SECOND DIVISION COMMISSIONER OF INTERNAL REVENUE, Petitioner, - versus G.R. No. 180042 Present: Carpio, J.

, Chairperson, Brion, Del Castillo, Abad, and Perez, JJ. IRONCON BUILDERS AND DEVELOPMENT CORPORATION, Respondent. Promulgated:

February , !"#" $ ---------------------------------------------------------------------------------------- $ DECISION / ABAD, J.: %his addresses the &uestion o' (hether or not )reditable value-added ta$ *+A%, (ithheld 'rom a ta$payer in e$)ess o' its output +A% liability may be the sub-e)t o' a ta$ re'und in pla)e o' a ta$ )redit. The Facts and the Case .n /ay #", !""# respondent 0ron)on Builders and Development Corporation *0ron)on, sought the re'und by the Bureau o' 0nternal Revenue *B0R, o' its in)ome ta$ overpayment and e$)ess )reditable +A%. 1hen petitioner Commissioner o' 0nternal Revenue *C0R, )ontinued not to a)t on its )laims, on 2uly #, !""! 0ron)on 'iled a petition 'or revie( (ith the Court o' %a$ Appeals *C%A, in C%A Case 34"!, (hi)h (as ra''led to its 5e)ond Division. A'ter hearing, the 5e)ond Division held that in regard to the )laim 'or overpaid in)ome ta$es, ta$payers have the option to either )arry over the e$)ess )redit or as6 'or a re'und. 7ere, respondent 0ron)on 'iled t(o in)ome ta$ returns 'or the year !""", an original and an amended one. 0n the original return, 0ron)on pla)ed an 8$9 mar6 in a bo$ )orresponding to the option 8%o be )arried over as ta$ )redit ne$t year:&uarter.9 Although 0ron)on;s amended return indi)ated a pre'eren)e 'or 8re'und9 o' the overpaid ta$, the 5e)ond Division ruled that 0ron)on;s original )hoi)e is regarded as irrevo)able, pursuant to 5e)tion <3 o' Republi) A)t *R.A., =!= *the >ational 0nternal Revenue Code o' #??< or >0RC,. Further, the 5e)ond Division 'ound that 0ron)on a)tually )arried over the )redit 'or overpaid in)ome ta$es and applied it to the ta$ due 'or the year !""#. 0t, there'ore, denied 0ron)on;s )laim 'or its re'und. As to the )laim 'or +A% re'und, the 5e)ond Division 'ound that by the end o' !""", 0ron)on had e$)ess ta$ )redit o' P@,#@4,??".3? )arried over 'rom #???, allo(able input ta$ o' P#4,!=!,!<#.=@, and 3A )reditable +A% o' P##,"!<,<4 .4#, (ithheld and remitted by its )lients. %hese amounts (ere dedu)tible 'rom 0ron)on;s total output +A% liability o' P!","<@,=!!.3@. Conse&uently, by the end o' !""" 0ron)on;s a)tual e$)ess )reditable +A% (as P?,@@!,4?<.?? only as against its )laim 'or re'und o' P# ,"4@,<#4.3=. %he C%A held, ho(ever, that input +A% payments should 'irst be applied to the reported output +A% liability. .nly a'ter this dedu)tion has been made (ill the 3A +A% (ithheld be applied to the amount o' +A% payable. %hus, the e$)ess o' P?,@@!,4?<.?? mentioned above represents the e$)ess 3A )reditable +A% (ithheld, not )reditable input +A%. %he C%A 'urther ruled that sin)e 0ron)on had no more output +A% against (hi)h the e$)ess )reditable +A% (ithheld may be applied or )redited, the +A% (ithheld had been e$)essively paid. %hus, the Court ruled that the e$)ess amount may be re'unded under 5e)tion !"=*C, in relation to 5e)tion !!? o' the >0RC. Be'ore a re'und may be granted, ho(ever, it must be sho(n that the )laim (as not used or )arried over to the su))eeding &uarters.

