776

SUPREME COURT REPORTS ANNOTATED

Systra Philippines, Inc. vs. Commissioner of Internal Revenue
G.R. No. 176290. September 21, 2007.*
SYSTRA PHILIPPINES, INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE,
respondent.
Remedial Law; Civil Procedure; Motions for Reconsideration; Second Motion for
Reconsideration a Prohibited Pleading; Denial of a motion for reconsideration is
final; Thus, as a rule, a second motion for reconsideration is a prohibited pleading.
The denial of a motion for reconsideration is final. It means that the Court will no
longer entertain and consider further arguments or submissions from the parties
respecting the correctness of its decision or resolution. It signifies that, in the
Courts considered view, nothing more is left to be discussed, clarified or done in the
case since all issues raised have been passed upon and definitely resolved. Any
other issue which could and should have been raised is deemed waived and is no
longer available as ground for a second motion. A denial with finality underscores
that the case is considered closed. Thus, as a rule, a second motion for
reconsideration is a prohibited pleading. The Court stressed in Ortigas and Company
Limited Partnership v. Velasco, 254 SCRA 234 (1996): A second motion for
reconsideration is forbidden except for extraordinarily persuasive reasons, and only
upon express leave first obtained. (emphasis supplied)
Same; Same; Procedural rules are not to be belittled or dismissed simply because
their non-observance may have resulted in prejudicing a partys substantive rights.
It is true that procedural rules may be relaxed in the interest of substantial justice.
They are not, however, to be disdained as mere technicalities that may be ignored
at will to suit the convenience of a party. They are intended to ensure the orderly
administration of justice and the protection of substantive rights in judicial
proceedings. Thus, procedural rules are not to be belittled or dismissed simply
because their non-observance may have resulted in prejudicing a partys
substantive rights. Like all rules, they are required to be followed except only when,
for the most persuasive of reasons, they may be relaxed to relieve a litigant of
negative consequences commensurate with the degree of thoughtlessness in not
complying with the prescribed procedure.
Taxation; Two options in favor of a corporation entitled to a tax credit or refund of
the excess estimated quarterly income taxes paid; Remedies are in the alternative
and the choice of one precludes the other; The irrevocability rule embodied in the
last sentence of Section 76 of the Tax Code prevents a taxpayer from claiming twice
the excess quarterly taxes paid.A corporation entitled to a tax credit or refund of
the excess estimated quarterly income taxes paid has two options: (1) to carry over
the excess credit or (2) to apply for the issuance of a tax credit certificate or to
claim a cash refund. If the option to carry over the excess credit is exercised, the
same shall be irrevocable for that taxable period. In exercising its option, the
corporation must signify in its annual corporate adjustment return (by marking the
option box provided in the BIR form) its intention either to carry over the excess
credit or to claim a refund. To facilitate tax collection, these remedies are in the

alternative and the choice of one precludes the other. This is known as the
irrevocability rule and is embodied in the last sentence of Section 76 of the Tax
Code. The phrase such option shall be considered irrevocable for that taxable
period means that the option to carry over the excess tax credits of a particular
taxable year can no longer be revoked. The rule prevents a taxpayer from claiming
twice the excess quarterly taxes paid: (1) as automatic credit against taxes for the
taxable quarters of the succeeding years for which no tax credit certificate has been
issued and (2) as a tax credit either for which a tax credit certificate will be issued
or which will be claimed for cash refund.
MOTION for Leave to File a Second Motion for Reconsideration and SECOND MOTION
FOR RECONSIDERATION of a decision of the Supreme Court.

The facts are stated in the resolution of the Court.

