EIGHTH DIVISION [C.A.-G.R. SP NO. 38304. April 14, 2000.] BANK OF THE PHILIPPINE ISLANDS, petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, respondent. DECISION AQUINO, J p: The original ponente in this appealed case was Justice Jainal D. Rasul who recently retired from this Court. The undersigned was designated as such only on March 6, 2000. This is an appeal by petition for review of the decision dated July 19, 1994 of the Court of Tax Appeals in C.T.A. Case No. 4214 rejecting petitioner Bank of the Philippine Islands' (BPI) claim for refund of creditable income tax withheld for 1985, because it was time barred. cdtai The facts are undisputed. By virtue of the Articles of Merger approved by the Securities and Exchange Commission on July 1, 1985 (Exhibit D) petitioner BPI became the successor-ininterest 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 in the total amount of P 174,065.77 (Exhibit E) were remitted to the Bureau of Internal Revenue. Moreover, the FBTC 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. Cdpr 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-ininterest of FBTC filed a letter claim dated October 10, 1986 (Exhibit B) with 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, petitioner BPI filed on December 29, 1987 a petition for review with the Court of Tax Appeals seeking a reversal of BIR's resolution. After due proceedings, the Court of Tax Appeals rendered on July 19, 1994 a decision dismissing the petition for review on the ground that the

claim for tax refund had already prescribed. A motion for reconsideration was filed but it was denied. LexLib Hence, this petition for review. The simple issue in this case is a legal one: 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? The BIR and CTA said, yes, but petitioner BPI says, no. To resolve this issue, it is necessary to determine the deadline for the filing by the FBTC of its final adjustment return. Citing Sec. 78 of the Tax Code and Sec. 744 of the Income Tax Resolution, the CTA held that said return should have been filed within 30 days from SEC's approval of the Articles of Merger on July 1, 1985. Petitioner BPI disagrees and, invoking Sec. 46 (a) and Sec. 70 (B) of the Tax Code, contends that said return should have been filed on the 15th day of the 4th month following the close of FBTC's taxable year. cdll It should be noted that this case was decided under the Tax Code which has already been amended and modified by R.A. 8424 otherwise known as the Comprehensive Tax Reform Program which became effective on January 1, 1998. With the parties invoking different provisions of law and regulations, there is a need to reproduce them for a better understanding and resolution of issues. 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." cdtai 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. . . ." cda 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. Cdpr (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." cdphil 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." Upon deep reflection, this Court shares the opinion of the BIR and the CTA. 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. cdtai Petitioner contends that Sec. 78, supra required not a income tax or final adjustment return but an information return. It submits that"To understand what Sec. 70 really requires, a review of its origin, its amendment by Executive Order No. 1026 of Mr. Marcos, and its further amendment by P.D. No. 1994 (81 O.G. 5527 & 5576) which transposed it as Sec. 46 (c) of the Tax Code, and its re-enactment in Executive Order No. 37 of Pres. Aquino as sec. 46(c) but without the second paragraph introduced by Executive Order No. 1026, would be very enlightening. (1) The original sec. 78.

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. These other information returns were: return of corporations on dividends paid (sec. 75). return on payments of P1,000 or more (sec. 77), return or brokers (sec. 79) and return on foreign corporations (sec. 80). 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.'" This Court does not agree. The holding of the CTA on this point is what, in the opinion of this Court, is the correct interpretation of the law. This Court quotes with approval said holding: "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 filled by the President, vice-president, or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer." LexLib "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. The amendment merely added a sanction on the part of the officers of the corporation in case of failure to provide such information return and to secure the necessary tax clearance, "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. llcd "Moreover, this Court gives more weight to Section 244 of Rev. Regs. No. 2 when it stated 'income tax return'. As a rule, all regulations promulgated by the Secretary of Finance for the effective enforcement of the provisions of the National Internal Revenue Code are presumed valid unless they are unreasonable and contrary to law or the Constitution. (see Art. 7, New Civil Code), "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. The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also relates to accumulation or experience and growth of specialized capabilities by the administrative agency charged with implementing a particular statute, (Nestle Philippines, Inc. vs. Court of Appeals, G.R. No. 86738, November 13, 1991, 203 SCRA 504)." cdlex In view of the foregoing, this court, finds no reversible error in the appealed decision. WHEREFORE, for lack of merit, the petition is DISMISSED and the appealed decision is AFFIRMED. Cost against the petitioner. SO ORDERED. Guerrero and Gozo-Dadole, JJ., concur.

C o p y r i g h t 2 0 0 2 C D T e c h n o l o g i e s A s i a, I n c.

CA-G.R. SP No. 47745 April 6, 2000