State Land Investment Corp. v. Commissioner of Internal Revenue

ELEVENTH DIVISION [CA-G.R. SP No. 72500. November 22, 2004.] STATE LAND INVESTMENT CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N BUZON , J p : Before us is a petition for review of the Decision of the Court of Tax Appeals (CTA), which denied petitioner's claim for tax refund for excess withholding tax credit for the year 1997 in the amount of P9,742,270.51. The facts of the case, as found by the CTA, are as follows: "On April 15, 1998, Petitioner filed its Annual Income Tax Return for the calendar year ended December 31, 1997 (Exhibit B), reflecting a taxable income of P27,723,328.00, with tax due thereon in the amount of P9,703,165.00. Its total tax credits for the said year amounted to P23,632,959.00, inclusive of its prior year's excess tax credits of P9,289,084.00. Thus, after applying its total tax credits of P23,632,959.00 against its income tax liability of P9,703,165.00, the amount of P13,929,794.00 remained unutilized, which Petitioner opted to apply as tax credit to the succeeding taxable year 1998: On April 15, 1999, Petitioner filed its Annual Income Tax Return for the calendar year ended December 31, 1998, declaring a minimum corporate income tax due in the amount of P4,187,523.00. Petitioner charged the said amount against its 1997 excess credit of P13,929,794.00, leaving a balance of P9,742,271.00. Claiming that taxable year 1997 is still governed by the old National Internal Revenue Code, as amended and Section 68 thereof limits the crediting of the refundable amount shown on a final adjustment return against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year only, Petitioner filed with the Appellate Division of the Bureau of Internal Revenue on April 7, 2000, a letter-claim for the refund of its unutilized tax credit for the year 1997 in the amount of P9,742,270.51 (Annex Q, Petition for Review, Exhibit D). EAaHTI There being no immediate action on the part of herein Respondent and the two-year prescriptive period was about to lapse, the instant petition was filed on April 13, 2000." 1 In a Decision dated April 4, 2002, the CTA denied petitioner's claim for the refund of its unutilized tax credit for the year 1997 pointing out that the 1998 income tax return of petitioner showed its intention of carrying over its 1997 excess tax credit to the following taxable year 1999 by marking an "X" on the box indicating "to be carried as tax credit next year"; and that petitioner's failure to present its 1999 income tax return is fatal to its claim for refund as it failed to prove with certainty that its 1997 excess tax credit was not charged against its tax liabilities for said year. A motion for reconsideration was filed by petitioner alleging that the submission of its 1997 income tax return is not indispensable, as testimonial and documentary evidence are sufficient to prove that there was no carryover of the excess tax credit; that the "X" mark in its 1998 income tax return on the box indicating "to be carried as tax credit next year" was intended to show its intention to carry over as tax credit for 1999 only what it earned during the taxable year 1998 amounting to P6,228,288.00, as it could no longer utilize the 1997 excess tax credit for the year 1999; and that respondent did not rebut its allegation that it did not apply the 1997 excess tax credit against its 1999 tax liabilities. Nonetheless, petitioner attached its 1999 and 2000 income tax returns to its motion for reconsideration. In a Resolution dated August 8, 2002, the CTA denied petitioner's motion for reconsideration, ruling that the 1999 income tax return should have been submitted during the presentation of its evidence in chief, although it pointed out that in petitioner's 1999 income tax return, "the prior year's excess credit of P16,080,558.00 was still inclusive of its 1997 excess credits." 2 Hence, the instant petition on the following grounds: 1. THE COURT OF TAX APPEALS ERRED IN DECIDING THAT PETITIONER IS NOT ENTITLED TO A TAX REFUND FOR 1997 EXCESS TAX CREDITS IN THE AMOUNT OF P9,742,270.51 FOR THE SOLE REASON OF FAILURE TO PRESENT THE 1999 INCOME TAX RETURN II. THE COURT OF TAX APPEAL ( sic ) ERRED IN DEMANDING A VERY STRICT APPLICATION OF THE RULES ON EVIDENCE, CONTRARY TO ITS CHARTER AND ESTABLISHED JURISPRUDENCE. III. THE COURT OF TAX APPEALS ERRED IN FINDING THAT THE PETITIONER CARRIED OVER ITS 1997 UNAPPLIED EXCESS TAX CREDITS AND APPLIED IT AGAINST ITS INCOME TAX LIABILITY FOR THE YEARS 1999 AND SUBSEQUENT" While we agree with petitioner that since the CTA, under its charter, is not governed strictly by technical rules of evidence so that additional evidence may be submitted by a party in the motion for reconsideration, nonetheless, we deny petitioner's claim for refund of its excess tax credit for the year 1997. In the Resolution dated