REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

QUEZON CITY

En Bane

COMMISSIONER OF INTERNAL CTA EB No. 2467

REVENUE , (CTA Case No. 9808)
Petitioner,

Present:

DEL ROSARIO , ill

CASTANEDA, JR.,
UY,
-versus- Rl NG PIS-LI BAN ,
MANAHAN,
BACORRO-VILLENA,
MODESTO-SAN PEDRO,
REYES-FAJARDO, and
CUI-DAVID, JJ.

SONOMA SERVICES, INC. ,

Respondent.
X ------------------------------------------------------------------------

DECISION

DEL ROSARIO, PJ.:

Before this Court is a Petition for Review posted on May 21 ,

2021 via registered mail by the Commissioner of Internal Revenue
(CIR), praying that the Court En Bane reverse and set aside the
Decision dated October 1, 2020 and the Resolution dated March 2,
2021 promulgated by the Court of Tax Appea ls (CTA) Third Division 1
in CTA Case No. 9808, entitled Sonoma Services, Inc. vs.
Commissioner of Internal Revenue, which granted Sonoma Services,
Inc.'s (Sonoma) Petition for Review, and ordered the CIR to refund
or issue a tax credit certificate to Sonoma in the amount of
P4,993,000.00, representing its excess and unutilized Creditable
Withholding Tax (CWT) for Calendar Y.e ar (CY) 2015.

1
Composed of Associate Justice Erlinda P. Uy, Associate Justice Ma. Belen M. Ringpis-Liban ,
and Associate Justice Maria Rowena Modesto-San Pedro.
Cf1
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 2 of 13

The dispositive portions of the assailed Decision and assailed

Resolution of the Court in Division are as follows:

October 1, 2020 Decision:

"WHEREFORE, in view of the foregoing, the present Petition

for Review is hereby GRANTED. Accordingly, respondent is hereby
ORDERED TO REFUND OR TO ISSUE A TAX CREDIT
CERTIFICATE in the amount of Php4,993,000.00 in favor of
petitioner, representing its excess and unutilized CWT for CY 2015.

SO ORDERED."

March 2, 2021 Resolution:

"WHEREFORE, the Motion for Reconsideration is hereby

DENIED for lack of merit.

SO ORDERED."

THE PARTIES 2

Petitioner is the duly appointed CIR vested under appropriate

laws with the authority to carry out the functions, duties, and
responsibilities of said office including, inter alia, the power to decide,
approve, and grant refunds and/or tax credits of overpaid and
erroneously paid or collected internal revenue taxes. 3

Respondent Sonoma is a corporation duly organized and

existing under the laws of the Republic of the Philippines, with
principal office at 3rd Floor, Makati Stock Exchange Building, Ayala
Triangle, Ayala Avenue, Makati City. 4 It is registered with the Bureau
of Internal Revenue (BIR), Revenue Region No. 8 (RR 8), Revenue
District Office No. 50 (ROO 50) with Tax Identification No. 220-868-
954-000.5

2 Commissioner of Internal Revenue is the respondent; while Sonoma Services, Inc. is the
petitioner in the case docket CTA Case No. 9808 entitled Sonoma Services, Inc. vs.
Commissioner of Internal Revenue.
3 Par. 3, Admitted Facts, Pre-Trial Order, CTA Division Docket, Vol. I, p. 348.
4 Par. 1, Admitted Facts, Pre-Trial Order, CTA Division Docket, Vol. I, p. 347.
5 Par. 2, Admitted Facts, Pre-Trial Order, CTA Division Docket, Vol. I, p. 348.r!1
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 3 of 13

THE FACTS

The facts of the case as found by the Court in Division are as

follows:
"On 13 April 2016, petitioner filed, through the BIR's
Electronic Filing and Payment System ('eFPS'), its original Annual
Income Tax Return ('ITR') for CY 2015. On 25 April 2016, petitioner
filed, through the eFPS, an Amended Annual ITR. Following its
filing of said ITRs, petitioner filed before BIR RDO 50 an
administrative claim for refund of its excess and unutilized CWT for
CY 2015 in the amount of Php4,993,000.00.

On 25 September 2017, the BIR RR 8's Regional Director,

Mr. Glen A. Geraldina, issued Letter of Authority ('LOA') No.
eLA201500084361 authorizing revenue officers from RDO 50,
namely, Mr. Roland Dela Torre and Ms. Marilou Cortez, to examine
petitioner's books of accounts and other accounting records for
CWT refund for CY 2015.

In view of respondent's inaction on its claim for refund,

petitioner filed the instant Petition before this Court on 11 April
2018.

