Facts: Petitioner Philippine Bank of Communications (PBCom), a commercial banking corp. duly organized under Philippine Laws, filed its quarterly income tax returns for the 1st and 2nd quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom’s tax credit memos and accordingly, the BIR issued tax Debit Memo.
Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1985, it declared a net loss of P25,317,228.00, thereby showing no income tax liability. For the succeeding year, ending December 31, 1986, it likewise declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes in 1985 and 1986.
On August 7, 1987, petitioner requested the CIR, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the 1st and 2nd quarters of 1985.
Thereafter on July 25, 1988, petitioner filed on claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for 234,077.69.
Pending the investigation of the respondent CIR, petitioner instituted a Petition for Review on November 18, 1988 before the CTA.
On May 20, 1993, the CTA denied the request of petitioner for a tax refund or credit in the sum of P5,299,849.95 on the ground that it was field beyond the 2-year reglementary period provided for by law. The petitioners claim for refund in 1986 amounting to P234,077.69 was likewise denied on the assumption that it was automatically credited by PBCom against its tax payment in the succeeding year.
Issue: Whether or not the need to signify whether a taxpayer intends to avail of a tax refund or a tax should be made on its annual corporate adjustment return.
Held: Sec. 69 of 1977 NIRC (now Sec. 76 of 1997 NIRC) provides that any excess of the total quarterly payments over the actual income tax computed in the adjustment or final corporate income tax return, shall either:
a.) be refunded to the corporation, or
b.) may be credited against the estimated quarterly income tax liabilities or the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.
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