August 8, 2002, which denied petitioner's motion for reconsideration of the Decision dated April 4, 2002, the CTA actually took into account petitioner's 1999 income tax return when it held that the prior year's excess credits of P16,080,558.00 was still inclusive of its 1997 excess credits. Commenting on the petition for review, respondent stated as follows: "The 1998 Annual Income Tax return of petitioner evidently shows that it intends to carry over the excess tax credits to the succeeding year, 1999. Petitioner unqualifiedly marked an 'X' in the box indicating that it will carry over the 1997 excess tax credit to the succeeding year, 1999. Thus, there was a need for petitioner to prove, by convincing evidence, that the excess tax credits were not actually carried over to the year 1999. On the contrary, however, petitioner submitted its 1999 Annual Income Tax Return, which, without touching on the issue of its admissibility, reflected a 'prior year's excess credits of P16,080,559.00, thus: 25. Aggregate Income Tax Due (Sum of Items 24C and 24D 2,994,350 26. Less: Tax, Credits/Payments 26A Prior Years Excess Credits 16,080,558 26B Tax Payments of the First Three Quarters 26C Creditable Tax Withheld for the First Three Quarters 4,158,703 It is respectfully submitted that the P16,080,558.00 declared as prior year's excess credit was still inclusive of the 1997 unutilized excess tax credits absent any proof that the same was actually applied in the succeeding quarter or year. It bears reiterating that after signifying its option in its 1998 Annual Income Tax Return to apply the 1997 excess tax credit [to] the following year (1999), petitioner never submitted succeeding quarterly returns to negate the fact that said tax overpayment was applied in its 1999 Annual Income Tax Return, or beyond the one-year period limitation. As aptly noted by the Court of Tax Appeals in its Resolution dated August 8, 2002: 'In this case, however, after signifying in its 1998 return its intention to carry-over its tax credits to the succeeding year 1999, petitioner did not present any succeeding quarterly returns to prove that the same were not actually carried-over . In fact, in its 1999 return, the prior year's excess credits of P16,080,558.00 was still inclusive of its 1997 excess credits'." xxx xxx xxx "In contrast, petitioner, in the instant case, failed to prove the impossibility of carrying-over the 1997 excess tax credit to the taxable year 1999. Petitioner's 1999 income tax return, setting aside the issue of whether it may be considered by the court, glaringly reflects an amount of P2,994,350.00 representing its minimum corporate income tax, to which the 1997 unutilized excess tax credit may have been applied. Besides, the same income tax return of petitioner declared a prior year's excess credit of P16,080,558.00 which, as earlier emphasized, is inclusive of the 1997 excess tax credits. The figures may be illustrated as follows: 1998 Tax Due Minimum Corporate Income Tax (MCIT) P4,187,523.00 LESS: Tax Credits 1997 P13,929,793.51 1998 6,338,288 (20,268,081.51) Amount to be refunded (P16,080,558.51)" 3 It is interesting to note that while a reply 4 to the comment was filed by petitioner, however, it did not bother to refute the above-findings of respondent showing that the 1997 excess tax credit was included in its 1999 income tax return. Petitioner's silence on the matter thus shows that it did carry over the 1997 excess tax credit to the year 1999, as it had indicated in its 1998 income tax return. In fact, on page 11 of the instant petition, petitioner alleged as follows: "The 1998 Income Tax Return of the Petitioner indicated an income tax due of P4,187,523.00 for taxable year 1998, while the withholding tax credits incurred in same year amounted to P6,338,288.00. After applying the 1997 excess tax credits amounting to P13,929,794.05, there remained an excess unapplied tax credit amounting to P9,742,271.00, which represents the claimed 1997 Excess Tax Credits , and unutilized 1998 withholding tax credits in the amount of P6,338,288.00 or for a total of P16,090,559.00." As held in Philippine Bank of Communications vs. Commissioner of Internal Revenue : 5 "On the second issue, the petitioner alleges that the Court of Appeals seriously erred in affirming CTA's decision denying its claim for refund of P234,077.69 (tax overpaid in 1986), based on mere speculation, without proof, that PBCom availed of the automatic tax credit in 1987. Sec. 69 of the 1977 NIRC (now Sec. 76 of the 1997 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 marking 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." WHEREFORE, the petition for review is DENIED for lack of merit. SO ORDERED. Guaria III and Ranada, JJ., concur. Footnotes 1. Rollo , pp. 3536. 2. Id ., at 44. 3. Id ., at 357358 and 368369. 4. Id ., at 390395. 5. 302 SCRA 241, 255256.