G.R. No. 119286; October 13, 2004
PASEO REALTY & DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

FACTS

Paseo Realty and Development Corporation filed its 1989 Income Tax Return showing a tax due of ₱27,653.00. It claimed total tax credits of ₱200,130.00, consisting of a prior year’s excess credit and creditable taxes withheld for 1989, resulting in a credit balance of ₱172,477.00. In its return, petitioner marked the option for this entire balance “to be applied as tax credit to the succeeding taxable year.” Later, petitioner filed a claim for refund specifically for ₱54,104.00, representing part of the creditable taxes withheld in 1989. The Court of Tax Appeals initially ordered a refund but, upon reconsideration, dismissed the petition after noting that the claimed amount was already included in the ₱172,477.00 which petitioner had elected to carry over to 1990.
The Court of Appeals affirmed the CTA’s dismissal. It ruled that by marking the box to apply the total credit balance to the next year, petitioner made a deliberate election for a tax credit, precluding a refund for any portion of that total. Petitioner argued that it did not actually apply the specific ₱54,104.00 to its 1990 liability and that a prior Court of Appeals decision involving the same parties for 1990 supported its position.

ISSUE

Whether petitioner is entitled to a refund of ₱54,104.00 representing excess creditable withholding taxes for 1989, despite having indicated in its 1989 tax return that its total excess credits were to be applied as a tax credit for the succeeding taxable year.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic centers on the taxpayer’s binding election between a refund or a tax credit as provided under Section 69 of the 1977 National Internal Revenue Code. The Court held that the act of filing an income tax return constitutes a formal claim for refund or tax credit. By marking the option box on its 1989 return to apply the entire ₱172,477.00 credit balance to the next year, petitioner made a conclusive choice for a tax credit. This election is irrevocable for that taxable year.
The Court rejected petitioner’s argument that it could later claim a refund for a component of the total credit, as this would violate the doctrine against unjust enrichment and allow a taxpayer to benefit twice—once by offsetting the amount against future liabilities and again by receiving a cash refund. The fact that the total credit might not have been fully utilized in 1990 is irrelevant; the law requires the choice to be made at the time of filing the return for the year the credit arose. The prior Court of Appeals decision regarding 1990 taxes was deemed a separate matter that did not alter the finality of petitioner’s 1989 election. Thus, having chosen the tax credit option, petitioner was no longer entitled to a refund.