MSI-ECS PHILS. INC. (formerly MSI DIGILAND PHILS., INC.) v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION MSI-ECS PHILS., INC. (formerly MSI DIG/LAND PHILS., INC.), Petitioner, CTA CASE NO. 7072 -versus- Present: BAUTISTA, Chairperson PALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS, JJ COMMISSIONER OF INTERNAL Promulgated: REVENUE SEP 29 2010 Respondent, //,' c-~ /9 If, ffl. � X-- ---- -- -- - - - -- -- ---- --- -- -- - - - - - -- -- - - - -- - - - - - -- -- - -X DECISION COTANGCO-MANALASTAS, J.: STATEMENT OF THE CASE Petitioner, by way of this Petition for Review, is seeking refund of the amount of P 12,241 ,25 1.00, representing petitioner's alleged cumulative excess creditable withholding taxes as of June 30, 2003.~ 94

DECISION Page 2 of 17 CTA Case No. 7072 MSJ-ECS PHILS. , INC vs. CJR STATEMENT OF FACTS MSI-ECS Philippines, Inc. (petitioner) is a domestic corporation duly organized and existing under the laws of the Philippines, with principal office address at Topy II Building, Economia Street, Lib is, Quezon City. 1 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) with authority to act as such , including, among others, the power to decide, approve, and grant refunds or tax credit of overpaid internal revenue taxes as provided by law. He holds office at the BIR National Office Building, BIR Road , Diliman, Quezon City. On October 15 , 2002, petitioner filed its Annual Income Tax Return for fiscal year ended June 30, 2002, wherein it reported the following fi gures in its return: 2 Sales/Revenue/Receipts/ Fees - I, 063 ,3 78 ,347 Less: Cost of Sales 950,913 ,5 04 Gross Income from Operations 4,485 ,298 I 12,464,843 Add: Non-operating and other Income I,741 ,3 05 Total Gross Income 2 ,2 8 4 , 123 1 14,206,148 Less: Deductions 100 , 189 ,592 Taxab le Income 14,016,556 Income Tax 4,485,298 MCIT Tax Due PriorYear's Excess Credits 0 Creditable tax withheld for the first 3 12 ,6 2 9 ,804 quarters 2,339,95 2 Creditab le tax withheld per BIR Form 2307 14,969,756 Total Tax Credits/Payments ~ 1 Par. 1, Facts Admitted, Joint Stipulations of Facts and Issues, docket, p. 68 2 Exhibit "B"; par. 7, Facts Admitted, Joint Stipulations of Facts and Issues, docket pp. 69-70 95

DEC ISION Page 3 of 17 CTA Case No. 7072 MSI-ECS PHJLS. , INC. vs. CJR (1 0,484,458)] I Tax Payable (Overpayment) Petitioner indi cated its chosen option regardin g the excess creditab le withholdin g tax by marking with "x" the box correspond ing to the option "To be refunded" on Line 31 of the return. 3 On the other hand , for the fiscal year ended June 30, 2003, petitioner fil ed its Annual Income Tax Return on October 15, 2003, wherein it reported the fo llowing amounts: 4 Sa les/R e v e n u e/ R e ce ipts/ Fees 1,406 ,830 ,096 1,2 88 ,347,725 Less: Cost of Sales 118,4 82,37 1 Gross Income from Operation s -- - 2, 046 ,974 Add: Non-operating and other Income 12 0 , 52 9 ,34 5 117, I00, 193 Total Gross Income 3,429, 152 Less: Deductions 2,410,587 Taxable Income - ~ Income Tax I,097,329 MCIT Tax Due - 2,4 10,587 Prior Year's Excess Credits 10 ,4 84 ,458 Cred itab le tax w ithheld for the first 3 1,295,592 quarters 2, 871 ,788 Creditab le tax withheld per BIR Form 23 07 14,651,838 Tota l Tax Cred its/Payments Tax Payable (Overpayment) (12,241,251) (4-- 3 Exhibit " B-10" 4 Exhibit "A"; par. 8, Facts Admitted, Joint Stipulations of Facts and Issues, docket p. 70 Ju

