Commissioner of Internal Revenue vs. Primetown Property Group, Inc.

Under Section 31, Chapter VIII, Book I of the Administrative Code of 1987 (EO 292), a "year" for purposes of computing legal periods consists of 12 calendar months, not 365 days; therefore, the two-year prescriptive period for tax refunds under Section 229 of the NIRC is properly computed as 24 calendar months reckoned from the filing of the final adjusted return, rendering irrelevant whether the period includes a leap year.

During the 1997 Asian Financial Crisis, Primetown suffered substantial losses in its real estate business. Despite these losses, it paid quarterly corporate income taxes and creditable withholding taxes totaling P26,318,398.32 for taxable year 1997. Primetown sought to recover these payments, contending that losses rendered it not liable for income tax.

• March 11, 1999: Primetown filed an administrative claim for refund with the BIR (Revenue District No. 049, Makati) through Vice Chair Gilbert Yap.
• May 13, 1999: Revenue Officer Elizabeth Y. Santos required submission of additional documents; Primetown complied but the BIR did not act on the claim.
• April 14, 2000: Primetown filed a petition for review with the CTA (C.T.A. Case No. 6113).
• December 15, 2000: The CTA dismissed the petition as filed beyond the two-year prescriptive period, computing 730 days from April 14, 1998 (filing of final adjusted return) and finding that April 14, 2000 was the 731st day due to the leap year.
• August 1, 2003: The CA reversed the CTA, ruling that Article 13 of the Civil Code makes no distinction between regular and leap years; thus, each year counts as 365 days regardless of actual days elapsed.
• February 9, 2004: The CA denied reconsideration.
• August 28, 2007: The SC denied the CIR's petition and remanded the case to the CTA.

• Primetown filed its final adjusted return on April 14, 1998.
• It paid the following taxes for 1997:
  • 1st Quarter: P4,127,865.00
  • 2nd Quarter: P16,327,677.00
  • 3rd Quarter: P5,574,375.32
  • 4th Quarter: P288,481.00
  • Total: P26,318,398.32
  • The judicial claim was filed with the CTA on April 14, 2000.
  • The year 2000 was a leap year (366 days).

• Tax refunds are in the nature of tax exemptions and must be strictly construed against claimants.
• Section 229 of the NIRC must be strictly applied; the prescriptive period begins to run on the day the claimant files the final adjusted return (April 14, 1998).
• Under Article 13 of the Civil Code, a year equals 365 days; thus, the two-year period equals exactly 730 days.
• Since the filing on April 14, 2000 was the 731st day (accounting for the leap year), the claim was filed out of time and should have been made on or before April 13, 2000.

• The filing on April 14, 2000 was within the reglementary period under either Article 13 of the Civil Code (which counts a year as 365 days regardless of leap years) or the Administrative Code of 1987 (which counts a year as 12 calendar months).
• The CA correctly ruled that the Civil Code does not distinguish between regular and leap years.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether the two-year prescriptive period under Section 229 of the NIRC should be computed as 730 days or as 24 calendar months.
  • Whether Article 13 of the Civil Code or Section 31 of the Administrative Code of 1987 governs the computation of legal periods.
  • Whether the filing of the judicial claim on April 14, 2000 was within the reglementary period.

• Procedural: N/A
• Substantive:
  • Section 31 of the Administrative Code of 1987 governs the computation of legal periods, having impliedly repealed Article 13 of the Civil Code on this point.
  • Under the Administrative Code, a "year" is defined as 12 calendar months, rendering the number of days irrelevant; consequently, the two-year prescriptive period equals 24 calendar months.
  • The filing on April 14, 2000 was made exactly on the last day of the 24th calendar month from April 14, 1998 (the date of filing the final adjusted return), and was therefore timely filed.
  • The case is remanded to the CTA for expedited hearing on the merits of the refund claim.

• Lex posteriori derogat priori — A later law prevails over an earlier one on the same subject matter. Applied to hold that EO 292 (Administrative Code of 1987) prevails over the Civil Code (enacted 1950) regarding computation of legal periods.
• Implied Repeal — Repeal by implication is not favored and requires clear legislative intent; the test is whether the subsequent law entirely encompasses the subject matter of the former and they cannot be logically reconciled. The SC found manifest incompatibility between Article 13 (365 days) and Section 31 (12 calendar months), warranting implied repeal.
• Strict Construction of Tax Refunds — Tax refunds are in the nature of exemptions and are strictly construed against the claimant; however, this principle applies to substantive entitlement, not to procedural requirements like the computation of reglementary periods.
• Calendar Month — Defined as "the period of time running from the beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month, then up to and including the last day of that month."

• "A calendar month is 'a month designated in the calendar without regard to the number of days it may contain.' It is the 'period of time running from the beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month, then up to and including the last day of that month.'"
• "Implied repeals, however, are not favored. An implied repeal must have been clearly and unmistakably intended by the legislature. The test is whether the subsequent law encompasses entirely the subject matter of the former law and they cannot be logically or reasonably reconciled."
• "There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods."

• National Marketing Corporation v. Tecson (139 Phil. 584) — Previously held that under the Civil Code, a year is equivalent to 365 days regardless of whether it is a regular year or a leap year; distinguished/reconsidered in light of the Administrative Code of 1987.
• Gutierrez v. Carpio (53 Phil. 334) — Cited for the definition of "calendar month."
• Agujetas v. Court of Appeals (G.R. No. 106560) — Cited for the principle that a repealing clause referring to "all laws inconsistent herewith" is not an express repealing clause but operates as an implied repeal.
• David v. Commission on Elections (G.R. No. 127116) — Cited for the test for implied repeal (subsequent law encompasses entirely the subject matter of the former and they cannot be reconciled).
• CIR v. CA (361 Phil. 359) — Cited for the rule that the two-year prescriptive period for tax refunds begins to run from the filing of the final adjusted return.

• Section 229, National Internal Revenue Code — Governs recovery of taxes erroneously or illegally collected; provides for a two-year prescriptive period for filing suits for tax refunds reckoned from the date of payment or filing of final adjusted return.
• Article 13, Civil Code — Provided that "years are of three hundred sixty-five days each"; held impliedly repealed by the Administrative Code of 1987 regarding computation of legal periods.
• Section 31, Chapter VIII, Book I, Administrative Code of 1987 (EO 292) — Defines legal periods: "Year" shall be understood to be twelve calendar months; "month" of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains.
• Section 27, Book VII, Administrative Code of 1987 — Repealing clause providing that all laws inconsistent with the Code are hereby repealed or modified accordingly (basis for finding implied repeal).