CTA Case No. 4214

DECISION

Sui t b r· ought by petitioner

Bank

of

Philippine

Islands

(BPI)

i s a c laim for r ef und of a n alleged ove r· p a id c r e di table ~-.~ithholding taxes of Family Ba nk a nd Tru s t

Company (FBTC)

i n the a mo unt of P174,065.77 for t h e six mo n t h pe r· i o d , Ja n u a r· y to June 19 8 5 . Th e right to pur s u e the claim arose when petitioner became t h e s u ccesso r·- in - inter· est of FBTC by virtue of a n Arti c l es of

Merger

duly ap pro ve d by the Sec urity a nd Exchange Commi ss ion on July 1, 1 985 (E x h . "D"). Dur·'lng t h e six month period e nded

June

3 0, 1985,

FBTC

r eceived rental income from l eas ing offi ce spaces a nd int e re st income fr·o m treasury note s pur c ha se d from Ce n tra l Bank .

On t h ese income, petitioner a ll e g e d that a 565

- 2 - 5% creditable withholding ta x was dedu cte d by vario u s l essees a nd a 15% wi t hh oldi ng tax by the Cent r al Bank. Petitioner further alleged t hat FBTC at the e nd of it s corporate existe nce on June 3 0, 19 85 filed its final income ta>< t-eturn wit h the Bureau of Internal Reve nu e on April 10, 1986 s h owing a net l oss of P6 4, 502 ,93 5. 00 and a r ef und able a mou n t of P1 74,065.77, represe n ting cre ditable income tax withheld at so ur ce for the period January to June 1985 (Exh. · "A") .

On October 1 7 , 1986, p e titioner filed a letter claim for refund dated October 10, 1986 with respondent's Chi e f Appellate Divisio n a s ki ng for t h e r· ef und of P1 74,065 . 77 (E x h .

II c II ) •

Since

respondent h as not acted on the matter, petitioner on Dece mb e r 29, 198 7 filed the insta nt case.

Hence, thi s petition for review. Responde nt in his a nswer a nd by way of s pe cial d e fen ses , a ll eges among others, t hat: a .

petitioner ' s right to claim the refund / tax c r e d i t )1 a d a 1 t' e a d y p r e s c r i b e d ; b .

it is incumbent upon petitioner to s ho w that it has complied \.Jith t h e provi s ion of Sec.

292 of t h e Tax Code; and c .

clai ms for· r·e fund are construed s trictly against c laimant s s inc e a c l ai m fot- r·e fund partakes t h e nat u re of tax exe mption . 566

DECI S ION -

C.T.A. CA SE NO .

4 21 4 - 3 - The is s ues to be r esolved, b y this Court, are: 1 .

Wh et h er or n ot the petition for·.

review is barred by p rescriptio n ;

a nd 2.

Wh et h er or not petitioner i s entitled to the refund of P174,065.66.

An e nt t h e first issue, the pro vis ioh of the law is very clear o n t h e matter. · I n fact, it i s a well settle d r- ul e that a clai m for r e fund of a tax alleged to have been erroneo u sly o r illegally co ll ecte d mu st be filed wit h th e Com missio n er of

Internal

Reve nu e wit hin two years from the date of pay ment of t h e tax and no s uit or pr ocee ding for refund s hall be begun after t h e expirati on of th e t\-Jo - year period.

Thi s i s provided und er Sectio n 292 of t h e National Int e rnal Reve nu e Code, as amended, which r· ea d s:

Sec. 292.

Recovery of tax erroneously or illegally collected .

No

s uit or proceeding s llal.l be maintain e d in a ny co ur t for t h e reco v ery of any national internal re ve nue ta x h e r e a f t e r a 11 e g e d to h a v e b e e n e r r .o n e o u s 1 y o r i ll egally col lected , or of a ny p e nalty c laimed to h av e been col l ected witho ut aut hority, or of any s um allege d to h ave been excessive or i n a n y m a n n e r· w r o n g f u 11 y c o 11 e c t e d , u n t i 1 a c 1 a i rn for· ref und or cre d it h a s been duly filed with t h e Co mmi s s io n e r· ;

but s u c h s uit o r· pr·ocee ding may be maintained, whether or n ot s uch tax, penalty, or s um h as been paid und er prot est or durf~ss.

