TELETRADE CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

/ il' REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY TELETRADE CORPORATION, C.T.A. CASE NO. 5801 Petitioner, -versus - COMMISSIONER OF INTERNAL Promulgated: REVENUE, .JUL Z 1 2QQQ?/S Respondent. x ----------------------------------------------------------- - DECISION The case at bar seeks the refund/tax credit of the amount of P3,424,316:oo allegedly representing Petitioner's erroneously paid income taxes for the year ending December 31, 1996. As represented, Petitioner is a corporation duly organized and existing under the laws of the Philippines with office address at 211d floor, Eurovilla I Condomiuium, Legaspi cor. Herrera Streets, Legaspi Village, Makati City. On April 15, 1997, Petitioner filed with Rizal Commercial Banking Corporation (RCBC) its Tentative Corporate A1mual Income Tax Return (ITR) for the calendar year I 1996 (Exh. A) declaring a taxable income of P10,722,035.00. In said return, petitioner declared a tax due of P3,752,712.00, tax credits of P315,820.00 and a tax payable of P3,436,892.00. The said tax payable was paid by petitioner on the same elate as shown in ,. ' the machine validatiop fotmd on the lower portion of said lTR. 1(J8i.

--�� ' T ���' ...,.�����11,1. ��� .. ' . In � I ol . :,� i!'� ;,,!: :.:i: DECISION- II 'i CTA CASE NO. 5801 t;. PAGE2 il i i li On April 30, 1997,Petitioner filed with the Development Ban];, of tLc : ' :i> �.�:;L�:' I' its AMENDED Corporate Armual Income?ax Return for the year 1996 (i .'.I . l :). J n said amended return, Petitioner declared a taxable income of P9JS,27�i.OC:, .1 l::�: .: -: 0 J! ., i P328,396.00, tax credits of P315,82Q.OO, a 1tax payable ofP12,57G.OO, a tx :<�'J ... �:: .� /I' II P3,436,892.00 made on April 15, 1997 when it filed its tentative JTR, <md ;1 : ,�:\ :J :,\: I ! amount ofP3,424,316.00 to be applied as tax credit to the succcding yc:r ( i :>.. ;. Sometime in April, 1998,Petitioner filed its Tentative Corporalc 1\ :1; :� :: �! 1 i. � �1�..: ' �, Tax Return for the year 1997. (Exh. D, Attachment, p. 116, dock�..:l). L: .. ::. . .:.:.:.-:�, Petitioner declared a loss ofP13,042,770.00, a tax cred it/payment of P\� I Yi} �- ��r: :;; .. : :1 tax refundable ofP3,456,872.00. Petitioner, signified in said return il> ink;;: .. :: ,; ��: � ... - over/apply the said refundable amount ofP3,456,872.00 to the succcc�.liug i::: .. :,:.. :r-��:�: :,:� 1998. On January 5, 1999, Petitioner filed with RCBC its 1\fvlSNLL:) (\: w;::l . Ammallncome Tax Return for 1997 (Exh. E, attachment, pages J 33 to l�-iCl, .. 1., >'L _ ; said re.turn, it declared a loss of P13,4,86,780.00, a prior years exec::; c:�.. ,::;:; \,;� P3,424,316.00, a tax withheld of P84,081.00, and a tax ovcrpymcnt of n,:J:., .. f!.'.J\i. Petiti:mer likwise manifests in said amended ITR �that lhc t1x ov�;�;-�:l)'i/1�:;:< u; . ' ' P3,508,397.00 is to be carried as tax credit t the succeeding taxable year of I');:;. On April 14, 1999, Petitioner again. amended its earlier amended .i.'):Ci .u1d I'.,,, _o..././1 " ITRs (Exhs. D and E). The specific porti'o of Petitioner's 1996 /\mcitdcd IT:\ :::;: �:,it; �',,' again amended on April 14, 1999 was ! �.that of Petitioner' s option <:s l'l,i_>�rd:> !l:c: I' .. overpayment of taxes. Petitioner wanted, the overpayment of t<:xcs for l S>S':', lo be 'I 10\12

