion is wholly a creation of the statute— "solely a matter of legislative grace." Hence, the
taxpayer has the burden of justifying the allowance of any deduction claimed. As in connection with all other tax
controversies, the burden of proof to show that a disallowance of depletion by the Commissioner is incorrect or that an
allowance made is inadequate is upon the taxpayer, and this is true with respect to the value of the property constituting
the basis of the deduction. This burden-of-proof rule has been frequently applied and a value claimed has been disallowed
for lack of evidence.

The Company's balance sheet for December 31, 1947 lists the "mine cost" of P2,500,000 as "development cost" and the
amount of P1,738,974.37 as "suspense account (mining properties subject to war losses)." The Company claims that its
accountant, Mr. Calpo, made these errors, because he was then new at the job. Granting that was what had happened, it
does not affect the fact that the, evidence on hand is insufficient to prove the cost of development alleged by the Company.
Nor can we rely on the statements of Eligio S. Garcia, who was the Company's treasurer and assistant secretary at the time
he testified on August 14, 1959. He admitted that he did not know how the figure P4,238,974.57 was arrived at, explaining:
"I only know that it is the figure appearing on the balance sheet as of December 31, 1946 as certified by the Company's
auditors; and this we made as the basis of the valuation of the depletable value of the mines."

We, therefore, have to rely on the Commissioner's assertion that the "development cost" was P131,878.44, broken down
as follows: assessment, P34,092.12; development, P61,484.63; exploration, P13,966.62; and diamond drilling, P22,335.07.

The question as to which figure should properly correspond to "mine cost" is one of fact. The findings of fact of the Tax
Court, where reasonably supported by evidence, are conclusive upon the Supreme Court.

TAX.7.2. Bank of America NT and SA v. CA and Commissioner

In the 15% remittance tax, the law specifies its own tax base to be on the “profit remitted abroad.” There is absolutely
nothing equivocal or uncertain about the language of the provision. The tax is imposed on the amount sent abroad, and
the law calls for nothing further.

FACTS: Bank of America is a foreign corporation licensed to engage in business in the Philippines through a branch in
Makati. Bank of America paid 15% branch profit remittance tax amounting to PhP7.5M from its regular unit operations
and another 405K PhP from its Foreign Currency Deposit Operations. The tax was based on net profits after income tax
without deducting the amount corresponding to the 15% tax. Bank of America thereafter filed a claim for refund with the
BIR for the portion the corresponds with the 15% branch profit remittance tax. BOA’s claim: “BIR should tax us based on
the profits actually remitted (45M), and NOT on the amount before profit remittance tax (53M)... The basis should be the
amount actually remitted abroad.” CIR contends otherwise and holds that in computing the 15% remittance tax, the tax
should be inclusive of the sum deemed remitted.

ISSUE: Whether or not the branch profit remittance tax should be base on the amount actually remitted?

RULING: Yes. It should be based on the amount actually committed, NOT what was applied for. There is nothing in
Section 24which indicates that the 15% tax/branch profit remittance is on the total amount of profit; where the law does
NOT qualify that the tax is imposed and collected at source, the qualification should not be read into law. Rationale of
15%: To equalize/ share the burden of income taxation with foreign corporations

TAX.7.3. Commissioner of Internal Revenue v. Asian Transmission Corporation

FACTS: Asian Transmission Corporation (ATC) is a domestic corporation engaged in the manufacture of automotive
parts. It filed its annual Income Tax Return (ITR) for the year 2000 on April 10, 2001 where it declared a gross income of
P370,532,082.00, a net loss of P279,926,225.00 and a minimum corporate income tax (MCIT) of P7,410,642.00. The
MCIT due was offset against the P38,301,198.00 existing tax credits and creditable taxes withheld of the ATC, thereby
leaving an excess tax credit or overpayment of P30,890,556.00. For the P30,890,556.00 overpayment, ATC opted “To be
issued a Tax Credit Certificate.”

In its ITR for the year 2001, ATC declared a gross income of P322,839,802.00, a net loss of P37,869,455.00, and MCIT
of P6,456,796.00. After deducting its MCIT due against its existing tax credits and creditable taxes, ATC was left with a
total tax credit of P51,760,312.00.
ATC, however, applied part of its unutilized creditable taxes for the year 2000 amounting to P7,639,822.00 to its MCIT
due of P6,456,796.00 for the year 2001. Left unapplied of its 2000 creditable taxes, therefore, was the amount of
P1,183,026.00.

Again, ATC opted “To be issued a Tax Credit Certificate” for the excess income tax payment.

On April 9, 2003, ATC filed with CIR’s Large Taxpayers Service an administrative claim for the issuance of tax credit
certificate or cash refund in the amount of P28,509,578.00, representing excess/unutilized creditable income taxes withheld
as of December 31, 2001

CIR’s Contention - while the certificates of withholding taxes and the annual income tax returns for the years 2000 and
2001 submitted by ATC may prove the inclusion of income payments which were the bases of the withholding taxes and
the fact of withholding, they are not sufficient to prove entitlement to the tax refund requested. Since Section 2.58.3 (B) of
Revenue Regulation provides that “claims for refund or tax credit shall be given due course upon showing that income
payment has been declared as part of gross income and the fact of withholding is established,” the mere submission of the
withholding tax statements shall only mean that ATC’s claim shall be given due course, i.e., heard or considered. ATC
still has to show that it is entitled to the refund requested by proving not only the income payments made but also the
reported losses.

ISSUE: Whether or not ATC is entitled to refund in the amount of P27,325,856.58 representing the alleged unutilized
creditable withholding taxes for the taxable year 2001.

RULING: No. In Barcelon, Roxas Securities, Inc. (now known as UBP Securities, Inc.) v. Commissioner of Internal
Revenue, this Court more explicitly pronounced:

Jurisprudence has consistently shown that this Court accords the findings of fact by the CTA with the highest
respect. In Sea-Land Service Inc. v. Court of Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-446], this
Court recognizes that the Court of Tax Appeals, which by the very nature of its function is dedicated exclusively to the
consideration of tax problems, has necessarily developed an expertise on the subject, and its conclusions will not be
overturned unless there has been an abuse or improvident exercise of authority. Such findings can only be disturbed on
appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax
Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a
decision which is valid in every respect.

At any rate, the CIR is correct in stating that the taxpayer bears the burden of proof to establish not only that a
refund is justified under the law but also that the amount that should be refunded is correct. In this case, however, the CTA-
First Division and the CTA-En Banc uniformly found that from the evidence submitted, ATC has established its claim for
refund or issuance of a tax credit certificate for unutilized creditable withholding taxes for the taxable year 2001 in the
amount of P27,325,856.58. The Court finds no cogent reason to rule differently. As correctly noted by the CTA-En Banc:

x x x proof of actual remittance by the respondent is not needed in order to prove withholding and remittance of
taxes to petitioner. Section 2.58.3 (B) of Revenue Regulation No. 2-98 clearly provides that proof of remittance is the
responsibility of the withholding agent and not of the taxpayer-refund claimant. It should be borne in mind by the petitioner
that payors of withholding taxes are by themselves constituted as withholding agents of the BIR. The taxes they withhold
are held in trust for the government.

With respect to the losses incurred by the ATC, it is true that the taxpayer bears the burden to establish the losses,
but it is quite clear from the evidence presented that ATC has fulfilled its duty. Moreover, other than the bare assertion that
ATC must establish its losses, the CIR fails to point to any circumstance or evidence that would cast doubt on ATC’s
sworn declaration that it incurred losses in 2000 and 2001.