G. R. No. 138342 - July 8, 2003
AB LEASING AND FINANCE CORPORATION, petitioner-appellant, vs. COMMISSIONER OF INTERNAL REVENUE, respondent-appellee.
CARPIO MORALES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the October 29, 1998 Decision and the April 19, 1999 Resolution of the Court of Appeals (CA) which upheld the July 2, 1997 Decision and the September 2, 1997 Resolution of the Court of Tax Appeals (CTA).
For taxable year 1993, petitioner AB Leasing and Finance Corporation had a net income of P1,775,832.00 for which it was liable to pay income tax in the amount of P621,541.00. It appeared, however, that for the year 1993, petitioner had made payments in the total amount of P1,594,756.00 inclusive of unused prior year's tax credits, broken down as follows:
Petitioner thus opted to apply its excess payment of P973,215.00 (P1,594,756.00 less P621,541.00) as tax credits for the following year, 1994.
In the third quarter of taxable year 1994, petitioner had a net income of P3,624,280.89 for which it paid income tax in the amount of P295,283.32. At the end of 1994, however, petitioner incurred a net loss of P3,450,916.00 to thereby exempt it from payment of income tax for taxable year 1994. It was thus unable to apply the P973,215.00 tax credits incurred in 1993.
Petitioner thereupon indicated in its amended annual income tax return for calendar year ending December 31, 1994 that it made excess tax payments totaling P1,268,498.001 (P973,215.00 in 1993 plus P295,283.32 in 1994).
On April 12, 1996, petitioner filed with respondent, Commissioner of Internal Revenue, a letter-claim for refund of overpaid income taxes for taxable year 1993 in the amount of P973,215.00. As respondent had not acted on the claim, to interrupt the "seemingly applicable prescriptive period for filing suits for refund," petitioner filed on April 15, 1996 a petition for review2 with the CTA, docketed as C.T.A. Case No. 5372, praying for the refund of the amount of P973,215.00 representing overpaid income taxes remitted in 1993, offering as part of its evidence its income tax returns for 1993 and 1994.
On April 15, 1997, petitioner filed another case with the CTA, docketed as C.T.A. Case No. 5513, seeking a refund of overpaid income taxes for taxable year 1994 in the amount of P295,283.32. In said case, it offered as part of its evidence its income tax returns for 1994, 1995, and 1996.
By Decision of July 2, 1997, the CTA dismissed C.T.A. Case No. 5372 for insufficiency of evidence, drawing petitioner to file a motion for new trial and reconsideration which was denied by the CTA by Resolution of September 2, 1997.3
In denying petitioner's claim for refund of overpaid income taxes for the year 1993, the CTA noted its failure to present its 1995 income tax return as well as the breakdown of its excess taxes paid for 1994.
Petitioner thereupon filed a petition for review with the CA which, by Decision of October 29, 1998, affirmed the CTA decision and resolution.4 Petitioner filed on November 20, 1998, a motion for reconsideration of the CTA decision.
In the meantime, on February 10, 1999, the CTA rendered a decision in C.T.A. Case No. 5513 ordering respondent to refund or issue a tax credit certificate to petitioner in the amount of P295,283.32 representing unutilized income tax paid for the year 1994.5
By Resolution of April 19, 1999, petitioner's motion for reconsideration of the CA Decision of October 29, 1998 (claim for refund of excess tax payments for 1993) was denied, hence, the present petition for review on certiorari, petitioner imputing grave abuse of discretion to the Court of Appeals, viz:6
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISMISSED THE PETITION FOR REVIEW AND UPHELD THE DECISION OF THE [COURT OF TAX APPEALS] CTA THEREBY AFFIRMING THE COURT OF TAX APPEALS' REASONS IN DISMISSING THE PETITIONER'S JUDICIAL CLAIM FOR REFUND.
At the outset, it must be stressed that a petition for review on certiorari under Rule 45 of the Rules of Court, like the one at bar, serves to correct a reversible error and not a grave abuse of discretion as imputed by the petitioner.7 This procedural lapse notwithstanding, this Court, in the interest of substantial justice, shall treat the petition as one involving a reversible error.
The dispute arises from the parties' conflicting understanding or interpretation of law applicable at the time, Section 69 of the old National Internal Revenue Code (NIRC):
In affirming the decision of the CTA denying refund, the CA quoted with approval the following portions of the CTA decision:
It is worthy to note that for taxable year 1994, petitioner's Income Tax Return reflected a net loss of P3,450,916.00, the reason why petitioner was not able to utilize as tax credit its 1993 excess tax payment of P973,215.00. However, said 1994 revised Income Tax Return showed a refundable amount of P1,268,498.00 which must have included the sum of P973,215.00 which was declared by the petitioner in the 1994 unamended return. But, petitioner failed to present the components of the P1,268,498.00 excess payment for 1994 so as to apprise the Court that the said amount excludes the P973,215.00 excess payment for 1993 and thus may be a proper subject for refund. The petitioner likewise indicated in its 1994 revised Income Tax Return filed on November 24, 1995 that the entire refundable amount of P1,268,498.00 will be applied as credit to the following year (1995) by marking X on the corresponding box. But petitioner, again, failed to submit its 1995 Income Tax Return for verification whether or not the refundable amount has been actually applied as a tax credit in its income tax liability for the year 1995 or whether it suffered a loss for that year.