DECISION Page 4 of 17 CTA Case No. 7072 MSI-ECS PHILS., INC. vs. GR Petitioner also indicated its decision to seek refund of its cumulative excess creditable withholding taxes as of Jun e 30, 2003, by marking th e box corres ponding to the opti on "To be refund ed" on Line 3 1 of th e return. 5 In view of th e a lleged tax overpay ments indicated in its Annu a l Income Tax Returns for fi scal years 2002 and 2003, petiti oner fil ed a fo rm al written applicati on for refund with th e SIR-Revenu e Di stri ct Offi ce N o. 40-Cubao on October 15, 2003, in the amount of P 12,24 1,2 5 1.00, representin g its cumul ati ve excess creditable w ithholding taxes as of Jun e 30, 2003.6 Howeve r, du e to th e inacti on of respondent on petiti oner' s applicat ion for refund , petitioner fil ed the prese nt Petiti on fo r Rev iew before thi s Court on October 11 , 2004. In hi s A nswe r fil ed on December 6, 20047, respond ent ra ised the foll owing Special and Affirm ati ve Defenses: "4. C laims for refund are stri ctl y constru ed aga inst the taxpayer as the same partakes the nature of a tax exempti on ; 5. The taxpayer has the burden to show that the taxes were erroneou sly or ill egall y paid . Failure on the part of the P etitioner to prove the same is fatal to its cause of action; 6. The Petitioner should prove its legal basis fo r c laimin g the amount being refund ed. " On Janu ary 4, 2005 , a No tice of Pre-Tri a l Conference was iss ued by this Co urt, settin g the case for Pre-T ri al Confere nce on February 25 , 2005 and requirin g both pattie~ 5 Exhibit " A- 10" 6 Exhibit " D" 7 Docket, pp. 46-47 97

DECISION Page 5 of 17 CTA Case No. 7072 MSI-ECS PHILS. , INC. vs. CIR to be present at the pre-trial and to file with the Court and serve on the adverse party their pre-trial brie fs. 8 Consequently, petitioner and respondent filed their pre-trial briefs on February 24, 2005 and April 1, 2005 , respectively. 9 On April 20, 2005, th e parties filed their Joint Stipulations of Facts and Issues 10, which this Court approved in a Resolution dated April 22, 2005. In the same Resolution, the pre-trial was considered terminated. 11 On May 31 , 2005 , petitioner moved for the commissioning of an Independent Certified Public Accountant (CPA) pursuant to CTA Circular No. 1-95. The same was granted during the hearing on July I, 2005 .12 In due time, the Court-commissioned Independent CPA submitted her report and the same formed part of the evidence of petitioner. Aside from the Independent CPA Report, petitioner presented and formally offered its documentary and testimonial evidence; whi le respondent was considered to have waived his right to present evidence for fai lure to appear before this Court on the various dates set for the initial presentation of respondent's evidence, and upon oral motion of petitioner' s counsel. ~ 13 - 8 Docket, p. 48 9 Docket, pp. 52-58 and 59-61 10 Docket, pp . 68-71 11 Docket, p. 72 12 Docket, p. 97 13 Docket, p. 361 98

