Asianbank Corp. v. Commissioner of Internal Revenue

SPECIAL FOURTEENTH DIVISION [CA-G.R. SP NO. 69129. December 6, 2010.] ASIANBANK CORPORATION (now known as GLOBAL BUSINESS BANK) , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION BALTAZAR-PADILLA , J p : Pending resolution of this case, Republic Act 9282 1 was enacted on March 22, 2004 making the decisions of the Court of Tax Appeals (CTA) no longer appealable to this Court but directly to the Supreme Court. However, considering that the present case took place at the time when Republic Act No. 1125, otherwise known as An Act Creating the Court of Tax Appeals , was still in effect, this Court was vested with jurisdiction over the present petition. This is a petition for review of the decision dated October 9, 2001 of the Court of Tax Appeals in CTA Case No. 6095 entitled "Asianbank Corporation vs. Commissioner of Internal Revenue" 2 denying Asianbank Corporation's (now known as Global Business Bank, petitioner hereinafter ) claim for tax refund on the ground of prescription. FACTS As culled from the decision of the CTA, the facts of the case are as follows: "Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines. On April 15, 1998, petitioner filed with the Bureau of Internal Revenue its Corporate Annual Income Tax Return for the calendar year 1997 reporting a net loss in the amount of P16,163,420.00 and a refundable amount of P2,803,609.00. In its return, petitioner indicated its intention of applying its refundable amount as credit to next year. The refundable amount of P2,803,609.00 allegedly represents the sum of the first quarter income tax payments of P2,734,268.00 and the creditable income taxes withheld of P9,341.00 in 1997. DASCIc On May 4, 1999, petitioner filed its Amended Annual Income Tax Return for taxable year 1998 reflecting a net loss of P21,716,831.00. Irrespective of the fact that it was at a net loss position at the end of taxable year 1998, petitioner allegedly paid P6,666,387.00 minimum corporate income tax from which the prior year's excess credits of P2,803,609.00 and creditable taxes withheld in 1998 of P349,436.00, were deducted resulting to an income tax payable of P3,513,342.00. Since it allegedly paid an amount of P6,666,387.00 instead of the income tax payable in the amount of P3,513,342.00, petitioner now claims that it failed to utilize the prior year's (1997) excess tax credits of P2,803,609.00 as well as the 1998 creditable withholding taxes of P349,436.00. Hence, the claim for refund. Believing as it does that it is entitled to a refund of what has been erroneously paid, petitioner filed an administrative claim for refund with the Bureau of Internal Revenue on April 17, 2000. On even date, petitioner elevated its grievance to this Court (Court of Tax Appeals) via Petition for Review. On May 19, 2000, respondent filed his Answer to the Petition for Review and denied petitioner's assertions. By way of Special and Affirmative Defense, respondent interposed the following: "4. The alleged claim for refund is subject to administrative investigation/examination by the respondent; 5. Petitioner failed to show that the taxes subject of the case at bar were erroneously or illegally collected; 6. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence, not refundable; 7. In an action for tax credit/refund, the burden of proof is on the taxpayer to establish its right to refund and failure to adduce sufficient proof is fatal to the action for tax refund/credit; 8. It is incumbent upon the petitioner to show that it has complied with the provisions of Sections 204(c) and 229 of the National Internal Revenue Code, as amended; CcAHEI 9. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation ( Commissioner of Internal Revenue vs. Ledesma , G.R. No. L-13509, January 30, 1970, 31 SCRA 95) and as such, they are looked upon with disfavor ( Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121). The core of the problem the Court is called upon to resolve is whether or not petitioner is entitled to the refund of the amount of P2,803,609 representing alleged overpaid income tax for the year 1997. In his memorandum, respondent raises for the first time the issue of prescription to defeat the claim of the petitioner. His contentions hinges mainly on the alleged failure of the petitioner to file its claim for refund within the two (2) year period of prescription provided under Section 229, of the Tax Code. . . . To contradict respondent's assertions, petitioner, in its Reply to Memorandum of respondents filed on March 16, 2001, advances the argument that the issue of prescription belatedly raised by the respondent should not be considered at all by this Court since it was never raised as an issue in the Joint Stipulation of Facts arising out of the pre-trial conference. . . . Moreover, petitioner places premium on the admission made by the respondent in the Joint Stipulation of Facts and Issues dated July 21, 2000 that the petitioner files its administrative claim of refund of the overpaid income taxes for the calendar year 1997 with the BIR on April 17, 2000 "within the prescriptive period allowed by law". Thus, respondent is allegedly already estopped from claiming otherwise." On October 9, 2001, the CTA rendered a Decision 3 denying petitioner's claim for refund on the ground of prescription. Petitioner's motion for reconsideration was, likewise, denied in a Resolution 4 dated January 23, 2002. Hence, this petition. ISSUE Petitioner submitted the following issues for Our consideration, to wit: I THE DECISION AND RESOLUTION ARE ERRONEOUS INSOFAR AS THEY HOLD THAT THE PETITIONER'S CLAIM FOR REFUND IS BARRED BY PRESCRIPTION. EcSCHD II THE DECISION AND RESOLUTION ARE ERRONEOUS INSOFAR AS THEY HOLD THAT THE GOVERNMENT IS NOT BOUND BY THE ADMISSION OF THEN RESPONDENT IN THE JOINT STIPULATION OF FACTS THAT THE ADMINISTRATIVE CLAIM FOR REFUND WAS FILED WITHIN THE PRESCRIPTIVE PERIOD ALLOWED BY LAW. RULING The petition is highly meritorious. The Commissioner of Internal Revenue (respondent) asserts