Commissioner of Internal Revenue v. Husky (Phils.), Oil, Inc.

[CA-G.R. SP No. 31250. February 7, 1994.] (C.T.A. Case No. 3757) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . HUSKY (PHILS.) OIL, INC., PHILIPPINE BRANCH, and THE COURT OF TAX APPEALS , respondents . D E C I S I O N PARDO , J p : What is before the Court is a petition for review of the decision of the Court of Tax Appeals ordering the Commissioner of Internal Revenue to refund or credit to Husky (Phils.) Oil, Inc., the amount of P1,293,795.00, erroneously paid as income tax for the taxable year 1981. In its answer to the petition, the respondent Husky (Phils.) Oil, Inc. contended that its 1981 income tax return, as amended, correctly reflected the financial results of its operation during the year as a service contractor and that it was liable to pay any amount of tax due to losses in its operation because of the high costs of operation. In its decision dated May 8, 1992, the Court of Tax Appeals granted petitioner's claim for refund. It ruled that the claim for refund was practically admitted by the Commissioner of Internal Revenue except that it was negated by a proposed assessment on the respondent. Hence, this appeal. We find no sufficient basis to reverse or modify the decision of the Court of Tax Appeals. The facts, as found by the Court of Tax Appeals, and admitted by the Commissioner of Internal Revenue, are as follows: For taxable year 1981, Husky (Phils.) Oil, Inc. filed on April 15, 1982, an income tax return showing the following: a) Gross Income P24,119,342.00 b) Deductions: Dry Hole Expenses P652,509.00 Intangible Drilling Exploration Expenses Allocable Home Office Expenses 1,036,418.00 Depletion 18,173,304.00 Administrative, Overhead and Miscellaneous Expenses 531,081.00 ____________ Total P20,394,212.00 c) Net Income P3,725,130.00 d) Tax Due and Paid P1,293,795.00 However, on September 12, 1983, respondent Husky (Phils.) Oil, Inc. filed an amended income tax return for 1981, showing a net loss as follows: a) Income P24,119,159.00 b) Deductions: Dry Hole Expenses 16,202,954.00 Intangible Drill- ing Exploration Expenses 15,761,021.00 Allocable Home office Expenses 1,783,999.00 Depletion 11,000,467.00 Administrative, Overhead and Miscellaneous 531,980.00 Total P45,280,421.00 Net Loss P21,161,262.00 Hence, there is no income tax due for the year 1981. On October 25, 1983, Husky (Phils.) Oil, Inc. filed with the Commissioner of Internal Revenue a claim for tax credit in the amount of P1,293,795.00, as overpaid income tax for the year 1981. Because there was no ruling on its claim for tax credit, on April 4, 1984, Husky (Phils.) Oil, Inc. filed a petition for review with the Court of Tax Appeals. In the petition at bench, the Commissioner relies on a memorandum of Revenue Enforcement Officer Ramon Tadeo Cangco dated December 3, 1985, stating that the deductions totalling P48,278,459.88 were disallowed resulting in deficiency income tax of P13,099,588.40, including interests. There is no reason for disallowing the deductions claimed. Revenue Regulation No. 1-81, provides that the following items are deductible, namely: (a) Dry Hole Expenses; (b) Intangible Drilling Exploration Expenses; and (c) Allocable Home Office Expenses. The deductions claimed were for said items. IN VIEW WHEREOF, the Court renders judgment DENYING the petition for review. SO ORDERED. Herrera and Martin, Jr ., JJ ., concur.