FACTS:

The petitioner, Winebrenner & Iñigo Insurance Brokers, Inc., filed its Annual Income Tax Return for calendar year (CY) 2003 and later applied for administrative tax credit/refund of its excess or unutilized creditable withholding tax (CWT) for CY 2003. The claim was initially partially granted but eventually denied by the Court of Tax Appeals (CTA) due to the petitioner's failure to present the quarterly Income Tax Returns (ITRs) of the succeeding years.

On the other hand, the petitioner, Philam Asset Management Inc., also filed an administrative claim for refund of its unutilized CWT for the year 2004. The claim was denied by the Bureau of Internal Revenue (BIR) and was subsequently granted by the CTA First Division. However, the CTA En Banc reversed the decision and denied the refund based on the petitioner's failure to present the quarterly ITRs of the first, second, and third quarters of 2004.

In both cases, the CTA En Banc held that the presentation of the quarterly ITRs for the succeeding periods is necessary to prove that the excess CWT was not carried over or utilized. The dissenting justices argued that the submission of quarterly ITRs was not required by law or jurisprudence to establish the claimant's entitlement to a refund of excess or unutilized CWT.

The main issue in these cases is whether the submission and presentation of the quarterly ITRs are indispensable in a claim for tax refund. The petitioner argued that the non-presentation of quarterly ITRs was not mandatory and that it was able to sufficiently demonstrate that the excess CWT for the previous year was not carried over or applied to its income tax liabilities for the current year by submitting its annual ITR. On the other hand, the Commissioner of Internal Revenue (CIR) contended that an investigation is necessary to determine the correctness of the corporate returns and the amount sought to be credited, and that the petitioner failed to prove its right to a tax refund by not presenting the quarterly ITRs of the succeeding quarters.

ISSUES:

1. Whether the non-submission of quarterly ITRs is fatal to the claim for refund.

2. Whether presenting quarterly ITRs of the succeeding taxable year is indispensable in a claim for refund.

3. Whether the petitioner is required to present the quarterly income tax returns (ITRs) in order to prove the non-carry over of excess creditable withholding tax (CWT) in a claim for refund.

4. Whether the annual income tax return (ITR) is sufficient to prove the non-carry over of excess CWT in a claim for refund.

5. Whether the presentation of quarterly income tax returns (ITRs) is mandatory to prove a claimant's entitlement to a refund of excess tax credits.

6. Whether the absence of quarterly ITRs in this case renders the claim for refund insufficient.

7. Whether the petitioner has complied with the requirements for refund

8. Whether the burden of proof of establishing the propriety of the claim for refund has been discharged

9. Whether the grant of refund is proper

10. Whether the claimed amount should be granted in its entirety

11. Whether the original decision of the CTA Division granting refund of a reduced amount should be reinstated

12. Whether substantial justice, equity, and fair play take precedence over technicalities and legalisms

13. Whether the CIR must return anything it has received

14. Whether the presentation of quarterly ITRs is indispensable to prove entitlement to the claimed refund

15. Whether petitioner should be prejudiced for relying on a previous decision

RULING:

1. The Court finds for the petitioner and holds that the non-submission of quarterly ITRs is not fatal to the claim for refund. It rules that presenting quarterly ITRs of the succeeding taxable year is not indispensable in a claim for refund. Proving that no carry-over has been made does not absolutely require the presentation of the quarterly ITRs. The Court cites a previous case, Philam, which ruled that the presentation of the quarterly ITRs is not necessary. The Court explains that nothing in the Tax Code mandates the presentation of the succeeding year's quarterly ITRs, and that the law only requires the filing of the FAR for the preceding taxable year. The Court states that any document, other than quarterly ITRs, may be used to establish the fact of not having carried over the excess credits.

2. The Court held that there is no categorical requirement for the presentation of the quarterly ITRs to prove the non-carry over of excess CWT. As long as the existence of the non-carry over is sufficiently proven through competent and relevant evidence, such as the annual ITR, the claim for refund may be granted.

