BPI-FAMILY SAVINGS BANK, INC. vs. COURT OF APPEALS et al | G.R. No. 122480. April 12, 2000.

G.R. No. 122480. April 12, 2000.*

BPI-FAMILY SAVINGS BANK, INC., petitioner,

vs.

COURT OF APPEALS, COURT OF TAX APPEALS and the COMMISSIONER OF INTERNAL REVENUE, respondents.

Facts:
This case involves a claim for tax refund for an amount of P112,491.00 representing BPI’s tax withheld for the year 1989.

It was shown that BPI had in its 1989 Income Tax Return that BPI had a total refundable amount of P297,492 inclusive of the P112,491.00 being claimed as tax refund in the present case. BPI declared that the said refundable amount will be applied as tax credit to the succeeding taxable year.

The next taxable year, on October 11, 1990, BPI filed a written claim for refund in the amount of P112,491.00 with the Commissioner of Internal Revenue alleging that it did not apply the 1989 refundable amount of P297,492.00 (including P112,491.00) to its 1990 Annual Income Tax Return or other tax liabilities due to the business losses it incurred for the same year.

While waiting for the CIR, BPI filed a petition for review with the Court of Tax Appeals, seeking for refund. But the CTA dismissed BPI’s petition for its allege failure to present as evidence its ITR for 1990 in order to establish the fact that BPI has not yet credited the amount which is the subject of the controversy to its 1990 income tax liability.

Issue:
Whether BPI is entitled to the refund 

Ruling:
Yes. BPI is entitled to the tax refund.

It is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus entitled to a refund amounting to P112,491. Pursuant to Section 69 of the 1986 Tax Code which states that a corporation entitled to a refund may opt either (1) to obtain such refund or (2) to credit said amount for the succeeding taxable year, petitioner indicated in its 1989 Income Tax Return that it would apply the said amount as a tax credit for the succeeding taxable year, 1990.

In this case, BPI presented evidence to prove its claim that it did not apply the tax credit. A copy of the Final Adjustment Return was attached to the motion for reconsideration filed in the CTA. The said return clearly showed that BPI incurred P52,480,173 as net loss in 1990 which clearly shows that it could not have applied the amount in dispute as a tax credit.’

It should be stressed that the rationale of the rules of procedure is to secure a just determination of every action. They are tools designed to facilitate the attainment of justice. But there can be no just determination of the present case if the return submitted to the CTA was ignored, on grounds of strict technicality. To repeat, it is an undisputed fact that BPI suffered a net loss in 1990; accordingly, it incurred no tax liability to which the tax credit could be applied. Consequently, there is no reason for the BIR and the Court to withhold the tax refund which rightfully belongs to BPI.

Tax Refunds; Strictissimi Juris
The CIR claim that Tax Refunds are in the nature of tax exemptions and thus, must be strictly construed against the claimant.

BPI was able to establish its claim, though it may have failed to strictly comply with the rules of procedure. But the Court could not disregard the cold, undisputed fact that BPI suffered losses in 1990 and it could not have applied the amount claimed as tax credits.

Substantial justice, equity and fair play are on the side of BPI. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.