Paseo Realty and Development Corp. v. Commissioner of Internal Revenue

[CA-G.R. SP No. 33589. October 14, 1994.] PASEO REALTY AND DEVELOPMENT CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS , respondents . D E C I S I O N YNARES-SANTIAGO , J p : This Petition for Review on Certiorari seeks the reversal of Resolution dated October 21, 1993, and Resolution dated March 10, 194, of the respondent Commissioner of Internal Revenue, denying petitioner's claim for refund of excess creditable taxes withheld in 1989. The factual antecedents of the case are as follows: On April 16, 1990, petitioner filed its Income Tax Return for the calendar year 1989 declaring a gross income of P1,855,000.00, deductions of P1,775,991.00, net income of P79,009.00, an income tax due thereon in the amount of P27,653.00, prior year's excess credit of P146,026.00, and creditable taxes withheld in 1989 of P54,104.00 or a total tax credit of P200,130.00, and credit balance of P172,477.00 On November 14, 1991, petitioner filed with respondent a claim for "the refund of excess creditable withholding and income taxes for the years 1989 and 1990 in the aggregate amount of P147,036.15." On December 27, 1991 alleging that the prescriptive period for refunds for 1989 would expire on December 30, 1991 and that it was necessary to interrupt the prescriptive period, petitioner filed with the respondent Court of Tax of Appeals a petition for review praying for the refund of "P54,104.00 representing creditable taxes withheld from income payments of petitioner for the calendar year ending December 31, 1989". On February 25, 1992, respondent Commissioner filed an Answer and by way of Special and/or affirmative defenses averred the following: a) the petition states no cause of action for failure to allege the dates when the taxes sought to be refunded were paid; b) petitioner's claim for refund is still under investigation by respondent Commissioner; c) the taxes claimed are deemed to have been paid and collected in accordance with law and existing pertinent rules and regulations; d) petitioner failed to allege that it is entitled to the refund or deductions claimed; e) petitioner's contention that it has available tax credit for the current for the current and prior year, is gratuitous and does not ipso facto warrant the refund; f) petitioner failed to show that it has complied with the provision of Section 230 in relation to Section 204 of the Tax Code. After trial, the respondent Court rendered a decision ordering respondent Commissioner "to refund in favor of petitioner the amount of P54,104.00, representing excess creditable withholding taxes paid for January to July 1989." Respondent Commissioner moved for reconsideration of the decision, alleging that the P54,104.00 ordered to be refunded "has already been included and is part and parcel of the P172,477.00, which petitioner automatically applied as tax credit for the succeeding taxable year 1990". In a resolution dated October 21, 1993 Respondent Court reconsidered its decision of July 29, 1993 and dismissed the petition for review, stating that it has "overlooked the fact that the petitioner's 1989 Corporate Income Tax Return (Exh. "A") indicated that the amount of P54,104.00 subject of petitioner's claim for refund has already been included as part and parcel of the P172,477.00, which the petitioner automatically applied as tax credit for the succeeding taxable year 1990." Petitioner filed a Motion for Reconsideration which was denied by respondent Court on March 10, 1994. Hence, this petition for review on certiorari filed pursuant to Sec. 9 of B.P. 129 and Supreme Court Circular No. 1-91. The issues to be resolved in this petition are: (1) whether petitioner is entitled to a refund of P54,104.00, representing creditable taxes withheld in 1989; and 2) whether the petitioner applied such creditable taxes withheld to its 1990 income tax liability so that the same is no longer refundable. The petition is devoid of merit. Petitioner's 1989 corporate annual income tax return reflected a refundable amount of P172,477.00, which comprise its prior years (1988) excess credit of P146,002.00 and its current (1989) withholding tax of P54,104.00, after deducting therefrom its 1989 tax liability of P27,653.00. The aforesaid amount of P172,477.00 was supplied by petitioner as tax credit for the succeeding year 1990. Section 69 of the National Internal Revenue Code provides: "SEC. 69. Final adjustment return . Every corporation liable to tax under Section 24 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 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. 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 may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. (as amended by Pres. Decree No. 1705)." This provision of law is implemented by Section 7 of Revenue Regulations 10-77 of the Bureau of Internal Revenue, which reads: SEC. 7. Filing of final or adjustment return and final payment of income tax . A final or an adjustment return on B.I.R. Form No. 1702 covering the total taxable income of the corporation for the preceding calendar or fiscal year shall be filed on or before the 15th day of the fourth month following the close of the calendar or fiscal year. The return shall include all the items of gross income and deductions for the taxable year. The amount of income tax to be paid shall be the balance of the total income tax shown on the final or adjustment return after deducting therefrom the total quarterly income taxes paid during the preceding first three quarters of the same calendar or fiscal year. Any excess of the total quarterly payments over the actual income tax computed and shown in the adjustment or final corporate income tax return shall either (a) be refunded to the corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. The corporation must signify in its annual corporate adjustment return its intention whether to request for refund of the overpaid income tax or claim for automatic credit to be applied against its income tax liabilities for the quarters of the succeeding taxable year by filling up the appropriate box on the corporate tax return (B.I.R. Form No. 1702) . In the instant case, it appears that when petitioner filed its income tax return for the year 1989, it filled up the box stating that the total amount of P172,447.00 shall be applied against its income tax liabilities for the succeeding taxable year. Petitioner did not specify in its return the amount to be refunded and the amount to be applied as tax credit to the succeeding taxable year, but merely marked an "x" to the box indicating "to be applied as tax credit to the succeeding taxable year." Unlike what petitioner had done when it filed its income tax return for the year 1988, it specifically stated that out of the P146,026.00 the entire refundable amount, only P64,623.00 will be made available as tax credit, while the amount of P81,403.00 will be refundable. In its 1989 income tax return, petitioner filled up the box "to be applied as tax credit to succeeding taxable year", which signified that instead of a refund, petitioner will apply the total amount of P172,477.00, which includes the amount of P54,104.00 sought to be refunded, as tax credit for its tax liabilities in 1990. Thus, there is really nothing left to be refunded to petitioner for the year 1989. To grant petitioner's claim for refund is tantamount to granting twice the refund therein sought to be refunded, to the prejudice of the Government. Premises considered, We find no reversible error when the respondent court reconsidered its decision of July 29, 1993 and dismissed the petition for review. WHEREFORE, the instant petition is DENIED DUE COURSE and consequently DISMISSED. No costs. SO ORDERED. Cui and Carpio Morales, JJ ., concur.