SECOND DIVISION

[G.R. No. 206526. January 28, 2015.]

WINEBRENNER & IÑIGO INSURANCE BROKERS, INC. , petitioner, vs .

COMMISSIONER OF INTERNAL REVENUE , respondent.

DECISION

MENDOZA , J : p

In this petition for review under Rule 45 of the Rules of Court and Rule 16 of the
Revised Rules of the Court of Tax Appeals, Winebrenner & Iñigo Insurance Brokers, Inc.
(petitioner) seeks the review of the March 22, 2013 Decision 1 of the Court of Tax Appeals
En Banc (CTA-En Banc) . In the said decision, the CTA- En Banc a rmed the denial of
petitioner's judicial claim for refund or issuance of tax credit certi cate for excess and
unutilized creditable withholding tax (CWT) for the 1st to 4th quarter of calendar year (CY)
2003 amounting to P4,073,954.00. In denying the refund, the CTA- En Banc held that
petitioner failed to prove that the excess CWT for CY 2003 was not carried over to the
succeeding quarters of the subject taxable year. Under the 1997 National Internal Revenue
Code (NIRC), a taxpayer must not have exercised the option to carry over the excess CWT
for a particular taxable year in order to qualify for refund.
The Factual Antecedents
On April 15, 2004, petitioner filed its Annual Income Tax Return for CY 2003.
About two years thereafter or on April 7, 2006, petitioner applied for the
administrative tax credit/refund claiming entitlement to the refund of its excess or
unutilized CWT for CY 2003, by ling BIR Form No. 1914 with the Revenue District O ce
No. 50 of the Bureau of Internal Revenue (BIR).
There being no action taken on the said claim, a petition for review was led by
petitioner before the CTA on April 11, 2006. The case was docketed as CTA Case No.
7440 and was raffled to the Special First Division (CTA Division).
On April 13, 2010, CTA Division partially granted petitioner's claim for refund of
excess and unutilized CWT for CY 2003 in the reduced amount of P2,737,903.34 in its April
13, 2010 Decision 2 (original decision). The dispositive portion of the decision reads:
In view of the foregoing, the Petition for Review is hereby PARTIALLY
GRANTED . Accordingly, respondent is hereby ORDERED to REFUND or ISSUE
A TAX CREDIT CERTIFICATE in favor of the petitioner in the reduced amount
of P2,737,903.34 representing its excess/unutilized creditable withholding taxes
for the year 2003.

SO ORDERED . 3

Petitioner led a Motion for Partial Reconsideration with Leave to Submit

Supplemental Evidence. It prayed that an amended decision be issued granting the entirety
of its claim for refund, or in the alternative, that it be allowed to submit and offer relevant
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 documents as supplemental evidence. CTEDSI

Respondent Commissioner of Internal Revenue (CIR) also moved for

reconsideration, praying for the denial of the entire amount of refund because petitioner
failed to present the quarterly Income Tax Returns (ITRs) for CY 2004. To the CIR, the
presentation of the 2004 quarterly ITRs was indispensable in proving petitioner's
entitlement to the claimed amount because it would prove that no carry-over of unutilized
and excess CWT for the four (4) quarters of CY 2003 to the succeeding four (4) quarters
of CY 2004 was made. In the absence of said ITRs, no refund could be granted. In the CIR's
view, this was in accordance with the irrevocability rule under Section 76 of the NIRC which
reads:
SEC. 76. Final Adjustment Return. — Every corporation liable to tax under
Section 27 shall le an adjustment return covering the total taxable income for
the preceding calendar or scal 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:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credits; or

(C) Be credited or refunded with the excess amount paid, as the case may
be.

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 nal
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
period and no application for cash refund or issuance of a tax credit certi cate
shall be allowed therefor.

On July 27, 2011, the CTA-Division reversed itself. In an Amended Decision, 4 it

denied the entire claim of petitioner. It reasoned out that petitioner should have presented
as evidence its rst, second and third quarterly ITRs for the year 2004 to prove that the
unutilized CWT being claimed had not been carried over to the succeeding quarters. Thus:
WHEREFORE , in view of the foregoing, petitioner's Motion for Partial
Reconsideration is hereby DENIED while respondent's Motion for
Reconsideration is hereby GRANTED . Accordingly, the Decision dated April 13,
2010 granting petitioner's claim in the reduced amount of P2,737,903.34 is hereby
REVERSED AND SET ASIDE . Consequently, the instant Petition for Review is
hereby DENIED due to insufficiency of evidence.

SO ORDERED . 5

Aggrieved, petitioner elevated the case to the CTA En Banc praying for the reversal
of the Amended Decision of the CTA Division.
In its March 22, 2013 Decision, 6 the CTA- En Banc a rmed the Amended Decision
of the CTA-Division. It stated that before a cash refund or an issuance of tax credit
certi cate for unutilized excess tax credits could be granted, it was essential for petitioner
to establish and prove, by presenting the quarterly ITRs of the succeeding years, that the
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 excess CWT was not carried over to the succeeding taxable quarters considering that the
option to carry over in the succeeding taxable quarters could not be modi ed in the nal
adjustment returns (FAR). Because petitioner did not present the rst, second and third
quarterly ITRs for CY 2004, despite having offered and submitted the Annual ITR/FAR for
the same year, the CTA- En Banc stated that the petitioner failed to discharge its burden,
hence, no refund could be granted. In justifying its conclusions, the CTA- En Banc cited its
own case of Millennium Business Services, Inc. v. Commissioner of Internal Revenue
(Millennium) 7 wherein it held as follows: SDATEc

Since the burden of proof is upon the claimant to show that the amount
claimed was not utilized or carried over to the succeeding taxable quarters, the
presentation of the succeeding quarterly income tax return and nal adjustment
return is indispensable to prove that it did not carry over or utilized the claimed
excess creditable withholding taxes. Absent thereof, there will be no basis for a
taxpayer's claim for refund since there will be no evidence that the taxpayer did
not carry over or utilize the claimed excess creditable withholding taxes to the
succeeding taxable quarters.

Signi cantly, a taxpayer may amend its quarterly income tax return or
annual income tax return or Final Adjustment Return, which in any case may
modify the previous intention to carry-over, apply as tax credit certi cate or
refund, as the case may be. But the option to carry over in the succeeding taxable
quarters under the irrevocability rule cannot be modi ed in its nal adjustment
return.

The presentation of the final adjustment return does not shift the burden of
proof that the excess creditable withholding tax was not utilized or carried over to
the rst three (3) taxable quarters. It remains with the taxpayer claimant. It goes
without saying that nal adjustment returns of the preceding and the succeeding
taxable years are not su cient to prove that the amount claimed was utilized or
carried over to the first three (3) taxable quarters.

