G.R. No. 96322. December 20, 1991
ACCRA INVESTMENTS CORPORATION, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS, RESPONDENTS.
GUTIERREZ, JR., J.:
This petition for
review on certiorari presents the issue of whether or not the petitioner
corporation is barred from recovering the amount of P82,751.91
representing overpaid taxes for the taxable year 1981.
The petitioner corporation is a domestic corporation engaged in the business of real estate
investment and management consultancy.
On April 15, 1982, the petitioner corporation filed with the
Bureau of Internal Revenue its annual corporate income tax return for the
calendar year ending December 31, 1981 reporting a net loss of P2,957,142.00
(Exhibits “B”, “B-1” to “B-10”). In the said return, the petitioner
corporation declared as creditable all taxes withheld at source by various
withholding agents, as follows:
“Withholding Agent Amount
Withheld
a) Malayan Insurance Co., Inc. P 1,429.97
(Exh. “C”)
b) Angara Concepcion Regala
& Cruz Law Offices P 73,588.00
(Exh. “D”)
c) MJ Development Corp. P 1,155.00
(Exh. “E”)
d) Philippine Global
Communications, Inc.
(Exh. “F”) P 6,578.94
TOTAL P 82,751.91“
(CTA Decision, p. 4;
Records, p. 10)
The withholding agents aforestated paid and remitted the above amounts
representing taxes on rental, commission and consultancy income of the
petitioner corporation to the Bureau of Internal Revenue from February to
December 1981.
In a letter dated December
29, 1983 addressed to the respondent Commissioner of Internal
Revenue (Exh. “G”), the petitioner
corporation filed a claim for refund inasmuch as it had no tax liability
against which to credit the amounts withheld.
Pending action of the respondent Commissioner on its claim for
refund, the petitioner corporation, on April
13, 1984, filed a petition for review with the respondent Court of
Tax Appeals (CTA) asking for the refund of the amounts withheld as overpaid
income taxes.
On January 27, 1988,
the respondent CTA dismissed the petition for review after a finding that the
two-year period within which the petitioner corporation’s claim for refund
should have been filed had already prescribed pursuant to Section 292 of the
National Internal Revenue Code of 1977, as amended.
Acting on the petitioner corporation’s motion for
reconsideration, the respondent CTA in its
resolution dated September 27, 1988
denied the same for having been filed out of time. It ruled that the reckoning date for purposes
of counting the two-year prescriptive period within which the petitioner
corporation could file a claim for refund was December 31, 1981 when the taxes
withheld at source were paid and remitted to the Bureau of Internal Revenue by its withholding agents, not April 15,
1982, the date when the petitioner corporation filed its final adjustment
return.
On January 14, 1989, the petitioner corporation filed with us its
petition for review which we referred to the respondent appellate court in our
resolution dated February 15, 1990 for proper determination and disposition.
On May 28, 1990, the respondent appellate court affirmed the
decision of the respondent CTA opining that the two-year prescriptive period in
question commences “from the date of payment of the tax” as provided
under Section 292 of the Tax Code of 1977 (now Sec. 230 of the National
Internal Revenue Code of 1986), i.e., “from the end of the tax year when a
taxpayer is deemed to have paid all taxes withheld at source“,
and not “from the date of the filing of the income tax return” as
posited by the petitioner corporation (CA Decision, pp. 3-5; Rollo, pp. 27-29)
Its motion for reconsideration with the respondent appellate
court having been denied in a resolution dated November 20, 1990, the
petitioner corporation (ACCRAIN) elevated this case to us presenting as main
arguments, to wit:
I
ACCRAIN’S JUDICIAL ACTION FOR RECOVERY OF
CREDITABLE TAXES ERRONEOUSLY
WITHHELD AT SOURCE WAS FILED ON TIME.
