ACCRA Investments Corp. v. CA (1991)

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G.R.No.96322

THIRDDIVISION

[G.R.No.96322,December20,1991]

ACCRAINVESTMENTSCORPORATION,PETITIONER,VS.THEHONORABLECOURTOFAPPEALS,COMMISSIONEROFINTERNALREVENUEANDTHECOURTOFTAXAPPEALS,

RESPONDENTS.

DECISION

GUTIERREZ,JR.,J.:

Thispetition for reviewoncertioraripresents the issueofwhetherornot thepetitioner corporation is barred from recovering the amount of P82,751.91representingoverpaidtaxesforthetaxableyear1981.

Thepetitionercorporationisadomesticcorporationengagedinthebusinessofrealestateinvestmentandmanagementconsultancy.

OnApril 15,1982, thepetitioner corporation filedwith theBureauof InternalRevenue its annual corporate income tax return for the calendaryear endingDecember31,1981reportinganetlossofP2,957,142.00(Exhibits"B","B1"to"B10").Inthesaidreturn,thepetitionercorporationdeclaredascreditablealltaxeswithheldatsourcebyvariouswithholdingagents,asfollows:

"WithholdingAgentAmountWithheld

a)MalayanInsuranceCo.,Inc.P1,429.97

(Exh."C")

b)AngaraConcepcionRegala

&CruzLawOfficesP73,588.00

(Exh."D")

c)MJDevelopmentCorp.P1,155.00

(Exh."E")

d)PhilippineGlobalCommunications,Inc.

(Exh.F)P6,578.94



TOTALP82,751.91"

(CTADecision,p.4Records,p.10)

The withholding agents aforestated paid and remitted the above amountsrepresenting taxes on rental, commission and consultancy income of thepetitioner corporation to the Bureau of Internal Revenue from February toDecember1981.

In a letter dated December 29, 1983 addressed to the respondentCommissionerofInternalRevenue(Exh."G"),thepetitionercorporationfiledaclaimforrefundinasmuchasithadnotaxliabilityagainstwhichtocredittheamountswithheld.

Pending action of the respondent Commissioner on its claim for refund, thepetitioner corporation, on April 13, 1984, filed a petition for review with therespondentCourt of TaxAppeals (CTA)asking for the refundof theamountswithheldasoverpaidincometaxes.

On January 27, 1988, the respondent CTA dismissed the petition for reviewafterafindingthatthetwoyearperiodwithinwhichthepetitionercorporation'sclaim for refund should have been filed had already prescribed pursuant toSection292oftheNationalInternalRevenueCodeof1977,asamended.

Acting on the petitioner corporation's motion for reconsideration, therespondentCTAinitsresolutiondatedSeptember27,1988deniedthesameforhavingbeenfiledoutoftime.Itruledthatthereckoningdateforpurposesofcounting the twoyear prescriptive period within which the petitionercorporationcouldfileaclaimforrefundwasDecember31,1981whenthetaxeswithheldatsourcewerepaidandremittedtotheBureauofInternalRevenuebyits withholding agents, not April 15, 1982, the date when the petitionercorporationfileditsfinaladjustmentreturn.

On January 14, 1989, the petitioner corporation filed with us its petition forreviewwhichwe referred to the respondent appellate court in our resolutiondatedFebruary15,1990forproperdeterminationanddisposition.

OnMay28,1990, therespondentappellatecourtaffirmedthedecisionof therespondent CTA opining that the twoyear prescriptive period in questioncommences"fromthedateofpaymentofthetax"asprovidedunderSection292of theTaxCodeof1977(nowSec.230of theNational InternalRevenueCodeof1986),i.e.,"fromtheendofthetaxyearwhenataxpayerisdeemedtohavepaidalltaxeswithheldatsource",andnot"fromthedateofthefilingoftheincometaxreturn"aspositedbythepetitionercorporation(CADecision,pp.35Rollo,pp.2729)

Itsmotionforreconsiderationwiththerespondentappellatecourthavingbeendenied in a resolution dated November 20, 1990, the petitioner corporation



(ACCRAIN)elevatedthiscasetouspresentingasmainarguments,towit:

I

ACCRAIN'SJUDICIALACTIONFORRECOVERYOFCREDITABLETAXESERRONEOUSLYWITHHELDATSOURCEWASFILEDONTIME.

II

THERECKONINGDATEFORTHECOMMENCEMENTOFTHETWOYEARPRESCRIPTIVE PERIOD IS 15 APRIL 1982. ACCORDINGLY, THE 13APRIL 1984 ACTION OF ACCRAIN FOR THE RECOVERY OF TAXESERRONEOUSLYWITHHELDATSOURCEIN1981ISNOTBARREDANDACCRAIN IS ENTITLED TO THE REFUND OF P82,751.91 OF SUCHTAXES."(Rollo,p.116)

Wefindmeritinthepetitionercorporation'spostures.