The importance of the presentation of the succeeding quarterly income tax

return and the annual income tax return of the subsequent taxable year need not
be overly emphasized. All corporations subject to income tax, are required to le
quarterly income tax returns, on a cumulative basis for the preceding quarters,
upon which payment of their income tax has been made. In addition to the
quarterly income tax returns, corporations are required to le a nal or adjustment
return on or before the fteenth day of April. The quarterly income tax return, like
the nal adjustment return, is the most reliable rsthand evidence of corporate
acts pertaining to income taxes, as it includes the itemization and summary of
additions to and deductions from the income tax due. These entries are not
without rhyme or reason. They are required, because they facilitate the tax
administration process, and guide this Court to the veracity of a petitioner's claim
for refund without which petitioner could not prove with certainty that the claimed
amount was not utilized or carried over to the succeeding quarters or the option to
carry over and apply the excess was effectively chosen despite the intent to claim
a refund.
In the same vein, if the government wants to disprove that the excess
creditable withholding tax was not utilized or carried over to the succeeding
taxable quarters, the presentation of the succeeding quarterly income tax return
and the annual income tax return of the subsequent taxable year indicating
utilization or carrying over are [sic] indispensible. However, the claimant must rst
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 establish its claim for refund, such that it did not utilize or carry over or that it
opted to utilize and carry over to the 1st, 2nd, 3rd quarters and nal adjustment
return of the succeeding taxable year.
Concomitantly, the presentation of the quarterly income tax return and the
annual income tax return to prove the fact that excess creditable withholding tax
was not utilized or carried over or opted to be utilized and carried over to the 1st,
2nd, 3rd quarters and nal adjustment return of the succeeding taxable quarter is
not only for convenience to facilitate the tax administration process but it is part
of the requisites to establish the claim for refund. Section 76 of the NIRC of 1997
provides that if the taxpayer claimant carries over and applies the excess
quarterly income tax against the income tax due for the taxable quarters of the
succeeding taxable years, the same is irrevocable and no application for cash
refund or issuance of a tax credit certificate shall be allowed. 8

Hence, this petition.

Noteworthy is the fact that the CTA- En Banc ruling was met with two dissents from
Associate Justices Juanito C. Castañeda (Justice Castañeda) and Esperanza R. Fabon-
Victorino (Justice Fabon-Victorino).
In his Dissenting Opinion 9 which was concurred in by Justice Fabon-Victorino,
Justice Castañeda expressed the view that the CTA- En Banc should have reinstated the
CTA-Division's original decision because in the cases of Philam Asset Management, Inc. v.
Commissioner of Internal Revenue (Philam); 1 0 State Land Investment Corporation v.
Commissioner of Internal Revenue (State Land); 1 1 Commissioner of Internal Revenue v.
PERF Realty Corporation (PERF Realty); 1 2 and Commissioner of Internal Revenue v. Mirant
(Philippines) Operations, Corporation (Mirant), 1 3 this Court already ruled that requiring the
ITR or the FAR for the succeeding year in a claim for refund had no basis in law and
jurisprudence. According to him, the submission of the FAR of the succeeding taxable year
was not required under the law to prove the claimant's entitlement to excess or unutilized
CWT, and by following logic, the submission of quarterly income tax returns for the
subsequent taxable period was likewise unnecessary. He found no justi able reason not to
follow the existing rulings of this Court. DcaSIH

Petitioner's reasoning in this petition echoes the dissenting opinion of Justice

Castañeda. It further submits that despite the non-presentation of the quarterly ITRs, it has
su ciently shown that the excess CWT for CY 2003 was not carried over or applied to its
income tax liabilities for CY 2004, as shown in the Annual ITR for 2004 it submitted. Thus,
petitioner insists that its refund should have been granted. Petitioner further avers, in its
Reply, 1 4 that even if Millennium Business case was applicable, such must be given
prospective effect considering that this case was litigated on the basis of the doctrines
laid down in Philam, State Land and PERF Realty cases wherein the submission of quarterly
ITRs in a case for tax refund was held by this Court as not mandatory.
In its Comment, 1 5 the CIR counters that even if the taxpayer signi es the option for
either tax refund or carry-over as tax credit, this does not ipso facto confer the right to
avail of the option immediately. There is a need, according to the CIR, for an investigation
to ascertain the correctness of the corporate returns and the amount sought to be
credited; and part of which is to look into the quarterly returns so that it may be
determined whether or not excess and unutilized CWT was carried over into the
succeeding quarters of the next taxable year. Because the pertinent quarterly ITRs were
not presented, the CIR submits that the petitioner failed to prove its right to a tax refund.
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 Issue
The sole issue here is whether the submission and presentation of the quarterly ITRs
of the succeeding quarters of a taxable year is indispensable in a claim for refund.
The Court's Ruling
The Court recognizes, as it always has, that the burden of proof to establish
entitlement to refund is on the claimant taxpayer. 1 6 Being in the nature of a claim for
exemption, 1 7 refund is construed in strictissimi juris against the entity claiming the refund
and in favor of the taxing power. 1 8 This is the reason why a claimant must positively show
compliance with the statutory requirements provided for under the NIRC in order to
successfully pursue one's claim. As implemented by the applicable rules and regulations
and as interpreted in a vast array of decisions, a taxpayer who seeks a refund of excess
and unutilized CWT must:
1) File the claim with the CIR within the two year period from the date of
payment of the tax;
2) Show on the return that the income received was declared as part of the
gross income; and
3) Establish the fact of withholding by a copy of a statement duly issued by
the payor to the payee showing the amount paid and the amount of
tax withheld. 1 9
The original decision of the CTA-Division made plain that the petitioner complied
with the above requisites in so far as the reduced amount of P2,737,903.34 was
concerned. In the amended decision, however, it was pointed out that because petitioner
failed to present the quarterly ITRs of the subsequent year, there was an impossibility of
determining compliance with the irrevocability rule under Section 76 of the NIRC as in
those documents could be found evidence of whether the excess CWT was applied to its
income tax liabilities in the quarters of 2004. The irrevocability rule under Section 76 of the
NIRC means that once an option, either for refund or issuance of tax credit certi cate or
carry-over of CWT has been exercised, the same can no longer be modi ed for the
succeeding taxable years. 2 0 For said reason, the CTA- En Banc a rmed the conclusion in
the amended decision that because of the said impossibility, the claim for refund was not
substantiated.
The CIR agrees with the disposition of the CTA- En Banc, stressing that the petitioner
failed to carry out the burden of showing that no carry-over was made when it did not
present the quarterly ITRs for CY 2004.
Petitioner disagrees, as the dissents did, that the non-submission of quarterly ITRs
is fatal to its claim. DSAacC

Hence, the issue on the indispensability of quarterly ITRs of the succeeding taxable
year in a claim for refund.
The Court finds for the petitioner.
There is no question that those who claim must not only prove its entitlement to the
excess credits, but likewise must prove that no carry-over has been made in cases where
refund is sought.

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 In this case, the fact of having carried over petitioner's 2003 excess credits to
succeeding taxable year is in issue. According to the CTA- En Banc and the CIR, the only
evidence that can su ciently show that carrying over has been made is to present the
quarterly ITRs. Some members of this Court adhere to the same view.
The Court however cannot.
Proving that no carry-over has been made does not absolutely require the
presentation of the quarterly ITRs.
I n Philam, the petitioner therein sought for recognition of its right to the claimed
refund of unutilized CWT. The CIR opposed the claim, on the grounds similar to the case at
hand, that no proof was provided showing the non-carry over of excess CWT to the
subsequent quarters of the subject year. In a categorical manner, the Court ruled that the
presentation of the quarterly ITRs was not necessary. Therein, it was written:
Requiring that the ITR or the FAR of the succeeding year be presented to
the BIR in requesting a tax refund has no basis in law and jurisprudence.

First, Section 76 of the Tax Code does not mandate it. The law merely
requires the ling of the FAR for the preceding — not the succeeding — taxable
year. Indeed, any refundable amount indicated in the FAR of the preceding taxable
year may be credited against the estimated income tax liabilities for the taxable
quarters of the succeeding taxable year. However, nowhere is there even a tinge of
a hint in any provisions of the [NIRC] that the FAR of the taxable year following
the period to which the tax credits are originally being applied should also be
presented to the BIR.
Second, Section 5 of RR 12-94, amending Section 10 (a) of RR 6-85, merely
provides that claims for refund of income taxes deducted and withheld from
income payments shall be given due course only (1) when it is shown on the ITR
that the income payment received is being declared part of the taxpayer's gross
income; and (2) when the fact of withholding is established by a copy of the
withholding tax statement, duly issued by the payor to the payee, showing the
amount paid and the income tax withheld from that amount.

