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CIR vs.

Mirant (Phils) Operations Corporation,


GR 171742 & 176165, June 5, 2011
Mendoza, J.
TOPIC: Tax Refund;

FACTS:

Petitioner (CIR) has the duty to act on and approve claims for refund or tax credit while Respondent
(MIRANT) is a corporation primarily engaged in design, construction etc. of gas turbine and other power
generating plants. Mirant filed the following:
a.) ITR for fiscal year ending June 30, 1999: net loss = 235M; unutilized tax credits = 32M
b.) Amended ITR for fiscal year ending June 30, 1999: net loss = 379M; unutilized tax credits = 32M

Mirant, to synchronize its accounting period filed with the BIR to change from fiscal year to calendar year
effective Dec. 31, 1999, which the BIR granted. Hence, ITR for interim period July 1, 1999-Dec. 31, 1999
was filed with net loss = 381M; unutilized tax credits= 48M. Mirant indicated in its Interim ITR that the
excess 48M as to be carried over as tax credit next year/quarter.

On April 10, 2001, Mirant filed its ITR for Dec. 31, 2000 with net loss = 56M; unutilized tax credits= 87M.
Thereafter, on Sept. 20, 2001, Mirant wrote to BIR for refund of the 87M representing unutilized tax
credits filed in its ITR.

Sec. 229 of the NIRC provides for the 2-year prescriptive period for filing of judicial claim so due to
inaction of BIR, before it lapsed, Mirant filed a petition for review its case to CTA.

CTA partially granted the petition; unutilized tax credits for 2000 from claim of 38.7M, granted 38.6M only
because duly substantiated while for 1999, claim of 48M denied; MR denied

Dismissed; MR denied. Hence, this petition.

ISSUE:
1. WON Mirant is entitled for tax refund or to the issuance of a tax credit certificate from 1999?

2. WON Mirant is entitled for tax refund or to the issuance of a tax credit certificate from 2000?

HELD:
1. NO. Mirants choice to carry over its 1999 excess income tax credit to succeeding taxable years is
irrevocable, regardless of whether it was able to actually apply the said amount to a tax liability. It is a
mistake to understand the phrase "for that taxable period" as a prescriptive period for the irrevocability
rule

2. YES. since the tax credit in this case was acquired in 1999, and Respondent opted to carry it over to
2000, then the irrevocability of the option to carry over expired by the end of 2000, leaving Respondent
free to again take another option as regards its 1999 excess income tax credit. The Court ruled that this
interpretation effectively renders nugatory the irrevocability rule.
RATIO:
A. THE OPTION TO CARRY-OVER IS IRREVOCABLE ONCE IT IS EXERCISED.
Sec. 76 of NIRC: Final Adjustment Return - Every corporation liable to tax shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal
year. If the sum of the quarterly tax payments made during the said taxable year is not
equal to the total tax due on the entire taxable income of that year, the corporation shall
either:
a.) pay the balance of the tax still due; or
b.) carry-over the excess credit; or
c.) be credited or refunded with the excess amount paid

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable
years. Once the option to carry-over and supply the excess quarterly income tax against income
tax due for the taxable quarters of the succeeding taxable years has been made, such option shall
be considered irrevocable for that taxable period and no application for cash refund or issuance
of a tax credit certificate shall be allowed.

Having chosen to carry-over, corporation cannot thereafter choose to apply for a cash refund or issuance
of a tax credit certificate.

The controlling factor is that the taxpayer chose an option and once it had already done so, it
could no longer make another one. The intent of the rule is to keep the taxpayer from flip-flopping
on its options and avoid confusion and complication as regards excess tax credit.

Since Mirant, in its ITR and Interim ITR for 1999 clearly ticked the box signifying that overpayment was to
be carried over, it is now barred from applying for refund or issuance of a tax credit. Hence, Court denied
claim of 48M for 1999. There will be no unjust enrichment to the State because refund prescribes in 2
years, but carry-over has none.

B. MIRANT IS ENTITLED TO REFUND OF ITS UNUTILIZED CREDITABLE WT FOR 2000.


1. CTA findings and conclusions are accorded with respect by the very nature of its functions and
expertise unless there has been an abusive or improvident exercise of authority. CTA found Mirant
complied with all the requirements for the refund of its unutilized creditable WT. In CIR vs. FEBTC, Court
enumerated the requisites for claiming a tax credit or a refund for creditable WT:
a.) Claim must be filed with the CIR w/in the 2-year period from date of payment of tax.
- Mirant complied with sec. 229 of NIRC that no suit shall be filed after expiration of 2-years from date
of payment of tax and to file a claim before the CIR. Mirant filed its ITR for 2000 on April 10, 2001 so it
had until April 10, 2003 to file claim for refund or tax credit. Mirant filed its claim on Sept. 10, 2001 to CIR
and case to CTA on Oct. 12, 2001, clearly within 2-year period.
b.) It must be shown on the return that the income received was declared part of the gross
income.
- Mirant declared that the creditable WT was declared as part of its gross income. The 38.7M was
withheld from the service fees of 871M it received, the same amount declared in its annual ITR.
c.) The fact of withholding must be established by a copy of a statement duly issued by the
payor to the payee showing the amount paid and the amount of tax withheld.
- Mirant was able to establish the fact of withholding of the creditable WT because the Creditable Tax
Withheld at Source (CWTs) were duly signed and prepared under the pain of perjury and found by the
duly commissioned independent CPA to be faithful reproductions of the originals. The duly commissioned
independent CPA explained that the discrepancy was merely brought about by difference in FOREX rates
at the time Mirant recorded it and time the CWTs were issued by its customers.
- Having complied with all the requirements, Mirant is entitled for refund or issuance of tax credit
certificate for 2000 of 38.6M, having been substantiated from 38.7M claim

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