G.R. No. 117254 January 21, 1999
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and BANK OF THE PHILIPPINE ISLANDS as LIQUIDATOR OF PARAMOUNT ACCEPTANCE CORPORATION, respondent.

FACTS

Bank of the Philippine Islands (BPI), as liquidator of the dissolved Paramount Acceptance Corporation, sought a refund of P65,259.00 representing overpaid income tax for calendar year 1985. Paramount filed its final corporate annual income tax return on April 2, 1986, showing that its total quarterly tax payments exceeded the annual tax due by the refundable amount. BPI filed an administrative claim for refund on April 14, 1988, and a judicial petition with the Court of Tax Appeals (CTA) on April 15, 1988.
The pivotal dispute centered on the reckoning point for the two-year prescriptive period to claim a tax refund under Section 230 of the National Internal Revenue Code (NIRC). The CTA and the Court of Appeals ruled that the period commenced from April 15, 1986—the last day for filing the final adjustment return without penalty—holding BPI’s claim timely. The Commissioner of Internal Revenue contended that prescription began on April 2, 1986, the actual filing date of the return, which would bar the claim.

ISSUE

Whether the two-year prescriptive period for filing a claim for refund of overpaid corporate income tax commenced from the actual date of filing the final adjustment return or from the last day prescribed for its filing.

RULING

The Supreme Court reversed the Court of Appeals and held that the claim was barred by prescription. The legal logic is anchored on the interpretation of Section 230 NIRC, which states the two-year period is counted “from the date of payment of the tax.” For corporate income tax, quarterly payments are mere installments or advances on the annual tax liability. The definitive computation, revealing whether there is a deficiency or an overpayment, is determined only upon the filing of the final adjustment return.
Following the doctrine established in Commissioner of Internal Revenue v. TMX Sales, Inc., the two-year period is computed from the time of filing the Adjustment Return and final payment of the tax. The Court clarified that the “date of payment” in this context is the date the return is actually filed, as it is at that point the tax becomes finally ascertained and payable. The last day for filing (April 15) is merely a deadline; it does not supersede the actual filing date as the operative event for prescription. Since Paramount filed its return on April 2, 1986, and BPI filed its claim on April 14, 1988, more than two years had elapsed, rendering the claim prescribed.