It has been submitted that Philam cannot be cited as a precedent to hold that the
presentation of the quarterly income tax return is not indispensable as it appears that the
quarterly returns for the succeeding year were presented when the petitioner therein led
an administrative claim for the refund of its excess taxes withheld in 1997.
It appears however that there is misunderstanding in the ruling of the Court in
Philam. That factual distinction does not negate the proposition that subsequent quarterly
ITRs are not indispensable. The logic in not requiring quarterly ITRs of the succeeding
taxable years to be presented remains true to this day. What Section 76 requires, just like
in all civil cases, is to prove the prima facie entitlement to a claim, including the fact of not
having carried over the excess credits to the subsequent quarters or taxable year. It does
not say that to prove such a fact, succeeding quarterly ITRs are absolutely needed. cTaDHS

This simply underscores the rule that any document, other than quarterly ITRs may
be used to establish that indeed the non-carry over clause has been complied with,
provided that such is competent, relevant and part of the records. The Court is thus not
prepared to make a pronouncement as to the indispensability of the quarterly ITRs in a
claim for refund for no court can limit a party to the means of proving a fact for as long as
they are consistent with the rules of evidence and fair play. The means of ascertainment of
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 a fact is best left to the party that alleges the same. The Court's power is limited only to
the appreciation of that means pursuant to the prevailing rules of evidence. To stress, what
the NIRC merely requires is to su ciently prove the existence of the non-carry over of
excess CWT in a claim for refund.
The implementing rules similarly support this conclusion, particularly Section 2.58.3
of Revenue Regulations No. 2-98 thereof. There, it provides as follows:
SECTION 2.58.3. Claim for Tax Credit or Refund. —
(A) The amount of creditable tax withheld shall be allowed as a tax credit
against the income tax liability of the payee in the quarter of the taxable year in
which income was earned or received.
(B) Claims for tax credit or refund of any creditable income tax which was
deducted and withheld on income payments shall be given due course only when
it is shown that the income payment has been declared as part of the gross
income and the fact of withholding is established by a copy of the withholding
tax statement duly issued by the payer to the payee showing the amount paid and
the amount of tax withheld therefrom.

xxx xxx xxx

Evident from the above is the absence of any categorical pronouncement of

requiring the presentation of the succeeding quarterly ITRs in order to prove the fact of
non-carrying over. To say the least, the Court rules that as to the means of proving it, It has
no power to unduly restrict it.
In this case, it confounds the Court why the CTA did not recognize and discuss in
detail the su ciency of the annual ITR for 2004, 2 1 which was submitted by the petitioner.
The CTA in fact said:
In the present case, while petitioner did offer its Annual ITR/Final
Adjustment Return for taxable year 2004, it appears that petitioner miserably
failed to submit and offer as part of its evidence the rst, second, and third
Quarterly ITRs for the year 2004. Consequently, petitioner was not able to prove
that it did not exercise its option to carry-over its excess CWT. 2 2

Petitioner claims that the requirement of proof showing the non-carry over has been
established in said document.
Indeed, an annual ITR contains the total taxable income earned for the four (4)
quarters of a taxable year, as well as deductions and tax credits previously reported or
carried over in the quarterly income tax returns for the subject period. A quick look at the
Annual ITR reveals this fact:
Aggregate Income Tax Due
Less Tax Credits/Payments
Prior Year's excess Credits — Taxes withheld
Tax Payment (s) for the Previous Quarter (s) of the same taxable year other
than MCIT cHDEaC

xxx xxx xxx

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 Creditable Tax Withheld for the Previous Quarter (s)
Creditable Tax Withheld Per BIR Form No. 2307 for this Quarter

xxx xxx xxx 2 3

It goes without saying that the annual ITR (including any other proof that may be
su cient to the Court) can su ciently reveal whether carry over has been made in
subsequent quarters even if the petitioner has chosen the option of tax credit or refund in
the immediately 2003 annual ITR.
Section 76 of the NIRC requires a corporation to le a Final Adjustment Return (or
Annual ITR) covering the total taxable income for the preceding calendar or scal year. The
total taxable income contains the combined income for the four quarters of the taxable
year, as well as the deductions and excess tax credits carried over in the quarterly income
tax returns for the same period.
If the excess tax credits of the preceding year were deducted, whether in whole or in
part, from the estimated income tax liabilities of any of the taxable quarters of the
succeeding taxable year, the total amount of the tax credits deducted for the entire taxable
year should appear in the Annual ITR under the item "Prior Year's Excess Credits."
Otherwise, or if the tax credits were carried over to the succeeding quarters and the
corporation did not report it in the annual ITR, there would be a discrepancy in the amounts
of combined income and tax credits carried over for all quarters and the corporation would
end up shouldering a bigger tax payable. It must be remembered that taxes computed in
the quarterly returns are mere estimates. It is the annual ITR which shows the aggregate
amounts of income, deductions, and credits for all quarters of the taxable year. It is the
nal adjustment return which shows whether a corporation incurred a loss or gained a
pro t during the taxable quarter . 2 4 Thus, the presentation of the annual ITR would su ce
in proving that prior year's excess credits were not utilized for the taxable year in order to
make a final determination of the total tax due.
In this case, petitioner reported an overpayment in the amount of P7,194,213.00 in
its annual ITR for the year ended December 2003:
Annual ITR 2003
Income Tax Due 1,259,259.00
Less: Prior Year's Excess Credits (2002 Annual
(4,379,518.00)
ITR)
Creditable Tax Withheld for the 4th Quarter (4,073,954.00)
Tax Payable/(Overpayment) (7,194,213.00)

For the overpayment, petitioner chose the option "To be issued a Tax Credit
Certi cate." In its Annual ITR for the year ended December 2004, petitioner did not report
the Creditable Tax Withheld for the 4th quarter of 2003 in the amount of P4,073,954.00 as
prior year's excess credits. As shown in the 2004 ITR:
Annual ITR 2004
Income Tax Due 1,321,409.00
Less: Prior Year's Excess Credits -
Creditable Tax Withheld for the 4th Quarter (3,689,419.00)
Tax Payable/(Overpayment) (2,368,010.00)

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 Verily, the absence of any amount written in the Prior Year excess Credit — Tax
Withheld portion of petitioner's 2004 annual ITR clearly shows that no prior excess credits
were carried over in the rst four quarters of 2004 . And since petitioner was able to
su ciently prove that excess tax credits in 2003 were not carried over to taxable year
2004 by leaving the item "Prior Year's Excess Credits" as blank in its 2004 annual ITR, then
petitioner is entitled to a refund. Unfortunately, the CTA, in denying entirely the claim,
merely relied on the absence of the quarterly ITRs despite being able to verify the
truthfulness of the declaration that no carry over was indeed effected by simply looking at
the 2004 annual ITR. HETDAa

