Commissioner of Internal Revenue v. PCCI Securities Brokers Corp.

SPECIAL NINTH DIVISION [CA-G.R. SP No. 31188. August 23, 1996.] ( C.T.A. Case No. 4275) COMMISSIONER OF INTERNAL REVENUE , petitioner , vs . PCCI SECURITIES BROKERS CORP. and THE COURT OF TAX APPEALS , respondents . D E C I S I O N LIPANA-REYES , J p : This is a Petition for Review of the decision of the Court of Tax Appeals dated 16 February 1993 in CTA Case No. 4275, entitled "PCCI SECURITIES BROKERS CORPORATION V. COMMISSIONER OF INTERNAL REVENUE", the dispositive portion of which states: "IN VIEW OF THE FOREGOING, the Court GRANTS in part, petitioner's instant claim for refund/tax credit. Respondent is hereby ordered to refund to or issue a tax credit in petitioner's favor, in the total amount of P159,955.71, representing overpaid income taxes for taxable year 1986 which has not been utilized. No costs. SO ORDERED." ( Decision, Rollo, p. 39 ) The pertinent facts of the case, as found by the respondent court and made part of its decision are as follows: For the calendar year 1986, private respondent PCCI Securities Corporation ("PCCI" for brevity) filed with the Bureau of Internal Revenue ("BIR" for brevity) its Corporation/Partnership Annual Income Tax Return ( Exhibit "A", CTA Records, p. 7 ). In said document, it declared a net taxable of income of P280,597.00, which was subject to tax in the amount of P98,209.00. Private respondent also declared the following in its return: 1) prior year's excess credit in the amount of P95,742.00; 2) quarterly payments made in 1986 totalling P251,707.00; and 3) 1986 creditable withholding tax in the amount of P8,588.00. Consequently, for the taxable year 1986, private respondent had a declared refundable amount of P257,828.00, computed as follows (cf. Exhibits "B" to "L" , CTA records, pp. 8-18): AMOUNT OF TAX DUE FOR 1986 P98,209.00 LESS: a) PRIOR YEAR'S TAX CREDIT P95,742.00 b) 1986 QUARTERLY PAYMENTS 251,707.00 c) 1986 CREDITABLE WITHHOLDING TAX 8,588.00 356,037.00 TOTAL AMOUNT DUE (REFUNDABLE) P(257,828.00) This amount, indicated private respondent, was "to be applied as tax credit to the succeeding taxable year" (cf Exhibit "A-1" ). The following year, 1987, PCCI's annual corporate income tax return showed that it incurred a loss for that year, and consequently, a tax due of "NIL" ( Exhibit "P", CTA Records, p. 59 ). On 25 April 1988, PCCI filed with the BIR a letter dated 19 March 1988 requesting for a refund of the amount of P231,388.71, representing alleged overpaid income tax for taxable year 1986 ( Exhibit "N", CTA Records, pp. 4-6 ). Pending action by petitioner on the private respondent's claim for the tax refund/credit and in order to suspend the running of the two-year prescriptive period, the latter filed a petition for review with the respondent tax court on 27 May 1988 ( Rollo, pp. 21-23 ),which prayed that judgment be rendered ordering petitioner to refund to private respondent the sum of P257,828.00 or, in the alternative, issue a tax credit certificate for the said amount. On 19 October 1988, petitioner filed its answer ( Rollo, pp. 24-26 ) wherein it alleged that the petition for review stated no cause of action because it did not allege the date when the tax being claimed as refundable was paid and that the right to claim the refund had prescribed with respect to the corporate income tax payments. On 16 February 1993, the respondent court rendered the questioned decision. When the Motion for Reconsideration dated 17 March 1993 was denied by the respondent court in its Resolution dated 26 March 1993 ( Rollo, p. 48 ), the Commissioner of Internal Revenue filed this petition, pointing out in its pleading that the respondent court decided the case in a way not in accord with facts and law. Petitioner set forth the sole issue of whether or not private respondent is entitled to a tax refund/credit of P159,955.77 as alleged overpaid income tax for the year 1986 ( Petition, Rollo, p. 11 ). In the petition for review before this Court, it is argued that under Section 230 of the Tax Code, private respondent is not entitled to a tax refund since the right to claim such refund had already expired and that the amounts upon which the claim was predicated were not duly established, the mere statements in tax returns not being considered as sufficient evidence ( Petition for Review, Rollo, pp. 12-16 ). The issues set forth in the case at bench are not novel questions of law, the Supreme Court having had the opportunity to tackle them on numerous occasions. The well-established rule is that a corporate firm may claim tax refunds or credits on claims seasonably filed under Section 230 of the National Internal Revenue Code ( Maceda v. Macaraig, Jr., 223 SCRA 217 ). Under said provision, such suit or proceeding should be begun before 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" ( cf. sec. 230, NIRC ). In its Resolution dated 10 April 1989 in the case of Commissioner of Internal Revenue v. Asia Australia Express, Ltd. (G.R. No. 85956) , the Supreme Court 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. Should the view be upheld that the term "date of payment"' coincide with the "end of the taxable year", private respondent PCCI, at the end of the taxable year, would be in no position to determine whether or not it was liable for the payment of its yearly income tax. It bears emphasis that the rationale in computing the two-year prescriptive period with respect to the private respondent's claim for refund from the time it filed its final adjustment return fact that it was only then that the corporate firm could ascertain whether it made profits or incurred losses in its business operations. Only when the Final Adjustment return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figure. In the said return, where the figures of the gross receipts and deductions have been audited and adjusted, that is truly