THIRD DIVISION
|
FILINVEST DEVELOPMENT
CORPORATION, Petitioner, - versus - COMMISSIONER OF INTERNAL
REVENUE and COURT OF TAX APPEALS, Respondents. |
G.R. No. 146941
Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ. Promulgated: August 9,
2007 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before us is a Petition for Review on
Certiorari under Rule 45 of the
Revised Rules of Civil Procedure filed by Filinvest Development Corporation
(Filinvest) assailing the Decision[1] of
the Court of Appeals (CA), dated August 18, 2000, and its Resolution[2]
dated January 25, 2001 in CA-G.R. SP No. 56800.
The case stems from the claim for refund,
or in the alternative, the issuance of a tax credit certificate (TCC), filed by
petitioner Filinvest with respondent Commissioner of Internal Revenue (CIR) in
the amount of P4,178,134.00 representing excess creditable withholding
taxes for taxable years 1994, 1995, and 1996.[3]
When the CIR had not resolved
petitioner’s claim for refund and the two-year prescriptive period was about to
lapse, the latter filed a Petition for Review[4]
with the Court of Tax Appeals. In the petition before the CTA, docketed as CTA
Case No. 5603, petitioner prayed for refund, or in the alternative, the
issuance of a TCC, in the amount of P3,173,868.00. The amount of P1,004,236.00
representing excess/unutilized creditable withholding taxes for 1994 was no
longer included as it was already barred by the two-year prescriptive period.
On
Petitioner filed a motion for
reconsideration, which was denied on
Subsequently, petitioner filed a
Petition for Review[7] before
the CA on
On
Petitioner fails to discharge the burden of
being entitled to the tax refund sought for considering that evidence on hand
shows that although petitioner was able to comply with the requirements which a
taxpayer must have to comply before a claim for a refund would be sustained,
yet, it has failed to present vital documents (sic), its Income Tax Return for
the year 1997, which would show whether or not petitioner has applied or
credited the refundable amount sought for in its 1997 liability, if there be
any, since per its 1996 Income Tax Return, it readily revealed that petitioner
opted to carry over the excess income tax paid to the succeeding year and it is
only from petitioner’s Income Tax Return for the year 1997 that this fact can
be determined with certainty and the non-presentation of this vital document
proved fatal to the petitioner’s cause of action.
x
x x x
WHEREFORE, FOREGOING PREMISES CONSIDERED, the
petition is hereby DENIED for
lack of merit. The assailed Decision dated
SO
ORDERED.
Petitioner filed a motion for
reconsideration, which the CA denied in the assailed Resolution[11]
dated
Petitioner filed a petition for
review before this Court but the same was denied on
In this petition for review,
petitioner Filinvest alleges that the CA erred in (1) denying its claim for tax
refund on the sole ground that it failed to present in evidence its Annual
Income Tax Return for Corporations for 1997 despite holding that it had
complied with all the requirements to sustain a claim for tax refund; (2)
relying on CTA cases cited in its Decision as jurisprudential basis to support
its ruling; (3) not ruling that Section 34, Rule 132 of the Revised Rules of
Court, being a procedural rule, should be liberally construed in order that
substantial justice due petitioner shall have been served; and (4) not ruling
that, petitioner having proved that it paid excess taxes for taxable years 1995
and 1996, has shifted the burden of evidence to respondent CIR to show the
factual basis to deny petitioner’s claim.[14]
On the other hand, respondent CIR
argues that in claims for tax refund, the burden of proof of refundability
rests with claimant, and considering the rules on formal offer of evidence, the
CA did not err in ruling against petitioner due to its failure to present
evidence vital to sustain its claim. Likewise, respondent maintains that the CA
did not err in relying on CTA cases because the latter is an authority on
matters of taxation and therefore its resolutions carry great weight.[15]
The main issue for our resolution is
whether petitioner is entitled to the tax refund or tax credit it seeks.
We rule in the affirmative.
