G.R. No. 192076 - Tuason vs. Bank of Commerce

Cebu Holdings, Inc., a registered real estate developer, filed its Income Tax Return (ITR) for the taxable year 2002 on 15 April 2003 with the Bureau of Internal Revenue (BIR).
The original ITR indicated a tax computation showing sales, costs, gross income from operations, non-operating income, deductions, and eventually a tax due computed at 32%, along with a claim for an overpayment (credit) of P18,992,055.00.

Initially, the respondent opted to be issued a tax credit certificate for the alleged tax overpayment by its original ITR.
Cebu Holdings later filed an amended ITR for 2002 which repeated the claim for a tax credit certificate of P18,992,055.00.
On 4 March 2005, a written claim for a tax credit certificate in the stated amount was submitted to the BIR.

Due to the petitioner’s (Commissioner of Internal Revenue) failure to act on the claim, Cebu Holdings filed a Petition for Review before the CTA First Division on 15 April 2005.
The CTA First Division later appointed an Independent Certified Public Accountant (CPA) on 6 June 2006 pursuant to Rule 13 of the Revised Rules of the Court of Tax Appeals.
The Independent CPA rendered a Final and Consolidated Report on 3 August 2006 detailing his verification of the claimed overpayment based on documentary evidence.

The report noted creditable withholding taxes (“CWTs”) amounting to approximately P6,067,093.08 substantiated by various supporting documents, such as stamped original Withholding Tax Remittance Returns and corroborative contracts.
The breakdown included amounts supported by different types of documentation (machine-validated, stamped “Received,” and entries with discrepancies but passed due to immateriality).

The CPA identified creditable taxes totaling approximately P12,800,461.83.
The findings included CWTs supported by Certificates of Creditable Tax Withheld at Source, amounts that were not supported, filings out of period, and a noted double claim.

A separate claim of P124,500.00 was verified based on corresponding certificates.

The total aggregated CWTs and the corresponding unaccounted differences were carefully itemized in the report.

The CTA First Division largely agreed with the CPA’s findings but made pivotal adjustments:

It corrected the CPA’s inclusion of an amount (P3,857.33) erroneously filed as “CWTs filed out of period,” adjusting that portion to P2,814,403.50.
Out of the total tax credits claimed related to withholdings (amounting to P18,992,055.00), only P15,877,961.02 was accepted as having valid proof.

Discrepancies were noted in the reported revenue for real estate sales, where a minor difference of P19,999.70 was observed between the ITR and the withholding tax remittance returns; consequently, an amount of P999.99 was disallowed.
Additionally, a P124,500.00 credit for management fees was disallowed due to insufficient documentary support.
The CTA First Division further ruled that out of the reported prior year’s excess credits of P30,150,767.00, only P288,076.04 could be substantiated and applied against the 2002 tax liability, thereby reducing eligible tax credits.
As a result, the net refundable excess tax credit for 2002 was computed as P2,083,878.07.

Petitioner (the Commissioner of Internal Revenue) and respondent filed separate Motions for Partial Reconsideration, which were both denied by the CTA First Division in a Resolution dated 12 March 2009.
The respondent then attempted an urgent motion to withdraw its Petition for Review, opting instead to carry forward the excess credit to future taxable periods; however, this motion was denied.
Petitioner filed a petition for review before the CTA En Banc, contesting both the tax credit certificate issuance and the subsequent carryover issue affecting the 2003 tax liability.

The CTA En Banc affirmed the prior decisions of the CTA First Division with respect to the tax credit certificate amounting to P2,083,878.07 due to overpayment in 2002.
It confirmed the ruling regarding unsubstantiated carryover of prior year’s excess credits, specifically disallowing the carryover of P16,194,108.00 from 2002 to 2003.
Consequently, a deficiency tax for 2003 amounting to P8,540,182.00 was imposed on the respondent.
The decision also reiterated the timely filing of the refund claim and the proper compliance with the documentary requirements, notwithstanding the identified discrepancies.

Whether Cebu Holdings, Inc. is entitled to a tax credit certificate in the amount of P2,083,878.07 representing the excess creditable taxes for taxable year 2002.
Whether all requisite conditions for claiming a refund of excess creditable withholding tax were satisfied, such as timely filing, proper withholding documentation, and inclusion of the income in the ITR.

Whether the unsubstantiated carryover of prior year’s excess credits (amounting to P16,194,108.00) from 2002 to 2003 renders respondent liable for a deficiency income tax for the succeeding taxable year.
Whether the amount carried over was erroneously claimed and should be deleted, affecting the computation of the 2003 income tax deficiency.