DEC ISION Page 6 of 17 CTA Case No. 7072 MSI-ECS PH!LS., INC vs. CIR T he case was s ubmitted fo r dec ision on Janu ary 18, 2010, takin g into considerati on petition er's M emo randum fil ed on Janu ary 4, 2010 and the report of thi s Co urt 's R ecord Di vision that respondent fa iled to fil e hi s Memorandum des pite notice.14 STATEMENT OF ISSUES The parti es submitted the fo llowing iss ues 15 for this Co urt 's di sposition : " Wh eth er Petitioner is entitled to be refunded its cumul ati ve excess creditab le withho lding taxes as of th e fi sca l year ended Jun e 30, 2003 in the amount of P 12,24 1,25 1 by showing that - a) the creditabl e w ithholding taxes amountin g to P1 9, 137, 136 are dul y supported by Certificates of Creditabl e Tax Withhe ld at So urce; b) th e income from whi ch th ese credi ta bl e taxes were w ithhe ld were dul y declared as p art of Petit io ner's income in its Annua l Inco me Tax Return for th e fi sca l years ended June 30, 2002 and 2003 ; c) Peti tioner did not carry over its unutili zed creditabl e w ithho lding taxes as of fisca l year end ed Jun e 30, 2003 to the succeeding taxable year 2004 . d) Petiti oner duly fil ed both th e administrative and judicia l claim s for refund w ithin the two-year prescriptive period prov ided und er Secti o ns 204 and 229 of the Tax Code, as amend ed." DISCUSSION/RULING Petiti oner c la ims th at it is entitled to a refund in the amo unt of P 12,241 ,25 1.00, representin g its a lleged cumul ati ve excess creditable w ithholding taxes as of fisca l ye~ ended June 30, 2003. 14 Resolution dated January 18, 201 0, docket, p. 382 15 Docket, p. 71 98

DEC ISION Page 7 of 17 CTA Case No. 7072 MSJ-ECS PHJLS., INC vs. CJR In accord ance w ith settl ed juri sprudence, petiti oner's entitl ement to a refund of excess creditable w ithholding taxes is depend ent on its compli ance with th e fo llowin g req u i re m e nt s: 1. That th e claim for refund was fi led within th e two-year prescripti ve period prescribed und er Section 204(C), in relation to Secti on 229 of the N IRC of 1997, as amend ed; 2. T hat th e fact of w ithholding is established by a copy of a state ment dul y iss ued by th e payor (withholding age nt) to th e payee, showing the amount pa id and th e amount of tax w ithhe ld th erefrom; and 3. T hat it is shown on th e return of th e rec ipient that th e incom e p ayment rece ived was declared as p art of th e gross inco me. 16 As rega rd s th e first requirement, the releva nt prov isions of th e Nati onal Internal Reve nu e Code (NIRC) of 1997 , as amend ed, are Secti ons 204(C) and 229, whi ch provid e as follows: " SEC. 204. Authority of the Commissioner to Comprom ise, Abate and Refund or Credit Taxes . - The Commi ss ioner may - XXX XXX XXX (C) Credit or refund taxes erroneo usly or ill ega lly rece ived or penalti es imposed w ithout a uthority, refund the va lue of internal revenu e stamps when they are return ed in good co ndition by t he purchaser, and , in his discreti on, redeem or change unu sed stamps that have been rend ered unfit for use and refund their value upon proof <;>f destru ction. No credit or refund of taxes or pena lti es sha ll be a ll owed un less th e taxpayer fil es in w ritin g w ith th e Commission er a cla im for c r edit or r efund w ithin two (2) yea rs a ft e r th e paym e nt of th e tax o r pena lty: Provided, however, Tha t a r e turn fil ed showing a n overpaym ent sh a ll be consid er ed as a written cla im for credit or r efun d." (Emphasis supplied) "SEC. 229. Recovety of Tax Erroneously or lllegally Collected. -- N o suit or proceedin g sha ll be ma inta ined in any co urt for th e recove ry of any nati onal in tern al revenu e tax hereafter a lleged to h av~ 16 Section 2.58 of Revenue Regu lati ons (R.R .) No. 2-98, as amended; Citibank N. A. vs. Court of Appeals, ct a/., G.R. No. 107434, October 10, 1997; ACCRA In vostmonts Corporation vs. The Honorable Court of Appeals, ct a/. , G.R. No. 96322, December 20, 199 1 100

