GR 83736; (January, 1992) (Digest)
G.R. No. 83736 January 15, 1992
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. TMX SALES, INC. and THE COURT OF TAX APPEALS, respondents.
FACTS
Private respondent TMX Sales, Inc., a domestic corporation, paid an income tax of P247,010.00 on May 15, 1981, upon filing its quarterly income tax return for the first quarter of 1981. For the subsequent quarters of the same year, the corporation incurred losses. Consequently, upon filing its Final Adjustment Return (Annual Income Tax Return) on April 15, 1982, it reported a net loss for the entire taxable year 1981. On July 9, 1982, TMX filed a claim for refund of the P247,010.00 paid in the first quarter. The Commissioner of Internal Revenue did not act on the claim. TMX then filed a petition for review before the Court of Tax Appeals on March 14, 1984.
ISSUE
Did the two-year prescriptive period for filing a claim for refund of erroneously paid income tax, under Section 292 (now Section 230) of the National Internal Revenue Code, commence from the date of the quarterly tax payment (May 15, 1981) or from the date of filing the Final Adjustment Return (April 15, 1982)?
RULING
The Supreme Court ruled that the two-year prescriptive period commences from the date of filing the Final Adjustment Return and the final payment of the annual income tax. The Court affirmed the decision of the Court of Tax Appeals ordering the refund.
The legal logic is grounded on the nature of quarterly corporate income tax payments. These payments are not final taxes but mere installments or advances on the total annual income tax liability. The true tax due for the year can only be ascertained after the close of the taxable year upon audit and adjustment of the cumulative figures of gross income and allowable deductions. The Final Adjustment Return reflects the definitive and audited financial results of the corporation’s annual operations. Therefore, the “date of payment of the tax” under Section 292, for purposes of computing the prescriptive period for a refund claim, refers to the date when the final liability is settled, not when an installment is paid. To rule otherwise would lead to the absurdity of the prescriptive period expiring before the taxpayer could even determine its correct annual tax position and right to a refund. This interpretation aligns with prior jurisprudence holding that for taxes paid in installments, the prescriptive period runs from the date of the last payment. Since TMX filed its court petition on March 14, 1984, which was within two years from April 15, 1982, its claim was not barred by prescription.