II
THE RECKONING DATE FOR THE COMMENCEMENT OF
THE TWO-YEAR PRESCRIPTIVE PERIOD IS 15 APRIL 1982. ACCORDINGLY, THE 13 APRIL 1984 ACTION OF
ACCRAIN FOR THE RECOVERY OF TAXES
ERRONEOUSLY WITHHELD AT SOURCE IN 1981 IS NOT BARRED AND ACCRAIN IS ENTITLED TO
THE REFUND OF P82,751.91 OF SUCH TAXES.” (Rollo, p. 116)
We find merit in the petitioner corporation’s postures.
Crucial in our resolution of the instant case is the
interpretation of the phraseology “from the date of payment of the
tax” in the context of Section 230 (formerly sec. 292) of the National
Internal Revenue Code of 1986, as amended, which provides that:
” “Sec. 230. Recovery of tax
erroneously or illegally collected. – 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 excessive 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 begin after the expiration of two years from the date of
payment of the tax or penalty regardless of any supervening cause that
may arise after payment: Provided,
however, that the Commissioner may, even without
a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment
appears to have been erroneously paid.” (Underlining Supplied)
The respondent appellate
court citing the case of Gibbs v. Commissioner of Internal Revenue (155
SCRA 318 [1965]), construed the phrase “from the date of payment” as
to be reckoned from “the end of the tax year” when the petitioner
corporation was deemed to have paid its
tax liabilities in question under the withholding tax system. (CA Decision, pp. 4-5; Rollo,
pp. 28-29)
The respondent appellate court in this case has misapplied
jurisprudential law. In the Gibbs
case, supra, cited by the Court of Appeals, we have clearly stated that:
“Payment is a mode of extinguishing obligations (Art. 1231,
Civil Code) and it means not only the delivery of money but also the
performance, in any other manner, of an obligation (id., Art. 1231). A taxpayer, resident or non-resident, does so
not really to deposit an amount to the Commissioner of Internal Revenue, but,
in truth, to perform and extinguish his tax obligation for the year
concerned. In other words, he is paying
his tax liabilities for that year.
Consequently, a taxpayer whose income is withheld at source will be
deemed to have paid his tax liability when the same falls due at the end of the
tax year. It is from this latter date
then, or when the tax liability falls due, that the two-year prescriptive
period under Section 306 (now part of Section 230) of the Revenue Code starts
to run with respect to payments effected through the withholding tax system. x x x (At p. 325; Underlining supplied)
The aforequoted ruling presents two
alternative reckoning dates, i.e., (1) the end of the tax year; and (2) when
the tax liability falls due. In the
instant case, it is undisputed that the petitioner corporation’s withholding
agents had paid the corresponding taxes withheld at source to the Bureau of
Internal Revenue from February to December 1981. In having applied the first alternative date
– “the end of the tax year” in order to determine whether or not the
petitioner corporation’s claim for refund had been seasonably filed, the
respondent appellate court failed to appreciate
properly the attending circumstances of this case.
The petitioner corporation is not claiming a refund of overpaid
withholding taxes, per se. It
is asking for the recovery of the sum of P82,751.91.00, the refundable or creditable amount determined upon the
petitioner corporation’s filing of the its final adjustment tax return on or before
15 April 1982 when its tax liability for the year 1981 fell due. The distinction is essential in the
resolution of this case for it spells the difference between being barred by
prescription and entitlement to a refund.
Under Section 49 of the
National Internal Revenue Code of 1986, as amended, it is explicitly provided
that:
“Sec. 49. Payment and assessment of
income tax for individuals and corporations.
(a) Payment of tax – (1) In general. – The
total amount of tax imposed by this Title shall be paid by the person subject
thereto at the time the return is filed.
x x x“
Section 70, subparagraph (b) of the same Code states when the income tax return with respect
to taxpayers like the petitioner corporation must be filed. Thus:
“Sec. 70 (b) Time of filing the income return – The
corporate quarterly declaration shall be filed within sixty (60) days following
the close of each of the first three quarters of the taxable year. The final adjustment return shall be filed on or before the 15th day of the 4th
month following the close of the
fiscal year, as the case may be.”
