BPI Family Savings Bank, Inc. v. Commissioner of Internal Revenue

EIGHTH DIVISION [CA-G.R. SP No. 70769. September 11, 2003.] BPI FAMILY SAVINGS BANK, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N REYES , B . , J p : This is a Petition for Review under Rule 43 of the Rules of Court, filed by petitioner BPI Family Savings Bank, (BPI for brevity) assailing the decision of the Court of Tax Appeals in the case entitled "BPI Family Savings Bank versus the Commissioner of Internal Revenue", docketed as CTA Case No. 6090, promulgated on 4 March 2002 (Annex "A", p. 29, Rollo) , and its resolution dated 22 April 2002 denying petitioner's motion for reconsideration (Annex "B", p. 30, Rollo) . The facts of this case as found by the Court of Tax Appeals in its assailed decision promulgated on 4 March 2002, were the following: "Petitioner is a domestic corporation organized and existing under Philippine laws, with head office address located at the BPI Family Bank Building, Dela Rosa corner Paseo de Roxas Streets, Makati City (par. 1 Joint Stipulation of Facts). On April 15, 1998, Petitioner filed with the Bureau of Internal Revenue (BIR) its Annual Income Tax Return for the calendar year ended December 31, 1997 (Exhibit D), reflecting a net loss of P398,072,009.00 (Exhibit D-3) and unutilized tax credits/payments in the amount of P10,464,649.00 (Exhibit D-4), detailed as follows: Gross Income P4,664,962,437.00 Less: Deductions 5,063,034,446.00 Net Loss P398,072,009.00 Income Tax Due (34%) P- Less: Tax Credits/Payments 1) Prior year's excess credits P4,812,395.00 2.) 1st Quarter income tax payment 653,195.00 3.) Creditable taxes withheld in 1997 4,999,059.00 10,464,649.00 Income Tax Refundable P10,464,649.00 On April 15, 1999, Petitioner filed with the BIR its Annual Income Tax Return for the calendar year ended December 31, 1998 (Exhibit E), this time showing a taxable income of P22,056,004.00 and the tax due thereon amounting to P7,499,041.00 (exhibit E-3). Said return likewise disclosed excess income tax payments in the amount of P62,976,607.00 (Exhibit E-5), computed as follows: DAcaIE Gross Income P307,569,351.00 Less: Deductions 285,513,347.00 Taxable Income P22,056,004.00 Income Tax Due (34%) P7,499,041.00 Less: Tax Credits/Payments 1.) Prior year's excess credits P10,464,649.00 2.) Tax Credits/Withheld/ 58,349,274.00 Payments for the first three quarters 3.) Tax Withheld for the fourth 1,611,725.00 70,475,648.00 Quarter Income Tax Overpayment P62,976,607.00 According to the petitioner, after applying its prior year's excess credits of P10,464,649.00 against its 1998 tax liability of P7,499,041.00, the amount of P2,965,608 remained unutilized. Thus, on April 12, 2000, petitioner filed with the Large Taxpayers Assistance Division of the BIR a letter claiming for the refund of its creditable and excess income taxes for the year 1997 in the aggregate amount of P2,965,606.00 (Exhibit F). As there was no immediate action on the part of the Respondent and the two-year prescriptive period was about to elapse, petitioner elevated its case before this Court on April 14, 2000." (Decision of the Court of Tax Appeals, pp. 2930, Rollo ) The respondent Commissioner of Internal Revenue filed his Answer on 19 May 2000, and interposed, inter alia , as Special and Affirmative Defenses, that the alleged claim for refund is subject to investigation by the Bureau of Internal Revenue, and that taxes paid and collected are presumed to have been made in accordance with laws and regulations, hence, not refundable. On 4 March 2002, the Court of Tax Appeals rendered a decision, the dispositive portion of which reads: "WHEREFORE, in the light of the foregoing, petitioner's claim for refund of its unutilized creditable taxes withheld for the taxable year 1997 in the amount of P2,965,608.00 is hereby DENIED for lack of merit." (Decision of the Court of Tax Appeals, p. 35, Rollo .) The petitioner's Motion for Reconsideration had been denied; hence, there is a need to file this Petition for Review on Certiorari on pure questions of law, under Rule 43 of the Rules of Court. The sole issue in this petition for review is whether or not the Court of Tax Appeals erred in its legal application of then Section 69 of the National Internal Revenue Code to the effect that the petitioner BPI cannot carry over its unutilized tax credits for 1997 beyond one year and therefore is now legally barred from pursuing a claim for tax refund within the prescribed period under Section 204 of the same code. We find the present petition unmeritorious. Section 