3. BPI v.

Commissioner of Internal Revenue

April 14, 2000 | ADD
CC. Returns and Payment of Tax

Summary: BIR did not allow the refund of FBTC’s excess withholding taxes for being filed out of time. SC ruled that the claim for
refund indeed has lapsed since (See doctrine).
Doctrine: Sec. 78 of the Tax Code and Sec. 244 of the Revenue Regulations No. 2 required FBTC as a dissolving corporation to file its
income tax return within 30 days after the cessation of its business or 30 days after the approval of the merger.
Facts:
 By virtue of the Articles of Merger approved by the Securities and Exchange Commission on July 1, 1985 petitioner BPI
became the successor-in- interest of the Family Bank and Trust Company (FBTC) whose corporate existence ended on June
30, 1995.
 From January 1 to June 30, 1985, FBTC earned incomes consisting of rentals from its leased properties and interest from
treasury notes purchased from the Central Bank.
 Pursuant to the Expanded Withholding Tax Regulations, the lessees of FBTC withheld 5 percent or P 118,609.17 on said
rentals while the Central Bank withheld 15 percent or 55,456.60 on the interest on the treasury notes.
 These withheld income taxes were remitted to the BIR.
 The FBTC also had a prior years' excess credit of P 2,146,072.57, This excess credit plus the withheld income taxes
amounted to P2,320,138.34.
 On April 10, 1986, the FBTC filed its final income tax return (Exhibit A) with the BIR showing a net loss of P64,502,935.00 and
a refundable amount of P174,065.77 representing the creditable income tax withheld at source from January 1 to June 30,
1985.
 On October 7, 1986, petitioner BPI as successor-in-interest of FBTC filed a letter claim dated October 10, 1986with the BIR
asking for refund of P2,320,138.34. The BIR however refunded to petitioner BPI only the amount of P2,146,072.57 (prior
years' excess credits).
 Since the BIR refused to refund the withheld income taxes on rentals and interests in the amount of P174,065.77,
this case was filed.
 CTA affirmed the BIR’s decision on the ground that the claim for tax refund had already prescribed.
 Sec. 78 of the Tax Code and Sec. 244 of the Income Tax Resolution, said return should have been filed within 30
days from SEC's approval of the Articles of Merger on July 1, 1985.
 BPI’s argument:
 Sec. 46 (a) and Sec. 70 (B) of the Tax Code, said return should have been filed on the 15th day of the 4th month
following the close of FBTC's taxable year.
(See notes for the provisions)

Issue: On October 7, 1986, had petitioner BPI's claim for refund of the withheld income taxes in the amount of P174,065.77 already
prescribed? – YES

Held:
 Sec. 78 of the Tax Code and Sec. 244 of the Revenue Regulations No. 2 required FBTC as a dissolving corporation to file its
income tax return within 30 days after the cessation of its business or 30 days after the approval of the merger on July 1, 1985
or up to July 31, 1985.
 Under Sec. 292 of the Tax Code, an action to claim for refund of an excessively collected tax starts to run from the day in
which a corporate taxpayer is required by law to file its final income tax return. Accordingly, petitioner BPI should have filed
the action for the refund of the excessively collected income tax return within two (2) years from July 31, 1985 which was July
31, 1987. Unfortunately, petitioner filed said action only on December 29, 1987-which was late by 151 days. Said action was,
therefore, clearly time-barred.

[OTHER ISSUES] BPI contends that Sec. 78, required not an income tax or final adjustment return but an information return.
BPI says:
“Sec. 78 of the 1939 National Internal Revenue Code was found in Chapter IX (Administrative Provisions) of Title II (Income Tax),
together with other sections requiring the filing of information returns. On the other hand, the requirement to file income tax
return, imposed on individuals, corporations, partnerships, receivers and trustees, and the manner the income tax would be assessed
and paid on such returns was found in Ch. VI. Thus the requirement of an information return was very different from the requirement of
an income tax returns, which later would be called, in the case of corporations, as the ‘final adjustment return.”

Held:
 Petitioner’s claim has no merit.

“Sec. 46. Corporation returns. — (a) Requirement. — every corporation, subject to the tax herein imposed, except foreign
corporation not engaged in trade or business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax
return and final and adjustment return in accordance with the provisions of Chapter X of this title, the return shall be filed by the
President, vice-president, or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer.”
 On the other hand, Chapter X of Title II (Income Tax) refers to the Quarterly Corporate Income Tax Payments.
 Petitioner tried to mislead us by saying that what is required is only an information return.
  A closer look of Section 46(a) and Chapter X of Title II showed that it both made specific mention of "income tax return" and
"income tax payments", respectively.
 Normally, an ongoing corporation files a Quarterly Corporate Income Tax Return. The final adjustment return
therefore aptly refers to the Final Adjustment Income Tax Return.
 All references pointed to by petitioner have some relations to income tax payments and the filing of an accurate Income Tax
Return. We cannot deviate from the fact that indeed 'correct return' means 'correct income tax return', the Final
Adjustment Income Tax Return.
 Moreover, this Court gives more weight to Section 244 of Rev. Regs. No. 2 when it stated 'income tax return'.
 The construction given to a statute by an administrative agency charged with the interpretation and application of that
statute is entitled to great respect and should be accorded great weight by the courts, unless such construction is
clearly shown to be in sharp conflict with the governing statute or the Constitution or other laws.
Notes:
Sec. 78, Tax Code — "Sec. 78. Return of corporation contemplating dissolution. — Every corporation shall, within thirty days after the
adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of
its capital stock, render a correct return to the Collector of Internal Revenue, verified under oath, setting forth the terms of such
resolution or plan and such other information as the Minister of Finance shall by regulations, prescribe."
Sec. 244, Income Tax Regulations —
"Sec. 244. Return of corporation contemplating dissolution or retiring from business. — All corporations, partnership, joint accounts and
associations, contemplating dissolution, shall within 30 days after the approval of such resolution authorizing their dissolution, and
within the same period after their retirement from business, file their income tax return covering the profit earned or business done by
them from the beginning of the year up to the date of such dissolution or retirement and pay the corresponding income tax due thereon
upon demand by the Commissioner of Internal Revenue. . . ."
Sec. 42(which later on became Sec. 41 of Tax Code). "Sec. 42. Final or adjustment returns for a period of less than twelve months. —
(a) Return for short period resulting from change of accounting period. — If a taxpayer, other than an individual, with the approval of the
Commissioner of Internal Revenue, changes the basis of computing net income from fiscal year to calendar year, a separate final or
adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following
December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period
between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the
change is from one fiscal year to another fiscal year, a separate final or adjustment return shall be made for the period between the
close of the former fiscal year and the date designated as the close of the new
fiscal year.
(b) Income computed on basis of short period. — Where a separate final or adjustment return is made under subsection (a) on account
of a change in the accounting period, and in all other cases where a separate final or adjustment return is required or permitted by
regulations prescribed by the Secretary of Finance, to be made for a fractional part of a year, then the income shall be computed on the
basis of the period for which separate final or adjustment return is made.
Sec. 46 (a), Tax Code, "Sec. 46. Corporation returns. — (a) Requirements. — Every corporation,
subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines shall render, in
duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter IX
of this Title. The return shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and
by the treasurer or assistant treasurer."
Sec. 70 (b), Tax Code —"(b) Time of filing the income tax return. — The corporate quarterly
declaration shall be filed within (60) days following the close of each of the first three quarter of the taxable year. The final adjustment
return shall be filed on or before the 15th day of April or on or before the 15th day of the fourth month following the close of the fiscal
year, as the case may be."