ACCRA Investments Corp. v. Commissioner of Internal Revenue

FORMER SECOND DIVISION [CA-G.R. SP No. 16900. May 28, 1990.] ACCRA INVESTMENTS CORPORATION , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . D E C I S I O N PRONOVE, JR. , J p : Appeal by certiorari from a decision of the Court of Tax Appeals. ACCRA Investments Corporation (ACCRAIN) is a domestic Corporation engaged in the business of real estate investment and management consultancy. For the calendar year ending on December 31, 1981, it filed its income tax returns on April 15, 1982, declaring a net loss in the total amount of P2,957,142. In the same return, ACCRAIN declared as creditable all taxes withheld at source by various withholding agents, to wit: Withholding Agents Amount Withheld 1. Angara Concepcion Regala & Cruz Law Offices (Exh. "D") P73,588.00 2. Philippine Global Commu- nications, Inc. (Exh. "F") P6,578.94 3. Malayan Insurance Co. (Exh. "C") P1,429.97 4. MJ Development Corpo- ration (Exh. "E") P1,155.00 TOTAL P82,751.91 The above amounts were paid and remitted to the Bureau of Internal Revenue (BIR) by the withholding agents from February to December, 1981. Since it had no tax liability against which to credit the amounts withheld, ACCRAIN filed a claim for refund with the Commissioner of Internal Revenue on December 29, 1983. On April 13, 1984, without waiting for the action of the Commissioner, ACCRAIN filed a petition for review with the Court of Tax Appeals (CTA) asking for the refund of the amounts withheld, as overpaid income taxes. But in its decision, the CTA denied the claim on the ground that ACCRAIN's petition was filed out of time. When its motion for reconsideration was also denied, this appeal was interposed by ACCRAIN. Two principal questions are raised by ACCRAIN, namely: 1. What is the reckoning date for the commencement of the two-year prescriptive period for the filing of an action in the tax court for the recovery of creditable taxes erroneously withheld at source? 2. Is the action of ACCRAIN for the recovery of creditable taxes erroneously withheld at source from its income in the year 1981 barred by the two-year prescriptive period? These issues involve the interpretation of Section 292 of the Tax Code of 1977, as amended, which provides: Section 292. 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 wrongly 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 be begun 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. (Emphasis supplied). ACCRAIN contends that the start of the two-year prescriptive period should be reckoned from the date it filed its tax return on April 15, 1982. Hence, when it commenced its suit for refund with the Court of Tax Appeals on April 13, 1984, it was still within period. Continuing, it reasoned out that "the rule could not be otherwise because a taxpayer, prior to the filing of the return, would be in no position to determine whether or not he would be liable at all for the payment of income tax and, if so liable, how much he would be liable for." (p. 14, rollo) We are unable to agree with ACCRAIN's interpretation. Aside from straining the otherwise express provision of Section 292 that the two-year period commences "from the date of payment of the tax", it runs counter to existing case law. Far from being of first impression, as ACCRAIN contends, this case is fully covered by the ruling in Gibbs vs. Commissioner of Internal Revenue (15 SCRA 318), which ACCRAIN itself invoked. As in the instant case, Gibbs , involves the payment of income tax made through the withholding tax system. Shorn of qualifications that ACCRAIN appends to it, the ruling states: "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, who contributes to the withholding tax system, 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 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 of the Revenue Code starts to run with respect to payments effected through the withholding tax system. (Emphasis supplied) As clearly pointed out, the Supreme Court reckoned the prescriptive period from "the end of the tax year", that is, the calendar year, and not from the date of the filing of the income tax return. For it is at the end of the tax year that a taxpayer is deemed to have paid all taxes withheld at source. Applied to the instant case, the rule would deem ACCRAIN to have paid its tax liabilities, under the withholding tax system, at the end of 1981, the tax year in question. It is from this date that the two-year period must similarly be reckoned. Indeed, it is not disputed that the taxes were paid by the withholding agents to the BIR from February to December, 1981. It is interesting to note that in the case of payment of taxes by installments, the Supreme Court has held that "the prescriptive period of two years . . . should be counted from the date of final payment." (Collector of Internal Revenue v. Prieto, 2 SCRA 1007, 1016; Commissioner of Internal Revenue vs. Palanca, 18 SCRA 497). Thus, whether paid indirectly through the withholding tax system or by installments, the Supreme Court has consistently computed the prescriptive period from the "date of payment of the tax", as expressly provided and not from the filing of the income tax return, as ACCRAIN would have US read the law. In this connection, let it be emphasized that when ACCRAIN filed its return of April 15, 1982, it was not making any payment of taxes withheld at source, which had already been paid by December, 1981 by the withholding agents. It was merely making a declaration of its income from all sources for the purpose of determining its total tax liability. Indeed, it is only logical that the prescriptive period be computed from the date of payment of the tax. When a person applies for the refund of taxes wrongly collected, he is claiming taxes paid at a specific date in the past. It is from this date that the period for claiming refund should be counted, for the cause of action accrues then, not at any other time. Finally, it cannot be said that ACCRAIN was totally deprived of time within which to claim refund when the tax court reckoned the prescriptive period from the end of 1981. It still had one year, 8 months and 15 days within which to sue for a refund from April 15, 1982 when on filing its return it became aware of its tax liabilities. WHEREFORE, the judgment appealed from is AFFIRMED, with costs against petitioner. SO ORDERED. Melo and Benepayo, JJ., concur.