Salvador, Guevarra & Associates for petitioner.
Amado Rey B. Pagarigan special counsel for respondent.
RESOLUTION
CORONA, J.:

This resolves petitioner Systra Philippines, Inc.s (1) motion for leave to file a second
motion for reconsideration and
778

778
SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
(2) second motion for reconsideration of the Courts March 28, 2007 resolution.
On March 9, 2007, petitioner filed a petition for review on certiorari assailing the
January 18, 2007 decision1 of the Court of Tax Appeals (CTA) in CTA EB Case No.
135. The Court denied the petition in its March 28, 2007 resolution on the following
grounds:
(a) failure of petitioners counsel to submit his IBP2 O.R.3 number showing proof of
payment of IBP dues for the current year (the IBP O.R. No. was for 2006, i.e., it was
dated November 20, 2006);
(b) submitting a verification of the petition, certification of non-forum shopping and
affidavit of service that failed to comply with the 2004 Rules on Notarial Practice
with respect to competent evidence of affiants identities and

(c) failure to give an explanation why service was not done personally as required
by Section 11, Rule 13 in relation to Section 3, Rule 45 and Section 5(d), Rule 56 of
the Rules of Court.
On July 5, 2007, petitioners motion for reconsideration was denied with finality as
there was no compelling reason to warrant a modification of the March 28, 2007
resolution. Thus, the present motions.
Petitioner claims that this Court has granted second and even third motions for
reconsideration for extraordinarily persuasive reasons. It avers that this Court
should look into the importance of the issues involved in deciding whether leave to
file a second motion for reconsideration should be granted or not. It prays that its
petition should not be denied on the basis of procedural lapses alone and points out
that the
_______________

1 Rollo, pp. 40-50.

2 Integrated Bar of the Philippines.
3 Official receipt.
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Systra Philippines, Inc. vs. Commissioner of Internal Revenue
substantial amount involved in the petition justifies relaxation of technical rules. It
asserts that there is an important legal issue involved in this case: whether the
exercise of the option to carry over excess income tax credits under Section 76 of
the National Internal Revenue Code of 1997, as amended (Tax Code) bars a
taxpayer from claiming the excess tax credits for refund even if the amount remains
unutilized in the succeeding taxable year. Finally, it contends that the assailed CTA
decision was contradictory to the decisions of the Court of Appeals (CA)4 in Bank of
the Philippine Islands v. Commissioner of Internal Revenue 5 and Raytheon Ebasco
Overseas Ltd. Philippine Branch v. Commissioner of Internal Revenue 6 which
involved the same issue as that in this case. According to petitioner, in view of
those CA decisions, it is unjust to deprive it of the right to claim a refund.
We deny petitioners motions.
A SECOND MOTION FOR RECONSIDERATION IS PROHIBITED
The denial of a motion for reconsideration is final. It means that the Court will no
longer entertain and consider further arguments or submissions from the parties
respecting the correctness of its decision or resolution.7 It signifies that, in the

Courts considered view, nothing more is left to be discussed, clarified or done in the
case since all issues raised have been passed upon and definitely resolved. Any
other issue which could and should have been raised is deemed waived and is no
longer available as ground for a second motion. A denial with finality underscores
that the case is con_______________

4 Under RA 9282 which took effect on April 23, 2004, decisions of the CTA are no
longer appealable to the CA but directly to this Court. See also note 17.
5 CA-G.R. SP No. 77655, 29 April 2005.
6 CA-G.R. SP No. 80296, 11 April 2005.
7 Id.
780

780
SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
sidered closed.8 Thus, as a rule, a second motion for reconsideration is a prohibited
pleading.9 The Court stressed in Ortigas and Company Limited Partnership v.
Velasco:10
A second motion for reconsideration is forbidden except for extraordinarily
persuasive reasons, and only upon express leave first obtained.11 (emphasis
supplied)
It is true that procedural rules may be relaxed in the interest of substantial justice.
They are not, however, to be disdained as mere technicalities that may be ignored
at will to suit the convenience of a party.12 They are intended to ensure the orderly
administration of justice and the protection of substantive rights in judicial
proceedings.13 Thus, procedural rules are not to be belittled or dismissed simply
because their non-observance may have resulted in prejudicing a partys
substantive rights.14 Like all rules, they are required to be followed except only
when, for the most persuasive of reasons, they may be relaxed to relieve a litigant
of negative consequences commensurate with the degree of thoughtlessness in not
complying with the prescribed procedure.15
In this case, contrary to petitioners claim, there was no compelling reason to
excuse non-compliance with the rules.
_______________

