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By: Atty. Bryan Joseph L. Mallillin

1. The exercise of the option to carry-over the excess income tax credit prohibits a claim for
refund in the subsequent taxable years for the unused portion of the excess tax credits
carried over.

The clear intent in the amendment under Section 76 of the Tax Code is to make the option, once
exercised, irrevocable for the “succeeding taxable years.” Thus, once the taxpayer opts to carry-over
the excess income tax against the taxes due for the succeeding taxable years, such option is
irrevocable for the whole amount of the excess income tax, thus, prohibiting the taxpayer from
applying for a refund for that same excess income tax in the next succeeding taxable years. The
unutilized excess tax credits will remain in the taxpayer’s account and will be carried over and
applied against the taxpayer’s income tax liabilities in the succeeding taxable years until fully utilized.
Asiaworld Properties Philippines Corporation v. Commissioner of Internal Revenue, G.R.
No. 171766, July 29, 2010

2. A tax credit certificate (TCC) is immediately valid and effective after their issuance.

Petron correctly argues that the CTA En Banc erred in holding that the result of the post-audit
conducted by the Department of Finance One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (the Center) partook the nature of a suspensive condition for the validity of the
subject TCCs. Limited only to computational discrepancies arising from the use or transfer of TCCs,
the post-audit conducted by the Center would, if at all, only give rise to an adjustment of the
monetary value of the TCCs subjected thereto. The subject TCCs were valid upon their issuance in
favor of the original grantees which had the right to use them in payment of their tax liabilities
and/or transfer them in favor of assignees like Petron which could, in turn, utilize them as payment
of its own tax liabilities. Petron Corporation v. Commissioner of Internal Revenue, G.R. No.
180385, July 28, 2010

3. The rule against raising new issues on appeal is a procedural rule that the Court may relax
when compelling reasons or justice so warrant.

Even without the CIR raising the applicability of Section 104(A), the CTA should have considered it
since all four of respondent Eastern’s VAT returns corresponding to each taxable quarter of 1996
clearly stated that it earned income from exempt sales, i.e., non-VAT taxable sales. Eastern’s
quarterly VAT returns are matters of record. In fact, Eastern included them in its formal offer of
evidence before the CTA to prove it is engaged in VAT taxable, VAT exempt, and VAT zero-rated
sales. By declaring income from exempt sales, respondent effectively admitted that it engaged in
transactions not subject to VAT. As such, the Court finds the CA’s conclusion that “there is no
evidence on record that would evidently show that [Eastern] is also engaged in other transactions

Summary of Significant SC Decisions (June- July 2010) Page 1 of 2

that are not subject to VAT” is questionable. Commissioner of Internal Revenue v. Eastern
Telecommunications Philippines, Inc., G.R. No. 163835, July 7, 2010

4. Income from employees’ trust fund is exempt from income tax.

Petitioner MJOPFI is a corporation formed to administer the Employees' Trust Fund, investing its
funds to purchase the MBP lot. When the MBP lot was sold, the gross income of the Employees’
Trust Fund from the sale of the lot was deducted 7.5% withholding tax and broker’s commission.
The Court ruled that the private employees benefit trust fund met the requirements of the law and
regulations, and therefore qualify as reasonable retirement benefit plan within the contemplation of
Republic Act No. 4917 (now Sec. 28(b)(7)(A), Tax Code). The income from the trust fund
investments is therefore exempt from the payment of income tax and consequently from the
payment of the creditable withholding tax on the sale of the real property. Miguel J. Osorio
Pension Foundation, Incorporated v. Court of Appeals and Commissioner of Internal
Revenue, G.R. No. 162175, June 28, 2010

Summary of Significant SC Decisions (June- July 2010) Page 2 of 2