CIR vs.

MIRANT (PHILIPPINES) OPERATIONS

CORPORATION [G.R. No. 171742, June 15, 2011]

AUTHOR: CHA

MIRANT
(PHILIPPINES)
OPERATIONS
CORPORATION vs. CIR [G.R. No. 176165, June 15,
2011]
TOPIC: Tax Refund
PONENTE: Mendoza
FACTS:
- Petitioner has the duty to act on and approve claims for refund or tax credit while Respondent 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 yeat/quarter.
- On April 10, 2001, Mirant filed its ITR for Dec. 31, 2000 with net loss = 56M; unutilized tax credits= 87M. On Sept. 20,
2001, Mirant wrote to BIR for refund if 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 its case to CTA (pet for review).
- CTA 1ST DIV: partially granted; 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
- CTA-EB: Dismissed; MR denied. Hence, this petition.
ISSUE: WON Mirant is entitled for tax refund or to the issuance of a tax credit certificate?
HELD: YES. Court affirmed CTA-EB. Tax refund or tax credit certificate of 38.6 M.
RATIO:
A. THE OPTION TO CARRY-OVER IS IRREVOCABLE ONCE IT IS EXERCISED.
1. 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.
2. In CIR vs PL Management Intl Phils. Inc.: Congress added in the predecessor of Sec. 76, which is Sec. 79 of NIRC of
1985 the last sentence to lay down the irrevocability rule.
3. In Philam Asset Management Inc vs CIR: two alternative options of a corporate taxpayer whose total quarterly income
tax payments exceed its tax liability, and how the choice precludes the other. The first option be refunded provided the
taxpayer properly applies for the refund. The second option is by applying the refundable amount as shown on the
FAR against estimated quarterly income tax liabilities. These options are alternative and precludes one another.
4. In Phil. Bank of Communications vs CIR: corporation must signify its intention by marking the corresponding option
box provided in the FAR. While required to mark, this requirement is only for the purpose of facilitating tax collection.
5. 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.
6. 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.
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):