G.R. No. 178788
United Airlines vs. Commissioner of Internal Revenue
September 29, 2009
Facts:
International airline, petitioner United Airlines, filed a claim for income tax refund. Petitioner sought to be refunded the erroneously collected income tax from in the amount of P5,028,813.23 on passenger revenue from tickets sold in the Philippines, the uplifts of which did not originate in the Philippines. The airlines ceased operation originating form the Philippines since February 21, 1998.
Court of tAx appeals ruled the petitioner is not entitled to a refund because under the NIRC, income tax on GPB also includes gross revenue from carriage of cargoes from the Philippines. And upon assessment by the CTA, it was found out that petitioner deducted items from its cargo revenues which should have entitled the government to an amount of P 31.43 million, which is obviously higher than the amount the petitioner prayed to be refunded.
Petitioner argued that the petitioner’s supposed underpayment cannot offset his claim to a refund as established by well-settled jurisprudence.
Issue:
Whether or not petitioner is entitled to a refund?
HELD:
Petitioner was correct in averring that his claim to a refund cannot be subject to offsetting or, as it claimed the offsetting to be, a legal compensation under Sec. 28(A)(3)(a)
“Petitioner’s (similar) tax refund claim assumes that the tax return that it filed was correct. Given, however, the finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner is now put in doubt. As such, we(the court) cannot grant the prayer for a refund.”
The court held that the petitioner is not entitled to a refund, Having underpaid the GPB tax due on its cargo revenues for 1999, the amount of the former being even much higher (P31.43 million) than the tax refund sought (P5.2 million).
Relevant note:
The Court have consistently ruled that there can be no off-setting [or compensation”] of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.(francia vs Intermediate appellate court)
The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund. (CIR vs CTA)
