SUBJECT MATTER: FOR TAX REFUNDCOMMISSIONER OF INTERNAL REVENUE, petitioner, vs. PERF REALTY CORPORATION,respondent.557 SCRA 165G.R. NO.

163345. July 4,2008.REYES, R. T., J.: FACTS:Petitioner Commissioner is the head of the Bureau of Internal Revenue (BIR) whose principal duty is to assess collect internal revenue taxes. Respondent PERF is a domesticcorporation engaged in the business of leasing properties to various clients including the PhilippineAmerican Life and General Insurance Company (Philamlife) and Read-Rite Philippines (Read-Rite).On April 14, 1998, PERF filed its Annual Income Tax Return (ITR) for the year 1997s h o w i n g a n e t t a x a b l e i n c o m e i n t h e a m o u n t o f P 6 , 4 3 0 , 3 4 5 . 0 0 a n d i n c o m e t a x d u e o f P2,250,621.00.For the year 1997, it s tenants, Philamlife and Read-Rite, withheld and subsequentlyremitted creditable withholding taxes in the total amount of P3,531,125.00.After deducting creditable amount withholding taxes in the total amount of P3,531,125.00from its total income tax due of P2,250,621.00, PERF showed in its 1997 ITR an overpayment of income taxes in the amount of P1,280,504.00.On November 3,1999, PERF filed an administrative claim with the appellate division of theBIR for refund of overpaid income taxes in the amount of P1,280,504.00.On December 3, 1999, due to the inaction of the BIR, PERF filed a petition for review withthe Court of Tax Appeals (CTA) seeking for the refund of the overpaid income taxes.The CTA denied the petition on the ground of insufficiency of evidence. That PERF didnot indicate in its 1997 ITR the option to either claim the excess income tax as a refund or taxcredit pursuant to Section 76 0f the NIRC.Further the CTA likewise found that PERF failed to present in evidence its 1998 annualITR which left the court with no way to determine with certainty whether or not PERF has appliedor credited the refundable amount sought for in its administrative and judicial claims for refund.PERF move for reconsideration attaching to its motion its 1998 ITR but it was denied bythe CTA.Aggrieved by the decision of the CTA, PERF filed a petition for review with the CA under Rule 43 of the Rules of Court which ruled in favor of the PERF.The CIR filed a motion for reconsideration which was subsequently denied by the CA.Thus, the CIR appealed to the Supreme Court under rule 45.ISSUES:( 1 ) W H E T H E R O R N O T T H E C O U R T O F A P P E A L S E R R E D I N G R A N T I N G RESPONDENTS TAX REFUND CONSIDERING THE LATTERS FAILURE TOSUBSTANTIALLY ESTABLISH ITS CLAIM FOR REFUND( 2 ) W H E T H E R O R N O T T H E C O U R T O F A P P E A L S E R R E D I N C O N S I D E R I N G RESPONDENTS ANNUAL CORPORATE INCOME TAX RETURN FOR 1998 NOTWITHSTANDING THAT IT WAS NOT FORMALLY OFFERED INEVIDENCE.DECISION:(1.) PERF filed its administrative and judicial claim for refund on November 3, 1999 andDecember 3, 1999, respectively, which are within the two-year prescriptive period under section230 (now 229) of the National Internal Tax Code. The CTA noted that based on the records, PERF presented certificates of creditablewithholding tax at source reflecting creditable withholding taxes in the amount of P4,153,604.18withheld from PERFs rental income of P83,072,076.81. in addition, it submitted in evidence theMonthly Remittance Returns of its withholding agents to prove the fact of remittance of said taxesto BIR. Although the certificates of creditable withholding tax at source for 1997 reflected a totalamount of P4,153,604.18 corresponding to the total income of P83,072,076.81, PERF is claimingonly the amount of P3,531,125.00 pertaining to a rental income of P70,813,079.00. The amount of P3,531,125.00 less the income tax due of PERF of P2,250,621.00 leaves the refundable amount of P1,280,504.00.It is settled that the finding of fact of the CTA are entitled to great weight and will not bed i s t u r b e d o n a p p e a l u n l e s s i t i s s h o w n t h a t t h e l o w e r c o u r t s c o m m i t t e d g r o s s e r r o r i n t h e appreciation of facts. The Supreme see no cogent reason not to apply the same principle here.(2.) PERF attached its 1998 ITR to its

motion for reconsideration. The 1998 ITR is a partof the records of the case and clearly showed that income taxes in the amount of P1,280,504.00were not claimed as tax credit in 1998.Further, the Supreme Court sustain the rule of the CA that there is no need to rule on theissue of the admissibility of the 1998 ITR since the CTA ruled that PERF already complied withthe requisites of applying for a tax refund. The verification process is not incumbent on PERF; it isthe duty of the CIR to verify whether or not PERF had carried over the 1997 excess income taxes