Case Digest: COMMISSIONER OF INTERAL REVENUE v. MANILA ELECTRIC COMPANY

COMMISSIONER OF INTERAL REVENUE v. MANILA ELECTRIC COMPANY

The factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not be disturbed on appeal, unless it is shown that it committed gross error in the appreciation of facts, which did not happen in this case.

Manila Electric Company (Meralco) filed its tentative income tax reflecting a refundable amount of P101,897,741. Only P77,931,812 was applied as tax credit. An investigation was conducted showing that Meralco was liable for (1) deficiency income tax in the amount of P2,340,902.52; and (2) deficiency franchise tax in the amount of P2,838,335.84.” Later, Meralco filed an amended final corporate Income Tax Return reflecting a refundable amount of P107,649,729 and thus filed a letter-claim for refund or credit representing overpaid income taxes for the years 1987 and 1988. The Commission of Internal Revenue not having acted on its request, Meralco filed a judicial claim for refund or credit with the Court of Tax Appeals. It is gathered that Meralco paid the deficiency franchise tax in the amount of P2,838,335.84. It protested the payment of the alleged deficiency income tax and claimed as an alternative remedy the deduction thereof from its claim for refund or credit. After trial, the Court of Tax Appeals found in favor of Meralco being convinced that they proved its entitlement for the refund. The Court of Appeals affirmed the decision. 

ISSUE:

Whether or not the appellate court failed to consider Meralco’s failure to substantiate by positive evidence its entitlement to a tax refund or credit.

HELD:

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 taxable year. The issue of whether MERALCO adduced sufficient evidence to prove its entitlement to a refund is a question of fact. It bears noting that the tax court and the appellate court found MERALCO’s claim for tax refund or credit meritorious on the basis of the testimonial and documentary evidence adduced by the parties. It bears noting too that the Commissioner did not dispute the validity and authenticity of MERALCO’s quarterly income tax returns as well as the final adjustment returns for the years 1987 and 1988 and proofs of payment of its tax liabilities. Neither did the Commissioner refute MERALCO’s assertion that Commissioner failed to cross-examine its accountant who testified on the returns, and to object to its offer of evidence which included its quarterly and final adjustment returns and proofs of payment of its tax liabilities. It is doctrinal that the factual findings of the Court of Tax Appeals, when supported by substantial evidence, will not be disturbed on appeal, unless it is shown that it committed gross error in the appreciation of facts. Hence, as a matter of practice and principle, this Court will not set aside the conclusion reached by the said court, especially if affirmed by the Court of Appeals as in the present case. For by the nature of its functions, the tax court dedicates itself to the study and consideration of tax problems and necessarily develops expertise thereon, unless there has been an abuse or improvident exercise of authority on its part. None such is appreciated by this Court, however.