Anscor Hagedorn Securities, Inc. v. Commissioner of Internal Revenue

FIFTH DIVISION [CA-G.R. SP CASE NO. 38177. December 21, 1999.] ANSCOR HAGEDORN SECURITIES INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . D E C I S I O N SANDOVAL GUTIERREZ , J p : Petition for review of the decision of the Court of Tax Appeals in CTA Case No. 4786, "Anscor Hagedorn Securities, Inc. vs. Commissioner of Internal Revenue" denying petitioner's claim for tax refund in the sum of P323,316.28 representing overpaid withholding tax for the year 1989; and its resolution denying petitioner's motion for reconsideration. Petitioner Anscor Hagedorn Securities, Inc. (ANSCOR for brevity) is a domestic corporation licensed to do business as a stockbroker/dealer of securities under Philippine laws. In April, ANSCOR, filed its corporate annual income tax return for the taxable year 1987 with the Bureau of Internal Revenue (BIR) declaring therein the following: a net taxable income of P7,252,435.00; tax due of P2,538,352.00; quarterly tax payments of P3,538,456.06, leaving a refundable tax of P1,001,104.06, which petitioner opted to apply as tax credit for the succeeding taxable year. 1 On April 14, 1989, ANSCOR filed its corporate annual income tax return for the taxable year 1988 with the following declarations: a net taxable income of P636,692.00; tax due of P222,842.00; 1987 excess tax credit of P1,001,104.06; a withholding tax on consultancy fee of P75,000.00; and a refundable tax of P852,262.06, which petitioner opted to apply as tax credit for the succeeding taxable year (1988). 2 On November 28, 1989, ANSCOR filed its quarterly income tax return for the year 1989, declaring therein a net taxable income of P7,731,230.79; tax due of P2,705,930.78; excess tax payment for 1989 of P852,262.06, leaving the sum of P1,853,668.72 representing the income tax due for the third quarter of 1989. 3 On April 16, 1990, ANSCOR filed its corporate annual income tax return 4 for the calendar year 1989 showing a refundable amount of P323,316.28 arrived at as follows: "1989 taxable income P6,838,487.00 Tax due thereon P2,393,470.00 Less: 1988 excess credit 852,262.06 Balance P1,541,207.94 Less: 1989 3rd quarter payments P1,853,668.72 5% creditable withholding tax P10,855.50 1,874,524.22 Refundable amount: P323,316.28" =========== With respect to this amount of P323,316.28, petitioner opted to apply the same as tax credit for the succeeding taxable year. On April 15, 1991, ANSCOR filed its corporate annual income tax return for the taxable year 1990 5 1990 declaring therein a net loss of P1,918,267.00; the prior year (1989) excess tax credit of P 323,316.28; the amount paid during the 1st quarter of current year (1990) of P604,405.46; and the 5% withholding tax on its commission income of P11,763.56. This return reflected a refundable amount of P939,485.30, which petitioner opted to apply as tax credit for the succeeding taxable year 1991. LibLex In the letter of March 27, 1992 6 , ANSCOR filed with the BIR its claim for tax refund of P323,316.28 representing its overpaid income tax for the year 1989. However, without waiting for the result of the action of the BIR, and before the expiry of the two-year prescriptive period allowed by law for tax refund claims, ANSCOR, on April 13, 1992, filed a petition for review with the Court of Tax Appeals (CTA), docketed as CTA Case No. 4786, praying for the refund of its overpaid income tax for 1989 in the amount of P323,316.28. In its answer to the petition, respondent BIR raised the following special and affirmative defenses: "6. The claim for refund of petitioner has already prescribed because it involves Annual Income Tax Return for the year 1988 filed on April 14, 1989, whereas the petition was filed only on April 13, 1992 before this Honorable Court; 7. Petitioner failed to show that the taxes paid were erroneously or illegally collected. The presumption is that they were received by respondent in accordance with law; llcd 8. Petitioner has not likewise shown that the taxes allegedly collected and which it wants to be refunded were actually withheld and/or remitted to respondent; 9. Petitioner has also failed to show that it had strictly complied with the provisions of Section 204 of the Tax Code in relation to Section 270 thereof. The burden is imposed on petitioner to show compliance with these requirements since a claim for refund is in nature of an exemption which is construed strictly against the claimants (Resins, Inc. vs. Auditor General, 25 SCRA 754)" On May 15, 1995, the Court of Tax Appeals rendered a decision denying ANSCOR claim for refund, thus: "In so far as material to the issue posed herein, Section 69 of the Tax Code is quoted in