It is settled that the factual findings
of the CTA, as affirmed by the Court of Appeals, are entitled to the highest
respect[16]
and will not be disturbed on appeal unless it is shown that the lower courts
committed gross error in the appreciation of facts.[17]
In the case at bench, the CA erred in
ruling that petitioner failed to discharge the burden of proving that it is
entitled to the refund because of the latter’s failure to attach its 1997
Income Tax Return.
The appellate court itself
acknowledges that petitioner had complied with the requirements to sustain a
claim for tax refund or credit.[18]
Yet it held that “petitioner fail[ed] to discharge the burden of being entitled
to the tax refund sought for considering the evidence on hand shows that x x x it
has failed to present [a] vital document[], its Income Tax Return for the year
1997 x x x.”[19]
Both the CTA and the CA, citing the
case of F. Jacinto Group, Inc. v. CIR[20]
and Citibank
N.A. v. Court of Appeals, et al.,[21]
determined the requisites to sustain a claim for refund, thus:
(1)
That the
claim for refund was filed within two years as prescribed under Section 230 of
the National Internal Revenue Code;
(2)
That the
income upon which the taxes were withheld were included in the return of the
recipient; and
(3)
That the
fact of withholding is established by a copy of a statement duly issued by the
payor (withholding agent) to the payee showing the amount paid and the amount
of tax withheld therefrom.[22]
In the proceedings before the CTA,
petitioner presented in evidence its letter of claim for refund before the BIR
to show that it was made within the two-year reglementary period;[23]
its Income Tax Returns for the years 1995 and 1996 to prove its total
creditable withholding tax and the fact that the amounts were declared as part of
its gross income;[24]
and several certificates of income tax withheld at source corresponding to the
period of claim to prove the total amount of the taxes erroneously withheld.[25]
More importantly, petitioner attached its 1997 Income Tax Return to its Motion
for Reconsideration, making the same part of the records of the case. The CTA
cannot simply ignore this document.
Thus, we hold that petitioner has
complied with all the requirements to prove its claim for tax refund. The CA,
therefore, erred in denying the petition for review of the CTA’s denial of
petitioner’s claim for tax refund on the ground that it failed to present its
1997 Income Tax Return.
The CA’s reliance on Rule 132,
Section 34[26] of the
Rules on Evidence is misplaced. This provision must be taken in the light of
Republic Act No. 1125, as amended, the law creating the CTA, which provides
that proceedings therein shall not be governed strictly by technical rules of
evidence.[27]
Moreover, this Court has held time and again that technicalities should not be
used to defeat substantive rights, especially those that have been established
as a matter of fact.
The CA, likewise, erred in relying on
CTA decisions as jurisprudential basis for its decision. As this Court has held
in the past:
[B]y tradition and in our system of judicial administration this Court has the last word on what the law is, and that its decisions applying or interpreting the laws or the Constitution form part of the legal system of the country, all other courts should take their bearings from the decisions of this Court, ever mindful of what this Court said fifty-seven years ago in People vs. Vera that “[a] becoming modesty of inferior courts demands conscious realization of the position that they occupy in the interrelation and operation of the integrated judicial system of the nation.”[28]
The principle of stare decisis et non quieta movere, as embodied in Article 8 of the
Civil Code of the
This is not the first time this issue
has come before this Court. The case of BPI-Family
Savings Bank v. Court of Appeals,[31]
involves factual antecedents similar to the present case.
BPI Family Bank
involves a claim for tax refund representing therein petitioner's taxes
withheld for the year 1989. In petitioner’s 1989 Income Tax Return, petitioner
had a total refundable amount of P297,492.00 inclusive of the P112,491.00
being claimed as tax refund. However, petitioner declared in the same 1989
Income Tax Return that the said total refundable amount will be applied as tax
credit to the succeeding taxable year. On P112,491.00 before the CIR alleging that it
did not apply the 1989 refundable amount to its 1990 Annual Income Tax Return
or other tax liabilities due to alleged business losses it incurred for the
same year. Without waiting for the CIR to act on the claim for refund,
petitioner filed a petition for review with the CTA, seeking the refund of P112,491.00.
The CTA dismissed the petition on the
ground that petitioner failed to present as evidence its Corporate Annual
Income Tax Return for 1990 to establish the fact that petitioner had not yet
credited the refundable amount. Petitioner filed a motion for reconsideration.