0ron)on did not present be'ore the 5e)ond Division its +A% returns 'or the su))eeding &uarters o' !""#. 1ithout this, the 5e)ond Division )ould not veri'y (hether the ta$ )redit (as applied to output +A% liability in !""#. %hus, the 5e)ond Division also denied 0ron)on;s )laim 'or re'und o' e$)ess )reditable +A%. 0ron)on 'iled a motion 'or re)onsideration, atta)hing to it its amended &uarterly +A% returns 'or !""#. %hese (ere mar6ed in open )ourt as B$hibits 8A-#,9 8B-#,9 8C-#,9 and 8D-#.9 %he C%A promulgated an Amended De)ision on 2uly @#, !""3, admitting the e$hibits and ruling that 0ron)on su''i)iently proved that its e$)ess )reditable +A% (ithheld (as not )arried over or applied to any output +A% 'or !""#. %hus, the Court granted its appli)ation 'or the re'und o' unutilized e$)ess )reditable +A% o' P?,@@!,4?<.??. Petitioner C0R 'iled a motion 'or re)onsideration o' the amended de)ision, (hi)h the 5e)ond Division denied, prompting the C0R to elevate the matter to the C%A En Banc by (ay o' a petition 'or revie( in C%A BB !@4. %he C%A En Banc denied the petition in a De)ision dated August ?, !""<. 0t also denied the C0R;s motion 'or re)onsideration, hen)e, this petition 'or revie(.C#D Issue Presented 5imply put, the only issue the petition raises is (hether or not the C%A erred in granting respondent 0ron)on;s appli)ation 'or re'und o' its e$)ess )reditable +A% (ithheld. The Courts Ruling Respondent 0ron)on;s e$)ess )reditable +A% in this )ase )onsists o' amounts (ithheld and remitted to the B0R by 0ron)on;s )lients. %hese )lients (ere government agen)ies that applied the 3A (ithholding rate on their payments to 0ron)on pursuant to 5e)tion ##= o' the >0RC *prior to its amendment by R.A. ?@@<,. Petitioner C0R;s main )ontention is that, sin)e these amounts (ere (ithheld in a))ordan)e (ith (hat the la( provides, they )annot be regarded as erroneously or illegally )olle)ted as )ontemplated in 5e)tions !"=*C, and !!? o' the >0RC. Petitioner C0R also points out that sin)e the >0RC does not spe)i'i)ally grant ta$payers the option to re'und e$)ess )reditable +A% (ithheld, it 'ollo(s that su)h re'und )annot be allo(ed. B$)ess )reditable +A% (ithheld is mu)h unli6e e$)ess in)ome ta$es (ithheld. 0n the latter )ase, 5e)tions <3 and 4 *D, o' the >0RC spe)i'i)ally ma6e the option to see6 a re'und available to the ta$payer. %he C0R submits thus that the only option available to ta$payers in )ase o' e$)ess )reditable +A% (ithheld is to apply the e$)ess )redits to su))eeding &uarters. But the amounts involved in this )ase are )reditable (ithholding ta$es, not 'inal ta$es sub-e)t to (ithholding. As the C%A )orre)tly points out, ta$es (ithheld on )ertain payments under the )reditable (ithholding ta$ system are but intended to appro$imate the ta$ due 'rom the payee.C!D %he (ithheld ta$es remitted to the B0R are treated as deposits or advan)es on the a)tual ta$ liability o' the ta$payer, sub-e)t to ad-ustment at the proper time (hen the a)tual ta$ liability )an be 'ully and 'inally determined.C@D For the year !""", 0ron)on;s a)tual +A% liability payable may be )omputed as 'ollo(s: .utput ta$es Eess: allo(able input ta$es Eess: ta$ )redit *#???, +A% payable P !","<@,=!!.3@ P #4,!=!,!<#.=@ P =, @#,#4#.!" P @,#@4,??".3? P #,3?4,#3".4#

Respondent 0ron)on;s )lients had, ho(ever, already (ithheld and remitted P##,"!<,<4 .4# to the B0R in )omplian)e (ith 5e)tion ##=. As stated above, this (ithheld amount is to be treated as advan)e payment 'or 0ron)on;s +A% liability payable and, there'ore, the di''eren)e o' P?,@@!,4?<.?? should be treated as 0ron)on;s overpaid ta$es.