At this point, worth mentioning is the fact that subsequent cases a rm the
proposition as correctly pointed out by petitioner. State Land, PERF and Mirant reiterated
the rule that the presentation of the quarterly ITRs of the subsequent year is not mandatory
on the part of the claimant to prove its claims.
There are some who challenges the applicability of PERF in the case at bar. It is said
that PERF is not in point because the Annual ITR for the succeeding year had actually been
attached to PERF's motion for reconsideration with the CTA and had formed part of the
records of the case.
Clearly, if the Annual ITR has been recognized by this Court in PERF, why then would
the submitted 2004 Annual ITR in this case be insu cient despite the absence of the
quarterly ITRs? Why then would this Court require more than what is enough and deny a
claim even if the minimum burden has been overcome? At best, the existence of quarterly
ITRs would have the effect of strengthening a proven fact. And as such, may only be
considered corroborative evidence, obviously not indispensable in character. PERF simply
a rms that quarterly ITRs are not indispensable, provided that there is su cient proof
that carrying over excess CWT was not effected.
Stateland and Mirant are equally challenged. In all these cases however, the factual
distinctions only serve to bolster the proposition that succeeding quarterly ITRs are not
indispensable. Implicit from all these cases is the Court's recognition that proving carry-
over is an evidentiary matter and that the submission of quarterly ITRs is but a means to
prove the fact of one's entitlement to a refund and not a condition sine qua non for the
success of refund. True, it would have been better, easier and more e cient for the CTA
and the CIR to have as basis the quarterly ITRs, but it is not the only way considering
further that in this case, the Annual ITR for 2004 is su cient. Courts are here to
painstakingly weigh evidence so that justice and equity in the end will prevail.
It must be emphasized that once the requirements laid down by the NIRC have been
met, a claimant should be considered successful in discharging its burden of proving its
right to refund. Thereafter, the burden of going forward with the evidence, as distinct from
the general burden of proof, shifts to the opposing party, 2 5 that is, the CIR. It is then the
turn of the CIR to disprove the claim by presenting contrary evidence which could include
the pertinent ITRs easily obtainable from its own files.
All along, the CIR espouses the view that it must be given ample opportunity to
investigate the veracity of the claims. Thus, the Court asks: In the process of investigation
at the administrative level to determine the right of the petitioner to the claimed amount,
did the CIR, with all its resources even attempt to verify the quarterly ITRs it had in its les?
Certainly, it did not as the application was met by the inaction of the CIR. And if desirous in
its effort to clearly verify petitioner's claim, it should have had the time, resources and the
liberty to do so. Yet, nothing was produced during trial to destroy the prima facie right of
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 the petitioner by counterchecking the claims with the quarterly ITRs the CIR has on its le.
To the Court, it seems that the CIR languished on its duties to ascertain the veracity of the
claims and just hoped that the burden would fall on the petitioner's head once the issue
reaches the courts.
This mindset ignores the rule that the CIR has the equally important responsibility of
contradicting petitioner's claim by presenting proof readily on hand once the burden of
evidence shifts to its side. Claims for refund are civil in nature and as such, petitioner, as
claimant, though having a heavy burden of showing entitlement, need only prove
preponderance of evidence in order to recover excess credit in cold cash. To review, "
[P]reponderance of evidence is [de ned as] the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term
'greater weight of the evidence' or 'greater weight of the credible evidence.' It is evidence
which is more convincing to the court as worthy of belief than that which is offered in
opposition thereto. 2 6 cHAaEC

The CIR must then be reminded that in Philam, the CIR's " failure to present [the
quarterly ITRs and AFR] to support its contention against the grant of a tax refund to [a
claimant] is certainly fatal." PERF reinforces this with a sweeping statement holding that
the veri cation process is not incumbent on PERF [or any claimant for that matter]; [but] is
the duty of the CIR to verify whether . . . excess income taxes [have been carried over].
And should there be a possibility that a claimant may have violated the irrevocability
rule and thereafter claim twice from its credits, no one is to be blamed but the CIR for not
discharging its burden of evidence to destroy a claimant's right to a refund. At any rate, a
claimant who defrauds the government cannot escape liability be it criminal or civil in
nature.
Verily, with the petitioner having complied with the requirements for refund, and
without the CIR showing contrary evidence other than its bare assertion of the absence of
the quarterly ITRs, copies of which are easily veri able by its very own records, the burden
of proof of establishing the propriety of the claim for refund has been su ciently
discharged. Hence, the grant of refund is proper.
The Court does not, and cannot, however, grant the entire claimed amount as it nds
no error in the original decision of the CTA Division granting refund to the reduced amount
of P2,737,903.34. This nding of fact is given respect, if not nality, as the CTA, 2 7 which
by the very nature of its functions of dedicating itself exclusively to the consideration of
the tax problems has necessarily developed an expertise on the subject. 2 8 It being the
case, the Court partly grants this petition to the extent of reinstating the April 23, 2010
original decision of the CTA Division.
The Court reminds the CIR that substantial justice, equity and fair play take
precedence over technicalities and legalisms. The government must keep in mind that it
has no right to keep the money not belonging to it, thereby enriching itself at the expense
of the law-abiding citizen 2 9 or entities who have complied with the requirements of the
law in order to forward the claim for refund. Under the principle of solutio indebiti provided
in Article 2154 of the Civil Code, the CIR must return anything it has received. 3 0
Finally, even assuming that the Court reverses itself and pronounces the
indispensability of presenting the quarterly ITRs to prove entitlement to the claimed
refund, petitioner should not be prejudiced for relying on Philam. The CTA En Banc merely
based its pronouncement on a case that does not enjoy the bene t of stare decis et non
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 quieta movere which means "to adhere to precedents, and not to unsettle things which are
established." 3 1 As between a CTA En Banc Decision (Millennium) and this Court's Decision
(Philam), it is elementary that the latter should prevail.
WHEREFORE , the Court partly grants the petition. The March 22, 2013 Decision of
the Court of Tax Appeals En Banc is REVERSED . The April 13, 2010 Decision of the Court
of Tax Appeals Special First Division is REINSTATED . Respondent Commissioner of
Internal Revenue is ordered to REFUND to petitioner the amount of P2,737,903.34 as
excess creditable withholding tax paid for taxable year 2003.
SO ORDERED.

Carpio, Velasco, Jr. * and Del Castillo, JJ., concur.

Leonen, J., I dissent. See separate opinion.

Separate Opinions
LEONEN , J., dissenting :

I disagree with the ponencia that the submission of quarterly income tax returns of
the succeeding year is not indispensable in a claim for refund of the previous year's excess
or unutilized creditable withholding taxes. DHEACI

Section 76 of the 1997 National Internal Revenue Code is clear and categorical that
once the taxpayer chooses to carry over and apply its income tax overpayments against
the income tax due for the quarters of the succeeding taxable year, such option shall be
considered irrevocable. The taxpayer can no longer make a turnaround and claim instead a
refund of the overpayments. I submit that both the quarterly income tax returns (for the
rst to third quarters) and the income tax return/ nal adjustment return (ITR/FAR) of the
succeeding year are indispensable proofs to show whether the taxpayer availed of the
carry-over option or not.
It must be emphasized that this is the rst time that the indispensability of
presenting the quarterly returns in tax refund claims in light of Section 76 of the 1997
National Internal Revenue Code is raised.
The cases cited in the ponencia, namely, Philam Asset Management, Inc. v.
Commissioner of Internal Revenue, 1 State Land Investment Corporation v. Commissioner
of Internal Revenue, 2 Commissioner of Internal Revenue v. PERF Realty Corporation, 3 and
Commissioner of Internal Revenue v. Mirant (Philippines) Operations Corporation 4 are not
squarely in point.
Philam's ruling in G.R. No. 156337 5 that the presentation to the Bureau of Internal
Revenue of the ITR/FAR of the succeeding year has no legal basis was premised on the old
provision (Section 69 of the 1977 National Internal Revenue Code), which did not yet
contain the "irrevocable clause." Instead, the old provision merely provided that "[i]n case
the corporation is entitled to a refund of the excess estimated quarterly income taxes paid,
the refundable amount shown on its nal adjustment return may be credited against the
estimated quarterly income tax liabilities for the taxable quarters of the succeeding
taxable year."
Section 69 provides:
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 Section 69. 6 Final Adjustment Return. — Every corporation liable to tax under
Section 24 shall le a nal adjustment return covering the total net income for
the preceding calendar or scal 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 net income of that year[,] the corporation shall either:
(a) Pay the excess tax still due; or

(b) Be refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a refund of the excess estimated quarterly
income taxes paid, the refundable amount shown on its nal adjustment return
may be credited against the estimated quarterly income tax liabilities for the
taxable quarters of the succeeding taxable year.

