G.R. No. 96322 December 20, 1991

ACCRA INVESTMENTS CORPORATION, petitioner, vs.THE HONORABLE COURT OF APPEALS, COMMISSIONER OF INTERNAL REVENUE and THE COURT OF TAX APPEALS, respondents.

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 a letter dated December 29, 1983 addressed to the respondent Commissioner of Internal Revenue (Exh. "G"), the petitioner corporation filed a claim for refund inasmuch as it had no tax liability against which to credit the amounts withheld.

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. It ruled that the reckoning date for purposes of counting the two-year prescriptive period within which the petitioner corporation could file a claim for refund was December 31, 1981 when the taxes withheld at source were paid and remitted to the Bureau of Internal Revenue by its withholding agents, not April 15, 1982, the date when the petitioner corporation filed its final adjustment return.

The respondent appellate court affirmed the decision of the respondent CTA opining that the two-year prescriptive period in question commences "from the date of payment of the tax" as provided under Section 292 of the Tax Code of 1977 (now Sec. 230 of the National Internal Revenue Code of 1986), i.e., "from the end of the tax year when a taxpayer is deemed to have paid all taxes withheld at source", and not "from the date of the filing of the income tax return" as posited by the petitioner corporation.

Issue: whether or not the petitioner corporation is barred from recovering the amount of P82,751.91 representing overpaid taxes for the taxable year 1981.

Held:

We find merit in the petitioner corporation's postures.

Clearly, there is the need to file a return first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its withholding agents to the Bureau of Internal Revenue. The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15, 1982. In our Resolution dated April 10, 1989 in the case of Commissioner of Internal Revenue v. Asia Australia Express, Ltd. (G. R. No. 85956), we ruled 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 tax return. Hence, the petitioner corporation had until April 15, 1984 within which to file its claim for refund. Considering that ACCRAIN filed its claim for refund as early as December 29, 1983 with the respondent Commissioner who failed to take any action thereon and considering further that the non-resolution of its claim for refund with the said Commissioner prompted ACCRAIN to reiterate its claim before the Court of Tax Appeals through a petition for review on April 13, 1984, the respondent appellate court manifestly committed a reversible error in affirming the holding of the tax court that ACCRAIN's claim for refund was barred by prescription.

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 ACCRAIN could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore, in ACCRAIN's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on April 15, 1982.