Belle Corporation v. Commissioner of Internal Revenue

SEVENTH DIVISION [CA-G.R. SP No. 65428. January 25, 2007.] BELLE CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N CARANDANG , J p : The resolution of the pivotal issue of the case necessarily calls for the proper application of the pertinent provision of the old National Internal Revenue Code governing claims for tax refund and/or applications for tax credit of excess corporate income tax payments. This Petition for Review was instituted by BELLE Corporation in accordance with the provisions of Rule 43 of the 1997 Rules of Civil Procedure, to reverse and set aside: (a) the April 10, 2001 Decision of the Court of Tax Appeals in C.T.A. Case No. 6070, denying petitioner's claim for tax refund and/or application for issuance of tax credit certificate in the amount of Php106,447,318.00, representing petitioner's supposed overpaid or excess income tax for the taxable year ending on December 1, 1997; and (b) the June 5, 2001 Resolution of the CTA denying petitioner's subsequent Motion for Reconsideration for want of merit ( Rollo pp. 5-12, 24-27). The facts of the case are as follows: Herein petitioner BELLE Corporation is a domestic corporate entity duly licensed and registered to engage principally in real estate and property development business. On May 30, 1997, BELLE filed with the Bureau of Internal Revenue its Corporation Quarterly Income Tax Return for the quarter ending on March 31, 1997, from which an income tax due in the sum of Php236,679.254 was duly reflected ( Rollo p. 77). Accordingly, BELLE paid the income tax due on May 30, 1997 at the Tektite Tower Branch of PCI Bank, an authorized collection bank of the BIR. BELLE's payment was evidenced by Official Receipt No. 005510 ( Rollo p. 78). On April 15, 1998, BELLE filed before the BIR its Tentative Corporation Annual Income Tax Return for the taxable year 1997. Thereafter, on April 30, 1998, BELLE filed with the BIR its Final Corporation Annual Income Tax Return for the taxable year ending on March 31, 1997 which reflects the excess or otherwise refundable overpaid income tax in the sum of Php132,043,528.00. By marking the pertinent "option box" in the amended and adjusted Final Return, BELLE explicitly indicated its choice to apply the excess or refundable income tax payment as credit against the tax liabilities of the corporation for the succeeding taxable year of 1998 ( Rollo pp. 79-81). On May 31, 1999, BELLE filed its Annual Income Tax Return for the taxable year ending on December 31, 1998 that yielded an income tax due in the sum of Php25,596.210. It is evident that after applying its excess income tax payment for the taxable year 1997 (Php132,043.528) against its income tax obligations for 1998 (Php25,596.210), BELLE still had an overpayment in the amount of Php106,447.318 ( Rollo pp. 82-83). On April 12, 2000, BELLE filed an administrative claim with the BIR for the refund of its outstanding overpaid income tax for the taxable year 1997 in the sum of Php106,447.318. Its claim having been denied, BELLE instituted a Petition for Review before the CTA to question the ruling of the BIR. ACEIac On April 10, 2001, the CTA promulgated the herein assailed Decision denying BELLE's application for tax refund or for issuance of a tax credit certificate for its excess income tax payment for the taxable year 1997. In ratiocination, the CTA stated that pursuant to Section 69 of the old tax code, a corporation may carry forward any excess or overpaid income tax for a given taxable year only up to the next succeeding taxable year, and not at any year thereafter. Such being the case, as BELLE evidently carried forward its overpaid income tax for 1997 further up to the taxable year 1999, BELLE is now precluded from seeking for a refund or credit of its overpaid income tax against its income tax liabilities for the taxable years succeeding 1998. Aggrieved, BELLE thereafter lodged a Motion for Reconsideration on May 3, 2001 ( Rollo pp. 59-69). On June 5, 2001, the CTA issued a Resolution denying BELLE's move to impugn its judgment dated April 10, 2001 ( Rollo pp. 24-27). In disagreement with the rulings of the CTA, BELLE instituted the instant Petition for Review predicated on the following grounds: I. The CTA committed a serious error of law in applying the case of Philippine Bank of Communications vs. Commissioner of Internal Revenue , 302 SCRA 241. II. The CTA committed a serious error of law in disregarding the principles of fairness and equity. ( Rollo pp. 39-40) The Petition for Review is devoid of merit. In the case at bench, it is undisputed that BELLE still has an outstanding