On the other hand, Section 76 included that "[o]nce 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 period and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefor."
Moreover, the presentation in Philam of the 1998 ITR/FAR was not necessary
because the taxpayer had apparently submitted its quarterly returns for 1998 showing it
did not carry over and apply its 1997 excess creditable taxes, coupled with the ling of its
administrative claim for refund on September 11, 1998 even before the year's end. aEHASI

State Land was likewise decided on the basis of Section 69 of the 1977 National
Internal Revenue Code. This court held that "if the excess income taxes paid in a given
taxable year have not been entirely used by a . . . corporation against its quarterly income
tax liabilities for the next taxable year, the unused amount of the excess may still be
refunded, provided that the claim for such a refund is made within two years." 7
Accordingly, the amount of State Land's excess tax credit in 1997 that was not used in
1998 was allowed to be refunded. In this regard, this court further held that it was not
necessary on the part of State Land to le its 1999 income tax return because pursuant to
then Section 69, it could not utilize its 1997 excess credits beyond 1998. 8
PERF was similarly decided on the basis of the old tax provision. This court held that
PERF's failure to indicate its option in its income tax return to avail of either the tax refund
or tax credit was not fatal to its claim for refund. 9 Moreover, it was determined that there
was no need to rule on the admissibility of the income tax return for the succeeding year
(1998 income tax return) because it had actually been attached to PERF's Motion for
Reconsideration before the Court of Tax Appeals and had formed part of the records of
the case. The income tax return showed that the excess credits in 1997 were not carried
over and applied in 1998. 1 0
On the other hand, while Philam was decided on the basis of Section 76 of the 1997
National Internal Revenue Code, it did not touch on the issue of presenting the quarterly
income tax returns. Understandably, because in that case, Philam opted to carry over its
tax overpayment for 1999 by ticking the box in the return signifying that the overpayment
was "to be carried over as tax credit next year/quarter." 1 1 This court held that pursuant to
the irrevocability rule in Section 76, Philam was barred from applying for the
refund/issuance of tax credit certificate of the overpayments. 1 2
In all of these cases — Philam, State Land, PERF, and Mirant — the issue on the
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 indispensability of presenting the quarterly income tax returns of the succeeding year in a
refund claim was never raised especially in light of the "irrevocability rule" that was added
by Republic Act No. 8424 in Section 76. Here, this question was squarely raised as the core
issue.
The ponencia is of the view that the presentation of the quarterly income tax returns
for 2004 is not indispensable because petitioner already submitted its 2004 income tax
return.
I submit that the presentation of both the quarterly income tax returns and the
income tax return of the succeeding year is indispensable in a refund claim. This is implicit
in Section 76:
SEC. 76. Final Adjustment Return . — Every corporation liable to tax
under Section 27 shall le a nal adjustment return covering the total taxable
income for the preceding calendar or scal 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:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or

(C) Be credited or refunded with the excess amount paid, as the case may
be.
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 nal
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 period and no application for
cash refund or issuance of a tax credit certi cate shall be allowed
therefore . (Emphasis supplied) EcDTIH

Section 76 introduced two signi cant changes in the National Internal

Revenue Code: rst, once the taxpayer has chosen the carry-over option, such
option is irrevocable; and second, the excess tax payments may be carried over
and applied against the income tax liabilities for the succeeding quarters of the
succeeding taxable years until fully utilized.
This court elucidated the differences between the two provisions in Asiaworld
Properties Philippine Corporation v. Commissioner of Internal Revenue: 1 3
Under [Section 69 of the old National Internal Revenue Code], the option to
carry-over the excess or overpaid income tax for a given taxable year is limited to
the immediately succeeding taxable year only. In contrast, under Section 76 of the
1997 NIRC, the application of the option to carry-over the excess creditable tax is
not limited only to the immediately following taxable year but extends to the next
succeeding taxable years. The clear intent in the amendment under Section 76 is
to make the option, once exercised, irrevocable for the "succeeding taxable years."

Thus, once the taxpayer opts to carry-over the excess income tax against
the taxes due for the succeeding taxable years, such option is irrevocable for the
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 whole amount of the excess income tax, thus, prohibiting the taxpayer from
applying for a refund for that same excess income tax in the next succeeding
taxable years. The unutilized excess tax credits will remain in the taxpayer's
account and will be carried over and applied against the taxpayer's income tax
liabilities in the succeeding taxable years until fully utilized. 1 4

Section 76 is clear and categorical that once the carry-over option is chosen, it shall
be considered irrevocable for the whole amount of the excess income tax and no
application for a tax refund or issuance of a tax credit certificate shall then be allowed. 1 5 It
has been held that "the irrevocable rule was evidently added to keep the taxpayer from ip-
opping on its options, and avoid confusion and complication as regards the taxpayer's
excess tax credit." 1 6
In Philippine Bank of Communications v. Commissioner of Internal Revenue , 1 7 this
court ruled that a corporation must signify in its ITR/FAR (by marking the option box
provided in the Bureau of Internal Revenue form) its intention, whether to request for a
refund or claim for an automatic tax credit for the succeeding taxable year. Item 31 of the
income tax return (BIR Form No. 1702) indicates that "if overpayment, mark one box only:
(once the choice is made, the same is irrevocable)." 1 8
Accordingly, when a taxpayer has marked the carry-over option box in its ITR/FAR, it
is not entitled to a refund even though the excess tax credit was not utilized. 1 9 The
question of whether the taxpayer was able to actually apply the tax credit is irrelevant. In
such case, since the taxpayer is automatically barred from claiming a refund of the
overpayment, there is no need to look at the ITR/FAR or the quarterly returns for the
succeeding year.
However, while a taxpayer is required to mark its choice ( i.e., carry over, refund, or
issuance of tax credit) in the ITR/FAR, this requirement is only for the proper management
of claims for refund or tax credit. 2 0 Hence, failure to signify one's intention in the ITR/FAR
does not mean outright barring of a valid request for a refund, should one still choose this
option later on. 2 1
It may also happen that a taxpayer may have marked the refund box in its return but
nevertheless may have actually applied its excess tax payments to the taxable quarters of
the succeeding taxable year by lling out the portion "prior year's excess credits" in any of
its rst, second, or third quarterly income tax returns. 2 2 In such case, the taxpayer is
deemed to have effectively negated its previous intention to claim for a refund.
Consequently, since it had effectively opted to carry over its overpayments, the taxpayer
can no longer revert back to its original choice. EHScCA

