G.R. No. 171742 & G.R. No. 176165, June 15, 2011
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. MIRANT (PHILIPPINES) OPERATIONS, CORPORATION, Respondent. / MIRANT (PHILIPPINES) OPERATIONS CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Mirant (Philippines) Operations Corporation (Mirant) is a corporation engaged in operating and managing power plants. For the fiscal year ending June 30, 1999, it filed an income tax return declaring a net loss and unutilized tax credits of ₱32,263,388.00, which it opted to carry over to the next taxable year. It later filed an amended return showing a higher net loss but the same unutilized credits. With BIR approval, Mirant changed its accounting period from fiscal to calendar year. It filed an income tax return for the interim period July 1 to December 31, 1999, declaring a net loss and unutilized tax credits of ₱48,626,793.00, which it again indicated was “To be carried over as tax credit next year/quarter.” For the calendar year ending December 31, 2000, it filed a return reflecting a net loss and unutilized tax credits of ₱87,345,116.00. On September 20, 2001, Mirant filed a claim for refund of ₱87,345,116.00. As the BIR did not act, Mirant filed a Petition for Review with the Court of Tax Appeals (CTA). The CTA First Division partially granted the claim, ordering a refund of ₱38,620,427.00 representing substantiated unutilized creditable withholding taxes for 2000, but denied the claim for ₱48,626,793.00 for 1999, holding that Mirant’s option to carry over those credits was irrevocable under Section 76 of the 1997 NIRC. Both parties appealed to the CTA En Banc, which dismissed both petitions. Hence, these consolidated petitions.

ISSUE

1. In G.R. No. 171742 : Whether the CTA erred in holding Mirant entitled to a refund or tax credit of ₱38,620,427.00.
2. In G.R. No. 176165: Whether Mirant is entitled to an additional refund or tax credit of ₱48,626,793.00 representing excess creditable withholding taxes for the fiscal year ended June 30, 1999 and the interim period July 1 to December 31, 1999.

RULING

The Supreme Court denied both petitions and affirmed the CTA En Banc’s decisions.
1. Regarding G.R. No. 171742 (CIR’s Petition): The Court held that Mirant was entitled to the refund of ₱38,620,427.00 for 2000. The claim was filed within the two-year prescriptive period under Section 229 of the NIRC, computed from the filing of the final adjusted return for the taxable year 2000 on April 10, 2001. Mirant sufficiently substantiated its claim with the required evidence, including its income tax return and certificates of creditable tax withheld at source.
2. Regarding G.R. No. 176165 (Mirant’s Petition): The Court held that Mirant was not entitled to a refund of the ₱48,626,793.00 for 1999. Under Section 76 of the 1997 NIRC, a corporation entitled to a tax credit may either (a) carry it over to the succeeding quarters/years, or (b) apply for a refund. This choice is irrevocable. For the fiscal year ending June 30, 1999 and the interim period ending December 31, 1999, Mirant’s income tax returns explicitly indicated that the excess credits were “To be carried over as tax credit next year/quarter.” By electing the carry-over option, Mirant was barred from later claiming a refund for the same amounts. The carry-over was effectively applied to its 2000 tax return.