and unutilized overpaid income tax which traces back to the taxable year 1997, in the amount of Php106,447,318. Nevertheless, credit and carry over of said income tax overpaid in 1997 against BELLE's income tax obligations for the taxable years following 1998 may no longer be allowed pursuant to the legal preclusion provided for under Section 69 of the old tax code which is apropos in this case, i.e., the 1977 National Internal Revenue Code. In the same light, refund of such overpaid income tax is similarly prohibited in accordance with the doctrine enunciated by the Supreme Court in the case of Philippine Bank of Communications vs. Commissioner of Internal Revenue (302 SCRA 241). Pertinently, Section 69 of the 1977 NIRC provides, thus: 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 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 years. In as much as BELLE has already opted to apply, and has actually carried over its overpaid income tax for 1997 against its tax obligations for the succeeding taxable year of 1998, there is already a legal bar for BELLE to further carry over and credit whatever excess or overpayment that it may have against its tax liabilities for the taxable year 1999, for Section 69 of the old tax code provides in strict and in no uncertain terms that a corporation is legally entitled to credit an overpaid income tax against tax liabilities accruing only for the quarters of the next succeeding taxable year, and not to any other taxable year that may follow thereafter. On the matter of refund, on the other hand, it is a rule that the corporation must formally signify in its annual corporate adjustment return by marking the pertinent 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. In this regard, the Supreme Court ruled that to ease the administration of tax collection, the remedies of automatic tax crediting and refund are in the alternative, for which reason the choice of one remedy must necessarily preclude the availment of the other ( PBC vs. CIR , supra ). Contrary to the theory posited by petitioner, the High Court enunciated this doctrine without any circumstantial exceptions or legal qualifications, thus, in fine it is apropos whether a corporation's option for an automatic tax carry over may not have resulted to the full utilization of the corporation's overpaid income tax for the preceding taxable year. We concur with the position of the BIR Commissioner that by reason of the absence of any factual conditions in the manner by which Section 69 was worded, the intent of the framers of the 1977 old tax code became glaring that the rationale is to make the options of tax credit and tax refund strictly alternative in character, whether or not an option for tax credit has resulted to the complete use of the overpaid income tax. Such being the case, while BELLE may not have fully enjoyed the complete utilization of its 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 as it may, BELLE has only itself to blame for making such useless and damaging option, and BELLE may no longer opt to claim for a refund considering that the remedy of refund is barred after the corporation 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 it over further to the taxable year 1999, which is a blatant transgression of the "succeeding taxable year limit" provided for under Section 69 of the old NIRC. TCaSAH Finally, it bears stressing that a claim for refund or tax credit is akin to and is in the nature of a claim for tax exemption which should be construed in strictissimi juris against the taxpayer, and liberally in favor of the taxing authority. Corollarily, well entrenched is the rule that to be exempted from payment of taxes, it is the incumbent duty of the taxpayer to prove and justify the claimed exemption by words too plain to be mistaken and too categorical to be misunderstood ( CIR vs. Tokyo Shipping Company, Limited , 244 SCRA 332; Province of Tarlac vs. Alcantara , 216 SCRA 790). Vis--vis this doctrine, We hold that BELLE miserably failed to prove its claim, for in contrast, what is too plain to be mistaken and too categorical to be misunderstood is the provision of the old tax code that BELLE's claim for refund or tax credit is already barred. Verily, BELLE's invocation of the working principles of equity and fairness is totally unavailing in view of the law that precludes its claim in unequivocal terms. WHEREFORE, premises considered, the instant Petition for Review is DENIED, and accordingly the herein impugned April 10, 2001 Decision and June 5, 2001 Resolution of the CTA are hereby affirmed. SO ORDERED. Villarama, Jr. and Punzalan Castillo, JJ., concur.