Therefore, in both cases — when the taxpayer failed to mark its chosen option or
when it marked the refund option — the examination of the quarterly income tax returns
and the ITR/FAR of the subsequent taxable year becomes signi cant, in order to determine
the taxpayer's compliance with the explicit and categorical requirement under Section 76,
i.e., that it did not actually carry over its excess tax credit to the succeeding quarters of the
succeeding taxable year.
True, petitioner's 2004 income tax return shows that it did not carry over its claimed
unutilized creditable withholding taxes to the succeeding taxable year 2004 because the
item "prior year's excess credits" was left blank. However, this is not enough to conclude
that petitioner did not apply the said excess or unutilized creditable withholding taxes
against the income tax due for the rst three quarters of 2004. The 2004 quarterly returns
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 would have shown if petitioner effectively opted to carry over the 2003 excess or
unutilized creditable withholding taxes to the subsequent taxable year. If petitioner applied
the said excess or unutilized creditable withholding taxes against the income tax due for
the rst three quarters of taxable year 2004, it therefore effectively exercised the option to
carry over the 2003 excess or unutilized creditable withholding taxes to the succeeding
year 2004. Thus, its claim for refund should be denied.
Indeed, Section 75 of the National Internal Revenue Code requires corporate
taxpayers to le quarterly income tax returns showing "a quarterly summary declaration of
its gross income and deductions on a cumulative basis for the preceding quarter or
quarters upon which the income tax shall be paid." Section 76 allows excess tax payments
to be applied against estimated quarterly tax liabilities. Therefore, the earliest opportunity
when taxpayers may carry over and apply their previous year's excess tax payments would
be the first quarter of the succeeding year.
It is granted that the taxes computed in the quarterly returns are mere estimates
such that Section 76 requires the ling of the nal adjustment return covering the total
taxable income for the whole year. Section 232 of the National Internal Revenue Code
requires that the books of accounts of companies or persons with gross quarterly sales or
earnings exceeding P150,000.00 be audited and examined yearly by an independent
Certi ed Public Accountant and their income tax return be accompanied by certi ed
balance sheets, pro t and loss statements, schedules listing income producing properties
and the corresponding incomes therefrom, and other related statements. Hence, the
gures of gross receipts and deductions in the quarterly income tax returns are subject to
audit and adjustment by the end of the year in the final adjustment return. 2 3
This means that a taxpayer may realize a net income in the rst quarter but incur an
estimated loss in the succeeding quarters resulting in a net loss by the end of the year. 2 4
It may happen then that the previous year's overpayments, which a taxpayer seeks to be
refunded by the end of the year, was actually carried over and included as "prior years'
excess credits" in the rst quarter of the succeeding year. As such, the refund claim by the
end of the year cannot prosper because having exercised the carry-over option in the rst
quarter, the taxpayer is bound by the irrevocable rule. This is the signi cance of requiring
the presentation of the quarterly returns in addition to the ITR/FAR of the succeeding year.
While a taxpayer is allowed to modify or amend its quarterly income tax returns or
annual income tax return under Section 6 of the National Internal Revenue Code, 2 5 an
exception would be the irrevocable rule under Section 76 such that a taxpayer which opted
to carry over its previous year's overpayments in the succeeding rst, second, or third
quarterly returns can no longer change its previous intention to carry over.SCHTac

To reiterate, the 2004 ITR/FAR alone is not su cient proof that petitioner did not
exercise the carry-over option in any of the quarters of 2004. The best evidence to prove
that it did not exercise the carry-over option in any of the quarters would be the quarterly
returns.
Thus, petitioner's failure to present su cient evidence to justify its claim for refund
is fatal to its cause. After all, it is axiomatic that a claimant has the burden of proof to
establish the factual basis of its claim for tax credit or refund. Tax refunds, like tax
exemptions, are construed strictly against the taxpayer. 2 6 "The taxpayer is charged with
the heavy burden of proving that [it] has complied with and satis ed all the statutory
and administrative requirements to be entitled to the tax refund." 2 7

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 Even if the claim for refund was led within the two-year prescriptive period, the fact
of withholding of creditable taxes by the withholding agents was proven and the income
upon which the withholding taxes were withheld was included as part of the gross income
and was re ected in the preceding income tax return, nonetheless, the taxpayer should
prove that the excess creditable withholding tax was not carried over to the taxable
quarters of the succeeding, taxable years. Hence, the taxpayer-claimant must necessarily
present the quarterly income tax returns and nal adjustment return of the succeeding
taxable year. "Entitlement to a tax refund is for the taxpayer to prove and not for the
government to disprove." 2 8
Parenthetically, it would be faster to process claims for refund if all the pieces of
information necessary to verify the veracity of the taxpayer's claims were furnished by the
taxpayer-claimant, including the quarterly returns and income tax return of the succeeding
year than to have the Bureau of Internal Revenue search for these documents in its les.
Given the limited manpower of the Bureau of Internal Revenue to investigate all returns and
requests, expediency necessitates that evidentiary matters be within the control of the
taxpayer claiming a refund. The Bureau's primary function of tax collection should not be
unduly delayed or hampered by incidental matters. Requiring the taxpayer to submit
su cient evidence ensures a more prompt action on its claim for refund and promotes a
more efficient outcome.
E ciency is achieved when tasks, which necessarily entail costs, are allocated to
those who could best bear them. A party that could best bear the cost is not necessarily
the one who could do the task with the least cost, but a party's opportunity costs 2 9 should
also be taken into consideration. This concept is known as comparative advantage. 3 0 This
is contrasted with absolute advantage, 3 1 which does not take into consideration the
opportunity costs.
At rst glance, it might seem that the Bureau of Internal Revenue is in a better
position to assess if a taxpayer his already selected to carry over excess income tax
payments. It could be said that the Bureau of Internal Revenue has the absolute advantage
over gaining this information, considering that the returns are led with it. However, the
Bureau of Internal Revenue does not have comparative advantage over producing a single
taxpayer's previous returns for purposes of tax refund. The Bureau of Internal Revenue
manages millions of taxpayers' returns. Assessing if a taxpayer's claim for refund has not
yet been subject to carry over will entail the opportunity cost of the other functions of the
Bureau of Internal Revenue.
On the other hand, the taxpayer manages only its own taxes. The taxpayer is aware
of whether it has selected the option to carry over or the option to refund in its adjusted
returns. Requiring the taxpayer to present the adjusted returns does not entail substantial
opportunity costs to it. Hence, the allocation of the burden of proof to the taxpayer is more
efficient than requiring the Bureau of Internal Revenue to do the same task.
Indeed, why petitioner failed to present such a vital piece of evidence even during
the trial phase of this case confounds this court. The delay in this case could altogether
have been avoided had it presented its quarterly income tax returns for 2004. The "[non-
production] of a document which courts almost invariably expect will be produced
'unavoidably throws a suspicion over the cause.'" 3 2 Negligence consisting of the
unexplained failure to offer a material document should not be rewarded with undeserved
leniency. SAcaDE

Finally, it must be emphasized that there would be no unjust enrichment to the

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 government in the event of denial of the claim for refund under such circumstances
because there would be no forfeiture of any amount favoring the government. The amount
being claimed as a refund would remain in the account of petitioner creditable against its
future income tax liabilities until fully utilized. 3 3
ACCORDINGLY , I vote to DENY the Petition. The Decision dated March 22, 2013 of
the Court of Tax Appeals En Banc should be AFFIRMED .

Footnotes

* Designated Acting member in lieu of Associate Justice Arturo D. Brion, per Special Order No.
1910, dated January 12, 2015.

1. Rollo, pp. 36-49. Penned by Associate Justice Erlinda P. Uy, with Associate Justices Lovell R.
Bautista, Caesar A. Casanova, Cielito N. Mindaro-Grulla and Amelia R. Cotangco-
Manalastas, concurring and with Associate Justices Juanito C. Castañeda and
Esperanza R. Fabon-Victorino, dissenting.

2. Id., at 56-69. Penned by Associate Justice Caesar A. Casanova, with then Presiding Justice
Ernesto D. Acosta and Associate Justice Lovell R. Bautista, concurring.
3. Id., at 68.

