G.R. No. 105208 – 244 SCRA 446 – Taxation Law – NIRC Rules of Procedure – Prescriptive Period – Tax Refund
The Philippine American Life Insurance Co. (Philamlife) as a corporation has been paying quarterly income taxes. In 1983, it paid the following:
a) Quarter 1 (May 30, 1983) – P3.2 million
b) Quarter 2 (August 29, 1983) – P396k
c) Quarter 3 – no payment as it was entitled to a tax credit
d) Quarter 4 – no payment as it incurred losses
Philamlife, due to its losses in said year, determined that it actually had no income at the end of the year hence it is not liable for income tax. 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 CIR’s argument are correct.
HELD: No. It is true that the counting of the two-year prescriptive period shall begin to run from the date of payment. But in the case of corporations which are paying quarterly taxes, there is a qualification to be made. The prescriptive period for taxpayers paying quarterly shall commence from the time the refund is ascertained or from the time a final adjustment return has been accomplished. The rationale behind this is that, a taxpayer paying quarterly, like Philamlife, at the time it paid the quarterly taxes is not expected to ascertain if a tax refund is feasible. It could not have known in May and August 1983 that at the end of the year it will be incurring losses.
In the case at bar, the final adjustment return is deemed accomplished on April 16, 1984 – this is the date upon which the prescriptive period shall commence running. Hence, the refund claim filed in December 10, 1985 is well within the two year prescriptive period.
