G.R. No. 146710-15 - Estrada vs. Desierto

The case involves the Republic of the Philippines, represented by the Commissioner of Internal Revenue (petitioner), and Team (Phils.) Energy Corporation (respondent), formerly known as Mirant (Phils.) Energy Corporation.
The dispute centers on the excess and unutilized creditable withholding taxes for the calendar years 2002 and 2003.

The respondent, primarily engaged in the development, construction, and operation of power generating facilities, amended its corporate name and articles with the Securities and Exchange Commission in 2001.
It filed annual income tax returns (ITRs) for 2002 and 2003 on April 15, 2003 and April 15, 2004, respectively.
In the ITRs, the respondent indicated excess creditable withholding taxes of P6,232,003.00 (for 2002) and P10,134,410.00 (for 2003) and expressly opted for a refund of the overpaid tax.

On March 22, 2005, the respondent submitted an administrative claim for refund or the issuance of a tax credit certificate amounting to P16,366,413.00, covering both tax years.
To toll the running of the two-year prescriptive period under Section 229 of the NIRC, the respondent filed a petition for review in the Court of Tax Appeals (CTA) on April 14, 2005.
The CTA, in its Division decision on May 15, 2008, ordered the Commissioner of Internal Revenue to refund or issue a tax credit certificate in the modified amount of P16,366,412.59.

In its answer, the petitioner raised several special and affirmative defenses arguing that:

Taxes paid are presumed correct and not refundable unless proper documentary evidence proves otherwise.
The claimed excess was not fully substantiated, particularly through the non-presentation of quarterly returns which, according to petitioner, were necessary to determine whether the excess credit was carried over to succeeding taxable periods.

The petitioner further contended that the timing of issues raised (such as non-presentment of quarterly returns) was improper, having been raised for the first time on appeal rather than during the trial or in the motion for reconsideration.

The petitioner subsequently brought the issue to the CTA En Banc, contesting two main points:

That the lower court erred in granting the refund by not strictly requiring compliance with Section 76 of the NIRC regarding the presentation of quarterly returns.
That tax refund claims, which involve exemptions from taxation, must be construed strictly against the claimant.

On April 15, 2009, the CTA En Banc rendered its decision, dismissing the petition for review and affirming the lower court’s decision ordering the refund.

Whether the respondent (Team [Phils.] Energy Corporation) properly proved its entitlement to the refund of excess and unutilized creditable withholding taxes for the calendar years 2002 and 2003.

Whether the documented evidence (annual ITRs and Certificates of Creditable Taxes Withheld at Source) sufficiently established the claim.
Whether the timing of the administrative and judicial claims, filed within the two-year prescriptive period under Section 229 of the NIRC, was proper.

Whether the requirement to submit the quarterly income tax returns is mandatory for establishing that the excess tax was not carried over to succeeding taxable periods.

The petitioner argued that quarterly returns were necessary to confirm that the excess credit was not applied against subsequent tax liabilities.
Whether the absence of quarterly returns, given the respondent’s clear indication for a refund mode (as shown on the Annual ITRs), should invalidate the refund claim.