COMMISSIONER OF INTERNAL G.R. No.

173854 CBU -1st Quarter 633,085

REVENUE, -2nd Quarter 11,844,333
Petitioner, Present: FCDU -1st Quarter 955, 280
CARPIO, J., Chairperson, -2nd Quarter 1,104,942
- versus - BRION, Less:
DEL CASTILLO, Creditable Taxes 2,317,893
ABAD, and Withheld at Source
FAR EAST BANK & TRUST PEREZ, JJ. Refundable Income Tax [P12,682,864][6]
COMPANY (NOW BANK OF  
THE PHILIPPINE ISLANDS), Promulgated: Pursuant to Section 69[7] of the old National Internal Revenue Code (NIRC),
Respondent. March 15, 2010 the amount of P12,682,864.00 was carried over and applied against respondents income tax
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x liability for the taxable year ending December 31, 1995. On April 15, 1996, respondent filed
  its 1995 Annual Income Tax Return, which showed a total overpaid income tax in the amount
DECISION of P17,443,133.00, detailed as follows:
  FCDU CBU
DEL CASTILLO, J.: Gross Income P16,531,038 7,076,497,628
Entitlement to a tax refund is for the taxpayer to prove and not for the government to Less: Deductions 1,327,549 7,086,821,354
disprove. Net Income 15,203,539 [10,423,728]
  Tax Rate 35% 35%
This Petition for Review on Certiorari assails the January 31, 2006 Decision[1] of Income Tax Due Thereon 5,321,239 NIL
the Court of Appeals (CA) in CA-G.R. SP No. 56773 which reversed and set aside the Consolidated Tax Due for _______________________________________

October 4, 1999 Decision[2] of the Court of Tax Appeals (CTA) in CTA Case No. 5487. Also Both CBU and FCDU Operations P 5,321,239
assailed is the July 19, 2006 Resolution[3] of the CA denying the motion for reconsideration. Less:
  Prior years (1994) excess
The CTA found that respondent Far East Bank & Trust Company failed to prove income tax credit 12,682,864
that the income derived from rentals and sale of real property from which the taxes were Additional prior years excess
withheld were reflected in its 1994 Annual Income Tax Return. The CA found otherwise. income tax credit 6,283,484
  Creditable Taxes
Factual Antecedents Withheld at Source 3,798,024
  Refundable Income Tax [P17,443,133][8]
On April 10, 1995, respondent filed with the Bureau of Internal Revenue (BIR) two  
Corporate Annual Income Tax Returns, one for its Corporate Banking Unit (CBU)[4] and Out of the P17,433,133.00 refundable income tax, only P13,645,109.00 was sought
another for its Foreign Currency Deposit Unit (FCDU),[5] for the taxable year to be refunded by respondent. As to the remaining P3,798,024.00, respondent opted to carry it
ending December 31, 1994. The return for the CBU consolidated the respondents overall over to the next taxable year.
income tax liability for 1994, which reflected a refundable income tax of P12,682,864.00,  
computed as follows: On May 17, 1996, respondent filed a claim for refund of the amount of P13,645,109.00 with
FCDU CBU the BIR. Due to the failure of petitioner Commissioner of Internal Revenue (CIR) to act on
Gross Income P13,319,068 5,348,080,630 the claim for refund, respondent was compelled to bring the matter to the CTA on April 8,
Less: Deductions 1,397,157 5,432,828,719 1997 via a Petition for Review docketed as CTA Case No. 5487.
Net Income 11,921,911 [84,748,089]  
Tax Rate 35% 35% After the filing of petitioners Answer, trial ensued.
Income Tax Due Thereon 4,172,669 NIL  
Consolidated Tax Due for _______________________________________
To prove its entitlement to a refund, respondent presented the following documents:
Both CBU and FCDU Operations P 4,172,669  
Less: Exhibits Nature and Description
Quarterly Income Tax Payments  
 A Corporate Annual Income Tax Return covering income of  
respondents CBU for On October 4, 1999, the CTA rendered a Decision denying respondents claim for refund on
the year the ground that respondent failed to show that the income derived from rentals and sale of real
ended December 31, property from which the taxes were withheld were reflected in its 1994 Annual Income Tax
1994 together with Return.
attachments  
  On October 20, 1999, respondent filed a Motion for New Trial based on excusable
B Corporate Annual Income Tax Return covering income of negligence. It prayed that it be allowed to present additional evidence to support its claim for
respondents FCDU for refund.
the year  
ended December 31, However, the motion was denied on December 16, 1999 by the CTA. It reasoned,
1994 together with thus:
attachments  
  [Respondent] is reminded that this case was originally submitted
C Corporate Annual Income Tax Return covering income of for decision as early as September 22, 1998 (p. 497, CTA Records). In
respondents CBU for view, however, of the Urgent Motion to Admit Memorandum filed on
the year April 27, 1999 by Atty. Louella Martinez, who entered her appearance as
ended December 31, collaborating counsel of Atty. Manuel Salvador allegedly due to the latter
1995 together with counsels absences, this Court set aside its resolution of September 22,
attachments 1998 and considered this case submitted for decision as of May 7,
  1999. Nonetheless, it took [respondent] another five months after it was
D Corporate Annual Income Tax Return covering income of represented by a new counsel and after a decision unfavorable to it was
respondents FCDU for rendered before [respondent] realized that an additional material
the year documentary evidence has to be presented by way of a new trial, this time
ended December 31, initiated by a third counsel coming from the same law firm. x x x
1995 together with  
attachments Furthermore, in ascertaining whether or not the income upon
  which the taxes were withheld were included in the returns of the
N to Z; Certificates of Creditable [respondent], this Court based its findings on the income tax returns and
AA to UU Withholding Tax and Monthly Remittance Returns of their supporting schedules prepared and reviewed by the [respondent]
Income Taxes Withheld itself and which, to Us, are enough to support the conclusion reached.
issued by various  
withholding agents for WHEREFORE, in view of the foregoing, [respondents]
the year Motion for New Trial is hereby DENIED for lack of merit.
ended December 31,  
1994 SO ORDERED.[10]
   
VV Letter claim for refund dated May 8, 1996 filed with the Ruling of the Court of Appeals
Revenue District Office  
No. 33 on May 17, On appeal, the CA reversed the Decision of the CTA. The CA found that
1996[9] respondent has duly proven that the income derived from rentals and sale of real property
  upon which the taxes were withheld were included in the return as part of the gross income.
Petitioner, on the other hand, did not present any evidence.  
  Hence, this present recourse.
  Issue
Ruling of the Court of Tax Appeals  
 The lone issue presented in this petition is whether respondent has proven its
entitlement to the refund.[11]
 
Our Ruling
 
We find that the respondent miserably failed to prove its entitlement to the
refund. Therefore, we grant the petition filed by the petitioner CIR for being meritorious.
A taxpayer claiming for a tax credit or refund of creditable withholding tax must
comply with the following requisites:
 
1) The claim must be filed with the CIR within the two-year period from the date of
payment of the tax;
 
2) It must be shown on the return that the income received was declared as part of
the gross income; and
 
3) The fact of withholding must be established by a copy of a statement duly issued
by the payor to the payee showing the amount paid and the amount of the
tax withheld.[12]
 
The two-year period requirement is based on Section 229 of the NIRC of 1997 which
provides that:
SECTION 229. Recovery of Tax Erroneously or Illegally
Collected. No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have
been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to
have been excessive or in any manner wrongfully collected, until a claim
for refund or credit has been duly filed with the Commissioner; but such
suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress.
 
In any case, no such suit or proceeding shall be filed after the
expiration of two (2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written
claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have
been erroneously paid. (Formerly Section 230 of the old NIRC)
 
While the second and third requirements are found under Section 10 of Revenue Regulation
No. 6-85, as amended, which reads:
 
Section 10. Claims for tax credit or refund. Claims for tax credit
or refund of income tax deducted and withheld on income payments shall
be given due course only when it is shown on the return that the income
payment received was declared as part of the gross income and the fact of
withholding is established by a copy of the statement duly issued by the
payer to the payee (BIR Form No. 1743.1) showing the amount paid and
the amount of tax withheld therefrom.
 
Respondent timely filed its claim
for refund.
 
 
There is no dispute that respondent complied with the first requirement. The filing of
respondents administrative claim for refund on May 17, 1996 and judicial claim for refund
on April 8, 1997 were well within the two-year period from the date of the filing of the return
on April 10, 1995.[13]
 
Respondent failed to prove that
the income derived from rentals
and sale of real property were
included in the gross income as
reflected in its return.
 
However, as to the second and third requirements, the tax court and the appellate
court arrived at different factual findings.
 
The CTA ruled that the income derived from rentals and sales of real property were
not included in respondents gross income. It noted that in respondents 1994 Annual Income
Tax Return, the phrase NOT APPLICABLE was printed on the space provided for rent, sale
of real property and trust income. The CTA also declared that the certifications issued by
respondent cannot be considered in the absence of the Certificates of Creditable Tax Withheld
at Source. The CTA ruled that:
 
x x x the Certificates of Creditable Tax Withheld at Source submitted by
[respondent] pertain to rentals of real property while the Monthly
Remittance Returns of Income Taxes Withheld refer to sales of real
property. But, if we are to look at Schedules 3, 4, and 5 of the Annual
Income Tax Return of [respondent] for 1994 (Exhibit A), there was no
showing that the Rental Income and Income from Sale of Real
Property were included as part of the gross income appearing in
Section A of the said return. In fact, under the said schedules, the phrase
NOT APPLICABLE was printed by [respondent]. Verily, the income of
[respondent] coming from rent and sale of real property upon which
the creditable taxes withheld were based were not duly reflected. As
to the certifications issued by the [respondent] (Exh. UU), the same
cannot be considered in the absence of the requisite Certificates of
Creditable Tax Withheld at Source.
Based on the foregoing, [respondent] has failed to comply
with two essential requirements for a valid claim for
refund. Consequently, the same cannot be given due
course. [14] (Emphasis supplied)
 
 
On the other hand, the CA found thus:
 
We disagree with x x x CTAs findings. In the case of Citibank,
N.A. vs. Court of Appeals (280 SCRA 459), the Supreme Court held that:
 
a refund claimant is required to prove
the inclusion of the income payments which were
the basis of the withholding taxes and the fact of
withholding. However, a detailed proof of the
truthfulness of each and every item in the income tax
return is not required. x x x
 
x x x The grant of a refund is founded on the
assumption that the tax return is valid; that is, the facts
stated therein are true and correct. x x x
In the case at bench, the BIR examined [respondent] Banks
Corporate Annual Income Tax Returns for the years 1994 and 1995 when
they were filed on April 10, 1995 and April 15, 1996,
respectively. Presumably, the BIR found no false declaration in them
because it did not allege any false declaration thereof in its Answer (to the
petition for review) filed before x x x CTA. Nowhere in the Answer, did
the BIR dispute the amount of tax refund being claimed by [respondent]
Bank as inaccurate or erroneous. In fact, the reason given by the BIR (in
its Answer to the petition for review) why the claimed tax refund should
be denied was that x x x the amount of P13,645,109.00 was not illegally
or erroneously collected, hence, the petition for review has no basis [see
Record, p. 32]. The amount of P17,433,133.00 reflected as refundable
income tax in [respondent] Banks Corporate Annual Income Tax Return
for the year 1995 was not disputed by the BIR to be inaccurate because
there were certain income not included in the return of the
[respondent]. Verily, this leads Us to a conclusion that [respondent]
Banks Corporate Annual Income Tax Returns submitted were accepted as
regular and even accurate by the BIR.
 
evidence and in accordance with the applicable law and jurisprudence.
Incidentally, under Sec. 16 of the NIRC, the Commissioner of
the BIR is tasked to make an examination of returns and assess the
correct amount of tax, to wit:
Sec. 16. Power of the Commissioner to
make assessment and prescribe additional
requirements for tax administration and enforcement.
 
