Facts: Petitioner domestic corp. had for the taxable year 1982 a total income tax overpayment of P781,393,00 reflected on a creditable income tax in its annual final adjustment return. The application of the amount for the 1983 tax liabilities remained unutilized in view of petitioner’s net loss for the year and still yet had a credible income tax of P4,470.00 representing the 3% of 15% withholding tax on the storage credits. Accordingly the final adjustment income tax return for the taxable year 1983 reflected the amount of P781,393.00 carried over as tax credit and P4,470.00 creditable income tax.
In May 17, 1984 letter to the respondent, petitioner signified its intention to apply the total creditable amount of 785,869.00 against its 1984 tax dues consistent with the provision of Sec. 86 coupled with a comforting alternative request for a refund or tax credit of the same.
Respondent disallowed the proffered automatic credit scheme but treated the request as an ordinary claim for refund/tax credit under Sec. 292 in relation to Sec. 295 of the Tax Code and accordingly subjected the same for verification/investigation.
No sooner than the respondent could act on the claim petitioner filed a petition for review on July 18, 1984 and before this Court could formally hear the case, petitioner filed a supplemental petition on March 11, 1986, after having unilaterally effected a set-off of its creditable income tax vis-à-vis income tax liabilities, earlier denied by the respondent.
On February 28, 1990, the CTA dismissed the petition and held that prior investigation by and authority from the CIR were necessary before a taxpayer could avail of the provisions of Sec. 69 of the Tax Code. A motion for reconsideration was then filed but was denied thereafter, petitioner appealed the adverse decision of the CTA to the CA. On December 23, 1991, respondent court dismissed the appeal. Hence, this recourse.
Issue: Whether or not the option for either a refund or automatic tax credit scheme does not ipso facto confer on the taxpayer the right to avail the same.
Held: As for corporations and partnerships taxable as corporations, no automatic crediting of the overpaid income tax against taxes due in the succeeding quarters of the following year is allowed.
Once a taxpayer opts for either a refund or the automatic tax credit scheme, and signified his option in accordance with the regulation, this does not ipso facto confer on him the right to avail of the same immediately. An investigation as a matter of procedure, is necessary to enable the Commissioner to determine the correctness of the petitioner’s returns, and the tax amount to be credited.
It seems however that automatic crediting of excess tax payment against the quarterly income taxes due for the succeeding year of individuals, estates and trusts is allowed. As regards automatic crediting, Revenue Reg. No. 7-93 provides that should there still be payment after crediting is made against the quarterly income taxes due for the entire succeeding taxable year, then such excess payment may be claimed as a refund.
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