BPI v Commissioner Page 1 of 2

EIGHTH DIVISION Citing Sec. 78 of the Tax Code and Sec. 744 of the Income Tax Resolution, the CTA held that
[C.A.-G.R. SP NO. 38304. April 14, 2000.] 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
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, the Tax Code, contends that said return should have been filed on the 15th day of the 4th
respondent. month following the close of FBTC's taxable year.
It should be noted that this case was decided under the Tax Code which has already been
DECISION 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
AQUINO, J p:
provisions of law and regulations, there is a need to reproduce them for a better
The original ponente in this appealed case was Justice Jainal D. Rasul who recently retired understanding and resolution of issues.
from this Court. The undersigned was designated as such only on March 6, 2000.
Sec. 78, Tax Code —
This is an appeal by petition for review of the decision dated July 19, 1994 of the Court of Tax
"Sec. 78. Return of corporation contemplating dissolution. — Every corporation shall, within
Appeals in C.T.A. Case No. 4214 rejecting petitioner Bank of the Philippine Islands' (BPI) claim
thirty days after the adoption by the corporation of a resolution or plan for the dissolution of
for refund of creditable income tax withheld for 1985, because it was time barred. cdtai
the corporation or for the liquidation of the whole or any part of its capital stock, render a
The facts are undisputed. correct return to the Collector of Internal Revenue, verified under oath, setting forth the
By virtue of the Articles of Merger approved by the Securities and Exchange Commission on terms of such resolution or plan and such other information as the Minister of Finance shall
July 1, 1985 (Exhibit D) petitioner BPI became the successor-in-interest of the Family Bank by regulations, prescribe."
and Trust Company (FBTC) whose corporate existence ended on June 30, 1995. Sec. 244, Income Tax Regulations —
From January 1 to June 30, 1985, FBTC earned incomes consisting of rentals from its leased "Sec. 244. Return of corporation contemplating dissolution or retiring from
properties and interest from treasury notes purchased from the Central Bank. Pursuant to business. — All corporations, partnership, joint accounts and associations, contemplating
the Expanded Withholding Tax Regulations, the lessees of FBTC withheld 5 percent or P dissolution, shall within 30 days after the approval of such resolution authorizing their
118,609.17 on said rentals while the Central Bank withheld 15 percent or 55,456.60 on the dissolution, and within the same period after their retirement from business, file their
interest on the treasury notes. These withheld income taxes in the total amount of P income tax return covering the profit earned or business done by them from the beginning of
174,065.77 (Exhibit E) were remitted to the Bureau of Internal Revenue. Moreover, the FBTC the year up to the date of such dissolution or retirement and pay the corresponding income
had a prior years' excess credit of P 2,146,072.57, This excess credit plus the withheld income tax due thereon upon demand by the Commissioner of Internal Revenue. . . ."
taxes amounted to P2,320,138.34.
Sec. 42(which later on became Sec. 41 of Tax Code.
On April 10, 1986, the FBTC filed its final income tax return (Exhibit A) with the BIR showing a
"Sec. 42. Final or adjustment returns for a period of less than twelve months. — (a) Return
net loss of P64,502,935.00 and a refundable amount of P174,065.77 representing the
for short period resulting from change of accounting period. — If a taxpayer, other than an
creditable income tax withheld at source from January 1 to June 30, 1985. On October 7,
individual, with the approval of the Commissioner of Internal Revenue, changes the basis of
1986, petitioner BPI as successor-in-interest of FBTC filed a letter claim dated October 10,
computing net income from fiscal year to calendar year, a separate final or adjustment return
1986 (Exhibit B) with the BIR asking for refund of P2,320,138.34. The BIR however refunded
shall be made for the period between the close of the last fiscal year for which return was
to petitioner BPI only the amount of P2,146,072.57 (prior years' excess credits).
made and the following December 31. If the change is from calendar year to fiscal year, a
Since the BIR refused to refund the withheld income taxes on rentals and interests in the separate final or adjustment return shall be made for the period between the close of the
amount of P174,065.77, petitioner BPI filed on December 29, 1987 a petition for review with last calendar year for which return was made and the date designated as the close of the
the Court of Tax Appeals seeking a reversal of BIR's resolution. After due proceedings, the fiscal year. If the change is from one fiscal year to another fiscal year, a separate final or
Court of Tax Appeals rendered on July 19, 1994 a decision dismissing the petition for review adjustment return shall be made for the period between the close of the former fiscal year
on the ground that the claim for tax refund had already prescribed. A motion for and the date designated as the close of the new fiscal year.
reconsideration was filed but it was denied.
