G.R. No. 161997 October 25, 2005
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PHILIPPINE NATIONAL BANK, Respondent.

FACTS

In April 1991, respondent Philippine National Bank (PNB) remitted P180,000,000.00 to the Bureau of Internal Revenue (BIR) as an advance income tax payment for its 1991 operations. PNB subsequently filed its 1991 corporate income tax return, which reflected a total creditable tax payment of P217,552,122.38 against an annual tax liability of P144,253,229.78, leaving an excess credit of P73,298,892.60. PNB carried over this amount to offset its tax liabilities for 1992 to 1996 but alleged it remained unutilized due to net operating losses in those years.
On July 28, 1997, PNB formally requested the BIR to issue a Tax Credit Certificate (TCC) for the unutilized balance. The BIR denied the claim, arguing the request was premature when first made in 1991, that PNB had abandoned its claim by opting for a carry-over, and that the 1997 claim was filed beyond the two-year prescriptive period under the National Internal Revenue Code (NIRC). PNB appealed to the Court of Tax Appeals (CTA), which ruled in its favor. The Court of Appeals affirmed the CTA decision, prompting the Commissioner of Internal Revenue to elevate the case to the Supreme Court.

ISSUE

Whether PNB’s claim for a tax credit or refund of its unutilized advance income tax payment for 1991 has prescribed.

RULING

The Supreme Court denied the petition and affirmed the lower courts’ decisions, holding that PNB’s claim had not prescribed. The Court clarified that the two-year prescriptive period for filing a claim for refund or credit under Section 230 (now Section 204) of the NIRC is counted from the date of payment of the tax or penalty, not from the filing of the tax return. The crucial date of payment for the P180 million advance was April 1991. However, the Court ruled that the prescriptive period should be counted from the end of the taxable year (1991) to which the payment was applied, as the exact amount of any excess could only be determined after the close of that fiscal period.
Applying this, PNB’s two-year period to file a claim commenced on April 15, 1992, the last day for filing its 1991 final adjusted income tax return. Its formal written claim filed on July 28, 1997, was therefore indisputably late. Nevertheless, the Court found that PNB’s letters to the BIR in April and May 1991, which immediately requested the issuance of a TCC for the advance payment, constituted a valid written claim that effectively interrupted the prescriptive period. These letters were filed within two years from the end of the 1991 taxable year. The BIR’s inaction on these requests did not prejudice PNB’s right. Consequently, the subsequent 1997 letter was merely a reiteration of a timely filed claim, and prescription did not bar the action.