SC rules tax refund option not ‘irrevocable,’ denies hospital manpower agency’s refund claim
The Supreme Court (SC) has declared that the so-called “irrevocability rule” does not apply to the exercise of the tax refund option, setting the precedent in the case of a hospital manpower agency.
In a recent 17-page decision, the SC 3rd Division denied the petition of University Physicians Services, Inc. Management, Inc. (UPSI-MI) to be refunded P2.93-million in tax credits that were mistakenly “carried over” during the first quarter of 2007.
When a corporation overpays its income tax liabilities, it could either ask for a refund or a tax credit certificate, or carry over the excess tax to be applied as a deduction in the next income tax return (ITR). The carry-over option is irrevocable.
In the case of UPSI-MI, it chose the refund option in its 2006 annual ITR. But, the company mistakenly carried over its 2006 tax credits to its taxes for January to March 2007.
UPSI-MI tried to undo the carry-over option in an amended ITR. But, it could not revert to its initial choice to exercise the refund option because of the irrevocability rule.
UPSI-MI argued that it should not bound to its mistake because its previous choice to exercise the refund option should have been the one that was irrevocable, and not the latter move.
The SC disagreed, however. It said “only the option of carry-over is irrevocable” under Section 76 of the National Internal Revenue Code.
“The law does not prevent a taxpayer who originally opted for a refund or tax credit certificate from shifting to the carry-over of the excess creditable taxes to the taxable quarters of the succeeding taxable years,” read the decision penned by Associate Justice Samuel Martires.
The SC said that disallowing the carry-over just because of a pending refund claim would “encourage inefficiency or… suppress administrative feasibility.”