(a) After a return is filed as required under
the provision of this Code, the Commissioner shall
examine it and assess the correct amount of tax. x x x
which the [petitioner] Commissioner undeniably failed to
do. Moreover, noteworthy is the fact that during the hearing of the
petition for review before the CTA, [petitioner] Commissioner of the BIR
submitted the case for decision in view of the fact that he has no evidence
to present nor records to submit relative to the case x x x
 
Thus, although it is a fact that [respondent] failed to indicate said income
payments under the appropriate Schedules 3, 4, and 5 of Section C of its
1994 Annual Income Tax Return (Exhibit A), however, We give
credence to [respondent] Banks assertion that it reported the said
income payments as part of its gross income when it included the
same as part of the Other Income, Trust Income, and Interest
Income stated in the Schedule of Income (referred to as an attachment in
Section C of Exhibit A, x x x and in the 1994 audited Financial
Statements (FS) supporting [respondents] 1994 Annual Corporate Income
Tax Return. The reason why the phrase NOT APPLICABLE was
indicated in schedules 3, 4, and 5 of Section C of [respondents] 1994
Annual Income Tax Return is due to the fact that [respondent] Bank
already reported the subject rental income and income from sale of real
property in the Schedule of Income under the headings Other
Income/Earnings, Trust Income and Interest Income. Therefore,
[respondent] Bank still complied with the second requirement that the
income upon which the taxes were withheld are included in the return as
part of the gross income.
 
xxxx
 
[Respondent] Banks various documentary evidence showing that it had
satisfied all requirements under the Tax Code vis--vis the Bureau of
Internal Revenues failure to adduce any evidence in support of their
denial of the claim, [respondent] Bank should, therefore, be granted the
present claim for refund.[15] (Emphasis supplied)
Between the decision of the CTA and the CA, it is the formers that is based on the

To establish the fact of withholding, respondent submitted Certificates of Creditable
Tax Withheld at Source and Monthly Remittance Returns of Income Taxes Withheld, which
pertain to rentals and sales of real property, respectively. However, a perusal of
respondents 1994 Annual Income Tax Return shows that the gross income was derived solely
from sales of services. In fact, the phrase NOT APPLICABLE was printed on the schedules
pertaining to rent, sale of real property, and trust income.[16] Thus, based on the entries in the
return, the income derived from rentals and sales of real property upon which the
creditable taxes were withheld werenot included in respondents gross income as
reflected in its return. Since no income was reported, it follows that no tax was withheld. To
reiterate, it is incumbent upon the taxpayer to reflect in his return the income upon which any
creditable tax is required to be withheld at the source.[17]
 
Respondents explanation that its income derived from rentals and sales of real
properties were included in the gross income but were classified as Other Earnings in its
Schedule of Income[18] attached to the return is not supported by the evidence. There is
nothing in the Schedule of Income to show that the income under the heading Other Earnings
includes income from rentals and sales of real property. No documentary or testimonial
evidence was presented by respondent to prove this. In fact, respondent, upon realizing its
omission, filed a motion for new trial on the ground of excusable negligence with the
CTA. Respondent knew that it had to present additional evidence showing the breakdown of
the Other Earnings reported in its Schedule of Income attached to the return to prove that the
income from rentals and sales of real property were actually included under the heading Other
Earnings.[19] Unfortunately, the CTA was not convinced that there was excusable negligence
to justify the granting of a new trial.
Accordingly, the CA erred in ruling that respondent complied with the second
requirement.
Respondent failed to present all
the Certificates of Creditable Tax
Withheld at Source.
The CA likewise failed to consider in its Decision the absence of several Certificates
of Creditable Tax Withheld at Source. It immediately granted the refund without first
verifying whether the fact of withholding was established by the Certificates of Creditable Tax
Withheld at Source as required under Section 10 of Revenue Regulation No. 6-85. As
correctly pointed out by the CTA, the certifications (Exhibit UU) issued by respondent cannot
be considered in the absence of the required Certificates of Creditable Tax Withheld at
Source.
 
The burden is on the taxpayer to
prove its entitlement to the
refund.
Moreover, the fact that the petitioner failed to present any evidence or to
refute the evidence presented by respondent does not ipso facto entitle the respondent to a tax
refund. It is not the duty of the government to disprove a taxpayers claim for refund. Rather,
the burden of establishing the factual basis of a claim for a refund rests on the taxpayer.[20]
 
And while the petitioner has the power to make an examination of the returns and to
assess the correct amount of tax, his failure to exercise such powers does not create a
presumption in favor of the correctness of the returns. The taxpayer must still present
substantial evidence to prove his claim for refund. As we have said, there is no automatic
grant of a tax refund.[21]
 
Hence, for failing to prove its entitlement to a tax refund, respondents claim must be
denied. Since tax refunds partake of the nature of tax exemptions, which are
construed strictissimi juris against the taxpayer, evidence in support of a claim must likewise
be strictissimi scrutinized and duly proven.[22]
 
WHEREFORE, the petition is GRANTED. The assailed January 31,
2006 Decision of the Court of Appeals in CA-G.R. SP No. 56773 and its July 19, 2006
Resolution are REVERSED and SET ASIDE. The October 4, 1999 Decision of the Court
of Tax Appeals denying respondents claim for tax refund for failure to prove that the income
derived from rentals and sale of real property from which the taxes were withheld were
reflected in its 1994 Annual Income Tax Return, is REINSTATED and AFFIRMED.
 