full: 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 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 due; or b) Be refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." It must be pointed out that the above provision speaks of a carry-over only to the quarters of the succeeding taxable year . As correctly put in the case of Citytrust Banking Corporation versus CIR, CTA Case No. 4099, May 28, 1991, then affirmed by the Court of Appeals in CIR vs. Citytrust Banking Corporation, C.A. GR SP 26839, July 13, 1992 which reads: "If the refundable amount for one year was not fully credited in the succeeding year, the excess uncredited year, the excess uncredited amount can no longer be credited in the following year because the law limits the automatic tax credit to the 'succeeding year only.'" Although it may be correct for petitioner to carry-over to the next succeeding taxable quarter or year its 1987 excess tax credit, we find it erroneously for petitioner to further carry-over to the subsequent taxable quarter or year the balance of its 1987 excess tax credit or beyond 1988 . As culled from the records, it reveals that the 1989 final return displays that petitioner did apply as tax credit the amount subject of this claim for its First Quarter of 1990, to the succeeding taxable year 1991. All told, petitioner is not entitled to the refund. The table below reveals that the amount sought to be refunded originated from 1987 excess income tax payments and were carried over for two successive years 1988 and 1989. There is no doubt that such move runs in violation of Sec. 69 of the Tax Code. xxx xxx xxx WHEREFORE, in view of the foregoing premises, the claim for refund in the amount of P323,316.28 hereby DENIED for lack of merit. SO ORDERED." cdll ANSCOR filed a motion for reconsideration but was denied. Hence this petition for review. The main issue for this Court's resolution is whether petitioner ANSCOR is entitled to a tax refund of P323,316.28 representing its alleged excess tax payment for the year 1989. Implicit from the provisions of Section 69 of the NIRC, as amended, earlier quoted, is the fact that the refundable amount may only be credited against the income tax liabilities for the taxable quarters of the succeeding taxable year , not succeeding years ; and that the carry-over is only to the quarters of the succeeding taxable year. In the case at bench, We find that petitioner applied the refundable amount of P323,316.28, not for the taxable quarters of the succeeding single year, but for several succeeding year starting 1987 up to 1991. This is prohibited by the above provisions. cdlex The CTA, on the basis of the records, made the following findings: "A perusal of the antecedent facts of the case, reveals that the refundable amount of P323,316.09 springs from 1987 when it incurred a refundable amount of P1,001,104.06. It shows that the whole amount was carried over to succeeding taxable year and partially satisfied the 1988 tax liability of P282,842 which leaves a balance of P778,262.06. Petitioner further applied said excess payment for the year 1987 to taxable year 1989 which partially satisfied a tax liability in the amount of P2,393,470.00, thus leaving a balance of P323,316.28. Petitioner presented its Quarterly Income Tax Return for the year 1990, which shows that it applied as tax credit its 1989 refundable amount of P323,316.28 as against its income tax liability for the first quarter of 1990 which reflects a tax liability of P604,405.46 for the said quarter was paid on May 28, 1990." As correctly held by the CTA, it was erroneous for the petitioner to further carry-over beyond 1988 the balance of its 1987 excess tax credit. Petitioner's 1989 final return shows that it carried over the amount of P323,316.28 to 1990, up to the 1991 taxable quarters. Such action violates Section 69 of the Tax Code. All told, We find that the CTA did not err in denying petitioner's claim for refund. Let it be stressed that the appellate court is bound by the finding of facts of the Court of Tax Appeals 7 which, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority 8 which is not present here. WHEREFORE, the petition for review is hereby DENIED DUE COURSE and is DISMISSED. The assailed decision of respondent CTA is AFFIRMED. Cost against petitioner. SO ORDERED. Brawner and Dacudao, JJ., concur. Footnotes 1. Exhibit "D", Records, p. 38. 2. Exhibit "C", Records, p. 37. 3. Exhibit "E", Records, p. 39. 4. Exhibit "B", Records, p. 36. 5. Exhibit "L", Records, p. 46. 6. Exhibit "M", Records, p. 47. 7. Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 244 SCRA 446 [1995]. 8. Commissioner of Internal Revenue vs. Court of Appeals, 271 SCRA 605 (1997).