Assailing the foregoing disquisition, petitioner argues that there was no need to present its 1995 income tax return and introduce in evidence the breakdown of the excess taxes paid for the taxable year ending 1994 to prove its claim for refund of its 1993 overpaid income tax, for under Section 69 of the old NIRC, the 1993 excess tax payments could only be used to credit its 1994 income tax liabilities.
Respondent counterargues that petitioner's 1995 income tax return is essential to rebut the legal and disputable presumption that the entire excess estimated quarterly income taxes paid in 1994 (P295,283.32), without distinction as to its components, was carried over as a tax credit for the 1995 taxable year; and the breakdown of the excess taxes paid for the taxable year 1994 is necessary in order to determine if said excess taxes paid in 1994, intended to be applied as tax credit for 1995, still included the 1993 taxes which is the subject of the instant claim for refund in the amount of P973,215.00.
Respondent's arguments, premised on the assumption that the 1993 excess tax payment of P973,215.00 can be carried over as tax credit for the 1995 taxable year, do not lie. There was no need for petitioner to present in evidence the 1995 income tax return or to give a breakdown of the excess taxes paid for the taxable year ending 1994 to support a claim for refund of overpayment of income taxes for 1993.
The law is clear. The function of courts is simple application, not interpretation or circumvention.8
As earlier quoted, Section 69 of the old NIRC provides that in case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding year. The carrying forward of any excess or overpaid income tax for a given taxable year then is limited to the succeeding taxable year only. This, the CTA and the CA have repeatedly held.9
Since the case at bar involves a claim for refund of overpaid taxes for 1993, petitioner could only have applied the 1993 excess tax credits to its 1994 income tax liabilities. To further carry-over to 1995 the 1993 excess tax credits is violative of above-quoted Section 69 of the old NIRC.
That petitioner had signified its intention to apply the entire amount of P1,268,498 representing excess tax payments of P973,215.00 for 1993 and P295,283.00 for 1994 to the year 1995 is immaterial. For, it bears repeating, only the amount of P295,283.00 representing the 1994 income tax overpayments may only be applied to the succeeding taxable year, 1995.
But even assuming that there was a need for petitioner to present in evidence the 1995 income tax return or the breakdown of its excess taxes paid for the taxable year ending 1994, the CTA could have taken judicial notice of the records of C.T.A. Case No. 5513, petitioner's claim for refund of P295,283.00 overpaid income taxes for taxable year 1994, which was already pending before it. It is significant to note that petitioner's claim for refund in said case was granted by the CTA, as mentioned earlier, by Decision of February 10, 199910 and that out of the amount of P1,268,498.00 indicated in petitioner's income tax return, the refund being claimed by petitioner in the same case was only P295,283.32.
Clearly, the amount of P973,215.00 representing the 1993 tax credits subject of the petition at bar was excluded from the claim for refund in C.T.A. Case No. 5513. Moreover, the 1994 and 1995 income tax returns were offered as evidence in said C.T.A. Case No. 5513.11 Thus, the CTA had sufficient means to ascertain whether or not the 1993 tax credits were utilized in 1994.
Respondent, however, claims that the CTA cannot take judicial notice of the records of C.T.A. Case No. 5513. In BPI-Family Savings Bank v. Court of Appeals, this Court said:12
As in BPI-Family Savings Bank, the decision of the CTA in C.T.A. Case No. 5513 was attached to the petition at bar; and respondent does not claim that said decision was fraudulent or non-existent. This Court thus takes note of the decision in C.T.A. Case No. 5513.
At all events, while the rules of evidence13 and jurisprudence14 do not sanction the grant of evidentiary value to evidence which is not formally offered, it must be stressed that technical rules of procedure are not ends in themselves but are primarily designed to help in the administration of justice.15 Moreover, Section 8 of Republic Act No. 1125 creating the Court of Tax Appeals expressly provides that it shall not be governed strictly by technical rules of evidence.16
Substantial justice, equity and fair play are thus on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the State to keep money not belonging to it. If it expects its taxpayers to observe fairness and honesty in paying their taxes, it must apply the same standard against itself in refunding excess payments of such taxes.17 It should not enrich oneself at the expense of another.18
WHEREFORE, the assailed Decision of October 29, 1998 of the Court of Appeals in CA-G.R. SP. No. 45372 is hereby REVERSED and SET ASIDE. The Commissioner of Internal Revenue is ordered to refund to petitioner the amount of NINE HUNDRED SEVENTY THREE THOUSAND AND TWO HUNDRED FIFTEEN (P973,215.00) PESOS representing excess creditable taxes paid in 1993. No costs.
Puno, Panganiban, Sandoval-Gutierrez and Corona, JJ ., concur.
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