SO ORDERED.
G.R. No. 180290, September 29, 2014
COMMISSIONER OF INTERNAL
REVENUE, Petitioner, v. PHILIPPINE NATIONAL
BANK, Respondent.
DECISION
 LEONEN, J.:
Before this court is a petition for review1 under Rule 45 of the Rules
of Court, seeking to annul the October 1, 2007 decision2 and
October 30, 2007 resolution3 of the Court of Tax Appeals En Banc
in C.T.A. E.B. No. 285.
The assailed decision denied petitioner’s appeal and affirmed the
January 30, 2007 decision4 and May 30, 2007 resolution5 of the
First Division of the Court of Tax Appeals, granting respondent a
tax refund or credit in the amount of P23,762,347.83, representing
unutilized excess creditable withholding taxes for taxable year
2000.  The assailed resolution denied petitioner’s motion for
reconsideration.
The pertinent facts are summarized in the assailed decision as
follows:chanRoblesvirtualLawlibrary
In several transactions including but not limited to the sale of real
properties, lease and commissions, [respondent] allegedly earned
income and paid the corresponding income taxes due which were
collected and remitted by various payors as withholding agents to
the Bureau of Internal Revenue (“BIR”) during the taxable year
2000.
On April 18, 2001, [respondent] filed its tentative income tax
return for taxable year 2000 which [it] subsequently amended on
July 25, 2001.
. . . [Respondent] filed again an amended income tax return for
taxable year 2000 on June 20, 2002, declaring no income tax
liability . . . as it incurred a net loss in the amount of
P11,318,957,602.00 and a gross loss of P745,713,454.00 from its
Regular Banking Unit (“RBU”) transactions.  However, [respondent]
had a 10% final income tax liability of P210,364,280.00 on taxable
income of P1,959,931,182.00 earned from its Foreign Currency
Deposit Unit (“FCDU”) transactions for the same year.  Likewise, in
the [same] return, [respondent] reported a total amount of
P245,888,507.00 final and creditable withholding taxes which was
applied against the final income tax due of P210,364,280.00
leaving an overpayment of P35,524,227.00. . . .
....
In its second amended return, [respondent’s] income tax
overpayment of P35,524,227.00 consisted of the balance of the
prior year's (1999) excess credits of P9,057,492.00 to be carried-
over as tax credit to the succeeding quarter/year and excess
creditable withholding taxes for taxable year 2000 in the amount of
P26,466,735.00 which [respondent] opted to be refunded.
On November 11, 2002, [respondent] . . . filed a claim for refund
or the issuance of a tax credit certificate in the amount of
P26,466,735.40 for the taxable year 2000 with the [BIR].
Due to [BIR's] inaction on its administrative claim, [respondent]
appealed before [the Court of Tax Appeals] by way of a Petition for
Review on April 11, 2003.6 (Citation omitted)
On January 30, 2007, the Court of Tax Appeals First Division
rendered a decision in favor of respondent as
follows:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition is
hereby GRANTED.  Accordingly, respondent is hereby ORDERED
TO REFUND or ISSUE A TAX CREDIT CERTIFICATE to
petitioner in the reduced amount of Twenty Three Million Seven
Hundred Sixty Two Thousand Three Hundred Forty Seven Pesos
and 83/100 (P23,762,347.83) representing unutilized excess
creditable withholding taxes for taxable year 2000.7 (Emphasis in
the original)
Petitioner’s motion for reconsideration was subsequently denied for
lack of merit in the First Division’s resolution dated May 30, 2007.
On appeal, the Court of Tax Appeals En Banc sustained the First
Division’s ruling.  It held that the fact of withholding and the
amount of taxes withheld from the income payments received by
respondent were sufficiently established by the creditable
withholding tax certificates, and there was no need to present the
testimonies of the various payors or withholding agents who issued
the certificates and made the entries therein.  It also held that
respondent need not prove actual remittance of the withheld taxes
to the Bureau of Internal Revenue because the functions of
withholding and remittance of income taxes are vested in the
payors who are considered the agents of
petitioner.8cralawlawlibrary
The Court of Tax Appeals En Banc also denied petitioner’s motion
for reconsideration9 in its October 30, 2007 resolution.
Hence, this instant petition was filed.
Petitioner claims that the Court of Tax Appeals “erred on a question
of law in ordering the refund to respondent of alleged excess
creditable withholding taxes because(:)
A.  Respondent failed to prove that the creditable withholding taxes
amounting to P23,762,347.83 are duly supported by valid
certificates of creditable tax withheld at source;
B.  Respondent failed to prove actual remittance of the alleged
withheld taxes to the Bureau of Internal Revenue (BIR); and
C.  Respondent failed to discharge its burden of proving its
entitlement to a refund.”10chanrobleslaw
Petitioner questions the validity of respondent’s certificates of
creditable tax withheld at source (withholding tax certificates) and
contends that even if the original certificates were offered in
evidence, respondent failed to present the various withholding
agents to: (1) identify and testify on their contents; and (2) prove
the subsequent remittance of the withheld taxes to the Bureau of
Internal Revenue. Moreover, petitioner faults respondent for
presenting the withholding tax certificates only before the Court of
Tax Appeals, and not at the first instance when it filed its claim for
refund administratively before the Bureau of Internal
Revenue.11cralawlawlibrary
In its comment,12 respondent counters
that:chanRoblesvirtualLawlibrary
1) The petition should be dismissed for being pro forma because it
does not specify the reversible errors of either fact or law that
the lower courts committed, and the arguments raised are all
rehash and purely factual;
2) It complied with all the requirements for judicial claim for
refund of unutilized creditable withholding taxes;
3) The fact of withholding was sufficiently established by the 622
creditable withholding tax certificates, primarily attesting the
amount of taxes withheld from the income payments received
by respondent. Furthermore, to present to the court all the
withholding agents or payors to identify and authenticate each
and every one of the 622 withholding tax certificates would be
too burdensome and would unnecessarily prolong the trial of
the case; and
4) Respondent need not prove the actual remittance of withheld
taxes to the Bureau of Internal Revenue because the remittance
is the responsibility of the payor or withholding agent and not
the payee.
In its reply,13 petitioner maintains that claims for refund are strictly
construed against the claimant, and “it is incumbent upon
respondent to discharge the burden of proving . . . the fact of
withholding of taxes and their subsequent remittance to the Bureau
of Internal Revenue.”14cralawlawlibrary
In the resolution dated February 2, 2009,15 the court resolved to
give due course to the petition and decide the case according to
the pleadings already filed.
The petition, however, should be denied.
The petition is but a reiteration of reasons and arguments
previously set forth in petitioner’s pleadings before the Court of
Tax Appeals En Banc, and which the latter had already considered,
weighed, and resolved before it rendered its decision and
resolution now sought to be set aside.
Furthermore, the questions on whether respondent’s claim for
refund of unutilized excess creditable withholding taxes amounting
to P23,762,347.83 were duly supported by valid certificates of
creditable tax withheld at source and whether it had sufficiently
proven its claim are questions of fact.  These issues require a
review, examination, evaluation, or weighing of the probative value
of evidence presented, especially the withholding tax certificates,
which this court does not have the jurisdiction to do, barring the
presence of any exceptional circumstance, as it is not a trier of
facts.16cralawlawlibrary
Besides, as pointed out by respondent, petitioner did not object to
the admissibility of the 622 withholding tax certificates when these
were formally offered by respondent before the tax court.17  
Hence, petitioner is deemed to have admitted the validity of these
documents.18   Petitioner’s “failure to object to the offered evidence
renders it admissible, and the court cannot, on its own, disregard
such evidence.”19cralawlawlibrary Less: Creditable Taxes Withheld, the related       1,907,841.97
income of which was not verified against
At any rate, the Court of Tax Appeals First Division and En Banc the general ledger
uniformly found that respondent has established its claim for Refundable Excess Creditable Taxes Withheld P23,762,347.8320
refund or issuance of a tax credit certificate for unutilized excess (Emphasis supplied)
creditable withholding taxes for the taxable year 2000 in the
amount of P23,762,347.83.  The Court of Tax Appeals First Division This court accords respect to the conclusion reached by the Court
thoroughly passed upon the evidence presented by respondent and of Tax Appeals and will not presumptuously set it aside absent any
the report of the court-commissioned auditing firm, SGV & Co., and showing of gross error or abuse on its part.21cralawlawlibrary
found:chanRoblesvirtualLawlibrary
The certificate of creditable tax withheld at source22 is the
[O]ut of the total claimed creditable withholding taxes of competent proof to establish the fact that taxes are withheld.23   It
P26,466,735.40, [respondent] was able to substantiate only the is not necessary for the person who executed and prepared the
amount of P25,666,064.80 [sic], computed as certificate of creditable tax withheld at source to be presented and
follows:chanRoblesvirtualLawlibrary to testify personally to prove the authenticity of the
certificates.24cralawlawlibrary
Amount of Claimed Creditable Taxes Withheld P26,466,735.40
Less 1.) Certificates which do not 48,600.00 In Banco Filipino Savings and Mortgage Bank v. Court of
: bear any date or period Appeals,25 this court declared that a certificate is complete in the
when the indicated relevant details that would aid the courts in the evaluation of any
creditable taxes were claim for refund of excess creditable withholding
withheld taxes:chanRoblesvirtualLawlibrary
2.) Certificates dated 730,151.10
outside the period of claim In fine, the document which may be accepted as evidence of the
3.) Certificate without 8,794.50 third condition, that is, the fact of withholding, must emanate from
indicated amount of tax the payor itself, and not merely from the payee, and must indicate
withheld the name of the payor, the income payment basis of the tax
4.) Certificates taken-up            9,000.00 withheld, the amount of the tax withheld and the nature of the tax
twice paid.
Substantiated Creditable P25,670,189.80
Taxes Withheld At the time material to this case, the requisite information
regarding withholding taxes from the sale of acquired assets can be
.... found in BIR Form No. 1743.1. As described in Section 6 of
Revenue Regulations No. 6-85, BIR Form No. 1743.1 is a written
[O]ut of the claimed amount of P25,670,189.80 supported by valid statement issued by the payor as withholding agent showing the
certificates, only the creditable withholding taxes of income or other payments made by the said withholding agent
P23,762,347.83, the related income of which were verified to have during a quarter or year and the amount of the tax deducted and
been recorded in [respondent’s] general ledger and reported in withheld therefrom. It readily identifies the payor, the income
[respondent’s] income tax return either in the year 1999, 2000 or payment and the tax withheld. It is complete in the relevant
2001, satisfied the third requisite, computed as details which would aid the courts in the evaluation of any
follows:chanRoblesvirtualLawlibrary claim for refund of creditable withholding taxes.26 (Emphasis
supplied, citations omitted)
Creditable Taxes Withheld With Valid P25,670,189.80
Certificates Moreover, as correctly held by the Court of Tax Appeals En Banc,
the figures appearing in the withholding tax certificates can be
taken at face value since these documents were executed under
the penalties of perjury, pursuant to Section 267 of the 1997
National Internal Revenue Code, as amended, which
reads:chanRoblesvirtualLawlibrary
SEC. 267.  Declaration under Penalties of Perjury. – Any
declaration, return and other statements required under this Code,
shall, in lieu of an oath, contain a written statement that they are
made under the penalties of perjury.  Any person who willfully files
a declaration, return or statement containing information which is
not true and correct as to every material matter shall, upon
conviction, be subject to the penalties prescribed for perjury under
the Revised Penal Code.
Thus, upon presentation of a withholding tax certificate complete in
its relevant details and with a written statement that it was made
under the penalties of perjury, the burden of evidence then shifts
to the Commissioner of Internal Revenue to prove that (1) the
certificate is not complete; (2) it is false; or (3) it was not issued
regularly.
Petitioner's posture that respondent is required to establish actual
remittance to the Bureau of Internal Revenue deserves scant
consideration. Proof of actual remittance is not a condition to claim
for a refund of unutilized tax credits.  Under Sections 57 and 58 of
the 1997 National Internal Revenue Code, as amended, it is the
payor-withholding agent, and not the payee-refund claimant such
as respondent, who is vested with the responsibility of withholding
and remitting income taxes.
This court’s ruling in Commissioner of Internal Revenue v. Asian
Transmission Corporation,27 citing the Court of Tax Appeals’
explanation, is instructive:chanRoblesvirtualLawlibrary
. . . 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. In the event
that the withholding agents commit fraud against the government
by not remitting the taxes so withheld, such act should not
prejudice herein respondent who has been duly withheld taxes by
the withholding agents acting under government authority.
Moreover, pursuant to Section 57 and 58 of the NIRC of 1997, as
amended, the withholding of income tax and the remittance
thereof to the BIR is the responsibility of the payor and not the
payee. Therefore, respondent . . . has no control over the
remittance of the taxes withheld from its income by the
withholding agent or payor who is the agent of the petitioner. The
Certificates of Creditable Tax Withheld at Source issued by the
withholding agents of the government are prima facie proof of
actual payment by herein respondent-payee to the government
itself through said agents.28chanrobleslaw
Finally, petitioner’s allegation that the submission of the certificates of
withholding taxes before the Court of Tax Appeals was late is untenable. 
The samples of the withholding tax certificates attached to respondent’s
comment bore the receiving stamp of the Bureau of Internal Revenue’s
Large Taxpayers Document Processing and Quality Assurance Division.29  
As observed by the Court of Tax Appeals En Banc, “[t]he Commissioner is
in no position to assail the authenticity of the CWT certificates due to
PNB’s alleged failure to submit the same before the administrative level
since he could have easily directed the claimant to furnish copies of these
documents, if the refund applied for casts him any doubt.”30   Indeed,
petitioner’s inaction prompted respondent to elevate its claim for refund to
the tax court.
More importantly, the Court of Tax Appeals is not precluded from
accepting respondent’s evidence assuming these were not presented at
the administrative level.  Cases filed in the Court of Tax Appeals are
litigated de novo.31   Thus, respondent “should prove every minute aspect
of its case by presenting, formally offering and submitting . . . to the Court
of Tax Appeals [all evidence] . . . required for the successful prosecution of
[its] administrative claim.”32cralawlawlibrary
WHEREFORE, the petition is DENIED.
SYSTRA PHILIPPINES, INC., G.R. No. 176290
Petitioner,
Present:
 
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
 
COMMISSIONER OF
INTERNAL REVENUE,
Respondent. Promulgated:
September 21, 2007
 
x---------------------------------------------------x
RESOLUTION
CORONA, J.:
 
This resolves petitioner Systra Philippines, Inc.s (1) motion for leave to file
a second motion for reconsideration and (2) second motion for reconsideration of the
Courts March 28, 2007 resolution.
On March 9, 2007, petitioner filed a petition for review on certiorari
assailing the January 18, 2007 decision[1] of the Court of Tax Appeals (CTA) in CTA
EB Case No. 135. The Court denied the petition in its March 28, 2007 resolution on
the following grounds:
(a)        failure of petitioners counsel to submit his IBP[2] O.R.[3] number
showing proof of payment of IBP dues for the current year (the IBP
O.R. No. was for 2006, i.e., it was dated November 20, 2006);
(b)        submitting a verification of the petition, certification of non-forum
shopping and affidavit of service that failed to comply with the 2004
Rules on Notarial Practice with respect to competent evidence of
affiants identities and
(c)         failure to give an explanation why service was not done personally
as required by Section 11, Rule 13 in relation to Section 3, Rule 45
and Section 5(d), Rule 56 of the Rules of Court.
 
On July 5, 2007, petitioners motion for reconsideration was denied with
finality as there was no compelling reason to warrant a modification of the March 28,
2007 resolution. Thus, the present motions.
 
Petitioner claims that this Court has granted second and even third motions
for reconsideration for extraordinarily persuasive reasons. It avers that this Court
should look into the importance of the issues involved in deciding whether leave to
file a second motion for reconsideration should be granted or not. It prays that its
petition should not be denied on the basis of procedural lapses alone and points out
that the substantial amount involved in the petition justifies relaxation of technical
rules. It asserts that there is an important legal issue involved in this case: whether
the exercise of the option to carry over excess income tax credits under Section 76 of
the National Internal Revenue Code of 1997, as amended (Tax Code) bars a taxpayer
from claiming the excess tax credits for refund even if the amount remains unutilized
in the succeeding taxable year. Finally, it contends that the assailed CTA decision
was contradictory to the decisions of the Court of Appeals (CA) [4] in Bank of the
Philippine Islands v. Commissioner of Internal Revenue [5] and Raytheon Ebasco
Overseas Ltd. Philippine Branch v. Commissioner of Internal Revenue[6] which
involved the same issue as that in this case. According to petitioner, in view of those
CA decisions, it is unjust to deprive it of the right to claim a refund.
 
We deny petitioners motions.
 
