Case Summary (G.R. No. 226578)
Nature of the Case
The primary legal issue arises from the inaction of the Commissioner on the respondent's tax refund claim, which led the respondent to pursue judicial action before the Court of Tax Appeals (CTA). The CTA initially denied the claim due to the expiration of the applicable two-year prescriptive period. The respondent then appealed to the Court of Appeals (CA), which reversed the CTA's decision and ordered the Commissioner to refund the tax amount. The Commissioner subsequently appealed this decision.
Antecedents
In 1997, PL Management International generated an income of P24,000,000.00 from professional services, resulting in a withholding tax of P1,200,000.00. In the income tax return (ITR) filed for that year, the respondent recorded a net loss and claimed the withheld tax as a carryover for the next taxable year. However, a subsequent ITR for 1998 also showed a net loss, rendering the respondent unable to utilize the credit for that year. On April 12, 2000, the respondent filed a claim for a refund of the unutilized creditable withholding tax, but the Commissioner failed to act on the claim.
Ruling of the CTA
The CTA, upon reviewing the case due to the Commissioner's inaction, ruled on December 10, 2001, that the claim for refund was barred by prescription, concluding that the claim was filed more than two years from the time the subject tax was reported. The ruling specified that the respondent's action was initiated after the expiry of the two-year period mandated by Sections 204 (C) and 229 of the Tax Code.
Ruling of the CA
The CA reversed the CTA's ruling, reasoning that the two-year prescriptive period was not jurisdictional. It cited precedents that supported the suspension of the period due to equitable considerations. Consequently, the CA ruled in favor of the respondent, directing the Commissioner to refund the withheld tax amount. The Commissioner’s motion for reconsideration was denied by the CA.
Issues
On appeal, the petitioner challenged the CA's decision on two main grounds: first, the assertion that the CA erred by determining that the two-year prescriptive period under Section 229 is not jurisdictional, thus allowing for equitable suspension; and second, that the initial judicial claim was filed late, making it invalid.
Ruling of the Court
The Supreme Court reversed the CA's decision to refund the P1,200,000.00 to the respondent, emphasizing that the irrevocability rule in Section 76 of the National Internal Revenue Code of 1997 had been breached. The Court clarified that after opting to carry over the
...continue readingCase Syllabus (G.R. No. 226578)
Nature of the Case
- This case revolves around the inaction of the petitioner, the Commissioner of Internal Revenue, regarding the respondent's claim for a refund of unutilized creditable withholding tax for the taxable year 1997.
- The respondent filed a written claim for tax refund, which was not acted upon by the petitioner, prompting judicial action in the Court of Tax Appeals (CTA).
- The CTA denied the claim based on the premise that it was filed beyond the two-year prescriptive period, which was then appealed to the Court of Appeals (CA).
Antecedents
- In 1997, the respondent earned an income of P24,000,000.00, from which P1,200,000.00 was withheld as tax.
- The respondent reported a net loss in its 1997 income tax return (ITR) but indicated a claim for creditable withholding tax of P1,200,000.00 for the subsequent taxable year.
- The respondent's ITR for 1998 also reflected a net loss, preventing the claim from being utilized.
- A written claim for refund was submitted to the petitioner on April 12, 2000, which went unaddressed.
Ruling of the CTA
- Initially, the CTA ruled against the respondent on December 10, 2001, citing the claim's prescrip