COMMISSIONER OF INTERNAL REVENUE AND ARTURO V. PARCERO IN HIS OFFICIAL CAPACITY AS REVENUE DISTRICT OFFICER OF REVENUE DISTRICT NO. 049 (MAKATI), PETITIONERS, VS. PRIMETOWN PROP…

Primetown Property Group versus Commissioner of Internal Revenue

The Case

This is a petition for review on certiorari brought by the Commissioner of Internal Revenue and the revenue district officer of Makati against Primetown Property Group, Incorporated. The dispute is a tax case: a corporation that suffered heavy losses in 1997 nevertheless paid its quarterly corporate income tax and remitted creditable withholding tax, and then sought a refund or tax credit. The Commissioner resisted on the ground that the judicial claim was filed beyond the two-year prescriptive period. The case matters because the Supreme Court uses it to settle a question every tax practitioner must answer: how, exactly, is a legal period of years computed, and which law governs that computation, the Civil Code or the Administrative Code of 1987.

Procedural History

Primetown filed a petition for review in the Court of Tax Appeals after the Bureau of Internal Revenue failed to act on its administrative claim. The Court of Tax Appeals dismissed the petition, holding that it was filed beyond the two-year prescriptive period. It applied Article 13 of the Civil Code, treated the two-year period as 730 days, noted that the year 2000 was a leap year, and concluded that the petition, filed 731 days after the final adjusted return, was late. Primetown moved for reconsideration and was denied, so it appealed to the Court of Appeals.

The Court of Appeals reversed the tax court. It ruled that Article 13 of the Civil Code does not distinguish between a regular year and a leap year, so each of the two periods should still be counted as 365 days, for a total of 730 days, and a clear statute is neither interpreted nor construed. The Commissioner moved for reconsideration and was denied. The Commissioner then came to the Supreme Court by petition for review on certiorari.

Facts

On March 11, 1999, Gilbert Yap, vice chair of Primetown, wrote to the revenue district officer of Makati to claim a refund or credit of income tax paid in 1997. He explained that the increase in the cost of labor and materials, difficulty in obtaining financing, and difficulty in collecting receivables had slowed the real estate industry. Business was good in the first quarter of 1997, but the company suffered losses of 71,879,228 pesos that year. Because of those losses, it said it was not liable for income tax, yet it had paid quarterly corporate income tax and remitted creditable withholding tax totaling 26,318,398 pesos and 32 centavos. It therefore claimed a refund or credit.

A revenue officer required additional supporting documents, and the company complied, but its claim was never acted upon. On April 14, 2000, it filed a petition for review in the Court of Tax Appeals.

The tax court dismissed the petition as filed beyond the two-year prescriptive period, reckoned from the filing of the final adjusted return on April 14, 1998. Counting the period as 730 days and treating the leap year 2000 as adding a day, it found the petition filed on day 731. The Court of Appeals reversed, and the Commissioner elevated the matter to the Supreme Court.

Issues

• Whether or not the petition for review in the Court of Tax Appeals was filed within the two-year prescriptive period for a judicial claim for tax refund or tax credit.
• Whether or not Article 13 of the Civil Code or Section 31, Chapter VIII, Book I of the Administrative Code of 1987 governs the computation of the two-year legal period.

Applicable Provisions

Section 229 of the National Internal Revenue Code, as quoted in the decision, provides:

No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment.

This is the two-year prescriptive period whose computation is the heart of the case.

Article 13 of the Civil Code provides:

When the law speaks of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours, and nights from sunset to sunrise. If the months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last included.

This is the rule the tax court applied when it counted the period as 730 days.

Section 31, Chapter VIII, Book I of the Administrative Code of 1987 provides:

"Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day", to a day of twenty-four hours and; "night" from sunrise to sunset.

This is the later rule that the Court holds governs the computation of legal periods.

Section 27, Book VII of the Administrative Code of 1987 provides:

All laws, decrees, orders, rules and regulation, or portions thereof, inconsistent with this Code are hereby repealed or modified accordingly.

This is the repealing clause through which the later law displaced the earlier computation rule.

Ruling

On the first issue, the Court held that the petition was filed within the two-year prescriptive period, although not for the reason given by the Court of Appeals. The two-year period is reckoned from the filing of the final adjusted return, which was April 14, 1998. Counting under the Administrative Code, the period consisted of 24 calendar months, ending on April 14, 2000. The petition was filed on April 14, 2000, the last day of the twenty-fourth calendar month, and was therefore timely.

On the second issue, the Court held that Section 31, Chapter VIII, Book I of the Administrative Code of 1987 governs. Article 13 of the Civil Code treats a year as 365 days regardless of whether it is a regular year or a leap year. The Administrative Code treats a year as twelve calendar months, so the number of days is irrelevant. The two provisions deal with the same subject matter, the computation of legal periods, and cannot be reconciled. The repealing clause is not express because it does not identify the laws abolished, so the repeal is implied. Implied repeals are not favored, but here the later law encompasses the entire subject matter of the earlier one. The Court applied the maxim that the later law prevails over the earlier one. The Court thus affirmed the result reached by the Court of Appeals while correcting its reasoning.

Doctrine

A Bar candidate should retain these rules. First, the two-year prescriptive period under Section 229 of the National Internal Revenue Code is reckoned from the filing of the final adjusted return. Second, that period is computed under Section 31, Chapter VIII, Book I of the Administrative Code of 1987, which defines a year as twelve calendar months, not as 365 days. Third, Article 13 of the Civil Code, which fixes a year at 365 days, has been impliedly repealed on this point by the later Administrative Code, because the two cannot be reconciled and the later law covers the entire subject matter. Fourth, an implied repeal requires clear and unmistakable intent, tested by whether the subsequent law encompasses the former's subject matter entirely and the two cannot be logically or reasonably reconciled. Fifth, a repealing clause that does not identify the laws abolished is not an express repeal.

Disposition

The petition was denied. The Court affirmed that the claim was timely filed and remanded the case to the Court of Tax Appeals to hear and decide the refund claim expeditiously, with no costs.

Remember This

Memorize this line: a year means twelve calendar months under the Administrative Code of 1987, and that later law governs the computation of legal periods, including the two-year tax refund period. Examiners use this case to test the computation of prescriptive periods, the hierarchy between the Civil Code and the Administrative Code, and the doctrine of implied repeal.