FIRST
DIVISION
SYSTRA PHILIPPINES, INC., G.R. No. 176290
Petitioner,
Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s
- CORONA,
AZCUNA and
GARCIA, JJ.
COMMISSIONER
OF
INTERNAL
REVENUE,
Respondent. Promulgated:
September
21, 2007
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R E S O L U T I O N
CORONA,
J.:
This resolves petitioner Systra
Philippines, Inc.’s (1) motion for leave to file a second motion for
reconsideration and (2) second motion for reconsideration of the Court’s March
28, 2007 resolution.
On March 9, 2007, petitioner filed a
petition for review on certiorari assailing the January 18, 2007 decision[1] of the
Court of Tax Appeals (CTA) in CTA EB Case No. 135. The Court denied the
petition in its March 28, 2007 resolution on the following grounds:
(a)
failure
of petitioner’s counsel to submit his IBP[2] O.R.[3] number
showing proof of payment of IBP dues for the current year (the IBP O.R. No. was
for 2006, i.e., it was dated November 20, 2006);
(b)
submitting
a verification of the petition, certification of non-forum shopping and
affidavit of service that failed to comply with the 2004 Rules on Notarial
Practice with respect to competent evidence of affiants’ identities and
(c)
failure
to give an explanation why service was not done personally as required by
Section 11, Rule 13 in relation to Section 3, Rule 45 and Section 5(d), Rule 56
of the Rules of Court.
On July 5, 2007, petitioner’s motion
for reconsideration was denied with finality as there was no compelling reason
to warrant a modification of the March 28, 2007 resolution. Thus, the present
motions.
Petitioner claims that this Court has
granted second and even third motions for reconsideration for “extraordinarily
persuasive reasons.” It avers that this Court should look into the importance
of the issues involved in deciding whether leave to file a second motion for
reconsideration should be granted or not. It prays that its petition should not
be denied on the basis of procedural lapses alone and points out that the
substantial amount involved in the petition justifies relaxation of technical
rules. It asserts that there is an important legal issue involved in this case:
whether the exercise of the option to carry over excess income tax credits
under Section 76 of the National Internal Revenue Code of 1997, as amended (Tax
Code) bars a taxpayer from claiming the excess tax credits for refund even if
the amount remains unutilized in the succeeding taxable year. Finally, it
contends that the assailed CTA decision was contradictory to the decisions of
the Court of Appeals (CA)[4] in Bank
of the Philippine Islands v. Commissioner of Internal Revenue[5] and Raytheon
Ebasco Overseas Ltd. Philippine Branch v. Commissioner of Internal Revenue[6] which
involved the same issue as that in this case. According to petitioner, in view
of those CA decisions, it is unjust to deprive it of the right to claim a
refund.
We deny petitioner’s motions.
A Second Motion For
Reconsideration Is
Prohibited
The denial of a motion for
reconsideration is final. It means that the Court will no longer entertain and
consider further arguments or submissions from the parties respecting the
correctness of its decision or resolution.[7] It
signifies that, in the Court’s considered view, nothing more is left to be
discussed, clarified or done in the case since all issues raised have been
passed upon and definitely resolved. Any other issue which could and should have
been raised is deemed waived and is no longer available as ground for a second
motion. A denial with finality underscores that the case is considered closed.[8] Thus, as
a rule, a second motion for reconsideration is a prohibited pleading.[9] The
Court stressed in Ortigas and Company Limited Partnership v. Velasco:[10]
A second motion for reconsideration is forbidden except for
extraordinarily persuasive reasons, and only upon express leave first obtained.[11]
(emphasis supplied)
It is true that procedural rules may
be relaxed in the interest of substantial justice. They are not, however, to be
disdained as mere technicalities that may be ignored at will to suit the
convenience of a party.[12] They
are intended to ensure the orderly administration of justice and the protection
of substantive rights in judicial proceedings.[13] Thus,
procedural rules are not to be belittled or dismissed simply because their
non-observance may have resulted in prejudicing a party’s substantive rights.[14] Like
all rules, they are required to be followed except only when, for the most
persuasive of reasons, they may be relaxed to relieve a litigant of negative
consequences commensurate with the degree of thoughtlessness in not complying
with the prescribed procedure.[15]
In this case, contrary to
petitioner’s claim, there was no compelling reason to excuse non-compliance
with the rules. Nor were the grounds raised by it extraordinarily persuasive.[16]
Moreover, petitioner can neither
properly nor successfully rely on the decisions of the CA in the Bank of the
Philippine Islands and Raytheon Ebasco Overseas Ltd. Philippine Branch cases.
First, the CA and the CTA are now of the same level pursuant to RA 9282.[17]
Decisions of the CA are thus no longer superior to nor reversive of those of
the CTA. Second, a decision of the CA in an action in personam binds
only the parties in that case. A third party in an action in personam cannot
claim any right arising from a decision therein. Finally and most importantly,
while a ruling of the CA on any question of law is not conclusive on this
Court, all rulings of this Court on questions of law are conclusive and binding
on all courts including the CA. All courts must take their bearings from the
decisions of this Court.[18]
On The Substantive Aspect, The Petition Has No Merit
The antecedents of this case are as
follows:
On
April 16, 2001, petitioner filed with the [Bureau of Internal Revenue (BIR)]
its Annual Income Tax Return (“ITR”) for the taxable year ended December 31,
2000 declaring revenues in the amount of [P18,252,719] the bulk of which
consists of income from management consultancy services rendered to the
Philippine Branch of Group Systra SA, France. Subjecting said income from
consultancy services of petitioner to 5% creditable withholding tax, a total
amount of [P4,703,019] was declared by petitioner as creditable taxes
withheld for the taxable year 2000.
For
the same period, petitioner reflected a total gross income of [P3,752,129],
a net loss of [P17,930] and a minimum corporate income tax (MCIT) of [P75,043].
Said MCIT of P75,043 was offset against its total tax credits for the
year 2000 amounting to [P4,703,019] thereby leaving a total unutilized
tax credits of [P4,627,976], computed as follows:
Gross Income P3,752,129.00
Less: Deductions
P3,770,059.00
Net loss P 17,930.00
Minimum Corporate Income Tax Due
P75,043.00
Less: Tax Credits
Prior
year’s excess credits P -
Creditable taxes withheld P4,703,019.00 P4,703,019.00
during the year
Tax Overpayment P4,627,976.00
Petitioner
opted to carry over the said excess tax credit to the succeeding taxable year
2001.
For
the taxable year ended December 31, 2001, petitioner filed with the BIR its
Annual ITR on April 12, 2002, reflecting a total gross income of [P4,771,419]
and a total creditable taxes withheld of [P1,111,587] for consultancy
services. It likewise declared a taxable income of [P1,936,851] with
corresponding normal income tax due in the amount of [P619,792]. After
deducting the unexpired excess of the previous year MCIT [1999 and 2000] in the
amount of [P222,475] from the normal income tax due for the period,
petitioner’s net tax due of [P397,317] was applied against the
accumulated tax credits of [P5,739,563]. Said reported tax credits
comprised of prior year’s excess tax credits in the amount of [P4,627,976]
and creditable taxes withheld during the year 2001 in the sum of [P1,111,587].
These excess tax credits were utilized to pay off the income tax still due of [P397,317]
resulting to an overpayment of [P5,342,246], computed as follows:
Gross Income P4,771,419.00
Less:
Deductions P2,834,568.00
Taxable Income P1,936,851.00
Income Tax Due at the Normal Rate of 32% P 619,792.00
Less: Unexpired
Excess of Prior Year’s MCIT
Over
Normal Income Tax Rate P 222,475.00
P 397,317.00
Income Tax Still Due
Less:
Tax Credits
Prior
year’s excess credits P4,627,976.00
Creditable
taxes withheld
during the year 1,111,587.00 P5,739,563.00
Tax Overpayment P5,342,246.00
Petitioner
indicated in the 2001 ITR the option “To be issued a Tax Credit Certificate”
relative to its tax overpayments.
On
August 9, 2002, petitioner instituted a claim for refund or issuance of a tax
credit certificate with the BIR of its unutilized creditable withholding taxes
in the amount of P5,342,246.00 as of December 31, 2001.”
Due
to the inaction of the BIR on petitioner’s claim for refund and to preserve its
right to claim for the refund to its unutilized CWT for CYs 2000 and 2001 by
judicial action, petitioner filed a petition for review with the Court in
Division on April 14, 2003.[19]
In its August 3, 2005 decision, the
First Division of the CTA partially granted the petition and ordered the
issuance of a tax credit certificate to petitioner in the amount of P1,111,587
representing the excess or unutilized creditable withholding taxes for taxable year
2001. The CTA, however, denied petitioner’s claim for refund of the excess tax
credits for the year 2000 in the amount of P4,627,976. It ruled that petitioner
was precluded from claiming a refund thereof or requesting a tax credit
certificate therefor. Once it was made for a particular taxable period, the
option to carry over became irrevocable.
Petitioner moved for reconsideration
but it was denied. Petitioner elevated the case to the CTA en banc which
rendered the assailed decision. Thus, this petition.
As already stated, petitioner
formulated the issue in this petition as follows: whether the exercise of the
option to carry-over excess income tax credits under Section 76 of the Tax Code
bars a taxpayer from claiming the excess tax credits for refund even if the
amount remains unutilized in the succeeding taxable year. Petitioner contends
that it does not.
We disagree.
Section 76 of the Tax Code provides:
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 net 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)
A corporation entitled to a tax
credit or refund of the excess estimated quarterly income taxes paid has two
options: (1) to carry over the excess credit or (2) to apply for the issuance
of a tax credit certificate or to claim a cash refund. If the option to carry over
the excess credit is exercised, the same shall be irrevocable for that taxable
period.
In exercising its option, the
corporation must signify in its annual corporate adjustment return (by marking
the option box provided in the BIR form) its intention either to carry over the
excess credit or to claim a refund. To facilitate tax collection, these
remedies are in the alternative and the choice of one precludes the other.[20]
This is known as the irrevocability
rule and is embodied in the last sentence of Section 76 of the Tax Code. The
phrase “such option shall be considered irrevocable for that taxable period”
means that the option to carry over the excess tax credits of a particular
taxable year can no longer be revoked.
The rule prevents a taxpayer from
claiming twice the excess quarterly taxes paid: (1) as automatic credit against
taxes for the taxable quarters of the succeeding years for which no tax credit
certificate has been issued and (2) as a tax credit either for which a tax
credit certificate will be issued or which will be claimed for cash refund.[21]
In this case, it was in the year 2000
that petitioner derived excess tax credits and exercised the irrevocable option
to carry them over as tax credits for the next taxable year. Under Section 76
of the Tax Code, a claim for refund of such excess credits can no longer be made.
The excess credits will only be applied “against income tax due for the taxable
quarters of the succeeding taxable years.”
The legislative intent to make the
option irrevocable becomes clearer when Section 76 is viewed in comparison to
Section 69 of the (old) 1977 Tax Code:
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 tax credit or 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.
Under Section 69 of the 1977 Tax
Code, there was no irrevocability rule. Instead of claiming a refund, the
excess tax credits could be “credited against the estimated quarterly income
tax liabilities for the taxable quarters of the succeeding taxable year,” that
is, the immediately following year only. In contrast, Section 76 of the
present Tax Code formulates an irrevocability rule which stresses and fortifies
the nature of the remedies or options as alternative, not cumulative. It also
provides that the excess tax credits “may be carried over and credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding
taxable years” until fully utilized.
