ACCRA Investment Corp vs Court of Appeals

FACTS: The petitioner corporation filed with the Bureau of Internal Revenue its annual corporate income tax return for the calendar year ending December 31, 1981 reporting a net loss of P2,957,142.00. In the said return, the petitioner corporation declared as creditable all taxes withheld at source by various withholding agents. The withholding agents paid and remitted the amounts representing taxes on rental, commission and consultancy income of the petitioner corporation to the Bureau of Internal Revenue from February to December 1981.

In a letter dated December 29, 1983 addressed to CIR, the petitioner corporation filed a claim for refund inasmuch as it had no tax liability against which to credit the amounts withheld. Pending action of the respondent Commissioner on its claim for refund, the petitioner corporation, on April 13, 1984, filed a petition for review with CTA asking for the refund of the amounts withheld as overpaid income taxes. On January 27, 1988, the respondent CTA dismissed the petition for review after a finding that the two-year period within which the petitioner corporation's claim for refund should have been filed had already prescribed pursuant to Section 292 of the National Internal Revenue Code of 1977, as amended.

ISSUE: Whether or not the claim for refund was filed on time

RULING: YES. Crucial in the resolution of the instant case is the interpretation of the phraseology "from the date of payment of the tax" in the context of Section 230 on Recovery of tax erroneously or illegally collected.

A correct application of the Gibbs case according to the court is that “a taxpayer whose income is withheld at source will be deemed to have paid his tax liability at the end of the tax year. It is from when the same falls due at the his latter date then, or when 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..”

The aforequoted ruling presents two alternative reckoning dates, (1) the end of the tax year; and (2) when the tax liability falls due. In the instant case, it is undisputed that the petitioner corporation's withholding agents had paid the corresponding taxes withheld at source to the Bureau of Internal Revenue from February to December 1981. Petitioner corporation is not claiming a refund of overpaid withholding taxes, per se. It is asking for the recovery the refundable or creditable amount determined upon the petitioner corporation's filing of the its final adjustment tax return on or before 15 April 1982 when its tax liability for the year 1981 fell due. The petitioner corporation's taxable year is on a calendar year basis, hence, with respect to the 1981 taxable year, ACCRA had until 15 April 1982 within which to file its final adjustment return. The petitioner corporation duly complied with this requirement

Anent claims for refund, section 8 of Revenue Regulation No. 13-78 issued by the Bureau of Internal Revenue requires that:

Section 8. Claims for tax credit or refund — Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is established by a copy of the statement, duly issued by the payor to the payee (BIR Form No. 1743-A) showing the amount paid and the amount of tax withheld therefrom.

The term "return" in the case of domestic corporations like ACCRA refers to the final adjustment return. It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation's claim for refund from the time it filed its final adjustment return is the fact that it was only then that ACCRA could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore, in ACCRA's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on April 15, 1982.