However, the same was denied on P297,492.00 to its 1990 Annual Income Tax Return as
it had previously declared in its 1989 Income Tax Return that the amount would
be applied as a tax credit in 1990. Petitioner having failed to submit such
requirement, the CA said there is no basis to grant the claim for refund,
because tax refunds are in the nature of tax exemptions and are regarded as in
derogation of sovereign authority to be construed strictissimi juris against the person or entity claiming the
exemption. In other words, the burden of proof rests upon the taxpayer,
according to the CA.
In reversing the CA and ruling that
petitioner was entitled to the refund, this Court held:
More important, a copy of the Final
Adjustment Return for 1990 was attached to petitioner's Motion for
Reconsideration filed before the CTA. A final adjustment return shows whether a
corporation incurred a loss or gained a profit during the taxable year. In this
case, that Return clearly showed that petitioner incurred P52,480,173 as net
loss in 1990. Clearly, it could not have applied the amount in dispute as a tax
credit. Again, the BIR did not controvert the veracity of the said return. It
did not even file an opposition to petitioner's Motion and the 1990 Final
Adjustment Return attached thereto. In denying the Motion for Reconsideration,
however, the CTA ignored the said Return. In the same vein, the CA did not pass
upon that significant document.
True, strict procedural rules generally frown
upon the submission of the Return after the trial. The law creating the Court
of Tax Appeals, however, specifically provides that proceedings before it
“shall not be governed strictly by the technical rules of evidence.” The
paramount consideration remains the ascertainment of truth. Verily, the quest
for orderly presentation of issues is not an absolute. It should not bar courts
from considering undisputed facts to arrive at a just determination of a controversy.
In the present case, the Return attached to
the Motion for Reconsideration clearly showed that petitioner suffered a net
loss in 1990. Contrary to the holding of the CA and the CTA, petitioner could
not have applied the amount as a tax credit. In failing to consider the said
Return, as well as the other documentary evidence presented during the trial,
the appellate court committed a reversible error.
It should be stressed that the rationale of
the rules of procedure is to secure a just determination of every action. They
are tools designed to facilitate the attainment of justice. But there can be no
just determination of the present action if we ignore, on grounds of strict
technicality, the Return submitted before the CTA and even before this Court.
To repeat, the undisputed fact is that petitioner suffered a net loss in 1990;
accordingly, it incurred no tax liability to which the tax credit could be
applied. Consequently, there is no reason for the BIR and this Court to
withhold the tax refund which rightfully belongs to the petitioner.[32]
We find the foregoing disquisition
applicable to the present case.
As in the BPI Family Bank case, herein petitioner’s claim for refund is
anchored on the following provisions of the National Internal Revenue Code (NIRC)
then in effect:
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 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.
SEC. 230. 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 excessive 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 begun after the expiration of two 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)
On the other hand, Revenue Regulation
No. 12-94, Section 10 provides for the requirements to claim for tax credit or
refund, to wit:
Section 10.
Claim for Tax Credit or Refund.
—
(a) Claims
for Tax Credit or Refund of income tax deducted and withheld on income payments
shall be given due course only when it is shown on the return that the income
payment received 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.
(b) Excess
Credits. — A taxpayer's excess expanded withholding tax credits for the taxable
quarter/taxable year shall automatically be allowed as a credit for purposes of
filing his income tax return for the taxable quarter/taxable year immediately
succeeding the taxable quarter/taxable year in which the aforesaid excess
credit arose, provided, however, he submits with his income tax return a copy
of his income tax return for the aforesaid previous taxable period showing the
amount of his aforementioned excess withholding tax credits.