 
A SECOND MOTION
FOR
RECONSIDERATIO
N IS
PROHIBITED
 
The denial of a motion for reconsideration is final. It means that the Court
will no longer entertain and consider further arguments or submissions from the
parties respecting the correctness of its decision or resolution. [7] It signifies that, in
the Courts considered view, nothing more is left to be discussed, clarified or done in
the case since all issues raised have been passed upon and definitely resolved. Any
other issue which could and should have been raised is deemed waived and is no
longer available as ground for a second motion. A denial with finality underscores
that the case is considered closed.[8] Thus, as a rule, a second motion for
reconsideration is a prohibited pleading.[9] The Court stressed in Ortigas and
Company Limited Partnership v. Velasco:[10]
 
A second motion for reconsideration is
forbidden except for extraordinarily persuasive reasons, and only
upon express leave first obtained.[11] (emphasis supplied)
 
It is true that procedural rules may be relaxed in the interest of substantial
justice. They are not, however, to be disdained as mere technicalities that may be
ignored at will to suit the convenience of a party.[12] They are intended to ensure the
orderly administration of justice and the protection of substantive rights in judicial
proceedings.[13] Thus, procedural rules are not to be belittled or dismissed simply
because their non-observance may have resulted in prejudicing a partys substantive
rights.[14] Like all rules, they are required to be followed except only when, for the
most persuasive of reasons, they may be relaxed to relieve a litigant of negative
consequences commensurate with the degree of thoughtlessness in not complying
with the prescribed procedure.[15]
 
In this case, contrary to petitioners claim, there was no compelling reason to
excuse non-compliance with the rules. Nor were the grounds raised by it
extraordinarily persuasive.[16]
 
 Moreover, petitioner can neither properly nor successfully rely on the
decisions of the CA in the Bank of the Philippine Islands and Raytheon Ebasco
Overseas Ltd. Philippine Branch cases. First, the CA and the CTA are now of the
same level pursuant to RA 9282.[17] Decisions of the CA are thus no longer superior
to nor reversive of those of the CTA. Second, a decision of the CA in an action in
personambinds  only the parties in that case. A third party in an action in
personam cannot claim any right arising from a decision therein. Finally and most
importantly, while a ruling of the CA on any question of law is not conclusive on this
Court, all rulings of this Court on questions of law are conclusive and binding on all
courts including the CA. All courts must take their bearings from the decisions of
this Court.[18]
 
 
 
ON THE
SUBSTANTIVE
ASPECT,
THE PETITION H
AS NO MERIT
 
 
The antecedents of this case are as follows:
On April 16, 2001, petitioner filed with the [Bureau of
Internal Revenue (BIR)] its Annual Income Tax Return (ITR) for
the taxable year ended December 31, 2000 declaring revenues in
the amount of [P18,252,719] the bulk of which consists of income
from management consultancy services rendered to the Philippine
Branch of Group Systra SA, France. Subjecting said income from
consultancy services of petitioner to 5% creditable withholding
tax, a total amount of [P4,703,019] was declared by petitioner as
creditable taxes withheld for the taxable year 2000.
  Income Tax Still Due
For the same period, petitioner reflected a total gross
income of [P3,752,129], a net loss of [P17,930] and a minimum
corporate income tax (MCIT) of [P75,043]. Said MCIT of P75,043
was offset against its total tax credits for the year 2000 amounting
to [P4,703,019] thereby leaving a total unutilized tax credits of
[P4,627,976], computed as follows:
Gross Income P3,752,129.00
Less: Deductions P3,770,059.00
Net loss P 17,930.00
Minimum Corporate Income Tax Due P75,043.00
 
Less: Tax Credits
Prior years excess credits P -
Creditable taxes withheld P4,703,019.00 P4,703,019.00
during the year
Tax Overpayment P4,627,976.00
 
Petitioner opted to carry over the said excess tax credit to
the succeeding taxable year 2001.
 
For the taxable year ended December 31, 2001, petitioner
filed with the BIR its Annual ITR on April 12, 2002, reflecting a
total gross income of [P4,771,419] and a total creditable taxes
withheld of [P1,111,587] for consultancy services. It likewise
declared a taxable income of [P1,936,851] with corresponding
normal income tax due in the amount of [P619,792]. After
deducting the unexpired excess of the previous year MCIT [1999
and 2000] in the amount of [P222,475] from the normal income tax
due for the period, petitioners net tax due of [P397,317] was
applied against the accumulated tax credits of [P5,739,563]. Said
reported tax credits comprised of prior years excess tax credits in
the amount of [P4,627,976] and creditable taxes withheld during
the year 2001 in the sum of [P1,111,587]. These excess tax credits
were utilized to pay off the income tax still due of [P397,317]
resulting to an overpayment of [P5,342,246], computed as follows:
Gross Income P4,771,419.00
Less: Deductions P2,834,568.00
 
Taxable Income P1,936,851.00
 
Income Tax Due at the Normal Rate of 32% P 619,792.00
Less: Unexpired Excess of Prior Years MCIT
Over Normal Income Tax
Rate P 222,475.00 P 397,317.00
Less: Tax Credits
Prior years excess credits P4,627,976.00
Creditable taxes withheld
during the year 1,111,587.00 P5,739,563.00
 
Tax Overpayment P5,342,246.00
 
Petitioner indicated in the 2001 ITR the option To be
issued a Tax Credit Certificate relative to its tax overpayments.
 
On August 9, 2002, petitioner instituted a claim for refund
or issuance of a tax credit certificate with the BIR of its unutilized
 creditable withholding taxes in the amount of P5,342,246.00 as of
December 31, 2001.
 
Due to the inaction of the BIR on petitioners claim for
refund and to preserve its right to claim for the refund to its
unutilized CWT for CYs 2000 and 2001 by judicial action,
petitioner filed a petition for review with the Court in Division on
April 14, 2003.[19]
 
 
In its August 3, 2005 decision, the First Division of the CTA partially
granted the petition and ordered the issuance of a tax credit certificate to petitioner in
the amount of P1,111,587 representing the excess or unutilized creditable
withholding taxes for taxable year 2001. The CTA, however, denied petitioners
claim for refund of the excess tax credits for the year 2000 in the amount
of P4,627,976. It ruled that petitioner was precluded from claiming a refund thereof
or requesting a tax credit certificate therefor. Once it was made for a particular
taxable period, the option to carry over became irrevocable.
 
Petitioner moved for reconsideration but it was denied. Petitioner elevated
the case to the CTA en banc which rendered the assailed decision. Thus, this
petition.
 
As already stated, petitioner formulated the issue in this petition as follows:
whether the exercise of the option to carry-over excess income tax credits under
Section 76 of the Tax Code bars a taxpayer from claiming the excess tax credits for
refund even if the amount remains unutilized in the succeeding taxable year.
Petitioner contends that it does not.
We disagree.
 
Section 76 of the Tax Code provides:
 
SEC. 76. Final Adjustment Return. Every corporation
liable to tax under Section 27 shall file a final adjustment return
covering the total taxable income for the preceding calendar or
fiscal year. If the sum of the quarterly tax payments made during
the said taxable year is not equal to the total tax due on the entire
taxable net income of that year the corporation shall either:
 
(A)          Pay the balance of tax still due; or
 
(B)           Carry-over the excess credit; or
(C)          Be credited or refunded with the excess amount
paid, as the case may be.
 
In case the corporation is entitled to a tax credit or refund
of the excess estimated quarterly income taxes paid, the excess
amount shown on its final adjustment return may be carried over
and credited against the estimated quarterly income tax liabilities
for the taxable quarters of the succeeding taxable years. Once the
option to carry-over and apply the excess quarterly income tax
against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit
certificate shall be allowed therefor. (emphasis supplied)
 
 
A corporation entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid has two options: (1) to carry over the excess credit or (2)
to apply for the issuance of a tax credit certificate or to claim a cash refund. If the
option to carry over the excess credit is exercised, the same shall be irrevocable for
that taxable period.
 
In exercising its option, the corporation must signify in its annual corporate
adjustment return (by marking the option box provided in the BIR form) its intention
either to carry over the excess credit or to claim a refund. To facilitate tax collection,
these remedies are in the alternative and the choice of one precludes the other.[20]
This is known as the irrevocability rule and is embodied in the last sentence
of Section 76 of the Tax Code. The phrase such option shall be considered
irrevocable for that taxable period means that the option to carry over the excess tax
credits of a particular taxable year can no longer be revoked.
The rule prevents a taxpayer from claiming twice the excess quarterly taxes
paid: (1) as automatic credit against taxes for the taxable quarters of the succeeding
years for which no tax credit certificate has been issued and (2) as a tax credit either
for which a tax credit certificate will be issued or which will be claimed for cash
refund.[21]
 
In this case, it was in the year 2000 that petitioner derived excess tax credits
and exercised the irrevocable option to carry them over as tax credits for the next
taxable year. Under Section 76 of the Tax Code, a claim for refund of such excess
credits can no longer be made. The excess credits will only be applied against
income tax due for the taxable quarters of the succeeding taxable years.
 
The legislative intent to make the option irrevocable becomes clearer when
Section 76 is viewed in comparison to Section 69 of the (old) 1977 Tax Code:
SECTION 69. Final Adjustment Return. Every
corporation liable to tax under Section 24 shall file a final
 adjustment return covering the total net income for the preceding governments favor, because it may be claimed by petitioner as tax
calendar or fiscal year. If the sum of the quarterly tax payments credits in the succeeding taxable years. (emphasis supplied)
made during the said taxable year is not equal to the total tax due  
on the entire taxable net income of that year the corporation shall Since petitioner elected to carry over its excess credits for the year 2000 in
either: the amount of P4,627,976 as tax credits for the following year, it could no longer
  claim a refund. Again, at the risk of being repetitive, once the carry over option was
(A)          Pay the excess tax still due; or made, actually or constructively, it became forever irrevocable regardless of whether
  the excess tax credits were actually or fully utilized. Nevertheless, as held in Philam
(B)           Be refunded the excess amount paid, as the case Asset Management, Inc., the amount will not be forfeited in favor of the government
may be. but will remain in the taxpayers account. Petitioner may claim and carry it over in
  the succeeding taxable years, creditable against future income tax liabilities until
In case the corporation is entitled to a tax credit or refund fully utilized.[23]
of the excess estimated quarterly income taxes paid, the refundable  
amount shown on its final adjustment return may be credited WHEREFORE, petitioners motion for leave to file a second motion for
against the estimated quarterly income tax liabilities for the taxable reconsideration and the second motion for reconsideration are hereby DENIED.
quarters of the succeeding taxable year.  
  Costs against petitioner.
   
Under Section 69 of the 1977 Tax Code, there was no irrevocability rule.  
Instead of claiming a refund, the excess tax credits could be credited against the No further pleadings shall be entertained. Let entry of judgment be made in
estimated quarterly income tax liabilities for the taxable quarters of the succeeding due course.
taxable year, that is, the immediately following year only. In contrast, Section 76 of  
the present Tax Code formulates an irrevocability rule which stresses and fortifies SO ORDERED.
the nature of the remedies or options as alternative, not cumulative. It also provides
that the excess tax credits may be carried over and credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding
taxable years until fully utilized.
 
