CTA Case No. 4274 (Decision)

-- REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY PHILIPPINE COMMERCIAL CAPITAL, INC., Petitioner~ -- versus - C.T.A. CASE NO. 4274 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - X DEC I I0N This case involves a claim for the refund of ' the amount of P439,935 representing overpaid income tax or excess ta x credit for taxable year 1986 which wa s not applied or utilized in the succeeding taxable yea r 1987. For the calendar year ended December 31~ 1986~ petitioner's income return reflected the following i ncome ta x payments: First quarter 1986 ta x payment P381~810 Creditable taxes, etc. paid in --�-�~.�_,J._2 5 1986 In the same 1986 income tax return, it showed petitioner to have no income ta x liability since it incurr-ed a net loss of P7, 578,759. It therefore had overpaid its 1986 income tax liability in the

DECISION CTA CASE NO. 4274 - 2- amount of P439,935.00. And this amount of overpaid income tax was not utilized or applied against petitioner's quarter� 1y income ta:{ 1 iabi 1 i ties for ta xable year 1987. On March 1988, petitioner through its auditors, filed with respondent Commissioner of Internal Revenue a request for refund or issuance of a tax credit for the amount of P439,935, representing overpaid income tax or excess tax credit for 1986. After this date, respondent has not yet acted on the foregoing claim for refund. On May 26, 1988, petitioner filed its petition for review in the above- entitled case. On July 22, 1988, respondent's Makati Regional Office, Director Perfecto T. Domingo h~d favorably endorsed the approval of petitioner's claim for t-efund in the amount of P439,935 (E:�:h. "R"). The only issue presented for our determination is whether or not petitioner is entitled to the r�efund of the overpaid income ta:�: or excess ta>: credit in the amount of P439,935. It is the view of petitioner that it is entit led to the refund of the amount of P439,935 as overpaid income tax for the year 1986. On the other hand~ respondent alleged that in an action

DECISION CTA CASE NO. 4274 - 3- for ta >: refund or tax credit~ it has to be s hown th a t the ta>:es paid were erroneous or i 11 ega 11 y coll e cted from petitioner. We agree with petitioner that it is entitled to the refund of P439,935 in accordance with Sec tion 69 of the Tax Code which provides, thus - "Final adjustment return. - Every corp o r a t i on 1 iabl e to ta >: Ltnder Section 24 s ha ll file a final adjustment return c overing the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said ta>:able year is not equal to the total tax due on the entire taxable net income of the year~ the corporation shall either: (a ) Pay the e>:cess ta x still due� (b) Be refunded the e >: cess amoLtn t paid a s the case may be. In c a s e the corporation is entitled to a r e fu nd of the excess estimated quarter� I y income ta :�:es paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income ta x 1 iab i 1i t i es for the ta :�:abl e quarters of thl;? succeeding ta :�:able year." and its impl e menting regulation~ Revenue Circular No. 7- 85, which provides as follows: "In the above provision of the Regulations (Section 7 of Revenue RegLil a tions No. 10- 77) ~ the corporation may request for the refund of the overpaid income tax or claim for automatic credit. To insure prompt action on corporate annual income ta>: return s howing refundable amounts arising

DECISION CTA CASE NO. 4274 - 4- from overpaid quarterly income taxes, the office has promulgated Revenue Memorandum Order No. 32-76 dated June 11, 1976, c ontaining the procedures in processing said returns. Under these procedures, the retur-ns are mere 1y pre-audited which consist mainly of checking mathematical accuracy of the figures in the return. After which, the refund or tax credit is granted; and, this procedure was adopted to facilitate immediate action on cases like this. }: x x." In this case, the 1986 annual corporate income ta>: return reflected a payment of P439,935. The arne return showed that petitioner had no tax liability for the year 1986 since it incurred a net loss of P7,578,750. This net loss did not bring about any deficiency assessment for respondent nor has he seriously disputed the correctness thereof. (Dataprep [Phils.], Inc. v. Comm. of Int. Rev., CTA Case No. 3600, March 30, 1984.) Neither has he submitted particular controverting evidence, except that this case was submitted for decision based on the pleadings. Respondent may be considered to have no serious objection or opposition to petitioner� s anti tlement tq the refund. Besides, on July 22, 1988, respondent's Makati Regional Office, thru its Regional Director Perfecto T. Domingo, favorably endorsed to respondent Commissioner of Internal Revenue for approval of 49 .1

DECISION CTA CASE NO. 4274 - 5- petitioner's claim for refund in the amount of P439,93 5 due to overpayment (Exh. "R"). In the case of Ateneo de Manila University vs. Commissioner of Internal Revenue, CTA Case No. 3 213, dated July 28, 1989, this Court held: "No controverting evidence was presented by respondent. Neither was any evidence disputing petitioner's enti t lement to its claim for refund was presented by respondent and this case having been submitted for decision on the p 1ead ings and on the face of the unrebutted evidence of petitioner showing that it is entitled to refLmd :-: x :<, r�espondent may be considered to have no serious objection or opposition to petitioner ' s entitlement to the refund. The circumstances obtaining x x x compels us therefore to sustain the x >: >: the petitioner � s right to the refund :< :< :-: bas ed on the evidence and pleadings." (Ateneo de Manila University vs. Commissioner of Internal Revenue, CTA Case No. 3 213, July 28, 1989.) and wa s reiterated in the case of Bogo-Medellin Milling Co., Inc. vs. Commissioner of Internal Revenue, CTA Case No. 4014, decided on August 7, 1991. WHEREFORE, petitioner Philippine Commercial Capital, Inc. is entitled to the refund or tax credit in the amount of P439,935 representing overpaid income tax for the year 1986. 49?

DECISION CTA CASE NO. 4274 - 6- Without pronounc&ment as to costs. SO ORDERED. J Quezon City~ Metro Manila~ October 1 25, 1991. CONS~R~UIN Afsociate Judge WE CONCUR: ~~ t-~'Q . ~ ERNESTO D. ACOSTA Associate Judge CE RT I F I CAT I 0 N I hereby certify that this decision was reached after due consu ltation among the members of the Court of Tax Appeals in accordance with Section 13~ Article VIII of the Constitution. ~z~ Presiding Judge Court of Tax Appeals