If the taxpayer, in lieu of the aforesaid
automatic application of his excess credit, wants a cash refund or a tax credit
certificate for use in payment of his other national internal tax liabilities,
he shall make a written request therefor. Upon
filing of his request, the taxpayer's income tax return showing the excess
expanded withholding tax credits shall be examined. The excess expanded
withholding tax, if any, shall be determined and refunded/credited to the
taxpayer-applicant. The refund/credit shall be made within a period of
sixty (60) days from date of the taxpayer's request provided, however, that the
taxpayer-applicant submitted for audit all his pertinent accounting records and
that the aforesaid records established the veracity of his claim for a
refund/credit of his excess expanded withholding tax credits. (Emphasis
supplied)
It is true that herein petitioner has
the burden of proving that it is entitled to refund. However, we have already
held that once the claimant has submitted all the required documents, it is the
function of the BIR to assess these documents with purposeful dispatch.[33]
In proving the inclusion of the
income payments which formed the basis of the withholding taxes and the fact of
withholding, this Court has held that:
[D]etailed proof of the truthfulness of each
and every item in the income tax return is not required. That function is
lodged in the Commissioner of Internal Revenue by the NIRC which requires the Commissioner
to assess internal revenue taxes within three years after the last day
prescribed by law for the filing of the return. x x x The grant of a refund is
founded on the assumption that the tax return is valid; that is, the facts
stated therein are true and correct. In
fact, even without petitioner's tax claim, the Commissioner can proceed to
examine the books, records of the petitioner-bank, or any data which may be
relevant or material in accordance with Section 16 of the present NIRC.[34]
It is worth noting that under Section
230 of the NIRC and Section 10 of Revenue Regulation No. 12-84, the CIR is
given the power to grant a tax credit or refund even without a written claim
therefor, if the former determines from the face of the return that payment had
clearly been erroneously made. Evidently, the CIR’s function is not merely to
receive the claims for refund but it is also given the positive duty to
determine the veracity of such claim.
In another case, the Court held that
while a taxpayer is given the choice whether to claim for refund or have its
excess taxes applied as tax credit for the succeeding taxable year, such
election is not final. Prior verification and approval by the Commissioner of
Internal Revenue is required. The availment of the remedy of tax credit is not
absolute and mandatory. It does not confer an absolute right on the taxpayer to
avail of the tax credit scheme if it so chooses. Neither does it impose a duty
on the part of the government to sit back and allow an important facet of tax
collection to be at the sole control and discretion of the taxpayer.[35]
In the case of San Carlos Milling Co., Inc. v. CIR,[36]
the Court struck down therein petitioner’s attempt to unilaterally declare as
tax credit its excess estimated quarterly income taxes from the previous year.
The Court explained, thus:
The respondent Court held that the choice of
a corporate taxpayer for an automatic tax credit does not ipso facto confer on it the right to immediately avail of the same.
Respondent court went on to emphasize the need for an investigation to
ascertain the correctness of the corporate returns and the amount sought to be
credited. We agree.
It is difficult to see by what process of
ratiocination petitioner insists on the literal interpretation of the word
“automatic.” Such literal interpretation has been discussed and precluded by
the respondent court in its decision of 23 December 1991 where, as aforestated,
it ruled that “once a taxpayer opts for either a refund or the automatic tax
credit scheme, and signified his option in accordance with the regulation, this
does not ipso facto confer on him the
right to avail of the same immediately. An investigation, as a matter of
procedure, is necessary to enable the Commissioner to determine the correctness
of the petitioner's returns, and the tax amount to be credited.”
Prior approval by the Commissioner of
Internal Revenue of the tax credit under then section 86 (now section 69) of
the Tax Code would appear to be the most reasonable interpretation to be given
to said section. An opportunity must be given the internal revenue branch of
the government to investigate and confirm the veracity of the claims of the
taxpayer. The absolute freedom that petitioner seeks to automatically credit
tax payments against tax liabilities for a succeeding taxable year, can easily
give rise to confusion and abuse, depriving the government of authority and
control over the manner by which the taxpayers credit and offset their tax
liabilities, not to mention the resultant loss of revenue to the government
under such a scheme.
Hence we do not agree with
respondent’s contention that “the actual carry-over of the excess withholding tax
to the next quarter virtually negates a refund of the excess since it is
considered to have been automatically applied to any income of that period.”
However, even assuming that petitioner had the power to automatically apply its
excess withholding taxes to subsequent payments, the fact remains that, in this
particular case, it could not have done so given its business losses.
