Presentation of quarterly ITRs in refund claims

In the case of claims for refund of excess or unutilized CWT, the presentation of succeeding quarterly income tax returns (ITRs) is required to prove that the taxpayer did not carry over and/or apply its excess withholding taxes to the succeeding taxable quarters.

According to the CTA, the presentation of quarterly ITRs is necessary to establish that the taxpayer claiming the refund did not exercise its option to carry over its excess unutilized withholding tax against its tax liabilities for the succeeding taxable quarters.

The CTA pointed out that the option to carry over excess withholding tax under Section 76 of the Tax Code is exercised against the quarterly income taxes to the taxable quarters of the succeeding taxable years. Since it is against the quarterly income taxes in the quarterly ITRs that the option to carry over is exercised, the CTA maintained that the best evidence to prove that there was really no carry over is not the final adjustment return or annual ITR, which may be amended at the end of the taxable year, but the quarterly ITR where the exercise to carry over actually takes place.

Hence, in case of failure to present succeeding quarterly ITRs, the CTA cannot determine with reasonable certainty whether the taxpayer claiming the refund opted to carry-over its excess and unutilized CWT. In such an instance, since the taxpayer is unable to prove its entitlement to refund, its claim for refund of its excess unutilized CWT shall be denied by the CTA.

(Jardine Lloyd Thomson Insurance Brokers, Inc. v. Commissioner of Internal Revenue, CTA EB Case No. 861 re: CTA Case No. 7916, June 5, 2013.

Tax Brief – July 2013

Punongbayan and Araullo