8 Id.
9 Section 2, Rule 52 in relation to Section 4, Rule 56 of the Rules of Court.
10 324 Phil. 483; 254 SCRA 234, 240 (1996).
11 Id.
12 Santos v. Court of Appeals, G.R. No. 92862, 04 July 1991, 198 SCRA 806.
13 Spouses Galang v. Court of Appeals, G.R. No. 76221, 29 July 1991, 199 SCRA
683.
14 Id.
15 Id.
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781
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
Nor were the grounds raised by it extraordinarily persuasive.16
Moreover, petitioner can neither properly nor successfully rely on the decisions of
the CA in the Bank of the Philippine Islands and Raytheon Ebasco Overseas Ltd.
Philippine Branch cases. First, the CA and the CTA are now of the same level
pursuant to RA 9282.17 Decisions of the CA are thus no longer superior to nor
reversive of those of the CTA. Second, a decision of the CA in an action in personam
binds only the parties in that case. A third party in an action in personam cannot
claim any right arising from a decision therein. Finally and most importantly, while a
ruling of the CA on any question of law is not conclusive on this Court, all rulings of
this Court on questions of law are conclusive and binding on all courts including the
CA. All courts must take their bearings from the decisions of this Court.18
ON THE SUBSTANTIVE ASPECT,THE PETITION HAS NO MERIT
The antecedents of this case are as follows:
On April 16, 2001, petitioner filed with the [Bureau of Internal Revenue (BIR)] its
Annual Income Tax Return (ITR) for the taxable year ended December 31, 2000
declaring revenues in the
_______________

16 The fact that the amount involved is claimed to be substantial is neither a

compelling nor an extraordinarily persuasive reason. It is a subjective standard.

What may be a pittance for one may be a fortune for another. And all properties,
substantial or not, deserve protection under the laws.
17 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its
Rank to the Level of a Collegiate Court With Special Jurisdiction and Enlarging its
Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125,
as Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and
for Other Purposes.
18 Republic v. Maj. Gen. Garcia, G.R. No. 167741, 12 July 2007, 527 SCRA 495.
782

782
SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
amount of [P18,252,719] the bulk of which consists of income from management
consultancy services rendered to the Philippine Branch of Group Systra SA, France.
Subjecting said income from consultancy services of petitioner to 5% creditable
withholding tax, a total amount of [P4,703,019] was declared by petitioner as
creditable taxes withheld for the taxable year 2000.
For the same period, petitioner reflected a total gross income of [P3,752,129], a net
loss of [P17,930] and a minimum corporate income tax (MCIT) of [P75,043]. Said
MCIT of P75,043 was offset against its total tax credits for the year 2000 amounting
to [P4,703,019] thereby leaving a total unutilized tax credits of [P4,627,976],
computed as follows:
Gross Income
P3,752,129.00
Less: Deductions
P3,770,059.00
Net loss
P 17,930.00
Minimum Corporate Income Tax Due
P75,043.00
Less: Tax Credits
Prior years excess credits
P

Creditable taxes withheld

during the year
P4,703,019.00
P4,703,019.00
Tax Overpayment
P4,627,976.00
Petitioner opted to carry over the said excess tax credit to the succeeding taxable
year 2001.
For the taxable year ended December 31, 2001, petitioner filed with the BIR its
Annual ITR on April 12, 2002, reflecting a total gross income of [P4,771,419] and a
total creditable taxes withheld of [P1,111,587] for consultancy services. It likewise
declared a taxable income of [P1,936,851] with corresponding normal income tax
due in the amount of [P619,792]. After deducting the unexpired excess of the
previous year MCIT [1999 and 2000] in the amount of [P222,475] from the normal
income tax due for the period, petitioners net tax due of [P397,317] was applied
against the accumulated tax credits of [P5,739,563]. Said reported tax credits
comprised of prior years excess tax credits in the amount of [P4,627,976] and
creditable taxes withheld during the year 2001 in the sum of [P1,111,587]. These
excess tax credits were utilized to pay off the income tax still due of [P397,317]
resulting to an overpayment of [P5,342,246], computed as follows:
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783
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
Gross Income
P4,771,419.00
Less: Deductions
P2,834,568.00
Taxable Income
P1,936,851.00
Income Tax Due at the Normal Rate of 32%
P 619,792.00
Less: Unexpired Excess of Prior Years MCIT