DECISION- CTA CASE NO. 580 I PAGE3 refunded [as shown in the option box provided in the BIR Form (Exh. D)J, instead of being carried as tax credit to the succeeding year of 1997 [as shown in the option box of its amended 1996 ITR (Exb. B)]. Thus, in its April 14, 1999 amendment to its amended 1997 return, Petitioner deleted that portion which showed that it has a Prior Years Excess Credit of P3,424,316.00 (Exh. E-1) and reduced the amow1t of overpayment from P3,508,397.00, as shown in its amended 1997 ITR (pages 133-134, docket), to P84,081.00 (Exh. E, p. 131, docket). A day after or on April 15, 1999, Petitioner filed its administrative claim for refund and/or tax credit with the Respondent in the amow1t of P3,424,316.00, allegedly representing its erroneously paid income taxes for the calendar year 1996 (Exh. F). On the same date, April 15, 1999, Petitioner filed with this Court the instant Petition for Review. Petitioner posited that it is entitled to the refw1d of the aforesaid amount as it has sufficiently proven the factual circwnstances surrounding the claim for refund with substantial evidence, and that Section 69 of the Tax Code, so provides that any excess of the total quarterly payments over the actual income tax computed in the adjusted or final corporate income tax return, shall !!H!wr a) be refw1ded to the corporation, or (b) may be . : . �, . �-.�.,...: ' credited against the estimated quarterly income tax liabilities for the quarters of the succeeding taxable year. It said that since it was clearly shown on the face of its 1996 AMENDED Annual Corporate ITR (Exh. B) and its second AMENDED ITR for 1996 (Exh. D) that it incurred a tax overpayment for the year 1996 and that it opted for the

DECISION- CTA CASE NO. 580 l PAGE4 refund thereof (Exh. D-2), anu considering that overpaid and overwithileld or excesr; (erroneously paid in this case) income taxes paid can only refunded or applied as a l<lX credit to the taxable quarters of the succeeding taxable year (1997), and considering further that it did not carry forward the 1996 excess tax payments of P3,424,316.00 to the succeeding year of 1997 (Exh. E-1), Respondent is under obligation to refw1d the amount claimed. On the other hand, Respondent argued that Petitioner is not entitled to the claimed refund. It asseverates that Petitioner, in its 1996 Amended Corporate Income Tax Rctum (Exh. B) which was filed on April 30, 1997, opted that its excess tax payments in 1996 in the total amount of P3,424,316.00 be carried over to the succeeding year 1997, and sii1ce during 1997 Petitioner allegedly suffered losses, Petitioner likewise opted that the excess tax payment of P3,424,316.00 in 1996 be carried over to the year 1998, as clenrly shown in its tentative and an1ended ITR's for the year 1997 (Exh. D, Attachment, p 116 docket (' and Exh, E, Attachment, pages 133 to 140 docket). Thus, it concluded that since Petitioner has opted for an automatic tax credit of its 1996 excess tax payments to 1998, it can no longer refund the same as the remedies of refund and tax credit as provided for in !p." r ,, Section 69 (now 76) are alternatiy, #aj�p ;,dI the choice of one precludes the other (.Philippine �:.;\ �'( ' Ban!' of Communications vs. C(Jmmissioner of Internal Revenue, G.R. No. 112024, t1f q f l Jan!ff'Y 28, 1999). R spo1 e rf ier s;:pntends that the manifestation by Petitioner in .� �:�: ' .� its latest amended 1996 ITR filed on April 14, 1999 (Exh. D) to have its 1996 excess tax payments be refunded and that it had no prior year's excess credit in its latest amended � 1997 ITR, likewise filed on April 14, 1999 (E-1) should not lead this Court to grant the