that petitioner's claim for refund was filed beyond the two-year prescriptive period invoking Section 13 of the Civil Code which states: "Art. 13. When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours; and nights from sunset to sunrise. If months are designated by their name, they shall be computed by the number of days which they respectively have. In computing a period, the first day shall be excluded, and the last day included." Since petitioner filed its income tax return on April 15, 1998, it only had until April 14, 2000 to file its claim for refund considering that the year 2000 was a leap year (said year consisted of 366 days instead of 365 days). Having filed the same only on April 17, 2000, it was filed beyond the reglementary period. On the other hand, petitioner avers that it filed the claim for refund within the prescriptive period citing Section 31 of the Administrative Code of 1987 (Executive Order No. 292) which provides: "Sec. 31. Legal Periods. "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day," to a day of twenty-four hours; and "night," from sunset to sunrise." HTcADC Hence, it had until April 15, 2000 to file the claim for refund. April 15, 2000, being a Saturday, it had until the next working day, April 17, 2000, a Monday, to file the claim. WE find in favor of petitioner. The issue is not a novel one. The Supreme Court has settled this controversy in the case of Commissioner of Internal Revenue vs. Primetown Property Group, Inc. , 5 where the High Court made this pronouncement, viz. "The rule is that the two-year prescriptive period is reckoned from the filing of the final adjusted return. But how should the two-year prescriptive period be computed? As already quoted, Article 13 of the Civil Code provides that when the law speaks of a year, it is understood to be equivalent to 365 days. . . . However, in 1987, EO 292 or the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides: Sec. 31. Legal Periods. "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; "day", to a day of twenty-four hours and; "night" from sunrise to sunset. A calendar month is "a month designated in the calendar without regard to the number of days it may contain." It is the "period of time running from the beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month, then up to and including the last day of that month." To illustrate, one calendar month from December 31, 2007 will be from January 1, 2008 to January 31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008 until February 29, 2008. xxx xxx xxx Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori . Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998) consisted of 24 calendar months, computed as follows: Year 1 1st calendar month April 15, 1998 to May 14, 1998 2nd calendar month May 15, 1998 to June 14, 1998 3rd calendar month June 15, 1998 to July 14, 1998 4th calendar month July 15, 1998 to August 14, 1998 5th calendar month August 15, 1998 to September 14, 1998 6th calendar month September 15, 1998 to October 14, 1998 7th calendar month October 15, 1998 to November 14, 1998 8th calendar month November 15, 1998 to December 14, 1998 9th calendar month December 15, 1998 to January 14, 1999 10th calendar month January 15, 1999 to February 14, 1999 11th calendar month February 15, 1999 to March 14, 1999 12th calendar month March 15, 1999 to April 14, 1999 Year 2 13th calendar month April 15, 1999 to May 14, 1999 14th calendar month May 15, 1999 to June 14, 1999 15th calendar month June 15, 1999 to July 14, 1999 16th calendar month July 15, 1999 to August 14, 1999 17th calendar month August 15, 1999 to September 14, 1999 18th calendar month September 15, 1999 to October 14, 1999 19th calendar month October 15, 1999 to November 14, 1999 20th calendar month November 15, 1999 to December 14, 1999 21st calendar month December 15, 1999 to January 14, 2000 22nd calendar month January 15, 2000 to February 14, 2000 23rd calendar month February 15, 2000 to March 14, 2000 24th calendar month March 15, 2000 to April 14, 2000 We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period." (Emphasis supplied, citations omitted) cDCEIA Thus, applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 and the aforequoted ruling of the Supreme Court to this case, the start of the first calendar month of the two-year prescriptive period (reckoned from the time petitioner filed its Corporate Annual Income Tax Return on April 15, 1998) will begin on April 16, 1998 up to May 15, 1998. The second calendar month will begin on May 16, 1998 up to June 15, 1998 and so on and so forth. Hence, the last calendar month (which is the 24th calendar month) will begin on March 16, 2000 and end on April 15, 2000 (the last day for petitioner to file its claim for refund). However, April 15, 2000 falling on a Saturday, petitioner had until the next working day to file its claim for refund which was on April 17, 2000. Having filed the administrative claim (claim for refund with the Bureau of Internal Revenue) as well as the judicial claim (petition for review with the CTA) for refund on April 17, 2000, WE hold that petitioner's claim was filed on the last day of the 24th calendar month from the day that it filed its Corporate Annual Income Tax Return and hence, filed within the two-year prescriptive period. Considering that the claim for refund was filed within the reglementary period, the second issue need no longer be discussed. WHEREFORE , in the light of all the foregoing, the instant petition is hereby GRANTED . The Decision and Resolution of the Court of Tax Appeals dated October 9, 2001 and January 23, 2002, respectively, are REVERSED and SET ASIDE . The instant case is REFERRED BACK to the Court of Tax Appeals for further proceedings. aCcSDT SO ORDERED . Peralta and Ybaez, * JJ., concur. Footnotes * Acting Junior Member per Office Order No. 378-10-RSF dated December 8, 2010. 1. An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. 2. Rollo , p. 23. 3. Id. , p. 23. 4. Id. , p. 32. 5. G.R. No. 162155, August 28, 2007.