Anent the first issue, petitioner asserts that there is nothing in the law
which perpetually prohibits the refund of carried over excess tax. It
maintains that the option to carry-over is irrevocable only for the next
“taxable period” where the excess tax payment was carried over.
We are not convinced.
Section 76 of the NIRC of 1997 states –
Section 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
Pay the balance of tax still due; or
Carry-over the excess credit; or
Be credited or refunded with the excess amount paid, as the
case may be.
6 Id. at 137.
Decision 6 G.R. No. 168331
In case the corporation is entitled to 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 due for the taxable
quarters of the succeeding taxable years has been made, such option
shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall
be allowed therefore. (Emphasis supplied)
From the aforequoted provision, it is clear that once a corporation
exercises the option to carry-over, such option is irrevocable “for that
taxable period.” Having chosen to carry-over the excess quarterly income
tax, the corporation cannot thereafter choose to apply for a cash refund or for
the issuance of a tax credit certificate for the amount representing such
To avoid confusion, this Court has properly explained the phrase “for
that taxable period” in Commissioner of Internal Revenue v. Bank of the
Philippine Islands.8 In said case, the Court held that the phrase merely
identifies the excess income tax, subject of the option, by referring to the
“taxable period when it was acquired by the taxpayer.” Thus:
x x x Section 76 remains clear and unequivocal. Once the carry-over
option is taken, actually or constructively, it becomes irrevocable. It
mentioned no exception or qualification to the irrevocability rule.
Hence, the controlling factor for the operation of the irrevocability
rule is that the taxpayer chose an option; and once it had already done so,
it could no longer make another one. Consequently, after the taxpayer opts
to carry-over its excess tax credit to the following taxable period, the
question of whether or not it actually gets to apply said tax credit is
irrelevant. Section 76 of the NIRC of 1997 is explicit in stating that once
the option to carry over has been made, “no application for tax refund or
issuance of a tax credit certificate shall be allowed therefor.”
The last sentence of Section 76 of the NIRC of 1997 reads: “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
7 Commissioner of Internal Revenue v. Mirant (Philippines) Operations, Corporation, G.R. Nos.
171742 and 176165, June 15, 2011, 652 SCRA 80, 89-90.
8 G.R. No. 178490, July 7, 2009, 592 SCRA 219.
Decision 7 G.R. No. 168331
been made, such option shall be considered irrevocable for that taxable
period and no application for tax refund or issuance of a tax credit
certificate shall be allowed therefore.” The phrase “for that taxable
period” merely identifies the excess income tax, subject of the option,
by referring to the taxable period when it was acquired by the
taxpayer. In the present case, the excess income tax credit, which BPI
opted to carry over, was acquired by the said bank during the taxable year
1998. The option of BPI to carry over its 1998 excess income tax credit is
irrevocable; it cannot later on opt to apply for a refund of the very same
1998 excess income tax credit.
The Court of Appeals mistakenly understood the phrase “for that
taxable period” as a prescriptive period for the irrevocability rule x x x.
The evident intent of the legislature, in adding the last sentence to Section
76 of the NIRC of 1997, is to keep the taxpayer from flip-flopping on its
options, and avoid confusion and complication as regards said taxpayer’s
excess tax credit. The interpretation of the Court of Appeals only delays
the flip-flopping to the end of each succeeding taxable period.9
Plainly, petitioner’s claim for refund for 1998 should be denied as its
option to carry over has precluded it from claiming the refund of the excess
1998 income tax payment. [u]
Last edited by taxconsultantdavao on Fri Nov 16, 2012 1:14 am; edited 2 times in total