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ACCRA Investments Corporation vs. Court of Appeals

*
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.

Taxation; Prescription of action to claim refund; When two-

year prescriptive period commences to run.—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
lnternal 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

________________

* THIRD DIVISION.

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ACCRA Investments Corporation vs. Court of Appeals

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filing of the adjusted final tax return. Hence, the petitioner

corporation had until April 15, 1984 within which to file its claim
for refund.

PETITION for review on certiorari from the decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

          Angara, Abello, Concepcion, Regala & Cruz for
petitioner.

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 P2,957,1 42.00 (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 73,588.00     
Law
Offices (Exh. “D")
     c) MJ Development Corp. (Exh. “E") 1,155.00     
     d) Philippine Global Communications, 6,578.94     
Inc., (Exh. “F")
  TOTAL P82,751.91"     
(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

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ACCRA Investments Corporation vs. Court of Appeals

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

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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

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ACCRA Investments Corporation vs. Court of Appeals

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;

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.

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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.” (Italics
Supplied)

The respondent appellate court citing the case of Gibbs v.

Commissioner of lnternal Revenue (155 SCRA 318 [1965]),
con-

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strued 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. lt 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 x x (At p. 325; Italics 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

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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

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ACCRA Investments Corporation vs. Court of Appeals

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

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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:

“See. 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 Section 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

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ACCRA Investments Corporation vs. Court of Appeals

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 corporation 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
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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 lnternal 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

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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

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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.

Petition granted, decision and resolution reversed and set

aside.

Note.—Failure of taxpayer to appeal the assessment to

the Court of Tax Appeals in due time makes the
assessment final, executory and demandable and the
taxpayer is barred from disputing the correctness of the
assessment. (Republic vs. Court of Appeals, 149 SCRA 351.)

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