FACTS:

Paseo Realty and Development Corporation filed its Income Tax Return for the calendar year 1989, declaring a gross income of P1,855,000.00. It claimed deductions of P1,775,991.00, resulting in a net income of P79,009.00 and an income tax due of P27,653.00. The corporation also had a prior year's excess credit of P146,026.00 and creditable taxes withheld in 1989 amounting to P54,104.00, giving a total tax credit of P200,130.00 and a credit balance of P172,477.00.

In November 1991, Paseo Realty filed a claim for refund of excess creditable withholding and income taxes for the years 1989 and 1990 amounting to P147,036.15. In December 1991, the corporation filed a petition for review with the Court of Tax Appeals (CTA) seeking the refund of P54,104.00 representing creditable taxes withheld in 1989.

The Commissioner of Internal Revenue filed an Answer stating that the petition did not state a cause of action, the claim for refund was still under investigation, and that the taxes claimed were deemed to have been paid and collected. After trial, the CTA ordered the Commissioner to refund the amount of P54,104.00 to the corporation.

The Commissioner moved for reconsideration, arguing that the amount ordered to be refunded was already included in the P172,477.00, which the corporation applied as a tax credit for the succeeding year. The CTA reconsidered its decision and dismissed the petition for review.

Paseo Realty filed a Petition for Review with the Court of Appeals, arguing that it was entitled to a refund. The appellate court held that the corporation was not entitled to a refund because it had already elected to apply the total amount of P172,447.00, which includes the P54,104.00 refund claimed, against its income tax liability for 1990. The Court of Appeals denied Paseo Realty's Motion for Reconsideration.

The petitioner filed a petition for review arguing that it did not apply the amount of P54,104.00 to its 1990 income tax liability. The petitioner claimed that the decision subject of the petition was inconsistent with a previous decision involving the same parties and subject matter. The Office of the Solicitor General filed a comment stating that the petitioner's election to apply its overpaid income tax as a tax credit against its tax liabilities for the succeeding year is mandatory and irrevocable. The petitioner filed a reply insisting that the issue was not whether the amount was included as a tax credit, but whether it was actually applied. The Office of the Solicitor General filed a rejoinder stating that the petitioner's 1988 tax return showed a prior year's excess credit to be refunded, while the remaining amount shall be considered as a tax credit for 1989. The Office of the Solicitor General argued that by its own election, the petitioner can no longer ask for a refund of its creditable taxes withheld in 1989 as the same had been applied against its 1990 tax due. The Court gave due course to the petition but ultimately denied it, deferring to the expertise of the tax court and finding no abuse or improvident exercise of its authority. The petitioner claimed that it successively used the claimed amount when it obtained refunds and applied its 1990 tax liability, leaving a balance of P54,104.00 subject to the claim for refund. However, the petitioner failed to provide sufficient proof to support its claim.

Petitioner, a corporation engaged in supplying electricity, filed an administrative claim for refund with the Bureau of Internal Revenue (BIR). It claimed that it was entitled to a refund of P172,477.00, representing the excess of its creditable taxes withheld for taxable year 2008. The BIR did not act on the claim within the prescribed period, so petitioner filed a Petition for Review with the Court of Tax Appeals (CTA). In its petition, petitioner alleged that the BIR had already applied the refundable amount to its tax liabilities for the subsequent taxable years 2009 and 2010, as evidenced by its summary of account. However, no proof was presented to support this claim. Petitioner further asserted that an alleged finding in C.A.-G.R. Sp. No. 32 supported its entitlement to a refund.

ISSUES:

1. Whether the petitioner is entitled to a refund of the excess creditable tax withheld for the year 1989.

2. Whether petitioner presented sufficient evidence to establish its entitlement to the refund.

3. Whether petitioner has presented sufficient evidence to prove its claim for refund of tax credit.

4. Whether petitioner correctly and legally applied its 1988 tax credit against its 1990 tax liabilities in violation of Section 69 of the NIRC.

5. Whether the taxpayer's election, indicated by ticking boxes in the tax return, is a mere technical exercise.

6. Whether the taxpayer's choice to carry-over excess tax credits is irrevocable.

7. Whether the taxpayer is entitled to a refund or tax credit for excess tax payments made.

RULING:

1. The Court held that the petitioner failed to present sufficient evidence to establish its entitlement to the refund. While the petitioner claimed that it applied its excess creditable tax from 1989 to its succeeding tax liabilities and subsequent refunds, it did not provide any proof to support this claim. The Court also noted that the petitioner did not submit its tax return for the year 1990, which would have shown whether the claimed refund had been automatically credited and applied to its 1990 tax liabilities.

2. The grant of a refund is based on the assumption that the tax return is valid and the facts stated therein are true and correct. Without the tax return, it would be difficult to determine whether the proper taxes have been assessed and paid. The absence of the petitioner's 1990 tax return and the failure to present it in support of the claim for refund weakened the petitioner's case.

3. No. Petitioner's failure to present sufficient evidence is fatal to its claim for refund. A claimant has the burden of proof to establish the factual basis of their claim for tax credit or refund. Tax refunds are construed strictly against the taxpayer.

4. No. Petitioner's application of its 1988 tax credit against its 1990 tax liabilities is incorrect and illegal. Section 69 of the NIRC only allows the carrying forward of excess or overpaid income tax for a given taxable year to the succeeding taxable year.

5. The taxpayer's election, signified by ticking boxes in the tax return, is not a mere technical exercise. It aids in the proper management of claims for refund or tax credit by leading tax authorities in addressing the claim.

6. The taxpayer's choice to carry-over excess tax credits is irrevocable for the taxable period when such choice is made. No application for cash refund or issuance of a tax credit certificate shall be allowed once the option to carry-over and apply the excess quarterly income tax against income tax due for succeeding taxable quarters has been exercised.

7. The taxpayer may be entitled to a tax credit or refund for excess tax payments. However, this entitlement is subject to the taxpayer's proper indication in the tax return and compliance with the regulations provided. In this particular case, the taxpayer's claim for refund was denied.

PRINCIPLES:

• The burden of proving entitlement to a tax refund rests upon the taxpayer.

• The taxpayer must present sufficient evidence to support its claim for refund.

• A tax refund is granted based on the assumption that the tax return is valid and the facts stated therein are true and correct.

• A claimant has the burden of proof to establish the factual basis of their claim for tax credit or refund.

• Tax refunds are construed strictly against the taxpayer.

• Section 69 of the NIRC allows the carrying forward of excess or overpaid income tax for a given taxable year to the succeeding taxable year.

• The availment of the remedy of tax credit is not absolute and mandatory, and it requires prior verification and approval by the Commissioner of Internal Revenue.

• Taxation is a destructive power that interferes with the personal and property rights of individuals. Exemptions from taxation are construed strictly against the taxpayer and liberally in favor of the taxing authority.

• A claim for refund or exemption from tax payments must be clearly shown and should be based on language in the law that is too plain to be mistaken.