Revenue v. Bank Of The Philippine Islands

CHICO-NAZARIO, J.:

This is a Petition for Review assailing the Decision1 dated 29 April 2005 and the Resolution dated 20 April 2007 of the Court of Appeals in CA-G.R. SP No. 77655, which annulled and set aside the Decision dated 12 March 2003 of the Court of Tax Appeals (CTA) in CTA Case No. 6276, wherein the CTA held that respondent Bank of the Philippine Islands (BPI) already exercised the irrevocable option to carry over its excess tax credits for the year 1998 to the succeeding years 1999 and 2000 and was, therefore, no longer entitled to claim the refund or issuance of a tax credit certificate for the amount thereof. On 15 April 1999, BPI filed with the Bureau of Internal Revenue (BIR) its final adjusted Corporate Annual Income Tax Return (ITR) for the taxable year ending on 31 December 1998, showing a taxable income of ₱1,773,236,745.00 and a total tax due of ₱602,900,493.00. For the same taxable year 1998, BPI already made income tax payments for the first three quarters, which amounted to ₱563,547,470.46.2 The bank also received income in 1998 from various third persons, which, were already subjected to expanded withholding taxes amounting to ₱7,685,887.90.

BPI additionally acquired foreign tax credit when it paid the United States government taxes in the amount of $151,467.00, or the equivalent of ₱6,190,014.46, on the operations of former's New York Branch. Finally, respondent BPI had carried over excess tax credit from the prior year, 1997, amounting to ₱59,424,222.00. Crediting the aforementioned amounts against the total tax due from it at the end of 1998, BPI computed an overpayment to the BIR of income taxes in the amount of ₱33,947,101.00.

The computation of BPI is reproduced below: Total Income Taxes Due ₱602,900,493.00 Less: Tax Credits: Prior year's tax credits ₱59,424,222.00 Quarterly payments 563,547,470.46 Creditable taxes withheld 7,685,887.90 Foreign tax credit 6,190,014.00