Stock Transfer Service, Inc. v. Commissioner of Internal Revenue

SPECIAL EIGHTH DIVISION [CA-G.R. SP No. 48965. April 30, 1999.] STOCK TRANSFER SERVICE, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N VELASCO , JR. , J p : This is a petition for review under Rule 43 of the 1997 Rules of Civil Procedure of the Resolution of the Court of Tax Appeals in CTA Case No. 5629 for the refund of excess income taxes or in the alternative, for the issuance of a tax credit. The antecedents are: In taxable year 1995, petitioner Stock Transfer Service, Inc. (STSI for brevity) had a net income of ONE MILLION NINE HUNDRED THREE THOUSAND THREE HUNDRED EIGHTY TWO PESOS (PhP1,903,382.00) for which it was liable to pay income tax in the amount of SIX HUNDRED SIXTY SIX THOUSAND ONE HUNDRED EIGHTY FOUR PESOS (PhP666,184.00). For taxable year 1995, STSI overpaid the Bureau of Internal Revenue (BIR) income taxes in the total amount of PESOS ONE MILLION NINE HUNDRED THIRTY FOUR THOUSAND FIVE HUNDRED FIVE & 44/100 (PhP1,934,505.44). . . . Since STSI had income tax liabilities of only PhP666,188.00 for the year 1995 on its taxable income of PhP1,903,382.00, then it allegedly overpaid income tax for taxable year 1995 by PhP1,268,412.00. During taxable year 1996, STSI suffered a net loss of TWO HUNDRED THREE THOUSAND FIVE HUNDRED AND NINE PESOS (PhP203,509.00) in its business operations and was therefore unable to apply excess taxes paid in 1995 as payment for its 1996 income tax liabilities. LexLib STSI allegedly failed to use tax credits amounting to PhP1,268,412.00 representing the income taxes creditable withholding taxes paid or remitted for taxable year 1995 which were not utilized as it had no liabilities to begin with for the taxable year 1996. On March 20, 1998, pursuant to Section 204 of the NLRC, Petitioner, . . . filed with the BIR an application for the refund of the amount of PhP1,268,412.00 representing unused overpaid taxes for taxable year 1995. As the two-year period within which to file a judicial claim for refund was already about to expire and the administrative claim for refund of STSI has remained unacted upon, a judicial for refund was instituted on April 15, 1998 with the court a quo by way of a Petition for Review (CTA Case No. 5629), . . . Respondent Commissioner sought the dismissal of the Petition on the ground, among others that the same has prescribed. He maintained the position that Petitioner's Annual Income Tax Return was filed on April 10 , 1996 while the Petition for Review was filed on April 15 , 1998 and therefore, "is beyond the two-year prescriptive period provided for by law." On the other hand, STSI claims that "settled is the jurisprudence that the two-year prescriptive period within which to claim a refund commences to run at the earliest (not at the latest) on the date of the filing of the adjusted final tax return" citing ACCRA Investments Corporation vs. CIR, 204 SCRA 957. It argues that the qualification "at the earliest" logically means that there must be an alternative and later date which it claims to be April 15, the deadline for filing of the final adjusted income tax return. On August 18, 1998, the court a quo rendered the assailed Resolution dismissing the petition for review on the ground of prescription citing the cases of Commissioner of Internal Revenue vs. Asia Australia Express Ltd., G.R. No. L-85956, April 10, 1989; ACCRA Investments Corp. vs. CA, 204 SCRA 957; Commissioner of Internal Revenue vs. TMX Sales Inc., 205 SCRA 184; Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 244 SCRA 446 where it was ruled: "the most reasonable and logical application of the law would be compute the two-year prescriptive period at the time of filing the Final Adjustment Return or the Annual Income Tax Return, when it can be finally ascertained if the taxpayer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax " (emphasis supplied). Dissatisfied, petitioner comes to this Court seeking an elucidation of one lone issue: IS A CORPORATE TAXPAYERS WHO FILED ITS ANNUAL ADJUSTED FINAL INCOME TAX RETURN EARLIER THAN THE DEADLINE OF APRIL 15 OF EACH YEAR, NOT ENTITLED TO CLAIM THE BENEFIT OF THE DEADLINE OF APRIL 15 FOR PURPOSES OF COMPUTING THE COMMENCEMENT OF THE TWO-YEAR PRESCRIPTION PERIOD WITHIN WHICH TO FILE A CLAIM FOR REFUND? This petition must fail. Simply put, the query is: does the two-year prescriptive period commence to run on April 10, 1996 when petitioner filed its adjusted final income tax return or on April 15, 1996 which is the deadline prescribed by the Bureau of Internal Revenue for the filing of said return? Settled jurisprudence unmistakably proclaims that the prescriptive period must be reckoned from the date of the filing of the final adjusted income tax return on April 10, 1996 (Commissioner of Internal Revenue vs. Asia Australia Express Ltd., G.R. No. L-85956, Resolution dated April 10, 1989; ACCRA Investments Corp. vs. Court of Appeals, 204 SCRA 957; Commissioner of Internal Revenue vs. TMX Sales, Inc. 205 SCRA 184; Commissioner of Internal Revenue vs. Philippine American Life Insurance Co., 244 SCRA 446). The rationale behind this principle is it is only from the date of filing of the final adjusted return that the taxpayer can ascertain whether it made profits or incurred losses in it business operations. Petitioner, however, would like this Court to interpret the existing provision on prescription period on refunds or excess income taxes paid and unused creditable withholding taxes which we quote: "SECTION 230. 