We must also point out that, simply
by exercising the CIR’s power to examine and verify petitioner’s claim for tax
exemption as granted by law, respondent CIR could have easily verified
petitioner’s claim by presenting the latter’s 1997 Income Tax Return, the
original of which it has in its files. However, records show that in the proceedings
before the CTA, respondent CIR failed to comment on petitioner’s formal offer
of evidence,[37] waived
its right to present its own evidence,[38]
and failed to file its memorandum.[39]
Neither did it file an opposition to petitioner’s motion to reconsider the CTA
decision to which the 1997 Income Tax Return was appended.
That no one shall unjustly enrich
oneself at the expense of another is a long-standing principle prevailing in
our legal system. This applies not only to individuals but to the State as well.
In the field of taxation where the State exacts strict compliance upon its
citizens, the State must likewise deal with taxpayers with fairness and
honesty. The harsh power of taxation must be tempered with evenhandedness.
Hence, under the principle of solutio
indebiti,[40] the Government
has to restore to petitioner the sums representing erroneous payments of taxes.
WHEREFORE,
premises considered, the petition is GRANTED.
The CA decision and the CTA decision are REVERSED
and SET ASIDE. Respondent Commissioner of Internal Revenue
is ORDERED to refund, or in the
alternative, issue a Tax Credit Certificate to petitioner Filinvest Development
Corporation in the amount of P3,173,868.00.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MA. ALICIA AUSTRIA-MARTINEZ Associate
Justice |
MINITA V. CHICO-NAZARIO Associate Justice |
A T T E S T A T I O N
I attest that the conclusions in the above decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Third Division
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution,
and the Division Chairperson's Attestation, it is hereby certified that the
conclusions in the above decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court.
REYNATO
S. PUNO
Chief Justice
[1] Rollo, pp. 65-77
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15] Respondent’s Comment; rollo, pp. 395-400.
[16] Carrara
Marble Philippines, Inc. v. Commissioner of Customs, 372 Phil. 322, 333-334
(1999).
[17] Commissioner
of Internal Revenue v. Court of Appeals, 358 Phil. 562, 584 (1998).
[18] Rollo,
p. 73.
[19]
[20] CTA Case No. 4971,
[21] 345 Phil. 695 (1997).
[22] Rollo, p. 73.
[23] Formal Offer of Evidence, CTA rollo, pp. 100-109.
[24]
[25]
[26] SEC. 34. Offer of evidence. – The court shall consider no evidence which has
not been formally offered. The purpose for which the evidence is offered must
be specified.
[27] SEC. 8. Court of record; seal; proceeding. – The Court of Tax Appeals shall
be a court of record and shall have a seal which shall be judicially noticed.
It shall prescribe the form of its writs and other processes. It shall have the
power to promulgate rules and regulations for the conduct of the Court, and as
may be needful for the uniformity of decisions within its jurisdiction as
conferred by law, but such proceedings shall not be governed strictly by
technical rules of evidence.
[28] Caram Resources Corporation v. Contreras,
A.M. No. MTJ-93-849,
[29] ART.
8. Judicial decisions applying or interpreting the laws or the Constitution
shall form a part of the legal system of the
[30] De
Mesa v. Pepsi Cola Products Philippines, Inc., G.R. Nos. 153063-70, August
19, 2005, 467 SCRA 433, 440, citing Castillo
v. Sandiganbayan, 427 Phil. 785, 793 (2002).
[31] 386
Phil. 719 (2000).
[32] BPI-Family Savings Bank v. CA, supra, at 726-727.
[33] Philex
Mining Corporation v. Commissioner of
Internal Revenue, 356 Phil. 189, 201-202 (1998).
[34] Citibank N.A. v. Court of Appeals, supra
note 21, at 709-710.
[35] Paseo Realty and Development Corporation v.
Court of Appeals, G.R. No.
119286, October 13, 2004, 440 SCRA 235, 249.
[36] G.R. No. 103379,
[37] CTA rollo, p. 135.
[38]
[39]
[40] Civil Code of the