On 25 April 2018, Summons was issued to respondent, and

on 22 May 2018, respondent filed a Manifestation with Motion to
Admit Answer with the Answer attached therein, which was granted
in a Resolution, dated 5 June 2018.

On 8 June 2018, this Court issued a Notice of Pre-Trial

Conference, setting the Pre-Trial Conference on 9 August 2018, at
9:00a.m.

On 3 July 2018, petitioner filed its Pre-Trial Brief and

submitted the Judicial Affidavits of Ms. Krystal E. Gamit, which was
noted in a Resolution, dated 5 July 2018. Respondent filed his Pre-
Trial Brief on 1 August 2018, which was noted in a Resolution,
dated 2 August 2018.

On 9 August 2018, the Pre-Trial Conference ensued.

On 29 August 2018, petitioner filed a Motion to Commission

Independent Certified Public Accountant ('ICPA'), attaching therein
the Judicial Affidavit of Ms. Ma. Milagros F. Padernal, which was
granted by this Court. On the same date, the parties filed their Joint
Stipulation of Facts and Issues, which was approved by this Court.

In an Order, dated 19 September 2018, the Petition was

transferred from this Court's First Division to this Court's Third
(10
Division.
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 4 of 13

On 5 October 2018, a Pre-Trial Order was issued.

Trial began on 16 October 2018 when petitioner presented

its first witness, Krista I E. Gam it.

Meanwhile, on 18 October 2018, petitioner submitted its

ICPA Report. The USB containing the soft copies of the
summaries, schedules, and exhibits supporting the ICPA Report
was submitted on the same date. These were admitted in a
Resolution, dated 22 October 2018.

On 20 November 2018, petitioner presented its second

witness, ICPA Ma. Milagros F. Padernal who identified the ICPA
Report.

On 20 December 2018, on an allowed extension of time,

petitioner filed its Formal Offer of Evidence, to which respondent
filed a CommenUOpposition (Petitioner's Formal Offer of Evidence).
In a Resolution, dated 21 February 2019, this Court admitted
petitioner's Exhibits xxx but denied admission of Exhibits 'P-28' and
'P-29'.

On 14 March 2019, petitioner filed a Motion for

Reconsideration (Re: Resolution dated February 21, 2019) xxx. In a
Resolution, dated 17 June 2019, this Court granted the Motion for
Reconsideration (Re: Resolution dated February 21, 2019), and
admitted Exhibits 'P-28' and 'P-29'.

During the hearing on 6 August 2019, respondent

manifested that he would no longer be presenting any evidence in
view of the fact that there is no BIR Report of Investigation. Further,
the parties agreed to submit their respective Memoranda no later
than 5 September 2019.

XXX XXX XXX

On 20 September 2019, respondent filed a Manifestation &

Motion informing this Court that he is adopting his Answer as his
Memorandum.

Xxx. Petitioner then filed its Memorandum on 15 October

2019.

On 17 October 2019, this Court issued a Resolution

submitting the instant Petition for decision."6 (Citations omitted)

On October 1, 2020, the Court in Division rendered the assailed

Decision 7 granting Sonoma's Petition for Review.

6 Annex "B", CTA En Bane Docket, pp. 22-45.

7
/d~
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 5 of 13

On October 21, 2020, the CIR filed a "Motion for

Reconsideration". 8

On March 2, 2021, the Court in Division issued the assailed

Resolution 9 denying the CIR's "Motion for Reconsideration" for lack of
merit.

Undeterred, the CIR posted the present "Petition for Review" 10

before the Court En Bane on May 21, 2021.

With the filing of Sonoma's "Comment (Re: Petition for Review

dated May 19, 2021)", 11 the "Petition for Review" filed by the CIR was
submitted for decision on October 7, 2021. 12

THE ISSUES

The CIR raises the following issues 13 for the Court En Bane's
resolution:

I. Sonoma evidently failed to comply with the requirements

under Revenue Regulations (RR) No. 2-98, as amended
by RR No. 2-2006, on the claim for refund of its
excess/unutilized CWT for CY 2015; and,

II. Sonoma's documentary exhibits consisting of Certificates

of Creditable Withholding Tax at Source (CCWTS) (i.e.
Bl R Form 2307) marked as Exhibits "P-27-1" to "P-27-30"
are inadmissible in evidence for being hearsay.