4. Id., at 71-85. Penned by Associate Justice Caesar A. Casanova, with Presiding Justice
Ernesto D. Acosta, concurring.
5. Id., at 84-85.

6. Id., at 36-49. Penned by Associate Justice Erlinda P. Uy, with Associate Justices Lovell R.
Bautista, Caesar A. Casanova, Cielito N. Mindaro-Grulla and Amelia R. Cotangco-
Manalastas, concurring and with Associate Justices Juanito C. Castañeda and
Esperanza R. Fabon-Victorino, dissenting.

7. CTA EB No. 510, Decision dated September 28, 2010, with Entry of Judgment dated October
28, 2010, https://www.google.com.ph/?gws_rd=ssl#q=CTA+EB+510+; last visited
August 29, 2014.
8. Rollo, pp. 45-47. Penned by Associate Justice Cielito N. Mindaro-Grulla, with then Presiding
Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda, Lovell R. Bautista,
Erlinda P. Uy, Caesar A. Casanova, Olga Palanca-Enriquez and Amelia R. Cotangco-
Manalastas, concurring.

9. Id., at 50-54.
10. 514 Phil. 147 (2005).

11. 566 Phil. 113 (2008).

12. 579 Phil. 442 (2008).

13. G.R. No. 171742, June 15, 2011, 652 SCRA 80.

14. Rollo, no pagination [counted as pp. 121-131].

15. Id., at 90-106.

16. Eastern Telecommunications Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No.
168856, August 29, 2012, 679 SCRA 305, 316, citing Philippine Phosphate Fertilizer
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 Corporation v. Commissioner of Internal Revenue, 500 Phil. 149, 163 (2005).
17. Commissioner of Internal Revenue v. Solidbank Corp., 462 Phil. 96, 132 (2003); citations
omitted.

18. Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal

Revenue, 569 Phil. 483, 494 (2008).
19. Commissioner of Internal Revenue v. Mirant (Philippines) Operations Corporation, G.R. No.
171742, June 15, 2011, 652 SCRA 80, 95 and Commissioner of Internal Revenue v. Team
(Philippines) Operations Corporation, G.R. No. 185728, October 16, 2013, 707 SCRA 467,
474, citing Commissioner of Internal Revenue v. Far East Bank & Trust Company (now
Bank of the Philippine Islands), G.R. No. 173854, March 15, 2010, 615 SCRA 417, 424,
further citing Banco Filipino Savings and Mortgage Bank v. Court of Appeals, 548 Phil.
32, 36-37 (2007).

20. Asiaworld Properties Philippine Corporation v. Commissioner of Internal Revenue, G.R. No.
171766, July 29, 2010, 626 SCRA 172, 179.
21. CA records, Vol. 1, pp. 809-810.

22. Rollo, p. 45.

23. See BIR Form No. 1702 Annual Income Tax Return.
24. BPI-Family Savings Bank, Inc. v. Court of Appeals, 386 Phil. 719 (2000).

25. Jimenez v. National Labor Relations Commission, 326 Phil. 89, 95 (1996).
26. Peñalber v. Ramos, G.R. No. 178645, January 30, 2009, 577 SCRA 509, 526-527, citing Ong
v. Yap, 492 Phil. 188, 196-197 (2005). Emphasis supplied.
27. Commissioner of Internal Revenue v. Toledo Power, Inc., G.R. No. 183880, January 20, 2014,
714 SCRA 276.
28. Commissioner of Internal Revenue v. Mirant (Philippines) Operations Corporation, supra
note 19, at 94, citing Toshiba Information Equipment (Phils.), Inc. v. Commissioner of
Internal Revenue, G.R. No. 157594, March 9, 2010, 614 SCRA 526, 561, further citing
Commissioner of Internal Revenue v. Cebu Toyo Corporation, 491 Phil. 625, 640 (2005),
further citing Barcelon, Roxas Securities, Inc. (now known as UBP Securities, Inc.) v.
Commissioner of Internal Revenue, 529 Phil. 785, 794-795 (2006).
29. Supra note 24.

30. State Land Investment Corporation v. Commissioner of Internal Revenue, 566 Phil. 113, 122
(2008).
31. Confederation of Sugar Producers Association, Inc. v. Department of Agrarian Reform
(DAR), 548 Phil. 498, 534 (2007), citing Black's Law Dictionary, Fifth Edition.
LEONEN, J., dissenting:
1. 514 Phil. 147 (2005) [Per J. Panganiban, Third Division]. In G.R. No. 156637 , Philam paid
excess income tax for 1997. It did not indicate its option to carry over or refund said
excess income tax in its income tax return for 1997. On September 11, 1998, however, it
filed a claim for refund of the same. In G.R. No. 162004 , Philam incurred a net loss in
1998 and had unapplied excess creditable income tax for the same period in the amount
of P459,756.07. In its income tax return for the succeeding year of 1999, Philam reported
a tax due of only P80,042.00, creditable withholding tax of P915,995.00, and excess
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 credit carried over from 1998 of P459,756.07. On November 14, 2000, Philam filed a
claim for tax refund, alleging that its tax liability for 1999 was deducted from its
creditable withholding tax for the same taxable period; leaving its excess tax credit
carried over from 1998 still unapplied.
2. 566 Phil. 113, 120-121 (2008) [Per J. Sandoval-Gutierrez, First Division].

3. 579 Phil. 442 (2008) [Per J. Reyes, R.T., Third Division].

4. G.R. No. 171742, June 15, 2011, 652 SCRA 80 [Per J. Mendoza, Second Division].

5. The issue in G.R. No. 156637 of Philam was whether the presentation of the ITR/FAR of the
succeeding year is necessary. This court, in ruling that the 1998 ITR/FAR is not required
in requesting a refund of excess taxes withheld in 1997, reasoned:
1) Section 76 does not mandate it. The law merely requires the filing of the FAR for the
preceding — not the succeeding — taxable year.

2) Section 5 of Revenue Regulations No. 12-94, amending Section 10 (a) of Revenue

Regulations No. 6-85, 5 merely provides that claims for refund shall be given due course
only (a) if it is shown on the income tax return that the income payment received is being
declared part of the taxpayer's gross income; and (b) when the fact of withholding is
established by copy of the withholding tax statement, duly issued by the payor to the
payee and showing the amount paid and the income tax withheld from that amount.

3) The Bureau of Internal Revenue must "have on file its own copies of Philam's [1998] FAR, on
the basis of which it could rebut the assertion that there was no subsequent credit of the
excess income tax payments for [1997]."

4) The Court of Tax Appeals should have taken judicial notice of the fact of filing and the
pendency of Philam's subsequent claim for a refund of excess creditable taxes withheld
for 1998.
It appears, though, that Philam presented its quarterly returns for 1998, as evident from the
following findings of the court:

In the present case, although petitioner did not mark the refund box in its 1997 FAR, neither did
it perform any act indicating that it chose a tax credit. On the contrary, it filed on
September 11, 1998 an administrative claim for the refund of its excess taxes withheld
in 1997. In none of its quarterly returns for 1998 did it apply the excess
creditable taxes . Under these circumstances, petitioner is entitled to a tax refund of its
1997 excess tax credits in the amount of P522,092.00.

6. Philam stated that Section 69 reappeared in the National Internal Revenue Code (or Tax
Code) of 1997 as Section 76.
7. State ,span>Land Investment Corporation v. Commissioner of Internal Revenue, 566 Phil. 113, 120-121
(2008) [Per J. Sandoval-Gutierrez, First Division].

