G.R. No. 227932 , November 08, 2023
Mindanao II Geothermal Partnership [Now Axia Power Holdings Philippines Corporation], Petitioner, vs. Commissioner of Internal Revenue, Respondent.

FACTS

Mindanao II Geothermal Partnership (M2GP) filed claims for refund or tax credit certificates (TCCs) for excess creditable withholding tax (CWT) payments for calendar years 2008 and 2009. For 2008, M2GP did not mark a refund option in its annual income tax return (ITR), carrying over the excess to 2009. For 2009, it marked the refund option. M2GP’s general partner withdrew on January 1, 2010, following a merger, and the Securities and Exchange Commission (SEC) certified the partnership’s dissolution on March 29, 2010. M2GP filed its administrative and subsequent judicial claims for refund.
The Court of Tax Appeals (CTA) Division initially denied both claims. For 2008, it ruled the carry-over was irrevocable, and M2GP failed to prove legal dissolution for tax purposes. For 2009, it found M2GP failed to prove the income subjected to CWT was declared. The CTA En Banc reversed these findings, holding M2GP validly dissolved and established the requisites for both refund claims. However, it denied the claims because M2GP failed to file a short-period income tax return covering January 1 to March 29, 2010, within 30 days of its SEC-certified dissolution, as required under Section 52(C) of the National Internal Revenue Code (NIRC).

ISSUE

Whether the CTA En Banc correctly denied M2GP’s claim for refund of excess CWT payments due to its failure to file a short-period return upon its dissolution.

RULING

Yes, the Supreme Court affirmed the CTA En Banc’s denial. The legal logic centers on the mandatory requirement for a dissolving corporation to file a final return. Under Section 52(C) of the NIRC, a corporation contemplating dissolution must render a correct return within 30 days after adopting a resolution or plan for dissolution. Jurisprudence clarifies this return must be a short-period return if the taxable year is shortened by the dissolution. This final return is crucial for the Bureau of Internal Revenue (BIR) to ascertain the taxpayer’s final tax liability, including the determination of any true overpayment available for refund.
The Court rejected M2GP’s argument that the requirement did not apply because it filed its regular 2009 annual ITR before its dissolution and had no income in 2010. The law’s purpose is to settle the tax account up to the point of dissolution definitively. Filing only the 2009 annual ITR, which covered a period ending December 31, 2009, left the period from January 1, 2010, to the March 29, 2010, dissolution unaccounted for. Without a short-period return for this interval, the BIR and the courts cannot conclusively determine if a net overpayment exists after considering all liabilities up to the dissolution date. Consequently, M2GP’ failure to comply with this procedural mandate was fatal to its claim for refund, regardless of the merits of its substantive evidence for the 2008 and 2009 excess credits. The claim was properly denied for non-compliance with a condition precedent for claiming a refund upon dissolution.