G.R. No. 206517 - Stablewood Philippines, Inc. vs. Commissioner of Internal Revenue

Stablewood Philippines, Inc., formerly known as Rollsaroyce Philippines, Inc. and previously Orca Energy, Inc., is a domestic corporation duly organized under Philippine law and registered with the SEC.
From January 1998 to July 2007, it was registered with BIR Revenue Region No. 8, RDO No. 50 (South Makati), later transferring to RDO No. 47 (East Makati) due to change of address.

On April 7, 2006, Stablewood electronically filed its Annual Income Tax Return (ITR) for taxable year (TY) 2005, showing an overpayment of creditable withholding tax (CWT) amounting to PHP 76,245,344.99.
In the same ITR, the taxpayer requested issuance of a Tax Credit Certificate (TCC) for the unutilized CWT.
Subsequently, Stablewood carried over the tax overpayment indicated in the TY 2005 Annual ITR in its first, second, and third quarter income tax returns for TY 2006.
On November 24, 2006, Stablewood filed an administrative claim for refund for the excess CWT of PHP 65,085,905.82 with the BIR.
Filed its TY 2006 Annual ITR electronically on April 2, 2007 and manually on April 12, 2007, indicating it did not carry over its unutilized CWT from TY 2005.

The CIR failed to act on the administrative claim, prompting Stablewood to file a Petition for Review before the CTA on November 13, 2007.
The CIR argued taxpayer must prove compliance with the requirements under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) for refund or issuance of TCC, and that taxes are presumed paid correctly unless proven otherwise.

On January 31, 2011, the CTA Third Division denied Stablewood's claim for refund, holding that by carrying over the tax overpayment in quarterly returns of TY 2006, Stablewood irrevocably elected the carry-over option under Section 76 of the NIRC.
This carry-over act negated the taxpayer's original election for refund or TCC.

Stablewood filed a motion for reconsideration and new trial, alleging new evidence of its dissolution arising after trial.
The dissolution process included amending Articles of Incorporation to shorten corporate term (December 10, 2010); publishing notice of dissolution; approval by stockholders and directors of dissolution on December 31, 2010; informing BIR and applying for tax clearance certificate.
Evidence of business closure as of December 31, 2008, was cited.
The motion was denied as evidence was newly created and not "newly discovered".

On October 8, 2012, the CTA En Banc affirmed the denial of refund.
It relied on Systra Philippines, Inc. v. CIR, affirming the irrevocability of the carry-over option once chosen.
The En Banc rejected Stablewood's claim that the refund option remained available because it did not actually use the carried over credits.
The En Banc discussed that when a corporation ceases operations permanently before full utilization of credits, the irrevocability rule ceases and refund may be allowed, but requires proof and compliance with Sections 52(C) and 235 of NIRC.
Stablewood failed to present a tax clearance certificate and SEC certificate of dissolution.

Stablewood argued that Sections 52(C) and 235 do not require a tax clearance certificate to claim refund.
It also contended it made an irrevocable election for refund as stated in the TY 2005 ITR, and the carry-over was inadvertent.
Further argued that cessation of business makes the irrevocability rule inapplicable.
Claimed compliance with the two-year prescriptive period and presentation of proper CWT certificates.

Argued that the Court may look beyond the ITR declaration to the taxpayer’s conduct and evidence.
Contended Stablewood failed to prove permanent cessation of operations.

Whether Stablewood is entitled to a refund of its excess creditable withholding tax for taxable year 2005 in the amount of PHP 65,085,905.82.
Whether the election to carry over excess tax credits under Section 76 of the NIRC is irrevocable.
Whether the taxpayer’s permanent cessation of business affects application of the irrevocability rule and refund entitlement.
Whether compliance with tax clearance requirements under Sections 52(C) and 235 of the NIRC is mandatory for a refund claim following dissolution.