Facts: Petitioner bank’s annual corporate income tax return for 1989 showed that it suffered a loss of P8,286,960, and that it had a total refundable amount of P297,492 inclusive of P112,491 being claimed as tax refund in the present case. However, petitioner declared in its 1989 income tax return as a tax credit in the succeeding taxable year.
On October 11, 1991, petitioner bank filed a written claim for refund of P112,491 with the BIR alleging that it did not apply the 1989 refundable amount of P297,492 as tax credit to its 1990 annual corporate income tax return or either tax liabilities due to business losses it incurred for the same year. Without waiting for respondent CIR’s action in its claim for refund, petitioner filed a petition for review with the CTA.
CTA dismissed the petition on the ground that petitioner bank failed to present as evidence its 1990 annual income tax return to prove that it had not yet credited the amount of P297,422, inclusive of P112,491 which is the subject of the present controversy to its 1990 tax liability. Since petitioner declared in its 1989 income tax return that it would apply the excess withholding tax as tax credit for the following year, the tax court presumed that it did so. Petitioner failed to overcome this presumption because it did not present its 1990 tax return which would have shown that the amount was not applied as a tax credit. Hence, it was concluded that petition was not entitled to a tax refund. The CA affirmed said decision of the CTA.
Issue: Whether or not petitioner is entitled to a tax refund of P112,491 representing creditable withholding tax paid for 1989.
Held: The petition is meritorious. As a rule, the factual findings on the appellate court are binding on the SC. This rule, however, does not apply where, inter alia, the judgment is premised on a misapprehension of facts or when the appellate court failed to notice certain relevant facts which if considered would justify a different conclusion. This case is one such exception.
Strict procedural rules generally frown up the submission of the return the trial. R.A. 1125, the law creating the CTA, however, specifically provides the proceedings before it “shall not be governed strictly by the technical rules of evidence”. The paramount considerations remains the ascertainment of truth. Verily, the quest for orderly presentation of issues is not an absolute. It should not bar courts from considering undisputed facts to arrive at a just determination of a controversy.
While tax refunds are in the nature of the exceptions and are to the construct strictissimi juris against the claimant, under the facts of this case, petitioner has established its claim.
Substantial justice equity, and fair play are on the side of petitioner. Technicalities and legalisms, however, exalted, should not be misused by the government to keep money not belonging to it and thereby enrich would be better by allowing to appeal.
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