G.R. No. 206517, May 13, 2024
STABLEWOOD PHILIPPINES, INC. [FORMERLY ROLLS­ROYCE PHILIPPINES, INC., (FORMERLY ORCA ENERGY, INC.)], PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FACTS

Petitioner Stablewood Philippines, Inc. (Stablewood), a domestic corporation, electronically filed its Annual Income Tax Return (ITR) for taxable year (TY) 2005 on April 7, 2006, reflecting a creditable withholding tax (CWT) overpayment of PHP 76,245,344.99 and marking the choice “To be issued a Tax Credit Certificate.” Subsequently, Stablewood carried over this tax overpayment to its Quarterly Income Tax Returns for the first, second, and third quarters of TY 2006. On November 24, 2006, Stablewood filed an administrative claim for refund of its excess CWT for TY 2005 in the amount of PHP 65,085,905.82. In its TY 2006 Annual ITR, filed in April 2007, Stablewood indicated that it did not carry over its unutilized CWT from TY 2005. The Commissioner of Internal Revenue (CIR) failed to act on the administrative claim, prompting Stablewood to file a Petition for Review before the Court of Tax Appeals (CTA) on November 13, 2007. While the case was pending, Stablewood’s Board amended its Articles of Incorporation to shorten its corporate term on December 10, 2010, and its stockholders and directors approved the corporation’s dissolution effective December 31, 2010.

ISSUE

Whether Stablewood is entitled to a tax refund or issuance of a tax credit certificate for its alleged unutilized creditable withholding tax for taxable year 2005.

RULING

No. The Supreme Court denied the petition and affirmed the rulings of the CTA. The Court held that Stablewood’s act of carrying over its excess CWT from TY 2005 to its quarterly returns for TY 2006 constituted an exercise of the carry-over option under Section 76 of the National Internal Revenue Code (NIRC), which is irrevocable for that taxable period. This irrevocable choice precludes a claim for refund or tax credit for the same excess taxes, regardless of whether the carried-over amount was actually utilized in the succeeding year. The Court further ruled that the subsequent dissolution of the corporation does not automatically entitle it to a refund. While the irrevocability rule ceases to apply if a corporation permanently ceases operations before full utilization of carried-over credits, the taxpayer must first comply with the requirements under Sections 52(C) and 235 of the NIRC, which mandate notifying the Commissioner and securing a tax clearance prior to dissolution. Stablewood failed to prove compliance with these requirements before filing its judicial claim. Therefore, it is not entitled to the refund.