Furthermore, this case is closely similar to Philam Asset Management, Inc.
v. Commissioner of Internal Revenue.[22] In that case, Philam Asset Management, Inc.
had an unapplied creditable withholding tax in the amount of P459,756.07 for the
year 1998. It carried over the said excess tax to the following taxable year, 1999. In
the next succeeding year, it had a tax due in the amount of P80,042 and a creditable
withholding tax in the amount of P915,995. As such, the amount due for the year
1999 (P80,042) was credited to its P915,995 creditable withholding tax for that year.
Thus, its 1998 creditable withholding tax in the amount of P459,756.07 remained
unutilized. Thereafter, it filed a claim for refund with respect to the unapplied
creditable withholding tax of P459,756.07 for the year 1998. The Court denied the
claim and ruled: BELLE CORPORATION, G.R. No. 181298
 
Section 76 [is] clear and unequivocal. Once the carry-over option Petitioner,
is taken, actually or constructively, it Present:
becomes irrevocable. Petitioner has chosen that option for its 1998
creditable withholding taxes. Thus, it is no longer entitled to a tax
refund of P459,756.07, which corresponds to its 1998 excess tax CORONA, C. J., Chairperson,
credit. Nonetheless, the amount will not be forfeited in the - versus - VELASCO, JR.,
 LEONARDO-DE CASTRO, (c) Creditable Withholding Tax - ____________
DEL CASTILLO, and (P 66,634,290.00)[6]
 
PEREZ, JJ.  
COMMISSIONER OF In view of the overpayment, no taxes were paid for the second and third quarters of
INTERNAL REVENUE, Promulgated: 1997.[7] Petitioners ITR for the taxable year ending December 31, 1997 thereby reflected an
Respondent. January 10, 2011 overpayment of income taxes in the amount of P132,043,528.00, computed as follows:
 
x------------------------------------------------------------------ Gross Income P 1,182,473,910.00
-x Less: Deductions 879,485,278.00
  Taxable Income P 302,988,362.00
DECISION Tax Rate x 35%
  Tax Due P 106,046,021.00
DEL CASTILLO, J.: Less: Tax Credits/Payments
  (a) Prior Years Excess Tax Credit -
Section 69 of the old National Internal Revenue Code (NIRC) allows unutilized tax (b) 1st Quarter Payment P236,679,254.00
credits to be refunded as long as the claim is filed within the prescriptive period. This, (c) Creditable Withholding Tax (1,410,295.00) (238,089,549.00)
however, no longer holds true under Section 76 of the 1997 NIRC as the option to carry-over REFUNDABLE AMOUNT (P 132,043,528.00) [8]
excess income tax payments to the succeeding taxable year is now irrevocable.  
This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeks  
to set aside the January 25, 2007 Decision[2] and the January 21, 2008 Resolution[3] of the Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax
Court of Appeals (CA). credit to the succeeding taxable year by marking the tax credit option box in its 1997 ITR.[9]
   
  For the taxable year 1998, petitioners amended ITR showed an overpayment
Factual Antecedents of P106,447,318.00, computed as follows:
   
Petitioner Belle Corporation is a domestic corporation engaged in the real estate and Gross Income P 1,279,810,489.00
property business.[4] Less: Deduction 1,346,553,546.00
  Taxable Income (Loss) (P 66,743,057.00)
On May 30, 1997, petitioner filed with the Bureau of Internal Revenue (BIR) its Tax Rate 34%
Income Tax Return (ITR) for the first quarter of 1997, showing a gross income Tax Due (Regular Income Tax) - NIL
of P741,607,495.00, a deduction of P65,381,054.00, a net taxable income Minimum Corporate Income Tax P 25,596,210.00
of P676,226,441.00 and an income tax due of P236,679,254.00, which petitioner paid on Tax Due 25,596,210.00
even date through PCI Bank, Tektite Tower Branch, an Authorized Agent Bank of the BIR.[5] Less: Tax Credits/Payments
  (a) Prior years excess Tax Credits (P 132,041,528.00)
On August 14, 1997, petitioner filed with the BIR its second quarter ITR, declaring (b) Quarterly payment -
an overpayment of income taxes in the amount of P66,634,290.00. The computation of which (c) Creditable tax withheld -
is reproduced below: Tax Payable/Overpayment (P 106,447,318.00)[10]
   
Gross Income P 833,186,319.00  
Less: Deductions 347,343,565.00 On April 12, 2000, petitioner filed with the BIR an administrative claim for refund
Taxable Income P 485,842,754.00 of its unutilized excess income tax payments for the taxable year 1997 in the amount
Tax Rate x 35% of P106,447,318.00.[11]
Tax Due P 170,044,964.00  
Less: Tax Credits/Payments Notwithstanding the filing of the administrative claim for refund, petitioner carried
(a) Prior Years Excess Tax Credit - over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to
(b) 1st Quarter Payment P236,679,254.00
its 1999 Minimum Corporate Income Tax (MCIT) liability, as evidenced by its 1999 ITR.
[12]
 Thus:
 
Gross Income P 708,888,638.00
Less: Deduction 1,328,101,776.00
Taxable Income (P 619,213,138.00)
Tax Due -
Minimum Corporate Income Tax P 14,185,874.00
Less: Tax Credits/Payments
(a) Prior years excess Credit P 106,447,318.00
(b) Tax Payments for the 1st & 3rd Qtrs. 0
(c) Creditable tax withheld 0 P 106,447,318.00
TAX PAYABLE/REFUNDABLE (P 92,261,444.00)[13]
 
 
Proceedings before the Court of Tax Appeals (CTA)
 
 
On April 14, 2000, due to the inaction of the respondent Commissioner of Internal
Revenue (CIR) and in order to toll the running of the two-year prescriptive period, petitioner
appealed its claim for refund of unutilized excess income tax payments for the taxable year
1997 in the amount of P106,447,318.00 with the CTA via a Petition for Review,[14] docketed
as CTA Case No. 6070.
 
In answer thereto, respondent interposed that:
 
4. Petitioners alleged claim for refund/tax credit is subject to
administrative routinary investigation/examination by respondents
Bureau;
 
5. Petitioner failed miserably to show that the total amount
of P106,447,318.00 claimed as overpaid or excess income tax is
refundable;
 
6. Taxes paid and collected are presumed to have been paid in
accordance with law; hence, not refundable;
 
7. In an action for tax refund, the burden is on the taxpayer to
establish its right to refund, and failure to sustain the burden is fatal to the
claim for refund;
 
8. It is incumbent upon petitioner to show that it has complied
with the provisions of Section 204 (c) in relation to Section 229 of the tax
Code;
 
9. Well-established is the rule that refunds/tax credits are
construed strictly against the taxpayer as they partake the nature of tax
exemptions.[15]
 
 
To prove entitlement to the refund, petitioner submitted, among others, the
following documents: its ITR for the first quarter of taxable year 1997 (Exhibit B),[16] its
tentative ITRs for taxable years 1997 (Exhibit D)[17]and 1998 (Exhibit H),[18] its final ITRs for
taxable years 1997 (Exhibit E),[19] 1998 (Exhibit I)[20] and 1999 (Exhibit J),[21] its Letter Claim
for Refund filed with the BIR (Exhibit K)[22] and the Official Receipt issued by PCI Bank
showing the income tax payment made by petitioner in the amount of P236,679,254.00 for
the first quarter of 1997 (Exhibit C).[23]
 
On April 10, 2001, the CTA rendered a Decision[24] denying petitioners claim for
refund. It found:
 
[T]hat all the allegations made by the Petitioner as well as the figures
accompanying Petitioners claim are substantiated by documentary
evidence but noticed some flaws in Petitioners application of the pertinent
laws involved.
 
It bears stressing that the applicable provision in the case at
bar is Section 69 of the old Tax Code and not Section 76 of the 1997
Tax Code. Settled is the rule that under Section 69 of the old Tax Code,
the carrying forward of any excess/overpaid income tax for a given
taxable year is limited only up to the succeeding taxable year.
 
A painstaking scrutiny of Petitioners income tax returns would
show that Petitioner carried over its 1997 refundable tax
of P132,043,528.00 to the succeeding year of 1998 yielding an
overpayment of P106,447,318.00 (Exhibit I-1) after deducting therefrom
the minimum Corporate Income tax of P25,596,210.00. However,
Petitioner even went further to the taxable year 1999 and applied the
Prior Years (1998) Excess Credit of P106,447,318.00 to its income tax
liability.
 
True enough, upon verification of Petitioners 1999 Corporate
Annual Income Tax Return (Exh. I), this Court found that the whole
amount of P106,447,318.00 representing its prior year's excess credit
(subject of this claim) was carried forward to its 1999 income tax
liability, details of the 1999 Income Tax Return are shown below as
follows:
 
Gross Income P 708,888,638.00
Less: Deduction 1,328,101,776.00
Taxable Income (P 619,213,138.00)
 Tax Due - transgression of the succeeding taxable year limit provided for under
Minimum Corporate Income Tax P 14,185,874.00 Section 69 of the old NIRC.[32] (Emphasis supplied)
Less: Tax Credits/Payments  
(a) Prior year's excess Credit P 106,447,318.00  
(b) Tax Payments for the 1st & 3rd Qtrs. 0 Hence, the fallo of the Decision reads:
(c) Creditable tax withheld 0 P 106,447,318.00  
TAX PAYABLE/REFUNDABLE (P 92,261,444.00) WHEREFORE, premises considered, the instant Petition for
  Review is DENIED, and accordingly, the herein impugned April 10,
It is an elementary rule in taxation that an automatic carry 2001 Decision and June 5, 2001 Resolution of the CTA are hereby
over of an excess income tax payment should only be made for the affirmed.
succeeding year. (Paseo Realty and Devt. Corp. vs. CIR, CTA Case No.  
4528, April 30, 1993) True enough, implicit from the provisions of SO ORDERED.[33]
Section 69 of the NIRC, as amended, (supra) is the fact that the refundable  
amount may be credited against the income tax liabilities for the taxable  
quarters of the succeeding taxable year not succeeding years; and that the Petitioner moved for reconsideration.[34] The CA, however, denied the same in a
carry-over is only limited to the quarters of the succeeding taxable year. Resolution[35] dated January 21, 2008.
(citing ANSCOR Hagedorn Securities Inc. vs. CIR, CA-GR SP 38177,  
December 21, 1999) To allow the application of excess taxes paid for two Issues
successive years would run counter to the specific provision of the law  
above-mentioned.[25] (Emphasis supplied.) Aggrieved, petitioner availed of the present recourse, raising the following
  assignment of errors:
   
Petitioner sought reconsideration[26] of the CTAs denial of its claim for refund, but A.          THE CA COMMITTED SERIOUS ERROR OF LAW IN
the same was denied in a Resolution[27] dated June 5, 2001, prompting petitioner to elevate the APPLYING THE PBCOM CASE.
matter to the CA via a Petition for Review[28] under Rule 43 of the Rules of Court. A.1. THE [DECISION IN THE] PBCOM CASE HAS ALREADY
  BEEN REPEALED.
Ruling of the Court of Appeals A.2. ASSUMING ARGUENDO THAT THE [DECISION IN THE]
  PBCOM CASE HAS NOT BEEN REPEALED, IT HAS
On January 25, 2007, the CA, applying Philippine Bank of Communications v. NO APPLICATION TO BELLE.
Commissioner of Internal Revenue,[29] denied the petition. The CA explained that the  
overpayment for taxable year 1997 can no longer be carried over to taxable year 1999 because B. THE CA COMMITTED SERIOUS ERROR OF LAW IN FINDING
excess income payments can only be credited against the income tax liabilities of the THAT BELLES REFUND CLAIM IS NOT ON ALL FOURS
succeeding taxable year, in this case up to 1998 only and not beyond.[30] Neither can the WITH THE CASES OF BPI FAMILY AND AB LEASING.
overpayment be refunded as the remedies of automatic tax crediting and tax refund are  
alternative remedies.[31] Thus, the CA ruled: B.1. BELLES CARRYING-OVER OF ITS EXCESS INCOME
  TAX PAID FOR 1997 TO 1999 (BEYOND THE
[W]hile BELLE may not have fully enjoyed the complete utilization of its SUBSEQUENT YEAR) IS IMMATERIAL.
option and the sum of Php106,447,318 still remained after it opted for a  
tax carry over of its excess payment for the taxable year 1998, but be that B.2. BELLES PARTIAL USE OF ITS EXCESS INCOME TAX
as it may, BELLE has only itself to blame for making such useless and PAID IN 1998 (THE SUBSEQUENT YEAR) DOES NOT
damaging option, and BELLE may no longer opt to claim for a refund PRECLUDE BELLE FROM ASKING FOR A REFUND.
considering that the remedy of refund is barred after the corporation [36]

has previously opted for the tax carry over remedy. As a matter of  
fact, the CTA even made the factual findings that BELLE committed an  
aberration to exhaust its unutilized overpaid income tax by carrying In a nutshell, the issue boils down to whether petitioner is entitled to a refund of its
it over further to the taxable year 1999, which is a blatant excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.
  