Crucial in our resolution of the instant case is the interpretation of thephraseology "from thedateof paymentof the tax" in the context ofSection230 (formerly sec. 292) of the National Internal Revenue Code of 1986, asamended,whichprovidesthat:

""Sec.230.Recoveryoftaxerroneouslyorillegallycollected. Nosuitorproceedingshallbemaintainedinanycourtfortherecoveryofanynational internalrevenuetaxhereafterallegedtohavebeenerroneously or illegally assessed or collected, or of any penaltyclaimed to have been collected without authority, or of any sumalleged to have been excessive or in any manner wrongfullycollected,untilaclaimfor refundorcredithasbeenduly filedwiththeCommissionerbutsuchsuitorproceedingmaybemaintained,whetherornotsuchtax,penaltyorsumhasbeenpaidunderprotestorduress.

In any case, no such suit or proceeding shall begin after theexpiration of two years from the date of payment of the tax orpenalty regardless of any supervening cause that may arise afterpayment: Provided, however, that the Commissioner may, evenwithoutawrittenclaimtherefor,refundorcreditanytax,whereonthefaceofthereturnuponwhichpaymentwasmade,suchpaymentappearstohavebeenerroneouslypaid."(UnderliningSupplied)

The respondent appellate court citing the case of Gibbs v. Commissioner ofInternalRevenue(155SCRA318[1965]),construedthephrase"fromthedateof payment" as to be reckoned from "the end of the tax year" when thepetitioner corporationwas deemed to have paid its tax liabilities in questionunderthewithholdingtaxsystem.(CADecision,pp.45Rollo,pp.2829)



Therespondentappellatecourtinthiscasehasmisappliedjurisprudentiallaw.IntheGibbscase,supra,citedbytheCourtofAppeals,wehaveclearlystatedthat:

"Payment is a mode of extinguishing obligations (Art. 1231, CivilCode) and it means not only the delivery of money but also theperformance,inanyothermanner,ofanobligation(id.,Art.1231).A taxpayer, residentornonresident,does sonot really todepositanamounttotheCommissionerofInternalRevenue,but,intruth,toperformandextinguishhistaxobligationfortheyearconcerned.Inother words, he is paying his tax liabilities for that year.Consequently,ataxpayerwhoseincomeiswithheldatsourcewillbedeemedtohavepaidhistaxliabilitywhenthesamefallsdueattheendofthetaxyear.Itisfromthislatterdatethen,orwhenthetaxliabilityfallsdue,thatthetwoyearprescriptiveperiodunderSection306 (now part of Section 230) of the Revenue Code starts to runwith respect to payments effected through the withholding taxsystem.xxx(Atp.325Underliningsupplied)

Theaforequoted rulingpresents twoalternative reckoningdates, i.e., (1) theend of the tax year and (2)when the tax liability falls due. In the instantcase, it isundisputedthat thepetitionercorporation'swithholdingagentshadpaid the corresponding taxes withheld at source to the Bureau of InternalRevenue from February to December 1981. In having applied the firstalternativedate"theendof thetaxyear" inorder todeterminewhetherornotthepetitionercorporation'sclaimforrefundhadbeenseasonablyfiled,therespondent appellate court failed to appreciate properly the attendingcircumstancesofthiscase.

The petitioner corporation is not claiming a refund of overpaid withholdingtaxes,perse. It isasking for the recoveryof thesumofP82,751.91.00, therefundableor creditable amount determined upon the petitioner corporation'sfilingoftheitsfinaladjustmenttaxreturnonorbefore15April1982whenitstax liability for the year 1981 fell due. The distinction is essential in theresolution of this case for it spells the difference between being barred byprescriptionandentitlementtoarefund.

UnderSection49oftheNationalInternalRevenueCodeof1986,asamended,itisexplicitlyprovidedthat:

"Sec.49.Paymentandassessmentofincometaxforindividualsandcorporations.

(a) Payment of tax (1) In general. The total amount of taximposedbythisTitleshallbepaidbythepersonsubjecttheretoatthetimethereturnisfiled.xxx"



Section 70, subparagraph (b) of the sameCode stateswhen the income taxreturnwithrespecttotaxpayerslikethepetitionercorporationmustbefiled.Thus:

"Sec. 70 (b) Time of filing the income return The corporatequarterly declaration shall be filedwithin sixty (60) days followingthecloseofeachofthefirstthreequartersofthetaxableyear.Thefinaladjustmentreturnshallbefiledonorbeforethe15thdayofthe4thmonth following the close of the fiscal year, as the casemaybe."

