But even assuming for the sake of argument that we consider the 1998 Annual ITR which petitioner [The Philippine American Life and General Insurance Company] attached to its memorandum, the same would likewise not render support to petitioner's claim. Petitioner could not deny the fact that the alleged 1997 overpaid tax was indeed carried forward to the succeeding taxable year. From the face of the 1998 ITR, the amount P19,522,305 to which the 1997 tax refund claim of P9,326,979.35 formed part is indicated as "Prior year's excess credit." Considering that petitioner had a tax due of P8,025,705 for the year 1998, petitioner's allegation of non-use deserves scant consideration. Equally noteworthy is the fact that the excess portion of the 1997 tax credit after charging the 1998 tax due now forms part of the 1998 total overpaid tax which petitioner opted again to carry over to the next taxable year 1999. This further refutes its claim that the 1997 claimed amount was unutilized.
As a recapitulation, the 1998 Income Tax Return attached to the Memorandum for petitioner is inadmissible in evidence. It was not presented and identified during the trial nor formally offered as evidence. And as the amount being claimed had been charged against its tax liabilities for 1998 and 1999, the claim for refund cannot be granted.8
WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution of the Court of Tax Appeals in CTA Case No. 5978 dated 4 June 2002 and 2 October 2002 respectively are REVERSED and SET ASIDE and a new one rendered in favor of the petitioner [The Philippine American Life and General Insurance Company] ordering the refund of the sum of P9,326,979.35 representing petitioner's overpayment and unapplied creditable withholding tax for the taxable year 1997 to petitioner.
SO ORDERED.9
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)
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; orIn 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.
(b) Be refunded the excess amount paid, as the case may be.
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. 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."
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. 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. (Emphasis supplied)
Endnotes:
* Designated additional member per Raffle dated 27 September 2010.
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
2 Rollo, pp. 7-14. Penned by Associate Justice Enrico A. Lanzanas, with Associate Justices Bienvenido L. Reyes and Lucas P. Bersamin (now Associate Justice of this Court), concurring. The title of the Decision inadvertently misstated petitioner as "The Philippine Life and General Insurance Company" instead of "The Philippine American Life and General Insurance Company."
3 Id. at 15-16.
4 Id. at 52-56.
5 Id. at 58-62.
6 Id. at 63-64; Annex "G."
7 Annex "F."
8 Id. at 61-62.
9 Id. at 13.
10 Id. at 88-89.
11 Id. at 78.
12 G.R. No. 171766, 29 July 2010.
13 Commissioner of Internal Revenue v. Bank of Philippine Islands, G.R. No. 178490, 7 July 2009, 592 SCRA 219.