Petitioners Arguments
 
Petitioner insists that it is entitled to a refund as the ruling in Philippine Bank of
Communications v. Commissioner of Internal Revenue [37] relied upon by the CA in denying
its claim has been overturned by BPI-Family Savings Bank, Inc. v. Court of Appeals,[38] AB
Leasing and Finance Corporation v. Commissioner of Internal Revenue,[39] Calamba Steel
Center, Inc. v. Commissioner of Internal Revenue, [40] and State Land Investment Corporation
v. Commissioner of Internal Revenue.[41] In these cases, the taxpayers were allowed to claim
refund of unutilized tax credits.[42] Similarly, in this case, petitioner asserts that it may still
recover unutilized tax credits via a claim for refund.[43]
And while petitioner admits that it has committed a blatant transgression of the
succeeding taxable year limit when it carried over its 1997 excess income tax payments
beyond the taxable year 1998, petitioner believes that this should not result in the denial of its
claim for refund but should only invalidate the application of its 1997 unutilized excess
income tax payments to its 1999 income tax liabilities. [44] Hence, petitioner postulates that a
claim for refund of its unutilized tax credits for the taxable year 1997 may still be made
because the carry-over thereof to the taxable year 1999 produced no legal effect, and is,
therefore, immaterial to the resolution of its claim for refund.[45]
 
Respondents Arguments
 
Respondent, on the other hand, maintains that the cases of BPI-Family Savings
Bank[46] and AB Leasing[47] are inapplicable as the facts obtaining therein are different from
those of the present case.[48] What is controlling, therefore, is the ruling in Philippine Bank of
Communications,[49] that tax refund and tax credit are alternative remedies; thus, the choice of
one precludes the other.[50] Respondent, therefore, submits that since petitioner has already
applied its 1997 excess income tax payments to its liabilities for taxable year 1998, it is
precluded from carrying over the same to taxable year 1999, or from filing a claim for refund.
[51]
 
Our Ruling
The petition has no merit.
Both the CTA and the CA erred in applying Section 69 [52] of the old NIRC. The law
applicable is Section 76 of the NIRC.
 
Unutilized excess income tax
payments may be refunded
within two years from the date of
payment under Section 69 of the
old NIRC
 
Under Section 69 of the old NIRC, in case of overpayment of income taxes, a
corporation may either file a claim for refund or carry-over the excess payments to the
succeeding taxable year. Availment of one remedy, however, precludes the other.[53]
 
Although these remedies are mutually exclusive, we have in several cases allowed
corporations, which have previously availed of the tax credit option, to file a claim for refund
of their unutilized excess income tax payments.
 
In BPI-Family Savings Bank,[54] the bank availed of the tax credit option but since it
suffered a net loss the succeeding year, the tax credit could not be applied; thus, the bank filed
a claim for refund to recover its excess creditable taxes. Brushing aside technicalities, we
granted the claim for refund.
 
Likewise, in Calamba Steel Center, Inc.,[55] we allowed the refund of excess income
taxes paid in 1995 since these could not be credited to taxable year 1996 due to business
losses. In that case, we declared that a tax refund may be claimed even beyond the taxable
year following that in which the tax credit arises x x x provided that the claim for such a
refund is made within two years after payment of said tax.[56]
 
In State Land Investment Corporation,[57] we reiterated that if the excess income
taxes paid in a given taxable year have not been entirely used by a x x x corporation against its
quarterly income tax liabilities for the next taxable year, the unused amount of the excess may
still be refunded, provided that the claim for such a refund is made within two years after
payment of the tax.[58]
 
Thus, under Section 69 of the old NIRC, unutilized tax credits may be refunded as
long as the claim is filed within the two-year prescriptive period.
 
The option to carry over excess
income tax payments is
irrevocable under Section 76 of
the 1997 NIRC
 
This rule, however, no longer applies as Section 76 of the 1997 NIRC now reads:
 
Section 76. Final Adjustment Return. Every corporation liable
to tax under Section 24 shall file a final adjustment return covering the
total net income for the preceding calendar or fiscal year. If the sum of the
quarterly tax payments made during the said taxable year is not equal to
the total tax due on the entire taxable net income of that year the
corporation shall either:
(a) Pay the excess tax still due; or
(b) Be refunded the excess amount paid, as the case may be.
   the 1997 NIRC moved the deadline for the filing of final adjustment
In case the corporation is entitled to a refund of the excess returns from 15 April to 15 March of each year, taxpayers filing returns
estimated quarterly income taxes paid, the refundable amount shown on after 15 March 1998 can excuse their tardiness by invoking the 1977
its final adjustment return may be credited against the estimated quarterly NIRC because the transactions subject of the returns took place before 1
income tax liabilities for the taxable quarters of the succeeding taxable January 1998. A keener appreciation of the nature and purpose of the
years. Once the option to carry over and apply the excess quarterly varied provisions of the 1997 NIRC cautions against sanctioning this
income tax against income tax due for the taxable quarters of the reasoning.[60]
succeeding taxable years has been made, such option shall be  
considered irrevocable for that taxable period and no application for  
tax refund or issuance of a tax credit certificate shall be allowed Accordingly, since petitioner already carried over its 1997 excess income tax
therefor. (Emphasis supplied) payments to the succeeding taxable year 1998, it may no longer file a claim for refund of
  unutilized tax credits for taxable year 1997.
   
Under the new law, in case of overpayment of income taxes, the remedies are still To repeat, under the new law, once the option to carry-over excess income tax
the same; and the availment of one remedy still precludes the other. But unlike Section 69 of payments to the succeeding years has been made, it becomes irrevocable. Thus, applications
the old NIRC, the carry-over of excess income tax payments is no longer limited to the for refund of the unutilized excess income tax payments may no longer be allowed.
succeeding taxable year. Unutilized excess income tax payments may now be carried over to  
the succeeding taxable years until fully utilized. In addition, the option to carry-over excess WHEREFORE, the petition is hereby DENIED. The Decision dated January 25,
income tax payments is now irrevocable. Hence, unutilized excess income tax payments may 2007 and the Resolution dated January 21, 2008 of the Court of Appeals are
no longer be refunded. hereby AFFIRMED only insofar as the denial of petitioners claim for refund is concerned.
   
In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in SO ORDERED.
denying the claim for refund. We find, however, that the applicable provision should be
Section 76 of the 1997 NIRC because at the time petitioner filed its 1997 final ITR, the old
NIRC was no longer in force. In Commissioner of Internal Revenue v. McGeorge Food
Industries, Inc.,[59] we explained that:
 
Section 76 and its companion provisions in Title II, Chapter
XII should be applied following the general rule on the prospective
application of laws such that they operate to govern the conduct of
corporate taxpayers the moment the 1997 NIRC took effect on 1
January 1998. There is no quarrel that at the time respondent filed its
final adjustment return for 1997 on 15 April 1998, the deadline under
Section 77 (B) of the 1997 NIRC (formerly Section 70(b) of the 1977
NIRC), the 1997 NIRC was already in force, having gone into effect a
few months earlier on 1 January 1998. Accordingly, Section 76 is
G.R. No. 206526               January 28, 2015
controlling.
 