Over Normal Income Tax Rate

P 222,475.00
Income Tax Still Due
P 397,317.00
Less: Tax Credits
Prior years excess credits
P4,627,976.00

Creditable taxes withheld

during the year
1,111,587.00
P5,739,563.00
Tax Overpayment
P5,342,246.00
Petitioner indicated in the 2001 ITR the option To be issued a Tax Credit Certificate
relative to its tax overpayments.
On August 9, 2002, petitioner instituted a claim for refund or issuance of a tax credit
certificate with the BIR of its unutilized creditable withholding taxes in the amount
of P5,342,246.00 as of December 31, 2001.
Due to the inaction of the BIR on petitioners claim for refund and to preserve its
right to claim for the refund to its unutilized CWT for CYs 2000 and 2001 by judicial
action, petitioner filed a petition for review with the Court in Division on April 14,
2003.19
In its August 3, 2005 decision, the First Division of the CTA partially granted the
petition and ordered the issuance of a tax credit certificate to petitioner in the
amount of P1,111,587 representing the excess or unutilized creditable withholding
taxes for taxable year 2001. The CTA, however, denied petitioners claim for refund
of the excess tax credits for the year 2000 in the amount of P4,627,976. It ruled that
petitioner was precluded from claiming a refund thereof or requesting a tax credit
certificate therefor. Once it was made for a particular taxable period, the option to
carry over became irrevocable.
_______________

19 Supra note 1, pp. 41-43.

784

784
SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
Petitioner moved for reconsideration but it was denied. Petitioner elevated the case
to the CTA en banc which rendered the assailed decision. Thus, this petition.
As already stated, petitioner formulated the issue in this petition as follows: whether
the exercise of the option to carryover excess income tax credits under Section 76
of the Tax Code bars a taxpayer from claiming the excess tax credits for refund even
if the amount remains unutilized in the succeeding taxable year. Petitioner contends
that it does not.
We disagree.
Section 76 of the Tax Code provides:
SEC. 76. Final Adjustment Return.Every corporation liable to tax under Section 27
shall file a final adjustment return covering the total taxable income for the
preceding calendar or fiscal year. If the sum of the quarterly tax payments made
during the said taxable year is not equal to the total tax due on the entire taxable
net income of that year the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid, the excess amount shown on its final adjustment
return may be carried over and credited against the estimated quarterly income tax
liabilities for the taxable quarters of the succeeding taxable years. 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. (emphasis
supplied)
A corporation entitled to a tax credit or refund of the excess estimated quarterly
income taxes paid has two options: (1) to carry over the excess credit or (2) to apply
for the issuance of a tax credit certificate or to claim a cash refund. If the option
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VOL. 533, SEPTEMBER 21, 2007

785
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
to carry over the excess credit is exercised, the same shall be irrevocable for that
taxable period.
In exercising its option, the corporation must signify in its annual corporate
adjustment return (by marking the option box provided in the BIR form) its intention
either to carry over the excess credit or to claim a refund. To facilitate tax collection,
these remedies are in the alternative and the choice of one precludes the other.20
This is known as the irrevocability rule and is embodied in the last sentence of
Section 76 of the Tax Code. The phrase such option shall be considered irrevocable
for that taxable period means that the option to carry over the excess tax credits
of a particular taxable year can no longer be revoked.
The rule prevents a taxpayer from claiming twice the excess quarterly taxes paid:
(1) as automatic credit against taxes for the taxable quarters of the succeeding
years for which no tax credit certificate has been issued and (2) as a tax credit
either for which a tax credit certificate will be issued or which will be claimed for
cash refund.21
In this case, it was in the year 2000 that petitioner derived excess tax credits and
exercised the irrevocable option to carry them over as tax credits for the next
taxable year. Under Section 76 of the Tax Code, a claim for refund of such excess
credits can no longer be made. The excess credits will only be applied against
income tax due for the taxable quarters of the succeeding taxable years.
The legislative intent to make the option irrevocable becomes clearer when Section
76 is viewed in comparison to Section 69 of the (old) 1977 Tax Code:
_______________

