CIR v Manila Electric Company G.R No.

121666 October 10, 2007

Facts: The respondent Manila Electric Company filed a refundable amount of P101.897 with the BIR. Meanwhile, on a yearly routine Letter of Authority, the petitioner found that respondent was liable for: 1. deficiency income tax in the amount of P2,340,902.52; and 2. deficiency franchise tax in the amount of P2,838,335.84. The respondent amended its final corporate income tax return and filed for a refund/credit in the amount of P107,649,729 representing overpaid income taxes for the years 1987 and 1988 but the CIR did not act upon such refund/credit. Hence, the respondent filed a judicial claim for refund/credit with the CTA. While the claim was pending with the CTA, the respondent paid the deficiency franchise tax in the amount of P2,838,335.84. It protested the payment of the alleged deficiency income tax and claimed as an alternative remedy the deduction thereof from its claim for refund or credit but this was refused by the petitioner. CTA decided in favor of the respondent and ordered the petitioner to issue a certificate of credit for the unused credits of the respondent. The petitioner questioned the ruling of the CTA and filed an appeal. On appeal, the CA affirmed the CTAs decision. Hence, this petition. The petitioner contends that a claim for tax refund is construed strictly against the claimant as it partakes of the nature of exemption from taxes.

ISSUE: Whether or not the respondent is entitled to credit? Held: Yes, the respondent is entitled to the credit. Under Sec 69 of the NIRC provides Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either: 1. pay the excess due or 2. be refunded the excess amount paid. A corporate taxpayers option to avail of tax credit does not, however, mean that it is ipso facto granted. For petitioner has still to investigate and ascertain the veracity of the claim. It bears noting that the tax court and the appellate court found respondents claim for tax refund or credit meritorious on the basis of the testimonial and documentary evidence adduced by the parties. The issue of whether respondent adduced sufficient evidence to prove its entitlement to a refund is a question of fact which cannot be brought to the supreme court. Hence, the findings of fact by the CTA and the CA will be upheld.