(b) Income computed on basis of short period. — Where a separate final or
Hence, this petition for review. adjustment return is made under subsection (a) on account of a change in the accounting
The simple issue in this case is a legal one: On October 7, 1986, had petitioner BPI's claim for period, and in all other cases where a separate final or adjustment return is required or
refund of the withheld income taxes in the amount of P174,065.77 already prescribed? The permitted by regulations prescribed by the Secretary of Finance, to be made for a fractional
BIR and CTA said, yes, but petitioner BPI says, no. To resolve this issue, it is necessary to part of a year, then the income shall be computed on the basis of the period for which
determine the deadline for the filing by the FBTC of its final adjustment return. separate final or adjustment return is made.
Sec. 46 (a), Tax Code,
BPI v Commissioner Page 2 of 2

"Sec. 46. Corporation returns. — (a) Requirements. — Every corporation, subject to the tax "Sec. 46. Corporation returns. — (a) Requirement. — every corporation, subject to the tax
herein imposed, except foreign corporations not engaged in trade or business in the 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 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 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 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." sworn to by such officer and by the treasurer or assistant treasurer."
Sec. 70 (b), Tax Code — "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
"(b) Time of filing the income tax return. — The corporate quarterly declaration shall be
information return. The amendment merely added a sanction on the part of the officers of
filed within (60) days following the close of each of the first three quarter of the taxable year.
the corporation in case of failure to provide such information return and to secure the
The final adjustment return shall be filed on or before the 15th day of April or on or before
necessary tax clearance,
the 15th day of the fourth month following the close of the fiscal year, as the case may be."
"A closer look of Section 46(a) and Chapter X of Title II showed that it both made specific
Upon deep reflection, this Court shares the opinion of the BIR and the CTA. Sec. 78 of the Tax
mention of "income tax return" and "income tax payments", respectively, Normally, an
Code and Sec. 244 of the Revenue Regulations No. 2 required FBTC as a dissolving
ongoing corporation files a Quarterly Corporate Income Tax Return. The final adjustment
corporation to file its income tax return within 30 days after the cessation of its business or
return therefore aptly refers to the Final Adjustment Income Tax Return. All references
30 days after the approval of the merger on July 1, 1985 or up to July 31, 1985.
pointed to by petitioner have some relations to income tax payments and the filing of an
Under Sec. 292 of the Tax Code, an action to claim for refund of an excessively collected tax accurate Income Tax Return. We cannot deviate from the fact that indeed 'correct return'
starts to run from the day in which a corporate taxpayer is required by law to file its final means 'correct income tax return', the Final Adjustment Income Tax Return.
income tax return. Accordingly, petitioner BPI should have filed the action for the refund of
"Moreover, this Court gives more weight to Section 244 of Rev. Regs. No. 2 when it stated
the excessively collected income tax return within two (2) years from July 31, 1985 which was
'income tax return'. As a rule, all regulations promulgated by the Secretary of Finance for the
July 31, 1987. Unfortunately, petitioner filed said action only on December 29, 1987-which
effective enforcement of the provisions of the National Internal Revenue Code are presumed
was late by 151 days. Said action was, therefore, clearly time-barred.
valid unless they are unreasonable and contrary to law or the Constitution. (see Art. 7, New
Petitioner contends that Sec. 78, supra required not a income tax or final adjustment return Civil Code),
but an information return. It submits that-
"The construction given to a statute by an administrative agency charged with the
"To understand what Sec. 70 really requires, a review of its origin, its amendment by interpretation and application of that statute is entitled to great respect and should be
Executive Order No. 1026 of Mr. Marcos, and its further amendment by P.D. No. 1994 (81 accorded great weight by the courts, unless such construction is clearly shown to be in sharp
O.G. 5527 & 5576) which transposed it as Sec. 46 (c) of the Tax Code, and its re-enactment in conflict with the governing statute or the Constitution or other laws. The rationale for this
Executive Order No. 37 of Pres. Aquino as sec. 46(c) but without the second paragraph rule relates not only to the emergence of the multifarious needs of a modern or modernizing
introduced by Executive Order No. 1026, would be very enlightening. society and the establishment of diverse administrative agencies for addressing and
(1) The original sec. 78. satisfying those needs; it also relates to accumulation or experience and growth of
specialized capabilities by the administrative agency charged with implementing a particular
Sec. 78 of the 1939 National Internal Revenue Code was found in Chapter IX (Administrative statute, (Nestle Philippines, Inc. vs. Court of Appeals, G.R. No. 86738, November 13, 1991,
Provisions) of Title II (Income Tax), together with other sections requiring the filing of 203 SCRA 504)."
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 In view of the foregoing, this court, finds no reversible error in the appealed decision.
(sec. 79) and return on foreign corporations (sec. 80). WHEREFORE, for lack of merit, the petition is DISMISSED and the appealed decision is
On the other hand, the requirement to file income tax return, imposed on individuals, AFFIRMED. Cost against the petitioner.
corporations, partnerships, receivers and trustees, and the manner the income tax would be SO ORDERED.
assessed and paid on such returns was found in Ch. VI.
Guerrero and Gozo-Dadole, JJ., concur.
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: