SECOND DIVISION
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ASIAWORLD PROPERTIES PHILIPPINE CORPORATION, Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. |
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G.R. No. 171766 Present: CARPIO,
Chairperson, VELASCO, JR.,* PERALTA, ABAD, and MENDOZA, JJ. Promulgated: July 29, 2010 |
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D E C I S I O N
CARPIO, J.:
The Case
This petition
for review[1] assails the 24 August 2005
Decision[2] and the 31 January 2006 Resolution[3] of the Court of Appeals in
CA-G.R. SP No. 82027.
The Facts
Petitioner
Asiaworld Properties Philippine Corporation (petitioner) is a domestic corporation
with principal office at Asiaworld City, Aguinaldo Boulevard, Parañaque, Metro
Manila. Petitioner is engaged in the business of real estate development.
For the calendar year ending 31 December 2001, petitioner
filed its Annual Income Tax Return (ITR) on 5 April 2002. Petitioner declared a
minimum corporate income tax (MCIT) due
in the amount of P1,222,066.00, but with a refundable income tax payment
in the sum of P6,473,959.00 computed as follows:
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Income: Realized Gross Profit Add: Other Income Gross Income Less: Deductions Taxable Income Tax Due (MCIT) Less: Tax Credit/Payments a. Prior Year’s Excess Credit b. Tax Payments For the First Three Quarters c. Creditable Tax Withheld For the First Three Quarters d. Creditable Tax Withheld For the Fourth Quarter Total Amount of Overpayment |
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160,000.00 67,964.00 |
11,868,847.00 58,148,630.00
7,696,025.00 |
In
its 2001 ITR,[4]
petitioner stated that the amount of P7,468,061.00 representing Prior Year’s Excess Credits was
net of year 1999 excess creditable withholding tax to be refunded in the amount
of P18,477,144.00. Petitioner also indicated in its 2001 ITR its option
to carry-over as tax credit next year/quarter the overpayment of P6,473,959.00.
On 9 April
2002, petitioner filed with the Revenue District Office No. 52, BIR Region VIII, a request for
refund in the amount of P18,477,144.00, allegedly representing partial
excess creditable tax withheld for the year 2001. Petitioner claimed that it is
entitled to the refund of its unapplied creditable withholding taxes.
On
12 April 2002, before the BIR Revenue
District Office could act on petitioner’s claim for refund, petitioner filed a
Petition for Review with the Court of Tax Appeals to toll the running of the
two-year prescriptive period provided under Section 229[5] of the National Internal
Revenue Code (NIRC) of 1997.
In
its Decision dated 11 September 2003, the Court of Tax Appeals denied the
petition for lack of merit. Petitioner moved for reconsideration, which the
Court of Tax Appeals denied in its Resolution dated 17 December 2003. In
denying the petition, the Court of Tax Appeals explained:
While we agree with the findings of the commissioned independent CPA that petitioner has unapplied creditable withholding taxes at source as of December 31, 2001, still the excess income tax payment cannot be refunded.
Upon
scrutiny of the records of the case, this court noted that the amount sought to
be refunded of P18,477,144.00
actually represents petitioner’s excess creditable withholding taxes for the
year 1999 which petitioner opted to apply as tax credit to the succeeding
taxable year as evidenced by its 1999 income tax return (Exhibit K).
Under Section 76 of the Tax Code, petitioner is precluded to claim the refund
or credit of the excess income tax payment once it has chosen the option to
carry-over and apply the excess quarterly income tax against income tax due for
the taxable quarters of the succeeding years.[6]
Petitioner
appealed to the Court of Appeals, which affirmed the Decision and Resolution of
the Court of Tax Appeals.
The Ruling of the Court of Appeals
The Court of
Appeals held that under Section 76 of the NIRC of 1997, when the income tax
payment is in excess of the total tax due for the entire taxable income of the
year, a corporate taxpayer may either carry-over the excess credit to the succeeding
taxable years or ask for tax credit or refund of the excess income taxes paid.
Section 76 explicitly provides that once the option to carry-over is chosen,
such option is irrevocable for that taxable period and the taxpayer is no
longer allowed to apply for cash refund or tax credit. In this case, petitioner
chose to carry-over the excess tax payment it had made in the taxable year 1999
to be applied to the taxes due for the succeeding taxable years. The Court of
Appeals ruled that petitioner’s choice to carry-over its tax credits for the
taxable year 1999 to be applied to its tax liabilities for the succeeding
taxable years is irrevocable and petitioner is not allowed to change its choice
in the following year. The carry-over of petitioner’s tax credits is not
limited only to the following year of 2000 but should be carried-over to the
succeeding years until the whole amount has been fully applied.
On 27 April
2006, petitioner filed a petition for review with this Court.
The Issue
The primary issue
in this case is whether the exercise of the option to carry-over the excess
income tax credit, which shall be applied against the tax due in the succeeding
taxable years, prohibits a claim for refund in the subsequent taxable years for
the unused portion of the excess tax credits carried over.
The Ruling of the Court
The petition
has no merit.
The resolution
of the case involves the interpretation of Section 76 of the NIRC of 1997,
which reads:
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 therefore. (Emphasis supplied)
The confusion
lies in the interpretation of the last sentence of the provision which imposes
the irrevocability rule.
Petitioner
maintains that the option to carry-over and apply the excess quarterly income
tax against the income tax due in the succeeding taxable years is irrevocable
only for the next taxable period when the excess payment was carried over.
Thus, petitioner posits that the option to carry-over its 1999 excess income
tax payment is irrevocable only for the
succeeding taxable year 2000 and that for the taxable year 2001, petitioner is
not barred from seeking a refund of the unused tax credits carried over from
year 1999.
The Court
cannot subscribe to petitioner’s view. Section 76 of the NIRC of 1997 clearly
states: “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 therefore.” Section 76 expressly states that “the option
shall be considered irrevocable for that
taxable period” – referring to the period comprising
the “succeeding taxable years.”
Section 76 further states that “no application for cash refund or
issuance of a tax credit certificate shall be allowed therefore” – referring to “that taxable period” comprising the
“succeeding taxable years.”
Section 76 of
the NIRC of 1997 is different from the old provision, Section 69 of the 1977 NIRC, which reads:
SEC.
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 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. (Emphasis supplied)
Under this old
provision, the option to carry-over the excess or overpaid income tax for a
given taxable year is limited to the immediately succeeding taxable year only.[7] In contrast, under Section
76 of the NIRC of 1997, the application of the option to carry-over the excess
creditable tax is not limited only to the immediately following taxable year
but extends to the next succeeding taxable years. The clear intent in the
amendment under Section 76 is to make the option, once exercised, irrevocable
for the “succeeding taxable years.”
Thus, once the
taxpayer opts to carry-over the excess
income tax against the taxes due for the succeeding taxable years, such option is irrevocable for
the whole amount of the excess income tax, thus, prohibiting the taxpayer from
applying for a refund for that same excess income tax in the next succeeding
taxable years.[8] The unutilized excess tax credits will remain
in the taxpayer’s account and will be carried over and applied against the taxpayer’s income tax liabilities in the succeeding taxable years until fully
utilized.[9]
In this case,
petitioner opted to carry-over its 1999
excess income tax as tax credit for the succeeding taxable years. As correctly
held by the Court of Appeals, such option to carry-over is not limited to the
following taxable year 2000, but should apply to the succeeding taxable years
until the whole amount of the 1999 creditable withholding tax would be fully
utilized.
WHEREFORE, we DENY the petition. We AFFIRM
the Decision dated 24 August 2005 and the Resolution dated 31 January 2006
of the Court of Appeals in CA-G.R. SP
No. 82027.
SO
ORDERED.
ANTONIO
T. CARPIO
Associate
Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
DIOSDADO M. PERALTA ROBERTO A. ABAD
Associate Justice Associate Justice
JOSE C. MENDOZA
Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the
Constitution, and the Division
Chairperson’s Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
* Designated additional member per Raffle dated 26 July 2010.
[1] Under Rule 45 of the 1997 Rules of Civil Procedure.
[2] Rollo, pp. 8-20. Penned by Associate Justice Mariano C. Del Castillo (now SC Associate Justice), with Associate Justices Salvador J. Valdez, Jr. and Magdangal M. De Leon, concurring.
[3] Id. at 22.
[4] Exhibit “A.”
[5] 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 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.
[6] Rollo, p. 87. (Italics in the original)
[7] Paseo Realty & Dev’t. Corp. v. Court of Appeals, 483 Phil. 254 (2004).
[8] Philam Asset Management, Inc. v. Commissioner of Internal Revenue, G.R. Nos. 156637 and 162004, 14 December 2005, 477 SCRA 761.
[9] Systra Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 176290, 21 September 2007, 533 SCRA 776.