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 wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner of Internal Revenue; 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 : . . ." (Emphasis Supplied) This provision of law is actually free from ambiguity. It is well-settled that the court may not construe a statute that is clear and free from doubt. "Time and time again, it has been repeatedly declared by this Court that where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application." (Resins, Inc., v. Auditor General, 25 SCRA 754, 757 (1968). Where the law is clear and unambiguous, it must be taken to mean exactly what is says and the court has no choice but to see to that its mandate is obeyed. (Luzon Surety Co., Inc. v. De Garcia, 30 SCRA III (1969); Quijano v. Development Bank of the Phil., G.R. No. 26419, Oct. 19, 1970, 35 SCRA 270 (1970); Chartered Bank Employees Ass'n. v. Ople, 138 SCRA 273 (1985). Even granting for the sake of argument that there was some ambiguity caused by the implementation of the provision of law in question, the same was clarified by the Supreme Court in the leading case of "Commissioner of Internal Revenue vs. TMX Sales, Inc." In the TMX case, the BIR Commissioner contended that the basis in computing the two-year period of prescription provided for in Section 292 (now 230) of the tax code should be May 15, 1989, the date when the quarterly income tax was paid and not April 15, 1982 when the Final Adjustment Return for the year ended December 31, 1981 was filed. The High Tribunal ruled that the prescriptive period should be reckoned from the filing of the adjusted return instead of the date of tax payment, ratiocinating this way: "Section 292 (now Section 230) provides a two-year prescriptive period to file a suit for a return of a tax erroneously or illegally paid, counted from the time the tax was paid. But a literal application of this provision in the case at bar which involves quarterly income tax payments may lead to absurdity and inconvenience. . . . It is generally recognized that before an accountant can make a certification on the financial statements or render an auditor's opinion, an audit of the books of accounts has to be conducted in accordance with generally accepted auditing standards. Since the audit, as required by Section 321 (now Section 232) of the Tax Code is to be conducted yearly, then it is the Final Adjustment 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 a business enterprise. Thus, it is only when the 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 figures. Therefore, the filing a quarterly income tax returns required in Section 85 (now Section 68) and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payment 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 87 (now 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 292 (now Section 230) of the Tax Code should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax. In the case of Collector of Internal Revenue vs . Antonio Prieto (2 SCRA 1007 {1961}, this Court held that when a tax is paid in installments, the prescriptive period of two years provided in Section 306 (Section 292) of the National Internal Revenue Code should be counted from the date of the final payment. This ruling is reiterated in Commissioner of Internal Revenue vs. Carlos Palanca (18 SCRA 496 {1966}, wherein this Court stated that where the tax account was paid on installment, the computation of the two-year prescriptive period under section 306 (Section 292) of the Tax code, should be from the date of the last installment. In the instant case, TMX Sales, Inc. filed a suit for a refund on March 14, 1984. Since the two-year prescriptive period should be counted from the filing of the Adjustment Return on April 15, 1982, TMX Sales, Inc. is not yet barred by prescription." In the case of ACCRA Investment Corp. vs. Court of Appeals, 204 SCRA 957, the facts are substantially the same as the TMX case and expectedly, the High Court ruled that the prescriptive period should be determined as of the date of the filing of the adjusted final tax return in lieu of the date of the payment. Thus, it held that "the two-year prescriptive period within which to claim a refund commences to run at the earliest, on the date of filing of the adjusted final tax return". LibLex As if to take a cue from the ACCRA Investment Corp. ruling, Petitioner now argues that "the two-year prescriptive period within which to claim a refund commences to run at the earliest on the date of filing of the adjusted final tax return" then logically, there must be an alternative and later date for computation of the commencement of the prescriptive period which they