DECISION- CTA CASE NO. 5801 PAGE 5 claimed refund, as it was already too !ate for the purpose. It said that Pcti lioner, in lls 1997 amended ITR filed on January 5, 1999, had already declared asPrior Yar's Excc;s Credit the excess tax payments for 1996 in the amount of P3,424,316.00 as well as manifested its option that the same be carried over as tax credit to the succeeding taxable year of 1998, thus the presumption that Petitioner has applied its 1996 unutilized t;:tx credit to the taxable year 1998. HencePetitioner has the obligation to show to this Court 'I I .jI that the said 1996 excess tax payments were not carried over to the year 1998. Since in 1) the case at barPetitioner failed to include its 1998 ITR among the documents it offered as I 'I �I proof of its claim, the Court must deny the instant claim for refund. The issue which is presented for our consideration is whether or not PctitioJicr is entitled to the refund of its excess income tax payments for the year 1996 in the total amount ofP3,424,3 16.00. The Court agrees with Petitioner's point that before the effectivity of the Tax �I Reforni Act of 1997 (RA No. 8424), ifthe refundable amount for one year was not fully credited in the succeeding year, the excess uncredited amount can no longer be crcdilcd 1i in the following year because the law limits the automatic tax credit to the "succecLling year" only (Citytrust Banking f:.f:flP,[.!/1 vs. Commissioner of Internal Revenue, CTA ,If. ' ' 4099, 199Jr Uw Case No. May 28, � ver, since in the case at bar Petitioner clearlyr �. t j ' r shows, prior to its latest (pppnd) amertdment to its 1997 ITR, that it opted to carry.Qy its 1996 excess tax payment, which were not utilized in the succeeding year 1997 due to " losses, to the next succeeding year 1998, Petitioner cannot use the above reason that since the 1996 excess tax payments were not utilized in the succeeding year 1997, Respondent

DECISION- CTA CASE NO. 580 I PAGE6 has to refund the said amount. If Petitioner had actually credited its 1996 excess tax payments indicated in its 1996 and 1997 ITR's to its 1998 income tax liabilities then the petition should be denied for there is no other way from which the petition can be premised. However, if the claimed refund was not, credited to the year 1998 for one reason or another then the claim for reftmd or tax credit can be granted provided there is a clear showing that the refundable amount was not applied to the said year of 1998. Ironically, Petitioner failed to present in evidence its 1998 Income Tax Return. Such doctunent is indispensable in determining whether or not Petitioner applied its 1996 excess tax payments, which were not utilized in 1997 due to losses, to its income tax liability in 1998. Petitioner cannot expect this Court to venture a wild guess on whether or not the same was applied or not. Since the burden of proof lies with tlJe taxpayer- petitioner claiming for a refund or credit, it is incumbent upon Petitioner to prove that the refundable amount was not actually credited to its income tax liability for 1998. ( . Simply stated, when the taxpayer-petitioner opted to apply its excess tax payments (refundable amount) as a tax credit for the succeeding years it is important to present as evidence the succeeding years' Income Tax Return for verification if the an1otmt was credited against its incme tax liability for that year. I(! ;t . remains� ' glaring fact , � � . -��:=:(! ,t:fh. Verily,the at in the instant case there is absence of :c�.t� t on- evidence that tha did not actually credit the amoun��t�j. record ' would. support Petitioner may not be amiss to point i' .: :, refundable to the succeeding taxable year of 1998. It : '�,_,:, out that in a claim for refund, it is incumbent upon Petitioner to show that it is entitled thereto, otherwise, failure on its part to prove the same is fatal to its claim for refund. This is true

--IJ�. DECISION- CTA CASE NO. 580 I PAGE 7 since claims for refund are construed in strictissimi juris against the taxpayer (Piliiipip ne Ban/c of Communication vs. CIR, CTA & Court of Appeals, GR. No. 112024 promulgated January 28, 1999; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332). We are therefore unable to find for the Petitioner's entitlement of the claimed refund as a matter of fact. I N THE LIGHT OF ALL THE FOREGOING, the instant Petition for Review is DISMISSED for lack of merit. SO ORDERED. - ERNESTO D. ACOSTA Presiding Judge yR WECONC : I/ 4,._ �A ,IYRA ( 0N 0. DE j.i � Associate Jud � i- CERTI FICATION .., . I hereby certify that the above decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ,. �o ERNESTO D. ACOSTA Presiding Judge