PARTIES' ARGUMENTS

Petitioner's arguments

The CIR argues that:

8 Annex "C", eTA En Bane Docket, pp. 46-54; eTA Division Docket, Vol. II, pp. 847-855.
9 Annex "A", CTA En Bane Docket, pp. 18-21.
10 CTA En Bane Docket, pp. 1-12.
11 CTA En Bane Docket, pp. 65-82.
12 CTA En Bane Docket, pp. 84-85.
13 Petition for Review, CTA En Bane Docket, pp. 5 and 3.{11
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 6 of 13

1. Sonoma failed to present the documentary requirements [i.e.

Summary Alphalist of Withholding Agents of Income
Payments Subjected to Withholding Tax (SAWT) and
Monthly Alphalist of Payees (MAP)], prescribed under RR
No. 2-98, as amended by RR No. 2-2006 in support of its
claim for refund of excess/unutilized CWT for CY 2015;

2. Sonoma failed to present various payors and withholding

agents in order to establish and validate the fact of
withholding and remittance of the full amount subject of the
present claim for refund. The CIR claims that the CCWTS
(i.e. BIR Form 2307) marked as Exhibits "P-27-1" to "P-27-
30" are inadmissible in evidence for being hearsay as
Sonoma's witness - Ms. Ma. Milagros F. Padernal, the
Court-commissioned Independent Certified Public
Accountant (ICPA), who testified and identified the CCWTS,
was not the one who issued them; and,

3. Tax refunds are in the nature of tax exemptions and as such,

they are regarded as in derogation of sovereign authority
and to be construed strictissmi juris against the person or
entity claiming the exemption. The burden of proof is upon
Sonoma who claims the exemption in its favor. Sonoma
must be able to justify its claim for tax refund by the clearest
grant of organic or statute law and its alleged exemption
cannot be permitted to exist upon vague implications. Thus,
when tax exemption is claimed, it must be shown indubitably
to exist, for every presumption is against it, and a well-
founded doubt is fatal to the claim.

Respondent's arguments

Sonoma, in its Comment, counter-argues:

1. It is well-settled that the presentation of CCWTS (BIR Form

2307) issued by the withholding agents constitutes sufficient
proof of the existence and validity of a taxpayer's CWT;

2. Sonoma's documentary evidence, particularly the CCWTS

(BIR Form No. 2307), were properly admitted in evidence as
the same do not constitute hearsay evidence~
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 7 of 13

3. The rule that "claims for refund of overpaid taxes are

construed strictissimi juris against the taxpayer" does not
apply to claims for refund of overpaid or erroneously paid
taxes, such as in the present case.

RULING OF THE COURT EN BANC

The Petition for Review was

filed on time

As to whether the present Petition for Review was timely filed,

Section 3 (b), Rule 8 of the Revised Rules of the Court of Tax
Appeals states:

"SEC. 3. Who may appeal; period to file petition. - xxx

XXX

(b) A party adversely affected by a decision or resolution of a

Division of the Court on a motion for reconsideration or new trial
may appeal to the Court by filing before it a petition for review
within fifteen days from receipt of a copy of the questioned
decision or resolution. Upon proper motion and the payment of
the full amount of the docket and other lawful fees and deposit for
costs before the expiration of the reglementary period herein fixed,
the Court may grant an additional period not exceeding fifteen days
from the expiration of the original period within which to file the
petition for review. (Rules of Court, Rule 42, sec. 1a)"

Records show that the CIR received the assailed Resolution on

March 16, 2021. The CIR had fifteen (15) days from March 16, 2021
or until March 31, 2021 within which to file his Petition for Review
before the Court En Bane.

Meanwhile, the Supreme Court, in addressing the rising cases

of COVID-19, issued several administrative circulars, 14 ordering the
physical closure of courts in affected areas, and suspending the filing
and service of motions, pleadings, and other court submissions
beginning March 29, 2021, and declaring the resumption thereof
seven (7) calendar days counted from the first day of the physical
reopening of the relevant court. The CTA physically reopened on May
17, 2021, pursuant to Supreme Court Administrative Circular (AC)

,
14 Administrative Circular (AC) No. 14-2021 dated March 28,2021, AC No. 15-2021 dated April3,

2021, AC No. 21-2021 dated April10, 2021, AC No. 22-2021 dated April14, 2021, AC No. 29-
2021 dated April 30, 2021, and AC No. 33-2021 dated May 14, 2021.
DECISION
Commissioner of lntemal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 8 of 13

No. 33-2021 dated May 14, 2021. Counting seven (7) calendar days
from May 17, 2021, the period for filing and service of motions,
pleadings, and other court submissions resumed on May 24, 2021.