69 of the 1986 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 tax still due; or CIAHaT (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 judgment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." It is undisputed that the petitioner had excess tax credits of P10,464,649.00 carried-over from its 1997 income tax return (Exhibit "D-5", p. 78, Rollo ). However, the amount of P10,464,649.00 represents the sum of the excess tax credits equivalent to P4,812,395.00 in 1996 (Exhibit "I", p. 80, Rollo ), 1997 first quarter income tax payment of P653,195.00 (Exhibit "J", p. 80, Rollo ), and creditable taxes withheld in 1997 of P4,999,059.00 (Exhibit "H-a", p. 80, Rollo ). Thus, on the basis of the aforequoted provision of Section 69, the 1996 excess tax credits of petitioner amounting to P4,812,395.00 can be applied only to the succeeding taxable year 1997. The fact that the petitioner suffered a net loss and was unable to utilize the 1996 tax credits of P4,812,395.00 in 1997, does not automatically entitle the petitioner to carry-over the said amount in 1998. Consequently, We agree with the findings of the Court of Tax Appeals that out of the prior year's excess credits of P10,464,649.00 indicated in the petitioner's 1998 income tax return, only the 1997 first quarter income tax payment of P653,195.00 and creditable taxes withheld in 1997 of P4,999,059.00 or the total sum of P5,652,254 can be credited against its 1998 income tax liability of P7,499,041.00. Therefore, since the total 1997 credit of P5,652,254.00) is lower than the 1998 income tax liability of P7,499,041.00, there is no amount of 1997 excess credit which may be the proper subject of a claim for refund under Section 69, in relation to sections 204 and 230 of the Tax Code. aHcACT Moreover, it is worthy of note from the assailed decision of the Court of Tax Appeals that the same conclusion finds support in cases previously decided by the said Court involving a similar issue. The more recent of which is Belle Corporation vs. Commissioner of Internal Revenue, CTA Case No 6070, promulgated on April 10, 2001 , which provides that: "It is an elementary rule in taxation that an automatic carry over of an excess income tax payment should only be made for the succeeding year ( Paseo Realty and Devt. Corp. vs CIR , CTA Case No. 4528, April 30, 1993). True enough, implicit from the provisions of Section 69 of the NIRC as amended, ( supra ) is the fact that the refundable amount may 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 limited to the quarters of the succeeding taxable year (citing ANSCOR Hagedorn Securities Inc. vs. CIR, CA-GR SP 38177, December 21, 1999). To allow the application of excess taxes paid for two successive years would run counter to the specific provision of the law above-mentioned." (Decision of the Court of Tax Appeals, p. 34, Rollo ) The Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Because of this recognized expertise, the findings of the Tax Court will not ordinarily be reviewed absent a gross error or abuse on its part ( Philippine Refining Co. vs. Court of Appeals , 256 SCRA 667). A fortiori , this Court will not reverse or set aside lightly the legal interpretation and the conclusion reached by the Court of Tax Appeals, which by the very nature of its function, is dedicated exclusively to the consideration of tax problems, in the absence of abuse or improvident exercise of authority. In connection therewith, the Commissioner of Internal Revenue, in its comment ( Comment dated 14 January 2003, pp. 120121, Rollo ), stated that since petitioner suffered a net loss and was unable to utilize the 1996 excess credits of P4,812,395.00 in 1997, it should have filed a claim for refund corresponding thereto within the two-year prescriptive period provided for in the Tax Code. The opinion of the Commissioner of Internal Revenue is entitled to great weight in the absence of any showing that it is plainly wrong ( Commissioner of Internal Revenue vs. Court of Appeals , 329 SCRA 237). After the two-year prescriptive period provided for in sections 204 and 230 of the Tax Code had lapsed, then the unclaimed tax refund shall be forfeited in favor of the Government and the amount thereof shall revert to the general fund. WHEREFORE, premises considered, the present petition is hereby DISMISSED. Accordingly, the assailed Decision dated 4 March 2002 of the Court of Tax Appeals and the Resolution denying petitioner's motion for reconsideration are hereby AFFIRMED. SO ORDERED. Vasquez, Jr. and Magpale, JJ ., concur.