Professional Documents
Culture Documents
FACTS:
28 May 1991 The Court of Tax Appeals (CTA) ordered the Commissioner of Internal
Revenue (CIR) to grant Citytrust Banking Corporation (Citytrust) a refund in the
amount of around Php13.3 million, representing Citytrusts overpaid income
taxes for 1984 and 1985.
In its supplemental MR, the CIR alleged an additional ground: that Citytrust had
outstanding deficiency income and business tax liabilities of around Php4.5
million for 1984, thus, the claim for refund was not in order.
CTA One of the exhibits presented and offered by the CIR in the CTA hearings was
proceedings a letter dated 28 February 1995, signed by the CIR, where the CIR demanded
the following sums from Citytrust for 1984:
Citytrust paid these deficiency tax liabilities. Thus, Citytrust considered all its
deficiency tax liabilities for 1984 fully settled.
The CIR objected to Citytrusts above allegation, arguing that Citytrust still had
unpaid deficiency income, business and withholding taxes for the year 1985, as
evidenced by Exhibit 5 of the CIR.
16 Oct 1997 The CTA set aside the CIRs objections and granted the refund.
G.R. No. On petition for review on certiorari before the SC, the CIR contended that
150812 Citytrust is not entitled to the refund of Php13.3 million as alleged overpaid
income taxes for 1984 and 1985. The CIR claims that the CA erred in not
holding that payment by Citytrust of its deficiency income tax was an admission
of its tax liability and, thus, a bar to its entitlement to a refund of income tax for
the same taxable year. Due to the 1985 deficiency assessments, the CIR
insists that Citytrust is not entitled to any tax refund.
ISSUE: Is Citytrust entitled to a tax refund despite the 1985 deficiency tax assessments
contained in Exhibit 5? In other words, should there be a set-off or legal compensation of the
taxes involved?
HELD/RATIO: No. In resolving this case, the CTA, as affirmed by the SC, did not allow a set-off
or legal compensation of the taxes involved, reasoning:
1. The SC directed the CTA to conduct further proceedings for the reception of Citytrusts
evidence, and the disposition of the present case. Thus, the evidence presented should
pertain only to the 1984 assessments which were the only assessments raised as a
defense on appeal to the CA and the SC. The assessments in Exhibit 5 of the CIR were
never raised on appeal to the higher courts. Hence, evidence related to said
assessments should not be allowed.
2. The CTA has no jurisdiction to try an assessment case which was never appealed to it.
In hearing a refund case, the CTA cannot hear in the same case an assessment dispute
even if the parties involved are the same parties.