GR 163345; (July, 2008) (Digest)
G.R. No. 163345 July 4, 2008
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. PERF REALTY CORPORATION, respondent.
FACTS
Respondent PERF Realty Corporation, a domestic corporation engaged in leasing properties, filed its 1997 Annual Income Tax Return showing an income tax due of P2,250,621.00. Its tenants had withheld and remitted creditable withholding taxes totaling P3,531,125.00. This resulted in a computed overpayment of P1,280,504.00. PERF filed an administrative claim for refund of this amount on November 3, 1999, and subsequently a judicial claim with the Court of Tax Appeals (CTA) on December 3, 1999, due to BIR inaction. The CTA denied the petition, citing insufficiency of evidence. It noted PERF’s failure to indicate in its 1997 ITR its option for a refund or tax credit as required by Section 76 of the Tax Code, and its failure to formally present its 1998 ITR in evidence to prove it had not carried over the excess credit.
ISSUE
Whether the Court of Appeals erred in granting PERF Realty Corporation’s claim for tax refund despite its alleged failure to comply with the requisites for such a claim.
RULING
The Supreme Court ruled in favor of PERF, affirming the CA’s grant of the refund. On the first issue, the Court found that PERF had substantially complied with the requisites for a refund claim. It filed its claims within the two-year prescriptive period, included the income subject to withholding in its return, and established the fact of withholding and remittance through certificates and monthly remittance returns. The CTA’s factual findings on compliance, accorded great weight, were upheld.
On the second issue, the failure to indicate a choice between refund or tax credit in the 1997 ITR was not fatal. Citing Philam Asset Management, Inc. v. CIR, the Court held that such an election is not an absolute requirement but a procedural tool to facilitate tax processing. The filing of a judicial claim for refund itself constitutes a definitive election for a refund, superseding any prior omission in the ITR. Furthermore, the duty to verify whether the taxpayer applied the excess credit to the succeeding year lies with the CIR, not the taxpayer. The CIR failed to rebut PERF’s claim despite having the opportunity. The principle against unjust enrichment mandates the refund of erroneously paid taxes.