reflective of the results of the operations of the business enterprise ( Commissioner of Internal Revenue v. TMX Sales, Inc., 205 184; ACCRA Investment Corporation v. Court of Appeals, 204 SCRA 957 ). The fact that private respondent pays its corporate income tax quarterly, or in installments, would not be a case for deviating from the aforementioned interpretation of the provision. Section 230 of the Tax Code stipulates the two-year prescriptive period to claim refunds should be counted from the date of payment of the tax sought to be refunded. When applied to taxpayers such as private respondent who filed income tax returns on a quarterly basis, the date mentioned in said provision must be deemed to be qualified by Sections 68 and 69 of the present Tax Code which respectively provide: "SEC. 68. Declaration of corporate quarterly income tax . Every corporation shall file in duplicate a quarterly summary declaration of its gross income and deductions on a cumulative basis for the preceding quarter or quarters upon which the income tax, as provided in Title II of this Code shall be levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid or assessed during the preceding quarters and shall be paid not later than sixty (60) days from the close of each of the first three (3) quarters of the taxable year, whether calendar or fiscal year. SEC. 69. Final adjustment return . Every corporation liable to tax under Section 24 shall file a final adjustment return covering 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. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year." It may be observed that although quarterly taxes due are required to be paid within sixty days from the close of each quarter, the fact that the amount shall be deducted from the tax due for the succeeding quarter shows that until a final adjustment return shall have been filed, the taxes paid in the preceding quarters are merely partial taxes due from a corporation. Neither amount can serve as the final figure to quantify what is due the government nor what should be refunded to the corporation. This interpretation may be gleaned from the last paragraph of Section 69 of the Tax Code which provides that the refundable amount, in case of a refund is due a corporation, is that amount which is shown on its final adjustment return and not its quarterly returns ( Commissioner of Internal Revenue v. Philippine American Life Insurance Co., 244 SCRA 446; Commissioner of Internal Revenue v. TMX Sales, Inc., Supra .) The filing of quarterly income tax returns should only be considered mere installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 69 which provides for the filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive period provided in Section 230 of the Tax Code should be computed from the time of the filing of the Adjustment return or Annual Income Tax Return and final payment of income tax ( Ibid ). The "date of payment", therefore, in PCCI's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on 03 April 1987 ( cf. BIR records, p. 43; Exhibit "A", CTA Records, p. 7 ). Hence, when it filed its petition for review before the Court of Tax Appeals on 27 May 1988, its right to file or institute said action had not yet prescribed. With regard to the issue of whether or not private respondent had satisfactorily shown by competent evidence that it is entitled to the amount sought to be refunded, the findings of fact of the Court of Tax Appeals on the matter is entitled to respect. It has been the constant holding of this Court that in the absence of a showing of an abuse or improvident exercise of its authority, said tax court's determination of the facts must be accorded deference. They are well-high conclusive ( Comm. of Internal revenue v. Philippine America Life Insurance Co., supra; Nasiad v. Court of Appeals, 61 SCRA 238 ). Of great significance on this matter is respondent court's finding that: "It is worthwhile to note that petitioner's income and business tax liabilities for 1986 have already been investigated and the deficiency taxes found due thereon were already paid per Exhibit "K" and "L", CTA Records, pp. 17-18." ( Decision, p. 9, Rollo, p. 36 ) True enough, respondent court had ample basis for its conclusions. The BIR records presented before this Court and respondent court reveals that private respondent, aside from filing its corporate income tax return, also presented supporting documents which validated its claim for a refund. Private respondents also filed comparative balance sheets and income statements accompanied by the report of the independent certified public accountants ( BIR Records, pp. 48-53 ), schedular deductions ( BIR Records, pp. 44-45 ) and reconciliation of net income and analysis of changes in retained earnings/computation of tax due ( BIR Records, pp. 47 ). The grant of refund is founded on the assumption that the tax return is valid ( Commissioner of Internal Revenue v. Court of Tax Appeals, 234 SCRA 348 ). Its correctness and the tax amount to be credited is determined first as a matter of procedure. An opportunity must be given the internal revenue branch of the government to investigate and confirm the veracity of the claims of the taxpayer ( San Carlos Milling Co., Inc. v. CIR, 228 SCRA 135 ). In the case at bench, petitioner was given ample opportunity to scrutinize the documents filed by private respondent along with its tax return. In fact and of its examiners, Loreto Panganiban, made an audit, his findings stated in the audit sheets and certified by Regional Director Perfecto Domingo (cf. BIR Records, pp. 56-60). Hence, all arguments with regard to the alleged insufficiency of the documentary evidence presented by private respondent should be thrown aside for being without basis. WHEREFORE, all premises considered, the Petition for Review is hereby DISMISSED. SO ORDERED. Imperial and Agcaoili, JJ . , concur.