G.R. No. 188016 - Separate Opinion

REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF INTERNAL REVENUE v. TEAM (PHILS.) ENERGY CORPORATION (formerly MIRANT (PHILS.) ENERGY CORPORATION), G.R. No. 188016, January 14, 2015
♦ Decision, Bersamin [J]
♦ Separate Concurring Opinion, Sereno [J]

REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
TEAM (PHILS.) ENERGY CORPORATION (formerly MIRANT (PHILS.) ENERGY CORPORATION), Respondent.

I agree with the result of the voting, which is, to deny the Petition. However, I would like to express an alternative analysis of the statements in the Decision in this case that may prove more coherent with the applicable provision of the National Internal Revenue Code (NIRC) of 1997.

I agree with the ponencia that pursuant to Section 76 of the NIRC of 1997, a corporate taxpayer whose total quarterly income tax payments exceed its tax liability has two options. The first option is to file an application for a refund or an issuance of tax credit; the other option is to carry over the excess tax credit to the quarterly income tax liabilities of the succeeding taxable year.

I believe it is not correct, however, to reiterate the pronouncement of the Court in Philam Asset Management, Inc. v. Commissioner of Internal Revenue (Philam)1 that the two options are alternative and not cumulative in nature: that the choice of one precludes the other. I believe that such pronouncement should be read in relation to the factual milieu of Philam and should not encompass all claims under Section 76.

Philam is not applicable as it is not on all fours with the present case. Here, unlike in Philam, respondent has categorically opted for a tax refund. On the other hand, there were two situations contemplated in Philam: (1) in G.R. No. 156637, wherein the taxpayer failed to indicate a choice in the Final Adjustment Return (FAR), the Court ruled that such failure did not mean the outright barring of the request for a refund, should one still choose this option later on; and (2) in G.R. No. 162004, the taxpayer filled up the portion on "Prior Year's Excess Credits" in its subsequent FAR, an act that was then interpreted by the Court to mean that the taxpayer had constructively chosen the carry-over option.

A careful reading of Section 76 suggests that the irrevocability rule applies only to the option to carry over. The provision reads:

SEC. 76. Final Adjustment Return. -Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either:

In case the corporation is entitledto a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable periodand no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. (Emphasis supplied) The last sentence of the above provision shows the intention of the law to limit the irrevocability rule to the carry-over option. Simply stated, if the taxpayer originally opted for a refund, there is nothing in the law that prevents it from changing its choice and carrying over its tax credits to succeeding taxable quarters in which it incurs a tax liability. Once it carries over to succeeding taxable quarters the excess tax for the previous taxable year, the act becomes irrevocable for that taxable period.

To my mind, in claims for a refund under Section 76, the requirement of presenting the subsequent quarterly returns is indispensable to show that the taxpayer did not apply its tax creditsto succeeding taxable quarters. We should be mindful of the basic principle in taxation that the burden of proving entitlement to a refund is on the taxpayer; therefore, it is the taxpayer that has the burden of proving that it has not carried over its creditable tax to succeeding quarterly returns.

I would agree that Philam categorically ruled that the presentation of subsequent returns is not necessary in claims for a refund. However, I believe that such principle should be revisited. Although the Court ruled in the first case (Philam, G.R. No. 156637) that the requirement of presentation of the ITR or FAR of the succeeding year has no basis in law or in jurisprudence, it is worth emphasizing that the Court still found the importance of the succeeding FAR in the resolution of G.R. No. 162004, in which the subject of the claim for a refund was the 1998 excess tax credits. In determining that petitioner in Philamhad effectively chosen the carry-over option in G.R. No. 162004, the Court ruled:

First, the fact that it filled out the portion "Prior Year’s Excess Credits" in its 1999 FAR means that it categorically availed itself of the carry-over option. In fact, the line that precedes that phrase in the BIR form clearly states "Less: Tax Credits/Payments." The contention that it merely filled out that portion because it was a requirement -- and that to have done otherwise would have been tantamount to falsifying the FAR -- is a long shot. (Emphasis supplied)

After the Court examinedthe succeeding FAR, it found that there was a constructive carry-over choice. The Court contradicted its own pronouncement in the first case when it effectively recognized the importance of the presentation of the succeeding return in the second case. It could not have disposed of G.R. No. 162004 in the same manner had it not examined the succeeding return. Undeniably, that is the logic behind the requirement of presenting not just the preceding but also the subsequent returns.

Mere filling up the portion on "Prior Year’s Excess Credits" is tantamount to a constructive carry-over choice.1âwphi1 This portion is clearly available for the taxpayer to fill up, notjust in the FAR but even in the quarterly returns.2 Logically also, upon the filing of subsequent quarterly returns, the entries in that portion may be utilized and tax liabilities for the quarter deducted therefrom. I therefore find it significant to require taxpayers to present subsequent returns to the court to avoid the possibility of granting a refund even when the amount claimed had actually been applied to tax liabilities for the succeeding taxable quarters or year after the claim was filed.

It must be emphasized that this requirement is evidentiary, as the CTA (being the trial court) has no access to these documents; and so when the quarterly returns are not submitted, the court cannot verify whether the choice was amended and excess credits were utilized during the succeeding quarters. The duty of the court in resolving claims for a refund of creditable withholding taxes is not confined to the computation of the creditable tax, but includes making sure that the excess tax was not applied to the taxpayer’s liabilities through the carry over option. This precaution is in keeping with the thrust that the taxpayer cannot claim a refund and at the same time apply its excess tax to its succeeding tax liabilities. The presentation of the quarterly returns, apart from the final adjusted return, is for the purpose of ascertaining that the taxpayer did not apply (carry over) its creditable tax to its current tax liabilities. Once this option is availed of, it becomes irrevocable, and the taxpayer can no longer change its option and apply for a refund.

Also, contrary to the observation of the ponencia, the burden of rebutting (the evidence of the taxpayer by presenting its subsequent returns) was not shifted to the government, considering that the taxpayer has not completely shown that it did not utilize its creditable withholding taxes against its current liabilities. In short, taxpayers ought to show through all means and documents that they have not yet utilized their creditable taxes, and that they have complied with the law (Section 7 6).

To address the position that since the quarterly returns are with the Bureau of Internal Revenue (BIR) then the BIR, and not the taxpayer, that must present them, it must be stressed that it was the taxpayer who brought the case to court in order to claim a refund. Thus, it has the responsibility and the burden to prove its case and not rely on the BIR to prove otherwise. Parenthetically, taxpayers also ought to have copies of their quarterly returns as it is their statutory obligation to file those with the BIR within a certain period; the requirement of presenting the succeeding returns cannot be a superfluity or just another burden, considering that the quarterly returns are readily available in their own files. Hence, it would be appropriate and even more practical for the court to require the taxpayer to present these documents to prove that the creditable tax has not yet been carried over and utilized, rather than for the court to grant a refund simply because the BIR has neglected to present the quarterly returns. It would be more in keeping with the thrust of justice and equity that we protect the coffers of the government than allow some taxpayers to avail themselves of double benefits in view of the negligence or weakness of the counsel for the BIR.

Accordingly, I vote to DENY the Petition, but with qualifications to the statements, adverted to above, made in the Decision.