Furthermore, this case is closely
similar to Philam Asset Management, Inc. v. Commissioner of Internal Revenue.[22] In that
case, Philam Asset Management, Inc. had an unapplied creditable withholding tax
in the amount of P459,756.07 for the year 1998. It carried over the said
excess tax to the following taxable year, 1999. In the next succeeding year, it
had a tax due in the amount of P80,042 and a creditable withholding tax
in the amount of P915,995. As such, the amount due for the year
1999 (P80,042) was credited to its P915,995 creditable
withholding tax for that year. Thus, its 1998 creditable withholding tax in the
amount of P459,756.07 remained unutilized. Thereafter, it filed a claim
for refund with respect to the unapplied creditable withholding tax of P459,756.07
for the year 1998. The Court denied the claim and ruled:
Section 76 [is]
clear and unequivocal. Once the carry-over option is taken, actually or constructively, it becomes irrevocable. Petitioner
has chosen that option for its 1998 creditable withholding taxes. Thus, it is
no longer entitled to a tax refund of P459,756.07, which
corresponds to its 1998 excess tax credit. Nonetheless, the amount will
not be forfeited in the government’s favor, because it may be claimed by
petitioner as tax credits in the succeeding taxable years. (emphasis
supplied)
Since petitioner elected to carry over
its excess credits for the year 2000 in the amount of P4,627,976 as tax
credits for the following year, it could no longer claim a refund. Again, at
the risk of being repetitive, once the carry over option was made, actually or
constructively, it became forever irrevocable regardless of
whether the excess tax credits were actually or fully utilized. Nevertheless, as
held in Philam Asset Management, Inc., the amount will not be
forfeited in favor of the government but will remain in the taxpayer’s account.
Petitioner may claim and carry it over in the succeeding taxable years, creditable
against future income tax liabilities until fully utilized.[23]
WHEREFORE, petitioner’s motion for leave to
file a second motion for reconsideration and the second motion for
reconsideration are hereby DENIED.
Costs against petitioner.
No further pleadings shall be
entertained. Let entry of judgment be made in due course.
SO ORDERED.
Associate Justice
W E C
O N C U R :
Chief Justice
Chairperson
Associate Justice Associate
Justice
CANCIO C. GARCIA
Associate Justice
Pursuant to Section 13, Article VIII of the Constitution, I
certify that the conclusions in the above resolution had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
Chief Justice
[1] Rollo, pp. 40-50.
[2] Integrated Bar of the Philippines.
[3] Official receipt.
[4] Under RA 9282 which took effect on April 23, 2004, decisions of the CTA are no longer appealable to the CA but directly to this Court. See also note 17.
[5] CA-G.R. SP No. 77655, 29 April 2005.
[6] CA-G.R. SP No. 80296, 11 April 2005.
[7] Id.
[8] Id.
[9] Section 2, Rule 52 in relation to Section 4, Rule 56 of the Rules of Court.
[10] 324 Phil. 483 (1996).
[11] Id.
[12] Santos v. Court of Appeals, G.R. No. 92862, 04 July 1991, 198 SCRA 806.
[13] Spouses Galang v. Court of Appeals, G.R. No. 76221, 29 July 1991, 199 SCRA 683.
[14] Id.
[15] Id.
[16] The fact that the amount involved is claimed to be substantial is neither a compelling nor an extraordinarily persuasive reason. It is a subjective standard. What may be a pittance for one may be a fortune for another. And all properties, substantial or not, deserve protection under the laws.
[17] An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to the Level of a Collegiate Court With Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes.
[18] Republic of the Philippines v. Maj. Gen. Garcia, G.R. No. 167741, 17 July 2007.
[19] Supra note 1, pp. 41-43.
[20] Philippine Bank of Communications v. Commissioner of Internal Revenue, 361 Phil. 916 (1999).
[21] De Leon, Hector, The National Internal Revenue Code, Seventh Edition, 2000, p. 430.
[22] G.R. Nos. 156637/162004, 14 December 2005, 477 SCRA 761.
[23] Where, however, the corporation permanently ceases its operations before full utilization of the tax credits it opted to carry over, it may then be allowed to claim the refund of the remaining tax credits. In such a case, the remaining tax credits can no longer be carried over and the irrevocability rule ceases to apply. Cessante ratione legis, cessat ipse lex.