GR 205955; (March, 2018) (Digest)
G.R. No. 205955 March 7, 2018
University Physicians Services Inc. – Management, Inc. vs. Commissioner of Internal Revenue
FACTS
Petitioner University Physicians Services Inc.-Management, Inc. (UPSI-MI) filed its 2006 Annual Income Tax Return reflecting an income tax overpayment of Php 5,159,341.00. In its original 2007 ITR for a short fiscal year, UPSI-MI carried over this entire amount as “Prior Year’s Excess Credit.” Subsequently, on the same filing date, UPSI-MI filed an amended 2007 ITR removing the 2006 overpayment from the carry-over entry, reducing the prior year’s credit to a different amount. It then filed a formal claim for refund or issuance of a Tax Credit Certificate for its 2006 excess creditable withholding taxes.
The Court of Tax Appeals (CTA) Division denied the claim. It ruled that by reflecting the 2006 excess credit in its original 2007 return, UPSI-MI had effectively and irrevocably elected the carry-over option under Section 76 of the National Internal Revenue Code (NIRC). The CTA En Banc affirmed, holding that the amendment of the 2007 return could not undo the already exercised option.
ISSUE
Whether UPSI-MI is barred from claiming a refund for its 2006 excess income tax credit after it initially carried over the amount in its original 2007 ITR, which it later amended on the same day to remove the carry-over.
RULING
Yes, the claim for refund is barred. The Supreme Court affirmed the CTA’s decisions, applying the irrevocability rule under Section 76 of the NIRC. The law provides that a corporation with an overpaid income tax liability must choose either to seek a refund or to carry over the excess as a credit against taxes due in the succeeding taxable quarters. This election, once made, is irrevocable.
The Court held that UPSI-MI made a definitive election when it filed its original 2007 ITR, which expressly included the 2006 overpayment as a tax credit for the current year. This act constituted a positive exercise of the carry-over option. The subsequent filing of an amended return to retract this carry-over and pursue a refund instead is precisely the kind of change of mind the irrevocability rule seeks to prohibit. The rule admits of no exceptions based on the taxpayer’s alleged inadvertence or mistake. To allow such a reversal would undermine administrative feasibility, create uncertainty in tax administration, and contravene the clear mandate of the law designed for finality and order in the tax system. The carry-over, once made, forecloses the alternative refund claim.