Failure to Fill Up the 'Creditable Tax Withheld' Portion of BIR Form 1701 and 1702
Orix Auto Leasing Corporation vs. CIR, CTA EB Case No. 1016, December 9, 2013
The fact that the “Creditable Tax Withheld” portion of the Annual Income Tax Return of the taxpayer which was left blank should not be taken lightly. It is well settled that much credence is imbued in the Annual Income Tax Return. The taxpayer asserts the truth and correctness in the declarations made therein, explicitly stating that the same are made under the penalties of perjury. Such declaration is made pursuant to the provisions of Section 267 of the NIRC.
Applying this provision to the instant case, taxpayer’s failure to fill up the “Creditable Tax Withheld” portion, coupled by the inability of the pieces of evidence submitted to prove that the income subjected to the claimed unutilized creditable withholding tax was declared as part of its gross income, is fatal to a claim for issuance of TCC on the unutilized creditable withholding tax.
In this claim for refund of unutilized creditable withholding taxes, the BIR questioned, among others, the taxpayer’s compliance of the requirement that the income upon which the taxes were withheld were included in the return of the recipient, on the ground that the creditable tax withheld column in schedule 1 of the annual ITR was not filled-up.
CIR vs. Sonoma Services Inc., CTA EB No. 931, December 11, 2013
The CTA en banc ruled that there is neither law nor jurisprudence that states that the taxpayer’s failure to fill up the entry in the “Creditable Tax Withheld” column in Schedule 1 of the Annual ITR would be fatal to a claim for refund. What Section 2.58.3 of RR No. 2-98 and the applicable jurisprudence require is that the taxpayer be able to declare as part of its gross income in the Annual Income Tax Return the income payment from which the withholding was made. Further, failure on the part of a taxpayer to make an entry in the “Creditable Tax Withheld” column found in page 2 of the Annual Income Tax Return, specifically Schedule 1 or the “Schedule of Sales/Revenues/Receipts/Fess” is not a sufficient basis to conclude that the taxpayer failed to comply with the requirement that “income upon which the taxes were withheld were included in the return of the recipient” when the taxpayer has offered other evidence to establish its compliance with this requirement. The claim for refund was granted.
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