GR 226592; (July, 2021) (Digest)

G.R. No. 226592, July 27, 2021
COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. CARRIER AIR CONDITIONING PHILIPPINES, INC., RESPONDENT.

FACTS

Respondent Carrier Air Conditioning Philippines, Inc. declared cash dividends to its non-resident foreign parent company, Carrier HVACR Investments B.V., in 2009, from which it withheld and remitted final withholding taxes to the Bureau of Internal Revenue (BIR). An audit later revealed the dividends were overdeclared due to insufficient unrestricted retained earnings. The overpaid dividends were recorded as receivables. In 2011, the Board of Directors approved a new cash dividend declaration and authorized the deduction of the 2009 overpayment from the amount payable, effectively reversing the excess. On November 29, 2011, respondent filed an administrative claim for refund or tax credit for the final withholding tax on the 2009 overpaid dividends. On December 9, 2011, ten days later, respondent filed a judicial claim via a Petition for Review before the Court of Tax Appeals (CTA). The CTA Second Division and later the CTA En Banc granted the refund. The Commissioner of Internal Revenue (CIR) appealed, arguing the judicial claim was premature for violating the doctrine of exhaustion of administrative remedies, as it was filed without awaiting the CIR’s decision on the administrative claim.

ISSUE

Whether or not the Court of Tax Appeals erred in granting respondent’s judicial claim, instead of dismissing the Petition on the grounds of violation of the doctrine of exhaustion of administrative remedies and lack of cause of action.

RULING

The Petition is denied. The Supreme Court upheld the CTA’s decision. Section 229 of the National Internal Revenue Code of 1997 prescribes two conditions for an action to recover erroneously paid or illegally collected taxes: (1) filing an administrative claim with the BIR, and (2) filing the judicial claim within two years from the tax payment. The Court ruled that respondent complied with both conditions. The administrative claim was filed on November 29, 2011, and the judicial claim was filed on December 9, 2011, well within the two-year prescriptive period from the tax payments made on December 10, 2009, and January 12, 2010. The Court clarified that while Section 229 requires the prior filing of an administrative claim, it does not require the CIR to act on it before a judicial suit can be filed. The two-year period for filing the judicial suit is mandatory and jurisdictional; waiting for the CIR’s decision could cause the claim to prescribe. Therefore, respondent’s judicial claim was proper and not premature.