I n a n y c a s e , n,-'o"--....=;s...:::u;:...;c::..:...:h_...:::s:...::u=-=.i....::t=---'o::....;..r _.s::;p...:.r·_o=-=c....::e:c..e=-=d-=i:...:n..:...::~.q s h all b e b e gun after the expirat i ~ n of two year s f r· om the d ate of payme n t of the tax or pen a lty regardle ss of any s up e r vening ca u se 567 —- qq — that may arise after payment; Provided, however, that the Commissioner may, even without a written claim therefor, refund or credit any tax, where on face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

(Underlining supplied).

Respondent contends that the instant case is barred by prescription. For the alleged amount of tax withheld and paid was for the fiscal year ending June 30, 1985. The petition for review was filed with this Court only December 29, 1987, which is clearly beyond the two year period allowed by law.

Before this Court can rule on the issue of prescription, it is noteworthy to point out that based on the financial statements of FBTC and the independent auditor's opinion (Exhs. "A-7" to "A-17"), FBTC operates on a calendar year basis. Its twelve . (12) months accounting period was shortened at the time it was merged with BPI. Thereby, losing its corporate existence on: July 1, 1985 when the Articles of Merger was approved by the Security and Exchange Commission. Thus, respondent stand that FBTC operates on a fiscal year basis, based on its incothe tax return, holds no ground. This Court believes that FBTC is operating on a calendar year period based on the audited financial statements and the opinion thereof. The fiscal period ending June 30, 1985 on the upper left corner of the income “tax return can be 068 concluded as an error on the part of FBTC. It should have been for the six month period ending June 30, 1985. It should also be emphasized that "Where one corporation succeeds another both are separate entities and the ‘ dasons earned by the precedecessor corporation before ‘organization of its successor is not income to the successor" (Mertens, Law of Federal Income Taxation, Vol. 7 $ 38.36).

Ruling now on the issue of prescription, this Court finds that the petition for review is filed out of time., FBTC, after the end of its corporate life on June 30, 1985, should have filed. its income tax return within thirty days after the cessation of its business or thirty days after the approval of the Articles of Merger. This” is bolstered by Sec. 78 of the Tax Code and under Sec. 244 of Revenue Regulations No. 2. Pertinent provisions.

of said laws are hereby quoted as:

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 Commissioner 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. Return of corporation contemplating dissolution or retiring from o69 ag = 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 due thereon upon demand by the Commissioner of Internal Revenue. xxx. (Underscoring supplied) Based on the record, FBTC filed its income tax return on April 10, 1986 whereas the law provides that the same should be filed’ within thirty days after the approval of the articles of Merger or from July 2, 1985 to July 31, 1985. And the claim for refund should be filed within two years from the date of payment of the tax or from July 31, 1985 to July 30, 1987 pursuant to Sec. 292 of the Tax Code, as amended.

However, this case was filed on December 29, 1987 which is 152 days late from July 30, 1987, the last day allowed by law for petitioner to file judicial claim for refund with this Court. | Therefore, respondent's contention that the petition is barred by prescription is hereby upheld. Not on ground that FBTC is on fiscal period rather FBTC ceased to operate as a juridical person on July 1, 1985.

In view of Our finding that the period to file ulte claim for refund has in deed prescribed, the question of 570 whether or not petitioner is entitled to the refund of the amount of P174,065.66 becomes moot and academic.

WHEREFORE, finding the petition for review without merit, the case is DISMISSED and the refund seught is hereby DENTED. | With costs against petitioner.

Presiding Judge

WE CONCUR: A

AK, GRUBA ciate Judge aA, RAMON O. DE V fi

Associate Jud

~ O71

7 =a ow wean"

DECISION —

C.T.-A. CASE NO. 4214 as i =

Cc ERTIF IC ATION

I hereby certify that the decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution.

Cue 2. Gun ry ERNESTO D. ACOSTA

Presiding Judge

Court of Tax Appeals

O72