Case Summary (G.R. No. 96322)
Key Dates
- Taxes withheld and remitted by withholding agents: February–December 1981.
- Final adjustment/corporate income tax return filed by petitioner: April 15, 1982 (reporting a net loss).
- Claim for refund filed with Commissioner of Internal Revenue: December 29, 1983.
- Petition for review filed with Court of Tax Appeals: April 13, 1984.
- CTA decision dismissing petition: January 27, 1988; denial of reconsideration: September 27, 1988.
- Petition to Court of Appeals by Supreme Court referral: petition filed January 14, 1989; CA decision affirming CTA: May 28, 1990; CA denial of reconsideration: November 20, 1990.
- Supreme Court decision resolving the petition: December 20, 1991.
Applicable Law and Authorities
- 1987 Philippine Constitution (applicable as decision date is after 1990).
- National Internal Revenue Code (NIRC) of 1986, formerly Revenue Code of 1977: Section 230 (formerly Sec. 292) on recovery of erroneously or illegally collected taxes; Section 49 on payment and assessment of income tax; Section 70 (b) and (c) on time of filing and payment for corporate returns; Section 69 on final adjustment return.
- Revenue Regulation No. 13-78, Section 8, governing claims for tax credit or refund for taxes withheld at source.
- Jurisprudence cited: Gibbs v. Commissioner of Internal Revenue (155 SCRA 318 [1965]) regarding when a taxpayer whose income is withheld at source is deemed to have paid his tax liability.
Factual Background
ACCRAIN filed its annual corporate income tax return for the 1981 calendar year on April 15, 1982, reporting a net loss of P2,957,142.00. In that return ACCRAIN declared creditable withholding taxes totaling P82,751.91 remitted by various withholding agents during 1981: Malayan Insurance Co., Inc. (P1,429.97); Angara Concepcion Regala & Cruz Law Offices (P73,588.00); MJ Development Corp. (P1,155.00); and Philippine Global Communications, Inc. (P6,578.94). Because the return showed no tax liability, ACCRAIN sought recovery of the credits. ACCRAIN filed a claim for refund with the Commissioner on December 29, 1983; when the Commissioner did not act, ACCRAIN filed a petition for review with the CTA on April 13, 1984.
Procedural Posture
The CTA dismissed ACCRAIN’s petition on January 27, 1988, holding that the two-year period to file a refund claim had prescribed under Section 292 (now Sec. 230) of the Revenue Code, reckoning the limitation from December 31, 1981 — the end of the tax year when the taxes were remitted by withholding agents. The CTA denied reconsideration. The Court of Appeals affirmed the CTA on May 28, 1990, applying Gibbs and holding that the two-year prescriptive period commences “from the date of payment of the tax,” equated with the end of the tax year for withholding cases. The CA denied reconsideration on November 20, 1990. The Supreme Court granted review.
Issue Presented
Whether ACCRAIN’s action for recovery of P82,751.91 in withheld taxes for taxable year 1981 is barred by prescription under the two-year limitation in Section 230 (formerly Sec. 292) of the NIRC, and specifically when the two-year prescriptive period commences to run for withholding-at-source situations such as this.
Court’s Analysis
- Proper construction of the phrase “from the date of payment of the tax” in Section 230 is pivotal. The CA relied on Gibbs to treat the prescriptive period as beginning “from the end of the tax year” for taxes withheld at source. Gibbs, however, articulates two alternative benchmarks: (1) the end of the tax year, and (2) when the tax liability falls due.
- The Court emphasized the factual and legal distinction in this case: ACCRAIN was not merely seeking recovery of amounts withheld in absolute terms, but sought refund/credit after filing its final adjustment return showing no tax liability. Under the NIRC provisions cited, a corporate taxpayer’s total income tax is payable at the time the return is filed (Sec. 49), the final adjustment return must be filed on or before the 15th day of the fourth month following the close of the fiscal year (Sec. 70[b]), and payment of income tax due on the final return is made at the time the return is filed (Sec. 70[c]). Section 69 likewise contemplates that refund claims depend on the final adjustment return.
- Revenue Regulation No. 13-78, Section 8, requires that a claim for refund of withholding taxes be supported by showing the income received on the return and the statement of withholding issued by the payor (BIR Form No. 1743-A). Thus, the right to claim and to demonstrate entitlement to refund is dependent on filing the return that reflects the income and withholding.
- Given these provis
Case Syllabus (G.R. No. 96322)
Case Citation and Court
- 281 PHIL. 1060, THIRD DIVISION, G.R. No. 96322, December 20, 1991.
- Decision penned by Justice Gutierrez, Jr.
- Concurrence by Justices Feliciano, Bidin, Davide, Jr., and Romero.