8. Id., at 121.
9. Commissioner of Internal Revenue v. PERF Realty Corp., 579 Phil. 442, 448 (2008) [Per J.
Reyes, R.T., Third Division].

10. Id., at 448-454.

11. Commissioner of Internal Revenue v. Mirant (Philippines) Operations, Corporation, G.R. No.
171742, June 15, 2011, 652 SCRA 80, 93-94 [Per J. Mendoza, Second Division].
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 12. Id., at 100.

13. Asiaworld Properties Philippine Corporation v. Commissioner of Internal Revenue, 640 Phil.
230 (2010) [Per J. Carpio, Second Division].
14. Id., at 237.

15. United International Pictures AB v. Commissioner of Internal Revenue, G.R. No. 168331,
October 11, 2012, 684 SCRA 23 [Per J. Peralta, Third Division]; Commissioner of Internal
Revenue v. PL Management International Philippines, Inc., 662 Phil. 431 (2011) [Per J.
Bersamin, Third Division]; Belle Corporation v. Commissioner of Internal Revenue, 654
Phil. 102 (2011) (Per J. Del Castillo, First Division]; Commissioner of Internal Revenue v.
The Philippine American Life and General Insurance Co., 646 Phil. 161 (2010) [Per J.
Carpio, Second Division]; Systra Philippines, Inc. v. Commissioner of Internal Revenue,
560 Phil. 261 (2007) [Per J. Corona, First Division].

16. Commissioner of Internal Revenue v. Bank of the Philippine Islands, 609 Phil. 678 (2009)
[Per J. Chico-Nazario, Third Division].
17. 361 Phil. 916 (1999) [Per J. Quisumbing, Second Division].

18. Id.
19. Asiaworld Properties Philippine Corporation v. Commissioner of Internal Revenue, 640 Phil.
230, 235 (2010) [Per J. Carpio, Second Division].

20. Commissioner of Internal Revenue v. McGeorge Food Industries, Inc., 648 Phil. 413 (2010)
[Per J. Carpio, Second Division].
21. Philam Asset Management, Inc. v. Commissioner of Internal Revenue, 514 Phil. 147 (2005)
[Per J. Panganiban, Third Division]; Paseo Realty & Development Corporation v. Court of
Appeals, 483 Phil. 254 (2004) [Per J. Tinga, Second Division].
22. In G.R. No. 162004 of Philam, this court held that the fact that the taxpayer filled out the
portion "Prior Year's Excess Credits" in its subsequent final adjustment return shows that
it has effectively chosen the carry-over option. This court noted that the line that
preceded the phrase in the Bureau of Internal Revenue form clearly stated "Less: Tax
Credits/Payments." It further stated that if an application for a tax refund has been or
will be filed, that portion of the Bureau of Internal Revenue form should necessarily be
blank, even if the final adjustment return of the previous taxable year already shows an
overpayment in taxes.
23. Rep. Act No. 8424 (1997), An Act Amending the National Internal Revenue Code, as
Amended, and for Other Purposes.

24. See Commissioner of Internal Revenue v. TMX Sales, Inc., G.R. No. 83736, January 15,
1992, 205 SCRA 184 [Per J. Gutierrez, Jr., En Banc]. That case involved a claim for
refund of overpaid income taxes. TMX Sales, Inc. filed its quarterly income tax return for
the first quarter of 1981, declaring an income of P571,174.31 and consequently paying
an income tax thereon of P247,010.00 on May 15, 1981. During the subsequent quarters,
however, TMX Sales, Inc. suffered losses so that when it filed on April 15, 1982 its
annual income tax return for the year ended December 31, 1981, it declared a gross
income of P904,122.00 and total deductions of P7,060,647.00, or a net loss of
P6,156,525.00. TMX Sales, Inc. sought to refund the amount of P247,010.00 that it paid
in the first quarter of 1981.

25. Rep. Act No. 8424 (1997), An Act Amending the National Internal Revenue Code, as
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 Amended, and for Other Purposes.
Section 6. Power of the Commissioner to Make assessments and Prescribe additional
Requirements for Tax Administration and Enforcement. —
(A) Examination of Returns and Determination of Tax Due. — After a return has been filed as
required under the provisions of this Code, the Commissioner or his duly authorized
representative may authorize the examination of any taxpayer and the assessment of
the correct amount of tax: Provided, however; That failure to file a return shall not
prevent the Commissioner from authorizing the examination of any taxpayer.

The tax or any deficiency tax so assessed shall be paid upon notice and demand from the
Commissioner or from his duly authorized representative.
Any return, statement of declaration filed in any office authorized to receive the same shall not
be withdrawn: Provided, That within three (3) years from the date of such filing,
the same may be modified, changed, or amended : Provided, further, That no
notice for audit or investigation of such return, statement or declaration has in the
meantime been actually served upon the taxpayer. (Emphasis supplied)
26. Far East Bank & Trust Co. v. Court of Appeals, 513 Phil. 148 (2005) [Per J. Azcuna, First
Division]; Paseo Realty & Development Corporation v. Court of Appeals, 483 Phil. 254
(2004) [Per J. Tinga, Second Division].

27. Commissioner v. Team Sual Corporation, G.R. No. 194105, February 5, 2014, 715 SCRA 478,
503 [Per J. Reyes, First Division], citing Commissioner of Internal Revenue v. Eastern
Telecommunications Philippines, Inc., 638 Phil. 334 (2010) [Per J. Brion, Third Division].
28. Commissioner of Internal Revenue v. Far East Bank & Trust Company , 629 Phil. 405, 406
(2010) [Per J. Del Castillo, Second Division].

29. PAUL A. SAMUELSON, ECONOMICS 746 (18th ed., 2006).

Opportunity cost is defined as "the value of the next-best use (or opportunity) for an economic
good, or the value of the sacrificed alternative."

30. Id., at 296 and 733.

The law of comparative advantage was devised by economist David Ricardo in order to
explain optimal production of goods for purposes of international trade. Comparative
advantage is "when a nation should specialize in producing and exporting those
commodities which it can produce at relatively lower cost. . . ."
To illustrate the concept of comparative advantage, for example, there are two individuals who
are very good in doing laundry: Aling Nena and Manny Pacquiao. Manny Pacquiao is
better at doing laundry than Aling Nena. He could wash three more loads of laundry in a
day than Aling Nena. In this case, Manny Pacquiao has an absolute advantage over
Aling Nena. However, Manny Pacquiao also happens to be an excellent boxer. If he
chooses to do laundry, it means foregoing training hours and matches as a boxer.
Hence, even if Manny Pacquiao is better at doing laundry, the costs he will bear in doing
laundry is much higher than Aling Nena. Hence, Aling Nena has a comparative
advantage in doing laundry over Manny Pacquiao.
31. Id., at 296 and 731.
David Ricardo considers a country that is able to have greater output per unit of input as a
country with absolute advantage. However, it does not take into consideration the
opportunity costs of creating the output.
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 32. Republic v. Sandiganbayan, 325 Phil. 762, 810 (1996) [Per J. Francisco, Third Division].
33. Commissioner of Internal Revenue v. McGeorge Food Industries, Inc., 648 Phil. 413 (2010)
[Per J. Carpio, Second Division]; Asiaworld Properties Philippine Corporation v.
Commissioner of Internal Revenue, 640 Phil. 230 (2010) [Per J. Carpio, Second Division].
Systra Philippines, Inc. v. Commissioner of Internal Revenue, 560 Phil. 261 (2007) [Per J.
Corona, First Division]; Commissioner of Internal Revenue v. Bank of the Philippine
Islands, 609 Phil. 678 (2009) [Per J. Chico-Nazario, Third Division].

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