G.R. No. 162155; August 28, 2007
COMMISSIONER OF INTERNAL REVENUE and ARTURO V. PARCERO vs. PRIMETOWN PROPERTY GROUP, INC.

FACTS

Respondent Primetown Property Group, Inc., having suffered a net loss in 1997, filed an administrative claim for refund or credit of its erroneously paid income taxes for that year on March 11, 1999. The claim was not acted upon. Consequently, on April 14, 2000, Primetown filed a judicial claim via a petition for review before the Court of Tax Appeals (CTA). The CTA dismissed the petition as time-barred. It applied Section 229 of the National Internal Revenue Code (NIRC), which prescribes a two-year period for filing such suits, reckoned from the date of tax payment. Primetown’s final adjusted return was filed on April 14, 1998. The CTA, applying Article 13 of the Civil Code which defines a year as 365 days, computed the two-year period as 730 days. It then held that since the year 2000 was a leap year, the period from April 15, 1998, to April 14, 2000, spanned 731 days. Thus, the petition filed on April 14, 2000, was one day late.
The Court of Appeals reversed the CTA, ruling that the two-year period should be strictly construed as 730 days regardless of leap years, thereby finding Primetown’s filing timely. The Commissioner of Internal Revenue elevated the case to the Supreme Court, arguing for strict construction of tax refund provisions against the taxpayer.

ISSUE

Whether the Court of Appeals correctly ruled that the judicial claim for tax refund was filed within the two-year prescriptive period under Section 229 of the NIRC.

RULING

Yes, the Court of Appeals was correct, but based on a different legal foundation. The Supreme Court affirmed that the claim was timely filed, clarifying the proper method of computing the two-year prescriptive period. The Court abandoned the application of Article 13 of the Civil Code (defining a year as 365 days) for computing statutory periods expressed in “years.” Instead, it applied Section 31, Chapter VIII, Book I of the Administrative Code of 1987, which provides that a “year” shall be understood as twelve calendar months.
Under this rule, the two-year period is computed by counting the months from the starting date. Since Primetown’s two-year period commenced on April 15, 1998 (the day after filing its final return), it ended on April 14, 2000. This is because the period is counted in calendar months: from April 15, 1998, to April 14, 1999, constitutes one year (12 calendar months), and from April 15, 1999, to April 14, 2000, constitutes the second year (another 12 calendar months). The inclusion of February 29, 2000, in this second calendar-year period is irrelevant under the Administrative Code’s “calendar month” rule. Therefore, April 14, 2000, was the last day of the prescriptive period, and Primetown’s filing on that date was perfectly within the reglementary period. The petition was not time-barred.