DECISION Page 8 of 17 CTA Case No. 7072 MSJ-ECS PHJLS., INC. vs. CJR 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 dale of payment of the lax 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) Relevantly, in the case of ACCRA Investments Cmporation vs. The Honorable Court of Appeals, et al. I I , the Supreme Court said that the reckoning of the two-year prescriptive period for the filing of a claim for refund/tax credit of excess income tax paid/withheld provided in the above-quoted provision should commence from the date of filing of the final adjustment return. Record shows that the claimed excess creditable withholding taxes involved fiscal years ended June 30, 2002 and June 30, 2003 , for which petitioner filed its correspond ing Ann ual Income Tax Returns on October 15, 2002 18 and October 15, 2003 19, respectively. Counting from these dates, petitioner had until October 15 , 2004 and October 15 , 2005, within which to file its claim for refund or issuance of tax credit certificate for fiscal years 2002 and 2003, respectively, both in the administrative and judicial levels. Petitioner's administrative claim for refund was filed on October 15, 200320 and its judicial claim , through its Petition for Review, was filed on October 11 , 2004. Clearly~ 17 G.R. No. 96322, December 20, 1991 18 Exhibit "B-2" 19 Exhibit "A-2" 20 Exhibit "D" 101

DECISION Page 9 of 17 CTA Case No. 7072 MSJ-ECS PHILS., INC. vs. CJR both the administrative and the judicial claims for refund were filed we ll within the two- year prescripti ve peri od . Goin g now to the seco nd req uisite of establishing th e fac t of withholding of the claimed creditable taxes w ithheld fo r the year 2003 in the amo unt o f P 12,24 1,25 1.00, petitioner submitted Certificates of C reditabl e Tax W i t h h e ld at So urc e 21 Summary of , Creditable Tax Withhe ld at Source by Customersn, and Li st of Certifi cates of Creditabl e Tax Withhe ld at Source23 , w hi ch were exa mined by the Cowt-commi ss ioned Ind epend ent C PA 24 . Based on the rev iew and va lidation made by th e Ind ep end ent C PA, th e followin g find ings we re noted :25 CWT W ithheld for the FY ended J une 30, 2002 A nn ex I p 5,578,220.07 A nnex 2 72 6 ,649. 2 6 A C WTs supported by ori ginal cettificates A nnex 3 7 2 ,766.68 B C WTs issued for th e pe ri od after fi sca l year endin g --A---n-n--e--x--4-- ---- - --2--1-,-0-1-9-.-5-7-- June 30, 2002 A nn ex 5 8,592, 11 9.99 c CWTs not suppo rted by certifi cates D CWTs supported by ori gina l certifi cate rece ived by the BIR but not li sted in the summ ary li st ofC WTs claimed �-- -----------------�-�-�----��------- ------- E C WTs supported by certifi cates coverin g Value- add ed Tax Total p 14,990,775.5 7 Amount Claimed in FY 2002 ITR 14,9 6 9 ,7 56 .0 0 Total P21,01 9.57 CWT W ithheld fo r the FY E nded J une 30,2003 A nn ex 6 p 4 ,165,038.68 A CWTs supp01ted by original certificates B CWTs supported by certificates with th e period Annex 7 ~ 2,341 .3 1 covered not indicated 21 Exhibits "A", pages 21 to 180 and " B", pages 18 to 121 22 Exhibits "G" and " L" 23 Exhibits " H" and " M" 24 Ms. Lorna Rayos del Sol 25 Exhibit " N", page 4 10 2

DEC ISION Page 10 of 17 CTA Case No. 7072 MSI-ECS PHILS. , INC vs. C'IR IP 4,167,379.99 1 J Total Further veri ficat ion of the evidence revea led that add iti ona l creditabl e taxes withhe ld fo r fisca l year 2003 in the amo unt of P 1,4 15.60 are supported by certi ficates with the period covered not indi cated, to w it: W ith holding Agent Exhibit Amo unt Ol ympia Phils. Inc. " A 124" p 966.00 Ol ympi a Phil s. Inc. " A 125" 449.60 Tota l p 1,415.60 Ta kin g into co nsiderat io n a ll of th e above o bservati o ns, thi s Court find s that petiti o ner was abl e to substa nti ate by prope r w ithho ld ing tax certificates onl y th e cred itable w ithholdin g taxes in the amo un ts of P6,3 04,869.33 (P5,5 78 ,220.07 plus P726,649.26) and P4,163 ,623.08 (P4,1 65,038. 68 less Pl ,4 15.60) fo r fisca l years end ed June 30, 2002 and June 30, 2003, respecti vely. Anent the third requisite, petiti oner was able to establi sh th at the income corresponding to the substanti ated creditable taxes w ithheld of P4, 163 ,623. 08 fo rmed part of the Pl ,406,830,096.00 sales declared by petitioner in its 2003 A nnu a l Income Tax Return26. The same is co rroborated by th e doc um entary evidence prese nted by petitioner such as, but not limited to, Sum ma ry of Sales to Custo mers w ith Taxes Withhe ld 27, Summary of Acco unts Receivable, Tota l Invo ice, Co ll ectio ns and Tax Withhe ld f~-� 26 Exhibit "A-3" 27 Exhibits "J" and "0" 10 3