The petitioner corporation’s taxable year is on a calendar year basis, hence, with respect to the 1981
taxable year, ACCRAIN had until 15 April 1982 within which to file its final
adjustment return. The petitioner
corporation duly complied with this requirement. On the basis of the corporate income tax
return which ACCRAIN filed on 15 April 1982, it reported a net loss of P2,957,142.00. Consequently, as reflected thereon,
the petitioner corporation, after due computation, had no tax liability for the
year 1981. Had there been any, payment
thereof would have been due at the time the return was filed pursuant to
subparagraph (c) of the aforementioned codal
provision which reads:
“Sec. 70 (c) – Time payment of the income tax – The
income tax due on the corporate quarterly returns and the final income tax
returns computed in accordance
with Sections 68 and 69 shall be paid at the time the declaration or return is
filed as prescribed by the Commissioner of Internal Revenue.”
If we were to uphold the respondent appellate court in making the
“date of payment” coincide with the “end of the taxable
year,” the petitioner corporation at the end of the 1981 taxable year was
in no position then to determine whether it was liable or not for the payment
of its 1981 income tax.
Anent claims for refund, section 8 of Revenue Regulation No.
13-78 issued by the Bureau of Internal Revenue requires that:
“Section 8. Claims for tax credit
or refund – Claims for tax credit or refund of income tax deducted and
withheld on income payments shall be given due course only when it is shown on
the return that the income payment received was declared as part of the gross
income and the fact of withholding is established by a copy of the statement,
duly issued by the payor to the payee (BIR Form No.
1743-A) showing the amount paid and the amount of tax withheld therefrom.”
The term “return” in the case of domestic corporations like ACCRAIN refers to the final adjustment return as mentioned in Section 69 of
the Tax Code of 1986, as amended, which partly reads:
“Sec. 69. Final Adjustment Return
? Every corporation liable to tax under Section
24 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 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.”
Clearly, there is the need to file a return first before a claim
for refund can prosper inasmuch as the respondent Commissioner by his own rules
and regulations mandates that the corporate taxpayer opting to ask for a refund
must show in its final adjustment return the income it received from all
sources and the amount of withholding taxes remitted by its withholding agents
to the Bureau of Internal Revenue. The
petitioner corporation filed its final adjustment return for its 1981 taxable
year on April 15, 1982. In our Resolution dated April 10, 1989 in the case of Commissioner of
Internal Revenue v. Asia Australia Express, Ltd. (G. R. No. 85956), we ruled that the two-year
prescriptive period within which to claim a refund commences to run, at the
earliest, on the date of the filing of the adjusted final tax return. Hence, the petitioner corporation had until April 15, 1984 within which to file
its claim for refund.
Considering that ACCRAIN filed its claim for refund as early as
December 29, 1983 with the respondent Commissioner who failed to take any
action thereon and considering further that the non-resolution of its claim for refund with the said
Commissioner prompted ACCRAIN to
reiterate its claim before the Court of Tax Appeals through a petition
for review on April 13, 1984, the respondent appellate court manifestly
committed a reversible error in affirming the holding of the tax court that ACCRAIN’s claim for refund was barred by prescription.
It bears emphasis at this point that the rationale in computing
the two-year prescriptive period with respect to the petitioner corporation’s
claim for refund from the time it filed its final adjustment return is the fact
that it was only then that ACCRAIN could ascertain whether it made profits or
incurred losses in its business operations.
The “date of payment”, therefore, in ACCRAIN’s
case was when its tax liability, if any, fell due upon its filing of its final
adjustment return on April 15, 1982.
WHEREFORE, in view of the foregoing, the petition is
GRANTED. The decision of the Court of
Appeals dated May 28, 1990
and its resolution of November 20, 1990 are hereby REVERSED and SET ASIDE. The respondent Commissioner of Internal
Revenue is directed to refund to the petitioner corporation the amount of P82,751.91.
SO ORDERED.
Feliciano, Bidin, Davide,
Jr., and Romero, JJ.,
concur.