The erroneous carry-over of excess creditable withholding tax from previous the previous year would not result to deficiency income tax assessment if the carry-over will not result to a tax benefit.

The annual income tax return of the taxpayer for the taxable year 2005 showed an excess tax payment (due to unutilized creditable withholding taxes) of P11,278,451.98. When the taxpayer prepared its income tax return for the year 2006, it reflected a prior year’s excess credit of P12,785,038, instead of the P11,278,451.98. After calculating its income tax due for the year 2006 and crediting the carried-over credit from prior year of P12,785,038 as well as the taxes withheld for the year, the 2006 income tax return showed excess income tax payment of P9,489,869.80. The BIR assessed taxpayer for the erroneous carry-over of the difference of P1,506,576 (P12,785,038 – P11,278,451.98). The Court disagreed with the assessment saying that had the taxpayer been able to declared in its 2006 ITR the prior year’s excess credit of P11,278,461.95, instead of P12,785,035, it would still have overpayment of P7,983,293.75. The Court also noted that the tax benefit derived from the erroneous carry-over redounded to the benefit of the succeeding year 2007, which is beyond the scope of the 2006 assessment. Since the benefit will be in 2007, at most, it may only be assessed in 2007. Assessing taxpayer for the year 2006 is not proper. (Waterfront Cebu City Hotel and Casino, Inc. vs. Commissioner of Internal Revenue, C.T.A. Case No. 8005, December 12, 2012)