DEC IS ION Page 11 of 17 CTA Case No. 7072 MSJ-ECS PHJLS. , iNC. vs. C1R Customers with Taxes Withhe ld 28, M onthl y Summary of Sales29, and the related sales invo ices30 and official rec e ipts3 1 . On the oth er hand , fo r fisca l yea r 2002, petiti oner did not present any doc ument similar to those presented for fiscal year 2003, by which thi s Co urt can ascerta in if it declared in its Annu al In come Tax Return 32 th e income pay ments related to the creditable w ithho lding taxes of P6,304,869.33 . To recapitul ate, for fi sca l yea r 2003, petitioner was abl e to sati sfy th e three bas ic requirements for refund of excess creditabl e withholdin g taxes, but onl y to th e extent of th e amount of P4, 163 ,623.08 , out of the total cla im of P4, 167 ,380.00 . As regard s fi sca l yea r 2002, while petitioner was abl e to establi sh th e tim e ly filin g of th e c la im and th e fact of w ithho lding of the amoun t of P6,304,869.33 , out of the tota l cla im of P8 ,073 ,87 1.00, petiti oner fa il ed to prove that it declared the income related to th e creditable w ithho ldin g taxes of P6,304,869 .33 . After establi shin g petiti oner' s compli ance w ith the above-menti oned requisites, thi s Court w ill now proceed to determin e whether petitioner exercised the option to carry- over its excess creditable w ithholding taxes to the succeedin g qu arters, pursuant to Secti on 76 of the N IRC of 1997. The said provision reads: "SEC 76. Final Adjustment Return . - Eve ry corporati on li able to tax und er Secti on 27 shall fil e a fin a l adju stm ent return coverin g the total taxable inco me for th e preceding ca lend ar or fi sca l year. If the sum of the qu arterly tax payments made during the said taxable year is not equ al to the total tax du e on the entire taxa ble inco me of that year, / ____ the corporation shall either: ~ 28 Exhibit 'T' 29 Exhibit "I" 30 Exhibits " R" to " R45-434" 31 Exhibits "W" to "W-977" 32 Exhibit " B" 10 4

DECISION Page 12 of 17 CTA Case No. 7072 MS!-ECS PHJLS. , INC. vs. CJR (A) Pay the balance of tax still du e; or (B) Carry-over the excess credits; or (C) Be credited or refund ed with the excess amo unt paid , as the case may be. In case the corporati on is entitled to a tax credit or refund of the excess estimated qu arterly inco me taxes paid , the excess amount shown on its fin al adju stment return may be carri ed over and credited against the estimated qu arterl y income tax liabilities fo r the taxa ble 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) Pursuant to the afore-qu oted prov ision, a corporati on entitl ed to a tax credit or refund of the excess inco me taxes paid in a given taxa bl e year, is all owed two (2) options, namely: (a) be credited or refunded (either in the form of cash or tax credit certifi cate) w ith the excess amount paid ; or (b) carry-over the excess credit to the quarters of the succeedin g taxa ble yea rs. Once the taxpaye r has exercised the option to carry-over and applied the excess qu arterl y income tax aga inst the income tax du e for the taxable qu arters of the succeedin g taxable years, such opti on becomes irrevoca bl e for that taxabl e peri od and appli cation fo r cash refund or issuance of tax credit certificate shall no longer be allowed. The "taxable period" referred to in Section 76 is th at taxabl e period which the taxpayer made the choice of carry-over and not the next taxa bl e yea r when the said excess or unutili zed tax credits wo uld be carried over. 33 In exercising its option, the corporation must signify in its annual corporate adju stment return its intenti on either to carry-over the excess credit or to claim a refun~ 33 SC & C Cosmetech Co., Inc. vs. Commissioner of Internal Revenue, CTA EB No. 126, July 31, 2006 (CTA Case No. 6650, June 6, 2005) 105

