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, Paseo Realty marked the option for this entire balance “to be applied as tax credit to the succeeding taxable year.” Later, it 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 the Commissioner’s motion, reconsidered and dismissed the petition.
The Court of Tax Appeals found that the ₱54,104.00 sought for refund was already included in the total ₱172,477.00 credit balance which the corporation had elected to apply against its 1990 tax liability. The Court of Appeals affirmed this dismissal, noting that by marking the box for applying the credit to the next year, Paseo Realty made a deliberate choice for automatic tax credit over a cash refund. The appellate court contrasted this with the corporation’s 1988 return, where it explicitly specified separate amounts for refund and for credit, underscoring the significance of its different action for 1989.

ISSUE

Whether petitioner Paseo Realty is entitled to a refund of ₱54,104.00 representing excess creditable withholding taxes for the year 1989.

RULING

No, the petitioner is not entitled to the refund. The Supreme Court affirmed the decisions of the lower courts. The legal logic hinges on the principle of election and the provisions of the Tax Code governing the treatment of excess credits. When a corporate taxpayer files its annual income tax return, it must choose between applying an excess credit against the tax liability for the succeeding taxable year or claiming a refund. This choice, once made, is irrevocable for that taxable period.
By marking the option box in its 1989 return to apply the entire credit balance to the next year, Paseo Realty made a conclusive election. The ₱54,104.00, as part of that total credit balance, was thus automatically carried over to 1990. A taxpayer cannot subsequently disavow this election to claim a cash refund for a component of that already credited amount. To rule otherwise would permit an unjust double benefit—a credit used to offset future taxes and a simultaneous cash refund—which is prejudicial to government revenue. The claim for refund therefore lacks merit, as there was no longer any excess credit from 1989 available for refund, having been validly applied as chosen by the taxpayer.