Commissioner of Internal Revenue vs Philippine American Life Insurance

FACTS: On May 30, 1983, private respondent Philamlife paid to the Bureau of Internal Revenue (BIR) its first quarterly corporate income tax for Calendar Year (CY) 1983 amounting to P3,246,141.00. On August 29, 1983, it paid P396,874.00 for the Second Quarter of 1983. For the Third Quarter of 1983, private respondent declared a net taxable income of P2,515,671.00 and a tax due of P708,464.00. After crediting the amount of P3,899,525.00 it declared a refundable amount of P3,158,061.00. For its Fourth and final quarter ending December 31, private respondent suffered a loss and thereby had no income tax liability. It then filed for a tax refund but it only filed the same in December 1985. The Commissioner of Internal Revenue (CIR) denied the claim on the ground that it has been filed beyond the two-year prescriptive period to file such refund claim. The CIR contends that the 2-year prescriptive period should be reckoned from the date of the quarterly payment.  Hence, Philamlife’s refund claim for the quarterly payments it paid in 1983 had prescribed in May 1985 and August 1985, respectively.

ISSUE: Whether or not the contention of CIR is correct

RULING: NO. 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 quantity what is due the government nor what should be refunded to the corporation.

Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not have been able to ascertain on that date, that the said amount was refundable. The same applies with cogency to the payment of P396,874.00 on August 29, 1983.

Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period.