DEC ISION Page 13 of 17 CTA Case No. 7072 MSJ-ECS PHJLS. , INC. vs. CJR by marking the option box provided in the BlR form. These remedies are in the alternative and th e choice of one precludes the other. 34 In this case, while petitioner marked with an "x" the box corresponding to the phrase "To be refunded" in its Annual Income Tax Returns for fiscal years 2002 and 2003 , petitioner had actually exercised the carry-over option by carrying over its 2002 excess creditable withholding tax to fiscal year 2003. Petitioner's very act of filling out the portion " Prior Year' s Excess Credits" in its 2003 Annual Income Tax Return with the amount of Pl 0,484,45 8.0035 manifested petitioner's intention to carry-over, instead of to refund, the excess creditable withholding tax it paid durin g fi sca l year 2002. Applying the provision of Section 76 in this case, when petitioner exercised the option to carry-over the claimed excess creditable withholding taxes for fi sca l year 2002, the sa id option became irrevocable for th at taxable period; thus, no app lication for cash refund or issuance of tax credit certificate can be al lowed. In the case of Paseo Realty and Development Corporation vs. Court ofAppeals, Court of Tax Appeals and Comm issioner of Internal Revenue36 , the Supreme Court had the occasion to expound on th e options contained in Section 76 of the NIRC of 1997 and the irrevocabi lity of the option made by the taxpayer; the pertinent pot1ion of which reads: "As clearly seen from this provi sion, the taxpayer is allowed three (3) options if the sum of its quarterly tax payments made durin g the taxab le year is not equa l to the tota l tax d ue for that year: (a) pay the balance of th e tax still du e; (b) carry-over the excess credit; or (c) be credited or refunded the amount paid . If the taxpayer has paid excesr- 34 Philippine Bank of Communications vs. Commissioner of Internal Revenue, eta/., G.R. No. 112024, January 28, 1999 35 Exh ibit "A-6" 36 G.R. No. 119286, October 13, 2004 106

DE C ISION Page 14 of 17 CTA Case No. 7072 MSI-ECS PHILS. , INC vs. CIR quarterly income taxes, it may be entitl ed to a tax credit or refund as shown in its final adjustment return which may be carried over and applied against the estimated quarterly income tax liabilities for the taxable quarters of the succeed ing taxab le years. However, once the taxpayer has exercised the option to carry-over and to apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years, such option is irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed." (Emphasis supplied) The High Tribunal reiterated said ruling in the case of Phi/am Asset Management, Inc. vs. Commissioner ofInternal Revenue37, in this wise: "These two options under Section 76 are alternative in nature. The choice of one precludes the other. Indeed, in Philippine Bank of Communications v. Commissioner of Internal Revenue, the Court ruled that a corporation must sign ify its intention - whether to request a tax rejimd or claim a tax credit - by marking the corresponding option box provided in the FAR. While a taxpayer is required to mark its choice in the form provided by the BIR, this requirement is only for the purpose of facilitating tax collection . XXX XXX XXX The carry-over option under Section 76 is permissive. A corporation that is entitled to a tax re.fimd or a tax credit for excess payment of quarterly income taxes may carry over and cred it the excess income taxes paid in a given taxable year against the estimated income tax liabilities of the succeeding quarters. Once chosen, the carry-over option shall be considered irrevocable for that taxable period, and no application for a tax refund or issuance of a tax credit certificate shall then be allowed. XXX XXX XXX Whether the FIFO principle is appli ed or not, Section 76 remains clear and unequivocal. Once the carry-over option is taken, actually or constructively, it becomes irrevocable. Petitioner has chosen that opt ion for its 1998 creditable withholding taxes. Thus, it is p no longer entitled to a tax refund of P459,756.07 , whi ch corresponds to its 1998 excess tax credit. xxx" (Emphasis supplied) 37 G.R. Nos. 156637 and 162004, December 14, 2005 10 7