Considering that the CIR had until March 31, 2021 within which
to file his Petition for Review before the Court En Bane and that the
period for filing and service of motions, pleadings, and other court
submissions was suspended beginning March 29, 2021 and resumed
on May 24, 2021, the CIR had two (2) days left from May 24, 2021 or
until May 26, 2021 within which to file his petition. The Petition for
Review was timely filed on May 21, 2021. 15

The presentation of SA WT and

MAP prescribed under RR No.
2-98, as amended by RR No. 2-
2006, is not required to
substantiate a claim for refund
of excesslunutilized CWT

RR No. 2-2006 issued on January 5, 2006 prescribes the

mandatory attachments of the SAWT to tax returns with claimed tax
credits due to Creditable Tax Withheld at Source and of the MAP
whose income received have been subjected to withholding tax to the
withholding tax remittance return filed by the withholding agent/payor
of income payments. Section 2 (A) of RR No. 2-2006 states:

"SECTION 2. Mandatory Submission of Summary Alphalist

of Withholding Agents of Income Payments Subjected to Creditable
Withholding Taxes (SAWT) by the Payee/Income Recipient and of
Monthly Alphalist of Payees (MAP) Subjected to Withholding Tax
by the Withholding AgenUincome Payor as Attachment to their
Filed Returns. -

A. Summary Alphalist of Withholding Agents of Income

Payments Subjected to Withholding Tax (SAWT) and Monthly
Alphalist of Payees (MAP) defined - Summary Alphalist of
Withholding Agents/Payers of Income Payments subjected to
Creditable Withholding Tax at Source (SAWT) Annex "A" is a
consolidated alphalist of withholding agents from whom income
was earned or received and subjected to withholding tax to be
submitted by the payee-recipient of income as attachment to its
duly filed return for a given period which Summary List contains a
summary of information showing, among others, total amounts of
income/gross sales/gross receipts and claimed tax credits taken

1s Filed via registered mail. ()"1

DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 9 of 13

from all Certificates of Creditable Withholding Tax at Source (BIR

Form No. 2307) issued by the payors of income payment.

Monthly Alphalist of Payees (MAP) Annex "B" is a

consolidated alphalist of income earners from whom taxes have
been withheld by the payor of income for a given return period and
in whose behalf, the taxes were remitted. It contains a summary of
information on taxes withheld and remitted through the monthly
remittance returns (BIR Form Nos. 1601-E, 1601-F, 1600) showing,
among others, total amounts of income/gross sales/gross receipts
and taxes withheld and remitted."

There is nothing in RR No. 2-2006 which states that the non-

submission of SAWT and MAP would ipso facto result to the denial of
a claim for tax refund or credit of excess and unutilized CWT. Truth to
tell, RR No. 2-2006 merely imposes, among others, a penalty of fine
for non-submission of the information or statement required therein,
but not the outright denial of a claim for tax refund or credit. Section 5
of RR No. 2-2006 provides:

"SECTION 5. Penalty Provision. - In accordance with the

provisions of the NIRC of 1997, a person who fails to file, keep or
supply a statement, list, or information required herein on the date
prescribed therefor shall pay, upon notice and demand by the CIR,
an administrative penalty of One Thousand Pesos (P1 ,000) for
each such failure, unless it is satisfactorily shown that such failure
is due to reasonable causes and not due to willful neglect. For this
purpose, the failure to supply the required information shall
constitute a single act or omission punishable thereof. However, the
aggregate amount to be imposed for all such failures during the
year shall not exceed Twenty Five Thousand Pesos (P25,000)."

There is, therefore, no legal basis for the CIR to insist that the
alleged non-submission of SAWT and MAP should result in the denial
of Sonoma's claim for tax refund or credit.

The CCWTS identified by the

Court-commissioned /CPA are
not hearsay evidence

The CIR maintains that in order to establish and validate the

fact of withholding and remittance of the full amount subject of the
present claim for refund, Sonoma must present the various payors
and withholding agents that issued the CCWTS. The CIR further
insists that due to Sonoma's failure to present the various payors and
withholding agents as witnesses, the CCWTS presented during trial
cf)
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 10 of 13

which was identified by Sonoma's witness - Ms. Ma. Milagros F.

Padernal, the Court-commissioned ICPA, who is neither payor nor
withholding agent, renders the same as mere hearsay; hence,
inadmissible as evidence.

The CIR's argument is specious.

This Court has time and again ruled that the presentation of
CCWTS is sufficient to prove the fact of withholding; and, that proof of
remittance of the taxes withheld to the BIR as well as the testimony of
various payers and withholding agents who issued the CCWTS are
not needed to prove the taxpayer's entitlement to the claim for refund.