%he ruling in Citibank N.A. v. Court of Appeals, (hile dealing (ith e$)essive in)ome ta$es (ithheld, is also appli)able to this )ase: 8Conse&uently and )learly, the ta$ (ithheld during the )ourse o' the ta$able year, (hile )olle)ted legally under the a'oresaid revenue regulation, be)ame untenable and too6 on the nature o' erroneously )olle)ted ta$es at the end o' the ta$able year.9 C=D Bven i' the la( does not e$pressly state that 0ron)on;s e$)ess )reditable +A% (ithheld is re'undable, it may be the sub-e)t o' a )laim 'or re'und as an erroneously )olle)ted ta$ under 5e)tions !"=*C, and !!?. 0t should be )lari'ied that this ruling only re'ers to )reditable +A% (ithheld pursuant to 5e)tion ##= prior to its amendment. A'ter its amendment by R.A. ?@@<, the amount (ithheld under 5e)tion ##= is no( treated as a 'inal +A%, no longer under the )reditable (ithholding ta$ system. C4D The rule is that before a refund ma be granted! res"ondent Ironcon must sho# that it had not used the creditable amount or carried it o$er to succeeding ta%able &uarters' .riginally, the C%A;s 5e)ond Division said in its 2anuary 4, !""3 de)ision that 0ron)on;s 'ailure to o''er in eviden)e its &uarterly returns 'or !""# (as 'atal to its )laim. 0ron)on 'iled a motion 'or re)onsideration, atta)hing its !""# returns, and, at the hearing o' the motion, had these returns mar6ed as B$hibits 8A-#,9 8B-#,9 8C-#,9 and 8D-#.9 Petitioner C0R argues that these B$hibits should be deemed inadmissible )onsidering that they (ere o''ered only a'ter trial had ended and should be treated as 'orgotten eviden)e. Citing BPI-Family Savin s Bank v. Court of Appeals,C3D the C%A ruled that on)e a )laim 'or re'und has been )learly established, it may set aside te)hni)alities in the presentation o' eviden)e. Petitioner C0R points out, ho(ever, that the present )ase is not on all 'ours (ith BPI. %he latter )ase dealt (ith the re'und o' )reditable in)ome ta$es (ithheld, 'or (hi)h the >0RC spe)i'i)ally grants ta$payers the option to apply 'or re'und o' any e$)ess. But, )onsidering the C%A;s 'inding in the present )ase that 0ron)on had e$)ess )reditable +A% (ithheld 'or (hi)h it (as entitled to a re'und, it ma6es no sense to deny 0ron)on the bene'it o' the BPI ruling that overloo6s te)hni)alities in the presentation o' eviden)e. 0n BPI, this Court admitted an e$hibit atta)hed to the )laimant;s motion 'or re)onsideration, even i' the )laimant submitted it only a'ter the trial. 8C%he )laimantD may have 'ailed to stri)tly )omply (ith the rules o' pro)edureF it may have even been negligent. %hese )ir)umstan)es, ho(ever, should not )ompel the Court to disregard this )old, undisputed 'a)t: that Cthe )laimantD $ $ $ )ould not have applied the amount )laimed as ta$ )redits.9C<D 5ubstantial -usti)e di)tates that the government should not 6eep money that does not belong to it at the e$pense o' )itizens. C D 5in)e he ought to 6no( the ta$ re)ords o' all ta$payers, petitioner C0R )ould have easily disproved the )laimant;s allegations. C?D %hat he )hose not to amounts to a (aiver o' that right. C#"D Also, the C0R 'ailed in this )ase to ma6e a timely ob-e)tion to or )omment on respondent 0ron)on;s o''er o' the do)uments in &uestion despite an opportunity to do so. C##D %a6ing all these )ir)umstan)es together, it (as su''i)iently proved that 0ron)on;s e$)ess )reditable +A% (ithheld (as not )arried over to su))eeding ta$able &uarters. WHEREFORE, the Court DENIES the petition and AFFIRMS the Court o' %a$ Appeals; En Banc!s de)ision in C%A BB !@4 dated August ?, !""<, its resolution dated .)tober ##, !""<, as (ell as the amended de)ision o' the Court o' %a$ Appeals; 5e)ond Division in C%A Case 34"! dated 2uly @#, !""3.

SO ORDERED.

ROBERTO A. ABAD Asso)iate 2usti)e