The Court of Tax Appeals (CTA) has denied the P11.7 million tax refund for 2019 sought by Norconsult Management Services Phils., Inc. from the Bureau of Internal Revenue (BIR).

In a decision handed down last June 30, the CTA said that since Norconsult’s carry-over option is irrevocable, the firm’s only recourse is to apply the excess and unutilized creditable withholding taxes (CWTs) of P11,717,431.36 to the succeeding taxable years until fully utilized.

The BIR did not act on the administrative claim filed by Norconsult for a tax refund of the firm’s CWTs for the year 2019.

As a result, Norconsult filed a petition for review before the CTA on April 12, 2022 and pointed out its claim was within the two-year prescriptive period.

It also told the CTA that the fact of withholding is proved by CWT certificates issued by the withholding agents, and it was shown through its annual income tax return (AITR) that the income payments upon which the taxes were withheld were included and declared as part of its gross income.

While the CTA agreed with the timeliness of Norconsult's petition, the same cannot be said of its compliance with Section 76 of the National Internal Revenue Code (NIRC) of 1997.

Section 76 of NIRC provides: “Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor.”

The CTA said that Norconsult's AITR for 2019 showed that it had total excess and unutilized CWTs of P44,881,216 as of Dec. 31, 2019.

However, Norconsult carried over to its 2020 AITR the amount of P44,881,216 which includes the subject claim of P11,717,431.36 as "Prior Year's Excess Credits Other Than MCIT" (minimum corporate income tax).

"Such being the case, petitioner's (Norconsult) chosen option to be refunded is effectively negated by its very act of carrying over the same amount to the subsequent 2020 as part of the prior year's excess credits," the CTA explained.

“The inevitable conclusion then is that petitioner categorically availed itself of the carry-over option. Consequently, petitioner is not entitled to the refund of the amount being sought. Petitioner's only recourse is to apply the subject excess and unutilized CWTs of P11,717,431.36 to the succeeding years until fully utilized," the CTA ruled.

The 18-page decision was written by Associate Justice Jean Marie A. Bacorro-Villena with the concurrence of Presiding Justice Roman G. Del Rosario and Associate Justice Lanee S. Cui-David.