Case Summary (G.R. No. 206517)
Applicable Law
The legal framework relevant to this case includes the National Internal Revenue Code (NIRC), particularly Sections 76, 204(C), and 229, which govern claims for tax refunds and the conditions under which a carry-over of tax credits can be made.
Background Facts
Stablewood is a corporation registered with the Securities and Exchange Commission (SEC) in the Philippines. From January 1998 to July 2007, it was registered under different names and with the Bureau of Internal Revenue (BIR) in multiple revenue districts. The dispute arose after Stablewood filed its Annual Income Tax Return (ITR) for tax year 2005, which indicated an overpayment of CWT. Having selected the option to obtain a tax credit certificate, Stablewood subsequently carried over this overpayment to its Quarterly Income Tax Returns for the first three quarters of 2006. After failing to receive action on an administrative claim for refund, Stablewood initiated a petition for review before the Court of Tax Appeals (CTA).
Key Issues and Arguments
The central issue revolves around whether Stablewood is entitled to a tax refund after it opted to carry over the CWT overpayment. The CIR contended that tax payments are assumed to be compliant with the law and must not be refunded unless the taxpayer proves erroneous payment. The CTA held that the election made by Stablewood to carry over the CWT amount was irrevocable, negating any claim for a refund. Stablewood argued that its initial choice for a tax credit certificate should allow for a refund as it had not utilized the CWT.
Rulings of the Tax Courts
The CTA Third Division ruled against Stablewood, emphasizing that once the option to carry over is exercised, it becomes irrevocable as per Section 76 of the NIRC. Stablewood’s Motion for Reconsideration, which cited its dissolution as a basis for the refund, was also denied due to the absence of newly discovered evidence.
The CTA En Banc affirmed the lower court's finding, iterating that the irrevocability of the carry-over option prohibits any subsequent request for refund, irrespective of the actual utilization of the excess CWT. It was noted that although the dissolution process was underway, it did not absolve Stablewood from the tax liabilities nor did it provide grounds for claiming the refund.
Court's Final Ruling
The Supreme Court upheld the findings of the CTA En Banc and Third Division, emp
...continue readingCase Syllabus (G.R. No. 206517)
Parties and Procedural Posture
- Petitioner: Stablewood Philippines, Inc., formerly known as Rollsaroyce Philippines, Inc., and before that Orca Energy, Inc.
- Respondent: Commissioner of Internal Revenue (CIR).
- Subject: Petition for Review on Certiorari under Rule 45 of the Rules of Court.
- Lower Courts: Court of Tax Appeals (CTA) Third Division and CTA En Banc.
- Final relief sought: Tax refund or issuance of a tax credit certificate (TCC) for overpayment of creditable withholding tax (CWT) for taxable year 2005 amounting to PHP 65,085,905.82.
Facts of the Case
- Stablewood is a domestic corporation organized under Philippine laws, registered with the Securities and Exchange Commission (SEC).
- Registered with the Bureau of Internal Revenue (BIR) under Revenue Region No. 8 and experienced a change of address from RDO No. 50 to RDO No. 47.
- Filed its Annual Income Tax Return (ITR) for TY 2005 on April 7, 2006, indicating an overpayment of CWT amounting to PHP 76,245,344.99 and marked for issuance of a Tax Credit Certificate.
- Despite this, Stablewood carried over this overpayment in its Quarterly Income Tax Returns for the first three quarters of TY 2006.
- On November 24, 2006, filed an administrative claim for refund with BIR for the excess CWT of PHP 65,085,905.82.
- Subsequently filed its Annual ITR for TY 2006 but indicated it did not carry over the unutilized CWT from TY 2005.
- CIR failed to act on the refund claim, prompting Stablewood to file a Petition for Review with the CTA.
CIR's Contentions
- Taxes paid and collected are presumed lawful unless the taxpayer proves erroneous or illegal collection.
- It was Stablewood's burden to prove compliance with Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) for refund or TCC issuance.
- Stablewood failed to prove its entitlement to refund or credit.
Court of Tax Appeals Division Decision
- Dated January 31, 2011, denying Stablewood's claim for refund of CWT.
- Reasoning: Carrying over the tax overpayment into TY 2006 quarterly returns constitutes an irrevocable choice under Section 76 of the NIRC.
- The initial choice marked in the TY 2005 Annual ITR for refund/TCC was negated by the carry-over action.
- Stablewood's Motion for Reconsideration and New Trial denied due to absence of newly discovered evidence.
Court of Tax Appeals En Banc Decision
- Affirmed CTA Division ruling on October 8, 2012.
- Cited Systra Philippines, Inc. v. Commissioner of Internal Revenue, holding that the option to carry over excess tax credit is irrevocable.
- Sta