Philippine Bank of Communications v. Commissioner of Internal Revenue

FOURTH DIVISION [CA-G.R. SP No. 31714. September 22, 1993.] (C.T.A. Case No. 4309) PHILIPPINE BANK OF COMMUNICATIONS , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE AND COURT OF TAX APPEALS , respondents . R E S O L U T I O N ISNANI , J p : In this Petition for Review of the decision rendered by the Court of Tax Appeals on May 20, 1993 in C.T.A. Case No. 4309, petitioner PBCom seeks for a reversal of said CTA Decision, (as well as the CTA Resolution dated July 20, 1993 denying the motion for reconsideration), the dispositive portion of which reads: "WHEREFORE, petitioner's claim for refund/tax credit of overpaid income tax for 1985 in the amount of P5,299,749.95 is hereby denied for having been filed beyond the reglementary period. The 1986 claim for refund amounting to P234,077.69 is likewise denied since petitioner has opted and in all likelihood automatically credited the same to the succeeding year. The petition for review is dismissed for lack of merit." There being no error, in fact or in law, in the CTA Decision dated May 20, 1993, the instant petition for review is DENIED DUE COURSE. The findings of the Court of Tax Appeals that herein petitioner is not entitled to refund or tax credit of alleged overpaid income tax for 1985 and 1986, has sufficient basis, both in fact and in law. In ruling that the filing of the petition for refund/tax credit with the Court of Tax Appeals is time barred insofar as taxable year 1985 is concerned the Court of Tax Appeals applied the 2-year prescription period mandated by Section 230 of the National Internal Revenue Code, which states, in part, that: "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 . . .". " The two-year period in Section 230, NIRC, is mandatory . (Such that) IF the Commissioner of Internal Revenue denies the claim for refund, there is no question that the taxpayer can appeal to the Court of Tax Appeals. But if the Commissioner fails to act on the refund and the two-year period is about to lapse, the taxpayer should institute the appeal to the Court of Tax Appeals, without the waiting for the decision of the Commissioner. This is so because of the positive requirement of Section 230 and the doctrine that delay of the Commissioner in rendering the decision does not extend the peremptory period fixed by the statute. (The National Internal Revenue Code of the Philippines Annotated by Nolledo, 1989-13th and Revised Edition, p. 688; citing Gibbs vs. Collector of Internal Revenue and CTA 107 Phil. 232; also Bar Reviewer in Taxation by Nolledo, 1990 Revised Ed., p. 610 and 611). Petitioner argues that the two-year prescription period provided for in Section 230 of the NIRC does not apply to claims for the recovery of overpaid internal revenue tax. We do not agree. The overpaid income taxes in this case falls under the category of "any sum alleged to have been excessive or in any manner wrongfully collected", because, although they were legally collected under the withholding tax system and the requirement for quarterly income tax payments, they were nevertheless "excessive". This, notwithstanding the fact that the title of Section 230, NIRC is "Recovery of Tax erroneously or illegally collected". Tax credits/refund, being in the nature of tax exemptions, are construed strictly against the claimant. It is likewise argued that the Commissioner of Internal Revenue, after promulgating RMC No. 7-85, is estopped by the principle of non-retroactivity of BIR rulings. Again we do not agree. The Memorandum Circular,. stating that a taxpayer may recover the excess income tax paid within 10 years from date of payment because this is an obligation created by law, was issued by the Acting Commissioner of Internal Revenue. On the other hand, the decision, stating that the taxpayer should still file a claim for a refund or tax credit and the corresponding petition for review within the two-year prescription period, and that the lengthening of the period of limitation on refund from two to ten years would be adverse to public policy and run counter to the positive mandate of Sec. 230, NIRC, was the ruling and judicial interpretation of the Court of Tax Appeals. Estoppel has no application in the case at bar because it was not the Commissioner of Internal Revenue who denied petitioner's claim of refund or tax credit. Rather, it was the Court of Tax Appeals who denied (albeit correctly) the claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of Internal Revenue is an administrative interpretation which is out of harmony with or contrary to the express provision of a statute (specifically Sec. 230, NIRC), hence, cannot be given weight for to do so would in effect amend the statute. As to the period of reckoning of the two-year prescriptive period, the Supreme Court, in Gibbs vs. Commissioner (107 Phil 232) held that "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 . It is from the latter date then or when the tax liability falls due that the two-year period in Section 230 of the NIRC starts to run with respect to payments effected through the withholding tax system. In so far as taxable year 1985 is concerned, April 15, 1986 was the end of the tax year. We therefore agree with the Court of Tax Appeals' finding that the two-year period within which petitioner may claim a refund/tax credit for 1985 commenced to run April 15, 1986 and expired on April 15, 1988. Thus, the filing of the petition for refund/tax credit with the Court of Tax Appeals on November 18, 1988 is barred by prescription. Finally, as to the claimed refund of income tax overpaid in 1986 the Court of Tax Appeals, after examining the adjusted final corporate annual income tax return for taxable year 1986, found out that petitioner opted to apply for automatic tax credit. This was the basis used (vis-a-vis the fact that the 1987 annual corporate tax return was not offered by the petitioner as evidence) by the CTA in concluding that petitioner had indeed availed of and applied the automatic tax credit to the succeeding year, hence it can no longer ask for refund, as to the two remedies of refund and tax credit are alternative. IN VIEW OF ALL THE FOREGOING, the instant petition for review is DENIED due course. The Decision of the Court of Tax Appeals dated May 20, 1993 and its resolution dated July 20, 1993, are hereby AFFIRMED in toto . SO ORDERED. De Pano, Jr . and Ibay Somera, JJ ., concur.