submit is April 15 following the close of the fiscal year (section 77 (B) of the National Internal Revenue Code). If this is the correct interpretation, then its petition in CTA Case No. 5629 has not prescribed. While Section 230 is unambiguous in meaning the High Tribunal; found that a literal application of the provision will lead to absurdity and inconvenience and construed it to mean it should be reckoned from date of filing of final adjusted tax return. Petitioner now proposes to this Court that another construction be given to the legal provision by making the deadline for filing of income tax return (April 15) as the reckoning point for computing the prescription period. We are not persuaded. While it may be true that the Supreme Court in the ACCRA Investment Corporation and TMX Sales cases made the statement 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 return", the phrase "at the earliest" was specifically used in reference to the date of payment vis-a-vis the date of filing of final adjusted income tax return. The ruling is clear that the prescriptive period commences at the earliest not from the date of tax payment but from the filing of said final adjusted return. The claim of petitioner that such phrase connotes a later date, say April 15, which is the deadline for filing of the income tax return, does not find anchor on the factual settings in the ACCRA and TMX cases and therefore does not have factual basis nor merit. Secondly, granting ex gratia argumenti that there is some ambiguity in the provision in question, such interpretation as will be avoid inconvenience and absurdity is to be adopted. Interpretatio talis in ambiguis semper frienda est , ut evitatur inconveniens et absurdum . If the proposed interpretation of petitioner will be allowed, then it will undeniably result to inconvenience and confusion. To allow petitioner's theory would result to inconvenience as the BIR will now have to consider two dates and to absurdity because our legislators could not have contemplated alternative dates for determining prescription for they could just have simply used the deadline for the filing of the tax return as the reckoning date as this is more definite in time and simple in application. Thirdly, for this Court to concede such interpretation would be tantamount to judicial legislation, an act which is unconstitutional under the well entrenched principle of separation of powers. The High Tribunal once enunciated that the "law is the law, We cannot change the law under the guise of interpretation. Under Our system of government, We may not tread on forbidden grounds; We cannot rewrite the law. This is the function of Congress." (Baking vs. Director of Prisons, 28 SCRA 850, 865) Lastly, petitioner miserably failed to present the deliberations of Congress demonstrating such intent of Congress, Sans such proof, its plea must fail. The argument that the ruling of the court a quo pegging the commencement of the prescriptive period on the date of the filing of the final adjusted income tax return will penalize the conscientious law-abiding taxpayers and reward the late filers is likewise bereft of merit as a late filer will always be exposed to payment of interests, penalties, and surcharges. The legal issue raised petitioner was laid to rest in the recent case of Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 117254, January 21, 1999 where the question presented is whether the two-year period of prescription for filing a claim for refund, as provided in 230 of the National Internal Revenue Code, is to be counted from April 2, 1986 when the corporate income tax return was actually filed or from April 15, 1986 when, according to 70(b) of the NLRC, the final adjustment return could still be filed without incurring any penalty. cdlex The Supreme Court ruled that the prescriptive period should be reckoned from the date of the actual filing of the corporate income tax return, citing the cases of Commissioner of Internal Revenue vs. TMX Sales, Inc. supra. ACCRA Investments Corporation vs. Court of Appeals, supra and Commissioner of Internal Revenue vs. Philippine American Life Insurance Co. supra and ratiocinating this way: "Thus, it can be deduced from the foregoing that, in the context of Section 230, which provides for a two-year period of prescription counted "from the date of payment of the tax" for actions for refund of corporate income tax, the two-year period should be computed from the time of actual filing of the Adjustment Return or Annual Income Tax Return . This is so because at that point, it can already be determined whether there has been an overpayment by the taxpayer. Moreover, under Section 49(a) of the NLRC, payment is made at the time the return is filed." From the foregoing, since the petition before the court below was filed more than 2 years from the date of the filing of the final adjusted income tax return on April 10, 1996, then petitioner's cause of action for the refund has prescribed and is lost. WHEREFORE, the Resolution of the court a quo is AFFIRMED in toto. SO ORDERED. Labitoria and de la Cruz, JJ . , concur.