In Commissioner of Internal Revenue v. Philippine National

Bank16 (PNB case), the Supreme Court categorically held that the
CCWTS are sufficient to prove the fact of withholding and that the
claimant need not present the person who executed and prepared the
CCWTS, to wit:

"The certificate of creditable tax withheld at source is the

competent proof to establish the fact that taxes are withheld. It is
not necessary for the person who executed and prepared the
certificate of creditable tax withheld at source to be presented
and to testify personally to prove the authenticity of the
certificates." (Boldfacing supplied)

Even without the testimony of the payor or the withholding

agent who issued the CCWTS, the same are admissible in evidence.
On this point, the Court En Bane quotes with approval the disquisition
of the Court in Division in the assailed Resolution, viz.:

"To reiterate, as long as the Certificates of Creditable

Withholding Tax at Source (i.e., BIR Forms 2307) are complete in
its relevant details and is with a written statement that it was made
under the penalties of perjury, the same is admissible in evidence
even without testimony on the part of its preparer attesting to its
authenticity and considered as competent proof of the fact of
withholding and the amount of tax withheld.

Following a detailed examination of the Certificates of

Creditable Withholding Tax at Source (i.e., BIR Forms 2307)
submitted and offered as proof by petitioner, this Court finds that
the same were prepared by the income payor; are complete in its
relevant details such as the name of the payor, the income

'" G.R. No. 180290, September 29, 2014.

rA
DECISION
Commissioner of lntemal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 11 of 13

payment basis of the tax withheld, the amount of the tax withheld
and the nature of the tax paid; and are with written statements that
they were made under the penalties of perjury. Consequently, it
cannot be denied that these documents are admissible in evidence
and are competent proof of the fact of withholding of income taxes
from the income payments made to petitioner and of the amount of
tax withheld."

In fine, the Court En Bane finds no cogent reason to reverse the

assailed Decision and assailed Resolution of the Court in Division
which granted Sonoma's claim for refund and ordered the CIR to
refund or issue a tax credit certificate to Sonoma in the amount of
P4,993,000.00, representing Sonoma's excess and unutilized CWT
for CY 2015.

In closing, the Court calls the attention of CIR's counsels, Atty.

Aveline G. Alfelor, Jr. and Atty. Philip A. Mayo, to be mindful of their
professional responsibility of keeping themselves abreast of the latest
laws and jurisprudence. Parenthetically, it is disturbing to note that
counsels proffer such basic arguments on the admissibility of
CCWTS sans the testimony of the persons who executed them when
such issue has long been settled in the PNB case 17 (a 2014
jurisprudence). The pronouncement of the Supreme Court case in
Spouses Williams v. Atty. Enriquez, 18 should serve as a fitting
reminder on what is expected of lawyers in their dealings with the
Court and clients, viz.:

"As pointed out by the Investigating Commissioner, Canon 5

of the Code of Professional Responsibility requires that a lawyer
be updated in the latest laws and jurisprudence. Indeed, when
the law is so elementary, not to know it or to act as if one does
not know it constitutes gross ignorance of the law. Xxx Implicit
in a lawyer's mandate to protect a client's interest to the best of
his/her ability and with utmost diligence is the duty to keep
abreast of the law and legal developments, and participate in
continuing legal education programs. Thus, in championing the
interest of clients and defending cases, a lawyer must not only be
guided by the strict standards imposed by the lawyer's oath, but
should likewise espouse legally sound arguments for clients,
lest the latter's cause be dismissed on a technical
ground. Ignorance encompasses both substantive and
procedural laws." (Citations omitted; Boldfacing supplied)

17 /d.
"A. C. No. 6353, February 27, 2006{11
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 12 of 13

WHEREFORE, in light of the foregoing, the Petition for Review

filed by petitioner Commissioner of Internal Revenue is DENIED for
lack of merit. The assailed Decision dated October 1, 2020 and the
assailed Resolution dated March 2, 2021 promulgated by the Court in
Division are hereby AFFIRMED.

SO ORDERED.

Presiding Justice

WE CONCUR:

Q.. ........z_- c. a..t-~ /9. '

JUt(NITO C. CASTANEDA, ~R.
Associate Justice
ER~P.UY
Associate Justice

~. ~ 4 t....__ ~-7~
MA. BELEN M. RINGPIS-LIBAN CATHERINE T. MANAHAN
Associate Justice Associate Justice

JEAN M4RIP LLENA

~ate Justice

MARIA RO¥NA .,<)D

Assod'~e J~stice
DECISION
Commissioner of Internal Revenue vs. Sonoma
Services, Inc.
CTA EB No. 2467 (CTA Case No. 9808)
Page 13 of 13

~~t~.~
MARIAN IVY{j. REYif1"-FAq;.RDO
Associate Justice

~diMA
LANEE S. CUI-DAVID
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.

Presiding Justice