WINEBRENNER & IÑIGO INSURANCE BROKERS, INC., Petitioner, 
The lower courts grounded their contrary conclusion on the fact
vs.
that respondents overpayment in 1997 was based on transactions COMMISSIONER OF INTERNAL REVENUE, Respondent.
occurring before 1 January 1998. This analysis suffers from the twin
defects of missing the gist of the present controversy and misconceiving DECISION
the nature and purpose of Section 76. None of respondents corporate
transactions in 1997 is disputed here. Nor can it be argued that Section 76 MENDOZA, J.:
determines the taxability of corporate transactions. To sustain the rulings
below is to subscribe to the untenable proposition that, had Congress in
In this petition for review under Rule 45 of the Rules of Court and Rule 16 of the Revised Rules
of the Court of Tax Appeals, Winebrenner & Ifiigo Insurance Brokers, Inc. (petitioner) seeks the
review of the March 22, 2013 Decision1 of the Court of Tax Appeals En Banc (CTA-En Banc). In
the said decision, the CTA-En Banc affirmed the denial of petitioner's judicial claim for refund or
issuance of tax credit certificate for excess and unutilized creditable withholding tax (CWT) for
the 1st to 4th quarter of calendar year (CJ} 2003 amounting to P4,073,954.00. In denying the
refund, the CTA-En Banc held that petitioner failed to prove that the excess CWT for CY 2003
was not carried over to the succeeding quarters of the subject taxable year. Under the 1997
National Internal Revenue Code (NJRC), a taxpayer must not have exercised the option to
carryover the excess CWT for a particular taxable year in order to qualify for refund.
The Factual Antecedents
On April 15, 2004, petitioner filed itsAnnual Income Tax Return for CY 2003.
About two years thereafter or on April 7, 2006, petitioner applied for the administrative tax
credit/refund claiming entitlement to the refund of its excess or unutilized CWT for CY 2003, by
filing BIR Form No. 1914 with the Revenue District Office No. 50 of the Bureau of Internal
Revenue (BIR).
There being no action taken on the said claim, a petition for review was filed by petitioner before
the CTA on April 11, 2006. The case was docketed as CTA Case No. 7440 and was raffled to
the Special First Division (CTA Division).
On April 13, 2010, CTA Division partially granted petitioner’s claim for refund of excess and
unutilized CWT for CY 2003 in the reduced amount of P2,737,903.34 in its April 13, 2010
Decision2 (original decision). The dispositive portion of the decision reads:
In view of the foregoing, the Petition for Review is hereby PARTIALLY GRANTED. Accordingly,
respondent is hereby ORDERED to REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor
of the petitioner in the reduced amount of P2,737,903.34 representing its excess/unutilized
creditable withholding taxes for the year 2003.
SO ORDERED. 3
Petitioner filed a Motion for Partial Reconsideration with Leave to Submit Supplemental
Evidence. It prayed that an amended decision be issued granting the entirety of its claim for
refund, or in the alternative, that it be allowed to submit and offer relevant documents as
supplemental evidence.
Respondent Commissioner of Internal Revenue (CIR) also moved for reconsideration, praying
for the denial of the entire amount of refund because petitioner failed to present the quarterly
Income Tax Returns (ITRs) for CY 2004. To the CIR, the presentation of the 2004 quarterly ITRs
was indispensable in proving petitioner’s entitlement to the claimed amount because it would
prove that no carry-over of unutilized and excess CWT for the four (4) quarters of CY 2003 to
the succeeding four (4) quarters of CY 2004 was made. In the absence of said ITRs, no refund
could be granted. In the CIR’s view, this was in accordance with the irrevocability rule under
Section 76 of the NIRC which reads:
SEC. 76. Final Adjustment Return. – Every corporation liable to tax under Section 27 shall file an
adjustment return covering the total taxable income for the preceding calendar or fiscal year. If
the sum of the quarterly tax payments made during the said taxable year is not equal to the total
tax due on the entire taxable income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credits; or
(C) Be credited or refunded with the excess amount paid, as the case may
be.
In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly
income taxes paid, the excess amount shown on its final adjustment return may be carried over
and credited against the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option to carry-over and apply the excess quarterly income
tax against income tax due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable period and no application for
cash refund or issuance of a tax credit certificate shall be allowed therefor.
On July 27, 2011, the CTA-Division reversed itself. In an Amended Decision,4 it denied the entire
claim of petitioner. It reasoned out that petitioner should have presented as evidence its first,
second and third quarterly ITRs for the year 2004 to prove that the unutilized CWT being
claimed had not been carried over to the succeeding quarters. Thus:
WHEREFORE,in view of the foregoing, petitioner’s Motion for Partial Reconsideration is hereby
DENIED while respondent’s Motion for Reconsideration is hereby GRANTED. Accordingly, the
Decision dated April 13, 2010 granting petitioner’s claim in the reduced amount
of P2,737,903.34 is hereby REVERSED AND SET ASIDE. Consequently, the instant Petition for
Review is hereby DENIEDdue to insufficiency of evidence.
SO ORDERED.5
Aggrieved, petitioner elevated the case to the CTA En Bancpraying for the reversal of the
Amended Decision of the CTA Division.
In its March 22, 2013 Decision,6 the CTA-En Bancaffirmed the Amended Decision of the CTA-
Division. It stated that before a cash refund or an issuance of tax credit certificate for unutilized
excess tax credits could be granted, it was essential for petitioner to establish and prove, by
presenting the quarterly ITRs of the succeeding years, that the excess CWT was not carried
over to the succeeding taxable quarters considering that the option to carry over in the
succeeding taxable quarters could not be modified in the final adjustment returns
(FAR).Because petitioner did not present the first, second and third quarterly ITRsfor CY 2004,
despite having offered and submitted the Annual ITR/FAR for the same year, the CTA-En Banc
stated that the petitioner failed to discharge its burden, hence, no refund could be granted. In
justifying its conclusions, the CTA-En Banccited its own case of Millennium Business Services,
Inc.v. Commissioner of Internal Revenue (Millennium)7 wherein it held as follows:
Since the burden of proof is upon the claimant to show that the amount claimed was not utilized
or carried over to the succeeding taxable quarters, the presentation of the succeeding quarterly
income tax return and final adjustment return is indispensable to prove that it did not carry over
or utilized the claimed excess creditable withholding taxes. Absent thereof, there will be no basis
for a taxpayer’s claim for refund since there will be no evidence that the taxpayer did not carry
over or utilize the claimed excess creditable withholding taxes to the succeeding taxable
quarters.
Significantly, a taxpayer may amend its quarterly income tax return or annual income tax return
or Final Adjustment Return, which in any case may modify the previous intention to carry-over,
apply as tax credit certificate or refund, as the case may be. But the option to carry over in the
succeeding taxable quarters under the irrevocability rule cannot be modified in its final
adjustment return.
The presentation of the final adjustment return does not shift the burden of proof that the excess
creditable withholding tax was not utilized or carried overto the first three (3) taxable quarters. It
remains with the taxpayer claimant. It goes without saying that final adjustment returns of the
preceding and the succeeding taxable years are not sufficient to prove that the amount claimed
was utilized or carried over to the first three (3) taxable quarters.
The importance of the presentation of the succeeding quarterly income tax return and the annual
income tax return of the subsequent taxable year need not be overly emphasized. All
corporations subject to income tax, are required to file quarterly income tax returns, on a
cumulative basis for the preceding quarters, upon which payment of their income tax has been
made. In addition to the quarterly income tax returns, corporations are required to file a final or
adjustment return on or before the fifteenth day of April. The quarterly income tax return, like the
final adjustment return, is the most reliable firsthand evidence of corporate acts pertaining to
income taxes, as it includes the itemization and summary of additions to and deductions from
the income tax due. These entries are not without rhyme or reason. They are required, because
they facilitate the tax administration process, and guide this Court to the veracity of a petitioner’s
claim for refund without which petitioner could not prove with certainty that the claimed amount
was not utilized or carried over to the succeeding quarters or the option to carry over and apply
the excess was effectively chosen despite the intent to claim a refund.
In the same vein, if the government wants to disprove that the excess creditable withholding tax
was not utilized or carried over to the succeeding taxable quarters, the presentation of the
succeeding quarterly income tax return and the annual income tax return of the subsequent
taxable year indicating utilization or carrying over are [sic] indispensible. However, the claimant
must first establish its claim for refund, such that it did not utilize or carry over or that it opted to
utilize and carry over to the 1 st, 2nd, 3rd quarters and final adjustment return of the succeeding
taxable year.
Concomitantly, the presentation of the quarterly income tax return and the annual income tax
return to prove the fact that excess creditable withholding tax was not utilized or carried over or
opted to be utilized and carried over to the 1st, 2nd, 3rd quarters and final adjustment return of
the succeeding taxable quarter is not only for convenience to facilitate the tax administration
process but it is part of the requisites to establish the claim for refund. Section 76 of the NIRC of
1997 provides that if the taxpayer claimant carries over and applies the excess quarterly income
tax against the income tax due for the taxable quarters of the succeeding taxable years, the
same is irrevocable and no application for cash refund or issuance of a tax credit certificate shall
be allowed.8
Hence, this petition.
Noteworthy is the fact that the CTA-En Bancruling was met with two dissents from Associate
Justices Juanito C. Castañeda (Justice Castañeda) and Esperanza R. Fabon-Victorino (Justice
Fabon-Victorino).
In his Dissenting Opinion9 which was concurred in by Justice FabonVictorino, Justice Castañeda
expressed the view that the CTA-En Banc should have reinstated the CTA-Division’s original
decision because in the cases of Philam Asset Management Inc. v. Commissioner of Internal
Revenue (Philam);10 State Land Investment Corporation v. Commissioner of Internal Revenue
(State Land);11 Commissioner of Internal Revenue v. PERF Realty Corporation (PERF
Realty);12 and Commissioner of Internal Revenue v. Mirant (Philippines) Operations, Corporation
(Mirant),13 this Court already ruled that requiring the ITR or the FAR for the succeeding year in a
claim for refund had no basis in law and jurisprudence. According to him, the submission of the
FAR of the succeeding taxable year was not required under the law to prove the claimant’s
entitlement to excess or unutilized CWT, and by following logic, the submission of quarterly
income tax returns for the subsequent taxable period was likewise unnecessary. He found no
justifiable reason not to follow the existing rulings of this Court. Petitioner’s reasoning in this
petition echoes the dissenting opinion of Justice Castaneda. It further submits that despite the
non-presentation of the quarterly ITRs, it has sufficiently shown that the excess CWT for CY
2003 was not carried over or applied to itsincome tax liabilities for CY 2004, as shown in the
Annual ITR for 2004 it submitted. Thus, petitioner insists that its refund should have been
granted. Petitioner further avers, in its Reply,14that even if Millennium Business case was
applicable, such must be given prospective effect considering that this case was litigated on the
basis of the doctrines laid down in Philam, State Landand PERF Realty cases wherein the
submission of quarterly ITRs in a case for tax refund was held by this Court as not mandatory.
In its Comment,15 the CIR counters that even if the taxpayer signifies the option for either tax
refund or carry-over as tax credit, this does not ipso facto confer the right to avail of the option
immediately. There is a need, according to the CIR, for an investigation to ascertain the
correctness of the corporate returns and the amount sought to be credited; and part of which is
to look into the quarterly returns so that it may be determined whether or not excess and
unutilized CWT was carried over into the succeeding quarters of the next taxable year. Because
the pertinent quarterly ITRs were not presented, the CIR submits that the petitioner failed to
prove its right to a tax refund.
Issue
The sole issue here is whether the submission and presentation of the quarterly ITRs of the
succeeding quarters of a taxable year is indispensable in a claim for refund.
The Court’s Ruling
The Court recognizes, as it always has, that the burden of proof to establish entitlement to
refund is on the claimant taxpayer.16 Being in the nature of a claim for exemption,17 refund is
construed in strictissimi juris against the entity claiming the refund and in favor of the taxing
power.18 This is the reason why a claimant must positively show compliance with the statutory
requirements provided for under the NIRC in order to successfully pursue one’s claim. As
implemented by the applicable rules and regulations and as interpreted in a vast array of
decisions, a taxpayer who seeks a refund of excess and unutilized CWT must:
1) File the claim with the CIR within the two year period from the date of payment of
the tax;
2) Show on the return that the income received was declared as part of the gross
income; and
3) Establish the fact of withholding by a copy of a statement duly issued by the payor
to the payee showing the amount paid and the amount of tax withheld.19
The original decision of the CTA-Division made plain that the petitioner complied with the above
requisites in so far as the reduced amount of P2,737,903.34 was concerned. In the amended
decision, however, it was pointed out that because petitioner failed to present the quarterly ITRs
of the subsequent year, there was an impossibility of determining compliance with the
irrevocability rule under Section 76 of the NIRC as in those documents could be found evidence
of whether the excess CWT was applied to its income tax liabilities in the quarters of 2004. The
irrevocability rule under Section 76 of the NIRC means that once an option, either for refund or
issuance of tax credit certificate or carry-over of CWT has been exercised, the same can no
longer be modified for the succeeding taxable years.20 For said reason, the CTA-En Banc
affirmed the conclusion in the amended decision that because of the said impossibility, the claim
for refund was not substantiated.
The CIR agrees with the disposition of the CTA-En Banc, stressing that the petitioner failed to
carry out the burden of showing that no carryover was made when it did not present the
quarterly ITRs for CY 2004.
Petitioner disagrees, as the dissents did, that the non-submission of quarterly ITRs is fatal to its
claim.
Hence, the issue on the indispensability of quarterly ITRs of the succeeding taxable year in a
claim for refund.
The Court finds for the petitioner.
There is no question that those who claim must not only prove its entitlement to the excess
credits, but likewise must prove that no carry-over has been made in cases where refund is
sought.
In this case, the fact of havingcarried over petitioner’s 2003 excess credits to succeeding taxable
year isin issue. According to the CTA-En Bancand the CIR, the only evidence that can
sufficiently show that carrying over has been made is to present the quarterly ITRs. Some
members of this Court adhere to the same view.
The Court however cannot.
Proving that no carry-over has been made does not absolutely require the presentation of the
quarterly ITRs.
In Philam, the petitioner therein sought for recognition of its right to the claimed refund of
unutilized CWT. The CIR opposed the claim, on the grounds similar to the caseat hand, that no
proof was provided showing the non-carry over of excess CWT to the subsequent quarters of
the subject year. In a categorical manner, the Court ruled that the presentation of the quarterly
ITRs was not necessary. Therein, it was written:
Requiring that the ITR or the FAR of the succeeding year be presented to the BIR in requesting
a tax refund has no basis in law and jurisprudence.
First, Section 76 of the Tax Code does not mandate it. The law merely requires the filing of the
FAR for the preceding – not the succeeding – taxable year. Indeed, any refundable amount
indicated in the FAR of the preceding taxable year may be credited against the estimated
income tax liabilities for the taxable quarters of the succeeding taxable year. However, nowhere
is there even a tinge of a hint in any provisions of the [NIRC] that the FAR of the taxable year
following the period to which the tax credits are originally being applied should also be presented
to the BIR.
Second, Section 5 of RR 12-94, amending Section 10(a) of RR 6-85, merely provides that
claims for refund of income taxes deducted and withheld from income payments shall be given
due course only (1) when it is shown on the ITR that the income payment received is being
declared part of the taxpayer’s gross income; and (2) when the fact of withholding is established
by a copy of the withholding tax statement, duly issued by the payor to the payee, showing the
amount paid and the income tax withheld from that amount.
It has been submitted that Philam cannot be cited as a precedent to hold that the presentation of
the quarterly income tax return is not indispensable as it appears that the quarterly returns for
the succeeding year were presented when the petitioner therein filed an administrative claim for
the refund of its excess taxes withheld in 1997.
It appears however that there is misunderstanding in the ruling of the Court in Philam. That
factual distinction does not negate the proposition that subsequent quarterly ITRs are not
indispensable. The logic in not requiring quarterly ITRs of the succeeding taxable years to be
presented remains true to this day. What Section 76 requires, just like in all civil cases, is to
prove the prima facie entitlement to a claim, including the fact of not having carried over the
excess credits to the subsequent quarters or taxable year. It does not say that to prove such a
fact, succeeding quarterly ITRs are absolutely needed.
This simply underscores the rulethat any document, other than quarterly ITRs may be used to
establish that indeed the non-carry over clause has been complied with, provided that such is
competent, relevant and part of the records. The Court is thusnot prepared to make a
pronouncement as to the indispensability of the quarterly ITRs in a claim for refund for no court
can limit a party to the means of proving a fact for as long as they are consistent with the rules of
evidence and fair play. The means of ascertainment of a fact is best left to the party that alleges
the same. The Court’s power is limited only to the appreciation of that means pursuant to the
prevailing rules of evidence. To stress, what the NIRC merely requires is to sufficiently prove the
existence of the non-carry over of excess CWT in a claim for refund.
The implementing rules similarly support this conclusion, particularly Section 2.58.3 of Revenue
Regulation No. 2-98 thereof. There, it provides as follows:
SECTION 2.58.3. Claim for Tax Credit or Refund.
(A) The amount of creditable tax withheld shall be allowed as a tax credit against the
income tax liability of the payee in the quarter of the taxable year in which income was
earned or received.
(B) Claims for tax credit or refund of any creditable income tax which was deducted
and withheld on income payments shall be given due course only when it is shown
that the income payment has been declared as part of the gross income and the fact
of withholding is established bya copy of the withholding tax statement duly issued by
the payer to the payee showing the amount paid and the amount of tax withheld
therefrom.
x x x           x x x          x x x
Evident from the above is the absence of any categorical pronouncement of requiring the
presentation of the succeeding quarterly ITRs in order to prove the fact of non-carrying over. To
say the least, the Court rules that as to the means of proving it, Ithas no power to unduly restrict
it.
In this case, it confounds the Court why the CTA did not recognize and discuss in detail the
sufficiency of the annual ITR for 2004,21 which was submitted by the petitioner. The CTA in fact
said:
In the present case, while petitioner did offer its Annual ITR/Final Adjustment Return for taxable In this case, petitioner reported an overpayment in the amount of P7,194,213.00 in its annual
year 2004, it appears that petitioner miserably failed to submit and offer as part of its evidence ITR for the year ended December 2003:
the first, second, and third Quarterly ITRs for the year 2004. Consequently, petitioner was not
able to prove that it did not exercise its option to carry-over its excess CWT.22
Annual ITR 2003