Parties
- Petitioner: Accra Investments Corporation (ACCRAIN), a domestic corporation engaged in real estate investment and management consultancy.
- Respondents: The Honorable Court of Appeals; Commissioner of Internal Revenue; and the Court of Tax Appeals (CTA).
Procedural Posture
- Petitioner filed annual corporate income tax return for 1981 on April 15, 1982.
- Petitioner filed a claim for refund with the Commissioner of Internal Revenue on December 29, 1983 (Exh. "G").
- Petitioner filed a petition for review with the Court of Tax Appeals on April 13, 1984.
- CTA dismissed the petition for review on January 27, 1988, finding the two-year prescriptive period had prescribed; motion for reconsideration denied in a resolution dated September 27, 1988 for being filed out of time.
- Petitioner filed a petition for review with the Supreme Court on January 14, 1989; matter referred to the Court of Appeals on February 15, 1990 for determination and disposition.
- Court of Appeals affirmed the CTA decision on May 28, 1990, holding the two-year prescriptive period commenced "from the date of payment of the tax," construed as "from the end of the tax year" when taxes withheld at source were deemed paid.
- Motion for reconsideration to the Court of Appeals denied in a resolution dated November 20, 1990.
- Supreme Court granted certiorari review and issued decision on December 20, 1991, reversing and setting aside the Court of Appeals decision and ordering refund.
Facts
- ACCRAIN is a domestic corporation engaged in real estate investment and management consultancy.
- On April 15, 1982, ACCRAIN filed 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 that return ACCRAIN declared as creditable withholding taxes remitted by various withholding agents, itemized as follows (Exh. references in source):
- Malayan Insurance Co., Inc. — P 1,429.97 (Exh. "C")
- Angara Concepcion Regala & Cruz Law Offices — P 73,588.00 (Exh. "D")
- MJ Development Corp. — P 1,155.00 (Exh. "E")
- Philippine Global Communications, Inc. — P 6,578.94 (Exh. "F")
- Total creditable withheld taxes claimed: P 82,751.91
- The withholding agents paid and remitted the above amounts representing taxes on rental, commission and consultancy income of ACCRAIN to the Bureau of Internal Revenue from February to December 1981.
- ACCRAIN had no tax liability for 1981 as shown by its final adjustment return filed April 15, 1982; consequently ACCRAIN sought recovery of the P82,751.91 as overpaid/creditable taxes.
- ACCRAIN filed claim for refund with the Commissioner on December 29, 1983; when no action was taken, ACCRAIN filed a petition for review before the CTA on April 13, 1984.
Issue Presented
- Whether the petitioner corporation (ACCRAIN) is barred by prescription from recovering P82,751.91 representing taxes withheld at source and remitted by withholding agents for taxable year 1981.
- Specifically, whether the two-year prescriptive period under Section 292 of the National Internal Revenue Code of 1977 (now Section 230 of the National Internal Revenue Code of 1986) runs from (a) the date the taxes were paid and remitted by withholding agents (end of the tax year / December 31, 1981), as the CTA and Court of Appeals held, or (b) the date the taxpayer’s tax liability fell due and the taxpayer filed its final adjustment return (April 15, 1982), as contended by ACCRAIN.
Petitioner's Contentions
- ACCRAIN argued its judicial action for recovery of creditable taxes erroneously withheld at source was filed on time.
- ACCRAIN maintained the reckoning date for commencement of the two-year prescriptive period was April 15, 1982 — the date it filed the final adjustment return and when its tax liability for 1981 fell due.
- ACCRAIN asserted that its claim for refund filed December 29, 1983, and petition for review filed April 13, 1984, were within the two-year prescriptive period computed from April 15, 1982, and thus not barred.
Lower Courts' Decisions and Reasoning
- Court of Tax Appeals (CTA):
- Dismissed ACCRAIN’s petition for review on January 27, 1988, finding the two-year period for filing a claim for refund had prescribed pursuant to Section 292 of the National Internal Revenue Code of 1977, as amended.
- Reconsideration denied on September 27, 1988 for being filed out of time.
- CTA held the reckoning date for the two-year prescriptive period was December 31, 1981 — when withholding agents paid and remitted the withheld taxes to the Bureau — not April 15, 1982.
- Court of Appeals (CA):
- On May 28, 1990, affirmed the CTA decision.
- Relied on Gibbs v. Commissioner of Internal Revenue (155 SCRA 318 [1965]) to construe "from the date of payment of the tax" as "from the end of the tax year when a taxpayer is deemed to have paid all taxes withheld at source."
- Rejected ACCRAIN’s position that the period should commence from the date of filing the income tax return.
Statutory and Regulatory Provisions Considered
- Section 230 (formerly Sec. 292) of the Nationa