20 Philippine Bank of Communications v. Commissioner of Internal Revenue, 361

Phil. 916; 302 SCRA 241 (1999).
21 De Leon, Hector, THE NATIONAL INTERNAL REVENUE CODE, Seventh Edition,
2000, p. 430.
786

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SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
SECTION 69. Final Adjustment Return.Every corporation liable to tax under
Section 24 shall file a final adjustment return covering the total net income for the

preceding calendar or fiscal year. If the sum of the quarterly tax payments made
during the said taxable year is not equal to the total tax due on the entire taxable
net income of that year the corporation shall either:
(A) Pay the excess tax still due; or
(B) Be refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated
quarterly income taxes paid, the refundable amount shown on its final adjustment
return may be credited against the estimated quarterly income tax liabilities for the
taxable quarters of the succeeding taxable year.
Under Section 69 of the 1977 Tax Code, there was no irrevocability rule. Instead of
claiming a refund, the excess tax credits could be credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable
year, that is, the immediately following year only. In contrast, Section 76 of the
present Tax Code formulates an irrevocability rule which stresses and fortifies the
nature of the remedies or options as alternative, not cumulative. It also provides
that the excess tax credits may be carried over and credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding taxable
years until fully utilized.
Furthermore, this case is closely similar to Philam Asset Management, Inc. v.
Commissioner of Internal Revenue.22 In that case, Philam Asset Management, Inc.
had an unapplied creditable withholding tax in the amount of P459,756.07 for the
year 1998. It carried over the said excess tax to the following taxable year, 1999. In
the next succeeding year, it had a tax due in the amount of P80,042 and a
creditable withholding tax in the amount of P915,995. As such, the amount due
_______________

22 G.R. Nos. 156637/162004, 14 December 2005, 477 SCRA 761.

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Systra Philippines, Inc. vs. Commissioner of Internal Revenue
for the year 1999 (P80,042) was credited to its P915,995 creditable withholding tax
for that year. Thus, its 1998 creditable withholding tax in the amount of
P459,756.07 remained unutilized. Thereafter, it filed a claim for refund with respect
to the unapplied creditable withholding tax of P459,756.07 for the year 1998. The
Court denied the claim and ruled:

Section 76 [is] clear and unequivocal. Once the carry-over option is taken, actually
or constructively, it becomes irrevocable. Petitioner has chosen that option for its
1998 creditable withholding taxes. Thus, it is no longer entitled to a tax refund of
P459,756.07, which corresponds to its 1998 excess tax credit. Nonetheless, the
amount will not be forfeited in the governments favor, because it may be claimed
by petitioner as tax credits in the succeeding taxable years. (emphasis supplied)
Since petitioner elected to carry over its excess credits for the year 2000 in the
amount of P4,627,976 as tax credits for the following year, it could no longer claim
a refund. Again, at the risk of being repetitive, once the carry over option was
made, actually or constructively, it became forever irrevocable regardless of
whether the excess tax credits were actually or fully utilized. Nevertheless, as held
in Philam Asset Management, Inc., the amount will not be forfeited in favor of the
government but will remain in the taxpayers account. Petitioner may claim and
carry it over in the succeeding taxable years, creditable against future income tax
liabilities until fully utilized.23
WHEREFORE, petitioners motion for leave to file a second motion
reconsideration and the second motion for reconsideration are hereby DENIED.

for

_______________

23 Where, however, the corporation permanently ceases its operations before full
utilization of the tax credits it opted to carry over, it may then be allowed to claim
the refund of the remaining tax credits. In such a case, the remaining tax credits
can no longer be carried over and the irrevocability rule ceases to apply. Cessante
ratione legis, cessat ipse lex.
788

788
SUPREME COURT REPORTS ANNOTATED
Systra Philippines, Inc. vs. Commissioner of Internal Revenue
Costs against petitioner.
No further pleadings shall be entertained. Let entry of judgment be made in due
course.
SO ORDERED.
Puno (C.J., Chairperson), Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur.
Motions denied.
Note.The rule prohibiting a second motion for reconsideration applies to final
judgments and orders, not interlocutory orders. (Tolentino vs. Natanauan, 416 SCRA
273 [2003])

o0o

[Systra Philippines, Inc. vs. Commissioner of Internal Revenue, 533 SCRA

776(2007)]