DECISION Page 15 of 17 CTA Case No. 7072 MSI-ECS PHILS., INC. vs. CIR Significantl y, a similar pronouncement was made by thi s Court in the case of Shell Services International Sendirian Berhad vs. Commissioner of Internal Revenue38 , as regards the determinati on of th e opti on chosen by the taxpayer in accordance w ith Section 76 of the NIRC of 1997, as amended. The appli cable portion of the said Decision reads: "In the case before Us, w hile petitioner ma t�ked w ith a n 'x' t he box corresponding to the phrase ' to be r efund ed ' in its 2000 ITR, petitioner ha d actually ex ercised the option to carry-over its 2000 excess cr edita ble w ithh old ing tax to the yea r 2001, and in fac t, it had already carried over to the succeeding year its unutilized creditable taxes withheld for the taxable year 2000 . By express ma nda te of Section 76, once the option to carry-over has been m a de, such option is irrevoca ble for tha t taxa ble period a nd no applica tion for cash r efund or iss ua nce of tax cr edit certifica te sha ll be a llowed therefore." (Emphasis supplied) In view of the forego ing di scuss ion, petitioner is already barred from claiming a refund of its 2002 excess tax credits, since it had actuall y exercised the option of carry- over and applied its 2002 excess tax credits against its 2003 income tax liability. As regard s the excess tax credit for fi sca l year ended June 30, 2003, petitioner properl y marked the option "To be refunded" in its A nnual Income Tax Return. It likewise did not carry-over the excess credits of Pl 2,24 1,2 5 1.00 as of June 30, 2003 to the succeeding year's income tax return, which inc luded the creditable tax withheld for fi scal yea r 2003 in the amount of P4, 167,3 80 .00 . As evidenced by its Annual Income Tax Return for fi scal year ended June 30, 2004, the amount indicated in the "Prior Year's Excess Credit" is zero . Hence, the excess creditable tax w ithheld fo r fi scal year end e~ 38 erA EB No. 196, June 13, 2007 (CfA Case No. 6658, March 14, 2006) 108

DEC ISION Page 16 of 17 CTA Case No. 7072 MSJ-ECS PHJLS. , INC vs. C/R June 30, 2003 can be th e proper subj ect of a claim for refund under Section 76 of the NIRC of 1997. Hav ing complied with all the requirements set by law, petitioner is entitled to a refund of its excess creditabl e withho lding taxes for fi scal year end ed June 30, 2003, but in the redu ced amount of P3,572,607.4 1, computed as foll ows: Substanti ated Creditable Withholding Taxes p 4,163,623 .08 Add : Pri or Year's Excess Credits P 6 ,304, 869.33 Substantiated Creditable Withholding Tax (FY 2 00 2) Less : Income Tax Due (FY 2002) 4,485,29 8.00 1,81 9,5 71 .33 Total Tax Credits p 5,98 3, 194.4 1 Less: Income Tax Due 2,410,5 87.00 Refundab le Excess Tax Credits p 3,572,607.41 WHEREFORE, premi ses consid ered, the instant Petition fo r Rev iew is hereby PARTIALLY GRANTED . Acco rdin gly, res pondent is hereby ORDERED TO REFUND in favor of petitioner the amount of P3,572,607.4 1, representing its excess creditabl e withho lding taxes fo r fi sca l year 2003. SO ORDERED . d~yJ_ (- ~~- AMfii~R. COTAN~CO- MANALASTAS A ssociate Justice ~~~ OLGA PALANCA-ENRIQUEZ A ssociate Justice 109

DECISION Page 17 of 17 CTA Case No . 7072 MSJ-ECS PHJLS. , IN C. vs. CJR ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before th e case was assigned to the writer of the opinion of the Court' s Division . CERTIFICATION Pursuant to Section 13, Article VIII 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. L ....... 0-..A- ERNEsTo D. ACOSTA Pres iding Justice 110