G.R. No. 162155 - Commissioner of Internal Revenue vs. Primetown Property Group, Inc.

Case Summary (G.R. No. 162155)

Factual Background

In 1997, Primetown Property Group, Inc. suffered losses amounting to P71,879,228 due to an economic slowdown in the real estate industry. Despite the losses, the respondent paid quarterly corporate income tax and remitted creditable withholding tax on real estate sales totaling P26,318,398.32. On March 11, 1999, Gilbert Yap, respondent's vice chair, applied to the revenue district officer, Arturo V. Parcero, for refund or credit of taxes paid in 1997, asserting that respondent was entitled to refund or credit because it had incurred net losses for the year.

Administrative Proceedings

On May 13, 1999, a revenue officer required respondent to submit additional documents to support its claim. Respondent complied. The claim, however, was not acted upon by the Bureau of Internal Revenue, prompting respondent to file a judicial claim for refund or credit.

Trial Court Proceedings

Respondent filed a petition before the Court of Tax Appeals on April 14, 2000, docketed as C.T.A. Case No. 6113. The CTA dismissed the petition on December 15, 2000 for being filed beyond the two-year prescriptive period prescribed in Sec. 229, National Internal Revenue Code. The CTA held that respondent filed its final adjusted return on April 14, 1998 and that the two-year prescriptive period began to run on that date. Applying Art. 13, Civil Code, which equates a year to 365 days, the CTA computed the two-year period as 730 days for the regular year and 366 days for the leap year 2000, totaling 731 days; hence, the petition filed on April 14, 2000 was held to be one day late.

Court of Appeals Decision

On appeal, the Court of Appeals reversed the CTA. The CA reasoned that Art. 13, Civil Code treats a year as 365 days notwithstanding the existence of a leap year, and therefore the two-year period comprised two successive periods of 365 days each, totaling 730 days. The CA concluded that respondent's petition fell within the reglementary period and ordered the case remanded to the CTA for hearing on the merits.

Issue Presented

The dispositive issue was how to compute the two-year prescriptive period under Sec. 229, National Internal Revenue Code for filing a judicial claim for tax refund or credit where the claimant filed its final adjusted return on April 14, 1998 and filed suit on April 14, 2000.

Parties' Contentions

Petitioners argued that tax refund provisions are exemptions that must be strictly construed against claimants and that the prescriptive period under Sec. 229 commences on the filing of the final adjusted return, to be strictly counted as 730 days; they maintained that respondent's petition was therefore late. Respondent contended that its petition was timely and relied upon the method of computation applied by the CA.

Legal Analysis and Reasoning

The Court recognized that the prescriptive period under Sec. 229, National Internal Revenue Code begins to run on the filing of the final adjusted return. The Court examined conflicting methods for computing legal periods. It noted that Art. 13, Civil Code provides that a year is 365 days and that the first day is excluded and the last included in computing periods. The Court also examined Sec. 31, Chapter VIII, Book I, Administrative Code of 1987, which defines "year" as twelve calendar months and prescribes that a "month" is thirty days unless it refers to a specific calendar month, in which case that month is computed according to the number of days it contains. The Court discussed the nature of repealing clauses and held that Sec. 27, Book VII of the Administrative Code effected an implied repeal of inconsistent provisions, but cautioned that implied repeal is not favored and requires clear and unmistakable intention.

Governing Rule Adopted

The Court concluded that both provisions address the same subject matter, the computation of legal periods, and that there exists a manifest incompatibility between the Civil Code method and the Administrative Code method. The Court held that the more recent law governs; thus Sec. 31, Chapter VIII, Book I, Administrative Code of 1987 supplants the computation rule of Art. 13, Civil Code. The maxim lex posteriori derogat priori controlled.

Computation of the Prescriptive Period

Applying Sec. 31, Administrative Code of 1987, the Court computed the two-year prescriptive period as twenty-four calendar months starting from the day after respondent filed its final adjusted return. The Court determined that the twenty-four calendar months ran from April 15, 1998 through April 14, 2000. Under this computation, respondent's petition filed on April 14, 2000 was filed on the last day of the twenty-fourth calendar month and therefore within the statutory two-year period.

Supreme Court Ruling and Disposition

The Supreme Court de

Case Syllabus (G.R. No. 162155)

Parties and Procedural Posture

Commissioner of Internal Revenue and Arturo V. Parcero in his official capacity as Revenue District Officer of Revenue District No. 049 (Makati) were the petitioners before the Court.
Primetown Property Group, Inc. was the respondent who sought a refund or credit of taxes paid for 1997.
The petition for review on certiorari under Rule 45, Rules of Court sought to set aside the August 1, 2003 decision of the Court of Appeals and the February 9, 2004 denial of reconsideration.
The Court of Appeals had reversed the Court of Tax Appeals and the petitioners elevated the case to the Supreme Court.

Key Factual Allegations

Primetown Property Group, Inc. alleged losses of P71,879,228 in 1997 due to increased costs, financing difficulty, and the regional economic downturn known as the Asian Financial Crisis.
The respondent admitted that business was good during the first quarter of 1997 but sustained the stated losses for the year.
The respondent paid quarterly corporate income tax and remitted creditable withholding taxes totaling P26,318,398.32 for 1997.
On March 11, 1999, Gilbert Yap, vice chair of the respondent, applied to the revenue district officer for refund or credit of the taxes paid.
A revenue officer requested additional documents on May 13, 1999, the respondent complied, and no administrative action was taken thereafter.
The respondent filed a petition for review in the Court of Tax Appeals on April 14, 2000.

Statutory Framework

Section 229, National Internal Revenue Code (NIRC) prescribes that no suit for recovery of erroneously or illegally collected national internal revenue tax shall be filed after the expiration of two years from the date of payment of the tax and requires prior filing of an administrative claim for refund or credit.
Article 13, Civil Code provides that a "year" shall be understood as 365 days and prescribes the rule of excluding the first day and including the last day in computing periods.
Section 31, Chapter VIII, Book I, Administrative Code of 1987 (EO No. 292) defines "year" as twelve calendar months and prescribes that a "month" is thirty days unless it refers to a specific calendar month, in which case the actual days of the month govern.
The rules on computation of time in the Rules of Court, Rule 22, Sec. 1 were invoked as consistent with Article 13 regarding exclusion and inclusion of days.

Procedural History

The Court of Tax Appeals dismissed the respondent's petition on December 15, 2000 for being filed beyond the two-year prescriptive period under Section 229, NIRC.
The CTA determined that the respondent filed its final adjusted return on April 14, 1998 and that the prescriptive period thus commenced on that date.
The CTA computed the two-year period as 731 days because the year 2000 was a leap year and held the petition to be prescribed.
The Court of Appeals, in CA-G.R. SP No. 64782, reversed the CTA on