3. The Court ruled that the annual ITR is sufficient to prove the non-carry over of excess CWT. The annual ITR contains the total taxable income earned for the four quarters of the taxable year, as well as deductions and tax credits previously reported or carried over in the quarterly ITRs. It is the final adjustment return that shows whether a corporation incurred a loss or gained a profit during the taxable year. Therefore, the presentation of the annual ITR is enough to establish that prior year's excess credits were not utilized for the taxable year and to determine the total tax due.

4. The presentation of quarterly ITRs is not mandatory to prove a claimant's entitlement to a refund of excess tax credits. The court recognizes that proving carry-over is an evidentiary matter and that the submission of quarterly ITRs is only a means to prove the fact of one's entitlement to a refund and not a condition sine qua non for the success of the refund. The court has previously held that quarterly ITRs are not indispensable, provided there is sufficient proof that carrying over excess credit was not effected.

5. The absence of quarterly ITRs in this case does not render the claim for refund insufficient. The petitioner sufficiently proved that excess tax credits in the previous year were not carried over to the taxable year in question by leaving the item "Prior Year's Excess Credits" blank in its annual ITR. The court held that the annual ITR, supplemented by other evidence, is sufficient to prove the claimant's entitlement to a refund. The burden to disprove the claim shifts to the Commissioner of Internal Revenue (CIR) once the claimant has met the requirements laid down by the National Internal Revenue Code (NIRC).

6. The Court grants the petition and partly reverses the decision of the Court of Tax Appeals En Banc. The April 13, 2010 decision of the Court of Tax Appeals Special First Division is reinstated. The Commissioner of Internal Revenue is ordered to refund the petitioner the amount of P2,737,903.34 as an excess creditable withholding tax paid for the taxable year 2003.

PRINCIPLES:

• The burden of proof to establish entitlement to refund is on the claimant taxpayer.

• A claim for refund is construed in strictissimi juris against the entity claiming the refund and in favor of the taxing power.

• To successfully pursue a claim for refund of excess and unutilized CWT, a taxpayer must file the claim within the two-year period from the date of payment of the tax, show on the return that the income received was declared as part of the gross income, and 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.

• The irrevocability rule under Section 76 of the NIRC means that once an option, either for refund or issuance of tax credit certificate or carry-over of CWT has been exercised, the same can no longer be modified for the succeeding taxable years.

• The presentation of the quarterly ITRs is not necessary to prove the fact of not having carried over the excess credits. Any document, other than quarterly ITRs, may be used to establish this fact, provided that it is competent, relevant, and part of the evidence.

• The court cannot limit a party to the means of proving a fact as long as they are consistent with the rules of evidence and fair play.

• The means of ascertainment of a fact is best left to the party that alleges the same.

• The presentation of the quarterly ITRs is not categorically required to prove the non-carry over of excess CWT.

• The annual ITR is sufficient to prove the non-carry over of excess CWT, as it shows the total taxable income for the four quarters of the taxable year as well as deductions and tax credits previously reported or carried over in the quarterly ITRs.

• The presentation of quarterly ITRs is not mandatory to prove a claimant's entitlement to a refund of excess tax credits.

• The annual ITR, supplemented by other evidence, is sufficient to prove a claimant's entitlement to a refund.

• 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 a refund.

• The burden of going forward with the evidence, as distinct from the general burden of proof, shifts to the CIR once the claimant has met the requirements for a refund.

• The CIR has the responsibility to contradict a claimant's refund claim by presenting proof readily on hand once the burden of evidence shifts to its side.

• Claims for refund are civil in nature, and a claimant need only prove preponderance of evidence to recover excess credits in cash.

• The burden of proof lies on the taxpayer to establish the propriety of a claim for refund (Burden of Proof).

• Substantial justice, equity, and fair play take precedence over technicalities and legalisms (Substantial Justice).

• The government has no right to keep money not belonging to it and must return anything it has received (Solution Indebiti).

• Compliance with previous decisions and the principle of stare decisis is important (Stare Decisis).