PALACIO, Sarah Jane B.

BSAT- 4D

PHILAM ASSET MANAGEMENT VS. CIR, 477 SCRA 761 (2005)

PRINCIPLE:

Under Section 76 of the National Internal Revenue Code, a taxable corporation with excess quarterly
income tax payments may apply for either a tax refund or a tax credit, but not both. The choice of one
precludes the other. Failure to indicate a choice, however, will not bar a valid request for a refund,
should this option be chosen by the taxpayer later on.

FACTS:

Petitioner, formerly Philam Fund Management, Inc., is a domestic corporation which acts as the
investment manager of both Philippine Fund, Inc. (PFI) and Philam Bond Fund, Inc. (PBFI) providing
management and technical services. Petitioner is, likewise, PFIs and PBFIs principal distributor which
takes charge of the sales of said companies’ shares to prospective investors. Pursuant to the separate
management and distribution agreements, both PFI and PBFI agree to pay the petitioner, by way of
compensation for the latter’s services and facilities, a monthly management fee from which PFI and PBFI
withhold the amount equivalent to a five percent (5%) creditable tax, pursuant to the Expanded
Withholding Tax Regulations. On April 3, 1998, petitioner filed its annual corporate income tax return for
the taxable year 1997representing a net loss of P2, 689,242.00. Consequently, it failed to utilize the
creditable tax withheld in the amount of P522, 092.00 representing the tax withheld by petitioners
withholding agents, PFI and PBFI, on professional fees. On September 11, 1998, petitioner filed an
administrative claim for refund with the BIR in the amount of P522, 092.00 representing unutilized
excess tax credits for calendar year 1997.Thereafter, on July 28, 1999, a written request was filed with
the same division for the early resolution of petitioners claim for refund. BIR did not act on the claim.
CTA denied the petition for review. The CA held that to request for either a refund or a credit of income
tax paid, a corporation must signify its intention by marking the corresponding option box on its annual
corporate final adjustment return (FAR).

ISSUE:

Is petitioner entitled to a refund of its creditable taxes withheld?

RULING:

YES, petitioner is entitled to a tax refund of its 1997 excess tax credits in the amount of P522, 092.
Section 76 of the NIRC offers two options to a taxable corporation whose total quarterly income tax
payments in a given taxable year exceeds its total income tax due. These options are (1) filing for a tax
refund or (2) availing of a tax credit.