The petitioner corporation's taxable year ison a calendar year basis, hence,withrespecttothe1981taxableyear,ACCRAINhaduntil15April1982withinwhich to file its final adjustment return. The petitioner corporation dulycomplied with this requirement. On the basis of the corporate income taxreturn which ACCRAIN filed on 15 April 1982, it reported a net loss ofP2,957,142.00.Consequently,asreflectedthereon,thepetitionercorporation,afterduecomputation,hadnotaxliabilityfortheyear1981.Hadtherebeenany, payment thereofwould have been due at the time the returnwas filedpursuant to subparagraph (c) of the aforementioned codal provision whichreads:

"Sec.70(c)TimepaymentoftheincometaxTheincometaxdueonthecorporatequarterlyreturnsandthefinal incometaxreturnscomputedinaccordancewithSections68and69shallbepaidatthetime the declaration or return is filed as prescribed by theCommissionerofInternalRevenue."

If we were to uphold the respondent appellate court inmaking the "date ofpayment"coincidewiththe"endofthetaxableyear,"thepetitionercorporationat the end of the 1981 taxable year was in no position then to determinewhetheritwasliableornotforthepaymentofits1981incometax.

Anentclaimsforrefund,section8ofRevenueRegulationNo.1378issuedbytheBureauofInternalRevenuerequiresthat:

"Section8.ClaimsfortaxcreditorrefundClaimsfortaxcreditorrefund of income tax deducted and withheld on income paymentsshallbegivenduecourseonlywhen it isshownonthereturnthatthe income payment received was declared as part of the grossincomeand the fact ofwithholding is establishedbya copyof thestatement, duly issued by the payor to the payee (BIR Form No.1743A) showing the amount paid and the amount of taxwithheldtherefrom."

Theterm"return"inthecaseofdomesticcorporationslikeACCRAINrefers tothefinaladjustmentreturnasmentionedinSection69oftheTaxCodeof1986,



asamended,whichpartlyreads:

"Sec.69.Final AdjustmentReturn Every corporation liable to taxunder Section 24 shall file a final adjustment return covering thetotaltaxableincomefortheprecedingcalendarorfiscalyear.Ifthesum of the quarterly tax payments made during the said taxableyearisnotequaltothetotaltaxdueontheentiretaxableincomeofthatyearthecorporationshalleither:

(a)Paytheexcesstaxstilldueor

(b)Berefundedtheexcessamountpaid,asthecasemaybe."

Clearly, there is the need to file a return first before a claim for refund canprosper inasmuch as the respondent Commissioner by his own rules andregulationsmandates that the corporate taxpayer opting to ask for a refundmustshowinitsfinaladjustmentreturntheincomeitreceivedfromallsourcesandtheamountofwithholdingtaxesremittedbyitswithholdingagentstotheBureau of Internal Revenue. The petitioner corporation filed its finaladjustmentreturnforits1981taxableyearonApril15,1982.InourResolutiondatedApril10,1989 in thecaseofCommissionerof InternalRevenuev.AsiaAustralia Express, Ltd. (G. R. No. 85956), we ruled that the twoyearprescriptive periodwithinwhich to claim a refund commences to run, at theearliest,onthedateof the filingof theadjusted final taxreturn. Hence, thepetitionercorporationhaduntilApril15,1984withinwhichto file itsclaimforrefund.

Considering thatACCRAIN filed its claim for refundasearlyasDecember29,1983withtherespondentCommissionerwhofailedtotakeanyactionthereonandconsideringfurtherthatthenonresolutionof itsclaimforrefundwiththesaidCommissionerpromptedACCRAINtoreiterateitsclaimbeforetheCourtofTax Appeals through a petition for review on April 13, 1984, the respondentappellatecourtmanifestlycommittedareversibleerrorinaffirmingtheholdingofthetaxcourtthatACCRAIN'sclaimforrefundwasbarredbyprescription.

It bears emphasis at this point that the rationale in computing the twoyearprescriptiveperiodwithrespecttothepetitionercorporation'sclaimforrefundfromthetimeitfileditsfinaladjustmentreturnisthefactthatitwasonlythenthatACCRAINcouldascertainwhether itmadeprofitsor incurredlossesin itsbusinessoperations.The"dateofpayment",therefore,inACCRAIN'scasewaswhenitstaxliability,ifany,felldueuponitsfilingofitsfinaladjustmentreturnonApril15,1982.

WHEREFORE,inviewoftheforegoing,thepetitionisGRANTED.ThedecisionoftheCourtofAppealsdatedMay28,1990anditsresolutionofNovember20,1990areherebyREVERSEDandSETASIDE.TherespondentCommissionerofInternalRevenueisdirectedtorefundtothepetitionercorporationtheamount



ofP82,751.91.

SOORDERED.

Feliciano,Bidin,Davide,Jr.,andRomero,JJ.,concur.

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ACCRA Investments Corp. v. CA (1991)

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