F & K Realty Development Corp. v. Commissioner of Internal Revenue

SEVENTH DIVISION [CA-G.R. SP No. 49497. March 30, 2001.] F & K REALTY DEVELOPMENT CORPORATION , petitioner , vs . THE COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N BARCELONA , J p : On November 26, 1998, petitioner F & K Realty Development Corporation filed the above captioned petition praying that the Decision of the Court of Tax Appeals dated July 29, 1998 be set aside and a refund of its excess creditable tax amounting to P124, 514 be refunded to it. cEATSI The antecedents of the case are as follows: Petitioner is a domestic corporation engaged in the leasing business. On May 24, 1995, petitioner filed its annual corporate income tax return for the calendar year 1994. It reported in said return creditable taxes withheld at source in the amount of P195, 380.00 with tax due in the amount of P70, 866.00. Because of the same, petitioner alleged that it has an excess creditable withholding tax in the sum of P124, 514.00. On April 15, 1996, petitioner filed its annual corporate income tax for the calendar year 1995. It reported creditable taxes withheld at source in the amount of P360, 387.00 with tax due of P157,729.00. Petitioner alleged that it has total excess tax credit amounting to P202,650.00. In sum, petitioner computed its 1994 and 1995 excess withholding tax as follows: 1994 Taxable Income P202,473.00 ========= Tax Due 70,586.00 Less: a) Prior Year's Excess Credit 0.00 b) Quarterly payment 0.00 c) Creditable Tax Withheld P195,380.00 195,380.00 Excess Tax Credit P124,514.00 ========= 1995 Taxable Income P450,654.00 ========= Tax due P157,729.00 Less: a) Prior Year's Excess Credit P124,514.00 b) Quarterly Payment 0.00 c) Creditable Tax P235,873.00 360,387.00 Withheld Excess Tax Credit P202,658.00 ========= (p. 49, Rollo) On December 27, 1996, petitioner filed a claim for refund with the Bureau of Internal Revenue (BIR) on its excess unutilized creditable withholding taxes for 1994. However, the same was not immediately acted upon by the BIR, thus, on April 10, 1997, petitioner filed an appeal with the Court of Tax Appeals because the two (2) year period for filing of appeal will soon lapse. On July 29, 1998, the Court of Tax Appeals decided against the claim of petitioner. The dispositive portion of said decision reads: "WHEREFORE, in view of all the foregoing, the instant petition for review is hereby dismissed for lack of merit." (p. 31, Rollo) The latter seasonably filed a motion for reconsideration on the Court of Tax Appeals decision. The same was denied on October 19, 1998. Petitioner received said Resolution on October 27, 1998. Hence, this petition wherein petitioner raised the following assignment of error. "The petitioner respectfully submits that the respondent Court of Tax Appeals erred in its appreciation of the facts and the application of law holding that petitioner is not entitled to a tax refund or credit on its excess unutilized creditable withholding tax for calendar year 1994 in the amount of P124,514.00." (p. 46, Rollo) Petitioner in support of its appeal argues that, though Section 69 of the Tax Code provides that the refundable amount shown on its final adjustment return of 1994 may be credited against the estimated quarterly income tax liabilities for taxable quarter of 1995, an application of its 1994 tax credit can no longer be made because in the succeeding three quarters of 1995, it has zero quarterly income tax liability. It concludes that when its 1995 income tax return was filed, its 1994 tax credit of P124,514 remained intact, since it has enough withheld tax cover its 1995 tax liability. aDcETC It further argued that the provision that directly applies to its situation is Section 24 (a) which it describes as clear and unequivocal in that income tax liability for the current year should be paid out of the taxable income received during the year. It added that the same is in direct contrast with the provision of Section 69 which is merely directory in nature where the tax payer may apply as tax credit its excess withholding tax in the prior year (p. 51, Rollo) Moreover, it added that Section 69 gives the taxpayer only the option to file for a refund or apply its excess creditable withholding tax against the estimated quarterly year tax liabilities for the quarters of the succeeding year (ibid). Thus, by the end of 1995 it realized that its creditable withholding tax in 1995 exceeded its taxable income. For said reason, it amended its annual corporate tax return of 1994 and 1995 on July 30, 1997 pursuant to Section 16 (a) of the Tax Code to apply for refund its unutilized creditable withholding tax for 1994 amounting to P124,514. It added that there is no limitation as to when a tax payer can modify/amend its return. It reasoned that the sole intention of petitioner in amending its 1994 return on July 30, 1997 was to inform the Court of Tax Appeals that its excess creditable withholding tax for 1994 no longer formed part of its 1995 tax credits so as to dispense any notion that there was double availment of the 1994 excess tax credit (p. 52, Rollo) The Court does not find merit in the instant appeal. It is undisputed that petitioner filed a claim for refund with the BIR and eventually with the CTA for its alleged excess creditable withholding tax for the year 1994. The same is provided for under Section 69 of the tax code, to wit: "SEC. 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 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 return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." As pointed out by the CTA, jurisprudence has laid down the rule as to when creditable withholding tax in excess of the amount of tax due can be refunded, to wit: "(1) that the claim for refund is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of tax as required under Section 204 of the Ta x Co de; (2) it must be shown on the return of the recipient that income payment received was declared as part of the gross income; and (3) the fact of withholding is established by a copy of statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. . . ." (pp. 26-27, Rollo) The reasoning of the CTA in denying petitioner's claim is simple. It stated that petitioner in its 1995 tax return carried over its excess creditable withholding tax in 1994 amounting to P124,514. The same amount became part of the P360,387.00 withholding tax in 1995 and eventually of the P202,658.00 excess tax credits in said year. As such, for petitioner to claim a refund it should have presented its 1996 tax return to show that the amount was not used. The conclusion of the CTA finds support in the recent case decided by the Supreme Court entitled Philippine Bank of Communications vs. CIR, 302 SCRA 241, to wit: "Sec. 69 of the 1977 NIRC, (now Sec. 76 of the NIRC) provides that any excess of the total quarterly payments over the actual income tax computed 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 (by making the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other." (at p. 243) As shown in the records, the tax returns for 1994 and 1995 filed by petitioner on may 24, 1995 and April 15, 1996 respectively showed the intent of petitioner to carry over its excess tax credit. Based on the above-cited ruling, petitioner is now precluded from asserting otherwise. Likewise, it was also found by the CTA that petitioner filed its amended income tax returns of 1994 and 1995 only on July 30, 1997, a long time after his claims has already been under consideration of the CTA. Surely, the CTA is not expected to speculate that petitioner will amend its tax returns during the time that its claim is under consideration, and decide to no longer apply its excess tax credit for the following year. The foregoing, is a finding of fact that this Court will not disturb absent patent abuse of discretion by CTA ( Ibid ). CDHSac WHEREFORE, in view of the above, the herein appeal is hereby DISMISSED for lack of merit. SO ORDERED. Cosico and Santos, JJ . , concur.