G.R. No. 206526 , January 28, 2015
WINEBRENNER & IÑIGO INSURANCE BROKERS, INC. v. COMMISSIONER OF INTERNAL REVENUE

FACTS

Petitioner Winebrenner & Iñigo Insurance Brokers, Inc. filed its Annual Income Tax Return for Calendar Year (CY) 2003 on April 15, 2004. On April 7, 2006, it filed an administrative claim for refund or tax credit of its excess or unutilized creditable withholding tax (CWT) for CY 2003 amounting to ₱4,073,954.00. Due to inaction, it filed a petition for review before the Court of Tax Appeals (CTA) on April 11, 2006. The CTA Special First Division partially granted the claim in a reduced amount of ₱2,737,903.34 in its April 13, 2010 Decision. Both parties moved for reconsideration. The CIR argued that petitioner failed to present its quarterly Income Tax Returns (ITRs) for CY 2004, which were indispensable to prove that the excess CWT for 2003 was not carried over to the succeeding year, as required by the irrevocability rule under Section 76 of the National Internal Revenue Code (NIRC). On July 27, 2011, the CTA Division reversed itself in an Amended Decision, denying the entire claim due to insufficiency of evidence, specifically the lack of the first, second, and third quarterly ITRs for 2004. The CTA En Banc affirmed this Amended Decision on March 22, 2013, holding that the presentation of the succeeding quarterly ITRs was indispensable to prove that the excess CWT was not carried over, citing its ruling in Millennium Business Services, Inc. v. Commissioner of Internal Revenue.

ISSUE

Whether the petitioner is entitled to a refund or issuance of a tax credit certificate for its excess and unutilized creditable withholding tax for CY 2003, despite its failure to present the quarterly Income Tax Returns for CY 2004 as proof that the excess was not carried over to the succeeding taxable quarters.

RULING

No. The Supreme Court denied the petition and affirmed the CTA En Banc Decision. The Court held that under Section 76 of the NIRC, a taxpayer has the option to either carry over excess creditable withholding tax to the succeeding taxable quarters or claim a refund. Once the option to carry over is made, it becomes irrevocable for that taxable period. Therefore, to be entitled to a refund, the taxpayer must prove that it did not carry over the excess credits. The burden of proof lies with the taxpayer-claimant. The Court ruled that the presentation of the quarterly ITRs for the succeeding year is indispensable to discharge this burden, as these returns are the most reliable firsthand evidence of whether the excess was utilized or carried over. Since the petitioner failed to present its first, second, and third quarterly ITRs for CY 2004, it did not sufficiently prove that the excess CWT for 2003 was not carried over. The submission of the Annual ITR/Final Adjustment Return for 2004 alone was insufficient. The Court emphasized that tax refunds are in the nature of tax exemptions and must be construed strictly against the claimant.