PASEO REALTY AND DEVELOPMENT CORP. vs.

CA

(G.R. No. 119286; 13 October 2004)

Facts:

Petitioner filed its Income Tax Return (ITR) for the calendar year 1989. He later filed with
respondent CTA for a refund of excess creditable taxes withholding (CTW) and income taxes for
the years 1989 and 1990 in the aggregate amount of 147, 036.15.

Respondent Commissioner (CIR) filed an Answer stating some defenses. The Court rendered
decision in favor of the petitioner. However, CIR filed a Motion for Reconsideration (MFR)
alleging that the amount sought to be refunded “has already been included in the 172, 447 which
the petitioner applied as tax credit for the succeeding taxable year 1990.

Upon the respondent Court (RC) dismissed the petition, the petitioner filed MFR which was
denied by the RC. Thus, petitioner filed a petition for Review before the CA. The appellate court
held that petitioner is not entitled to a refund because it appears that the latter did not specify the
amount to be refunded and the amount to be applied as tax credit to the succeeding taxable year,
but only marked an “X” to the box indicating “to be applied as tax credit to the succeeding
taxable year” when the latter filed its income tax return for the year 1989.

The Office of the Solicitor General (OSG) filed a Comment that the claimed refund was to be
applied against its tax liability for 1990.

Petitioner filed a Reply that the issue is not whether the 54,104 was included as tax credit to be
applied against its 1990 income tax liability but whether the same amount was actually applied
as tax credit for 1990.

The OSG filed a Rejoinder that petitioner’s 1989 tax return shows that the latter included 1988
excess credit which had already been segregated for refund and specified that the full amount of
Php 172, 479.00 be considered as its tax credit for 1990. The OSG further contended that the
remaining tax credit for 1989 should be the excess credit to be applied against its 1990 tax
liability. Hence, petitioner ask for a refund of its CTW in 1989 because it had been applied
against its 1990 tax due.

Issue:

Whether or not the petitioner should be refunded.

Ruling:
No. The grant of refund is founded on the assumption that the tax return is valid. Without the tax
return, it is error to grant a refund since it would be impossible to determine whether the proper
taxes have been assessed and paid.

In this case, petitioner did not present evidence to prove that its claimed refund had already been
automatically credited against its 1990 tax liability. The burden of proof to establish the factual
basis of claim for tax credit or refund lies on the claimant. Tax refunds are construed strictly
against the taxpayer.

Under the provision, the taxpayer is allowed three (3) options if the sum of its quarterly tax
payments made during the taxable year is not equal to the total tax due for that year:

 pay the balance of the tax still due;

 carry-over the excess credit; or
 be credited or refunded the amount period.

CIR v. PINEDA
GR No. L-22734, September 15, 1967
21 SCRA 105

FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the
eldest of whom is Atty. Manuel Pineda. Estate proceedings were had in Court so that the estate
was divided among and awarded to the heirs. Atty Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the BIR investigated the income tax liability of the
estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax
returns were not filed. Thereupon, the representative of the Collector of Internal Revenue filed
said returns for the estate issued an assessment and charged the full amount to the inheritance
due to Atty. Pineda who argued that he is liable only to extent of his proportional share in the
inheritance.

ISSUE: Can BIR collect the full amount of estate taxes from an heir's inheritance.

HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes
assessed.
The reason is that the Government has a lien on the P2,500.00 received by him from the estate as
his share in the inheritance, for unpaid income taxes for which said estate is liable. By virtue of
such lien, the Government has the right to subject the property in Pineda's possession to satisfy
the income tax assessment. After such payment, Pineda will have a right of contribution from his
co-heirs, to achieve an adjustment of the proper share of each heir in the distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by going after all
the heirs and collecting from each one of them the amount of the tax proportionate to the
inheritance received; and second, is by subjecting said property of the estate which is in the
hands of an heir or transferee to the payment of the tax due. This second remedy is the very
avenue the Government took in this case to collect the tax. The Bureau of Internal Revenue
should be given, in instances like the case at bar, the necessary discretion to avail itself of the
most expeditious way to collect the tax as may be envisioned in the particular provision of the
Tax Code above quoted, because taxes are the lifeblood of government and their prompt and
certain availability is an imperious need.

BOARD OF ASSESSMENT APPEALS OF LAGUNA vs. CTA, NWSA

8 SCRA 224
GR No. L-18125, May 31, 1963

"A tax on property of the Government, whether national or local, would merely have the effect
of taking money from one pocket to put it in another pocket."

FACTS: National Waterworks and Sewerage Authority (NWSA), a public corporation owned by
the Government of the Philippines as well as all property comprising waterworks and sewerage
systems placed under it, took over the Cabuyao-Sta. Rosa-Biñan Waterworks System in 1956. It
was assessed by the Provincial Assessor of Laguna, for purposes of real estate taxes, on the real
properties owned by Cabuyao Waterworks. The respondent protested claiming it is exempted
from the payment of real estate taxes in view of the nature and kind of said property and
functions and activities of petitioner. The petitioner denied the protest arguing that such real
properties are subject to real estate tax because although said properties belong to the Republic
of the Philippines, the same holds it, not in its governmental, political or sovereign capacity, but
in a private, proprietary or patrimonial character, which, allegedly, is not covered by the
exemption contained in section 3(a) of Republic Act No. 470.

ISSUE: Are the real properties owned by the respondent public corporation subject to real estate
tax?

HELD: No. Republic Act No. 470 makes no distinction between property held in a sovereign,
governmental or political capacity and those possessed in a private, proprietary or patrimonial
character. And where the law does not distinguish neither may we, unless there are facts and
circumstances clearly showing that the lawmaker intended the contrary, but no such facts and
circumstances have been brought to our attention. Indeed, the noun "property" and the verb
"owned" used in said section 3(a) strongly suggest that the object of exemption is considered
more from the view point of dominion, than from that of domain.
Moreover, taxes are financial burdens imposed for the purpose of raising revenues with which
to defray the cost of the operation of the Government, and a tax on property of the Government,
whether national or local, would merely have the effect of taking money from one pocket to put
it in another pocket. Hence, it would not serve, in the final analysis, the main purpose of taxation.
What is more, it would tend to defeat it, on account of the paper work, time and consequently,
expenses it would entail.
PBCom v CIR
GR No 112024, January 28, 1999

FACTS:
PBCom filed its quarterly income tax returns for the first and second quarters of 1985, reported profits
and paid the total income tax of P5,016,954. But, PBCom suffered net losses at the end of the year 1985
in the amount of P25,317,288 and P14,129,602 at the end of 1986. But during these two years, PBCom
earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding
creditable taxes in 1985 and 1986. On August 7, 1987, petitioner requested the CIR for a tax credit of
P5,016,954 representing overpayment of taxes. Thereafter, petitioner filed claim for refund of creditable
taxes.

ISSUES:
1. Whether PBCom is entitled to the tax refund 2. Whether the action has prescribed

RULING:
1. No. The corporation must signify in its annual corporate adjustment return its intention whether to
request for a refund or claim for an automatic tax credit for the succeeding taxable year. That the
petitioner opted for an automatic tax credit, his choice precludes the other.
2. The action has prescribed. The prescriptive period per Section 230 of the 1977 NIRC is 2 years and
must be followed notwithstanding the RMC 7-85 which changed the prescriptive period of 2 years to 10
years. Such clear inconsistency legislated guidelines contrary to the statute passed by Congress.