Tuesday, January 21, 2020
Recovery of Tax Erroneously or Illegally Collected.
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G.R. No. 179260 April 2, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
TEAM [PHILIPPINES] OPERATIONS CORPORATION [formerly MIRANT (PHILS) OPERATIONS CORPORATION], Respondent.
"x x x.
The Issue and Our Ruling
The core issue for the Court’s resolution is whether or not respondent has established its entitlement for the refund or issuance of a tax credit certificate in its favor the entire amount of P69,562,412.00 representing its unutilized tax credits for taxable year ended 31 December 2001, pursuant to the applicable provisions of the NIRC of 1997, as amended.
This is not novel.
In order to be entitled to a refund claim or issuance of a tax credit certificate representing any excess or unutilized creditable withholding tax, it must be shown that the claimant has complied with the essential basic conditions set forth under pertinent provisions of law and existing jurisprudential declarations.
In Banco Filipino Savings and Mortgage Bank v. Court of Appeals,13 this Court had previously articulated that there are three essential conditions for the grant of a claim for refund of creditable withholding income tax, to wit: (1) the claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of the tax;14 (2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income;15 and (3) the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom.
The first condition is pursuant to Sections 204(C) and 229 of the NIRC of 1997, as amended, viz:
SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. — The Commissioner may –
x x x x
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction.
No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. (Emphasis supplied)
x x x x
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Emphasis supplied)
The second and third conditions are anchored on Section 2.58.3(B) of Revenue Regulations No. 2-98,16 which states:
Sec. 2.58.3.Claim for Tax Credit or Refund
x x x x
(B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. (Emphasis supplied)
In addition to the abovementioned requisites, the NIRC of 1997, as amended, likewise provides for the strict observance of the concept of the irrevocability rule,17 the focal provision of which is Section 76 thereof, quoted hereunder for easy reference:
SEC. 76. Final Adjustment Return. — Every corporation liable to tax under Section 27 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 balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. (Emphasis supplied)
Applying the foregoing discussion to the present case, we find that respondent had indeed complied with the abovementioned requirements.
Here, it is undisputed that the claim for refund was filed within the two-year prescriptive period prescribed under Section 22918 of the NIRC of 1997, as amended. Respondent filed19 its income tax return for taxable year 2001 on 15 April 2002. Counting from said date, it indeed had until 14 April 200420 within which to file its claim for refund or issuance of tax credit certificate in its favor both administratively and judicially. Thus, petitioner’s administrative claim and petition for review filed on 19 March 2003 and 27 March 2003, respectively, fell within the abovementioned prescriptive period.
Likewise, respondent was able to present various certificates of creditable tax withheld at source from its payors, MPC and MSC, for taxable year 2001, showing creditable withholding taxes in the aggregate amount of P70,805,771.42 (although the refund claim was only P69,562,412.00).21 Moreover, as determined by the CTA in Division, respondent declared the income related to the claimed creditable withholding taxes of P69,562,412.00 on its return.22
Lastly, in compliance with Section 76 of the NIRC of 1997, as amended, respondent opted to be refunded of its unutilized tax credit (as evidenced by the "x" mark in the appropriate box of its 2001 income tax return), and the same was not carried over in its 2002 income tax return; therefore, the entire amount of P69,562,412.00 may be a proper subject of a claim for refund/tax credit certificate.23
It is apt to restate here the hornbook doctrine that the findings and conclusions of the CTA are accorded the highest respect and will not be lightly set aside. The CTA, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and has accordingly developed an expertise on the subject unless there has been an abusive or improvident exercise of authority.24
Consequently, its conclusions will not be overturned unless there has been an abuse or improvident exercise of authority. Its findings can only be disturbed on appeal if they are not supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. In the absence of any clear and convincing proof to the contrary, this Court must presume that the CTA rendered a decision which is valid in every respect.25
The Court in this case agrees with the conclusion of the CTA in Division and subsequent affirmation of the CTA En Banc that respondent complied with all the requirements for the refund of its unutilized creditable withholding taxes for taxable period ending 31 December 2001. We adopt the factual and legal findings as follows:
On the first ground, [petitioner] argues that [respondent] failed to present the various withholding agents/payors to testify on the validity of the contents of the Certificates of Creditable Tax Withheld at Source ("certificates"). Thus, the certificates presented by [respondent] are not valid. And even assuming that the certificates are valid, this Court cannot entertain the claim for refund/tax credit certificates because the certificates were not submitted to [petitioner].
[Petitioner’s] arguments are untenable since the certificates presented (Exhibits "R", "S", "T", "U", "V", "W", and "X") were duly signed and prepared under penalties of perjury, the figures appearing therein are presumed to be true and correct. Thus, the testimony of the various agents/payors need not be presented to validate the authenticity of the certificates.
In addition, that [respondent] did not submit the certificates to the [petitioner] is of no moment. The administrative and judicial claim for refund and/or tax credit certificates must be filed within the two-year prescriptive period starting from the date of payment of the tax (Section 229, NIRC). In the instant case, [respondent] filed its judicial claim (after filing its administrative claim) precisely to preserve its right to claim. Otherwise, [respondent's] right to the claim would have been barred. Considering that this [c]ourt had jurisdiction over the claim, frespondent] rightfully presented the certificates before this [c]ourt. Besides, any records that [petitioner] may have on the administrative claim would eventually be transmitted to this [c]ourt under Section S(b), Rule 6 of the Revised Rules of the Court of (Tax) Appeals.
As for the second ground, this [ c ]ourt finds [petitioner's] contention unmeritorious. The requirements for claiming a tax refund/tax credit certificates had been laid down in Citibank N.A. vs. Court of Appeals, G.R. No. 107434, October 10, 1997. Nowhere in the case cited is proof of actual remittance of the withheld taxes to the [petitioner] required before the taxpayer may claim for a tax refund/tax credit certificates.26 (Emphasis supplied)
In the same vein, this Court finds no abusive or improvident exercise of authority on the part of the CTA in Division. Since there is no showing of gross error or abuse on the part of the CTA in Division, and its findings are supported by substantial evidence which were thoroughly considered during the trial, there is no cogent reason to disturb its findings and conclusions.
All told, respondent complied with all the legal requirements and it is entitled, as it opted, to a refund of its excess creditable withholding tax for the taxable year 2001 in the amount of P69,562,412.00.
x x x."