Case Digest: AB LEASING AND FINANCE CORPORATION v. COMMISSION ON INTERNAL REVENUE 405 SCRA 380 (2003)

AB LEASING AND FINANCE CORPORATION v. COMMISSION ON INTERNAL REVENUE 405 SCRA 380 (2003)

A corporation that is entitled to a refund of the excess estimated quarterly income taxes paid may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding year.

In the year 1993, Petitioner AB Leasing and Finance Corporation (AB LFC) had a net income of P1,775,832.00, for which it was liable to pay an income tax amounting to P621,541.00. On the other hand, AB LFC had previously made payments in the total amount of P1,594,756.00, inclusive of unused prior year’s tax credits. AB LFC thus opted to apply its excess payment of P973,215.00 as tax credits for the following year, 1994. In 1994, AB LFC had a net income of P3,624,280.89 for which it paid income tax in the amount of P295,283.32. At the end of 1994, however, AB LFC incurred a net loss of P3,450,916.00, thereby exempting it from payment of income tax for that year. It was thus unable to apply the P973,215.00 tax credits incurred in 1993. AB LFC then indicated in its amended annual income tax return for calendar year ending December 31, 1994 that it made excess tax payments totaling P1,268,498.00 (P973,215.00 in 1993 plus P295,283.32 in 1994).
AB LFC filed a claim for refund to the respondent Commission on Internal Revenue (CIR) for the taxable year 1993 in the amount of P973,215.00, offering as evidence its income tax return for 1993 and 1994. The CIR failed to act on the said claim, prompting AB LFC to file an action in the Court of Tax Appeals. AB LFC likewise filed a claim for refund for the taxable year 1994 in the amount of P295,283.32. The CTA granted its initial petition, but denied the latter on the ground that AB LFC failed to present its 1995 income tax return as well as the breakdown of the excess taxes paid in 1994. The Court of Appeals (CA) affirmed the decision of the CIR.

ISSUE:

Whether or not the claim for tax refund should be denied

HELD:

The CIR’s arguments, premised on the assumption that the 1993 excess tax payment of P973,215.00 can be carried over as tax credit for the 1995 taxable year, does not lie. There was no need for AB LFC to present in evidence the 1995 income tax return or to give a breakdown of the excess taxes paid for the taxable year ending 1994 to support a claim for refund of over payment of income taxes for 1993.
Section 69 of the old NIRC provides that in case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding year. The carrying forward of any excess or overpaid income tax for a given taxable year then is limited to the succeeding taxable year only. This, the CTA and the CA have repeatedly held.
Since the case at bar involves a claim for refund of overpaid taxes for 1993, AB LFC only have applied the 1993 excess tax credits to its 1994 income tax liabilities. To further carry-over to 1995 the 1993 excess tax credits is violative of above-quoted Section 69 of the old NIRC.
That AB LFC had signified its intention to apply the entire amount of P1,268,498 representing excess tax payments of P973,215.00 for 1993 and P295,283.00 for 1994 to the year 1995 is immaterial. For, it bears repeating, only the amount of P295,283.00 representing the 1994 income tax overpayments may only be applied to the succeeding taxable year, 1995.
But even assuming that there was a need for the CIR to present in evidence the 1995 income tax return or the breakdown of its excess taxes paid for the taxable year ending 1994, the CTA could have taken judicial notice of the records of CTA Case No. 5513, AB LFC’s claim for refund of P295,283.00 overpaid income taxes for taxable year 1994, which was already pending before it. It is significant to note that AB LFC’s claim for refund in said case was granted by the CTA, as mentioned earlier, by Decision of February 10, 1999 and that out of the amount of P1,268,498.00 indicated in petitioner’s income tax return, the refund being claimed by AB LFC in the same case was only P295,283.32.
Clearly, the amount of P973,215.00 representing the 1993 tax credits subject of the petition at bar was excluded from the claim for refund in CTA Case No. 5513. Moreover, the 1994 and 1995 income tax returns were offered as evidence in said CTA Case No. 5513. Thus, the CTA had sufficient means to ascertain whether or not the 1993 tax credits were utilized in 1994.

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