Petitioner claims that the requirement of proof showing the non-carry over has been established
in said document. Income Tax Due 1,259,259.00

Less: Prior Year’s Excess Credits (2002 Annual (4,379,518.00)

Indeed, an annual ITR contains the total taxable income earned for the four (4) quarters of a ITR)
taxable year, as well as deductions and tax credits previously reported or carried over in the
quarterly income tax returns for the subject period. A quick look atthe Annual ITR reveals this Creditable Tax Withheld for the 4th Quarter (4,073,954.00)
fact:
Tax Payable / (Overpayment) (7,194,213.00)
Aggregate Income Tax Due
For the overpayment, petitioner chose the option "To be issued a Tax Credit Certificate." In its
Less Tax Credits/Payments Annual ITR for the year ended December 2004, petitioner did not report the Creditable Tax
Withheld for the 4th quarter of 2003 in the amount of P4,073,954.00 as prior year’s excess
credits. As shown in the 2004 ITR:
Prior Year’s excess Credits – Taxes withheld

Annual ITR 2004

Tax Payment (s) for the Previous Quarter (s) of the same taxable year other than MCIT

x x x           x x x          x x x Income Tax Due 1,321,409.00

Less: Prior Year’s Excess Credits -

Creditable Tax Withheld for the Previous Quarter (s)
Creditable Tax Withheld for the (3,689,419.00)
4th
Creditable Tax Withheld Per BIR Form No. 2307 for this Quarter

x x x           x x x          x x x23
It goes without saying that the annual ITR (including any other proof that may be sufficient to the
Court)can sufficiently reveal whether carry over has been made in subsequent quarters even if
the petitioner has chosen the option of tax credit or refund inthe immediately 2003 annual ITR.
Section 76 of the NIRC requires a corporation to file a Final Adjustment Return (or Annual ITR)
covering the total taxable income for the preceding calendar or fiscal year. The total taxable
income contains the combined income for the four quarters of the taxable year, as well as the
deductions and excess tax credits carried over in the quarterly income tax returns for the same
period.
If the excess tax credits of the preceding year were deducted, whether in whole or in part, from
the estimated income tax liabilities of any of the taxable quarters of the succeeding taxable year,
the total amount of the tax credits deducted for the entire taxable year should appear in the
Annual ITR under the item "Prior Year’s Excess Credits." Otherwise, or if the tax credits were
carried over to the succeeding quarters and the corporation did not report it in the annual ITR,
there would be a discrepancy in the amounts of combined income and tax credits carried over
for all quarters and the corporation would end up shouldering a bigger tax payable. It must be
remembered that taxes computed in the quarterly returns are mere estimates. It is the annual
ITR which shows the aggregate amounts of income, deductions, and credits for all quarters of
the taxable year. It is the final adjustment return which shows whether a corporation incurred a
loss or gained a profit during the taxable quarter.24 Thus, the presentation of the annual ITR
would suffice in proving that prior year’s excess credits were not utilized for the taxable year in
order to make a final determination of the total tax due.
Quarter
Tax Payable / (Overpayment) (2,368,010.00)
Verily, the absence of any amount written in the Prior Year excess Credit – Tax Withheld portion
of petitioner’s 2004 annual ITR clearly shows that no prior excess credits were carried over in
the first four quarters of 2004. And since petitioner was able to sufficiently prove that excess tax
credits in 2003 were not carried over to taxable year 2004 by leaving the item "Prior Year’s
Excess Credits" as blank in its 2004 annual ITR, then petitioner is entitled to a refund.
Unfortunately, the CTA, in denying entirely the claim, merely relied on the absence of the
quarterly ITRs despite being able to verify the truthfulness of the declaration that no carry over
was indeed effected by simply looking at the 2004 annual ITR.
At this point, worth mentioning is the fact that subsequent cases affirm the proposition as
correctly pointed out by petitioner. State Land, PERF and Mirantreiterated the rule that the
presentation of the quarterly ITRs of the subsequent year is not mandatory on the part of the
claimant to prove its claims.
There are some who challenges the applicability of PERF in the case at bar. It is said that
PERFis not in point because the Annual ITR for the succeeding year had actually been attached
to PERF’s motion for reconsideration with the CTA and had formed part of the records of the
case. Clearly, if the Annual ITR has been recognized by this Court in PERF, why then would the
submitted 2004 Annual ITR in this case be insufficient despite the absence of the quarterly
ITRs? Why then would this Court require more than what is enough and deny a claim even if the
minimum burden has been overcome? At best, the existence of quarterly ITRs would have the
effect of strengthening a proven fact. And as such, may only be considered corroborative
evidence, obviously not indispensable in character. PERF simply affirms that quarterly ITRs are
not indispensable, provided that there is sufficient proof that carrying over excess CWT was not
effected.
Stateland and Mirantare equally challenged. In all these cases however, the factual distinctions
only serve to bolster the proposition that succeeding quarterly ITRs are not indispensable.
Implicit from all these cases is the Court’s recognition that proving carry-over is an evidentiary
matter and that the submission of quarterly ITRs is but a means to prove the fact of one’s
entitlement to a refund and not a condition sine qua non for the success of refund. True, it would
have been better, easier and more efficient for the CTA and the CIR to have as basis the
quarterly ITRs, but it is not the only way considering further that in this case, the Annual ITR for
2004 is sufficient. Courts are here to painstakingly weigh evidence so that justice and equity in
the end will prevail.
It must be emphasized that once the requirements laid down by the NIRC have been met, a
claimant should be considered successful in discharging its burden of proving its right to refund.
Thereafter, the burden of going forward with the evidence, as distinct from the general burden of
proof, shifts to the opposing party,25 that is, the CIR. It is then the turn of the CIR to disprove the
claim by presenting contrary evidence which could include the pertinent ITRs easily obtainable
from its own files.
All along, the CIR espouses the viewthat it must be given ample opportunity to investigate the
veracity of the claims. Thus, the Court asks: In the process of investigation at the administrative
level to determine the right of the petitioner to the claimed amount, did the CIR, with all its
resources even attempt to verify the quarterly ITRsit had in its files? Certainly, it did not as the
application was met by the inaction of the CIR. And if desirous in its effort to clearly verify
petitioner’s claim, it should have had the time, resources and the liberty to do so. Yet, nothing
was produced during trial to destroy the prima facie right of the petitioner by counterchecking the
claims with the quarterly ITRs the CIR has on its file. To the Court, it seems that the CIR
languished on its duties to ascertain the veracity of the claims and just hoped that the burden
would fall on the petitioner’s head once the issue reaches the courts.
This mindset ignores the rule that the CIR has the equally important responsibility of
contradicting petitioner’s claim by presenting proof readily on hand once the burden of evidence
shifts to its side. Claims for refund are civil in nature and as such, petitioner, as claimant, though
having a heavy burden of showing entitlement, need only prove preponderance of evidence in
order to recover excess credit in cold cash. To review, "[P]reponderance of evidence is [defined
as] the weight, credit, and value of the aggregate evidence on either sideand is usually
considered to be synonymous with the term ‘greater weight of the evidence’ or ‘greater weight of
the credible evidence.’ It is evidence which is more convincing to the court asworthy of belief
than that which is offered in opposition thereto.26
Verily, with the petitioner having complied with the requirements for refund, and without the CIR
showing contrary evidence other than its bare assertion of the absence of the quarterly ITRs,
copies of which are easily verifiable by its very own records, the burden of proof of establishing
the propriety of the claim for refund has been sufficiently discharged. Hence, the grant of refund
is proper.
The Court does not, and cannot, however, grant the entire claimed amount as it finds no error in
the original decision of the CTA Division granting refund to the reduced amount
of P2,737,903.34. This finding of fact is given respect, if not finality, as the CTA,27 which by the
very nature of its functions of dedicating itself exclusively to the consideration of the tax
problems has necessarily developed an expertise on the subject.28 It being the case, the Court
partly grants this petition to the extent of reinstating the April 23, 2010 original decision of the
CTA Division.
The Court reminds the CIR that substantial justice, equity and fair play take precedence over
technicalities and legalisms.1âwphi1 The government must keep in mind that it has no right to
keep the rponey not belonging to it, thereby enriching itself at the expense of the law-abiding
citizen29 or entities who have complied with the requirements of the law in order to forward the
claim for refund. Under the principle of solution ihdebiti provided in Article 2154 of the Civil
Code, the CIR must return anythihg it has received.30
Finally, even assuming that the Court reverses itself and pronounces the indispensability of
presenting the quarterly ITRs to prove entitlement to the claimed refund, petitioner should not be
Brejudiced for relying on Philam. The CTA En Banc merely based its pronouncement on a case
that does not enjoy the benefit of stare decis et non quieta movere which means "to adhere to
precedents, and not to unsettle things which are established."31 As between a CTA En Banc
Decision (Millennium) and this Court's Decision (Philam), it is elementary that the latter should
prevail.
WHEREFORE, the Court partly grants the petition. The March 22, 2013 Decision of the Court of
Tax Appeals En Banc is REVERSED. The April 13, 2010 Decision of the Court of Tax Appeals
Special First Division is REINSTATED. Respondent Commissioner of Internal Revenue is
ordered to REFUND to petitioner the amount of P2,737,903.34 as excess creditable withholding
tax paid for taxable year 2003.
SO ORDERED.

The CIR must then be reminded that in Philam, the CIR’s "failure to present[the quarterly ITRs
and AFR] to support its contention against the grant of a tax refund to [a claimant] is certainly
fatal." PERF reinforces this with a sweeping statement holding that the verification process is not
incumbent on PERF[or any claimant for that matter]; [but] is the duty of the CIR to verify whether
xxx excess incometaxes [have been carried over].

And should there be a possibility that a claimant may have violated the irrevocability rule and
thereafter claim twice from its credits, no one is to be blamed but the CIR for not discharging its
burden of evidence to destroy a claimant’s right to a refund. At any rate, a claimant who
defrauds the government cannot escape liability be it criminal or civil in nature.