THIRD DIVISION
March 7, 2018
G.R. No. 205955
UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC., Petitioner
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent
D E C I S I O N
MARTIRES, J.:
When a corporation overpays its income tax liability as adjusted at the close of the taxable year, it has two options: (1) to be refunded or issued a tax credit certificate, or (2) to carry over such overpayment to the succeeding taxable quarters to be applied as tax credit against income tax due.1 Once the carry-over option is taken, it becomes irrevocable such that the taxpayer cannot later on change its mind in order to claim a cash refund or the issuance of a tax credit certificate of the very same amount of overpayment or excess m. come tax credit.2
Does the irrevocability rule apply exclusively to the carry-over option? Such is the novel issue presented in this case.
THE FACTS
Before the Court is a petition for review under Rule 45 of the Rules of Court filed by petitioner University Physicians Services Inc.-Management, Inc. (UPSI-MI) which seeks the reversal and setting aside of the 8 February 2013 Decision3 of the Court of Tax Appeals (CTA) En Banc in CTA-EB Case No. 828. ·Said decision of the CTA En Banc affirmed the 5 July 2011 Decision and 8 September 2011 Resolution of the CTA Second Division (CTA Division) in CTA Case No. 7908. The CTA Division denied the application of UPSI-MI for tax refund or issuance of Tax Credit Certificate (TCC) of its excess unutilized creditable income tax for the taxable year 2006.
The Antecedents
As narrated by the CTA, the facts are uncomplicated, viz:
UPSI-MI is a corporation incorporated and existing under and by virtue of laws of the Republic of the Philippines, with business address at 1122 General Luna Street, Paco. Manila. Respondent on the other hand, is the duly appointed Commissioner of Internal Revenue, with power, among others, 10 act upon claims for refund or tax credit of overpaid internal revenue taxes, with office address at the Fifth Floor, BIR National Office Building, BIR Road, Diliman , Quezon City.
On April 16, 2007. petitioner filed its Annual Income Tax Return (ITR) for the year ended December 31, 2006 with the Revenue District No. 34 of the Revenue Region No. 6 of the Bureau of Internal Revenue (BIR), reflecting an income tax overpayment of 5,159,341.00. computed as follows:4
Sales/Revenues/Receipts/Fees ₱ 28,808,960.00 Less: Cost of Sales/Services 23,834,605.00 Gross Income from Operation ₱ 4,974,355.00 Add: Non-Operating & Other Income 5,375.00 Total Gross Income ₱ 4,979,730.00 Less: Deductions ₱ 4,979,730.00 Taxable Income - Tax Rate (except MCIT Rate) 35% Income Tax - Minimum Corporate Income Tax (MCIT) ₱ 99,595.00 Aggregate Income Tax Due ₱ 99,595.00 Less: Tax Credits/Payments Prior Year's Excess Credits ₱ 2,331,102.00 Creditable Tax Withheld for the First Three Quarters
Creditable Tax Withheld for the Fourth Three Quarters
2,972,834.00
Total Tax Credits/Payments ₱ 5,258,936.00) Tax Payable/(Overpayment) ₱ (5,159,341.00) Subsequently, on November 14, 2007, petitioner filed an Annual ITR for the short period fiscal year ended March 31, '.W07, reflecting the income tax overpayment of 5. 159.341 from the previous period as "Prior Year’s Excess Credit", as follows:5
Sales/Revenues/Receipts/Fees 7,489,259 Less: Cost of Sales/Services 6,461,650 Gross Income from Operation 1,027,609 Add: Non-Operating & Other Income 479 Total Gross Income 1,028,088 Less: Deductions 1,206,543 Taxable Income (178,455) Tax Rate (except MCIT Rate) 35% Income Tax - Minimum Corporate Income Tax (MCIT) 20,562 Aggregate Income Tax Due 20,562 Less: Tax Credits/Payments Prior Year's Excess Credits 5,159,341 Creditable Tax Withheld for the First Three Quarters
1,107,228 Creditable Tax Withheld for the Fourth Quarter
6,266,569
Total Tax Credits/Payments 6,266,569
Tax Payable/(Overpayment) (6,246,007)
On the same date, petitioner filed an amended Annual ITR for the short period fiscal year ended March 31, 2007, reflecting the removal of the amount of the instant claim in the ''Prior Year's Excess Credit". Thus, the amount thereof was changed from ₱5, 159,341 to ₱2,231,507.
On October 10, 2008, petitioner filed with the respondent's office, a claim for refund and/or issuance of a Tax Credit Certificate (TCC) in the amount of ₱2,927.834.00, representing the alleged excess and unutilized creditable withholding taxes for 2006.
In view of the fact that respondent has not acted upon the foregoing claim for refund/tax credit, petitioner filed with a Petition for Review on April l4, 2009 before the Court in Division.
The Ruling of the CTA Division
After trial, the CT A Division denied the petition for review for lack of merit. It reasoned that UPSI-MI effectively exercised the carry-over option under Section 76 of the National Internal Revenue Code (NIRC) of 1997. On motion for reconsideration, UPSI-MI argued that the irrevocability rule under Section 76 of the NIRC is not applicable for the reason that it did not carry over to the succeeding taxable period the 2006 excess income tax credit. UPSI-MI added that the subject excess tax credits were inadvertently included in its original 2007 ITR, and such mistake was rectified in the amended 2007 ITR. Thus, UPSI-MI insisted that what should control is its election of the option "To be issued a Tax Credit Certificate" in its 2006 ITR.
The CTA Division ruled that UPSI-MI's alleged inadvertent inclusion of the 2006 excess tax credit in the 2007 original ITR belies its own allegation that it did not carry over the said amount to the succeeding taxable period. The amendment of the 2007 ITR cannot undo UPSI-MI's actual exercise of the carry-over option in the original 2007 ITR, for to do so would be against the irrevocability rule. The dispositive portion of the CTA Division's decision reads:
the instant Petition for Review is hereby DENIED for lack of merit.6WHEREFORE,