G.R. No. 175124 - Commissioner of Internal Revenue vs. Philippine American Life and General Insurance Co.

On 15 April 1998, the respondent, The Philippine American Life and General Insurance Company, filed its Annual Income Tax Return (ITR) for the taxable year 1997, declaring a net loss of P165,701,508.
On 16 December 1999, the respondent filed a claim for refund with the Bureau of Internal Revenue (BIR) Appellate Division for P9,326,979.35, representing a portion of its accumulated creditable withholding tax from rentals, real property, and dividend income during 1997.
When the BIR-Appellate Division did not act on the claim, the respondent elevated the matter by filing a petition for review with the Court of Tax Appeals (CTA) on 23 December 1999.

In its Decision dated 4 June 2002, the CTA denied the refund claim on the ground that the respondent failed to properly present its 1998 ITR as evidence.
A motion for reconsideration was subsequently filed by the respondent, which was also denied by the CTA in its Resolution dated 2 October 2002.
The CTA noted that the respondent’s 1998 ITR indicated that the excess credit (P19,522,305) from the 1997 tax overpayment had already been applied against the tax due in 1998 and subsequently elected to be carried over to 1999, thus nullifying the claim for an immediate refund.

The respondent appealed the CTA ruling to the Court of Appeals, which reversed the CTA decisions in its Decision dated 26 June 2006, thereby granting the refund of P9,326,979.35.
The ruling of the Court of Appeals was based on the view that the CTA, although not strictly bound by technical evidentiary rules, failed to appreciate that the 1998 ITR supported the claim by proving a net loss and showing that the refund amount was neither utilized nor applied as tax payment.
The Commissioner of Internal Revenue (petitioner) filed a motion for reconsideration with the Court of Appeals, which was denied in its Resolution dated 12 October 2006, prompting the petition for review before the Supreme Court.

Whether the respondent is entitled to a refund of its excess income tax credit for the taxable year 1997, despite having indicated on its 1997 and 1998 ITRs the option to carry over the excess tax credits to subsequent taxable years.
Whether the irrevocable nature of the carry-over option, as stipulated under Section 76 of the National Internal Revenue Code (NIRC) of 1997, precludes the respondent from later claiming a cash refund for the unutilized portion of the credit.